Mining the resources boom

Companies in the resources industry have provided the best shareholder returns in Western Australia during the past three years, with only two of the top 10 performers outside the sector.

Both of those companies – ST Synergy and Konekt – provide computer-based management systems.

But it’s no surprise that the state’s booming resources sector and runaway commodity prices have lifted resources companies Fortescue Mining, Paladin Resources and Western Areas to the first three spots.

In fourth is information manage-ment systems company ST Synergy, with a return of 188 per cent for the three years to the end of June 2005.

ST Synergy has been working on a number of knowledge and information management systems, and recently took its stake in ground-breaking display company Pano-ramaFLAT – its 4,000-line horizontal resolution digital theatrical projectors (digital cinema) and flat panel monitors and TVs – to 27.25 per cent.

ST Synergy says the worldwide digital theatrical projector market is for 130,000 projectors currently selling for $100,000 each, making a total market size worth $13 billion.

Injuries management and workplace health solutions company Konekt comes in at seventh, with a shareholder return of 144 per cent for the past three years.

Perth founded, but now Sydney-based, the company is Australia’s leading organisational health services consultant, with 400 staff in 40 offices throughout the country charged with reducing company costs and mitigating workplace health risks.

WA’s best shareholder performer is Pilbara iron ore project developer Fortescue Metals Group with returns of 402 per cent for the period.

Construction of the company’s $2 billion-plus project is expected to begin in December this year, with first production slated for January-February 2008, amid concerns over Chinese commitment to project financing.

The project has inferred and indicated resources of 1.5 billion tonnes at 58 per cent iron.

Next is uranium explorer Paladin Resources with returns of 307 per cent, based mainly on its Langer Heinrich project in Namibia, expected to go into production in September next year, and its Kayelekere Project in Malawi, where a bankable feasibility study is under way.

The $US92 million ($A120 million) Langer Heinrich project is expected to produce 1,180tpa (2.6Mlb), worth $US65 million ($A84.4 million) a year based on a uranium price of $US25 per pound. It has a mine life of 11 years and a process plant life of 15 years.

Kayelekere has total inferred resources of 1.8 million tonnes at 13 per cent uranium oxide containing 10,430 tonnes.

In third spot, rising nickel star Western Areas has done well for shareholders, posting a 194 per cent return for the three years, with its share price rising from $1.30 to about $2.14 in the last couple of months (see separate story this page).

Aurora Oil & Gas posted a 186 per cent shareholder return for fifth place on the shareholder returns list as the company moved from its previous life as menswear retailer Tony Barlow Australia.

The company has stakes of between 12.5 per cent and 16.6 per cent in a suite of producing and non-producing gas properties in Texas, US.

Next on the list is gold and silver producer Legend Mining with a 148 per cent shareholder return over the past three years.

The company has extensive silver holdings around Karratha and the old Gidgee gold mine, south west of Wiluna, which was shut down in March this year.

Extensive exploration since then has yielded a resource of 320,000 ounces, moving the company to describe the immediate region as having “multi million ounce resource potential”.

Celebrated prospector Mark Creasy has faith, despite losing $5 million on the project last year.

Wedgetail Exploration has been cranking up its Nullagine gold project in WA, the major contributor to a 142 per cent shareholder return in the period and eighth spot on the list.

The company is currently in the midst of mine design after delineating an open pit resource of 4.2mt at 2.6 grams gold a tonne (g/t) to produce 314,000 ounces at a cost of $359 ounces for a cash surplus of $62 million. This is based on the likely scenario of a 1Mtpa processing operation and a gold price of $A570/ounce.

The company says there is further upside from heap leaching the low-grade material and from numerous other exploration targets over the known 85 kilometres of mineralised strike.

Excellent preliminary feasibility study resource figures from ninth placed Moto Gold Mines’ Moto gold project in the Congo, have underpinned a healthy 142 per cent shareholder return.

Latest resource figures include an indicated 8.23mt at 2.6g/t containing 700,000 ounces and an inferred 89.23mt at 2.6g/t containing 7.33 million ounces.

The company is currently diamond drilling to upgrade the existing resources from inferred to the higher indicated category. The pre-feasibility study is expected to be completed late next year.

Precious Metals Australia rounds out the top 10 with a three-year shareholder return of 142 per cent after finalising the acquisition of the Windimurra vanadium project at Mt Magnet.

This is believed to be the largest such deposit in the world and plans are for a production capacity of between 20 million pounds and 22 million pounds of vanadium pentoxide a year. The feasibility study is scheduled to be completed early next year, with redevelopment expected to take a further six to nine months.