IMX Chief Counts Backwards From Christmas As Cairn Hill Moves Closer To Cash Flow
By Our Man in Oz
minesite.com[tt_news]=45620&tx_ttnews[backPid]=755&cHash=2dd4b2bb32
“I’m counting backwards from Christmas”. This isn’t an Australian attempt to re-write the famous Spike Milligan ditty from the Goon Show about “walking backwards for Christmas across the Irish Sea”. Rather it’s the challenge Duncan McBain, the chief executive of IMX Resources, has set himself as he plans the first delivery of the curious blend of iron ore and copper due to come out of the company’s Cairn Hill mine in South Australia. But like the great Milligan, McBain is also facing up to a daunting trip, not backwards over the sea, but across 2,000 kilometres of the central Australian desert, a trip made necessary by the absence of a suitable port to the south, and because once the ore reaches Darwin the shipping distance to China is significantly shortened. Whatever the rationale behind what appears to be the longest rail journey in the world for unprocessed iron ore, the impact on IMX’s financial status will be dramatic.
For the first time in its 22 year history IMX - formerly known as Goldstream Mining - will have cash flowing in through the front door. Estimates provided to a resources conference in Adelaide last week show Cairn Hill generating close to A$22 million in annual cashflow, a total which sits appealingly alongside IMX’s market capitalisation of A$90 million. More importantly, Cairn Hill is very much a starter project, located as it is, at the western end of an 18 kilometre long magnetic structure that holds considerable potential for revealing more deposits that are rich in iron ore and copper.
Understanding the geological composition of what IMX proposes, in a matter of months, to start mining and exporting to China, as McBain counts back on his timetable from a Christmas shipping deadline, is half the challenge in understanding the company. The material, while technically classified as a magnetite iron ore also contains “payable” quantities of copper and gold. If this seems an odd assemblage you only have to look at Cairn Hill’s near-neighbours. They include the Prominent Hill mine, owned by Oxian, the giant Olympic Dam mine owned by BHP Billiton, a bit further to the southeast, and the exciting Carrapateena discovery, owned by Canada’s Teck Cominco. All of these projects are based on the heavily-mineralised, proterozoic-age rocks which underlie much of South Australia and which contain varying blends of copper, uranium, gold and other minerals. In the case of Prominent Hill the blend is copper and gold. At Olympic Dam it’s copper, uranium and gold. At Cairn Hill it’s iron ore and copper.
McBain told Minesite on the fringe of the Adelaide conference that the average grade of the material IMX will export to China is 54.5 per cent iron and 0.41 per cent copper. The initial shipping target is 1.26 million tonnes a year, and the ore will go out from the same wharf being used by Territory Iron to export from its Frances Creek mine. “We’re making good progress with the mine and port plan,” McBain said. “The aim is to start stockpiling ore at Darwin by the end of October with the first shipment out by Christmas. That timetable means I’m counting backwards from Christmas.”
The Cairn Hill material is destined for Tonghua Iron & Steel, the biggest steel producer in the Chinese province of Jilin, and a 10 per cent shareholder in IMX. It wants magnetite, rather than Australia’s traditional haematite iron ore, because most of China’s steel mills are set up to run on locally mined magnetite. Getting copper in the ore, which will be separated out in China, is a bonus for both Tonghua and IMX. “We’ll do a small amount of upgrading at the mine, but not much,” McBain said. “The aim is to use a magnet to upgrade the iron content by between two and three per cent. To go any further risks lowering the copper content of the ore.”
Cashflow is the immediate objective of IMX at Cairn Hill. After that comes the considerable exploration blue sky in the company’s tenements, and the drive to grow the business. On the exploration front the company controls 3,480 square kilometres of ground - an area slightly smaller than the British county of Kent - regarded as Australia’s premier iron ore, copper-gold province. Drilling has been limited, but will accelerate as IMX builds its cash reserves from production at Cairn Hill. “We’re making a fairly straight forward start with a project which is a simple dig and ship operation,” McBain said. “We have sufficient ore to start development, and we’re pretty confident of growing the resource base.”
Keeping the operation simple will be a priority in the early years for IMX, especially after an ill-fated deep test hole designed to see what lies beneath the surface ore of Cairn Hill. In theory, it’s deep down that IMX may find the type of rich copper and/or uranium ore that’s mined at Prominent Hill and Olympic Dam. Unfortunately the test hole designed to pursue this theory, originally developed by IMX’s 5.6 per cent shareholder, Anglo American, was a dud. “Ever since I’ve been in this job some of our shareholders have been saying you must put down a deep test hole,” McBain told Minesite. “Well, we did and while we got some very high grade haematite it was 1,200 metres deep.”
If the exploration potential is one reason to maintain a watching brief on IMX there is a second of equal interest – the way the company’s board has changed shape over the past eight months. Last August saw the appointment of Johann Jacobs as chairman. That was followed in January by the appointment of Tony Haggarty. Neither man will be well known to London investors but both bring immense experience, especially in Australia’s hottest of hot commodities, coal. Jacobs was a senior manager with Agip Coal, Gloucester Coal, and CIM Resources. Haggerty has similar coal pedigree, but is best known in Australia for listing of Excel Coal, and which was subsequently sold less than two years later to Peabody Energy, leaving him with a A$200 million profit. Minesite’s man in Oz might using too much imagination but it’s hard to not imagine two old “coal men” sitting around in the IMX boardroom chatting about the benefits of coal investment in a world short of energy. |
