Tough economic conditions have prompted West Perth-based miner Matilda Minerals Ltd to suspend production at its Tiwi Islands mineral sands operation.
Tough economic conditions have prompted West Perth-based miner Matilda Minerals Ltd to suspend production at its Tiwi Islands mineral sands operation.
The company said the rising cost of fuel, the stronger Australian dollar and damage to the Port Melville wharf, which has prompted lengthy delays in shipping, had altogether hit the project's operating margins.
Below is the full announcement:
Matilda Minerals Limited (ASX: MAL) (Matilda or Company) advises that the Company intends to suspend mineral sands production on the Tiwi Islands in October this year following the completion of the Andranangoo project, due to unfavourable economic conditions. The Company's processing facilities will then be placed on care and maintenance.
After a thorough review of the Tiwi operations, the Board has concluded that the operating margins are currently insufficient to warrant the continuation of operations and moving to the next project area.
The Company's operating costs have risen significantly over the past 12 months, especially the price of fuel for both power generation and mining. In addition, with minerals sands concentrate sales being conducted in US dollars, operating margins have been eroded significantly since the commencement of operations as a result of adverse movement in the A$:US$ exchange rate. Zircon and rutile prices have risen somewhat over this period but not sufficiently to offset the strengthening of the A$.
Operations have been further impacted by the damage to the wharf at Port Melville which was announced on 31 October 2007. To date no repairs have been effected by the wharf owners. Matilda confirms it has no liability in respect of the damage to the wharf. The condition of the wharf has resulted in long delays in the Company resuming shipping which has resulted in additional holding costs and the need to develop alternate loading arrangements. In addition, the freight rate to China has doubled to approximately US$90/tonne since 2007.
The Chairman of Matilda, Barry Bolitho said "we are very disappointed to have to suspend our production on the Tiwi Islands but unless we can achieve significant improvements in our operating margins the financial risk of continuing operations is too high".
Matilda anticipates that the decision to suspend mining operations will result in impairment write downs in the value of its assets associated with the Tiwi operations. These write downs will be finalised as part of the 2008 year end audit.
Matilda has recently entered into sales contracts through Noble Resources Limited and recommenced shipping with 11,000 tonnes of concentrate shipped in mid-August 2008 and a further 22,000 tonnes of zircon rich concentrate scheduled to be shipped to China in September 2008. The balance of the concentrate produced from Andranangoo is scheduled to be shipped by calendar year end. Including the recent shipment of 11,000 tonnes, the Company expects to ship approximately 44,000 tonnes of concentrate by 31 December 2008.
Following the suspension of the operations, rehabilitation will continue at Andranangoo to ensure that the Company maintains its excellent rehabilitation record and meets all of its rehabilitation obligations.
The Company anticipates that after the sale of all concentrates produced at Andranangoo, it will have zero debt and, a net cash position of approximately A$4m following the payment of creditors in full. In addition the Company will fully own its production facilities.
The Company will continue to assess the future of the remaining Tiwi projects with a view that if economic conditions improve operations may recommence.
"Despite the short term economic conditions Matilda remains confident in the longer term future of the mineral sands industry and will continue its exploration efforts on the highly prospective Cape York tenements this season. Matilda is currently actively pursuing other minerals sands opportunities both nationally and internationally" Mr Bolitho said.
Matilda advises that it has applied for 34 Exploration Permits for Coal (EPC's) in Queensland near actively mined projects and is also pursuing other coal initiatives internationally.
Mr Bolitho said "Matilda has been developing a coal strategy for some time and these EPC's are an integral part of this strategy. We have to date been exclusively a minerals sands company focussing on zircon and rutile and the proposed diversification into coal should, if successful, offer excellent growth prospects for the Company."
"The Company is hopeful that these EPC's should offer early exploration results as past exploration data is available and the EPC's are in proximity to existing mines or known deposits. The areas applied for are in coal producing basins in proven coal bearing formations."
