“We have warned the market that we do not make a profit in this half,” David Moore, Mincor CEO, said during a chat with the man in minesite Oz, which took place earlier this week . It is a statement that he almost wished to make - as if companies focusing on how the conditions are difficult. “The key to everything we do is to manage the decline so that we are well positioned when conditions improve. Key elements of our strategy are to protect operating margins and protecting our balance sheet. We have set a goal to expand our resource base so that we can raise the production of the next upswing, to re-establish the basic price. ”
After a serious decline in the company’s share price during 2008, investors are beginning to understand the plan Moore. Since the share reached a low of 12 months A45.5 cents in late November, they were on the way back. Last week, the brand hit the A $ 1.00, before falling back to around A76 cents, a price that values the company at a lazy A $ 151 million, half of which can be represented simply by money in the bank account of Mincor. The other half of the value is represented by some of the best deposits of nickel, since they are located around the Kambalda Dome in the center of Western Australia. These are the same people who once mines Western Mining Corporation has made a name in mining.
Over the past eight years, and if you care to go back that far, remember the conditions very similar to those prevailing at present, Mincor has carefully assembled a portfolio of assets that extends around the ‘Kambalda Dome. For the record, the Kambalda Dome is a geological structure, surrounded by ancient volcanic lava channels containing nickel in high quality. And plans to produce a series of mine was moving towards a stable of 20,000 tons of metal a year before the global financial crisis struck. The current plan is to produce between 16,000 and 19,000 tonnes of metal per year. The decline was largely achieved by mothballing the Miitel mine, for the development of a new plan of mine, and mine more carefully at other mines.
The most important result of the cut to fit Mincor tougher times is that all transactions are cash positive, even if they are not profitable in a strict accounting. The cash cost per pound of nickel has been reduced to around U.S. $ 2.80, which, at current metal prices means that the company is still generating positive cash flows between A $ 2 million and 5 million dollars per month. “There is no denying how the conditions were difficult,” says Moore. “But we were also able to maintain a very strong financial position in the depths of a slowdown, which means that we are exceptionally well placed to recover. Right now, we are in a very strong position.”
Moore said that the beginning of January increased the price of nickel, when it rose to over U.S. $ 5.80 a pound, not aid, while the last retreat at U.S. $ 4.62 per pound will hurt. However, offsetting the decline in prices in U.S. dollars has been a corresponding decline in the value of the Australian dollar. In local currency, which fell to about US65 cents, Mincor is still getting more than U.S. $ 7.00 per pound. Help more modest hedging program, which covers about 15 percent of production, and has a positive value of nearly U.S. $ 40 million.
One of the best ways to look at is Mincor not consider the operations it has in production, but a mine that was shelved. Miitel was closed for the best reasons to allow the company to step back and look more closely at how best to expand the wealth of resources there. “Miitel has many good years ahead of him,” says Moore. “When nickel prices have fallen, we found that we could continue mining operations to a line of cash, but not at a profit.” But with the mine crew of the track, Mincor is now able to better analyze a discovery called Burnett Shoot which revealed high-quality tests to 13.15% nickel. The discovery is among the largest in several years.
Moore said that when nickel fell as low as U.S. $ 4.20 per pound in early December, each nickel miner in the world is under pressure. “But even at that price, our business is still cash flow positive. That’s good, but not really where you want, when you think from all the other things you want to do and maintain reserves “. He added: “We will fairly comfortable, but it would be nice to see a return to U.S. $ 8.00 per pound, because that’s when the game starts. At U.S. $ 10.00, you can have fun. ”
Exploration is critical to the functioning of the complex geology type of mine in the Kambalda region, continues, “says Moore. “We’ve cut back on the early generative work,” he says. “The key to the expansion of resources and the conversion of resources into reserves is continuing.”
If the geology is under control, the financial structure of Mincor is even more impressive. The company has a large cash generated during the explosion, a caution, covered the production, and costs to adapt to the borders of nickel prices. But more important that these assets is the philosophy of managing daily operations. “Our mind is not to use our cash reserves to fund existing operations,” says Moore. “That’s why we Miitel cocoon. We will not work the mines that are not cash flow positive at the very least. ”
As options for future growth, Moore sees a multitude of possibilities in the company of all the land around Kambalda as well as potential acquisitions. “We are interested in seeing what the possibilities are launched in this market,” he said. “We get a lot of knocks on the door for future promotions.” Are they attractive strikes? Minesite request. “For more attractive,” says Moore.
(worldminingexplorationnews.com)
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