TRANSCRIPTION OF FINANCE NEWS NETWORK INTERVIEW WITH METALLICA MINERALS LIMITED (ASX:MLM) MANAGING DIRECTOR, ANDREW GILLIES
Lelde Smits: Hello Lelde Smits reporting for the Finance News Network. Joining me today from diversified minerals developer Metallica Minerals (ASX:MLM) is Managing Director, Andrew Gillies.
Andrew welcome to FNN. Could we start with a brief introduction. Where do you operate, and what’s your focus?
Andrew Gillies: Well, we’re in north Queensland, we’re a Brisbane based company and our focus is nickel-cobalt and a rare earth metal called scandium. We’ve also got interests in Cape York in zircon and rutile and have Mineral Sands.
Lelde Smits: OK thanks, so where’s your share price and what’s your market cap?
Andrew Gillies: Well, recently we’ve been trading between say 25 and 30 cents; we’re around about 29 cents at the moment. We’ve got 170 million shares on issue, so that gives us a market cap of around about $33/$34 million.
Lelde Smits: And who are your major shareholders?
Andrew Gillies: Our largest shareholder of about 18 per cent is GM Mining which is a wholly-owned subsidiary of Jilin Nickel, the second largest nickel company in China. And second is about 7.5 per cent is my company Golden Breed; and thirdly is Resource Capital Funds, it’s a Denver based resource investment group.
Lelde Smits: Great. Now looking at your flagship project Nornico, where is it and what does it contain?
Andrew Gillies: Well, Nornico’s an acronym for North Queensland nickel-cobalt. It’s in the hinterland of Townsville; it’s about 2.5 hours’ drive on a sealed road. It’s on – centre where we’re going to be developing, is on the old Greenvale mine site that was developed in 1974 to ‘92 and we’ll be targeting nickel cobalt, and of course rare earth metal scandium.
Lelde Smits: OK, and what is scandium and where is it used?
Andrew Gillies: Well scandium is element 21 on the Periodic Table. It’s a silvery metal; it’s very close to yttrium, zircon and titanium. It has been used in the past extensively in the Soviet Military for missiles and big fighters. It enhances aluminium dramatically so it increases the strength the weld ability and lessens corrosion capability.
And the market’s very small at the moment but we expect that to change once a long term reliable supplier comes in. It’s also used for fuel cells and the world’s best fuel cells running on natural gas or hydrogen maybe, into the future will be using we expect, scandium. So we think there’s enormous growth potential there.
Lelde Smits: Right and what’s Nornico’s competitive advantage?
Andrew Gillies: Well we’re unique in the fact that we’ve got three metals that we’ll be recovering at the same time - that’s nickel, cobalt and scandium. Now, just to give you an example of a typical ore of 1 per cent nickel, .1 cobalt and 100 grams per tonne scandium oxide, that’ll give say over $200 a tonne of metal value for nickel, say $40 a credit from cobalt and about $170 or $180 credit or co-product value from scandium. So that amounts to about $400 a tonne of ore, so we’ll be expecting the processing costs to be under $200 a tonne.
So the margins are there. We’ve got long-life, we’re expecting 15 years and no-one else has got the scandium as a co-product like we have. They’re very rare deposits and of course, it’s excellent location. So those two big things combined will give it excellent competitive advantage.
Lelde Smits: Great, and what stage is the project?
Andrew Gillies: Well the project’s – we’ve actually just last month changed our development strategy from small to large. We’ve gone from 200,000 tonnes per annum to 500,000 tonnes per annum. We acquired Greenvale and Lucknow last year which added to our resource base. We’ve got about 49 million tonnes combined in Nornico nickel belt that contains about 400,000 tonnes of contained nickel and cobalt.
We’ve also changed the process route from atmospheric acid leach to now pressure acid leaching and that’ll be highly efficient as proven technology. It also means that we’ll get economies of scale, both with new technology but also that larger scale of three put.
Lelde Smits: So Andrew, what’s your stake in the project?
Andrew Gillies: Well, Metallica owns 100 per cent of Nornico, it’s also got 80 per cent of the scandium ore rights. We’ve also got Straits Resources in there with 20 per cent, so it gives a lot more confidence going forward and having 100 per cent ownership.
Lelde Smits: Thanks Andrew. Now you also have quite substantial stakes in other explorers with a focus on Queensland, what do you own?
Andrew Gillies: Well, we’ve got a portfolio of four listed companies; that’s MetroCoal, Planet Metals, Cape Alumina and Orion Metals. The biggest one is MetroCoal where Metallica’s got 80 million MetroCoal shares; they’re currently trading around 30 cents. So that’s a big part of our investment portfolio. Cape Alumina is bauxite in Cape York; we’ve got about 30 per cent. In fact, we’re just doing an in specie distribution of 10 per cent of those shares to our shareholders as a bit of a bonus.
Planet Metals, we’ve got 76 per cent and it just recently announced yesterday the $7 million sale of a tungsten mine, so that’s cashed the Company up - it will be extending its face in the copper/gold sector. And Orion Metals we’ve got 16 per cent of, they discovered the Killi Killi Hills discovery in Tanami Western Australia. So that’s an exciting prospect and we’ll be out drilling that in the next couple of months.
So we’ve been very active on all fronts, but very happy to grow that portfolio and at certain times I think it’ll help our shareholders either directly in specie, or partial sell downs to cash the Company up without having to dilute Metallica shareholders.
Lelde Smits: Is this part of the growth strategy?
Andrew Gillies: We’ve got enough in our four listed companies. We’ll be focusing now on Nornico development and feasibility studies and also the Mineral Sands. We’d hope to get Nornico developed in early 2014, into production. And the Mineral Sands, we could get that developed quite quickly and low capital costs, we would be expecting early capital payback in early 2013. So that’s the growth strategy for our project but we would also like to watch and help grow our investments.
Lelde Smits: OK, now to your financials, how much are you spending on a quarterly basis?
Andrew Gillies: Well the March quarter was fairly subdued because it’s that time of the year, there’s very little field activity particularly in Queensland the way the floods and the rains were. So that was about $1 million or less. We’d be, I think this quarter again, it’s fairly subdued, we’re mainly doing metallurgical tests work and the kick-off of a feasibility study, so a scoping study for Nornico, that’s about $1 million. So our burn rate is not too bad.
Lelde Smits: And what’s your cash position and are you funded for the rest of 2011?
Andrew Gillies: Yeah cash position at the moment as we speak is just over $4 million. We probably are looking later in the year of doing some funding. We’ve got a range of options there, obviously a placement is one, we could also look at a partial sell-down of one or more of our investments - not that we’ve got anything in mind at this point in time.
Lelde Smits: Thanks Andrew, now last question. Where would you like to see Metallica Minerals over the next six to 12 months?
Andrew Gillies: Definitely focused on Nornico, we see that as a company maker, it hasn’t been recognised in our share price. In fact, our share price is well below just our investments - our investments are 47 cents and we’re trading at 29 cents. But our focus will be on the development of Nornico, we think we’ve got something unique with the scandium added with the cobalt and nickel.
And also getting our Mineral Sands Project into production, we see that as an easy step to get into production, relatively low capital costs; we’d expect less than $10 million and also quick capital pay-back. So, I think that will be a
quantum leap for Metallica to get into production, something we’ve been waiting for, for some time.
Lelde Smits: Andrew Gillies thanks for the introduction.
Andrew Gillies: Thank you very much.