Friday, May 07, 2004Minerals Corporation (MSC) has inherited one...

Friday, May 07, 2004
Minerals Corporation (MSC) has inherited one of the mining industry's most comprehensive stuff-ups, the Skardon River kaolin project in far north Queensland.

Skardon was formerly owned by Venture Exploration, which sank over $100 million of its bankers' money into what was supposed to be a world class kaolin project.

When problems emerged during the plant commissioning, the renamed Australian Kaolin sought help from Sons of Gwalia.

Kaolin, it seems, is not simply a shiny white clay. It is actually a materials handling nightmare, and when AKL finally realised that much of its brand new equipment wasn't up to the job, the entire project appeared doomed to become a white elephant.

White elephants were a big thing for the Australian mining industry in the late 1990s. Our biggest mining company was at that time developing three large white elephants. That same mining company was at one stage rumoured to be considering a takeover of Venture Exploration. Which surely proves that white elephants like travelling in herds!

Anyway, the banks got tired of funding what amounted to a commercial scale pilot plant at Skardon River and pulled the plug. Sons of Gwalia wrote off its investment while Australian Kaolin disappeared into the, err, mud.

Minerals Corporation, which appears to be making headway with Skardon River. The company's recent ASX announcements indicate sales are increasing and a myriad of technical problems have been resolved. The slow production ramp-up has cost plenty of money, but the range of technical challenges in the processing plant meant there was probably no alternative to a slow and steady build-up.

Yet MSC's share price is bumping along close to 52-week lows. Either the market is ignoring a great investment or investors think MSC's progress is illusory.

Vic Alexander, MSC's managing director, knows Australian investors are sceptical, so he plans to list the company on London's Alternative Investment Market. That will either give him a receptive new audience or, depending on the Poms' willingness to trawl for some history, another group of sceptics. One thing's for sure; there is no connection between what MSC is saying and what the market is prepared to pay for.minerals Corporation was able to pick up the Skardon River facility and associated infrastructure for a song at $6.5 million.