TRANSCRIPTION OF FINANCE NEWS NETWORK INTERVIEW WITH METALLICA MINERALS LIMITED (ASX:MLM) CHIEF FINANCIAL OFFICER AND DIRECTOR, JOHN HALEY
Joining me today from diversified minerals developer Metallica Minerals (ASX:MLM) is Chief Financial Officer and Director, John Haley.
John welcome to FNN. Could you give us an update on your key project, NORNICO?
John Haley: Okay, we’re currently undertaking a number of studies on the NORNICO project; these have been ongoing in a way for a number of years. But with the recent acquisition of the southern part of the NORNICO project and the acquisition of the 20% of the scandium rights from Straits, we’re moving towards a HPAL process, at a potential level of production of 500,000 tonnes to a million tonnes per annum of processed product.
Now you recently acquired 100% ownership of the project’s scandium deposits with the purchase of a 20% stake from Straits Resources. What was the consideration?
John Haley: The consideration for that acquisition was 3.4 million Metallica shares and 2 million options to acquire Metallica shares. 1 million are exercisable at 50 cents and the other million are exercisable and 70 cents. We thought it was fairly crucial to acquire the remaining 20% of the scandium rights to give us 100% and to avoid even needing a joint venture on those rights in the short term. And that’s particularly crucial as the scandium is a key ingredient of that project. We really refer to it these days as a scandium, nickel and cobalt project rather than the other way around.
And what is Metallica’s stake in the other deposits, nickel and cobalt?
John Haley: We’ve always owned the other deposits 100%, so the Straits acquisition gives us now 100% of the nickel rights, 100% of the cobalt rights and 100% of the scandium rights. So in effect we’re completely controlling our own destiny there without any need to refer to joint venture partners.
Great, now you’ve recently appointed Gavin Becker as CEO for the NORNICO project. What’s Gavin’s experience?
John Haley: Gavin’s basically a metallurgist and engineer by background. He’s got about 35 years’ experience in the industry, both in Australia and in Africa. And fairly crucially for us, he’s got extensive experience including recently with Gladstone Pacific Nickel, in development of nickel laterite deposits. So he has the right background both technically and workwise, to both be the CEO of Metallica and also to drive the NORNICO project forward.
Thanks John, now you also have zircon and rutile projects near Weipa in the far north of Queensland and also in Gippsland in Victoria. At what stage are both projects at, starting with Weipa?
John Haley: The Weipa project, we’ve had that project for a couple of years now. We’ve been aware of it and it’s a small high-grade zircon rutile deposit. It’s currently in the environmental impact study stage and at the same time, we’re carrying out a feasibility study and some mining studies.
Having said that - anything like current rutile and zircon prices, the project is financially extremely robust, it has IRRs and MPVs that are almost unbelievable even at anything like the current price for those mineral sands. So we hope to push that project ahead and the timeline envisages that we might get that one into production in 2013.
Great, and in Gippsland?
John Haley: The Gippsland project is a much larger project that we just recently acquired under option from Rio Tinto. We actually started negotiations with them back in October last year and by the time we signed the agreement finally, it was August this year, but there’s no particular problem with that. What we basically have acquired is a 1 year option to buy that project for $8 million from Rio. So over the course of next year we plan to carry out some drilling programmes, negotiation with landowners, feasibility study, environmental impact studies etc. All the things you normally go through to the extent we can get those done in a year and by then, we’ll make a decision as to whether to apply for $8 million.
I should also mention Rio retain a royalty on the project of 2.5% if we do go into production. But it is a substantial project and it’s much larger as I said before, than the Weipa operation. So it does have the capacity to take us either with a loan or with a joint venture partner, into being a fairly large scale producer of mineral sands.
Now to your other investments in ASX listed companies, starting with MetroCoal where you have a 45% stake. They recently raised $24 million via a placement to a Chinese coal services company DADI Engineering Development Group. Where are the funds going?
John Haley: The funds that we’re raising from that placement, and I should just clarify that the placement’s in two stages, we’ve got $2.4 million already at 75 cents a share. The remaining money is subject to our shareholder approval, which we don’t envisage being an issue given that Metallica owns 45% of the shares and also a number of Chinese approvals, which are normal for Chinese companies making investments overseas. So we hope to have that placement completed by about the 30th of November, the target timeline. And once we’ve received all the funds, they’ll basically go towards the same sorts of activities that we’ve been expending funds on in MetroCoal to date. We have ongoing drilling programmes, ongoing studies into the feasibility of mining, the MetroCoal deposits and we also have some substantial infrastructure needs in the Surat Basin, to which we need to contribute in order to maintain access to port and rail facilities. So its infrastructure orientated but also allowing us to continue to fund drilling out our deposits.
So what does it mean to have an investor with that experience on the register?
John Haley: We’re obviously highly encouraged by DADI coming on board. DADI’s a leading manufacturer of underground mining equipment and mining services in China. MetroCoal is focused on becoming an underground mining company. That just happens to be where our deposits lay, that particular depth, but they’re more suitable to underground mining than open-pit mining and we see the DADI investment as a nice vote of confidence.
We don’t have any agreement with DADI to use their equipment. Obviously they will be interested in supplying that equipment, but they’ve come in as an investor and also a potential supplier of mining equipment. They also supply equipment but not exclusively to China Coal, who are our joint venture partner on one of our deposits in the Surat Basin with MetroCoal.
Now to corporate matters and the next key milestone will be the bankable feasibility study for NORNICO. How much do you estimate it will cost to develop and how will it be funded?
John Haley: The NORNICO feasibility study, the current estimate is in the range of $10 million and that’s fairly normal feasibility study cost for a
project of that size. $10-$15 million is I guess what most people might call the normal range these days. We currently have about $6 million in the bank. We did complete a rights issue about 3 weeks before one of the big market corrections back in early August, so we timed our run there fairly well we think. But we are exploring a number of other options in order to fund the remainder of that feasibility study and all that won’t be required for the next 2 or 3 months. So we’re not under any great pressure to go out there and raise further funds in what is obviously a pretty difficult market. But we do have a number of options there that we are pursuing and you know, obviously we would hope to make an announcement in that regard sometime in the forthcoming months.
Finally John, where would you like to see Metallica Minerals this time next year?
John Haley: This time next year we would like to see the feasibility study on the NORNICO project completed, that would be reasonably tight timing, but achievable. And we’d like to be more advanced, hopefully within about 6 months of getting the Weipa minerals sands project into production. And by this time next year, we need to have made a decision on the Gippsland project, whether to apply it alone or whether with a partner. So we would have liked that to have got to the stage where we’ve completed enough work, and we’re confident enough about it to enable us to go and make that acquisition, or alternatively to bring in a joint venture partner to help us make that acquisition.
So those are probably the 3 things, the NORNICO feasibility study, advancing the other projects particularly the mineral sands and growing our investments.
John Haley thanks for the update on Metallica Minerals and all the best for the year ahead.
John Haley: Thanks very much for the opportunity.