Michael Kiernan has a simple vision of where he wants to take Consolidated Minerals before he retires.
Michael Kiernan has a simple vision of where he wants to take Consolidated Minerals before he retires.
“In five years we will have a little manganese business, a little chromite business, a little iron ore business and a little nickel business, run from Western Australia,” he told WA Business News.
Given the recent growth in its core manganese business, little may not be the most appropriate word.
Nonetheless Mr Kiernan is clearly proud to be developing a diversified WA-based minerals business.
Manganese and chromite now provide a strong cash flow for the company, and Mr Kiernan is keen to further diversify ConsMin’s revenue by building nickel and iron ore projects.
The critics haven’t always shared this vision.
“When we took on chromite everyone said you’re crazy, you’re mad, stick to your knitting.”
“We’re now making over 100 per cent margin on our chromite; everyone’s saying good move.”
“We see the same thing in nickel.”
ConsMin has been criticised for pursuing a scattergun approach to its expansion, which has involved multiple equity investments and farm-in deals, but Mr Kiernan is ready to fire back at the critics.
He says the opportunities pursued by ConsMin are carefully targeted, and “the cost of entry to these is very low”.
Mr Kiernan has taken inspiration from Lion Selection Group, which backed ConsMin in its early days and subsequently sold its holding for a tidy profit.
“They supported me to drive the ConsMin bus and they were successful. I’ve used that philosophy in our business,” Mr Kiernan said.
One example is its deal with South Australian company Mithril Resources.
“That cost us about $3 million and the upside potential to that is astronomical,” he said.
“If Mithril strike a nickel ore body they don’t have the financial clout to develop themselves, they will look for a joint venture. That will be us.”
Mr Kiernan said ConsMin’s dealings with Titan Resources – it had planned a joint venture but after due diligence withdrew from the deal – illustrate its measured approach.
“We felt they were opening up the wrong pit. We felt Armstrong was going to present a problem to them, so we withdrew,” he said.
“We said Munda was the project they should be opening up.”
ConsMin has been proven correct at Armstrong and has subsequently agreed to spend $2 million for 50 per cent of the Munda ore body.
Another deal, with Austminex, involves ConsMin spending $6 million on exploration of the Nepean ore body.
“Nepean was a million tonne ore body that produced at 3 per cent. We reckon there may be a second Nepean down there,” Mr Kiernan said. “Once again our nickel exploration team will drive that. That’s not scattergun.”
A fourth deal is with Cazaly Resources.
“[They] approached us. They said they’ve got Kunanulling. They don’t have the resources to develop it so we committed $1 million.”
Mr Kiernan said ConsMin did not pursue a possible iron ore deal with Reed Resources because of the nature of the ore.
“Magnetite requires a pellet plant, that is upstream processing. We are not into that, we dig and deliver.”
By far the biggest move on the nickel front is the $76 million takeover offer for Reliance Mining, which has been endorsed by the Reliance board.
Mr Kiernan said the deal made sense for three main reasons.
“It’s a great location, Kambalda, you can’t get a better location for nickel.
“Second, it’s a well-managed, well-operated business.
“Third, they just don’t have the funds. They need $30 to $40 million to develop the full potential of Beta Hunt and East Alpha.”
If successful, Mr Kiernan is keen to pursue substantial growth.
“Reliance produced about 5,000 tonnes of contained nickel per year. We’d like to double that in the short term … with a goal to ultimately produce about 20,000 tonnes.”
