news article on web site

Geographically speaking, for a carbon
steel company, Territory Resources has
one of the most desirable addresses
in Australia to take advantage of the
current high demand for iron ore that is
coming out of China.
Territory’s exploration project areas are
close, via either rail or road, to the Port of
Darwin, which has a freight advantage over
other Australian ports due to its proximity
to Asian markets.
The company has four properties
located in the Northern Territory, the chief
of these being the Frances Creek Project
containing the old Frances Creek mines,
which have produced the majority of the
Northern Territory’s recorded iron ore
production to date.
Its other projects are at Yarram, which
comprises four tenements focused on
the Yarram and Batchelor prospect areas
located near the township of Batchelor;
the Mt Bundey project covers tenements
centred on the old Mt Bundey highgrade
haematite open cut mine and the
Warrego Tailings Project is centred on
the tailings discarded from gold mining
operations around Tennant Creek.
Territory’s initial focus, however, is on
developing Frances Creek together with
maintaining a vigorous exploration program
to identify the most prospective of the
other areas for longer-term growth.
Production is already in progress at
Frances Creek and railing of iron ore to the
Port of Darwin is underway.
“A major part of our plan was that we
wanted Frances Creek up and running
as quickly as we could,” Territory
Resources chairman Michael Kiernan told
RESOURCESTOCKS.
“In what can only be described as a
wonderful effort from all the boys onsite
and also in the head office, that project was



up and running in what must have been a
record time of just five months.
“We started mining in May and we
started shipping in September. From not
having a hunk of dirt to having a shipload in
five months is a fantastic achievement.”
Having dispatched its first shipment of
iron ore to China the company has upped
its original annual production target from
1.5 million tonnes per annum to 3Mtpa by
December 2008.
Territory intends to build itself into
a diversified carbon steel material
producer through appropriate mergers
or acquisitions while its approach to
generating shareholder value is through
exploration excellence that leads to
development success.
“For a business that is based on carbon
steel commodity supplies the two most
important aspects are, without doubt,
exploration and marketing,” Kiernan said.
“Exploration is the true value driver
of any business. If you don’t get your
exploration right you wither on the vine.
“The second and equally important
aspect is marketing. If you don’t get
your marketing right you die over the
weekend.
“Gold doesn’t need marketing, you just
ring up the bank and they send a truck
around. But with carbon steel you need
marketing.”
Territory has marketing agreements
in place with its cornerstone investor,
the Hong Kong-based Noble Group, a
global leader in supply chain management.
Noble plays a key role as intermediary in
the supply chain of iron ore into China.
Territory has entered into a life-of-mine
supply agreement with Noble.
“We are a group that has always been
very strongly focused on exploration and
we have been joined in our endeavours
with a very strong marketing group in
Noble Resources,” Kiernan said.
As a commodity and logistics chain
manager Noble has three definitive parts
to its business. The first is its significant
commodity dealing business through
which it buys 20Mt of iron ore annually,
40Mt of coal and other commodities such
as manganese and chromite.
Noble also operates a large grain/ethanol
business, particularly in South America and
also to a lesser extent in the US. Its philosophy
is simply to deal with the producers. It deals
with the agricultural farms and the growers
then arranges the logistics from the farms
into warehouses to port and finally loading
onto one of the many ships in the sizeable
charter shipping fleet that makes up its final
business interest.
“They have three serious columns to
their business,” Kiernan said.
“A significant commodity trading
business; a significant grain trading business,
which provides a foot in the door into
China; and finally a large shipping business
that supports the first two businesses.
“Noble are a wonderful partner for us
because they subscribe to the same theory
that we do.
“That is that our job is digging and
delivering whilst Noble’s job is marketing,
logistics and funding. It’s a very strong
commercial alliance.”
Although Frances Creek is online and set
to produce around 1.25Mtpa, Territory is
eager to build that up to 3Mtpa through
seriously aggressive exploration, which it
is confident will double its resource base
from 10Mt to 20Mt giving it a really strong
and solid platform to grow from.
The company is determined to keep
exploring like there is no tomorrow in the
Northern Territory for at least the next
three to four years and will be spending in
the order of $7.5–10 million on exploration
to build Frances Creek.
Half of the cash flow that Territory earns
from Frances Creek is used by the company
to pay annual dividends to shareholders
and the other half is earmarked to be used
in developing other projects.
Territory is also looking at some other
junior iron ore developers with a view to
consolidating one or two of them together
under its iron ore umbrella.
“We have got a philosophy of acquiring
and developing small projects,” Kiernan
said.
“When we [Kiernan and Noble] entered
into Territory Iron, as it was known in those
days, they had done very well given that
they had limited capital for exploration.
“They had discovered about 10 million
tonnes, which was just enough to get them
over the line to operate as a business, so
they had enough capital to develop the
business.
“Infrastructure, rail and ship loading was
in place so they didn’t have the big cost
associated with that and they had a target
of around 1 million tonnes a year.”
Territory Resources expects that, within
a three to four year period, it will not only
be exporting in the vicinity of 10–15Mt
of iron ore annually, it will also be heavily
involved in mineral sands.
“Territory Resources has broadened
its focus, which was something that the
Palinghurst guys certainly couldn’t get their
heads around,” Kiernan said.
“The simple fact is that at the beginning
of the year Territory shares were priced at
around 40c and now they’re worth about
a dollar.
“The difference is that the company has a
cornerstone investor; we have broadened
the company vision to make the move from
being a small producer to target becoming
a $2.5 billion company.
“We have experienced and competent
personnel in exploration with capital
married to a strong marketing group in
Noble, which is a very strong and powerful
formula.”
Head Office
23 Ventnor Avenue
West Perth WA 6005
Ph: +61 8 9483 5100
Fax: +61 8 9483 5111
Email: [email protected]
Website: www.territoryresources.com.au
Directors
Michael Kiernan
Allan Quadrio
Bruce McFadzean
Trevor Tennant
Julie Wolseley
Market Capitalisation
$219 million (at press time)
Major Shareholders
Crawley Holdings 30.1%
OM Holdings 12.5%
Zero Nominees 7.2%
at a glance
territory resources
RESOURCESTOCKS| november 2007 63