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Imdex takes a step back to simplify its business

MINING sand product company Imdex Limited has announced a major change in direction following a review of the company’s portfolio.

It means undoing some of the mistakes of the past by distancing itself from direct involvement in mining activities and returning to its core activity of mining services and support.

By year’s end the wholly-owned subsidiary Australian Vermiculite Industries Pty Ltd (AVI), with net assets of around $6 million, is expected to

be unloaded while the Micaceous Iron Oxide

business will be shown the door by mid-next year.

Vermiculite is commonly used in its exfoliated form. Exfoliated vermiculite has a large internal air volume and therefore possesses good thermal and insulation characteristics, as well as aeration properties. It can be used as a fire retardant, in potting mixes and as an absorbent, or as a carrying agent in slow-release fertiliser and stock feeds.

The mining assets sell-off marks a backflip for the Perth company after it purchased AVI less than 18 months ago, just days before director Bernie Ridgeway was appointed as managing director, replacing David Quinlivan.

Mr Ridgeway was formerly the general manager at Weldtronics Limited, a subsidiary of AI Engineering Corporation Limited.

Although already on the board at the time the decision was made to expand into mining, Mr Ridgeway said the company’s move to increase its stake in Australia’s sole operating vermiculite mine near Alice Springs from a 25 per cent interest to sole ownership was not one he would have made.

“That transaction wasn’t really in the best interest of Imdex and if I had been managing director I wouldn’t have bought a greater share,” he said.

Instead, Mr Ridgeway believes the total sell-out from the vermiculite business would have served the company better in the long term.

While investing in the vermiculite industry is now seen by the company as not being advantageous to its future growth prospects, the board has expanded its vermiculite assets with the buy-in of an 80 per cent interest in the Hillview vermiculite deposit in New South Wales near the town of Tottenham, 400 kilometres west of Sydney.

Settlement of the transaction, valued at around $500,000, most likely will be in the form of two million Imdex shares being issued to Helix Resources.

Mr Ridgeway told Business News the decision to purchase Australia’s only know deposit of vermiculite besides the Alice Springs deposit was a strategic decision to make the AVI business more attractive as an investment.

He said the removal of non-core assets was necessary not only to refocus the business on growth opportunities but also would remove investor confusion about the nature of the business.

“That will take away any confusion over whether we are a mining company or an industrial company. It’s basically simplifying the company,” he said.

DJ Carmichael analyst Peter Strachan welcomed the announcement by the company as “it returns to its knitting”.

Yet still a shadow hangs over the company. Its reliance on the supply of mud to mining companies as a drilling lubricant may be tested as explorers and mining companies adopt other underbalance fluids, including natural gas.

“Nowadays companies are starting to realise that you don’t need mud for drilling. Eventually this could be a threat to the mud business,” Mr Strachan said.

“You would hope that Imdex would continue to spend money on research and development to continue to provide fluids other than mud.”

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