Glowing report for Kimberley as resource sector leads the way

THE resource sector performed strongest of all sectors featuring WA companies listed on the Australian Stock Exchange during the past year. The Deloitte WA index during May increased 3 per cent on the previous month, turning around a fall of similar size in April.

Since its conception in May 2000 the Deloitte WA index has outperformed the All Ordinaries Index, growing by 34 per cent compared with the ASX All Ordinaries, which has risen by 9 per cent, further confirming the strength of the local economy.

Deloitte partner Peter McIver said the increase in May was driven by the growth of large resource-based companies.

“In particular, Woodside’s market capitalisation grew by approximately $320 million, assisted by the signing agreement for the sale of up to 3.7 million tonnes of LNG over five years to Shell,” he said.

“Sons of Gwalia benefited from strong world gold prices, increasing its market capitalisation by 16 per cent, or $158 million.

“Iluka Resources’ market capitalisation grew an impressive 139 million or 14 per cent on the back of their takeover offer for Basin minerals. ERG also recovered $120 million or 57 per cent after a period of decline.”

But it was Kimberley Diamond Company that deserved special attention, Mr McIver said.

Kimberley listed on the Australian Stock Exchange in 1994 with a market capitalisation of $5.6 million. By May 2000 it had increased marginally to $9 million.

“However, by May 2002 the company had grown its market capitalisation to $89 million, which represents growth of over 880 per cent over a two year period,” Mr McIver said.

“This growth reflects Kimberley’s transition to a diamond producer after several years of exploration progress.”

The Deloitte report says that: “Building on considerable exploration success since 1993 at Blina, Kimberley’s growth momentum really gathered pace during 2001 with its $23.25 million acquisition of the Ellendale Diamond Project, adjacent to Blina, from Argyle Diamonds Mines.

“This transaction, which settled in September 2001, gave Kimberley the opportunity to exploit one of Australia’s richest undeveloped diamond fields, which had been left virtually untouched since the mid-1970s.

“It also cleared the way for development of the first diamond mine in WA to come on stream since the giant Argyle project in the 1980s.

“The financial parameters of the Ellendale project are extremely positive. Based on a Stage One mining rate of 700,000 tonnes per annum, the first two to three years of operations have been forecast to generate over $60 million in revenue and up to $35 million in pre-tax cash flow from a feasibility study completed earlier this year.

“This will enable Kimberley to repay the minimum capital cost of the project and the acquisition cost while still supporting an aggressive regional exploration program and perhaps generating some surplus.

“Kimberley will then be debt-free, with a fully-funded diamond production infrastructure ready to pursue the real prize – the deeper resources of Ellendale Pipes 4 and 9 and the estimated 35 known diamondiferous pies to underpin a long-life operation through until 2010, or beyond,” the report says.


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