Minosora rises to the Windimurra challenge

THE Windimurra vanadium mine, south-east of Mt Magnet, is an operation that really shouldn’t exist.

It was supposed to be purged from the landscape when then-operator Xstrata shut the mine back in 2004, triggering one of the more colourful legal battles in the recent history of Western Australia’s litigation-prone resources sector.

And, if Xstrata’s efforts to permanently erase the mine weren’t damaging enough, the GFC and subsequent sluggish markets should have – and almost did – ensure no-one else got around to redeveloping it. 

On top of all that, the project is a very rare beast in Australian mining – a fully integrated operation that actually produces a finished metal, rather than simply a concentrate ready for export to markets better equipped for adding value. Such integrated projects generally have a dismal history in Australia.

The mine is very real, however, with its current owner, the Michael Minosora-led Atlantic Ltd, producing its first vanadium from the project in mid-January.

“This is a project that will succeed in some sense beyond the odds,” Mr Minosora told WA Business News.

First production came just 14 months after Atlantic plucked the project out of the ashes of Windimurra Vanadium.

That company, which originally went by the name Precious Metals Australia, had been a minority partner in the mine when Xstrata controversially shut it down. Xstrata had other vanadium operations and smelled the chance to make a superior return by closing Windimurra and driving up vanadium prices.

It was the start of a classic David and Goliath battle, with the crippled PMA and its managing director, Roderick Smith, chasing the behemoth Xstrata through the courts.

Even when PMA ultimately won the battle, more controversy was ahead.

Mr Smith was embroiled in the scandal that led to the downfall of then resources minister John Bowler, who had leaked cabinet documents pertaining to the Xstrata case to Windimurra Vanadium.

And the company was unable to carry momentum from its legal win into its efforts to bring the mine back into production. Burdened by heavy expenditures as it tried to redevelop the project, and with cash flow still very much in the distance, Windimurra was sucked into administration in 2009 as the GFC took hold.

Mr Minosora said the controversial history of Windimurra had been a hindrance in his efforts to bring the mine into production.

The time in administration meant Atlantic got a good deal; between acquisition costs and development expenditure it has spent about $330 million on a project that would cost around $850 million to replicate today

However many investors haven’t forgotten the bath they and others took when Windimurra Vanadium collapsed, and potential off-take partners remember all too well having the rug pulled out from under them when Xstrata decided to shutter the mine.

Mr Minosora is well aware that the mine and the company need to prove themselves to a cautious audience.

“From an institutional [investor] perspective, we’ve taken the view we’ll be low profile and look to deliver based on milestones and performance,” Mr Minosora said.

“Then in terms of customers, we’ve made a decision to pretty well stay out of the contract market for the time being and sell into the spot market.”

That, he hopes, will allow Atlantic to demonstrate both the mine’s reliability and the high quality of its vanadium.

China is a major consumer of vanadium, accounting for around 45 per cent of global consumption, but is largely self-sufficient. That leaves other producers to sell into European or North American markets.

Mr Minosora notes that while many other vanadium producers struggle to sell into the US market due to trade barriers, Atlantic faces no such challenges thanks to the free trade agreement between Australia and the US.

Whereas vanadium in the European market sells in the $US23 to $US24 a kilogram range, the metal goes for $US31 a kilogram in the US.

Given Windimurra’s previous history of disappointments, Atlantic is staying away from any forecasts about either its operating costs or its potential profitability over the mine’s estimated 28-year production life. But current vanadium prices should support a healthy project.

“At $US23-24 a kilo we’re pretty happy. At $US31 we’re very happy,” said Mr Minosora, who has a lot riding on Atlantic turning around the slide during which its price has fallen from $2.40 last April to around $1.10.

He currently owns around 7 per cent of the company, having spent $5.4 million of his own money buying up shares as part of a placement last December.

As much as the Atlantic story is about a mine that shouldn’t exist, it is also a fascinating study of one man’s career path. Mr Minosora had been flagged as a potential successor to Andrew Forrest at Fortescue Metals Group, but shocked many when he walked away from the chief financial officer’s role at the iron ore miner in 2009.

He was Atlantic’s only employee when he joined the company in October that year. Fortescue has gone from strength to strength, while Mr Minosora has been left to build a company from scratch during a particularly tough market for the junior resources sector.

“My leaving of Fortescue was nothing to do with any shortcomings in that organisation; quite to the contrary, and I think I’ve benefited from a lot of the experience I’ve had there in what we’ve been able to do to date at Atlantic,” Mr Minosora said.

“I would not trade what I’m doing for anything.”