22/02/2005 - 21:00

Tim Treadgold: Briefcase - Vanadium third time lucky?

22/02/2005 - 21:00


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Third time lucky? That is the kindest comment that can be offered to yet another attempt to revive the dream of WA having its own vanadium industry.

Tim Treadgold: Briefcase - Vanadium third time lucky?

Third time lucky? That is the kindest comment that can be offered to yet another attempt to revive the dream of WA having its own vanadium industry.

The latest player is Reed Resources which is busy reviving the Barrambie project, located about 450 kilometres north-east of Geraldton.

Readers with reasonably long memories may still visualise Barrambie as a play thing of players from booms past. Peter Briggs was certainly an owner in the 1970s, and The Count, a.k.a. Peter Englebrecht, is believed to have had a fling with the prospect.

And if you don’t remember Peter, The Count, and the infamous Ferrovanadium Corporation, then you may remember the late Sir Garrick Agnew and his vanadium dream at Coates Siding and Wundowie.

History aside, Barrambie falls into that category of potential assets that looks terrific when metal prices are high, and awful when they’re low.

Right now, Barrambie is positively glowing with good health, simply because the vanadium price is somewhere around $US10 a pound compared with less than $US2/lb when times are tough.

There is, of course, another aspect to Barrambie and the wider vanadium industry than it being just another would-be development. It was vanadium, and the Windimurra mine of Precious Metals Australia, which caused WMC’s suitor, Xstrata, so much pain – partly because of allegations of its premature closure in order to suit Xstrata’s South African vanadium mines.

Briefcase can’t be bothered going into all that again. It would rather wait for the verdict of the NSW Supreme Court where PMA is seeking damages over the closure.

The real point about vanadium, which is used to harden steel and is enjoying a bit of a dream run along with all steel additives (such as nickel, manganese and chromite), is that it falls into the category of a highly specialised material – of which there does not appear to have ever been a long-term shortage.

One of the problems is that a lot of the world’s vanadium is produced as a by-product of other mining and metal processing. Hiveld Steel and Vanadium, an 80 per cent-owned arm of South Africa’s Anglo American group, is primarily a steel producer with vanadium as a very useful bonus revenue generator, when the price is high – like now.

Back in the 1970s, Barrambie was going to take the world by storm. It didn’t. In the 1980s it was Wundowie (failed). And in the 1990s it was Windimurra (failed).

The track record of vanadium in WA is awful, which is perhaps why the market greeted Reed’s revival plans for Barrambie with limited enthusiasm. In the hours after the February 16 announcement the stock rose 2 cents to 26 cents, but then started to slide again.

Reed, in the best traditions of talking up an old project (set to the tune of "Everything Old is New Again" claimed that since acquiring Barrambie in April 2003, the price of vanadium had jumped from $US2.50/lb to $US10.50 – and that rather than go right through to a smelting operation, it was looking at producing a semi-processed concentrate.

Pre-feasibility studies continue with a report due by the end of June. Briefcase wishes Reed every success but just can’t get out of its mind visions of:

(a) Peter Briggs strutting the world with his Ferrovanadium and Barrambie files in hand;

(b) Sir Garrick doing the same thing with Wundowie; and

(c) Roderick Smith repeating the exercise with Windimurra.

Given the history, Briefcase thinks that Reed boss, and former stockbroker, David Reed, must be an early nominee for the 2005 Sir Humphrey Appleby award for "courageous decision making" – to the sound of collective laughter from Mick Davis and the boys at Xstrata, or did one of them just whisper "here we go again".

THE property market has been a regular target of Briefcase for the past year, and it has been wrong all that time with predictions of a serious downturn.

At the risk of being wrong again, and in the hope of eventually picking the interest-rate driven downturn, here’s yet another warning shot across the bows of rampant property speculators – with a very human twist.

The case of Jarrod McCracken is a story of a brilliant young rugby league footballer whose career was ended in 2000 by a spear tackle which drove him head-first into the ground.

Rugby, however, is not what interests Briefcase. It was the evidence given in a NSW Supreme Court case last week, when McCracken said he owned a property portfolio worth about $20 million "with about $15 million owing in mortgages".

If that information is correct, McCracken is geared to about 75 per cent of the value of his portfolio and, assuming he is paying, say, 8 per cent on his loans he needs to find about $1.2 million a year in interest alone, which means he needs to have very secure tenants because a 1 per cent increase in interest rates will lift his notional annual interest bill to $1.35 million.

Briefcase wishes McCracken every success as a property owner, but suspects that he, like a lot of others, are now looking at what an interest rate rise of 0.5 per cent or up to 1 per cent will do to (a) the cost of servicing the loans, and (b) the capital value of the assets – and that is not a pretty picture.

BY the time this week’s WA Business News hits the street the State election campaign will be largely over and everyone will be waiting to see who to salute as our leader.

Briefcase, which avoids politics like the plague and believes State premiers actually have less of a direct influence on our daily lives than local government, has learned one lesson from the lacklustre affair – and that is that the Labor Party has a long way to go to recognise what is happening in the workplace.

In order to attend formal Labor events, such as the campaign launch, media representatives required one of three forms of identification. A pass to State Parliament, a union membership card, or a letter from your employer on bureau letterhead.

It sounds reasonable, but largely assumes that all media are employed by someone else, and/or belong to a union. Perhaps no-one at the state level has recognised something that even Mark Latham started to identify before imploding – that there is a new class of self-employed workers and contractors who do not fit the old mould, but who are very much plugged into the national and global media courtesy of broadband cable and satellite communications.

What you see in the media also applies in every walk of life. If Britain was once a nation of shopkeepers (thank you Napoleon for that one) then Australia is fast becoming the nation of the small contractor.


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