Tamaya Re-Writes The Rule Book With A Money-Saving Move To London
By Our Man in Oz
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Not many mining companies move to London to save money. But that’s just what Tamaya Resources is doing as it juggles the challenges of developing a global spread of mining interests off a small financial base. Technically, Tamaya will retain its home stock exchange listing in Australia, but relocate its head office to the inner London suburb of Wimbledon.
The shift will save more than A$400,000 a year, mainly in the air fares currently being racked up shuttling managers between Tamaya’s copper interests in Chile, its gold interests in Armenia and its tungsten interests in Portugal. It’s the far-flung nature of Tamaya’s assets, and what appears to be a lack of clear focus on any single asset, that worries some outside observers. This is a company supporting far-flung aspirations on a modest market capitalisation and a share price which has fallen by 60 per cent over the past six months. But that’s history, according to Tamaya chairman, Hugh Callaghan. He reckons the future will be a lot different.
“We have had a number of issues with our share price,” Callaghan tells Minesite after the end of a three week hunt to pin him down for a telephone interview. “Cash costs at our copper mine in Chile have been high as we work through a low-grade ore zone. There was also the issue of a big shareholder selling down, and some rather odd trading during the margin-lending mess in Australia. Those matters are largely resolved and now we’re set to focus on expanding our copper assets in Chile”.
Unravelling Tamaya is not easy, but it’s worth the effort. Even Callaghan, a lawyer with a lawyer’s love of using more words than is always necessary, acknowledges the problem. He says the immediate focus of the company is copper in Chile: “It’s not hard to see that profit margins on copper in this market are excellent”. Centrepiece of Tamaya’s assets is the Punitaqui project, which has just hit its target of processing 3,000 tonnes of ore a day, and is now heading for 4,000 tonnes a day. At 3,000 tonnes the project is yielding between 21 million pounds of copper a year, valued at more than US$100 million.
Investors, however, are waiting to see Tamaya deliver on its promise. They were unimpressed with the company’s A$6.6 million profit in the 2007 calendar year, a result which Callaghan admits was dragged down by difficult operating conditions in the December quarter. “It is obviously pleasing to have been able to record a positive financial result at a time of rapid change within the business,” he says. “But the December quarter was particularly challenging”.
What Callaghan wants is for investors to see that Tamaya has moved on after a somewhat rocky start and is setting itself for a brighter future using London as the springboard. The business itself has roots in the small company SMC Gold, which worked in the Charters Towers district of northern Queensland. From gold in Australia SMC moved in 2006 into the copper business in Chile, though a deal which now makes Callaghan laugh. “The mine was processing between 600 to 700 tonnes of ore a day in a plant which was between 30 to 40 years old, and pretty much of a type you just don’t see any more. It was made of wood, concrete and corrugated iron,” he says. “SMC really struggled, tried to raise capital, and in June [2006] I was approached by a number of key shareholders who wanted to get the business moving.” At that time Callaghan was running the coal miner Riversdale Mining. “The challenge in Chile interested me partly because I had worked with Rio Tinto at Escondida”, he says.
SMC, which morphed into Tamaya, proved to be somewhat more of a challenge than Callaghan expected. “The company was technically bankrupt, trading at A6 cents a share, with a weak share register,” he continues. “We came in, used cash flow from the mine to build a new plant around the old one without stopping production. It quite literally involved making decisions on a week by week basis, buying a piece of ducting or new pipes. It was classic hand to mouth. It was no different to someone doing up an old house”. One potentially serious surprise was the discovery that the original owners did not have a single operating permit or government licence to mine. New management was brought in. The company board changed. Gradually the project expanded – and licences obtained.
Callaghan says mining over the past half year has been through a low-grade zone which is coming in at well below the long-run average of 1.6 per cent copper. At the average grade copper output will rise to around 26 million pounds, or 12,000 tonnes a year. Further expansion beyond that level is planned with output likely to grow by another 30 per cent over the next 12 months from ore delivered from a mix of underground and open pit developments. On top of that there is exploration blue sky which has the potential to change the longer-term outlook. Carefully-planned drilling, of a type never before seen at Punitaqui, is now expanding the resource base which currently stands at 127,000 tonnes of copper in the ground.
Punitaqui is the company starter for Tamaya. The next moves will be the development of a Soviet-era goldmine in Armenia, and the advancement of the tungsten and gold in Portugal. “We deliberately decided last year to add gold because we could see that the gold price was going to move up strongly,” says Callaghan. The Lichkvav project Armenia contains both gold and copper and should come on line next March. The assets in Portugal are some way further from development. But Callaghan says that even with the European assets and a London office, the major interest is still copper. “Our focus is clearly Chile and copper,” Callaghan says. “At Punitaqui we can see the makings of a quite meaningful and high-grade ore system.”
That leads to a pointed question for Callaghan: With a share price seemingly stuck around A12 cents is he under pressure to deliver? “We have been very aggressive corporately and we now need to deliver on the value in this portfolio,” he says. “We’ve got a substantial land position and we’ve got a substantial resource position. I doubt we’ll be doing much corporately for a while. People who know me will scoff at that because they know I’m a bit of a deal junky, but right now we need to focus on what we have.” |
