MINEMAKERS LIMITED
MAK - Excellence in Mining and Exploration Presentation - Mr Andrew Drummond, Managing Director
Wednesday, 17 September 2008 9:30am
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MINEMAKERS LIMITED (MAK)
ASX code: MAK
Website: http://www.minemakers.com.au
Industry: Materials
Principal Activities:
Base mineral exploration
Address:
, , 23 Altona Street,
WEST PERTH
WA
Phone: 08 9264 7000
Fax: 08 9264 7099
Executives & Directors
Mr George Arthur Savell , Chairman
Mr Andrew James Drummond , Managing Director
Mr Edward John Ellyard , Non Exec. Director
Mr Richard O'Shannassy , Non Exec. Director
Mr Dennis William Wilkins , Finance Director
Mr John Ribbons , Company Secretary
Company Podcasts
Company ASX Announcements
Company ASX announcements can be viewed on the ASX website.
Announcements from the preceding six months are shown below.
Please refer to the relevant stock exchange if any of the above information is incorrect
MINEMAKERS LIMITED (MAK) Events
Australia/Sydney
MINEMAKERS LIMITED (MAK)
| Notice of General Meeting/Proxy Form | Thu, 18 Mar 2010 |
| Minemakers to Apply for Dual Listing on NSX | Thu, 18 Mar 2010 |
| Half Year Accounts | Mon, 15 Mar 2010 |
| SandP Announces March SP/ASX Index Rebalance | Fri, 5 Mar 2010 |
| Change of Share Registry | Thu, 25 Feb 2010 |
| Investor Presentation - February 2010 | Tue, 23 Feb 2010 |
| Wonarah Phosphate Development Mineral Lease Grant Attained | Mon, 22 Feb 2010 |
| Resource Update Wonarah Rock Phosphate Project | Wed, 10 Feb 2010 |
| Trading Halt | Mon, 8 Feb 2010 |
| Request for Trading Halt | Mon, 8 Feb 2010 |
Please note: This company appears on this website as a result of its listing on the Australian Securities Exchange. Boardroom Radio does not claim any association with any company listed on this site.
PRESENTATION BY MR. ANDREW DRUMMOND, MANAGING DIRECTOR OF MINEMAKERS LIMITED (MAK)
“Excellence in Mining and Exploration Presentation”
http://www.brr.com.au/event/51316
WEDNESDAY, SEPTEMBER 17, 2008, 9:30 A.M.
MAK Fine. Thanks very much, (inaudible) (00:01:05), and thanks, ladies and gentlemen, for coming and listening. Our talk today we’ve put it up on our
10 website. I’m really going to deal with phosphate today. There are several other commodities and projects that our company has, but it isn’t a very long presentation. The market is pretty much concentrating on phosphate, so that’s all I’ll talk about today. I’m very happy to chat to anybody at our booth on our other -- tin, tungsten, fluorspar, et cetera, if anybody would like to do
15 that tomorrow. Okay, as Allan said, we did list on the ASX late 2006. So we’re nearly two years up. The critical thing for us there right now is that we’ve got plenty of cash for what we’re trying to do, and those tradeable options you can see are exercised at 30 cents before Christmas. So we’ve got about another $5 million due in between now and Christmastime. So we’re nicely
20 situated with respect to what we’re aiming to do in the next 6 months or so. But the major change on that slide we’ve got the market cap at $1.43 when we put this slide together 10 or 12 days ago and I think today we’re trading at about $1.
25 But I honestly think that that’s the market rather than our story, but you can form your own view on that shortly. We have been one of the better performing stocks on the ASX this year. We peaked at about a 1300% rise earlier on this year. We’ve sort of really run in full tilt into the horrors of the US market. I think since then I watched that and how that’s driven our market
30 downwards and I’d like to suggest today, along with plenty of other people, that our share prices really are the reflection of our true worth and, hopefully, you’ll form that, too, yourselves fairly shortly.
I’ll just move on. I won’t bother too much the board. What I will say, though, is
35 our company put itself together late 2004, 2005. Our founders and Board considered there was going to be a minerals price supercycle and consequent to that, we tried to acquire projects within Australia with our open cut, large deposits have been found by previous explorers. But why they didn’t go into production was because at that time the price of the commodity
40 wasn’t sufficient. The feeling was that it might have been a great time to buy some straw hats in winter. And the end result is our phosphate project at Wonarah, we’ve got the biggest fluorspar deposits in ground in Australia, and we are Number 1 for combined tin and tungsten. Now I do stress these numbers were really in our prospectus and some of them were pre-JORC
45 numbers, which we’re not allowed to quote anymore. So, we just have to sort of take that as a generalized statement. I can’t give you the backup now, but it is in our prospectus if anyone wants to refer to that on the website.
So looking at phosphate, well, in fact, looking at all the commodities since we’ve acquired the projects, they’ve all increased very strongly. But phosphate is the absolute standout. This time last year, it was about $50 a tonne fob Morocco. Right now, it’s about US$500.
5
So, the deposit I’m going to talk about, our Wonarah Project, the red star in the middle of the Northern Territory -- sorry about that. Okay, up in here. And that’s Wonarah. Now what’s driven phosphate and what’s driven the value of our company really is that without phosphate fertilizers and the other ones,
10 you really can’t produce food. There are 200,000 people born into the world on average everyday. On top of that, add the drive into biofuels. Brazil believes it can produce refined bioethanol for $36 a barrel. When oil is in the range of $100 or $136 of crude then there’s going to be a huge momentum I think going to Brazilian bioethanol if no one else and Brazil produces very
15 little phosphate. So just by way of an example, they are sort of driving that extra demand factor coming in.
Looking up into Asia, the wealth that’s being generated from Asia, on the one hand, the decreasing amount of lands that’s available for crops, the need to
20 get it more into chemical cropping means that we think that’s going to underpin great continued demand for phosphate and also the other fertilizers.
Plenty of people in the audience follow on the various stocks but on that graph, a few years ago iron and phosphate were each about $50 a tonne.
25 Iron has gone bananas in blue, but it’s only a couple of hundred dollars a tonne. Phosphate’s killing it, basically, at present. And that’s what drove our share price. And I guess the thing we honestly don’t know is that when we get into production in a couple of years’ time, will the price of phosphate be somewhere up here? Will it have tracked sideways or will it have come off the
30 top a bit? And that will obviously have a direct impact on our bottom line. And time will tell. But, you know, we’re aiming to get into production as cheaply as we can, as quickly we can to capture the price while it is at this really great, great level.
35 At current commodity prices, and we’re aiming 2, 3 million tonnes a year, Wonarah has the potential to become one of Australia’s -- not very many mines that turn over a $1 billion a year. We put this slide together a few months ago. Since then, with the price has gone up to $500, the Aussie dollar has gone down. If we were producing today at 3 million tonnes a year, we’d
40 be turning over not much short of AU$2 billion a year, which is one hell of a mine. And so hence, our aim is to be in production ASAP.
What’s driving it? For those who don’t particularly follow phosphate, a few years ago, in yellow -- here we go -- the US was an exporter of phosphate. It
45 no longer is. Here in China, it stopped exporting in 2005. So the main exporters now are a collection of Middle Eastern countries here. That’s Syria, Israel, Jordan, and then, principally, Morocco and Western Sahara. And these are the real price drivers. Everyone else is the smaller fry following along behind it. They’re the ones who’ve put the price up from $50 to $200 just before Christmas, drove it to $400 in March and $500 about four to six weeks ago.
We’re aiming to produce 3 million tonnes a year, which is about 2% of annual
5 world production. So we’re certainly not going to be killing the market.
So our project, 100%-owned. There was a 10% clawback to the previous vendor. We purchased that back from them a few months ago for $2 million cash plus 3 million shares. And so we’re aiming to produce 3 million tonnes a
10 year. We’ll be targeting Asia and I’ll show that in a slide in a moment. Courtesy of Rio, the previous owners, there’s a 72 million-tonne JORC-compliant resource. We’ve just done a lot of drilling. Resources are being estimated by Coffey Mining now, and in the next couple of months, we expect to come out with a significantly improved position for that.
15
As I’ve said, we are targeting export up into Asia. If we look in red at the current producers, we are -- here we go -- we’re looking at the Middle East and then also Morocco and Western Sahara. We are aiming to be producing and exporting out of Darwin, up into Asia and Southeast Asia, which, apart
20 from China which no longer exports, do not produce any indigenous phosphate of any consequence. In turn, we’ve got a $30- to $40-a-tonne sea freight advantage between the Middle East through Suez and Morocco and so on coming around the Cape. So we see we can capture some of that as well.
25
Okay, we are situated here in the middle of the Northern Territory, in yellow. We’re right beside the Barkly Highway here in red. Now phosphate this year is what uranium was last year in terms. The market everybody is finding something now, they’ve got an old drill hole or drill hole somewhere in the
30 lease. It’s got a bit of a phosphate intersection and they’re trying to raise the share price a bit and jolly good luck to them and all the rest of it.
What there is the, well, the Georgina Basin, which roughly runs through these dots along its margin and then out to about Tennant Creek. So these are all
35 eastern margin ones and without (inaudible) (00:08:01) it is just a statement of fact the problem they have, distance from infrastructure. We’re talking of bulk commodity but at the end of the day, bulk commodities are really about how the heck you get them to coast in terms of capital and operating costs. And I can exemplify that by just moving on to the next slide that shows
40 probably the biggest players out there at present. We’re putting to take Pivot on the side. They are in production, but they’re not in the export, so the rock phosphate export trade they are purely producing fertilizer for the eastern seaboard.
45 But we’ve got, for instance, Legend International. It’s a Joe Gutnick company. They are talking about a slurry pipeline into the coast and then some sort of barging out to a facility offshore to get loaded because the water is too shallow and at the last estimate they produced for (inaudible) (8:48) is about $850 million. And they’re forced into that simply because they don’t have a road, they don’t have a road, they don’t have a railway line. And we’re out here at Wonarah, we’re right beside the Barkly Highway. There’s a little luck in this game and I’ve got that on another slide. But there’s only one (inaudible) (00:09:01) link between the whole of the Northern Territory and
5 the whole of Queensland and runs right beside our ore body. Oh, sorry. Right beside our deposit, I should say.
What we’re aiming to do is simply dig it up, beneficiate it. Our metallurgical work is underway at present. We’ll use contract mining to keep costs down, to
10 keep our cable costs down. Contract tracking by using road trains across to a loading facility that is being built by a third party for a multiuser rehandling facility here just north of Tennant. Sorry, I’ve lost my light. All right, just north of Tennant Creek. We’ll then rail it up again to Darwin. So we’re basically looking at contract mining, contract tracking, contract rehandling, contract rail
15 freight, and then the normal costs across the wolf. And so, as I said, at a time of very -- I think difficulty in raising significant amounts of development capital worldwide due to and made from the US sort of -- well, all the things they’ve done to our financial system, we’ll try to go the low-capital route.
20 So, here’s the Barkly Highway right here curving along. There’s the Rio 72 million-tonne resource right at beside the road. This year, the main bulk of our work have been drilling this out to increase the resource, to get more confidence in it and to allow us to optimize our basic first ten-year production position. We’ve also drilled this Arruwurra Prospect, where it’s shallower.
25 There’s an average of about 35 meters of cover here which will take some capital to overcome in pre-stripping. This is much shallower and so we have a potential to get in here first and save operating costs.
So one of the things we’ll be doing as part of our scoping/pre-feasibility
30 through the rest of this year is to optimize a development plan in terms of just the impact on the bottom line with respect to capital and operating costs and so on. So we’ve done 190-odd holed RC program for resources. We’ve also done a couple of large diamond drilling programs to get all the metallurgical samples that we need. That’s all being processed now. We have our
35 scoping/pre-feasibility being done by Lycopodium Engineering and Coffey Mining. That’s proceeding quite nicely. Our environmental studies first stage had been done. The recommendation of the Government is that this project will qualify for a stage or for a lower level of assessment, meaning it can all be done in-house by the Government rather than having to put it out to public
40 and attract the attention of the Greenies and all the rest of it.
We have indicative, bundled-up quotes to take our material from site up to Darwin and get it in into ships’ holds. And that’s something under $100 a tonne. As a postscript, the Northern Territory Government, about two weeks
45 ago, awarded us Major Project Status for this. At current prices, if we’re in production today, the NT Government will be making an awful lot of money from royalties under their rather onerous royalty scheme. But it is a profits-based one. But with that money flowing into the territory coffers, they are very enthused about the project. We’re also talking about this being a long-life project, a decades and decades in all probability. And so, hence, there’s real potential to put regional employment into the district, building up opportunities especially around Tennant Creek which is very depressed and so on.
5 So the Government is right behind us. The Chief Minister has said his office is going to be a one-stop shop, and the Director of his department is where all the other departments are going to report to with the order of streamlining all of the approvals processes to get this in production ASAP.
10 I do stress these numbers will change as our scoping study comes out. But I don’t think they’re going to change enormously. We think we’re looking at production costs now allowing for changes in diesel price and everything else of somewhere in the low-$100 per tonne. If we’re in production today and capturing the Moroccan prices today, we’ll be getting something like $600 a
15 tonne. So it is right irrespective of what our operating costs works out to be provided the Moroccans get the price then we’re going to make a lot of money. Potential gross cash flows are well over $1 billion pre-tax, pre-operating. And, in fact, it’s not going to be much different to that at current prices sort of after taxes and royalties and so on.
20
So, given that, you know, maybe we’re looking at something like the best part of $1 billion a year as our share, I would suggest that at current market cap of about $100 million there’s something that’s not quite right. There’s a disparity between the two. And even if we settle somewhere in the middle, I’ll be very
25 happy and I’m sure the shareholders will be very happy.
So we’ve been drilling Arruwurra. This was just a prospect. But what we found today is about a 7- or 8-kilometer strike length is still open, a K or so wide, 500 meters thick. Resources will come out fairly shortly but
30 the advantages to this high-grade zone, these numbers here are actually depths of overburden. So looking at this high-grade zone and proximal to it in the green is quite respectable. We’re only talking sort of 10, 12, 14 tonnes of stripping - at a three to one strip hit, hence, not much capital.
35 The sort of thing we need to work out is for the sake of the argument, we had our first year -- our first year tin plan will be entirely revolved around mining here. Will it be -- will we just mine this for a couple of years at low capital and truck it up to the Main Zone, or will we just put it all to the Main Zone? Which is probably going to have resources put in operation there for a decade. So,
40 that should all get sorted out in the next few months. Thanks (inaudible) (00:15:03).
And the Main Zone up here, if we just sort of look at the reds and the oranges. Reds are more than 150 meter percent wherein round numbers say
45 6 meters at 25%. Some of that would be direct shipping grade. Whether we go direct shipping or whether we find that there’s just sort of high-grading the ore body and to ruining some lower grade stuff. We don’t know that. That’ll go into our planning. But we’re looking at a large area here. These squares are 2 kilometres x 2 Ks. So it’s sort of just within there where it’s mainly reds and oranges. There’s 4 square K’s. If it’s 5 meters thick, there’s about 40 -- I’m not saying it is yet, but then there would then be about 40 million tonnes just in there. We’ll be producing at 5 million tonnes a year pre-beneficiation and so on, so. So plenty of tonnes up there.
5
Here’s what it looks like. Weathered material in the hanging wall, pretty easy to dig. That’s the main ore. All of those are the grades, from XRF assaying. They’re pretty much right. So, a lot of that potentially is direct shipping which is about sort of 30%.
10
There is some material down in the footwall that’s still going grade. And
this lower ore zone or mineralisation zone. The gray here is quartz. We just have to crush it, sift that out and that will then allow us to concentrate the brown material in between. So all this metallurgical work is currently going on
15 now.
And just to -- I’ve talked about the luck factor. We are right beside the highway. Aboriginal owners were on Aboriginal freehold. They don’t have power of veto. Having said that, they’re right behind us anyway. The CLC is
20 right behind us. No associated uranium to muck things up for us.
There’s the Barkly Highway. Here’s our drilling lines. You can’t get much closer than that. That’s what the country looks like. It’s dead flat environmentally with no problems. That’s what it looks like on the ground.
25 And at this stage, it was said the environmental situation looks excellent.
There we are drilling. Our timetable, we’re aiming to be in production at about this time in 2010. We’ve spoken to the road, the rail, the ports, the people who have to design our plants. At this stage, no one has come up with a reason why we can’t be in production in two years’ time from now. And that will be where I will stop for the day. Thanks very much.
PRESENTATION CONCLUDED
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