Metals X Limited

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On October 20th and 27th respectively, Metals X Limited, Australia’s largest tin producer, announced that it had agreed to sell its royalties for A$20 million and is awaiting approval for an equity placement to raise a further A16.02 million for the company. Prior to these announcements, Metals X had also announced that it has agreed to sell up to 60 per cent of its Tasmanian operations for up to A$60 million in two parts. The first part an unconditional sale of 50 per cent for A$50 million.

Just one week before this news broke IRJ caught up with Warren Hallam, Managing Director, on what proved to be another landmark day for the company.
“Today we announced that we have sold our nickel royalty for A$20 million dollars,” Hallam says.

“Right now we’re in the process of crystallizing the value of our assets where they are undervalued, and we are recapitalizing our balance sheet. We’re in the process of selling 50 per cent of our Tasmanian tin business for $50 million dollars to Yunnan Tin which is the largest tin producer in the world. By the end of this year we should be looking at a balance sheet containing about $90 million dollars of cash and shareholdings of $30 million for a company with a market capitalization today of only about $140 million. And on top of this we hold a significant portfolio of assets.”

Creating Metals X

Metals X was formed from the merging of two companies. Originally called Bluestone Tin Limited, it changed its name after the successful merger with Metals Exploration Limited. The name reflects the company’s interests as a diversified group exploring and developing minerals and metals. It also captures the history of Metals Exploration that has been around since the 50’s which  is remembered by many of the older miners and was one of Australian’s major nickel explorers during the 1969 Poseidon nickel boom.

“The merger was completed in 2005 forming the current company Metals X which is the largest tin producer in Australia and produces around 2.5 per cent of the global supply of tin,” Hallam says.

Today, the company’s major exposure is to tin and nickel with additional interests in zinc, gold, copper, lead, phosphate and uranium through its strategic investments in Westgold Resources NL (29.6 per cent) and Aragon Resources Limited (11.35 per cent, 48.37 per cent voting interest).

“The biggest and most important asset in our portfolio today is the nickel asset (Wingellina). This is a world-class asset which is ranked as one of the top ten nickel laterite deposits in the world. Unfortunately, it’s a large deposit in a small company and requires a large amount of funding—A$2.3 billion dollars to get it off the ground. It holds a significant amount of value for our shareholders,” Hallam says.

“We have two major shareholders. One is Jinchuan Nickel, China’s largest nickel miner. The other is APAC Resources who are backed by Shougang steel in China as well. They’re based out of Hong Kong and will shortly hold 29 per cent of the company. Jinchuan holds a 13 per cent interest in the company.”

The Wingellina nickel asset and beyond

Metals X acquired 100 per cent ownership of the Western Australian Wingellina nickel project in 2006 from Acclaim Exploration.

“Wingellina hosts 180 million tonnes at one per cent nickel of which 90 per cent is measured and indicated,” Hallam says.

“We completed a feasibility study in mid-2008 on that project based on a mine life of 40 years at 40,000 tonnes per annum of nickel and 3,500 tonnes per annum of cobalt at an average cost of less than US$3.50 per pound after cobalt credits. The NPV of the project is about A$3.4 billion dollars assuming a US$20,000 dollar nickel price and a US$45,000 dollar cobalt price.”

However, the company producing 2.5 per cent of tin globally is bound to have more interests.

“Westgold Resources is currently exploring in the northern territory in an area called Rover 1 (the Rover project). That’s shaping up to be what we’d call a new gold-copper province near the Tennant Creek mining field which mined over five million ounces of gold and 500,000 tonnes of copper,” Hallam explains.

“In Aragon Resources, we own a direct interest of 11.35 per cent and we have 48 per cent of the voting rights through Westgold, as well as our direct holdings. That holds several gold and uranium projects throughout Australia and is in the process of completing an acquisition of an unlisted Australian Uranium explorer that holds highly prospective uranium and iron ore copper-gold exploration targets in Chile,” he continues.

The next step for Metals X

Hallam explains that the current focus of Metals X is on crystallizing the value of its assets (including the Wingellina nickel asset) and re-capitalising its balance sheet post the global economic crisis.

“The global financial crisis obviously had an impact on our tin business. Like other commodities, the tin price dropped down to about $10,000 US dollars per tonne. As an outcome we just had to tighten our belts and reduce the expenditure on our projects and try to conserve cash as much as possible,” he says.
“Our short-term plan is to complete and bed down the restart of our tin operations in Tasmania. Looking long term we’re working to crystallize the value of the Wingellina nickel assets and looking at the next phase of growth.”

As Metals X waits on approval from the Foreign Investment Review Board for their planned joint venture with Yunnan tin, and for the approval of the placement with APAC Resources, the group continues to grow, diversify and adapt to best benefit its shareholders.

“Metals X is now ready to take the next step in its growth strategy,having a strong portfolio of assets and a significant cashed up balance sheet” Hallam says.
The next few months are set to be a very exciting time for Australia’s largest tin producer and emerging nickel producer.