http://www.smh.com.au/news/business/aztec-in-sights-of-ambitious-...

http://www.smh.com.au/news/business/aztec-in-sights-of-ambitious-cambrian/2006/06/26/1151174131996.html

Aztec in sights of ambitious Cambrian
Barry FitzGerald
June 27, 2006
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AZTEC Resources is set to join the select ranks of Australia's iron ore money-making machines in the December quarter following the start of construction at its $125 million high-grade Koolan Island project in the blue waters off Western Australia's Kimberley coast.

The main issue for the Perth company now is whether it will be able to maintain its independence before production starts. John Byrne's mining investment group Cambrian Mining, Aztec's biggest shareholder, has declared it does not intend to merely sit on its 30 per cent.

Mr Byrne said yesterday that Cambrian had signalled its intention to become an operating company. He emphasised that Cambrian had not yet made a decision to either sell out or move to control.

The London-listed Cambrian has been a big supporter of Aztec's various funding initiatives to get Koolan Island to the starting stalls. But the intention of Cambrian to either get out or get bigger on the Aztec share register means Aztec is now effectively in play.

That comes as speculation builds that the consolidation of WA's mid-west iron ore hopefuls - Murchison, Mt Gibson, Gindalbie and Midwest Corp - is close at hand, with Aztec's much earlier move into production and its experienced management team giving Cambrian's Aztec stake particular strategic appeal in any new combination.

First iron ore is expected from Koolan Island in the December quarter, ahead of the annual production being ramped up to 4 million tonnes a year. At that level, Aztec could be generating $120 million in free cash flow. Aztec closed 0.5c a share higher yesterday, valuing the group at about $170 million.

Originally modelled on a traditional mining house, Cambrian demonstrated recently that it was intent on taking operating control of its underlying investments.

That came with Cambrian's recent move to buy out the minority shareholders in AGD Mining, the owner of the new Costerfield antimony and gold mine in central Victoria. Cambrian is planning to list on the Australian Stock Exchange.