Globe Metals & Mining (ASX: GBE) is continuing to unlock the potential of the Mt Muambe Fluorite and Rare Earth Element Project in Mozambique, and work towards production in 2015 at the Kanyika Niobium Project in Malawi.
Mark Sumich, managing director, fielded answers during Question Time at Proactive Investors’ One2One Forum in Melbourne, Wednesday 16th May.
The presentation on the night can be ACCESSED HERE.
Globe recently delivered a maiden JORC Inferred Resource at Mt Muambe, comprising 1.6 million tonnes at 19% fluorite for 310,000 tonnes of fluorite. In addition, the company identified three new near surface zones of rare earth elements.
The company also revealed that it is funded through a planned Definitive Feasibility Study at Kanyika and discussed details of potential future funding deals.
Question from the audience
What discount rate did you use to calculate your NVP?
Mark Sumich
6% - that’s based upon what I would call an expected interest rate to be provided by Chinese banks, and that’s footnoted in the announcement, so we put that out to the market.
Question from the audience
So it’s very dependent on getting the Chinese funds
Mark Sumich
Whether it’s 6% or 8%, you’re not going to get financing per se even at 15% from Deutsche Bank or Macquarie for a project like this, you’ve got to go to the end user which is China.
The greater the Chinese content, whether it’s the shareholder, the end user, the contractor or whatever the roughly speaking, the lower the rate, but they’re still normal project parameters.
You’re definitely into something in single digits, infinitely better than anything you would get from a western bank.
Question from John Phillips, chief operating officer of Proactive Investors
On your timeline that investors should look out for towards the end of 2012, in the next six or seven months, what major announcements do you think you’ll be making and what sort of time frames will they come out in.
Mark Sumich
There’s operational and corporate, operational is the DFS so that’s forecast for the end of 2012, there’s lots of things happening there but none of that we expect to be price catalysts.
From a more corporate point of view we would expect announcements in terms of financing and also offtakes.
That’s in terms of the main project, then also with the, there’s two second tier ones, both of those well we’re already drilling the Mount Muambe rare earth ones, I think we mentioned a few days ago that in the next four weeks we’ve got the first round of drilling from our 2012 should be coming up.
Where some of those 2.5-3% numbers have come from, we’ve done some more drilling there, so what we’re really looking for there is greater widths at 2% plus and within that you’ve got 20%, 30%, 40%, at 40% I think that project’s underway.
Question from the audience
In your pie chart showing the niobium tantalum mix you had a small slice for the uranium price, can you please describe how to get more, I mean is uranium going to come out as yellow cake or some other product?
Mark Sumich
To put it in context first of all, it’s about 4% of the estimated revenue, it has to come out purely from a cleaning point of view.
Obviously it’s a steel product, so even if it was a waste product you’d have to go through the process, the process is fine, we know we can do all of that.
We’ve indicated there a product called ADU, ammonium diurinate, what we would expect is to supply some product, when I say supply, sell, to Paladin who would take it off our hands.
I would rather have a lot of uranium or none, we’ve actually got sort of the wrong mix but that’s fine, it’s still economic, and they’ll take it off our hands.
Question from John Phillips, chief operating officer of Proactive Investors
Just about the share buyback you had announced a couple of months ago, first of all you told everyone about the share buyback but I believe you were going to buy shares at 5% up to 22c and if you can please talk about your current share price and then why it seems a bit of a disconnect.
Mark Sumich
Two things, why and what’s happening with it. Why is that we announced it in early January when we were trading below cash backing significantly and we also had significant cash so we wanted to support the share price we just thought we had to draw a line in the sand, and that’s all been put out into the market.
Why it hasn’t been implemented is because with a Chinese government entity, ECE, which is an SOE so under the FIRB legislation they are a foreign government entity.
If you think of this from a purely mathematical point of view, if we’re reducing the share capital by five per cent then they are, not through acquisition but just through mathematics, increasing their percentage potentially from 53% to 55%, therefore we need FIRB approval.
Put that in the context of we’ve got no assets obviously in Australia, all these assets went through FIRB anyway with the original application or transaction with ECE, so the portfolio hasn’t changed but notwithstanding that and notwithstanding the fact that there’s normally a 40 day turnaround for FIRB, we still have no indication at all as to if or what they’ll say. To me I think it’s frankly a disgrace.
Question from John Phillips, chief operating officer of Proactive Investors
So I guess Globe is one of the few shares on the ASX trading under cash backing?
Mark Sumich
Yes.
Question from John Phillips, chief operating officer of Proactive Investors
We do understand Globe does have quite a lot of money from the investment which is fantastic, so during 2012 how much do you think you’ll spend on drilling, maybe break it down per month?
Mark Sumich
The $36 million at the end of the March quarter, a budget of $10.2 million to finish the DFS and we would spend another $5-7 million for corporatisation and overhead for the balance of the projects and the company.
Question from John Phillips, chief operating officer of Proactive Investors
Excellent, so you’re well funded up through the DFS?
Mark Sumich
Yep.
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