You’re originally from South Africa, how long have you lived in Australia and what brought you here?
We moved to Australia in 1997 and were pleased to become citizens soon after. When I first considered moving to Australia, I was looking for open pit gold mining experience (South Africa was all deep level). Later after joining the financial sector, Macquarie Bank offered me a role in the equity research unit in Sydney, which was a tremendous opportunity for a young family.
Can you outline your background in mining? How did you start out and what attracted you to it in the first place?
Originally I started out studying zoology for a career in wild life management and took geology as a filler subject. Geology soon became my passion. Over time I have enjoyed getting involved in the entire value chain from discovery to sales.
You gave up the rock kicking and become a highly rated mining analyst. Was this good preparation for later developments in your career with companies?
I’ve enjoyed my time in investment banking and equity research; it certainly helped my understanding of what drives company performance as well as valuations. It’s however good to be back kicking rocks and advancing projects – although the one big learning point is as an asset owner – it’s not as easy to change your view from “buy” to “sell” like an analyst when the market turns. Things take a lot longer.
What has your primary focus been with Realm Resources?
In the last few years we have focused on the thermal coal sector in Indonesia. At the time we invested in coal in early 2011, I remember articles saying thermal coal was a “recession proof commodity” with rampant Asian and Indian energy demand driving forecasts for higher prices. In addition, at the time Indonesia was seen to be a safer investment destination than Australia – how have things changes since then.
What is the company’s main project? What are its resources and how has the plunge in coal prices changed the company’s strategy for the project?
Our main project is our 51% holding PT Katingan Ria in Central Kalimantan. The project has a JORC defined resource of 89Mt (50Mt measured and indicated) and simple geology with the Main seam being almost horizontal and about 3-5m thick. At first we planned on building an export operation as we estimated that we could achieve a $US15/t to $20/t margin FOB for the 4200Kcal/Kg GAR low sulphur coal. But as the coal price fell and the margin evaporated, we turned to a domestic strategy with a mine mouth power station the most likely way to commercialise the project. Indonesia is accelerating its power station development programme and this bodes well for our project which is close to two proposed power station sites.
What would be the preferred method of shipment from the coal mine?
We plan to transport the coal 40km by road to the proposed power station site, which is on a tributary of the Katingan River. This is also the location of our Upper Stock Pile for our planned export operation, should that become feasible in time. This will entail 435km of barging to the off shore anchorage where coal will be loaded onto the mother vessel for export.
What are some of the challenges facing Australian coal miners in Indonesia?
The last few years have been a huge learning curve. There are many challenges, of which a few include: understanding legal, regulatory and ownership rights; the ever changing regulatory environment and how to deal with that; security in remote locations; language and cultural barriers; importance of having good local partners and advisors; logistics in remote locations – for example getting used to rivers, barging and floating cranes; to name a few. We have yet to meet an “Indonesian expert” as it’s a constantly changing landscape.
Do you think that you need good people on the ground in Indonesia to ensure the project stays on track?
This is imperative – we are lucky to have excellent local support, particularly on the legal and commercial front as we are not developing the project at present and need to keep it in good standing. Separately we have established a number of good relationships with excellent service providers that could assist with project development.
Do you think that the coal prices have bottomed out or are we in for more pain?
I think coal prices have bottomed out, but I’m less certain as to when we will see a recovery. The industry has risen to the challenge and has significantly lowered its costs. This together with continued oversupply is likely to keep the lid on prices for a while. So I expect we will have a bit more time yet at low prices before the inevitable recovery arrives.
Apart from the Indonesian project, does Realm Resources see any opportunities closer to home?
Absolutely. We have focused our attention on Australia recently. There are a number of projects up for sale and labour rates are becoming a lot more reasonable as well. A number of the majors are cleaning out their asset portfolios and we believe this offers smaller companies like Realm an opportunity to take a lower cost/small mine approach. NSW continues to be a hard place to do business for coal miners – but we remain open minded and are looking at a number of projects on the east coast of Australia.
Do you think there are valuable coal assets in Australia that could be transformed using different management and labour?
Yes. This is the back bone of our strategy. We are also keen to look at underground mining opportunities and high wall operations where there is established infrastructure and access to export markets. Remnant and mine closure opportunities are all potential targets as one would not need to go bigger than say 1-2Mt pa at this stage in the cycle.
The mining industry can be pretty intensive. How do you relax?
I enjoy keeping fit and often run around the botanical gardens in the city – how lucky to be in such a great city and country. Fishing and just exploring Australia is another passion – we have a wonderful coast line – it’s good for the soul.