logo-loader

Noventa: A year of whirlwind change

Published: 12:41 19 Jul 2010 BST

no_picture_pai

The turnaround at Noventa (LON:NVTA) under boss Eric Kohn is on track as the miner prepares for the next stage in its development.

His plan is to transform the company into a world class and profitable supplier of tantalum concentrate, funded by US$23 million of new investment.

This follows a whirlwind of activity in the year since Kohn’s appointment as chairman, in which he has reversed many of the fundamental errors committed by the previous management.

Perhaps the most drastic step was to place the company’s Marropino opencast mine in Mozambique into care and maintenance until production problems could be fixed.

However he also appointed an entirely new senior management team.  All the new senior staff spoke Portuguese, the native tongue of the south east African country, and were based in Maputo, the capital of Mozambique.

Previously the group had been run at arm’s length from South Africa.

“I work on the principle you have to have the right management,” Kohn told Proactive Investors.

“I was very lucky to find the right Mozambican management at an early stage.  I also recognised that you could not run the mine in Mozambique from South Africa.  The operational base needed to be in Maputo, though we are still more than half a day travel from the mine.  And finally the operating language had to be Portuguese because that’s the language of the country.

“You are in a country where people do inspect you for labour relations, trade union relations and the way you treat people. Clearly if you are going to work in an environment like that what you need to do with the operations side is to attract the right people.”

Probably more crucial was getting to the bottom of why Marropino had performed so poorly since it began intermittent production in 2003.

Far less of the resource had been extracted and successfully processed than had been predicted.
It soon emerged the problem was the way the plant operated, rather than the quality of the resource in the ground.

Cash was raised to find a solution for the problem and output at Marropino has exceeded expectations since the mine opened again for testing and small scale one shift operation in April.

“We tried to understand what had gone wrong in the past,” Kohn said. “We learned never to accept anything on face value – you can’t on a turnaround.  And then logically we worked it through. We also took the basic engineering principle that you build quality at the front end and not at the back end.

“So in the case of a gravity separation plant you have to get it right at the beginning and then it will come out right at the end. Previous management decided the liberation size was 1.7 millimetres and that was fundamentally wrong. And they also lost 55 per cent of the tantalum in oversize.”

The planned fundraising of $23 million will be crucial to the next phase of Noventa’s development.
The cash will be used to raise plant production at Marropino to a greater than 500,000 pounds of tantalum pentoxide a year from 300,000 pounds and upgrade the facilities so they can handle material from the company’s Mutala and Morrua projects.

The plan is to bring Mutala into production by the end of 2012.

“We will set up a pre-concentration plant there and ship the pre-concentrate down to Marropino which is two and half hours away.  When Marropino expires in about three and half to four years, we will move the wet plant to Morrua and continue shipping down from Mutala and start mining Morrua.  But we will even consider moving to Morrua or doing something at Morrua before then.”

“With Morrua, the strip ratio is higher. We have to do far more stripping but the grade is better, about circa 450 parts per million against circa 220 Mutala and Marropino. So the balance is there.”

The interesting aspect of the fundraising is the payback period, which is expected to be two to three years and gives a very big pointer to Noventa’s route to profitability.

The company’s broker, Religare, predicts the group will generate around $10m in cashflow in 2012 based on conservative assumptions. Cash margins are expected to exceed33 per cent.

The fundraising might be one or a combination of the following: common equity, development bank loans, a strategic partnership, convertible debt, or redeemable convertible preference shares.Kohn said no decision has yet been made on the funding route.

Part of the company’s strategic plan set out earlier this year was to increase the amount it receives for its Tantalum and this was done by negotiating a new off-take agreement at market prices.

“This is clearly better than the deal signed in 2007,” Kohn points out.

Part of Kohn’s revolution will be to list the shares in Toronto, where he hopes the Noventa story will be better understood.

“We already have Canadian investors and we will probably get some Canadian private places,” the Noventa chairman said.

“We are going to Toronto because there is a very good retail market and they recognise mining companies better than AIM.

“There is a very good combination of retail and institutional investors.  I am on the board of a TSX company already and we feel it will do more for the shareholders being on Toronto than on AIM.”

Caledonia Mining tackles 2023 challenges with optimism for 2024 as it...

Caledonia Mining Corporation PLC (AIM:CMCL, NYSE-A:CMCL) chief executive Mark Learmonth tells Proactive's Stephen Gunnion the company faced a challenging 2023, primarily due to poor production in the first half of the year at its core asset, the Blanket Mine in Zimbabwe, and an underperformance...

1 hour, 29 minutes ago