Malachite Resources (ASX: MAR) chairman and managing director Garry Lowder has used his annual general meeting address to highlight the company's resilience in surviving the global financial crisis, which hit many Australian resource companies.
Mr Lowder credited his staff for accepting a a 50% pay cut for four months to assist the company in weathering the financial storm, saying Malachite was now in a "relatively strong financial position".
"In spite of that positive scenario for resources, there have been many casualties of the global financial crisis over the past year, including a number of junior resource companies in Australia," Mr Lowder said.
"I am very happy to report that your company has not been one of those casualties. Which is not to say that the past year has been easy. On the contrary, we have lived through the past year with much trepidation, as we endeavoured to stretch our available capital sufficiently to ensure our survival until better times."
Malachite is now in a reasonably strong financial position, following capital raisings in August and October this year - one that will become even stronger as the newly established relationship with China's Nanyang Mining builds into a long term strategic alliance.
"It seems to me to be very fitting for Malachite, as an Australian resource company, to be forming an alliance with a Chinese partner, reflecting in microcosm the alliance that has underwritten the economic recovery we are now enjoying in Australia."
Nanyang Mining Resources is a private company backed by Wong Ying Kin, who has been a major player in the growth and economic development of Guangdong in China. According to Mr Lowder, Mr Wong has identified Australian resources as a major growth area for the future, driven by what he sees happening in China, and he wishes to become a significant player in the Australian mining industry, beginning with a strategic alliance with Malachite.
"Already that alliance has been expressed by a direct equity injection into the company and soon we expect to sign documentation that will establish Nanyang as our joint venture partner at Conrad," he said.
"With Nanyang’s help, we plan to push Conrad ahead as quickly as possible and as we do so, Malachite’s shareholders will enjoy the leverage that will come from the new joint venture structure. It is also possible that we will form other joint ventures with Nanyang in the future, adding to the alliance and allowing us to further leverage shareholders’ funds, growing the company in parallel with Nanyang as it sets out to achieve its own growth objectives."
Malachite, is a Sydney-based resources company, listed on the ASX in November 2002 and is an active explorer for silver, tin, gold, copper and associated base metals in eastern Australia.
Turning his attention to other areas of activity, Mr Lowder said the Tooloom Gold Project had been idle until recently, due to the company's need to conserve funds.
"But it is gratifying that we are now able to conduct a modest reconnaissance drilling program to test attractive targets at three prospects: Pine Gully, Back Creek and Joes Gully," Mr Lowder said.
Two drill holes have been completed at Pine Gully and the rig is now drilling at Back Creek. The Pine Gully drilling intersected the targeted structure, and Mr Lowder said Malachite was encouraged by some of the rocks we have seen in drill core.
One area which Mr Lowder pinpointed was its alluvial tin aspirations, initially at Elsmore and now also on the Kings Gap exploration licence.
"We believe that a conventional wet processing alluvial mining operation would be difficult to get through the regulatory approvals process, so we have focussed on dry processing, which appears to offer a way to finesse the twin problems of water supply and slime disposal," he said.
"We have sent samples from Elsmore to Germany for test work utilising new dry separation technology being developed at the University of Aachen. Progress has been slow – the work to date has been done free of charge – but the results have been positive and more samples are to be sent to Germany soon.
"The is to make a call on the viability of alluvial tin mining by the middle of 2010 and if it looks good, to proceed immediately to develop a small operation, generating perhaps $2‐3 million p.a. in cash flow for a few years."
In a final address, Mr Lowder said he was optimistic about both the future of Malachite and of the Australian mining industry generally, despite the "dead hand of government that so often stifles wealth creation".
He said metal prices looked like remaining strong well into the future, as demand grows and supply failed to keep up.
"The outlook for precious metals is particularly encouraging, given the likely continued weakening of the US dollar and the re‐emergence of inflationary pressures," Mr Lowder said.
"It may surprise you to know that no less an authority than the United States Geological Survey has identified silver as the first metal that could become ‘extinct’ – that is virtually unprocurable – and that it could do so by 2020.
"Today, more than half of all silver use is in industrial applications and that proportion is growing. Unmined silver deposits, such as Malachite’s Conrad, could very soon become rare and highly sought after assets. If we can realise, with the help of our new friends at Nanyang, our objective of bringing Conrad to production over the next few years our timing may prove to be propitious indeed."