Straits Resources Limited

It’s been a very busy year for Straits Resources Limited, a diversified resources company hailing from New South Wales, Australia. In March this year, Straits embarked upon the formation of a strategic alliance with Asia Pacific Mining Pty Ltd (PTT Asia), a major energy company from Thailand, which saw the sale of 60 per cent of Straits Bulk and Industrial Pty Ltd (SBI) on April 28, 2009.

Milan Jerkovic, CEO, remembers the early days when the company had just begun.

“I joined the Straits group in 1991, when it was a private company. I was their first mine manager and helped them to develop their first mine in New South Wales as a private company,” he tells.

“Then Straits listed in 1994 (ASX200) and I’ve been with them ever since in various capacities. I joined the board in 1999 and took over as Chief Executive in June of 2002.”

Today the company’s flagship project is the Tritton Copper mine near Nyngan in New South Wales, Australia.

“It’s the main asset we’re working on and expanding on the copper side over the next few years, as well as some of the main exploration assets we have in copper in New South Wales,” Jerkovic says.

“The other key assets for us which are really set to drive the company in the next couple of years are the joint venture ownership we have in the global coal business with PTT (PTT Asia Pacific Mining Pty Ltd).”

Jerkovic says that Straits now has significant exposure to facilitate growth and business in coal.

“The other thing that sets us apart from the parties in this space in Australia is that we’re going to have a very strong net cash balance on our balance sheet by the end of this month, when we get a further payment from the coal restructuring that we did about three months ago.”

IRJ spoke to Jerkovic and Dave Greenwood, Executive General Manager Corporate Affairs and Investments, to find out more.

The Tritton Copper Project
“Tritton is an underground operation,” Jerkovic explains.

“We’re currently operating one mine but we’re actually developing a couple of other mines as well, servicing a single concentrator which is producing copper concentrate.”

Tritton has a current mined grade of approximately 2.5 per cent copper and an installed plant capacity to reach 35,000 tonnes of copper in concentrate.
“It’s currently operating at about 25,000 tonnes per annum copper in concentrate, which we expect to ramp up over the next 18 months as we install the infrastructure by expanding working capital in the mines to get to 35,000 tonnes annualized,” Jerkovic says.

The standout advantage of the Tritton project has to be its location.

“There’s a small town nearby so we’re not looking at a fly-in, fly-out project; we have readily available power by sealed roads and a railway line in close proximity. In comparison to projects in certain regions of Africa or the deserts of South America, while it may be medium grade and size, it has a lot of infrastructure advantages and cost advantages because of its location,” Jerkovic says.

“It also has good exploration upside, as well as many projects often do, but there is very good exploration upside at the Tritton operation,” Greenwood adds.
Today Straits is focused on lengthening the mine life at Tritton, and quickly too.

“We’re using that with our current balance sheet to take what is about a five-year mine life now and extend it to 10 years plus within the next 18 months,” Jerkovic says.

“That will really come through as we spend the money in the ground and go about doing the geological conversions to resources, and then the resource conversions to reserves.”

The Mount Muro Gold project
The Mount Muro Gold Project is a 47,013-hectare stretch on which Straits has a third generation Contract of Work agreement with the government of the Republic of Indonesia.

“It’s an operating mine with excellent exploration upside basically an exploration asset which we’ve had for a few years,” Jerkovic explains.

“We’re putting about $20 million dollars into the asset now to recapitalize it and give it a five-year reserve life which will be all completed by the second quarter of next year, producing about approximately 60,000 ounces of gold annualized.”

Straits are looking at fairly high-cost gold at Mount Muro; roughly $600 dollars per ounce upon project completion.

“The thing about Mount Muro is its great geological setting in the middle of Kalimantan, a very gold-rich area,” Jerkovic says.

“We’re seeing a lot more exploration potential there so we’re working to get a pretty stable five or six year cash flow then hit exploration there pretty hard over the next few years.”

To date, Straits has seen some promising results in the region.

“We’ve discovered a couple of 100,000 ounces of good grade material there since we began exploring it over the last three years or so,” Jerkovic says.

“We’ve already built two coal mines in Indonesia which are now in this coal joint-venture that we own, so we have a lot of experience operating in the region and that sets us apart from lot of other people up there.”

However, Straits has more exciting assets beyond these mines.

Goldminco
“Our key exploration assets other than around our mine sites on the copper-gold side are a company called Goldminco, which has assets in southern New South Wales and these are large copper porphyry systems which we’re drilling out at the moment,” Jerkovic says.

“We hold 66 per cent of that company which is listed in Canada,” Greenwood adds.

Jerkovic says that the Goldminco assets are large and the company has a five hundred million tonnes resource target on ground held by Goldminco.
“That really is our main greenfield to advanced exploration asset that is set to generate what is a regionally expandable, new copper/copper-gold project in New South Wales,” he says.

“Beyond that we have a piece of ground which has been tied up in some access negotiation and that project is called Torrens, in South Australia. We’ve got a few drill holes into it but what both we and the other industry commentators in Australia believe is that we’ve got the best undrilled Olympic dam-type targets in South Australia.”

Jerkovic says that they have drilled three holes there and discovered some very interesting mineralization.

“It has all of the alterations that go with Olympic-damn style copper/copper-gold, potentially also uranium systems,” he says.

“We’re looking to get on the ground in the next six months and drill six deep 1.2-kilometre holes as we look for a high-risk, high-reward discovery of a very large system. Hopefully that will come through in the next 12 to 18 months as well.”

Expertise and past experience
“Straits is a diversified resources company focussed on generating strong and sustainable earnings for its shareholders from a balanced portfolio of resource projects,” the company website says.

And balancing this wealth of different projects under the Straits umbrella is an exciting business.

“In the short term, our main focus is to clean up the balance sheet, restructure or divest some of the assets that are just not core to the group, then refocus ourselves around fewer but higher uplift opportunities both in operation and exploration,” Jerkovic says.

“In the long term, we are looking to realize the full potential of the underlying coal joint-venture, by firstly getting  production in Indonesia to match installed  capital, as I said about 19 million tonnes, and then convert what is a very large and growing resource base into further production which will drive that value north of what it is now. Then we look to use our current balance sheet and main operating copper assets to grow a copper/copper-gold business to what we have achieved in the coal business over the last five years. That would give us a diversified model where we get redeployment of some of the capital taken out of the coal and deployed into the metal business.”

With enviable locations, growing projects, great partnerships and many avenues to explore, Straits Resources is set for an equally busy year in 2010.
“We do aspire in the next few years to be an ASX 100–listed company. We’re currently an ASX 200-listed company and there’s no reason why we can’t grow into the top 100,” Greenwood says.

“We’re positioned in a very good space relative to our current peers to be able to grow the company from a strong balance sheet and a strong asset base with whatever the current recovery in the world financial industrial base will be,” Jerkovic explains.

“We have both the expertise and the past experience behind us to be able to achieve that.”

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