Mining boss Michael Kiernan recently returned from a national road show aimed at shoring up Consolidated Minerals Ltd and walked straight into the firestorm that threatens to consume Croesus Mining NL.
Mining boss Michael Kiernan recently returned from a national road show aimed at shoring up Consolidated Minerals Ltd and walked straight into the firestorm that threatens to consume Croesus Mining NL.
While he was particularly upbeat on the future of the commodities mined by Consmins, Mr Kiernan cut profit projections.
Croesus suspended itself from the stock exchange pending an external review, posted a $27.4 million loss for the first half of 2005-06 and two of its directors resigned.
Mr Kiernan is managing director of metals miner ConsMins and took over as revivalist chairman of gold miner Croesus late last year from Ron Manners, who founded the company 20 years ago.
Croesus will remain under suspension for at least another two weeks as a new mine plan for its Norseman operation is developed.
While Mr Manners declined to comment on Croesus’ fall from grace when contacted by WA Business News, the ever confident Mr Kiernan is backing the company’s survival, possibly with his own money.
Meanwhile at ConsMins, new managing director and former top Anglo American plc executive, Rodney Baxter, is suiting up to weather the slings and arrows of a skeptical market caught off guard by a heavily reduced $7.4 million December 2005 half profit that followed a $22 million previous half profit. The result was savaged by lower nickel and manganese prices, the latter market experiencing a period of volatility and short-term oversupply of alloys, “conditions that will not be replicated in the future”, Mr Kiernan said.
He vehemently refuted suggestions ConsMins had not acted quickly enough to inform the market of the dire effects the lower prices would have on ConsMins’ half year.
At the end of last year, Mr Kiernan predicted a now unrealisable 2005-2006 net profit of $50 million – since reduced to $30 for the above reasons and due to a Chinese company defaulting on a contract. The 2006-2007 net profit prediction of $100 million has since been reduced to $85 million and 2007-2008 is down from $150 million to $115 million.
The company has more than $80 million in cash, receivables and inventory, relatively low net gearing and its immediate future growth is in expanding nickel, copper and zinc production. Existing manganese and chromite production would continue to be a solid base.
It is a more dire story at Croesus, with its Norseman gold operation costs probably the highest in the country.
Mr Kiernan said the board was reviewing all aspects of the company’s business, including the possible need for more capital, which he could be involved in supplying.
“The Norseman ore bodies are sound and the company’s regional tenements highly prospective, however from a cost point of view the operation has simply gone off the rails even in this time of high gold prices,” he said.
The major problems appear to be costs and productivity at Croesus’ Harlequin underground mine, compounded by hedging, or selling forward, much more gold than the mine can supply.
In the December 2005 half, $25 million of the $27.4 million loss came from hedging losses.
