Kiernan outlines ambitious plan for consolidation
Special Reports: 27-June-07 by Mark Beyer
Mining entrepreneur Michael Kiernan last week outlined to WA Business News his plan plan to bring together his non-gold companies under the joint ownership of iron ore miner, Territory Resources Ltd.
Mr Kiernan, who formerly ran diversified mining house Consolidated Minerals Ltd, is currently chairman or a director of eight listed companies.
In partnership with Hong Kong trading house Noble Group, he is planning to use Territory as the vehicle to consolidate ownership of most of these companies.
“We will leave Monarch but bring everything else together under Territory Resources,” he said.
This would include Precious Metals Australia Ltd, which is developing the Windimurra vanadium project, mineral sands miner Matilda Minerals Ltd, and newly floated India Resources Ltd.
“I like building projects, I like building companies,” he said.
“There are very many opportunities for smaller companies that don’t have access to capital, don’t have access to exploration or mining expertise. You bring them all under one umbrella and they become very successful.
“It’s a formula we used to use at ConsMins and its very successful.”
Mr Kiernan said Territory, which this month started mining at its Frances Creek mine in the Northern Territory, was likely to make an acquisition before the end of the year.
“There are three milestones for Territory over the next six months; one is to get Frances Creek into production, two is to start a seriously aggressive exploration program to double resources within 18 months and double the production, and third is to probably do a corporate acquisition.”
A common link between all of the companies in Mr Kiernan’s stable is that he, Noble Group, or their jointly owned investment company, Crawley Resources, have substantial shareholdings.
Territory, for instance, is 31 per cent owned by Crawley, following a $30 million placement earlier this year.
Mr Kiernan said Territory could acquire some of the shares held by Noble in other companies, such as Precious Metals.
“Noble has a 10 per cent stake in Windimurra Pty Ltd and ultimately will also have a 10 per cent stake in PMA, the parent company,” he said.
“I wouldn’t see that being restructured into Crawley but could well be restructured into Territory Resources.
“Or Territory Resources may take a position direct into PMA.”
Renowned for being a straight shooter, Mr Kiernan said he and Noble selected Territory as their consolidation vehicle “because it was there”.
“It was an opportunity to invest in that company…develop the project, and then use Territory Iron as the vehicle to become a diversified carbon steel material supplier. That’s why we changed the named to Territory Resources,” he said.
“Its first subsidiary is Territory Iron, which will operate Frances Creek and one or two other iron ore projects we are looking at.
“Each of the other projects we get involved with will be fully owned subsidiaries with their own management in place.”
Mr Kiernan’s game plan for the next couple of years also includes further acquisitions by gold miner Monarch.
The company recently commenced gold production at its Davyhurst project, and later this year will start producing at its Minjar project.
Together, these projects will produce about 200,000 ounces of gold per year; his targeted production rate is 500,000oz by December 2009.
“It is quite obvious that we will acquire or merge a couple of other projects,” Mr Kiernan said.
A long row of yellow files in Mr Kiernan’s office is testament to the number of gold projects he has reviewed.
He is prepared to be opportunistic, bidding for distressed assets, and also has people bringing projects to the company.
Reflecting his background as a contractor, Mr Kiernan said each of Monarch’s gold projects would be discrete, with its own management team, including accounting, technical and operating staff.
“Each project has to stand on its own,” he told WA Business News.
“I make each site stand totally on its own from a profitability point of view and return on equity.”
With Mr Kiernan holding so many board positions, it is inevitable that he gets asked about his ability to manage the workload.
He left the board of Australian Zircon Ltd in April and stepped down as chairman of uranium explorer Uran Ltd earlier this month.
Mr Kiernan insists he can handle the remaining roles, describing himself as a professional director who works six days a week from his office in West Perth with three secretarial staff to assist.
He also emphasises that each business has its own management in place.
As chairman, Mr Kiernan said his job was to focus on corporate governance, strategic direction and funding.
“The managers of the companies execute and operate the businesses. I don’t have to operate. We set budgets, we set KPIs, and that’s what I manage against.”
Being decisive also helps Mr Kiernan manage his many roles.
“In business today people are afraid to make timely decisions. Love or hate me, I listen to people and I make a decision,” he said.
He will soon have to make some big decisions about PMA’s Windimurra vanadium project, which has been through some major revisions.
Planned production has increased from 12 million pounds to 22 million pounds, the project will produce ferrovanadium, and it has been affected by the cost pressures facing all developers in WA.
It has also deferred the target date for locking in debt funding from March 31 to June 30.
Mr Kiernan said he had asked the project team to finalise the flow process and precisely quantify the capital cost.
“Once those two have been established, we can then look at the exact funding required,” he said.
“There were no problems or issues, it was a case of ‘let’s take two months to really review and refine’.”
The project’s total capital cost has previously been estimated at $200 million, but this will increase.
“I suspect the component PMA will be responsible for will remaining $200 million,” Mr Kiernan said.
“We may get one or two of the aspects done by a contractor under a build, own, operate and transfer, so PMA is not responsible for that capital up front.”
He remains confident that PMA, with the assistance of Noble, will arrange funding for that project.
The aim was to repeat the successful formula he and Nobl had at ConsMins.
“The philosophy is quite simple. My job is to dig and deliver. Noble’s job is to market and be responsible for logistics and funding.”