Mayur Resources Limited (ASX:MRL) Managing Director, Paul Mulder provides an update on the company's PNG projects, which span industrial minerals, power generation, coal, copper and gold.
Rachael Jones: Hello. I'm Rachael Jones for the Finance News Network. Today I'm speaking with Managing Director of Mayur Resources (ASX:MRL) Paul Mulder. Paul, welcome back to FNN.
Paul Mulder: Thank you for having me.
Rachael Jones: Now, Mayur Resources has a number of projects in PNG, spanning a wide range of commodities. How is progress there?
Paul Mulder: Look, we're really happy actually. 2019, we saw a lot of progress made. From a development point of view, we're seeing that the lime and cement project's reaching a final phase of investment, where we're in an equity investment process that KPMG have been engaged in. And that will continue.
We're in the final stages of also securing a mining lease, which will be the final statutory approval. We're expecting to see that granted in this quarter. What is that actually going to mean? It's going to mean that PNG, for the first time, will actually have its own cement and lime plant on a vertically integrated basis, for its own nation-building.
The mineral sands, we've actually started camp construction. And that camp construction is to enable the pilot plant to be built. That pilot plant will be sufficient enough in size to actually do a commercial grade shipment to China.
The coal project with the biomass for the energy and for power, the good news is that there has been some movement at the ministerial level, where they're very keen to secure any source of energy.
Mayur Resources Project Map
Rachael Jones: And, Paul, could you tell me more about the coal use in PNG?
Paul Mulder: Coal, traditionally, hasn't been used extensively in PNG. Electricity, 13% of the population has access to electricity. Half of that electricity, to date, has been supported by imported heavy fuel oil and diesel coming out of the likes of Singapore. We see foreign currency come out of the country and have very high0-cost, high-polluting energy form coming into the country.
Coal is used by the fisheries. They import that from Indonesia and use it for their own captive needs because it's so much cheaper than using electricity off the grid. And they need that form of energy as well for steam, for cooking of the fish, for refrigerant, etc.
So, what we're proposing is that... The coal that's actually in PNG is far better quality than what even Australia uses for its own energy needs. What we're proposing is that coal is used instead of Indonesian coal, firstly.
Secondly, we're proposing that the energy mix that the country adopts is a responsible energy mix. If there's a disaster, a natural disaster, if there's drought or earthquake, if one of those energy mixes goes down, you can't just be solely reliant on gas or solely reliant on hydro. Renewables is expanding, but the reality is they have to have coal for the next 20, 30 years in that mix. And to give you an idea of the quantum difference that we're talking about, the amount of coal that will be used will be 10,000 times less in one year than what China would use in one year. So we're talking an absolute tiny fraction, but that has such a huge benefit.
Rachael Jones: Thanks, Paul. And what's the status of the copper gold portfolio?
Paul Mulder: The copper gold portfolio, whilst very exciting with regard to prospectivity, doesn't really fit centrally with our industrial minerals and energy focus for nation-building. There's a potential that that will end up in a separately listed vehicle. We see that as still a benefit for Mayur Resource shareholders, because they'll be a shareholder in that separate entity, but when investors and shareholders look at our prime focus, our prime focus is industrial minerals and energy.
Rachael Jones: And now let's talk about your funding and approvals for your flagship cement and limestone project. How much equity finance are you seeking?
Paul Mulder: Based on gearing, if you're looking at a traditional project finance range of anywhere between 60 and 70 per cent debt, and the remainder of that being equity, the total project capital of around $330 million, we'll be looking for around $110, maybe $120 million in equity. Around $220 million in debt, depending on the gearing range.
What we're doing is we're running two parallel processes. One is in train with equity, so we're working with the various equity participants that have put forward bids. And KPMG continue to work on that. But in addition to that we've also received expressions of interest, or letters of intent, or what have you, in relation to the provision of debt also for that project. And that's across a range of institutional global financiers, being banks.
Rachael Jones: Thanks Paul. And just to the last question now, is there anything else you'd like to add?
Paul Mulder: Look, we're very confident in the robust financial nature of the project. The returns are extremely attractive. You can look at the bankable feasibility study, and look at the IRRs, and the NPVs of those projects. You're talking very, very attractive IRRs. And that's just because of the nature of the project, being a first mover in PNG. We're three times closer to the Australian market than the rest of China and Japan that's importing into Australia.
So, I think from a value point of view, you just look at one of those projects, one of the three projects has more than the value of the entire market capitalisation of the entire company. When you look at, say, the cement and lime project, it's got a valuation of 600 million NPV. Acknowledging that we will raise equity at the project level for that. We're not expecting the Mayur Resources shareholders to have to fund that. But what we're expecting is at a project level we raise that money. But we still keep the lion share or if not very close to a majority of the economics in that project.
Rachael Jones: Paul Mulder, thanks for the update.
Paul Mulder: Thank you very much.