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Reality Bites Peter Johnston, CEO Sydney Mining Club Luncheon 1 August 2002

Reality Bites Peter Johnston, CEO Sydney Mining Club Luncheon 1 August 2002. Who’s squeezing who?. Agenda. Background to Murrin Murrin & Anaconda Major issues impacting on current position The promises The facts (current performance) Now and the future Summary. Murrin Murrin.

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Reality Bites Peter Johnston, CEO Sydney Mining Club Luncheon 1 August 2002

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  1. Reality Bites Peter Johnston, CEO Sydney Mining Club Luncheon 1 August 2002

  2. Who’s squeezing who?

  3. Agenda • Background to Murrin Murrin & Anaconda • Major issues impacting on current position • The promises • The facts (current performance) • Now and the future • Summary

  4. Murrin Murrin

  5. Murrin Murrin Joint Venture • Murrin Murrin is a 60/40 Joint Venture between Anaconda Nickel Ltd and Glencore International AG • Project is located in the North Eastern Goldfields region of Western Australia • Design Basis: • 4 MTPA Mill Feed • 45,000 TPA Nickel (LME) • 3,000 TPA Cobalt • Current reserve approx 300 Million tonnes at 1% Nickel • Process Design based on licensed Sherritt Technology

  6. Murrin Murrin • Project Construction started in May 1997 • US$420m Financing Aug 1997 • Mechanical Completion Dec 1999 • Lloyds Insurance Recovery (A$113m) Aug 2000 • Commercial Production April 2001 • Fluor Arbitration – 1st stage • - Begins Jan 2002 • - Interim award Sep 2002

  7. Significant commissioning delays Slow production ramp-up Capital cost overruns True operating costs still emerging Technical viability Short term liquidity/viability Debt restructuring essential Major Issues

  8. The promises: Three Nickel Provinces (3NP) Dominating Australia’s rich and ancient Yilgarn Craton

  9. The promises – Production profile Announced PlansDate announced 2000 1999 1998 1997 1995 Expected

  10. The promises – Production profile Announced PlansDate announced 2000 1999 1998 1997 1995 Expected

  11. The promises:Corporate Governance – the missing 5th autoclave Quotes from Quarterly Reports: • Sep 99 - 100 day rolling expansion • Mar 00 - studying installation of 5th autoclave • Jun 00 - tenders received for 5th autoclave • Sep 00 - contract has been let for supply of 5th autoclave • Dec 00 - 5th autoclave specifications finalised • Mar 01 - progress on 5th autoclave continued • Jun 01 - ramp up strategy in line with forecast

  12. Over promising – The Share Price Reality Debt restructure requirement announced

  13. The facts: Cash burn Cashflow: 6 months July – Dec 2001 $ million

  14. The facts: Commissioning delay Design Actual

  15. The facts: Production

  16. Restructured the organisation Reduced overhead $457.4m loss for Dec 2001 half year Re-budgeted next 18 months - realistic Reduced all peripheral activities Resolved liquidity issues Debt restructuring negotiations commenced Now and the futureNew management – achievements to date

  17. Now and the futureAbsolute imperatives • Debt restructure - Complete recapitalisation • Murrin Murrin operations – plant performance • Focus on cost management • Retention of key personnel • Eliminate legacy legal disputes • Remain cash positive pre financing • Resolve Fluor Daniel arbitration • Transparent organisation – focus on corporate governance

  18. Summary • Debt restructure close to resolution • Murrin Murrin performance trending up • Experienced management team in place • Consolidation phase: - reduce costs - reduce production variability - generate positive cash flow • Clean balance sheet • Viable long term future

  19. If this is difficult wait for Saturday

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