TRANSCRIPTION OF FINANCE NEWS NETWORK INTERVIEW WITH SYLVANIA RESOURCES
(ASX:SLV) MANAGING DIRECTOR, TERRY McCONNACHIE
Clive Tompkins: Hello Clive Tompkins reporting for the Finance News Network. Joining me for the first time from Sylvania Resources is Managing Director Terry McConnachie. Terry welcome to FNN. What is Sylvania’s core focus?
Terry McConnachie: Sylvania is a platinum producer. We produce platinum from tailing stumps that have previously been mined for chrome and we go back produce chrome out of these stumps and platinum as a concentrate. Obviously because it’s on surface already, it’s a low cost producer – very low cost – and obviously because it’s on surface, it’s got a very low mining risk to it. We know what’s there before we start and we end up with quite a cheap way of producing platinum.
Platinum obviously is used mostly in auto-cats but the jewellery industry as well - auto-cats for environmentally making auto catalysts on cars to prevent pollution.
Clive Tompkins: Terry the last twelve months has seen a rejuvenation in the resource sector, how does Sylvania sit financially?
Terry McConnachie: This time last year Septemberish, we had the big resource crash and it impacted heavily on everybody. Seventy-five percent of all the platinum producers were under water, but because ours is a very low cost operation, we run in at costs of somewhere around $300/$350 an ounce, we were able to maintain a profitable margin of forty to fifty percent down from the all time highs of seventy/eighty percent.
We have seen the platinum price pick up now, almost to $1,300 or just over $1,300 an ounce and our costs are still at $350 an ounce – so a healthy margin – we are way over fifty percent margin. All our operations are profitable at an operational level, so when this platinum price picks up obviously our margins pick up, but we are still profitable that’s the important thing.
Clive Tompkins: Turning to your core assets, tell us about the tailings business.
Terry McConnachie: The core assets of Sylvania is that we process platinum predominantly out of Samancor which is the second biggest chrome producer in the world. We process all of their dumps, we extract chrome out of these dumps that we give back to Samancor and we keep the platinum for our own account. We’ve got about thirteen dumps that we treat and there’s a finite amount of chrome in these things and obviously these dumps expire.
And that really is the tailings business. We have now bought Great Australian and Pan Palladium because there’s further access to low grade platinum producing ores. We will only open cast mine and that is the new direction of the business that’s a lot bigger than the dumps and marginally more expensive to mine or process it. Still very, very competitive though because it’s all open cast.
Clive Tompkins: So Terry how do recent acquisitions fit into the business model?
Terry McConnachie: We’ve been working hard on getting six plants operational to treat the tailings that we get from Samancor that being dumps and the risings from their current mining operations. We process in around 37,000 tons into each plant - into each of these six plants. And that will build us up to seventy-five thousand to a hundred thousand ounces by 2011 – and that really is everything that we can do in dumps.
We’ve now recently purchased all the shares of Great Australian Resources and Pan Palladium and that is going to be the next phase of our development, where we will start processing platinum out of virgin open cast stand alone projects. Instead of the plants being thirty-seven thousand tons, they’ll be a hundred thousand ton feed plants and we plan to built up to eight plants phased one year apart over the next few years.
Clive Tompkins: On to technology now, how important is it in the treatment of low grade platinum concentrate?
Terry McConnachie: Of course technology is always important. This whole business is only about recovery, how much we treat and how much we get out. And a hundred percent obviously being the goal but because these ores are very oxidised, especially in the dump part, we have to use a lot of technology and this has been an ongoing learning curve for us.
We’ve had to install bead mills, bore mills to break down the little rust particles really that go round these platinum particles. We’ve had to put in column cells; we’ve had to put in a variety of IP to get these recoveries up. I mean we started off budgeting recoveries of thirty-two percent and we really got to sort of the sixty percent – this after two years of constantly working at it to get the stuff up. So technology is extremely important.
Clive Tompkins: So we know platinum’s up considerably since the start of the year, has this had any other flow on effects to other minerals that you are involved in?
Terry McConnachie: What’s often overlooked though is that this company’s actually a rhodium producer with platinum palladium by-products. Fifteen percent of our basket of elements is rhodium and when we had rhodium up at $10,000 an ounce, it was fifty-one percent of our income. It’s now – rhodium’s back rising a lot quicker than the platinum price – almost at $3,000 an ounce now. So this business is really very strong on the rhodium part and obviously with the platinum price going up as well, it’s improved our margins.
Clive Tompkins: Okay Terry, so what makes Sylvania Resources different from any other number of junior miners?
Terry McConnachie: Well the first thing of course is our cost price - I mean its $350 an ounce. We are substantially cheaper than the average junior, $400/$500 an ounce. You know, we’ve got no risk because we know what’s on surface, it’s already been analysed and assayed many, many times. So we hydro mine there’s no faults or fissures or fires or flooding or fatals or any of the normal primary mining risks associated with mining.
That really is one of the big things that we’ve got. Obviously the downside is life because there is a finite life to these things, but that’s where our new mines that we’ve acquired from Pan Palladium and GAU will come into their own in the future.
