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Page 1: Four-mine profile pays off - Mincor Resources NL · Four-mine profile pays off MINCOR RESOURCES O ne thing the market and financiers love is a proven track record. Not something Mincor

Four-mine profile pays off

MINCOR RESOURCES

One thing the market andfinanciers love is a proven trackrecord.

Not something Mincor Resourcesseemed to care too much about when itbattled to scrape together $31.2 millionfor its share in a $38 million bid forWMC’s Miitel nickel mine near Kambaldain 2000.

At the time, an 18-month-old Mincorhad just $1 million to its name, a marketcapitalisation of $5 million and no trackrecord in production.

Only the faith of BankWest and furiouslast minute scrambling for interestedinvestors by then Hartley Poyntonrealised the funds required to win thebidding race.

Six months later, when Mincor wassuccessfully producing from both theMiitel and the separately purchasedWannaway mine, the share price wasscaling unfamiliar heights and enjoyingnewfound market support.

However when Mincor announced 18months ago it was going to bring theMariners and Redross mines intoproduction — two mines that had hungup their boots long ago — the marketwas again resoundingly indifferent as thestock levelled out, loitering around the70c mark.

Once again, Mincor proved it was morethan up to the challenge as all four minesproduced in chorus for the first time inthe June quarter this year, allowing Mincorto announce a $20.3 million after taxprofit for the 2004-05 financial year.

Chief executive and managing directorDavid Moore is now patiently andconfidently waiting for the market to getbehind the company, which has to thispoint continually proved itself.

“The share price has been a bit flatreally for the past 18 months and that’sprobably, looking back, because themarket took the view that we were goingto spend a lot of money on these new

developments with the associated risk, sowas waiting to see how it panned out,”he said.

Moore said the market was starting torealise the four-mine production profilewas working and strong nickel priceswould further enhance Mincor’s prospectsas an investment.

He also predicted the recentlyannounced financial results from last yearwould attract further attention from themarket.

“With the major capital developmentprograms behind us, rising production,and a good, expanding reserve base, wecan rake in the dollars, spend a fair bit ofit on exploration, but also pay it out toshareholders,” Moore said.

“Certainly given the continuing strongnickel price the company looks well setfor the future.”

During the milestone year, profitfattened by 80% to eclipse the $20million mark and the dividend paid toshareholders doubled to 3c.

Redross, Mariners and North Miitelramped into production at various stages,generating a 15% production hike from8679 tonnes of nickel concentrate from330,000t of ore, to 10,028t of nickelconcentrate from 419,000t of ore.

Mincor has budgeted for a 30%production increase this financial year to13,000t — not bad for a company thatfive years ago had only a suite of high-cost African gold prospects to its name.

But it hasn’t all been beer and skittlesin recent years, with the industry-wideboom producing its share of problems. Asthe nickel price improved and moreoperations came into production, theincreased mining activity created ashortage of people and equipment. “Toactually grow your operations, developthree new operations (including MiitelNorth) and man them up in the face ofthese very tight conditions has reallybeen a major achievement — especiallywhen you think of the number of new

From a junior gold explorer in Africa in 1999, MincorResources has become a West Australian nickelproducer with a 2005 profit exceeding $20 million. By Chris Cann

Mincor chief executive and managing director David Moore:“We’ve been sowing for the last

18 months and now we can look forward to harvesting some of those efforts”.

A truck load of ore emerges from Mincor’s flagship mine, Miitel.

50 RS september/october 2005

SUN RESOURCES NL

Flour Bluff Gas Project, South Texas Gulf Coast, USA

Sun Resources has variable interests (12.5% to 16.67%) in the redevelopment of an Sun Resources has variable interests (12.5% to 16.67%) in the redevelopment of an old south Texas giant gas fi eld complex that has produced to date 1.3 TCFG and 64 old south Texas giant gas fi eld complex that has produced to date 1.3 TCFG and 64 old south Texas giant gas fi eld complex that has produced to date 1.3 TCFG and 64 old south Texas giant gas fi eld complex that has produced to date 1.3 TCFG and 64 old south Texas giant gas fi eld complex that has produced to date 1.3 TCFG and 64 MBBO.

The project aims to increase production from the current level to 40 MMCFG/day in the The project aims to increase production from the current level to 40 MMCFG/day in the The project aims to increase production from the current level to 40 MMCFG/day in the The project aims to increase production from the current level to 40 MMCFG/day in the The project aims to increase production from the current level to 40 MMCFG/day in the next 12-18 months. next 12-18 months. next 12-18 months.

Dec 2004 3P reserves of 92.5 BCFG are anticipated to have increased to 143 BCFG at Dec 2004 3P reserves of 92.5 BCFG are anticipated to have increased to 143 BCFG at Dec 2004 3P reserves of 92.5 BCFG are anticipated to have increased to 143 BCFG at Dec 2004 3P reserves of 92.5 BCFG are anticipated to have increased to 143 BCFG at Dec 2004 3P reserves of 92.5 BCFG are anticipated to have increased to 143 BCFG at Dec 2004 3P reserves of 92.5 BCFG are anticipated to have increased to 143 BCFG at Dec 2004 3P reserves of 92.5 BCFG are anticipated to have increased to 143 BCFG at the end of the current program of 3 new wells and workovers/recompletions of 3 shut-the end of the current program of 3 new wells and workovers/recompletions of 3 shut-the end of the current program of 3 new wells and workovers/recompletions of 3 shut-the end of the current program of 3 new wells and workovers/recompletions of 3 shut-the end of the current program of 3 new wells and workovers/recompletions of 3 shut-the end of the current program of 3 new wells and workovers/recompletions of 3 shut-the end of the current program of 3 new wells and workovers/recompletions of 3 shut-in producers in early October 2005. Potential to 200 BCFG remains in the West Flour in producers in early October 2005. Potential to 200 BCFG remains in the West Flour in producers in early October 2005. Potential to 200 BCFG remains in the West Flour in producers in early October 2005. Potential to 200 BCFG remains in the West Flour in producers in early October 2005. Potential to 200 BCFG remains in the West Flour in producers in early October 2005. Potential to 200 BCFG remains in the West Flour in producers in early October 2005. Potential to 200 BCFG remains in the West Flour Bluff, East Flour Bluff and Pita Island Gas Fields in the giant fi eld complex. Bluff, East Flour Bluff and Pita Island Gas Fields in the giant fi eld complex. Bluff, East Flour Bluff and Pita Island Gas Fields in the giant fi eld complex. Bluff, East Flour Bluff and Pita Island Gas Fields in the giant fi eld complex. Bluff, East Flour Bluff and Pita Island Gas Fields in the giant fi eld complex. Bluff, East Flour Bluff and Pita Island Gas Fields in the giant fi eld complex. Bluff, East Flour Bluff and Pita Island Gas Fields in the giant fi eld complex.

Eagle Oil Project, San Joaquin Basin, California, , USAEagle Oil Project, San Joaquin Basin, California, , USAEagle Oil Project, San Joaquin Basin, California, , USAEagle Oil Project, San Joaquin Basin, California, , USAEagle Oil Project, San Joaquin Basin, California, , USAEagle Oil Project, San Joaquin Basin, California, , USAEagle Oil Project, San Joaquin Basin, California, , USA

Sun Resources has a 10% interest in the development of an oil pool in a signifi cant Sun Resources has a 10% interest in the development of an oil pool in a signifi cant Sun Resources has a 10% interest in the development of an oil pool in a signifi cant Sun Resources has a 10% interest in the development of an oil pool in a signifi cant Sun Resources has a 10% interest in the development of an oil pool in a signifi cant Sun Resources has a 10% interest in the development of an oil pool in a signifi cant Sun Resources has a 10% interest in the development of an oil pool in a signifi cant Sun Resources has a 10% interest in the development of an oil pool in a signifi cant Sun Resources has a 10% interest in the development of an oil pool in a signifi cant stratigraphic trap with potential of between 13 MMBO + 25 BCFG to 34 MMBO + 58 stratigraphic trap with potential of between 13 MMBO + 25 BCFG to 34 MMBO + 58 stratigraphic trap with potential of between 13 MMBO + 25 BCFG to 34 MMBO + 58 stratigraphic trap with potential of between 13 MMBO + 25 BCFG to 34 MMBO + 58 stratigraphic trap with potential of between 13 MMBO + 25 BCFG to 34 MMBO + 58 stratigraphic trap with potential of between 13 MMBO + 25 BCFG to 34 MMBO + 58 BCFG through a horizontal lateral test of the host Gatchell sand reservoir in November BCFG through a horizontal lateral test of the host Gatchell sand reservoir in November BCFG through a horizontal lateral test of the host Gatchell sand reservoir in November BCFG through a horizontal lateral test of the host Gatchell sand reservoir in November BCFG through a horizontal lateral test of the host Gatchell sand reservoir in November BCFG through a horizontal lateral test of the host Gatchell sand reservoir in November – December 2005. – December 2005. – December 2005.

Offshore Carnarvon Basin, Western AustraliaOffshore Carnarvon Basin, Western AustraliaOffshore Carnarvon Basin, Western Australia

Three wells are currently scheduled; Hestia 23 MMBO Q4/05 in WA-261-P; Duomonte Three wells are currently scheduled; Hestia 23 MMBO Q4/05 in WA-261-P; Duomonte 47 MMBO H1/06 in WA-254-P, and Sextent 134 MMBO H1/06 in WA-257-P. Well 47 MMBO H1/06 in WA-254-P, and Sextent 134 MMBO H1/06 in WA-257-P. Well interests range from 6.15% to 9.65%.interests range from 6.15% to 9.65%.

Offshore Malta

Sun Resources has a 20% reducing interest in offshore ESAs abutting Libyan and Sun Resources has a 20% reducing interest in offshore ESAs abutting Libyan and Tunisian waters. NYSE listed Anadarko has farmed in to earn a 75% interest by Tunisian waters. NYSE listed Anadarko has farmed in to earn a 75% interest by conducting seismic infi ll and drilling/testing 2 wells on major reef complex plays, Chianti conducting seismic infi ll and drilling/testing 2 wells on major reef complex plays, Chianti and Limoncello, which have large reserve potential (500 to 1,000 MMBO) and have producing major fi eld analogues in adjacent Libyan and Tunisian waters.

25 PROWSE STREET ~ WEST PERTH ~ WESTERN AUSTRALIATELEPHONE +61 8 9481 3638 ~ FACSIMILE +61 8 9481 3528

EMAIL [email protected] ~ WEBSITE WWW.SUNRES.COM.AU

Page 2: Four-mine profile pays off - Mincor Resources NL · Four-mine profile pays off MINCOR RESOURCES O ne thing the market and financiers love is a proven track record. Not something Mincor

mining projects that have been cancelledin the last 12 months because costs haveblown out and they can’t get the people,”Moore said.

In June last year, Mincor decided toreplace Clough Engineering with majorfirm Barminco as contractor, citing agreater depth in personnel andequipment as its reasons.

Moore regards that decision as asuccess and points to lower costs as proof.

Mincor also overcame politicalchallenges when it switched from a locallybased Kambalda staff to a fly-in, fly-outarrangement, which included theconstruction of a camp, in response tocompetition for skilled undergroundworkers.

The challenges of recent years are nowbehind Mincor.

The new mines have morphed fromcash sponges into members of Mincor’smoney-making mÈnage and the companyhas spent the past six months on its nextstage of development — an explorationfocus to provide “organic growth”.

“We’ve been sowing for the last 18months and now we can look forward toharvesting some of those efforts,” Mooresaid.

He said there were three elements tothe exploration program, starting withreserve extensional drilling, then regionalwork, and then finally broader goldexploration and more “conceptual” work.

The majority of funds will be devotedto extensional drilling to increase thereserves and therefore mine life.

Based on current reserves, the life ofthe Kambalda operations extends to 2009.

Moore said a sustained extensiondrilling program launched early this year,with at least three drill rigs operatingcontinuously, had started to pay off.

“We’ve extended the North Miitelorebody, we’re beginning to understandwhat’s happening at south Miitel, we cansee tremendous further potential —which we’re beginning to hit — at

Mariners, and at Redross we’re still a bitpuzzled but we’re getting mineralisation— we just can’t quite get it to hangtogether,” he said.

Mincor aims to double its Kambaldaore reserves in coming years.

The June resource update revealedMincor had replaced about half of the oremined last financial year, but it was theresource update due around the end ofthe 2006 March quarter that Mooreexpected to yield impressive returns.

“When the results of all this drillingbecome clear to us, we will significantlyexpand resources and reserves,” he said.

Moore was targeting extending thereserves to support mining into 2015,without consideration for potentialdiscoveries from regional exploration.

As part of the 2001 transaction, Mincorsecured a significant ground holdingaround the Widgiemooltha Dome, which itbelieves is prospective for further nickeldiscoveries.

Mincor is using new technology andtechniques to improve its chances ofexploration success on its regional playsin the heavily scrutinised ground aroundKambalda.

The company has an arrangement withBHP Billiton for the cost price use of its“geoferret” technology — which is able toreturn high detail geological informationfrom great depth — in return for nickelprocessing rights.

“What we’re aiming to find is anothernice one million tonne, 4% orebody —I’m personally convinced there’s at leastone more around the WidgiemoolthaDome,” Moore said.

“Because there are repetitions, we’vegot about 60km of prospectivestratigraphy around the WidgiemoolthaDome and there are already four 1Mt-plusorebodies (Mincor’s four mines) so it isclearly a fertile environment.”

An early-stage gold project is alsounderway and Mincor’s offshore assetsare all joint ventured out to othercompanies, with the company retainingsignificant, but not managerial, stakesthat do not require financial commitment.

Mincor would also consider project-level acquisitions to grow the company,but Moore said with current prices it wasdifficult find a worthy acquisition.

“It’s not critical — we don’t have tomake one (acquisition) because we havea very clear organic growth path mappedout for us,” Moore said.

mincor resources... at a glance

HEAD OFFICELevel 1, 1 Havelock StWest Perth,WA 6005Ph: +61 8 9321 7125

Fax: +61 8 9321 8994Email: [email protected]

Web: www.mincor.com.au

DIRECTORSDavid Humann, David Moore,

Jack Gardner, Ian Burston

MARKET CAPITALISATION$150 million (at press time)

MAJOR SHAREHOLDERSNational Nominees (8.27%)

AMP Life (5.79%)

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A jumbo operator placing split set rock bolt which are used for ground support at all four mines.

52 RS september/october 2005

The access road to Wannaway.

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