Small Talk: Australian miner spreads bets with zinc, copper and uranium
Tuesday 25 March 2008
If Mother Earth was a real person, the entrepreneur Mark Hohnen would surely have made her a business partner by now, as his career has been built on farming, mining and extraction companies. He is founding chairman of the Cape Mentelle and Cloudy Bay Vineyards, and has interests in markets as diverse as hospitality and olive oil.
Mr Hohnen is now drawing up the strategy for his AIM-listed exploration group Kalahari Minerals, which mines uranium, copper and other base metals in Namibia, all from his base in Perth, western Australia.
Things have moved fast for Kalahari in the past few months with investment opportunities opening up and the backing of a new investor, which bought in heavily last week. The miner is also in the process of issuing new shares that will inject £14.4m into the company, should stockholders agree to the move. In fundraising terms, Mr Hohnen is already claiming the placing a success, after setting out to raise "between £8m and £12m".
The funds will be used to invest in its mining interests.Mr Hohnen said the group will use some of the proceeds to bolster its holding in Extract Resources, a uranium groupin which Kalahari already holds a 36.2 per cent stake.
Extract, which is listed on the Sydney and Toronto stock exchanges, is on the verge of great things, Kalahari insists. The firm's core project, known as Husab, is located next to some notable uranium projects, including the Rössing mine, owned by the Anglo-Australian giant Rio Tinto and the Langer Heinrich mine, owned byPaladin Energy.
In October last year, Extract released the results of a scoping study, which revealed that a deposit site within the Husab project could ensure viable open pit mining. The report estimated that capital costs would be $211m (£107m).
Kalahari, Extract's majority shareholder, raised concerns that the group will fund much of the extraction work by raising additional capital. If the study is correct and Extract's site does yield plentiful amounts of uranium, Kalahari wants to ensure it is in position to back the project.
But Mr Hohnen was keen to point out that the group is not just concerned with the work of Extract. The firm has its own copper and zinc extracting projects, and is looking at "moving them on".
Much of the copper and zinc mining operations are some way off completion, with Mr Hohnen estimating a "three-year process" for both. However, the group added, "drilling at both copper projects, Witvlei and Dordabis, and at Namib, thelead-zinc project, continues to be encouraging, with further positive results released in October 2007 highlighting the potential of the projects".
The group faces a number of risks. As with any exploration and mining group, there is always the potential that some sites may flatter to deceive. Despite all the positive statements about the amount of uranium at the tips of Extract's drills and encouraging news on copper and zinc exploration, the projects may yield little in the end.
Mr Hohnen is banking on at least some of the firm's enterprises paying off. "We own 100 per cent of our copper interests, 90 per cent of the zinc mines and have the 36 per cent interest in Extract. I'd say we are pretty well balanced."
Others seem to agree. Last Thursday, the group received a £10m boost from Niger Uranium, which announced it had taken a 17.8 per cent stake in Kalahari.
Soaring price of gold may help African Eagle take off
One commodity that has benefited from the credit crunch is gold, as buyers flock to the precious metal worried that other investments will unravel as the crisis plays out.
With demand pushing the price of gold above $1,000 an ounce last week, mining companies churning out vast quantities are laughing all the way to bank. One group still waiting to profit from the gold rush, however, is the AIM-listed exploration group African Eagle, which has licences to mine the precious metal from sites in Tanzania.
That could all be about to change. The company is hoping to produce about half a million ounces of gold from its existing site while, according to managing director Mark Parker, the high price of gold means opening smaller mines is becoming more financially viable.
In the past, these lesssignificant sites were viewed as not commercially suitable, but as demand, and the price, continues to soar, these mines become moreattractive. Tanzania has plenty of such sites, and, as a player in the country already, Mr Parker says his company is well placed to reap the rewards.
There are, of course, risks, above all if the price of gold slumps, although most industry experts believe any drop would be small, at least in the short term. Even so, the market will remain volatile going forward, says an analyst at Ambrian Capital.
There is also the risk that the US economy, already in recession say some, will toil in the coming months, and, as the biggest consumer market for gold, the impact could be significant. Investors will have their fingers crossed as they await developments.
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