Mr Kiernan Goes to India Hand-in-Hand With Hindustan Copper
By Our Man In Oz
Take your eye off the ball in sport or business and someone else will seize it. Australia learned that last week when it’s old enemy, England, took its opportunities to score a famous rugby victory. Consolidated Minerals, a business which has had its attention diverted by multiple takeover bids and time-consuming defence is now watching one of its enemies seize the day in India. Michael Kiernan, one-time chief executive of ConsMin has picked up a ball dropped by his former company to create a new business based initially on an old copper mine near Calcutta. First ore was hauled to the surface by the aptly-named India Resources at the Surda mine three weeks ago, and first copper concentrate should be produced early in the New Year. It’s not a big project, and Kiernan is keen to keep a low profile in a difficult country, but it is a project with considerable potential, and it is a project which his old firm dropped which adds to the interest. The Surda opportunity, which involves a joint venture with India’s dominant copper producer, Hindustan Copper, was originally designated within ConsMin as its “Indian initiative”. The plan was to apply geological and mining knowledge gained in Australia to the conditions found in India. As all geology students learn in their first year, India, Australia and Africa, were once joined in the giant southern super-continent known as Gondwanaland. It’s this geological link which largely explains why similar mineralisation is found in Australian, India and South Africa – iron ore, diamonds and gold being commodities which bring the regions together.
Geology might be the link, but politics is the difference. Australia is an easy place to explore and mine. South Africa, with its race issues, somewhat harder, and India, courtesy of a civil service designed by Sir Humphrey Appleby of Yes Minister fame, all but impossible. ConsMin discovered this three years ago when it made little headway with its India Initiative despite Kiernan egging things along. When management and ownership issues swamped ConsMin it dropped the plan, only to watch Kiernan, who has been stalking his old firm with an eye on revenge as much as profit, swoop in to claim the deal, and strike a novel business arrangement with an Indian partner.
“One thing I learned about doing business in India is that you must have local involvement, and a local partner,” Kiernan told Minesite. To that end, he appointed a senior local representative and teamed up with Hindustan Copper. Their plan is to re-open Surda, which last produced in 2003, and target initial annual production of 4,500 tonnes of copper in concentrate. This material will be acquired by Hindustan at what is believed to be a substantial discount.
How big a discount is a secret. However, Minesite’s Man in Oz reckons that a casual observer wouldn’t be far off the mark to assume a discount of somewhere between a 33 per cent and a 50 per cent of the London Metal Exchange copper price on that initial 4,500 tonnes, a contribution which might best be seen as the “entry fee” India Resources must pay to do business in a complex country. Once up an running Kiernan is confident that India Resources will be accepted as a useful contributor. It is, for example, expected that the introduction of highly-efficient Australian mining techniques, will quickly get Surda’s output above the start-up target. Copper produced above the 4,500 tonne mark is likely to receive the full LME price.
Details are yet to be fully revealed, but there is little doubt that India Resources is off and running. A few days ago the company announced a fresh A$20 million capital raising pitched at A20 cents a share. Kiernan said the funds would be partly used to expand Surda. “We are now on the cusp of full time mining at Surda,” Kiernan said. “Refurbishment work on the mine and the associated Mosaboni concentrator is nearly complete, with a team of more than 200 people on the ground making great strides, and all key plant and infrastructure in place or on order.” Kiernan said India Resources was also continuing a strategic exploration programme on a range of commodities throughout India, to capitalise on the largely undeveloped potential in the country.
Kiernan’s plan for India is to avoid setting himself up as a big target, no small feat for a big man. He told Minesite that he has watched bigger Australian companies go to India with the same geological theory in their briefcase, and fail miserably. “India isn’t an easy market, but neither was China when we started doing business there,” Kiernan said. “But, if you can find a way into the economy the opportunities are enormous. The lights blinking in New Delhi are an obvious sign that coal is an excellent exploration target for us. Diamonds are another opportunity which is coming our way.”
There is no attempt by Kiernan to hide the fact that his India Initiative is a direct pinch from ConsMin. The board structure of the India Resources says as much with Kiernan joined by Allan Quadrio, Andrew Simpson, and other ex-ConsMin executives in much the same way as this team can be found at Territory Resources, a Kiernan-led iron ore miner in Australia’s Northern Territory. The typical straight talking Kiernan said of India that he was “not betting the farm, just a paddock”. The plan is to be opportunistic and to prove that Australian expertise can “dig and deliver” in a way which is faster and cheaper than traditional Indian methods, and to work closely with partners such as Hindustan Copper. “It’s really a work in progress,” Kiernan says. “But it’s showing a lot of potential, especially as India moves to free up its economy to overseas investment.”
On the market, Australian investors are starting to show an increased awareness of Kiernan’s India play, despite a traditional reticence when it comes to foreign destinations. Over the past few days as news of Surda’s production start and expansion plans filter through the share price of India Resources has crept marginally higher. From around A21 cents in late September the stock is now trading around A23.0 cents cents, which values the entire company at a very untaxing A$12 million – which Kiernan might note is about the price of a paddock on a good farm these days. (Must be a bloody big paddock! Ed)
IRL Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
