Q. Can you please tell me how the capital injection of up to $100m from OneSteel Manufacturing will impact Havilah’s iron ore assets and copper prospects?
This proposed investment in Havilah by GFG Alliance will see Havilah’s work programs for its iron ore assets and its copper prospects in the Mutooroo Copper- Cobalt District, including the Mutooroo deposit, being fully funded through the completion of definitive feasibility studies.
This will allow Havilah to make decisions about investing in the development of the projects and potentially transforming them into actual mining operations.
Funding is an ongoing challenge for many junior explorers but this strategic alliance with GFG presents an opportunity for Havilah to advance its work programs to the benefit of all shareholders, and the wider South Australian community.
The work programs can be advanced with confidence, knowing that they are fully funded, including adequate allowance for contingency.
Q. How will the partnership with GFG help Havilah commercialise and gain access to global markets?
The GFG Alliance is a London-headquartered international group of businesses, founded and owned by the British Gupta family, with annual revenue of over US$15 billion and around 15,000 staff. It combines energy generation, metal manufacturing, engineering, natural resources and financial services, working together to deliver a common business strategy.
The Alliance comprises Liberty, an integrated industrial and metals business; SIMEC, a resources and infrastructure group; Wyelands, a banking and financial services arm; JAHAMA, a division that manages and develops the Alliance’s global property holdings; and the GFG Foundation, that focuses on retention and creation of engineering and industrial skills.
The acquisition of the ArcelorMittal European assets will increase the group’s workforce to about 30,000 people and turnover to over US$20 billion.
The GFG Alliance acquired the Whyalla steelworks, which also includes an iron ore export facility.
Establishing a relationship with the GFG Alliance provides access for Havilah’s iron ore assets to a steelworks and a port. Shipping directly to a steelworks, securing a market for the iron ore and avoiding the high capital cost associated with the construction of a port creates for Havilah the opportunity for value to be added and costs to be reduced.
Q. Can you please explain how the funding via equity placements will work and how Havilah will maintain control and independence?
An overview of the proposed funding via a Share Subscription Agreement (Agreement) was provided in our announcement of May 1, 2019, with further detail to follow upon the release of our Notice of Meeting, which is expected to be completed by the end of June 2019.
Broadly, Havilah will receive a committed initial placement of $6m of funding by way of subscription for fully paid ordinary shares, with committed subsequent placements of $44m subject to the achievement of project milestones and $17m in conditional project funding, if required, to complete agreed work programs on the projects.
These subscriptions will take place over an expected three years, which is the current expected duration of the agreed work programs. GFG’s interest in Havilah will therefore increase as the work on the work programs is completed.
It is expected that GFG will own 51pc of Havilah upon completion of the work programs.
A further $25m in conditional development funding for the Mutooroo project is provided for in the agreement for funding of the development costs of the Mutooroo project post-delivery of a positive DFS.
Havilah will also have access to $8m conditional discretionary corporate funding, if required.
Havilah will retain operational control of all assets including Kalkaroo and regional exploration.
Havilah’s Board of Directors will also continue to consist of a majority of independent directors and will have an independent chair.
As a listed entity on the ASX, Havilah will also need to continue to comply with the ASX Listing Rules and the Corporations Act which provides protection for minority shareholders.
Q. Now Havilah is fully funded, what are your plans for the Mutooroo project?
Work has already commenced on a new scoping study for the Mutooroo Project (Mutooroo), with the aim of developing Mutooroo initially as a higher throughput copper only operation.
This strategic rationale is based on internal modelling and option analysis that demonstrates Mutooroo project economics are enhanced significantly if plant throughput and mine life can be increased (see slides 31 – 38 in the CEO Update at the 2018 AGM).
This approach can also reduce project risk by maximising the benefit from conventional processing methods and relatively low capital input to produce a copper concentrate.
Key to this strategy is the discovery of additional shallow copper-cobalt resources located in the surrounding highly prospective Mutooroo Copper-Cobalt District, within trucking distance of the existing Mutooroo resource.
Later stages of the program will seek to realise the potential value of cobalt contained in the Mutooroo ore as well as investigate the viability and potential value of transitioning to an underground mining operation (see summary of the planned staged work program in Table 1).
In summary, the approach to advancing Mutooroo is not changing, but work may be accelerated with the confidence once it is fully funded. Mutooroo also stands to benefit significantly from infrastructure that will potentially be built to support the iron ore assets. This could further improve the economics of the project.
Q. Can you please run through the next steps for Kalkaroo after the granting of three mining leases in South Australia?
On May 23, 2019, Havilah announced that the South Australian Minister for Energy and Mining had granted three Mineral Leases (MLs) and two Miscellaneous Purposes Licenses (MPLs) for the Kalkaroo Copper-Gold Project (Kalkaroo Project).
This decision now secures Havilah’s right to mine the Kalkaroo Project.
The next step in the permitting process is to obtain permission to mine which requires the submission and approval of a Program for Environment Protection and Rehabilitation (PEPR), as required under South Australia’s Mining Act.
Work continues on the finalisation of the updated prefeasibility study (PFS), due for completion in the last quarter of 2019.
Work is continuing on investigating development opportunities, which includes progressing discussions with potential investment partners.
Q. What is Havilah’s iron ore asset project strategy and how is the iron ore scoping study progressing at Maldorky and Grants projects?
The iron ore scoping study commenced in June 2018 as part of the due diligence work led by SIMEC Mining on Havilah’s Maldorky and Grants iron ore projects in north-eastern South Australia, near Broken Hill.
The scope of work assessed the resource, project life, production, infrastructure and ultimately commercial viability of the iron ore projects, culminating in the proposed funding of up to $100 million from OneSteel Manufacturing Pty Ltd (trading as SIMEC Mining), a member of the GFG Alliance. Work plans to provide a pathway to potential commercialisation of the iron ore projects, as well as copper prospects in the Mutooroo Copper- Cobalt District will be executed following shareholder approval of the transaction.
Q. Where do you see Havilah in the next five years?
Havilah’s strategy has been to develop what is within reach, fundable and manageable.
World metal prices and variable conditions in global financial markets have meant that Havilah has needed to maintain agility in order to take advantage of opportunities when and where they have arisen.
Our strategy to divest projects that are of lower priority where fair value can be obtained was implemented in our divestment of our North Portia project.
This divestment has seen Havilah receive $6m to date of a total divestment price of $12m plus 1.5pc NSR royalty.
This is a very favourable outcome for Havilah considering that the North Portia Project is not a fully permitted project.
Whilst our preparedness to consider various ownership and funding arrangements for large capital projects is critical to our strategy, our core business is exploration.
Replenishing our project pipeline with new discoveries leveraging off our large prospective tenement holding and utilising our extensive knowledge base therefore remains our key focus.
My vision for the next five years is for Havilah to grow and realise the value of its multi-commodity portfolio, through discoveries and transactions, to generate a cash flow stream by focusing on the commodity of choice. I will know that we have been successful when Havilah receives recognition for the value of its multi-commodity portfolio and its performance.
Q. Is there anything else you would like to add?
This strategic alliance with GFG Alliance provides Havilah with a rare opportunity to contribute on a larger scale to the prosperity of the South Australia, whilst retaining exposure for our shareholders to the potential project value appreciation as fully funded work programs are applied to move projects rapidly towards definitive feasibility studies.
This is an exciting time in Havilah’s history and I am looking forward to executing the work programs as part of the proposed transaction with GFG whilst always looking for our next opportunity.
