Transcription of Finance News Network interview with Cape Lambert Resources (ASX:CFE) executive chairman, Tony SageRebecca Richardson: Hello Rebecca Richardson for the Finance News Network. Joining me from mineral investment company Cape Lambert Resources is executive chairman, Tony Sage.
Tony welcome to FNN. Can you start by introducing the Company?
Tony Sage: Cape Lambert’s a different company; we base ourselves on a funds management model. My background was funds management, I was a fund manager for 15 years and I saw a different niche in the market where most companies that start up want to develop a mine. And if you look at the history of mining in Australia, out of every hundred companies, only about six or seven actually end up being producers.
Most of the growth that you find in companies is when you have your discovery, the share market just appreciates that and the share price goes up. So what Cape Lambert tries to do is capture that growth. Once you have found the discovery and you go into the bankable feasibility study etc, the share price flattens off before it goes into production again. So what we try and do is capture that and then pay that money back as a dividend to our shareholders.
Rebecca Richardson: So how long have you been listed and what have you returned to shareholders over that time?
Tony Sage: We listed in 2006 and in that time, we’ve paid back to shareholders $150 million. But the key point is, we’ve not gone back to the market and diluted our existing shareholders. So we raised $20 million back in 2006, we’ve returned $150 million back to shareholders, but we didn’t have to go back and raise any more money. So we generated our own cash flow by selling the assets that we do acquire.
Rebecca Richardson: And who’s on the Board?
Tony Sage: Myself as executive chairman. We have a very distinguished lawyer out of Melbourne, Ross Levin as a non-executive director. Tim Turner, expert in finance based in Perth and one of the most doyens of the industry if you like, the iron ore industry, Brian Maher who was with
BHP Hamersley for 30 or 40 years. So we complement each other, you’ve got an entrepreneurial type like myself, a finance, legal and also a mining person.
Rebecca Richardson: Now to your projects starting with Marampa. Can you describe the resource?
Tony Sage: Yeah look it’s a fantastic resource. It’s one of the only resources out of West Africa that was mined before. It was mined for 40 years by the British and all the tanks and the war ships and the planes built for World War II came from iron ore from Sierra Leone, which is fantastic history. But they had a pretty horrific civil war in Sierra Leone and the operators just fled the country. The country’s been stable now for 13 years.
We went in there, picked up the old mine, we’ve drilled it now; we’ve got to a 700 million tonne JORC Compliant resource. If you drilled it further, we could probably increase that to 1.5 billion but where it is now, is about a 30 to 40 year mine life. So we’ve just stopped the drilling work. We finished the feasibility study; the railway line is built so we don’t have to go through that huge Capex. So it’s ready to go in the Cape Lambert model for sale.
Rebecca Richardson: Tony what was the outcome of the recent Scoping Study?
Tony Sage: The outcome of the Scoping Study showed that for about $450 million, you can start up a 2 million tonne per annum operation, expanding that by another 600 million will get to you 10 million tonnes per annum. We don’t have to spend a lot of money on infrastructure because the infrastructure has already been put in place by another company, and we’ve got access rights to that infrastructure. So if you look at virtually every other iron ore deposit in West Africa, it’s billions of dollars worth of investment to start exporting. At Cape Lambert Marampa deposit, it’s only $457 million.
Rebecca Richardson: And what advantages does the Marampa asset have?
Tony Sage: Its proximity to the coast number one, proximity to an operating port number two and a railway line built by a third party, which we have access to. They’re the three main advantages. Other advantages include that it is a hematite deposit, not a magnetite deposit. It does need beneficiation but because the ore is so soft, you don’t have to use as much power to grind it as you do a big magnetite. So many, many advantages for Marampa.
Rebecca Richardson: Tony now to your other projects. Can you run through them in order of size, we’ll start with Pinnacle Group Projects?
Tony Sage: The Pinnacle Group is another set of iron ore assets in West Africa. West Africa is the hottest place at the moment for iron ore. For the first time in history you’ve got Rio Tinto Limited (
ASX:
RIO), BHP Billiton Limited
(ASX:BHP) and Vale (NYSE:VALE), all in the same location fighting for resources. You’ve also got Xstrata (LON:XTA) coming in there and they’ve never produced a tonne of iron ore themselves yet, so they’re now big players in the West African iron ore space.
So we’ve got as well as Marampa two deposits, one called Kukuna. Our independent geologists believe there’s about 2 billion tonnes there and that’s only 80 kilometres from the coast. Our next one is Sandenia, that’s in Guinea. It’s probably 300 kilometres from the coast and about 30kilometres from Bellzone’s 3.5 billion tonne deposit - hasn’t been drilled, but again our estimate is about 3 to 3.5 billion tonnes there. So all in all with Marampa, you can see we’ve almost got 7 billion tonnes of iron ore all very, very close to the coast.
Rebecca Richardson: What about Leichhardt?
Tony Sage: Leichhardt, it’s near the Lady Annie project that we’ve sold recently to CST. It’s an existing mine, it’s got an existing plant on it. If you wanted to replace that plant it would cost you $90 million. It’s only a 10,000 tonne per annum plant but with current copper prices the way they are, it’s going to be very profitable. We bought it as a liquidated company as we do, we pick up distressed assets. We’re now drilling it to get the mine life to more than the current 18 months, probably to about five years. We’ll stop drilling and then we’ll put that one on the market to sell.
Rebecca Richardson: And Australis?
Tony Sage: Australis – rock phosphate, something that Cape Lambert’s not got a lot of experience in. So at the moment we are just doing a lot of mapping work, on the ground work, geophysical work, find out what’s there and then we’ll look at the options after that.
Rebecca Richardson: What about your legal proceedings against Metallurgical Corporation of China Limited (SHA:601618), when is a decision likely?
Tony Sage: Okay that one’s an interesting one; we’ve tried mediation with the Chinese on this. They finally agreed, so we’re going to meet in the next six to eight weeks. They owe us $80 million. The good news is that in their accounts, they’re a listed company in Hong Kong now; they’ve actually put in their accounts a contingent liability to Cape Lambert of $80 million. So they have acknowledged that the debt does exist, I think it’s just a matter of mediation to finalise that. I don’t expect it to be finalised this calendar year, but by the First Quarter next year.
Rebecca Richardson: Now to your investments, you retained a 25 per cent interest in African Iron at the IPO. What other investments does the Company hold?
Tony Sage: We hold numerous investments in different companies. I think the Cape Lambert philosophy is not just to be stuck with one commodity. We have a company called Cauldron for example, we own close to, or we control close to 30 per cent of, which is in uranium in Argentina and Australia. We have another company called International Goldfields which again we retain about 30 per cent interest, that’s got gold in near Tropicana in Western Australia.
Also in Marley and also in Cote D’Ivoire right next to the big Perseus deposit, it also has a gold operation in Brazil. So we want to diversify into other assets for future reference and not just stick to iron ore. But our core focus at the moment is iron ore, but we’ve got interests in these other companies which are self-funding. That means the money doesn’t come from Cape Lambert itself.
Rebecca Richardson: Now to financials. What’s your cash position and budgeted expenditure for this financial year?
Tony Sage: Look we’ve got currently $40 million in the bank. We recently sold an asset to another company called Glory Resources. That’s going to bring in another $32.5 million into the bank, so say roughly $70 million by the end of December. We’re going to spend most of that money drilling at our West African iron ore project, so say we use $30 million of that to drill over the next 12 months. So it still leaves us a very healthy cash balance after the drilling work’s done.
Rebecca Richardson: And barring asset sales, do you have the room to make further acquisitions?
Tony Sage: We certainly do, yeah. The way the current market is going there are fantastic opportunities out there. During 2008, we spent $200 million buying various assets around the world and they proved to be very astute buys at the time because the market was down. At the moment the market is down and there’s plenty of opportunities out there, and we’re looking at 10 to 15 new projects a month.
Rebecca Richardson: Last question Tony. Where would you like to see Cape Lambert in twelve months’ time?
Tony Sage: I’ve hopefully paid out another dividend to our shareholders, that’s the aim of the Company. We don’t really worry about where the share price is day to day, what we worry about is how much we’ve returned to shareholders. As I said at the top, we’ve already given $150 million back to shareholders. I hope in 12 months’ time I would have given back $250 million.
Rebecca Richardson: Tony Sage thanks for the update.
Tony Sage: No problems, thank you.
ENDS
