TRANSCRIPTION OF FINANCE NEWS NETWORK INTERVIEW WITH SCANDINAVIAN RESOURCES (ASX:SCR) CHAIRMAN, DAMIAN HICKS
Rebecca Richardson: Hello Rebecca Richardson for the Finance News Network. Joining me for an update from diversified mineral explorer Scandinavian Resources Limited (ASX:SCR) is Chairman, Damian Hicks. Damian welcome to FNN.
Damian Hicks: Thanks Rebecca.
Rebecca Richardson: Can you start by introducing Scandinavian Resources?
Damian Hicks: Sure, Scandinavian Resources is a company we listed on the ASX in April 2010. Its market cap at the time was about $12 million and as at today it’s worth about $60 million, and we definitely believe it’s on the way to a much greater value in a short time. Primarily it’s an incubation company of lots of projects in Sweden and Norway, but the project that’s taken the market sort of attention is the Kirunairon Project in far northern Sweden.
Rebecca Richardson: And Damian, what’s an Australian company doing in Sweden?
Damian Hicks: It’s a good question I’m always asked – it’s actually a Swedish company that’s listed on the ASX. So that’s the way I like to look at it because all of our staff live in northern Sweden and the majority are Swedes or Norwegians. And there’s nothing that the Aussies or Australians can contribute to the expertise of the Swedes, other than maybe some encouragement and some additional capital.
So whilst we’re listed on the ASX, it’s more than likely that in due course we will probably transfer our listing to the Oslo Bors, The First Nordic Exchange in Stockholm, or to London’s alternative market.
The other thing is that Scandinavian is all about – has been built around one person and he’s a fantastic chap from Sweden, his name is Oluf Forslund, so Oluf ran all of Sweden’s data. So when we teamed up in 2007, I said, “Oluf, you do whatever you like, I’ll find the money and let’s go and find some big mines”. And that’s pretty much how we started and we’re still going strong today.
Rebecca Richardson: You’ve just announced the acquisition of two projects in northern Sweden, what was the consideration?
Damian Hicks: Sure, the consideration for the June transaction was US$6.5 million and that was from a Swedish company called Grängesberg Iron. And the consideration for the acquisition from Anglo American (LON:AAL) and Rio Tinto Ltd (ASX: RIO) last November was US$7 million.
So we raised $6.5 million in the IPO. We’re acquiring these projects; we’re joint venturing into new projects and we’re spending a lot of money on drilling - so yeah, very rapid progression for the Company.
Rebecca Richardson: Who did you acquire them from?
Damian Hicks: We acquired the Rakkuri Project from Anglo American (LON:AAL) and Rio Tinto (ASX:RIO) and that project is only 7 kilometres from the town of Kiruna and all the modern iron infrastructure. Anglo and Rio sold the asset because they were looking for copper and ultimately the copper was too small to be material to them. But all the copper is hosted in iron, so it’s actually going to probably turn into a 100 million tonne iron deposit 7 kilometres from the largest iron mine in Europe. So, for a junior company that’s a great space to be in.
In terms of the Grängesberg Iron portfolio we acquired in June, their projects all join our existing portfolio. So it’s really bolt-on acquisitions to try and get the scale we need to become meaningful. And absolutely not afraid to say that we’ve stolen this strategy, it’s a pretty basic strategy but it’s a strategy made famous by – in the Pilbara region by Fortescue Metals Group (ASX:FMG), by Atlas Iron (ASX:AGO), by Brockman (ASX:BRM), by Aquila (ASX:AQA), by Giralia (ASX:GIR). All these guys that picked up for low cost, assets that were considered non-core to BHP (ASX:BHP) and Rio Tinto (ASX:RIO), and in a very short period of time measured in 5 to 7 years, they’ve gone from zero market cap in the case of FMG, to be one of Australia’s you know, largest market cap stocks.
On a micro level it’s exactly what we’re trying to do. We’re trying to secure all of the old iron deposits in Europe’s number one iron district that we’re considered non-core by the major mining company, but for a junior are very, very significant and hopefully we follow the same trajectory.
Rebecca Richardson: Thanks, so how much iron do they contain?
Damian Hicks: Basically we aim to put out a JORC for Resource at the end of July and we’ve just completed 10,000 metres of diamond drilling. And it’s our expectation that JORC Resource will be somewhere between 200 and 250 million tonnes of inferred resources, plus an exploration target of something similar.
For the rest of the year we’re going to do another 10,000 metres of diamond drilling. And it’s our expectation that early in the New Year, we’ll have roughly 500 million tonnes of Inferred JORC Resources subject to all the exploration’s success in the acquisition. So that’s quite a meaningful number. They’re all open-pit opportunities and having a number of different deposits in that area gives us the flexibility to manage weather, manage the requirements from the community and manage the path of the reindeer herders during the year, which is always something we need to work within.
Our closest iron deposit to the Kiruna town is only 7 kilometres. So that’s 7 kilometres from rail, 7 kilometres from skilled workforce, 7 kilometres from power and really that’s where we’d like to start our future at Rakkurijoki - is the project name. Alternatively, at a project that we recently acquired from Grängesberg Iron called Ekströmsberg, so it’ll be a bit of a balancing act at this stage.
Rebecca Richardson: And being Sweden it can get pretty cold over there, does drilling stop during winter?
Damian Hicks: The best time to be drilling is in winter because what happens; there’re two periods when you can’t drill. And that’s the melting period when the ice is melting, because obviously you’d fall through the lakes and you sink in the boggy ground, and when it’s really snowing very heavily.
But winter is the best time because the ice freezes, creates a very hard base and essentially you can drive your track mounted diamond drill rigs wherever you like without disturbing the surface. Because then the ice melts and you’ve left no tracks. So whilst it’s very cold, less than 30 below at times, it is actually the best time environmentally and supported by Sami villages to do your exploration.
In the summer when there’s no ice, generally you have to use helicopter mounted or transported drill rigs or drill very close to existing roads.
Rebecca Richardson: Onto corporate matters now Damian. The project sounds like it’s going to require a lot of capital, what’s your funding position?
Damian Hicks: Our funding position is quite strong because one of our largest shareholders in Scandinavian Resources is manganese mining company called OM Holdings (ASX:OMH). And OM is a fantastic company, its mining magnesium in the Northern Territory but it’s also made a very large investment in an iron mine in Norway that’s owned by Northern Iron, another ASX listed stock. So we have the support of Northern Iron, we have the support of our founding shareholders but I have to say, a lot of attention is now coming to us from Oslo, from Stockholm and from London.
So I honestly believe that in the future, the funding will come from the investment banks that would like to take us from explorer, to developer, to miner in their backyard because they understand the jurisdiction. They’re very comfortable with the geology, they’re comfortable with the capital markets and because they can see the Company is so undervalued relative to its peers who are operating there now, they’re quite happy to come in at these levels and above.
So, we’re going to need a lot of capital, make no mistake, much like the iron miners in the Pilbara region. But if you have the quality assets, you have the right capital structure and corporate plan; I think it can be managed quite well.
Rebecca Richardson: And are you looking at joint venture or partnering options?
Damian Hicks: Not joint venturing out our ground; we’re always looking to come into more opportunities ourselves. However, if we’re going to bring Rakkurijoki or Ekströmsberg into production in 2015 or thereabouts, there may need to be some co-operation shown by a number of parties in the district.
Rebecca Richardson: Last question. What’s the priority for Scandinavian Resources for 2011?
Damian Hicks: Drilling, drilling and drilling to increase the size of the resources and maintaining our capital structure, so that in 2012 we’re fully funded and we’re moving towards development opportunities.
Rebecca Richardson: Damian Hicks thanks for the introduction.
