here it is yes the same country china WMC gains ground on Chinese nickel Author: Ian Howarth Date: 19/07/2004 Words: 699 Source: AFR Publication: Australian Financial Review Section: Companies and Markets Page: 14
WMC Resources appears set to clinch access to nickel exploration acreage in China, a move that would give it a head start in the race to tap one of the world's least explored countries. Mining majors such as BHP Billiton and Rio Tinto have been trying, without much success, to get access to China's largely untapped mineral reserves. Now WMC could be leader of the pack. The world's fourth-largest nickel producer may be close to finalising lease applications with China's Ministry of Land and Resources and the regional Department of Land and Resources.
Having just walked away from two years' work trying to find commercial nickel sulphide deposits in China's southern Yunnan province, WMC is now concentrating elsewhere to become China's first international nickel producer.
Chief executive Andrew Michelmore confirmed WMC's interest in China but he refused to give any details of where the company's interest lay. "We can't flag it. Our approach would be, 'Where's the geology? Could this host something'?
"In the past we would have set up an office and go and tie up all the land and then get on it. We'd take a long time, incur a lot of costs, have a look at the data and then you might find there's nothing there. It was very, very expensive and time consuming," he said.
Despite the losses incurred by many companies that have attempted to crack the Chinese market, WMC is determined to make its plans work. It is taking a new approach that is cheaper but riskier and which requires total secrecy if rival companies are to be kept at bay.
Mr Michelmore said the new approach was much leaner and quicker by keeping it quiet, identifying key areas and accumulating whatever information could be found to make an initial assessment before applying for exploration ground.
He said WMC would then apply for land, probably with a partner. "That is our approach at the moment. We have been in the southern end, in Yunnan province," he told The Australian Financial Review. "We were down there looking at nickel sulphides a couple of years ago. Our conclusion was, there are nickel sulphides there but they are all too small."
He confirmed that WMC was still looking in China, but he would not elaborate on the region for fear of sparking the interest of rival players.
"WMC has spent a lot of time working with [the Ministry of Land and Resources] about the whole process of mining legislation and the process of getting access" to exploration ground, Mr Michelmore said.
"In applying, it is complex. You end up having to go through both of them [the Ministry of Land and Resources and the Department Land and Resources] to get your exploration lease granted, but you can get exploration leases."
Last week WMC laid some ghosts to rest when it reported a half-year of strong production from its troubled Olympic Dam copper and uranium mine. If the company can maintain that performance, it will produce a massive profit result, possibly more than $1 billion by the end of December, with most analysts and fund managers sharply upgrading their profit forecasts.
Senior funds manager at Merrill Lynch, Mark Himpoo, said that the consolidation of tax losses announced last week could sharply improve the group's profit by December. Mr Himpoo said that on a wider industry scale, WMC could benefit from a fundamental change in the metal-price cycle.
WMC represented a "real leverage play" to the metal-price cycle, particularly if prices rose even higher, he said.
Assuming a continuous strong commodity demand by China and the possibility of more strengthening in the US and European economies, WMC and other major resources companies may generate so much cash that they start repaying investors with special dividends or share buybacks.
What makes this metal-price cycle different, Mr Himpoo said, "is that this time round there is not the capacity to bring in new [metal] production quickly".
A sudden surge in demand could force metal prices higher, producing a cash windfall for the major miners, Mr Himpoo said.
