Mining: Another Day In The Pits

The Age

Tuesday December 16, 2008

BARRY FitzGERALD

IT WAS another day of woe for resources. OMH slashed next year's manganese production target by 30 per cent, Territory Resources flagged hedge book problems and Aquarius' Everest platinum mine in South Africa has been closed.

The cutback at OMH's Bootu Creek mine in the Northern Territory means the operation will produce 200,000 tonnes less high-grade manganese.

At the record contract prices that prevailed for much of the year, this equates to about $220 million in revenue. But like the rest of the raw materials plugged in to the world steel industry, demand for manganese has collapsed. So much so that some traders talk of the market for the material disappearing altogether, for the time being at least.

OMH's response has been to suspend shipments in October and November. It hopes to resume shipments in the first quarter of 2009 once China, the world's biggest steel producer, works off its excess inventory.

OMH closed 4 lower at 90 a share. It was a $2.87 stock in June and worries that its low share price could make it vulnerable to a low-ball bid from Consolidated Minerals after ConsMin's recent acquisition of an 11 per cent OMH shareholding.

The good news from Northern Territory iron ore producer Territory was that it remained fully sold and that it had achieved a minor price increase for sales of its lump and fines iron ore. But it has also been served a "standstill" notice by the provider of its hedging facility because the revenue covered by its hedging contracts is now more than the previously agreed levels of (forecast) US dollar cash receipts.

That is due to lower prices and the dramatic slump in the Australian dollar. The provider of the facility is holding off exercising its termination rights subject to it reaching an agreement on the shortfall with Territory. Territory closed 0.2 higher at 9.6 a share, due mainly to its fully sold position.

In South Africa, Aquarius will retrench up to 1950 workers from its Everest mine, which has subsidence problems. The mine will be closed for at least six months.

© 2008 The Age

Back to News Index | Back to Home