TRANSCRIPTION OF FINANCE NEWS NETWORK INTERVIEW WITH MERIDIAN MINERALS LIMITED
(ASX:MII) MANAGING DIRECTOR, JEREMY REED
Rebecca Richardson: Hello Rebecca Richardson reporting for the Finance News Network. Joining me from Meridian Minerals is Managing Director, Jeremy Read. Jeremy welcome to FNN.
Jeremy Read: Yeah nice to be here.
Rebecca Richardson: You describe yourself as a resource development and exploration company. What are you targeting and what stage are your projects?
Jeremy Read: Our main project is the Lennard Shelf Lead-Zinc Project in Western Australia. That’s a pre-production asset and today we’ve just announced the sale of that to our major shareholder. So we’ve been working on that for 12 months now and so we’ve been able to realise some value out of that. And the other major asset that we’ve been looking at is a Russian gold project which again is at pre-production stage. So, our focus as a company has been on looking at projects that are at pre-production stage, looking to increase resources and then capture value for our shareholders, either through sale of projects or taking them through to production. But our focus is very much on capturing value for our shareholders.
Rebecca Richardson: OK so what’s your share price today and what’s your market cap?
Jeremy Read: Well our share price has gone up today as a result of the announcement we just made for the sale of the Lennard Shelf Project - so about 14.5 cents right now which gives us a market cap of about $70 million.
Rebecca Richardson: Thanks Jeremy. Can you tell us a bit about the Board and their experience?
Jeremy Read: Yeah most of us have had major resource company experience. I spent quite a while at BHP. Our Chairman and one of our Non-Executive Directors also had long careers with BHP, so we come out predominantly of a large company background. My background in particular was on mineral exploration, our Chairman was on the financial side – he ended up being CFO for MIN. So we have a lot of exploration project development experience but [we are] also strong on the financial side of things. So I guess we sort of bring to a certain extent, a big company background into a small company nimble approach.
Rebecca Richardson: Jeremy you just announced the sale of your lead-zinc project Lennard Shelf. Why did you sell it?
Jeremy Read: I guess we wanted to capture some value for our shareholders. The lead-zinc market is quite – it’s very cyclical. So we had an opportunity here to capture significant value for our shareholders. We’ve been working on the project a bit over a year; we’ve invested about $27 million in the project and a $78 million consideration is about a 280 per cent return on that investment in a relatively short period of time. And so we thought that that was a good opportunity. It was also going to enable Meridian to go forwards and look at acquisitions of another level of project that we wouldn’t have been able to do up until this point in time. So it’s, you know, a significant event for us and we thought that with that consideration, it was good value capture for our shareholders.
Rebecca Richardson: The transaction will settle in August, what will you do with the funds?
Jeremy Read: Well we’re going to look at a number of options. I guess as a project development company, we would like to reinvest those funds in making another acquisition and to a certain extent, doing what we’ve already done but on a larger scale on a different type of project. I guess our focus is probably going to be more on the copper and gold side of things. So we’ll be assessing what opportunities we have for reinvestment of those funds and we’ll be having discussions with our shareholders as well about, you know, what they’d like to see us do with those funds. And that will be an important component of the decision we make come the end of August.
Rebecca Richardson: Now to the purchase of Russian gold company Omchak. How did you become aware of it and was this a goal of Meridian to acquire a gold producer?
Jeremy Read: It was, we set up Meridian about three years ago and our initial focus was going to be on copper and gold. The Lennard Shelf Project presented itself, we thought it was too good an opportunity to pass up, so we acquired that and you know, now crystallised some value out of that. So we have throughout the last couple of years been looking for gold opportunities and this one was brought to us by contact. We have Macquarie Bank and Macquarie on our share register and late last year they brought us this project and said it was something that they were aware of and were we interested in gold. We said yes we are, didn’t know much about Russia at that stage so we had to get up to speed with that, but it’s quite a sweet resource, it’s quite high grade. So on the basis of that, we have gone through and we are completing due diligence, and hopefully that will be positive and we’ll move forward with the acquisition.
Rebecca Richardson: And is the purchase fully funded now given the sale of Lennard Shelf?
Jeremy Read: It should be able to be fully funded with what we’ve just done with the sale of the Lennard Shelf Project. So, subject to the due diligence being completed, we’ll be in a position to be able to go through and make that acquisition without having to go out and raise any further funds. And then there’ll be the money to actually put it in production and it’s got about an $80-90 million capital expenditure to put it in production. And that proportion – some of that would need to be funded.
Rebecca Richardson: Great, so when do you see production commencing?
Jeremy Read: Well Omchak asset, the approval they have is that construction has to start next January, so January 2011. So if you’re looking sort of towards the middle part of 2013 for gold production to be coming out of Omchak’s assets.
Rebecca Richardson: Closer to home, you have copper/gold projects in the Thomson Fold and Lachlan Fold Belts. What stage are these projects?
Jeremy Read: The Lachlan ones, we haven’t done that much work on them over the last six months or so. We drilled some initial holes a while ago and we’re sort of assessing those projects. Thomson has been pretty active. Thomson is right in the northern part of NSW and over the course of the last month; we’ve been doing some drilling up there. So we’re into five holes - on our last hole now out of a five hole drill programme. So that’s just about to complete, we’ll see what comes out. It’s an exciting part of the world, there’s been very little exploration done up there and so, even with five holes it’s a significant advance forward in just the geological understanding of that part of the world. So yeah, we’ve just about wrapped that up and in a couple of months will be able to say something about results of that.
Rebecca Richardson: Last question Jeremy. What does the next six to 12 months hold for Meridian Minerals?
Jeremy Read: Well in 12 months’ time I’d like to see us to have completed Omchak acquisition and to have made further acquisitions of gold projects within Russia, and really be on the way to building a significant gold business in that part of the world.
Rebecca Richardson: Jeremy Read thanks for the update and congratulations on the sale.
Jeremy Read: Thank you.
ENDS
