Murchison Metals Limited (ASX:MMX) Announce 2011 Full Year Results and Market Update
Murchison recorded an overall net loss after tax of A$16.6 million for the 2011 financial year (FY10: loss of A$21.6m), reflecting the Company's continued focus on feasibility studies for the Oakajee Port & Rail ("OPR") infrastructure project and Jack Hills Expansion Project ("JHEP"). Cash and cash equivalents at 30 June 2011 stood at A$12.4 million, in addition to A$70.1 million of funds available for drawdown under the US$100 million bridging finance facility secured with Resource Capital Fund ("RCF") in March 2011.
Murchison is in discussions to refinance the facility which expires in April 2012.
Murchison has a 50% interest in Crosslands Resources ("Crosslands"), which delivered a net profit after tax of A$2.6 million (Murchison share: A$1.3 million), compared to a net loss after tax of A$8.6 million (Murchison share: A$4.3 million) in 2010, on the back of increased sales revenue from the Stage 1 mine at Jack Hills.
Stage 1 mine operating cash flow increased by A$21.3 million to A$33.6 million for the 2011 financial year, reflecting a 38% increase in sales revenue to A$228 million on the back of stronger iron ore prices.
Crosslands achieved an average price of A$143 per tonne of ore sold from the Stage 1 mine at Jack Hills in 2011 (FY10: A$94/t).
The increase in prices offset a 10% reduction in sales volumes during the year resulting from adverse weather conditions in the March Quarter 2011, which limited the transport of iron ore to port during this period. Total volumes sold for the year amounted to 1.57 million tonnes (FY10: 1.75 Mt).
The primary focus of activity during the year was on feasibility studies for OPR's infrastructure project and the JHEP. Murchison invested A$70.2 million in the projects during the year, comprising A$26.4 million for OPR and A$43.8 million for Crosslands. The figure for Crosslands includes Murchison's share of Crosslands' pro-rata contribution to OPR.
Oakajee Port & Rail
As previously announced, Murchison considers securing supply chain agreements with OPR's targeted Foundation Customers vital to the development of both OPR and the JHEP. To date agreement on supply chain agreements has not been achieved. Murchison and its partner, Mitsubishi, are evaluating a number of options, ranging from revised tariff models to a broader based restructure of OPR, in an attempt to reach a balanced commercial outcome with OPR's targeted Foundation Customers.
In view of the need to resolve these commercial issues, and given the advanced state of planning, evaluation and design of both projects, expenditure and short term work programs for OPR and Crosslands are being scaled back whilst a commercial solution is being sought. Crosslands continues to work on a revision of the JHEP feasibility study, as announced previously.
Murchison announced the details of OPR's and Crosslands' respective feasibility studies on 4 July 2011. At the same time, the Company also announced that it is conducting a Strategic Review to assist Murchison to meet its funding obligations or otherwise unlock value for its shareholders.
The Strategic Review is ongoing and Murchison is currently engaged in confidential and incomplete discussions with a number of parties. There can be no assurances that a transaction will emerge which is either capable of being recommended to shareholders or otherwise enacted by the Company.
Murchison will update the market as appropriate.
Murchison Metals Limited