Andy Haslam, managing director of iron ore producer Territory Resources, is delighted to be mirroring the growth of Asia’s resurgent economies. Jayne Flannery reports.
Asia’s industrial growth is driven by an insatiable demand for steel. In turn, steel production is dependent upon iron ore, a bulk commodity that Territory Resources is uniquely well placed to supply. Production began at the company´s flagship mine at Frances Creek in 2007; and by the end of 2009, Territory had completed 40 shipments to China, totaling over three million tonnes of high grade lump and fines product.
The company occupies a prime position among Australia’s junior producers with a life-of-mine marketing agreement in place with its main shareholder, the Hong Kong-based supply chain management company, Noble Group. This is supported by ready access to world-class infrastructure in the Adelaide-to-Darwin rail line and Darwin Port.
“We have witnessed a remarkable turnaround over the last year,” states managing director Andy Haslam, who adds that just a year ago, the company faced a full blown crisis. “From a $71 million loss in the previous year we have gone to a $41 million profit. As at 30 June 2010, our debt has been reduced to $34 million from over $90 million and we project that we will be debt-free by the end of the financial year, assuming prices for our ore remain at current levels.”
This year, Territory is riding the crest of a wave. From a low point of just $47 per tonne in May 2009, prices have recovered to a heady average of $110 per tonne over the last quarter. Meanwhile, production costs have been slashed to just $58 per tonne, owing to a drive to increase productivity which has seen annualised output increase by 30 per cent to two million tonnes per annum without the use of any additional resources.
“The global financial meltdown compelled us to take a long, hard look at the business. At the height of the GFC, the water was lapping at the edge of the boat, but we remained optimistic and positioned ourselves so that we could take advantage of an upturn and that is precisely what has taken place,” he says.
Most important of all was a shift in the corporate mindset to highlight the importance of the company’s human assets over its capital assets. “Improving our internal communications has had a remarkably powerful impact on the performance of the business,” he continues. “I personally brief every one of our staff on the past month’s performance and our next set of targets. Everyone understands exactly their role and the contribution expected of them. Everyone knows that they are accountable.”
The company also initiated a comprehensive ‘pit to port’ review approximately one year ago. This re-evaluated the efficiency of every aspect of the operation from drilling to final transportation and included detailed analysis of pit optimisation plans, mining techniques, transport and off-site overheads.
“We made some of the biggest gains by taking simple steps such as paying attention to timekeeping, ensuring that trucks are loaded to the maximum and checking that drill holes are made to the precise depth we require. We are also very pleased with the improvements we have witnessed through the introduction of a new ore crushing contractor, Barminco, who we brought in in March 2010. Their job is to manage the crushing operation and they have managed to consistently produce the volumes we require,” he comments.
The price upturn has meant that all the pits at Frances Creek, which contains a vein style mineral system similar to gold, have been re-optimised. In June 2010, estimates of the probable ore reserves were increased to 5.69 million tonnes andTerritory has put in place a three-pronged programme to further extend the mine’s life. A budget of $4.67 millionhas been approved for the 2011 financial year to explore for and develop iron ore resources both in the near-mine environment and within a 35 kilometre radius of Frances Creek.
At present, the mine’s life is projected to last until at least 2014, but Haslam believes there are still further reserves to unlock. “All our experience tells us we are going to be there for a long time yet and we believe there is still additional mine life in the area,” he says.
As a long-term objective, the company is eager to identify and develop other iron ore deposits, but to date it has not identified any opportunity that compares favourably to Frances Creek. “We have spent a lot of time looking and we remain interested in growing through other acquisitions; but the search has made us appreciate the advantages of our wonderful position in relation to the strength of the local infrastructure. Darwin Harbour is the closest port to China from Australia with just seven days’ steamer time, which means we have a cost advantage over south Australian producers,” he explains.
“Many potential projects are simply not feasible when you really look hard at the costs and in particular the difficulties associated with transportation and associated infrastructure. So far nothing excites us enough to go forward, but we are very optimistic that the right opportunity will turn up.”
Meanwhile, Haslam still finds every day a new and exciting challenge. “I love running a small, responsive company where it is possible to see very rapid changes. Last year we were on the brink of a serious crisis, but now we face an entirely different future. Currency and commodity markets are always in flux, but we are now seeing much more stable trading conditions and I believe that the dramatic price falls of 2009 were an aberration that we will not quickly see repeated.
“The numbers are now stacking up in the right direction,” he adds. “But even if there is another storm ahead, the cuts we have achieved to our production costs have made us extremely competitive. That factor and the special advantages of our geographical location mean we are always going to be in the right part of the cost spectrum.” www.territoryresources.com
