Small Talk: Strategic Minerals puts tax concerns aside in Queensland
Monday 18 July 2011
It has now been a week since the announcement by the Australian government of sweeping plans to curb carbon emissions, with Canberra unveiling a levy on the country's biggest polluters. The continent boasts a vast mining industry, and the news has been met with disappointment among industry groups. Some big- name miners also weighed in, agreeing with the principle of tackling climate change, but not so receptive to the idea of the planned tax on their operations.
But what about the smallerplayers? There are numerous mid- and small-cap miners acrossAustralia – one of them is Strategic Minerals, which made its market debut in London last month.
The company is focused on iron ore in north-eastern Australia and, through its wholly owned subsidiary Iron Glen, owns an exploration permit for minerals covering some 2,100 hectares just south-west of Townsville in resource-rich Queensland. Well, as it turns out, chief executive Patrick Griffiths is not too pleased with the news from Canberra either.
"It's a hotchpotch of a policy," he says, complaining that while he does not disagree with the aim of tackling emissions, the best way to go about it is via collective action around the world. But if the proposal does become law, Mr Griffiths warns it will "add to the cost of Australian exports", and "certainly have a negative impact".
For now, though, his focus is on Strategic and its Iron Glen exploration programme. The company has been busy since listing, with four updates to the market, including one at the end of last week.
The latest release was encouraging, with Strategic saying that its Iron Glen drilling plans are advancing well. Altogether, 10 holes have been completed and another two are nearing completion. The area is known to hold magnetite, which is in increasing demand as an iron ore source – it makes up around 24 per cent of Australia's economic demonstrated reserves of iron ore – and comes in handy in steelmaking. And in addition to showing this resource, recent results, although preliminary, have also pointed to deposits of copper, zinc, silver and gold.
"While these results can only be considered preliminary, they are consistent with our expectations for the area covered by the work completed to date," Mr Griffiths said when he announced the latest results on Friday. "The consistency of the silver value is encouraging, as is the presence of gold. The commercial value of both can only be properly assessed when our geologists have analysed the full assay results, combined with a subsequent assessment of the mineability of the deposit and associated factors."
Ferrex to test mettle on Aim
From iron ore in Australia to iron ore in Africa. This morning will see the commencement of dealings in Ferrex, a miner focused on developing iron ore and manganese deposits in South Africa and Mozambique.
The company has raised £2m before expenses by placing shares at 3p apiece, thus commanding a market value of around £15.5m on admission to London's junior market. The money will go towards expanding and advancing itsportfolio, which includes theMalelane iron and the Leinstermanganese projects in South Africa, as well as a joint venture covering an early stage manganese project at Changara in Mozambique's Tete province.
Ferrex is led by chief executive Dave Reeves and chairman Brian Moritz, who is well known in London's mining circle. A chartered accountant by training, he was once senior partner at Grant Thornton UK, where he formed the accountancy firm's capital markets team, helping to bring more than 100 companies to the Alternative Investment Market during his time there. Mr Reeves specialises in miners, and in the past was the chairman at African Platinum and Metal Bulletin.
The veteran, who has spent more than a decade developing African projects, says that, alongside a sound management team, Ferrex offers a "compelling valuation relative to its peers", adding that he thinks all of the company's projects are well placed to make advances.
"Our near-term resource and mid-term production horizon ideally places Ferrex to capitalise on the increasing world demand for steel, which is the primary market for iron ore and manganese," Mr Reeves says. "The market for steel-feed commodities is growing rapidly, primarily driven by demand in China, and the economic outlook for a company producing such commodities is set to be favourable."
Enegi runs the rule over ABT
Enegi Oil has now been around on the Alternative Investment Market since 2008. The oil prospector, which has interests in Ireland and Newfoundland, Canada, recently raised money via an equity placing, with the funds earmarked for exploration activities, working capital and to pay for due diligence on Advanced Buoy Technology or ABT, which Enegi has an option to acquire.
ABT is a private firm, fully owned by Enegi's chief executive, Alan Minty. So far, however, Enegi has not put any money towards the business. In an update in May, it said it had secured the "exclusive, four-month option, at nominal cost", and wanted to study the business before deciding whether or not to put the deal to shareholders, who will get the chance to vote on the matter.
The company, which recently secured a strategic partnership with the oil services heavyweight Wood Group, is a specialist in new, unmanned buoy technology that allows for the development of marginal oil and gas fields. The idea is attractive. It doesn't make sense to build costly offshore platforms with production systems when it comes to marginal or end-of-life fields; the expense plays havoc with the economics of sucking out a few thousand barrels.
ABT offers a way out with a buoy structure that has an access tower. The unmanned buoy sits just below the surface and houses the production and processing equipment. Crucially, it costs a lot less than big platforms or pricey vessels, making it worthwhile for companies to exploit marginal fields. There are a lot of marginal fields where this technology could be applied. In the UK continental shelf alone, there are numerous avenues for new developments, with many of them too small to merit a huge capital outlay.
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