Relieved of debt, Anaconda molts

Having shed its Murrin Murrin debt, Aussie nickel-laterite miner Anaconda Nickel plans on a fresh start by asking shareholders to approve a 1-for-15 share consolidation and name change to Minara Resources.

The moves will be put to shareholders at Anaconda’s annual meeting slated for Nov. 26. The share consolidation would reduce the company’s issued capital to 461.5 million from the current 6.9 billion.

Earlier this year, as part of a debt-restructuring deal, Anaconda raised A$323 million via a renounceable rights issue to pay off secured creditors of the company’s wholly owned subsidiary Murrin Murrin holdings to the tune of US$114 million, or about US25 on the dollar. The deal left Anaconda virtually debt free.

Anaconda’s debt woes stem from its troubled Murrin Murrin nickel-laterite project in Western Australia, which was financed with around US$500 million in bond debt. The high-pressure acid leach operation was originally expected to hit its stride by early 2000; plagued with start-up problems it still hasn’t reached capacity of 40,000 tonnes of nickel per year.

In 1999, Anaconda filed a claim against US-based Fluor Daniel for problems related to the screening and acid leach circuits at Murrin Murrin. The company was recently awarded A$42.3 million, net of Fluor’s counterclaims. Anaconda also received A12.4 million in costs. So far, Fluor has paid A$27.6 million into an escrow account controlled by creditors of the Murrin Murrin joint venture. Those creditors will take home 90% of the Phase 1 award, subject to Anaconda’s arbitration costs.

The second phase of arbitration will consider a separate claim worth A$160 million.

Anaconda says that an A$100 million capital works program begun earlier this year is starting to pay dividends with sustained improvements in plant reliability. Anaconda’s production target is 40,000 tonnes of nickel per year.

Says Johnston: "Our capital program remains on time and on budget. We are operating cash flow positive for the year to date and underlying production trends continue to improve.”

For the year ended June 30, Murrin Murrin produced 26,676 tonnes of nickel and 1,832 tonnes of cobalt, compared with output of 28,652 tonnes of nickel and 1,589 tonnes of cobalt the previous year.

Meanwhile, a reoptimisation of Murrin Murrin’s mine plan has halved reserve tonnage, while boosting both nickel and cobalt reserve grades. At the end of June, reserves stood at 145 million tonnes running 1.07% nickel and 0.085% cobalt, compared with 296 million tonnes grading 0.99% nickel and o.064% cobalt at the end of June 2002. The reserves are sufficient for more than 30 years of production. Resources are little changed at 327 million tonnes running 0.99% nickel and 0.063% cobalt.

Paced by a A$553.2-million gain on debt forgiveness and restructuring, Anaconda posted a net profit of A$500.2 million for the year ended June 30, a far cry better than the whopping A$919.9-million net loss the previous financial year.

Still, excluding the unusual gain, Anaconda’s year-end was accompanied by a net operating loss of $A6.2 million (down from a loss of A$17.7 million a year earlier). Revenue increased 11.8% to A$252.6 million, thanks to stronger nickel prices, particularly in the second half of the year.

In a prepared statement, Anaconda’s chief executive Peter Johnston said, “The headline number is impressive however it is primarily a result of removing the company’s enormous debt burden."

Switzerland-based Glencore International is Anaconda’s 40% joint-venture partner at Murrin Murrin, and its largest shareholder with a 46.7% stake.