The meteoric growth of Perth-based Catalpa Resources has been down to a solid strategy and a culture of excellence—as well as a dash of bravery, as managing director Bruce McFadzean tells Andrew Pelis.
A daring escapade in the 19th century serves as a reminder of the core values for one of Australia’s leading growth businesses. In 1876, the Catalpa rescue saw the escape of six Irish prisoners from the then penal colony of Western Australia, who escaped on a boat called the Catalpa. The risk involved, and the bravery of those concerned—who managed to overcome enormous odds—has only added to the event’s notoriety.
In August 2008, the boat involved lent its name to Catalpa Resources, an Australian gold mining business formerly known as Westonia Mines Limited, that has seen phenomenal growth ever since.
Prior to the change of name came the arrival of Bruce McFadzean, managing director and CEO. With experience in the gold mining sector stretching back to the 1970s, McFadzean set about delivering profitable operations for the ASX-listed business.
“I arrived in June and decided in August that we needed a name change and we selected Catalpa—which has a fair bit of meaning around here. The story of the Catalpa rescue embodies everything that our organisation stands for: we are bold, brave, gutsy, well planned and successful,” he comments.
Catalpa is a gold mining company running two operating mines. The Edna May mine (located between Perth and Kalgoorlie in Western Australia), is owned 100 per cent by the company and produces 100,000 ounces of gold each year. Catalpa also owns a 30 per cent share of the Cracow mine (in a joint venture with Newcrest Mining) which also produces 100,000 ounces per annum.
Catalpa’s capital raising flotation in 2002 produced $100 million of investment—enough to purchase the assets that now stand Catalpa in good stead. The Edna May project, McFadzean says, had a long history of production and closures since its initial mining operations in 1911. It has been reopened by Catalpa, who commissioned it back into production last May. Similarly, Cracow had first begun production in the 1930s and had a succession of closures and reopening, with 2004 heralding the latest era.
“Westonia was more of an exploration company,” McFadzean explains. “It really laid the foundations for what we have today at Edna May. The capital we raised enabled us to construct a large gold processing plant.”
So why resurrect a gold mine for the umpteenth time? “Edna May had been run a certain way before and we felt that given gold prices, the strategy simply needed to be applied differently to make it profitable. There has been no real rocket science to what we have done, but we’ve restructured it now to generate in the region of $70 million a year for the next ten years,” McFadzean explains.
Edna May is currently an open pit operation with a mine life of nine-and-a-half years, capable of producing 100,000 ounces a year. “We know, however, that the ore bodies are open to the east and west at a depth, so we are spending several million dollars right now to test the depths, with a view to targeting underground mining operations by 2013,” says McFadzean. “Our aim is to reach 150,000 ounces of production each year for the next twelve to fifteen years.”
Cracow, in contrast to Edna May, is an underground mining operation producing a higher grade of gold (7.5 grams per ton) and comprising multiple ore bodies. McFadzean suggests that Cracow contains over 1.4 million ounces in resources and currently two-and-a-half years in reserves—but being underground, it is expensive to drill. “We have mining inventory for the next five to six years but plans for ten years,” he explains. “At present our joint venture is investing around $10 million a year on further exploration of Cracow.”
Such is the allure of gold that at the height of the global economic downturn, Catalpa Resources was able to secure sufficient funding for the Edna May project in April 2009. McFadzean says that the feasibility study conducted in 2008 highlighted just how profitable operations would be; and by February 2009 the business had secured $65 million in funding from a bank. March and April 2009 saw a further $40 million in funding raised through placement and entitlement offers with shareholders. “Since then, our investors have seen three-and-a-half times growth,” McFadzean confirms.
The rewards have been generated to an extent by the construction of a $92 million, three million ton processing plant, which helped to get Edna May’s operations up and running. The growth of the business since then has been meteoric. “When I joined two years ago I was employee number four in the company,” says McFadzean. “Today, we have 155 employees, including sub-contractors.
“We are in a rural district and tend to focus our recruitment drives on local residents to whom we provide extensive training,” he continues. “The remaining workforce are experienced in mining and typically come from Perth [Catalpa’s headquarters are in West Perth] and Kalgoorlie.”
In spite of the success Catalpa currently enjoys, McFadzean feels that there is no room for complacency. The company is committed to focusing heavily on safety, the environment and its people. “Those are aspects you simply must get right. We also strive for operational and technical excellence. It’s a simple recipe: having sound assets, great people to extract and optimise the assets, and growing the people within the organisation. It’s all about establishing a culture of excellence and output.”
The transition of Edna May to include underground mining is one that holds few concerns for McFadzean. “In Australia, mining is a large part of our world. We rely on lots of support from the industry and can contract out the supply of equipment and maintenance.”
Looking forward, the company’s five-year strategy will take it from production of 130,000 ounces per year to over 500,000 ounces. “We are only two months in and have a strategy for organic growth at our existing sites,” comments McFadzean. “We also have an acquisition plan and will assess opportunities in Australia as well as overseas, where the African and Asian markets interest us. Our vision is that Catalpa will be a safe, significant and successful gold company, focusing on delivering rational growth, cash generation and stakeholder reward.”
As a company that has grown its market capitalisation from $15 million to over $300 million inside 18 months, it appears McFadzean’s goals remain firmly on course. www.catalparesources.com.au
