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Reality Bites: Challenges and Promises at Murrin Murrin

This presentation by Peter Johnston, CEO of Sydney Mining Club, discusses the major issues impacting Murrin Murrin, a joint venture between Anaconda Nickel Ltd and Glencore International AG. It covers the promises made, the current performance, and the future outlook. Topics include commissioning delays, capital cost overruns, debt restructuring, and the need for technical viability and long-term liquidity.

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Reality Bites: Challenges and Promises at Murrin Murrin

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  1. Reality Bites Peter Johnston, CEO Sydney Mining Club Luncheon 1 August 2002

  2. Who’s squeezing who?

  3. Agenda • Background to Murrin Murrin & Anaconda • Major issues impacting on current position • The promises • The facts (current performance) • Now and the future • Summary

  4. Murrin Murrin

  5. Murrin Murrin Joint Venture • Murrin Murrin is a 60/40 Joint Venture between Anaconda Nickel Ltd and Glencore International AG • Project is located in the North Eastern Goldfields region of Western Australia • Design Basis: • 4 MTPA Mill Feed • 45,000 TPA Nickel (LME) • 3,000 TPA Cobalt • Current reserve approx 300 Million tonnes at 1% Nickel • Process Design based on licensed Sherritt Technology

  6. Murrin Murrin • Project Construction started in May 1997 • US$420m Financing Aug 1997 • Mechanical Completion Dec 1999 • Lloyds Insurance Recovery (A$113m) Aug 2000 • Commercial Production April 2001 • Fluor Arbitration – 1st stage • - Begins Jan 2002 • - Interim award Sep 2002

  7. Significant commissioning delays Slow production ramp-up Capital cost overruns True operating costs still emerging Technical viability Short term liquidity/viability Debt restructuring essential Major Issues

  8. The promises: Three Nickel Provinces (3NP) Dominating Australia’s rich and ancient Yilgarn Craton

  9. The promises – Production profile Announced PlansDate announced 2000 1999 1998 1997 1995 Expected

  10. The promises – Production profile Announced PlansDate announced 2000 1999 1998 1997 1995 Expected

  11. The promises:Corporate Governance – the missing 5th autoclave Quotes from Quarterly Reports: • Sep 99 - 100 day rolling expansion • Mar 00 - studying installation of 5th autoclave • Jun 00 - tenders received for 5th autoclave • Sep 00 - contract has been let for supply of 5th autoclave • Dec 00 - 5th autoclave specifications finalised • Mar 01 - progress on 5th autoclave continued • Jun 01 - ramp up strategy in line with forecast

  12. Over promising – The Share Price Reality Debt restructure requirement announced

  13. The facts: Cash burn Cashflow: 6 months July – Dec 2001 $ million

  14. The facts: Commissioning delay Design Actual

  15. The facts: Production

  16. Restructured the organisation Reduced overhead $457.4m loss for Dec 2001 half year Re-budgeted next 18 months - realistic Reduced all peripheral activities Resolved liquidity issues Debt restructuring negotiations commenced Now and the futureNew management – achievements to date

  17. Now and the futureAbsolute imperatives • Debt restructure - Complete recapitalisation • Murrin Murrin operations – plant performance • Focus on cost management • Retention of key personnel • Eliminate legacy legal disputes • Remain cash positive pre financing • Resolve Fluor Daniel arbitration • Transparent organisation – focus on corporate governance

  18. Summary • Debt restructure close to resolution • Murrin Murrin performance trending up • Experienced management team in place • Consolidation phase: - reduce costs - reduce production variability - generate positive cash flow • Clean balance sheet • Viable long term future

  19. If this is difficult wait for Saturday

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