‘I’M WINSTON Wolfe, I solve problems,” said actor Harvey Keitel in the movie Pulp Fiction. It is a line and character that could perhaps call to mind in a corporate sense Julian Tapp, the former FMG executive who last month parachuted into the CEO role at uranium developer Minerals and Energy (ASX: EMA). And with last week’s appointment of the enthusiastic “can do” Mike Young – is that you MacGyver? – EMA may indeed now have the executives needed to get the Mulga Rock uranium project on track.
Tapp, an economist by profession, was apparently the Mr Wolfe of FMG whenever regulatory or government hurdles got in the way during the halcyon development days of that company last decade.
Young on the other hand was the driving force behind one of the very few juniors to actually turn rhetoric into hard cash (for shareholders!) during the iron ore boom.
Despite outlining a significant resource at Mulga Rock – located 240km north-east of Kalgoorlie in Western Australia – EMA has been in a bit of a holding pattern for some time due to both micro and macro issues.
Regarding the latter, even Mr Wolfe won’t be able to help. However, while Tapp doesn’t necessarily expect much positive uranium price action in the short term, longer term he is very confident given current primary production of 55,000 tonnes of uranium per annum versus 65,000tpa of supply – with the balance currently being met by utility stockpiles and the soon to be completed (2013!) ‘megatons to megawatts’ program involving bomb-grade uranium being recycled into low-enriched uranium fuel suitable for nuclear power plants.
In terms of company specific issues, EMA has had its moments in recent times including litigation by a third party (related to plainting and now resolved), and evident internal unrest given the new CEO effectively becoming the fourth executive to lead the company in less than two years following the initial managing director’s departure in June 2011.
Tapp’s has a good list of his own to work through.
For starters being uranium makes for sensitive authorities, sensitive governments and sensitive populations, all of whom will need to be convinced.
While Toro Energy’s success to date has certainly paved an easier way for EMA on the regulatory score, there’s still going to be plenty of convincing required.
On the ground, EMA is still yet to really nail down the optimal process route, though progress is believed advanced enough for consideration of a possible operation producing in the order of three million pounds per annum at operating costs of about $A40-45/lb.
The plan in the short term is that drilling will be undertaken to collect samples for further metallurgical optimisation work.
Funding for this could be sorted soon, with further funds potentially needed later this year for a subsequent, much bigger drill program (to firm up resources) and feasibility work.
The overall aim is to have a feasibility document and approvals in place by the end of next year.
The fund raising(s) to be undertaken will also dilute EMA’s major shareholder Mike Fewster, who still holds more than 63% of the company. From a market perspective, a reduced stake will ultimately be required.
Tapp is adamant he is not at EMA just to try and “tart up” the venture in order to flog it. Indeed he believes the only single way to actually make a uranium project attractive is to de-risk it by getting it into production.
Hence his focus.
Given his previous experience – which has also included a challenging new business development role in the Middle East for British Aerospace – there will be some confidence around in his chances of success.
It’s also surely not as difficult a problem as that faced by Mr Wolfe in that first scene ... namely “a corpse in a car minus a head, in the garage” and the none-the-wiser wife of the house about to arrive home.
Surely!
BCI Price at posting:
$3.35 Sentiment: None Disclosure: Held
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