It’s been an incredibly disappointing six months for everyone...

It’s been an incredibly disappointing six months for everyone involved with IDM, including the 70 staff that lost their jobs, and we are all asking ourselves what next? To be honest, I’m not sure, but here are some of my views.

Macquarie is owed over $10m as of 31st December 2012. Now there is little point Macquarie winding IDM to claim monies owed, as Sentient are the first line of creditor with their $5m injection.

Now Sentient have always been a very strong supporter of the project since it’s infancy, and it’s one of the reasons why I backed it. They have had some terrific results especially the projects under the control of Barry Bolitho (IDM chairman). Sentient are now the company behind Majellan Metals, and many people (especially west aussies’s) will know the issues they have had with this project. They have pumped over $80m into this and when we had the lead scare it was put on care and maintenance for over two years. The political and environmental issues could have easily shut this project down forever, but Sentient were never going to give this up because they see the long term benefit of this project. It is currently being re-commissioned and is nearly back online.

I know that Sentient have no faith in projects in Africa. Now 85% of all foundry chromite is supplied from South Africa and they continue to have issues with the black empowerment and electricity generation, this will only get worse. Other projects like Base Resources Zircon project in Kenya continue to run into issues, and this will not stop, remember this Africa and a change of government happen on a monthly basis.

Now we know Iluka are having problems flogging many of their products into China, including Zircon, but this won’t last forever. This actually plays into their hands in the long term. Many Zircon projects have been put on ice and projects like Base can’t even get an offtake for their Zircon. So Iluka will be the mainstay for supply.

So I think one of a few things will happen for IDM.

1.
Barry and the boys will look for a partner and quite possibly Chinese. Remember the Chinese will be worried about South Africa, especially with all the talk of them re-directing chromite supply into their own ferrochrome projects, or the possibility of export taxes on chromite. The Chinese could buy Macquarie’s debt and shares, but there are others that could do the same.

2.
The coos bay project could be sold, lock stock and barrel and the money be sent directly to creditors. Some miners out there might just think it’s a good time to pounce. But Sentient and Macca’s would lose squillions of dollars (Macquarie could get nothing).

3.
Sentient could become even more involved, just like they did with Majellan. These guys are pretty hard core and they’ve pumped a lot of money into the Coos Bay project, they have a very long time horizon, and they know that the plant runs, it’s just been hit by the mineral sands downturn and the lack of penetration into a soft Zircon market. The $5m they are owed could be changed into shares, they could well take on some of the debt owed to Macquarie, and for the short term continue to fund the project.

No matter what it’s going to be a hard road, but it’s still going, Macquarie haven’t called in the dogs, and I would be thinking that the company has inventory that it can sell. It’s now just up to the two big boys and whether they see a future, but something tells me they do as Sentient would have stopped funding it by now if they didn't.

Pep