April 04, 2008
By Our Man in Oz
No-one knows mining in Australia better than Phil Crabb, which has been a bit of an issue for London investors because the man who has seen more booms and busts than he cares to remember has confined himself to his home base in Perth for the past four years. That changes next week when Crabb makes an overdue visit to the City, where traditionally there has been strong support for the companies he runs. This time, the plain-talking Aussie will bring news about three companies that fit loosely into his stable, Thundelarra, United Minerals and Royal Resources. While each operates separately, Crabb is the glue which holds them together and if a pre-trip chat with Minesite’s Man in Oz is any guide then it will be worthwhile for London types to track him down, if only for a rejuvenating blast of optimism about his stable, the ongoing demand for resources, the outlook for the market – and everything Australian.
“We’re pretty excited about the projects we have on our books,†Crabb says. “The challenge has been getting the story told widely, which is why it’s time to spread the word in Londonâ€ÂÂÂÂÂ. Crabb dislikes lumping Thundelarra, United and Royal into the one basket. He sees each as a business deserving to be treated as a separate entity. The problem for an outside observer is that two, United and Royal, have lifted iron ore to the top of their lists of immediate priorities, while Thundelarra is a major shareholder in United, and all three have some directors in common.
To avoid an argument, the best way to look at the three is alphabetical, and that means starting with Royal, a Thundelarra spin-off which achieved a rare distinction in a generally flat market last week by copping a speeding ticket from the Australian Securities Exchange. What caught the eye of the regulators was an upward run in the Royal share price from A19c to A29c on 27th March. The drivers behind the 53 per cent one-day price rise appear to be two-fold. Excellent exploration news from the company’s iron ore projects in the Pilbara region of Western Australia, and market chatter that Royal would soon boost its management team with the recruitment of a former senior Rio Tinto executive – speculation that was confirmed on Monday with the appointment of Marcus Flis as Royal’s new chief executive.
On the exploration front, Crabb says drilling of Royal’s projects, Prairie Downs, Marillana and Mindy will get underway in April. Prairie Downs is located just 18 kilometres from BHP Billiton’s flagship iron ore operation in the region of Mt Newman, while Mindy is adjacent to the railway running north from Mt Newman. “The latest fieldwork at Prairie Downs has returned rock chip samples of up to 63 per cent iron,†Crabb says. “Old studies on the area have mapped outcropping iron ore formation of more than 800 metres, but there’s no recorded drilling in the area.†Crabb adds that over the next few months the news flow from Royal will accelerate.
Thundelarra is the second strong story from Crabb. There’s some decent enough uranium assets in the company, but in the near term the interest will come from the start up of mining around mid-year at the company’s 40 per cent-owned Copernicus nickel project in the far north Kimberley region of Western Australia. “I think the market can get ready for some really top stuff from Thundelarra,†Crabb says. Mining at Copernicus is being handled by the project’s 60 per cent owner, Sally Malay Mining, which will process ore through its nearby plant. “They’re got a drill rig on site now, and they take the top off [the orebody] in July, all the approvals are through,†Crabb says. If all goes to plan, Thundelarra’s share of the profit from nickel, copper and cobalt production will be up to A$12 million a year, he reckons.
What makes that profit estimate interesting is that when combined with cash in the bank, and the 20 million shares Thundelarra owns in United Minerals, the current A37c share price of Thundelarra is fully supported so no value is assigned to the uranium assets. “That’s a mistake,†Crabb said. “We’ve been getting really exciting exploration results from the Fleur De Lys project in the Northern Territory, including one sample from an old shaft on the property which assayed 1.58 per cent uranium,†he says. Fleur de Lys is one of a number of prospects in the Pine Creek area held in joint venture with GBS Gold. “We believe there’s every likelihood of a significant return of interest in uranium and we’ve got some of the best tenement positions in the Territory.
Third cab off Crabb’s rank is United Minerals, the company with the best share price performance over the past year, and with a market capitalisation more double that of Thundelarra and Royal combined. The twin keys to United are its iron ore and bauxite interests. Top of the iron ore list is the Railway prospect close to Rio Tinto’s Marandoo iron ore mine. The latest drilling there includes a hit of 40 metres of high-grade haematite ore at depths of between 40 metres and 80 metres with the hole ending in ore. Assays are due soon. Crabb says that that hole was to test for an eastern extension of Railway, and confirmed that mineralisation in the area extends for more than a kilometre. “It also supports a target potential of 100 million tonnes of ore,†he says. “The next step is to undertake more drilling and an economic evaluation of the discovery. It’s our view that we’ll be shipping ore to Port Hedland for export within the next few years.â€ÂÂÂÂÂ
Crabb acknowledges the accuracy of a barbed observation from Minesite’s Man that the corporate structure of his group is unusually complex. But that is largely a result of the way Crabb has created, managed, and positioned the companies to take best advantage of changing market conditions. Gold, which was once his favoured commodity, is curiously absent from the current structure – perhaps a question for when he does the rounds in the City next week.
