Go to Oz for mining investment

By Peter V O'Brien

Friday 8th November 2002

Surveying the state of listed New Zealand missing companies every three months is becoming a non-event, given the industry's current state.

The situation deteriorated last week when Otter Gold Mines was delisted from the New Zealand exchange. Its shareholders' base was outside the exchange's spread requirements.

The company said New Zealand shareholders could transfer their shares on to the Australian stock exchange. They might be better off quitting their investment, given Otter's current situation, assuming they were not already out.

The September-quarter report repeated a warning given in the report for the three months ended June (NBR, August 9).

Otter is in financial strife and "cannot simply rely on its principal shareholder's [Normandy NFM and then US company Newmont] guarantee of its financial obligations or to provide exploration funding."

Inability on Otter's part to fund its financial obligations and exploration costs independently could "force its principal shareholder and guarantor to consider liquidation or receivership."

Liquidation or receivership could create an interesting situation regarding the Martha Hill gold and silver mine at Waihi. Otter has a 31.94% interest in the mine, which is currently in the news, related to ground subsidence in the township.

Otter said "Waihi Operations" was working with authorities "on a no-liability basis for a 'community solution' approach to assist affected residential properties, including providing funding as it did in relation to the December 2001 Barry Rd collapse."

A "no-liability" basis for a "community solution" may be the company's view but the eventual legal outcome could be different. Assuming Otter went into receivership or liquidation, any buyer of the Martha Hill shareholding would be wary about potential, and possibly uncertain, liabilities.

GRD (another Australian-controlled and listed company) and New Zealand Oil & Gas are the only other groups with New Zealand based productive activities. The rest are exploring in other countries, although with a theoretical New Zealand base.

There was more development in the Reefton Goldfield project of GRD Macraes (a subsidiary of the diversified GRD).

The quarterly report said development of the Globe Progress mine was scheduled to coincide with the completion of concentrate tailings reclamation at Macraes in Central Otago.

Globe Progress would be commissioned in the fourth quarter of 2003.

Results to date confirmed the likely extension of mining from the old General Gordon mine to the Empress. Drilling in the fourth quarter of this year was aimed at further extending mining through to the planned Souvenir mine pit, which would add another 120,000 tonnes of ore at 3.83 grams of gold a tonne.

The Globe Progress drilling programme, aimed at increasing the current 577,000 ounces of gold reserves, was to be resumed this month after heavy rain caused deferral.

Apart from yielding good returns to GRD, the Reefton project would be a substantial boost for the West Coast economy, which suffered many blows in recent years.

BHP Billiton's annual meeting was held on Monday, two working days after the company issued a profit result for the three months ended September and production statistics for the same period.

The group reported an "attributable profit" of $US572 million, a 1.1% increase on the corresponding period of the previous year. BHP Billiton reckoned that was a strong result, despite weak markets.

The company's outlook assessment said the global economy remained weak, China being among the few countries to show growth. "Although petroleum prices have risen with geo-political tensions in the Middle East and rising steel production in Northeast Asia and China continues to support the iron ore and metallurgical coal markets, the prices of many of our products remain at very low levels. We anticipate that the current quarter will be just as difficult as the last.

Rio Tinto and MIM had similar comments. Quarterly production reports from the three Australian mining houses showed steady output but it was obvious commodity prices will affect profit when the groups next report.

New Zealand mining companies are in the never-never land category. Mining investors should be involved in Australia.

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