After three recent profit downgrades, Consolidated Minerals is looking to raise $70 million to shore up its Kambalda nickel aspirations, while the associated Kiernan family bails out.
It has been a lucrative few weeks for the resources sector’s Kiernan family.
Michael Kiernan and his son, James, added $3.34 million to the family coffers after selling down their respec-tive holdings in Consolidated Minerals Ltd and Great Western Exploration Ltd.
Outgoing ConsMins managing director, Michael Kiernan, sold a million shares in the company for about $2.66 million, 16 days before the company announced its third profit downgrade for the current financial year in six months.
A couple of days earlier, James Kiernan offloaded about $684,000 worth of stock in soon-to-be-rebadged uranium explorer Great Western, just a few days after his father was appointed a director of the company and ahead of the ratification of his appointment as chairman, expected later this month.
The sale reduced James Kiernan’s holding in Great Western from 20 per cent to 13 per cent, maintaining his status as the company’s biggest shareholder.
Great Western’s shares were around 12 cents in early May, but jumped to 46 cents on the switch to uranium exploration in former Soviet bloc countries and have since slipped back to 38 cents. James Kiernan’s sales were at 49.2 cents a share and 41 cents/share.
Michael Kiernan now holds only about 1 per cent of ConsMins, the manganese, chromite and nickel company he dragged out of the mire in 1997, and which recently announced a $70 million capital raising via unsecured convertible notes.
While he had earlier indicated his intention to sell and move into other areas of the resources sector, the sale two weeks ahead of the profit downgrade raised some shareholder ire.
Michael Kiernan has to come up with $600,000 to put into Great Western if shareholders approve the uranium switch, a name change to Uran Ltd and his appointment as chairman.
The Kiernan cash injection is for four million shares at 15 cents/share. The shares are currently trading at more than twice that.
The Kiernans are both major shareholders in gold explorer, Monarch Resources Ltd.
Just last month, Michael Kiernan announced the third downgrade of ConsMins’ profit projections for the current financial year, with net profit estimates down from $50 million in December 2005 to $25 million in March this year, to the latest $20 million estimate.
He put much of the profit spiral down to the manganese market.
“While Chinese manganese demand has firmed up since the beginning of 2006 and prices have recovered from the 30-35 per cent fall during the second half of last year, the increase has not been as strong as anticipated during the early part of this year,” Mr Kiernan said.
ConsMins produces a million tonnes a year of manganese from its Woodie Woodie mine in the Pilbara, about 10 per cent of the world market.
About 70 per cent of the company’s revenue comes from manganese, something incoming managing director Rod Baxter wants to cut to about 40 per cent “within a few years”. The balance comes from nickel, copper and zinc.
Mr Baxter will take the reins from Mr Kiernan in July, the latter remaining a non-executive director.
The strategy is to double nickel production to 10,000 tonnes a year by the end of 2006, then double it again over the next three years, Mr Baxter said.
Current production is from the Beta Hunt mine at Kambalda, near Kalgoorlie, and associated East Alpha mine, which began production in April.
The company has put about $15 million into the East Alpha development, with another $15 million earmarked through to mid 2009.
ConsMins has also begun a feasibility study into accessing a potential 200,000t nickel resource below existing operations via twin exploration declines under the Beta Hunt and East Alpha orebodies.
An important part of the 20,000t/year nickel strategy is the acquisition of Titan Resources Ltd and its 123,000t of contained nickel in the Widgiemooltha Dome near Kambalda. ConsMins holds 40 per cent of Titan. Mr Baxter said the Titan assets could provide at least one, if not two mines.
Another takeover target is Jabiru Metals Ltd, which is expected to be producing from its $56 million Jaguar zinc/copper mine, 300km north of Kalgoorlie, by mid 2007.
The mine is scheduled to produce 20,000t/year of zinc, 8,000t/year copper and 800,000 ounces/year of silver over a five-year mine life.
ConsMins has about 33 per cent of Jabiru.
