Monto Minerals fails to survive ambitious rescue mission: (Todays Newspaper) September 08, 2008 12:00am
EVEN in a commodities boom, and with high-profile directors and management, not all projects survive.
Monto Minerals is not an iron ore miner. It isn't into coal.
Rather, under the stewardship of former MIM executive general manager Peter Slaughter and former Consolidated Rutile boss Geoff Moore, it sank some $70 million into an industrial minerals project near the town that gave it its name.
But although customers were crying out for the suite of minerals Monto's Goondicum Crater operation was designed to produce, Monto couldn't get its processing plant up to planned capacity.
And having unsuccessfully beaten the bushes recently for survival funds - something the company had had to do on a number of previous occasions - Slaughter, Monto's chairman, called in administrators Ian Hall and David McEvoy of PricewaterhouseCoopers.
Slaughter and Moore, who resigned in April, put a huge effort into Monto after they took control of the company's strategy in 2002.
The operation was officially opened with some fanfare in November.
And its board was enlivened by no less a light than Queensland Gas Co CEO Richard Cottee.
But things didn't go to plan - with a veteran local resources analyst pointing out last week that industrial mineral prices didn't provide the premiums currently available to iron ore and coal producers and saying Monto was: "A case of good well-intentioned people, and a bum deposit. And ordinary deposits are always tough."
Monto floated in 1996 as a potential ilmenite miner, ironically on the back of the Goondicum Crater heavy minerals deposit that Consolidated Rutile had once looked at and walked away from.
Monto would produce ilmenite - destined like most sand minerals for the paint industry - as its main product. But it also set out to produce a small suite of other value products, for glass making, for fertiliser and for use in washing Queensland's ever burgeoning coal output.
Production of the latter mineral, titanomagnetite, was yet to come on stream when Monto bit the dust just over a week ago.
But Monto's other products were well received - and Monto expected its titanomagnetite to win good sales because of the plant's proximity to the coal fields, where imported magnetite, with heavy transport costs, is mainly used at present.
Multiple product streams make for complicated plants, however.
And unfortunately, Monto couldn't get its project's "feed preparation area" to perform - eventually assessing it as suffering from "significant design flaws". That left the rest of the project, designed to turn out some 150,000 tonnes of product, producing only half that amount at best.
Slaughter and Moore got Monto into production by raising a bundle of relatively small amounts in their early years with the group and then managed, in May 2006, to get it listed on London's Alternative Investment Market.
That saw Monto raise $40 million as it tapped into a morsel of London's vast pool of institutional capital.
On its share register are the likes of resource industry investor Sentient Group, which also has a direct stake in the operation, Henderson Global Investors, once owned by AMP and M&G Investment Funds, part of the Prudential group.
But the funds tap wouldn't flow again after the plant's problems began to surface earlier this year and the group racked up losses that it said couldn't be overcome unless its Phase 2 expansion, designed to double production, could be undertaken.
That might happen yet under a new owner - if someone buys the operation at a price that makes pumping in extra capital attractive.
But the analyst doubted whether anyone would want to resurrect the project.
Hall and McEvoy were last week "managing the wind-down" of Monto's mining operations and retaining only a skeleton care and maintenance staff.
"The directors called (PwC) in while Monto still had some funds, so we have a bit of flexibility," Hall said, and he indicated there had been some interest in at least some of Monto's assets, which include a hard rock magnetite exploration area at Eulogie Park north of its current operation.
But creditors will have to await a meeting tomorrow at Monto Town Hall to get a better idea of the project's likely fate.
It would be surprising, however, if Monto shareholders see much, if anything, from the wash-up.
MOO Price at posting:
6.0¢ Sentiment: None Disclosure: Held
