Coppied an interview with managing dorector Peter Harold from www.dyor.de. More stuff about PAN also on this site.
Master of the crisis
Mainly the producers of base metals like copper and aluminum felt the effects of the current worldwide economic crisis. Many of them, which weren’t prepared for it, had to close their mines. One company which defies the crisis due to excellent cost reduction programs is Panoramic Resources. Managing Director Peter Harold gave us the opportunity to get updated and assured us with his concepts to cope with the crisis.
You recently announced to purchase 25% holding in the Lanfranchi from your joint venture partner Brilliant Mining Corp., bringing Panoramic’s ownership of the Lanfranchi Project to 100%. What positive effects does this bring for Panoramic Resources?
Obviously we can consolidate the operation and it is easier to manage the project. We also get 25% more reserves and also 25% more cashflow, which is quite significant. We think it is a good buy and a good deal for Brilliant shareholders too. The price is fair for the asset, and we didn’t have to pay cash, only shares, what wasn’t very dilutive. We will have around 6% more shares after deal goes through, which – in my opinion – is a good deal for 25% more in resources and reserves. It also simplifies management of the operation which will save us significant management time.
How do current market conditions influent your production? Is the production still economic? What operating cost per ton do you have?
We have been working hard to optimize our operations by making some tough decisions a few months ago. We optimised the production rate at our Lanfranchi Project by going from 4 production crews to 3 production crews which has given us a significant cost reduction. So we went to an optimized production which brings us the optimal cashflow at lower nickel prices. We have also optimised operations at Savannah. That doesn’t mean that we are high grading the orebody, but rather we have changed the milling regime. That means that we now only process ore 15 days out of 21. The mill capacity is greater than ore production, which gives us the opportunity to mill only these 15 days and then to come back after 6 days and mill again 15 days. That saves us power costs and also labour costs. Across the company we have reduced the workforce from 650 to 550, which also has had a significant impact in reducing operational costs. The production is economic at current prices and we are targeting cash costs of about USD 3 to 3.5 per pound of payable nickel.
Do you still have active programs for optimizing the production?
We have been targeting an annual cost reduction of 10 million AUD at each site and are very pleased with the progress that we already made at both sites since implementing the cost reduction program in late 2008.
Are you still exploring at your Savannah and Lanfranchi projects?
While we are still exploring we have cut our exploration expenditure back. Last year we spent about 10 million AUD because we had a big programme to increase our resources and reserves. Therefore this year we will probably spent about 5 million AUD. It is right that exploration work is one of the areas where you can save money during bad market conditions, but we wouldn’t have spent this large amount of 10 million AUD this year anyway. We plan to spend more money probably next year rather than this year. We are exploring below the 500m fault at Savannah, where we will hopefully have a big increase in resources. We are also still exploring at Deacon and looking for extensions to the Winner mineralization.
What further potential do you expect from this exploration work?
It is still very good. At Savannah the orebody seems to continue at depth. We have also picked up some nice new electro-magnetic (EM) anomalies on the southern part of the Savannah ground holdings where we haven’t looked before.
At Lanfranchi there is the northern Tramway Dome which is the potential area on the northern side of the mineralized structure which could host more orebodies. And there are all of the mineralized channels on the southern side of the dome which we believe will continue deeper down. So there are a lot more opportunities at both projects with the potential to bring us more reserves.
Are you also interested in further projects?
We have two other projects which are quite significant. The Cowan Project is about 40km south of Lanfranchi with about 500 sqkm of tenements. The Cowan Project is under-explored and prospective for nickel. We recently bought these tenements for 2 AUD million and we are very excited by their potential. This year we are doing low cost ground EM exploration trying to identify walk-up drill targets.
The second project is our Norrland Project in Sweden, which has similar mineralization and exploration potential as the Kimberley. We are quite excited about the opportunity of finding Savannah-style mineralization in Sweden. We are earning up to a 70% interest in a joint venture with a private company. We like the prospectivity, the location and Sweden is a good place to do mining business.
Panoramic Resources paid dividends of 0.12 AUD per share in 2007 and 2008. Will you also pay dividends in 2009?
During April we paid a 1cent Australian dividend for the 6 month interim period to 31 December 2008, which was a very prudent decision. We do not currently have an estimate for the second dividend payment in autumn, which will depend on our profit on an operational basis. We are hoping that the dividend will be a higher number than it was the last half year.
Panoramic Resources sees the people as one of its biggest assets. Why?
Our people are very committed to the business and have great experience and expertise. I also think that it is very important to put a good orebody together with good, experienced people to get a maximum out of it. Good staff always brings you into a good position during a poor commodity market. Without good workers you cannot be successful. Our people work hard and are professional and that helps make the business successful.
Why is Panoramic Resources the best investment at current market conditions?
Panoramic Resources has good leverage to the nickel price which will hopefully come up from its lows. Our production is very strong this year and will be even stronger in the future. Within the last 12 months we were able to increase our reserve-base and therefore also the minelife of our operations. I am sure that the market will recognize this in time and the share price will become stronger. At 0.70 AUD per share we were basically trading at our cash level which means that the market did not give us any value for our assets and I think you are already seeing the equity market refocus on companies which have low debt levels and are making money. This has already started to happen hence the reason our share price has recovered to 1.52 AUD in mid April and could climb higher to the point which reflects the value of our operating assets. The broker‘s average target shareprice for Panoramic lies at about 1.60 AUD per share. Many nickel mines have been closed within the last few months, which equates to about 25% of annual world nickel production that has been stopped. Demand has also dropped, but there are signs that there could be a recovery in the fourth quarter of 2009 and I think that we will have higher prices than today as soon as there will be a recovery of demand for nickel.
ASX: PAN FSE: A0Q29H ISIN: AU000000PAN4
PAN Price at posting:
$1.61 Sentiment: Buy Disclosure: Not Held
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