17/10/2012 - 10:40

Jakarta-based Kiernan in manganese play

17/10/2012 - 10:40

Bookmark

Save articles for future reference.

A mining industry stalwart is back in the game with a metal he knows well.

Jakarta-based Kiernan in manganese play

A mining industry stalwart is back in the game with a metal he knows well.

MICHAEL Kiernan, the man who made manganese a popular metal with Australian investors through the company he once ran, Consolidated Minerals, is back in the manganese business.

His comeback is through an Indonesian-based company, Asia Minerals Corporation, in which he is president and major shareholder, and which is working towards a listing on the Australian stock market next year.

The privately owned business, which has the backing of a number of prominent Perth people, is far more advanced than most Australian companies trying to enter the lucrative manganese trade.

AMC is already in production and has its first shipment of 10,000 tonnes of ore from its Kefa mining operation on a wharf in West Timor, awaiting loading after receipt of an export certificate from the Indonesian government.

At 56 per cent manganese, the Kefa material is claimed by AMC to be the highest-grade manganese in the world, with a recent presentation by the company pointing to a highly profitable future as a provider of ore and eventually a producer of smelted manganese alloy.

Based in Jakarta for the past two years, Mr Kiernan has been quietly re-building his career after disastrous diversions into gold and titanium minerals.

“I lost my socks,” he said from his Jakarta office in a typically blunt, but alarmingly contrite, manner.

“I made some serious mistakes. Basically, I torched $8 million of accumulated wealth, and torched my reputation.

“I learned my lesson. I’ve gone back to my roots. I understand manganese. I understand bulk mining. Gold was foreign to me.”

Mr Kiernan described his latest venture as a significant opportunity because of the high-grade nature of manganese in West Timor, but with no modern investment in mining, or exploration.

“What we’re about to start exporting is a manganese of significantly higher grade than what’s exported from Australia,” he said.

“Interest from buyers is strong, and I’ve been able to reconnect with customers from my ConsMin (Consolidated Minerals) days.”

In some ways Mr Kiernan is repeating his experience at ConsMin by simply ‘going mining’ long before the process of exhaustive analysis favoured by modern miners.

Despite poor to non-existent geological maps or technical reports for West Timor, AMC has started digging manganese in its own right, as well as buying material from artisanal miners who work rich deposits of seabed-formed nodules of manganese uplifted over time, and lenses of the material similar to that mined by ConsMin at its Woodie Woodie mine in the Pilbara.

Mr Kiernan’s hands-on management style is probably a source of some amusement in Indonesia, but it is what he learned after rescuing ConsMin from a financial crisis.

Back in the 1990s, Mr Kiernan effectively inherited ConsMin after it was unable to pay the haulage account it had with his trucking business.

Rather than supervising truck drivers, he found himself learning the manganese ropes from the ground up.

But with control of Woodie Woodie came a need to live on site – in a location in the eastern Pilbara that ranks as one of the most isolated areas of Western Australia – overseeing every aspect of mining and trucking, to loading ships at Port Hedland.

Fortunately demand for manganese was booming, and so was its price.

While widely regarded as deeply unsexy, manganese is the world’s fourth most heavily used metal. It is consumed almost entirely by the steel industry, which needs it to produce high-strength products such as oil-drilling pipe.

Under Mr Kiernan, Consolidated switched from being a loss-maker into a highly profitable business, and one of the most valuable WA miners listed on the ASX.

Unfortunately for Mr Kiernan, other people recognised the value in the Woodie Woodie manganese deposit and when he fell out with major investors it opened the way for a corporate raid, with control eventually passing to Ukrainian billionaire Gennadiy Bogolyubov, who privatised ConsMin, de-listing it from the stock market.

After that bruising period, Mr Kiernan tried to find a way back into Australian gold mining via Swan Gold, and titanium minerals, via Matilda Zircon, without success, gradually fading from public view.

Today, he’s back, in a different country, but in a metal he knows better than any other.

AMC, which also has Perth lawyer Tom Bannerman, mining executive Mal Randall, and accountant Kevin Somes on its board, has started life with a small manganese mine of its own, supplemented by the purchase of material from local artisanal ‘diggers’.

In its latest presentation, AMC said its aim was to develop high-grade, direct shipping operations from Indonesia with a focus on manganese and iron ore.

The business development plan is broken into four stages. 

• Early cash flow from small-scale mining to minimise funding with an export target of 125,000t of high-grade manganese ore aiming for a profit margin of $50/t.

• Blending high and low-grade ores to achieve annual exports of 250,000t at a margin of $75/t.

• Smelting, with a $35 million investment in a bank of electric furnaces funded by cash flow, debt and an initial public offering (float) with a target of producing 125,000t of manganese alloy at a profit margin of $500/t.

• Full production by 2014, consisting of 250,000t of 50 per cent manganese ore plus 125,000t of 78 per cent manganese alloy.

At full production, AMC forecasts an annual profit of $47.3 million.

Generating quick cash is AMC’s primary aim. But, as that happens, Mr Kiernan has also engaged exploration geologists to start a detailed exploration program.

“I’m doing exactly what I did at Woodie Woodie,” he said.

“We’ve gone back to grass roots. We’re about to embark on a program to test which geophysical technique is the pathfinder for locating manganese deposits.

“That step is important because the manganese up here is slightly different to that at Woodie Woodie. We’ll try half-a-dozen of the techniques and then move onto a program of drilling next year.

“It’s early days for our field work but geologists who have looked at what we have in West Timor are gobsmacked.”

Mr Kiernan said no detailed plans had been drawn up for the IPO, but that AMC compared itself favourably with Australian-based manganese explorers and miners. It also estimates that its Kefa project is currently valued at $13.6 million.

“Before making a move to the ASX I want to prove that the system works,” Mr Kiernan said.

Iron ore, which is listed as AMC’s second mineral of interest, is still on the company’s exploration to-do list with no firm mining plans, yet.

AMC is more than a fresh business opportunity for Mr Kiernan; it is also a revival opportunity and a chance to tell the mining world ‘I’m back’.

***

“If at first you don’t succeed, try again. Then quit: no use being a damn fool about it. ” 

W.C. Fields

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

Subscription Options