Ignore that. Here's the interview
A mine with a presidential history: Myanmar Metals
Alan Kohler
John Lamb is the Executive Chairman and CEO of Myanmar Metals. This company used to be called Top End Minerals way back until they bought an option over 51% of a mine in Myanmar. The mine is a very ancient silver mine that’s now turned into a silver and lead mine, it was run by the former US President, Herbert Hoover, for a while back in the early 1900s. It became the world’s richest silver and lead mine before the World War Two. After World War Two it was nationalised by the Myanmar government, the Burmese government as it was then, and they mucked it up and it basically sank into care and maintenance until it’s been now revived or is going to be revived by this company called Myanmar Metals. It’s a province basically and it’s a very rich mine, it’s got all the infrastructure there, they’ve got tunnels and layers, drives, there’s above ground infrastructure as well. There’s still a lot of money to be spent but not as much as you’d be spending if you were developing a mine from scratch.
The company’s share price is pretty low, it is 7 cents at the moment and the market cap of the business is $87 million. The question, of course, is how much money do they have to raise. They’ve got a couple of decent sized shareholders, Perilya Minerals and Mark Creasy are on the register. They’ve got a couple of partners in the mine over there so it’s not all onto Myanmar Metals but they’re going to have to raise a fair bit of money in order to build the mine. They’re talking about finishing it, building it and getting it back online in fact by 2022 so you’re a few years off until cash starts to flow but it’s a very interesting project and well worth having a look at I think.
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ASX code: |
MYL |
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Share price: |
$0.067 |
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Market cap: |
$83.561 million |
Here is John Lamb to tell us about the history and current state of the Bawdwin Mine in Myanmar, the Executive Chairman and CEO of Myanmar Metals.
John, Myanmar Metals started as something called Top End Resources or something and acquired an option over the Bawdwin Mine in Myanmar. Can you tell us a bit about how that came about and I suppose in the process give us the history of the Bawdwin Mine? Because I understand it was at one stage the mine was run by an American president.
That’s exactly right. Bawdwin has an amazing history. It’s actually probably more correctly described as a mineral province or a mineral field. It’s a valley about nine or ten kilometres long and mining there dated right back to the mid-1400s. Chinese miners who had crossed the border at the areas getting close to the Chinese border and they were mining for silver in those days. That went on for some hundreds of years until British explorers came through in the late 1800s and discovered that the underlying ore body was very rich in lead. The British at that time were very interested in developing lead resources around the world and in opening up what was Burma at the time. They began to develop it but you’re quite right, it wasn’t until Herbert Hoover came on the scene around about 1910 I suppose, and this was long before he became the American President of course. He was a mining engineer and Australian miners would know that he spent time in Australia as well. He re-engineered the site, solved some of the logistical challenges and recapitalised the company. It was Burma Mines Ltd at the time.
Then under his leadership it built into what was the world’s greatest producer of silver and lead. During the 1920s and 1930s it was one of the most important mines in the world, certainly the biggest and most important in the British Empire. It had a very bright period in its history and that carried on through until World War Two. Unfortunately, World War Two ran right over the top of the mines, the Japanese forces came through and occupied the mine site, the concentrator was destroyed during the war and then after the war it was rebuilt but the British left that area in 1948 completely. The mine was nationalised at that point and it ran as a nationalised mine from then right through until 2009, very low levels of production. Myanmar is a country that doesn’t have an enormous amount of expertise in mining and you can certainly see it in the production rates from the mine. It was largely untouched as a resource for all those years.
In 2009 it fell into private hands held by the vendor in our relationship, a company called Win Myint Mo, they have had it for about a decade.
Are they a Myanmar company?
Yes, they are, they’re a Myanmar company, two Myanmar families, it’s a construction company really. They came across the asset because of another one of these coincidences in the history, their civil geologist happens to be a West Australian School of Mines trained mining geologist and led them to the asset. They obtained the concession from the government. They haven’t really done anything with it in that ten years either and just last year the Myanmar government said to them well perhaps you’d better go and get an international partner who knows about mining. In the middle of last year this asset was on the table for the first time in its history really to be dealt back into international hands again.
Did they go to the market with that or did they just come to you, how did that work?
No, and this is the interesting thing. One of the things that Myanmar doesn’t really have is a market presence or any market facing companies, there is a stock exchange but it’s not a place where people can tap the international capital markets. They had just begun looking in their private networks. I would suggest that perhaps the only person in Australia who was really aware of this was Mark Creasy. Mark, of course, is well known to Australian miners and investors and Mark has some business interests in Myanmar anyway and he had researched Bawdwin in his own private library and so he was aware. He led us to the asset so that’s how we got there, Mark was already a major shareholder in what was Top End Minerals at the time. Sure enough there was a deal there to be done and so May last year an option agreement was signed and we’ve taken it forward from then.
You paid I think a million and a half dollars for the option and you’ve ended up exercising that and it’s 51% of the mine, is that right?
Correct, yeah that’s right.
How much did you pay for exercising?
That was $20 million USD between ourselves and our third incoming partner. That’s calculated on the basis of expenditure on the tenement. Companies aren’t allowed to buy and sell mines for profit in Myanmar, that’s not how it works, but they were certainly able to recover their holding costs over the decade that they’ve held the asset, that’s how that was calculated. You’re quite right, we’ve ended up at now it’s 51% controlling major owner of Bawdwin concession and all of the Bawdwin Mineral Field and it is an absolutely outstanding asset, it’s one of the very best ore bodies that I’ve ever seen in 30 years of mining.
We’ll get onto the ore body in a moment but tell us about what the infrastructure looks like. How many levels are there to the underground mine, is there an open pit and is there any useful infrastructure above ground?
Amazingly, yes there is and it all dates from Herbert Hoover’s time. He was obviously an amazing man and constructed a tunnel, a 2.5 kilometre tunnel that goes underneath one of the mountains and obviously it was used for hauling ore in the old days and that’s still very useful for us. We’re looking at putting a conveyor in that. There was a steam railway that run from the site down to the town of Namtu and we’re certainly looking at using the railway alignment for a pipeline rather than a steam train but nonetheless we’ll use that. There’s a shaft which is still operable and a headframe and a winder that are still in working condition, access into an underground mine like that is always valuable. The mine itself there were 12 levels developed and with ore production it really was stopped by World War Two in mid-life. There’s any amount of additional resource and further development was planned below that but that was as far as they got. It’s about 450 metres, something like that, below the current surface. There is an open cut that was mined originally for waste and then some low grade was mined out of there in the 1970s and 80s.
We’re left with a largely untouched surface resource, or near surface resource, and then overall the three main deposits that were mined in the old days, about a quarter of what we currently know was extracted by historical underground mining so that leaves three quarters of what was the known resource still to be mined.
How was the known resource established, when and who did the drilling?
Originally it was all done by following the ore body, chip sampling the drives, assaying the results in the local laboratory and in typical British style they drew up these wonderful drawings with all of the levels in great detail and all of the assays marked on the plans. There’s any amount of historical data and really enormous amount of data has been digitised and captured. Of course none of that is useful to establish a JORC classification and so we have done two drilling programmes and we’re now into our third modern drilling programme, so drilling down in and around the old stopes and into the pillars and at sufficient density to classify the resource under the JORC code.
If you wouldn’t mind just backing up a bit because I was going to ask you, just so everyone understands JORC stands for Joint Ore Reserves Committee and it’s the Australasian standard for what it is actually the reserves. I suppose a core question is to what extent are the reserves, or the known resource at Bawdwin, acceptable under the JORC standards? Not at all?
Absolutely, completely, because we’ve done the modern work to define them and that’s one of the things that is very exciting about this project, that already classified to JORC standards we’ve got an 82 million tonnes resource sitting on this deposit, it is quite phenomenal.
What is the grade?
Overall it’s about 4.8 lead and 120 silver and 2.4 zinc but in amongst it there’s a high grade core of 44.5 million tonnes also to a JORC standard and that’s the exciting bit. That high grade core, 7.8% lead, 180 grams so that’s almost 6 ounces of silver a tonne, 3.7% zinc and 0.3% copper. That is very exciting, that is super high grade polymetallic deposit and large tonnes. In amongst all of that we’ve now got 24.8 million tonnes classified up to JORC indicated levels so that’s a much higher level of confidence. All of that resource is in the central lode, in the China lode, because that was the easiest to access for drilling. We’ve got a starter resource of about 25 million tonnes which is phenomenal.
You basically drilled that since acquiring the option last year?
Correct, we’ve been very busy.
Right. Tell us about the cash situation. How much are you going to need to turn it into an operating mine and how much have you got?
Well there’s a fair bit of work to be done between now and then. We’re looking at first production in 2021 and between now and then we have about a year of feasibility work to do so this time next year we’ll be looking to draw that to a close targeting that completed by around about November next year, issues of permits to follow and then construction will be in 2020, about 12 to 18 months, so first production in 2021. I’m expecting somewhere around $200 million USD to be the initial capital cost to establish a China pit, so the small pit, pay for the mill, build the infrastructure, the roads, pipelines and those sorts of things. Then of course as I said this is a mineral province, it’s not just one mine. What follows that first China pit is two more pits, one on the Shan and one of the Meingtha lode sort of next door, north and south, underground portions on both of those and then a long life underground on all three of those below that. In addition to the various resources that we’re currently developing and that will come out of our exploration programmes I’m expecting production to come from this mineral field for many decades to come.
Your 51% share basically covers the entire field, how big is it?
The tenement or the concession as they call it in Myanmar is 38 square kilometres and so the three joint ventures, ourselves and our two Myanmar partners, collectively own that. Our 51% is obviously the majority holder and yes that applies to the whole tenement and all the production that comes from that. It is very exciting. In Australia you would look at mans perhaps like Rosebery in Tasmania, very similar VMS style polymetallic deposit and it’s been running for 85 years now. It’s a similar type of deposit.
Tell us about your own register. How much does Mark Creasy own now? You’ve done a deal with Perilya which is another Australian listed company and they’ve got 20%.
That’s correct. We came into this as, and you mentioned it at the start, it was Top End Minerals. Prior to that it was Top End Uranium. It was a tiny exploration hopeful and so the shareholding was largely retail of course besides Mr Creasy. One of the things we needed to do earlier this year was obviously raise some cash to exercise the option but in the process we wanted to bring some institutional focus onto the register. We achieved that and as you say we had Perilya who are in there now at number one on the register with about 20%, Mark Creasy is number two at 12.6% and then there’s a number of additional institutions in there. Our top 20 list is now well populated by institutions, not only in Australia but also particularly Hong Kong, so groups like…from Hong Kong.
Who is behind Perilya?
Perilya is owned by Zhongjin, they’re a major Chinese market traded company, they’re listed, they’re a major producer of metals working with the sorts of metals that we’re in. Perilya, as folks would remember, are famous for getting Broken Hill back on its wheels and they still have that asset, they are zinc, lead and silver folks like we are. There’s actually a very good fit there and they offer a lot of technical support and we’ve been enjoying that additional support since they joined us back in June.
At the end of the quarter you had 16.5 million in cash and obviously you’re going through a fair bit of money to develop the resource, when do you think you’ll need to raise some more cash? Can you wait until you get the share price up a bit?
I would expect so, there’s no great hurry for that at this point in time. We’ve got 15 million still in the bank at the moment and obviously with our contribution from our partners that takes some of the cost burden off. You’re right, there’s a fair amount of money to be spent drilling holes and doing geotechnical work, soil sampling and geophysics, all of those things, various studies. I would have thought we won’t need to be looking for dollars again until some time next year, perhaps end of quarter one or thereabouts, maybe a little later than that even. I would expect that in the meantime shareholders would be looking forward to some share price growth and we’ve got some really good positive things happening now. We have another drilling programme underway and we’ve got a scoping study on the China pit that’s due for release. Then we’ll have something that’s very exciting, around February next year the completion of the pre-feasibility and that will allow us to declare the first JORC ore reserve ever at Bawdwin and that will be a big milestone moment where I would expect the share price to reflect that.
It hasn’t done all that much since you exercised the option, it popped up a bit from 5.5 to 7.5 cents and it’s kind of stayed there. It hasn’t exactly taken off yet, John, but time will tell.
I would agree with that. It was a very large raising, we just about doubled the issued share base.
Right, I didn’t realise that.
Yeah, it was an enormous raising and to maintain the price obviously we’re very pleased the raising was done at a slight premium to the previous price. Folks paid full tote odds coming in but I think the market at that point had already valued in the fact we were going to exercise the option because that was very clear. You do the raising, you exercise the option so it’s already reflected in the price. Since then we’ve really just got back on the horse and we’re working on it now. I think you’ll see some growth, I would argue that we’re a pretty cheap share at this point in time. We present still as obviously a small cap but we’re a well-managed listed company in the base metals space with 51% of an absolute world class asset. It’s already got a substantial JORC indicated resource, a clear plan to be producing in 2021, a pipeline of future production and an amazing exploration upside. I would have thought that folks looking for growth and looking into the base metals space for a listed story this has got to be right up there on the list.
It’s funny you mentioned Roseberry Mine before that you were actually General Manager of that mine in Tasmania, weren’t you?
I was, I was indeed, fantastic mines.
You still live in Tasmania, does that mean that’s where the company is based?
No, the company is based in Perth and the mining asset of course is in Myanmar. A large proportion of our Australian investors at any rate are eastern seaboard and Hong Kong, so Tasmania is not a bad spot to be based from. In fact I sort of do a loop and I go Perth to Myanmar and then back down the east coast of Australia and I can cover everybody off doing that.
Just tell us finally a bit about the sovereign risk situation in Myanmar. Obviously it has been a turbulent place in the past, what’s your feeling about the place now?
It has, it certainly has, but it’s visibly changing. Just in the last year you can see the changes. It’s now very open for global investment but particularly Western investment. There’s been a lot of Chinese money but if you cast your mind back a couple of years you had Aung San Suu Kyi’s party was victorious in 2015 and took office in 2016. At that point the then president, Obama, lifted the sanctions that the U.S. had in place and the economy has just opened up. It’s quite amazing, it’s the highest GDP growth rate in Southeast Asia and there is an enormous amount of capital. Large companies, companies that we would know like Ford for example, like Unilever, are making major investments in the country putting their cash into developments. The government for its part are very clear, on a path to develop a Western style democracy and they are doing everything they possibly can to wipe out corruption and they’ve been very successful in that. Perhaps to describe that it works very much as you would expect it to work.
The legal system is similar to Australia in that it’s based on English law originally so it works as you would expect it to work. The ministries work as you would expect them to work, there are democratically elected ministers in place and they have department heads and they refer to their set of statutes and their set of regulations as we do in Australia. They’re doing a pretty good job of steering the economy, steering the policy framework of the country. Bearing in mind that they’ve got an awful lot of work to do. There is a peace process rolling out in parallel with this sort of economic reformation that’s going on. Myanmar is a country that is full of many different ethnic groups that traditionally in their history viewed themselves as separate nations and were armed and often in conflict with one another. Those tensions are still there in the country. The task of uniting them into a federation is a large one and not without its problems and not without its setbacks.
As long as you’re not a Rohingya I guess, that’s the focus of their problems at the moment, they’re not being terribly nice to the Rohingyas and it’s causing them to be kind of international pariahs.
I think the first thing to say about that is that the Rohingya crisis is an absolute human tragedy and there’s no taking away from that. I suppose there’s a slightly broad brush that’s painted internationally, and when I say a broad brush in Myanmar the military has control of certain things and doesn’t answer to the civilian government. That was part of the terms of the original handing back of power from the military regime to the new democratically elected parliament. There’s a divide there, if you like, in power and that’s often missed when international commentators look at Myanmar and say they’re not doing the right thing. Until that’s resolved that’s going to remain as a source of tension. To be honest there’s not a lot I can do about that.
What I can do though is bring into being an outstanding asset that is going to do wonderful things from a social benefit point of view in an impoverished area. We are in the Shan state, so about as far away from the Rakhine State as you can get, still in Myanmar but an impoverished area and an area where there are low educational outcomes, poor health outcomes, lack of services. In my experience, and I’ve been doing this for 30 years, there’s nothing like a mining asset in a remote region to bring wealth and prosperity, business development, opportunities for training and opportunities for folks to experience what the world has to offer, nothing like a mining operation in a remote area to do that. That’s a big part of what we’re intending to do.
I suppose the bottom line is whether there’s likely to be a renationalisation of the mine as has happened in the early Sixties. I wonder whether you regard the chances of that as zero or 5%, 10%, I mean do you have a thing in your mind as to the possibility of that?
I wouldn’t put a number on it, I think it’s pretty low. Perhaps I can describe a little around sovereign risk, and people use the term sovereign risk and for a mining project in a place like Myanmar there are actually three elements to it. The first is can you get it, the second is can you keep it and the third is can you actually build it and run it. Those are the three elements of sovereign risk and can you get it, that’s all about can I obtain a title to this and can I work my way through with the government and obtain the right to be here, that’s been done, we’ve ticked that off with the government and we’ve ticked it off using our partners’ lobbying power as well with the government so that one is fine. The second one which is what you’re talking about is can I keep it, what’s to stop renationalisation, what’s to stop a large competitor company with lots of money and one answer to that is you have to have a look at the government and say are these folks trustworthy, are they going to keep their end of the bargain and do I think it’s likely that the political situation will change. I think Myanmar is a lot more stable and a lot better governed than people perhaps give them credit for in that sense, so that’s good.
What can you do to protect yourself? I would say you always have to look to your local partners. We’ve chosen two partners, these are major economic participants and are major employers. One of our partners, East Asia Power, is the mining arm of a group that includes the Europe and Asia Company and that company employs 15,000 people, has a dozen factories in Myanmar and makes about 70% of the fast moving consumer goods in the country. We’ve got two nice big gorillas at the table with us. If I could perhaps describe it this way, we’ve made ourselves a hard target deliberately. We tied ourselves up with folks that are obviously not the sort of companies that government would like to annoy, so perhaps if they felt they were going to do something with a mining asset they will go and choose somebody else’s mining asset. That’s about as good as I can do to protect us. I always believe that when you’re operating in a foreign country you rely so much on your in-country partner and we’ve picked two really good partners in that sense.
The third aspect of sovereign risk is can you actually build it and run it in that environment? In that social climate, in that location with all of the issues of doing business there. Don’t forget, that’s the one that bites in Australia and we say there’s no sovereign risk in Australia but that’s not true. Yes, you can get it and yes you can keep it but can you actually build it and run it? Well, look at the Carmichael Mine, you look at perhaps how Venture Minerals went if I come back to Tasmania again. There are plenty of aspects of what an international view would say is sovereign risk in Australia as well. Of course, that’s alive and well in Myanmar. We need to make sure that we are consulting and bringing the local community along with the development of the mine and we need to make sure that we hit international standards in environmental care, in safety, in social development and of course that’s one of the reasons that the Myanmar government is pleased to see an Australian listed company doing this because we bring all of those things and we have to be transparent in the reporting, so they’re very pleased.
Yeah. Great to talk to you, John, thanks very much for your time.
Thanks, Alan.
That was John Lamb, the Executive Chairman and CEO of Myanmar Metals.
