the article is nothing you haven't heard before. its generally a...

the article is nothing you haven't heard before. its generally a summary of the situation thats been Apex for sometime now, the harsh reality of which most of you here seem to not want to believe ..


The West Australian (Perth)

March 27, 2010 Saturday
Second Edition

Shoulders to the wheel at Apex;
PETER KLINGER

SECTION: MAI; Pg. 75

LENGTH: 1031 words

Mark Ashley has moved to Wiluna in an attempt to fix the problems dogging Apex Minerals and avoid what analysts are forecasting as the almost-inevitable collapse of the WA gold miner.

Having lost key senior staff over the past few months, including chief financial officer Anna Neuling two weeks ago, and unable to cash in on a soaring gold price, managing director Mr Ashley said yesterday he expected to spend the next two or three months living in a donga at the mine site to try to help management turn around the loss-making operation.

But he dismissed market speculation, which has gained momentum since Apex lodged its half-yearly accounts just after Ms Neuling's unexplained resignation, that the miner was on its last legs.

You know, those sorts of comments motivate me even more, Mr Ashley said from Wiluna.

You hear them all the time, I heard them when I was at (previous employer) LionOre when we were down at 30? to 40?.

The biggest issue is how that affects your workforce, and what you have to do is improve communications and you have to make sure that everyone is aware of what the objectives are and the issues and everyone pulls together and that's one of the principal reasons for me being up here.

We are not there, we have a way to go, but you can see it, you can taste it, the gold is coming out, the tonnes are coming out, the recovery is improving. But those sorts of rumours don't help.

Mr Ashley flew to the mine site, near the town of Wiluna, at the start of this week. He says morale is pretty good although some sources have suggested the opposite is true.

There are about 250 people working at Apex's Wiluna mine, which boasts a long list of previous owners including Denis Horgan's Barrack Mines, Diamond Joe Gutnick and Owen Hegarty's Oxiana.

The mine has a history of operational troubles, not least because of the ore's refractory nature. Over the past year it has also experienced seismicity, interrupting production.

Mr Ashley says he has no intention of usurping resident mine manager Rod Jacobs but is there to help and support the guys.

It can be done from Perth but I think it can be done much better face to face, understanding the dynamics of the various issues and opportunities and being able to explain to the team what these things mean, Mr Ashley said.

The crux of Apex's problem is that it has not produced enough gold-bearing ore of sufficient grade to keep its mill full and operating costs down.

Much of the past year has been spent trying to access the underground orebodies, resulting in huge cash outflows without generating substantial revenues.

The ore supplies problem came to the fore late last year when the tertiary crusher was switched off for seven days, purportedly to undergo repairs. Sources said that the repairs took little more than a couple of days but that Apex did not have enough ore to warrant the immediate restart of the crusher.

Even at an Australian-dollar gold price of more than $1200 an ounce, Apex is struggling to make money.

The bullion boom of the past two years has simply bypassed Apex.

The December-half accounts show that Apex recorded a $76.4 million loss for the six-month period, although the figure includes the early repayment of debt. Both Apex and auditor KPMG qualified their sign-offs by highlighting the miner's precarious financial position.

The operating loss of $37.6 million included a $32.4 million charge for depreciation and amortisation. The cash flow statement shows operating outflows of $12.5 million; gold revenues of $47.1 million were not enough to offset $57.7 million paid to employees and suppliers.

At the end of December, Apex had $18.2 million in cash.

Several analysts, none of whom wanted to be named, said they would be surprised if Apex survived for much longer. They say Apex's estimated recent production performance of about 6000 ounces a month is not enough to offset monthly mine operating costs of about $10 million, eating into already tight cash reserves.

That is not to mention the fact Apex continues to pay rent on two offices in West Perth, despite only occupying one. Both are up for lease.

I wouldn't want to see my name in the paper saying this but I must admit that I'd bet against it (Apex's survival), one investment bank analyst, who knows the Apex story well, said.

Its share price is languishing at 2.6? to value Apex at only $86 million. Two years ago the shares were worth $1.12.

According to Bloomberg, analysts at only three broking houses Goldman Sachs JBWere, Argonaut Securities and Southern Cross Equities cover Apex, and even they have not updated their views since last year's rights issue.

Patersons Securities, which managed Apex's rights issue, is not even on the Bloomberg list.

Mr Ashley himself has a lot at stake. In addition to owning 17 million shares, Mr Ashley has a well-earned reputation as an astute mining executive who oversaw Forrestania Gold's $150 million takeover by Canada's LionOre and its subsequent ascension to among Australia's biggest nickel producers.

The reputation took a hit last year when Kagara, the base metals miner run by his close mate Kim Robinson and which he chairs, survived a near-death experience when zinc and copper prices collapsed.

Even if Mr Ashley wanted to pursue a big equity raising which he ruled out yesterday it is unlikely to replicate the $109 million rights issue that Apex carried out at 4? a share last September.

Most of that money has been spent, in part to repay secured creditors and provide more mine development capital.

I think we've been spending about $4 million a month just on capital development, and of course you've got to get to the ore body before you can develop them, and the next step is to develop on-ore and that adds dilution but at least you are getting revenue, and then you get to the end of the ore body and you start stoping and that's when the real money comes in, Mr Ashley said.

We have three stopes at the moment, we are developing ore at two other deposits. The tonnes are most certainly increasing in terms of ounces and costs will be coming down.

What you have seen to date and what you are going to be seeing the next month and after is a completely different scenario.