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Aditya Birla Minerals

Copper-bottomed plans

Australian copper producer Aditya Birla Minerals has two well-established mines on the continent and a tireless drive to improve.

Over a decade of operation Aditya Birla Minerals (ASX:ABY) has become a successful copper producer in Western Australia and Queensland and continues to improve its productivity with every passing year. A subsidiary of the Aditya Birla Group – one of India’s largest conglomerates – ABM is 51% owned by Hindalco, another member company of the Group. Other major shareholders include JP Morgan, Black Rock Advisors, Old Mutual, DFA Australia Ltd, Paradise Investment Management Pty Ltd and LSV Asset Management.

In the year of ABM’s founding, 2003, it acquired both its present mines: the Birla Nifty copper mine near Port Hedland, WA, and the Birla Mount Gordon copper mine in Mount Isa, Queensland. When ABM acquired it, Nifty comprised an open pit copper mine with oxide ore processing and cathode production through a solvent extraction and electrowinning (SXEW) processing plant. Over the next two years, ABM developed the sulphide operations until in December 2005 it commenced copper ore production from an underground mine, and in March 2006 began concentrate production at its own copper concentrate plant. The Mount Gordon copper operation comprises two underground mines and a copper concentrate plant.

Fantastic figures

ABM’s most recent results, for the third quarter of financial year 2013 ending 31 December 2012, showed significant year-on-year improvements. Its ore mined totalled 827,551 tonnes, up 18% compared with the corresponding quarter last year, while its ore processed totalled 830,669 tonnes, up 21% compared with the previous year.

Chief executive and managing director Dr Sunil Kulwal says the growth of these numbers is “mainly attributable to the successful ramp up of Mount Gordon operations after care and maintenance and improved performance at Nifty”. The total impact of the ramp up is clear in the latest figures for Mount Gordon specifically, where ore mined was a staggering 64% higher than in the same quarter a year previous. Kulwal reports that ABM produced 18,734 tonnes of copper in Q3 FY13 – 13% more than in the previous quarter – due primarily to an increase in average copper grade at Nifty.

The Nifty mine has also benefited from significant improvements to productivity. “Ore mined and processing capacity has improved to approximately 2.36Mt on an annualised basis in FY13, compared with 2.11Mt achieved in FY12,” Kulwal reports.

“This is a 12% improvement over the previous year. We have been consistently improving our productivity every year. In the last five years, we have improved the productivity by approximately 43%.”

In the period from April to December 2012, ABM increased copper production at Nifty by 7.3% compared with the corresponding period in the previous year, to 36,678 tonnes. Simultaneously, it managed to bring the cost per tonne of ore down from AU$106/t to AU$102/t in the first nine-month period of FY13. “We have been able to reduce the cost per tonne of ore mined and processed by 23% over the last five years after absorbing the cost inflation by improving the productivity and achieving focused cost optimisations.”

Strong backing

ABM is a successful producer who has managed to grow and improve its business even in an economically challenging landscape, within which many mining companies have struggled and lost money. Kulwal attributes much of ABM’s success to the people and teams behind it.

“Aditya Birla Minerals has a technically strong and committed team,” he says. “The operating team at Nifty has, on a constant basis, improved productivity and optimised cost per tonne of ore mined and processed.

“ABM has sound financials and is backed up by a strong metal power house in Hindalco. The life of mine off-take agreement with Hindalco provides marketing security of its products. ABM is one of the few copper producers in Australia who has been paying dividends frequently.”

Kulwal acknowledges that there has been “an intense cost push up in Australia in recent years,” making business more difficult for all the country’s mining companies. “Moreover, the environmental regulations have become stronger and the compliance/governance cost has gone up significantly,” he adds.

Nevertheless, Kulwal maintains that Australia is a good place to operate, with “transparent policies” and a government that is keen to work with investors.

“Various government departments always try to facilitate investment and extend all possible help,” he remarks.

Cautiously optimistic

With ABM dealing exclusively in copper, it is just as well that Kulwal is “cautiously optimistic” in regards to the metal’s outlook. “The market for copper appears to be balanced right now,” he says.

“In the medium to long term, the new capacities coming in around the globe will be partially offset by reducing trend in ore grade. At the same time, recovery in the housing sector in the US, potential improvement in European economies and demand growth in China and emerging economies should continue to provide support to the increased supply from new capacities.”

ABM is also feeling optimistic about its exploration work near Nifty, through which it aims to identify new resources and reserves to extend the mine’s life.

“Based on the drilling and downhole electromagnetics done on all sides of the Nifty pit, we have identified drill targets with good potential,” Kulwal reveals. “We are planning to drill these targets over the coming year.”

Busy year ahead

While endeavouring to find new resources, convert existing known resources to reserves, and discover new ore bodies at Nifty, ABM also hopes to push the mine’s productivity higher. The company’s target is to increase mining and milling from the current level of approximately 2.4Mtpa to 2.7Mtpa by the end of FY14. “Cost optimisation initiatives have been identified at both Nifty and MGO to further improve the unit cost per tonne of ore mined and processed,” Kulwal says.

In addition to exploration tenements around the existing Nifty and Mount Gordon operations, ABM also holds exploration and mining rights to the Maroochydore Copper Project, which is located just 100km from Nifty. Kulwal says its focus at Maroochydore this year will be to “explore sulphide resources and reserves beneath the oxide resource, to find a Nifty-like ore body”. The company is also keen to grow through acquisitions and will be looking for medium-size, economically viable opportunities.

Production will remain ABM’s number-one priority, tying in with its long-term goal of becoming a medium-size copper player. Having already beaten the odds in this tough financial climate, the chances of ABM achieving that goal are looking good.


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