STRAITS ASIA RESOURCES LIMITED (Incorporated in the Republic of Singapore on June 10, 1995) (Company Registration Number: 199504024R)
ANNOUNCEMENT BY STRAITS RESOURCES LIMITED ON THE AUSTRALIAN STOCK EXCHANGE
The attached announcement was released to the Australian Stock Exchange by Straits Resources Limited (ASX: SRL). SRL held an interest in 47.1% of the shares of Straits Asia Resources Limited (Straits Asia) through a subsidiary but sold control of the subsidiary on 28 April 2009.
The announcement contains information relevant to Straits Asia Resources Limited.
James Carter Company Secretary
30 April 2009
QUARTERLY ACTIVITIES REPORT FOR THE PERIOD ENDED 31 MARCH 2009
HIGHLIGHTS ABOUT STRAITS Straits Resources Ltd (ASX Code: SRL) is an ASX200 diversified resources company focussed on OPERATIONAL generating strong and sustainable earnings for its Straits Asia achieved coal production of 1.76 Mt for the shareholders from a balanced March quarter. portfolio of resource projects.
Tritton produced 5,835 tonnes of copper in concentrate Straits controls and operates the Whim Creek Copper for the quarter at cash costs of US$0.96/lb Cu produced Operation in WA, the Tritton (US$1.21/lb in previous quarter). Copper and Hillgrove antimony/gold mines in NSW Whim Creek produced 2,389 tonnes for the quarter. and the Mt Muro gold mine in Mining operations have now ceased. Indonesia. Straits also holds 40% of Straits Bulk & Industrial Hillgrove produced 344 tonnes of antimony metal for 3 Pty Limited (SBI) which holds months to March 2009 and sold 316 tonnes. 47.1% of Straits Asia Resources which is listed on the Singapore Mt Muro produced 10,180 ounces of gold and 54,185 Exchange. Straits Asia controls ounces of silver for the quarter. and operates the Sebuku and Jembayan Coal mines in Indonesia. CORPORATE In addition, Straits has an PTT purchases 60% of Straits subsidiary SBI for US$335 exposure to an outstanding million. portfolio of mining investments, development projects and A$80 million convertible note issue placed with exploration ground throughout Standard Chartered Private Equity Limited (SCPEL). Australia, Indonesia, Madagascar & Brunei. Straits EXPLORATION Resources also owns GfE and Magontec, a European based Drilling programme continues at the Sakamena area specialty metals businesses. (Sakoa Project Madagascar). SHARES ON ISSUE Quoted: 233,985,310 Drilling programme at Goldminco s Temora project extends mineralisation along strike and a resource upgrade at Discovery Ridge Project. STRAITS RESOURCES LIMITED ABN 22 056 601 417
REGISTERED OFFICE First Floor 35 Ventnor Avenue WEST PERTH WA 6005 Australia Telephone (61 8) 9480 0500 Facsimile (61 8) 9480 0520
Email: [email protected] Website: www.straits.com.au
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Quarterly Activities Report, March 2009
OPERATIONS
March Qtr Dec Qtr Calendar yr 2009 2008 to Dec 2008 Tritton Copper Mine, NSW Copper produced [in conc.] (100%) tonnes 5,835 6,540 20,374 Copper sales [in conc.] (100%) tonnes 5,212 7,535 20,091 Cash costs (excludes TC/RC) US$/lb 0.96 1.21 1.41
Whim Creek Copper Mine, WA Copper produced (stripped) tonnes 2,389 3,291 12,282 Copper sales tonnes 2,389 3,394 12,300 Cash costs (excludes TC/RC) US$/lb 2,69 1.81 1.93
Mt Muro Gold Mine, Indonesia Production Au oz 10,180 12,880 51,796 Ag oz 54,185 95,898 263,182 Sales Au oz 9,612 14,290 55,279 Ag oz 63,337 96,935 250,938 Cash costs US$/oz Au 940 1,018 866
Hillgrove Sb/Au Mine, NSW Antimony (Sb) produced tonnes 344 148 222 Sales tonnes 316 124 137
Sebuku Coal Mine, Indonesia Coal mined '000t 648 900 4,225 Product coal '000t 531 720 3,531 Sales '000t 403 745 3,607
Jembayan Coal Mine, Indonesia Coal mined '000t 1,251 1,333 5,015 Product '000t 1,232 1,316 5,055 Sales '000t 1,249 1,356 4,985
Group Revenue Sales Revenue (excludes Varomet) A$ 000 203,162 306,357 955,086 Varomet A$ 000 58,928 104,764 1,336,695
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Quarterly Activities Report, March 2009
BULK COMMODITIES
Sebuku Coal Mine, Indonesia Straits Asia Resources Ltd (SGX: SAR) 100% Coal Co-operation Contract
Sebuku produced and sold 531kt and 403kt respectively in the March 2009 quarter. As expected Sebuku mine s production was lower on a year-on-year basis, due to the mining constraints associated with the forestry boundary. Rainfall also had an impact on year on year production shortfalls with Q1 2008 having lower rainfall than Q1 2009.
The mine is developing a highwall for mud stabilisation to enable access to reserves pending the boundary decision. The project is progressing satisfactorily. The mining methods that have been deployed as a result have meant that costs at Sebuku have risen over 2008 levels.
Jembayan Coal Mine, Indonesia Straits Asia Resources Ltd (SGX:-SAR) 100%
Jembayan performed well for the reporting period, increasing its production on a year-on-year basis.
Total production from the mine for the March quarter was 1,251 kt with 1,249 kt of coal sold.
A reduction in fuel prices since Q3 2008 has helped the mine to maintain its costs at around 2008 levels, the benefit being offset by higher contractor costs and a slightly higher strip ratio.
The drilling programme continues and results will be announced at appropriate times.
BASE METALS
Tritton Copper Mine, New South Wales Straits 100%
QUARTERLY PRODUCTION STATISTICS - TRITTON
Units Mar Qtr Dec Qtr Yr to Dec 2009 2008 2008
Mined tonnes 216,009 261,727 833,035 Grade % Cu 2.77% 2.88% 2.61% Milled tonnes 222,531 263,451 885,827 Grade % Cu 2.76% 2.65% 2.46% Recovery % 94.88% 93.77% 93.44% Cu Concentrate tonne 23,033 26,531 81,770 s Cu Grade % 25.3% 24.6% 24.9% Cu in concentrate tonne 5,835 6,540 20,374 s
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Quarterly Activities Report, March 2009
March quarter production from the Tritton Copper Mine totalled 5,835 tonnes of copper in concentrate, an 11% decrease on the previous quarter. Ore mined was 216,009 tonnes at a grade of 2.76% Cu. Ore milled was 222,531 tonnes at a grade of 2.76% Cu. Total ore mined and milled achieved decreased over the previous quarter by 17.5% and 15.5% respectively.
The Tritton mine is expected to deliver production of around 2,100t to 2,200t of copper in concentrate per month. Site cash costs (excluding TC/RCs) decreased for the quarter to US$0.96 per pound Cu (from US$1.21/lb in the December quarter). The benefits of the cost cutting programmes and the suspension of the expansion mining activities in the northern ore bodies has flowed through to operating costs. Given the current market price volatility and the high TC/RC charges associated with the current off-take agreement, the company will continue to closely monitor the economic viability of the Tritton operation.
The expanded processing plant s availability, throughput and metallurgical results have improved during the March quarter. The processing plant s average throughput during March was 168 dry tonnes per hour, with name plate design throughput of 175 dry tonnes per hour exceeded on occasions during March. Metallurgical results of the expanded processing plant have exceeded expectations with average recoveries of above 94.5% recorded for the quarter. The processing plant is well positioned to exceed the 1.4 million ore tonnes treated per annum when required.
The copper cementation process has proved successful with a gradual increase in production being recorded. In the March quarter 215 wet tonnes of cement were produced.
Whim Creek Copper Mine, Western Australia Straits 100%
QUARTERLY PRODUCTION STATISTICS - WHIM CREEK
Units Mar Qtr Dec Qtr Year to 2009 2008 Dec 2008
Ore Mined tonnes 0 359,723 1,896,753 Grade % Cu 0% 0.93% 0.91% Ore Stacked tonnes 229,438 511,036 1,757,390 Grade % Cu 1.24% 0.66% 0.83% Production (stripped) tonne 2,389 3,291 s 12,282 Cathode Sold (Cu) tonne 2,389 3,394 s 12,300
Production from the Whim Creek Copper Mine totalled 2,389 tonnes of copper cathode produced. Crushing activities were finalised during the quarter bringing mining and crushing activities at Whim Creek to an end.
The numerous initiatives implemented in the prior quarter had a positive impact on the cashflow performance of the operation. The operation will continue to draw down copper inventory from the heap leach pads which will steadily decline over a 12 to 18 month period.
Costs for the operation continued to reduce with the impact of lower acid prices being realised in mid March. With the cessation of crushing, site manning numbers were further reduced.
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Quarterly Activities Report, March 2009
Cash costs for the March quarter were US$2.69/lb up from the Dec Qtr. Included in the unit rate is a non cash component of US$1.23/lb that relates to the drawing down of stock from the inventory model and net realisable value adjustments. Revenue was positively impacted in March due to quotational period price adjustments. The operation is in a credit situation for copper sold in Q1 2009 which will be repaid over Q2 2009.
Hillgrove Antimony/Gold Project, New South Wales Straits 100% QUARTERLY PRODUCTION STATISTICS - HILLGROVE
Units Mar Qtr Dec Qtr Year to 2009 2008 Dec 2008 Ore Mined tonnes 30,163 34,182 117,982 Grade Au g/t 2.48 2.79 2.01 Grade Sb % 3.13% 3.54% 2.40% Grade W % 0.06% 0.04% 0.05% Ore Milled tonnes 24,688 29,777 72,192 Grade Au g/t 2.59 1.88 1.71 Grade Sb % 2.90% 2.11% 2.21% Grade W % 0.05% 0.03% 0.03%
Hillgrove produced 344 tonnes of antimony in the March quarter (148 tonnes previous quarter). Whilst the process plant has successfully demonstrated the ability to produce high quality antimony metal, the commissioning process has highlighted a number of areas in the process plant that require reconfiguration and modification in order to enable commercial production levels to be achieved.
A Process Plant Optimisation Programme was developed in late December/ early January to deal with the changes and it is anticipated that the plant will now be fully operational by July 2009. The timeframe for completing the optimisation programme is largely due to the need to import new filters for the solid-liquid separation. Additional capital required for plant optimisation is approximately $5m to be spent by July 2009. Once steady state antimony production has been achieved, the operation will then commission the gold circuit.
Antimony sales increased to 316 tonnes with a high level of customer support and strong demand for future production.
GOLD
Mt Muro Gold Mine, Indonesia Straits - Contract of Work 100% QUARTERLY PRODUCTION STATISTICS - MT MURO
Units Mar Qtr Dec Qtr Year to 2009 2008 Dec 2008 Ore Milled tonnes 138,185 204,997 590,343 Grade Gold g/t Au 2.59 2.25 3.02 Grade Silver g/t Ag 17 31 26 Recovery - Gold % Au 85.8% 86.2% 90.3% Recovery - Silver % Ag 64.5% 45.8% 54% Production (Gold)* oz Au 10,180 12,880 51,796
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Quarterly Activities Report, March 2009
Production (Silver) oz Ag 54,185 95,898 263,182 Gold Sold tonne 9,612 14,290 55,279 s * Production reported is gold poured The Mt Muro operation produced 10,180 ounces of gold and 54,185 ounces of silver. The plant encountered a number of metallurgical issues during March which resulted in decreased gold recovery. The feed rate to the plant was reduced to minimise the impact of these losses. The metallurgical issues had been resolved by the end of the quarter with recoveries back at design.
Further delays in commissioning the Coal Fired Power Station (CFPS) meant that the anticipated cost savings for the quarter were not fully realised.
Unit cash costs reduced for the quarter but remain higher than expected. Primarily the reasons for the higher than expected costs are due to the higher power cost (delay in CFPS) and the recommencement of mining activities at the Tasat pit which required pre-development and re-establishment of support infrastructure. The average unit cash cost for the quarter was US$940 per ounce, down 8% from the previous quarter. Year to date cash cost are US$881 per ounce.
Considerable work was undertaken during the quarter to secure access to a large elluvial deposit. In early April a MOU was signed with the local government to access this ore supply. IMK will commence mining and processing of this ore in Q2 2009.
PROJECTS
Madagascan Coal Project Straits 35% Red Island Minerals
Phase 2 of the drilling programme at the Madagascar coal project, the drilling of the Sakamena tenements commenced in late March 2009. Commencement was delayed from the original January date due to the cyclonic events and political unrest that has occurred in Madagascar. The first part of the Sakamena drilling programme will be to drill 18 shallow holes along strike in a NE / SW direction, starting in the north, close to the southern end of Sakoa. To date six holes have been drilled and coal has been intersected.
The coal samples from Phase 1, the drilling of Sakoa, are being tested and the final results are imminent. Initial indications suggest that the results are in line with expectations and that Sakoa can produce a washed coal with a 70% yield at 25 MJ/kg (6000 Kcal/kg), 15% ash and less than 1% sulphur.
Coal Exploration, Brunei Straits Joint Venture 35%
Over the reporting period a number of meetings with Brunei government agencies were held to discuss the application for the Prospecting License and FEE (JV Partner) outlined the proposed future activities for exploration drilling in Brunei.
A number of discussions were held with potential drilling contractors seeking expressions of interest in assisting with the proposed drilling program.
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Quarterly Activities Report, March 2009
Corporately, the establishment of a joint venture company is nearing completion. On finalisation, a branch office will be established in Brunei which will administer the prospecting license. The mapping program continues to progress well with on ground activities moving to the Temburong region.
Yannarie Solar Project, Western Australia Straits 100%
The Environmental Protection Authority s report on Straits appeal was released for comment to Straits on 24 December 2008. In response, Straits submitted further information to the appeals convenor on 20 January 2009. This delayed finalisation of the Appeals Convenor s confidential report to the Minister is now expected to be completed around the end of April. The Minister is expected to take several months before reaching a final decision on environmental approval.
EXPLORATION
INDONESIA
Straits Asia Resources (SARL)
During the March quarter exploration activities undertaken by SARL have focussed at the Sebuku and Jembayan mine sites.
At Sebuku, exploration activities have continued to focus on defining resources below the Kanibungan pit and in the Sebuku Strait. Drilling in the Sebuku Strait continues to confirm numbers and thicknesses of coal seams in line with the previously released resource. The drilling will continue through 2009.
Drilling activities have continued at the Jembayan Project during the quarter. Progressive updates of resources and reserves for Jembayan will be released when appropriate.
QUEENSLAND
Exploration efforts in Queensland have concentrated on the gold within the Drummond Basin and further evaluation of the remnant nickel resources at the historical Greenvale Nickel Mine.
Yandan Straits 100%, Drummond Gold earning 51%
Straits have entered into an agreement with Drummond Gold Limited (ASX:DGO) to earn a 51% interest in the Yandan Project.
Straits Gold Pty Ltd ( Straits ), a wholly owned subsidiary of Straits Resources Limited, refers to its previous announcements regarding its Agreement with Drummond Gold Limited
Under the terms of the conditions precedent in the Agreement, DGO are required to satisfy Straits that it has raised $1.0 million by 31 March 2009 to enable it to proceed with the joint venture earn-in. Whilst this term may be waived by both parties, DGO has agreed with Straits to extend the period for capital raising under the Agreement for one month until 30 April 2009.
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Quarterly Activities Report, March 2009
Greenvale (Three Rivers) Straits 70%
Geological modeling has been completed for the nickel and cobalt laterite and saprolite mineralisation. Further evaluation of the Project will commence once a resource has been completed to allow an assessment of the project.
WESTERN AUSTRALIA
Whim Creek Straits 100%
During the quarter exploration activities have been wound back in parallel with the scale back of the SX/EW copper operations. Salt Creek Straits-100%
During the quarter work continued on the sulphide project review on the existing sulphide resource inventory defined at the Whim Creek, Mons Cupri, and the Salt Creek deposits. In addition, results for the Balla Balla, East Balla & West Balla exploration prospects are being assessed for further exploration work to test the identified RAB drilling and geophysical anomalies.
Straits is reviewing its options in light of the Western Australian Governments announcement with respect to an Exploration Incentive Scheme (EIS). The Government contribution to each successful project will be limited to $150,000 to fund 50% of direct drilling costs.
NEW SOUTH WALES
Goldminco Straits - 58% (TSX-V: GCP)
Straits is a major shareholder (58%) in Goldminco Corporation (GCP), a TSX-listed exploration company.
During the quarter, work continued at the Blayney project near Orange, NSW and the Temora Project, NSW.
Drilling at the Temora project continued with further very encouraging results at the Yiddah project where the strike of mineralisation was extended by an additional 400 metres. The best result was 86m at 0.5% Cu and 0.2 g/t Au contained within an envelope of 333m at 0.3% Cu and 0.1 g/t Au (for details see ASX release on 20th March 2009).
In April 2009 an increased resource totalling 508,000 ounces gold was announced at the Discovery Ridge Project (see ASX release 21st April 2009) and a resource of 332,000 ounces gold was announced at the nearby Bald Hill project, both within the Blayney tenements.
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Quarterly Activities Report, March 2009
SOUTH AUSTRALIA
Torrens EL3195 Straits earning 70%
Straits is exploring for iron-oxide copper-gold ( IOCG ) systems in the highly prospective Stuart Shelf region of South Australia (Torrens Project). The Torrens Joint Venture is between Argonaut Resources NL (ASX:ARE) and the company (Straits earning 70%). The Torrens Project is located near the eastern margin of South Australia s Gawler Craton region (Stuart Shelf), within 50 kilometres of Teck Cominco s Carapateena copper-gold discovery and 75 kilometres from BHP Billiton s Olympic Dam mine.
During the quarter, the joint venture closely monitored ongoing third-party legal proceedings which will affect the timing of further access negotiations.
The joint venture has maintained a constant presence at the Torrens site at the substantial campsite constructed by Straits on Andamooka Island (within the tenement) for the purpose of deep diamond drill programs and other associated exploration works.
CORPORATE
Cash At the end of March 2009, the Straits Group cash resources totalled A$315 million. This comprised A$15 million for the Group s operations in Australia, A$270 million cash resources within the Straits Asia Group and A$30 million attributable to the Straits Group s other activities.
Debt Straits is currently reviewing its long term debt financing requirements. The Company has repaid A$45 million of debt facilities (drawn to A$43 million at 31 March 2009) provided by the ANZ and Macquarie banks on completion of the PTT transaction (see below).
Strategic co-investment alliance with PTT Group of companies In March 2009 Straits announced the formation of a strategic alliance with Asian energy major, the PTT Group of companies (PTT), via the sale of a 60% interest in its wholly owned subsidiary, Straits Bulk and Industrial Pty Ltd (SBI) for up to US$335m in cash to a wholly owned subsidiary of PTT Public Company Limited (the Transaction). This transaction was completed on 28th April 2009.
SBI is the holding company for SRLs Brunei coal exploration interests, Madagascan coal exploration interests and for SRLs 47.1% shareholding in the SGX listed Indonesian coal company, Straits Asia Resources Limited (SGX: SAR). SRL has also transferred the Yannarie solar salt project and a team of coal executives headed by Martin Purvis to SBI as part of the Transaction.
PTT is a diversified energy group of companies engaged in oil and gas exploration and production, gas transmission and processing, energy trading and retail distribution segments and accounts for nearly 30% of Thailand s total market capitalisation on the Stock Exchange of Thailand.
Following the Transaction, Straits has transformed into a company with significant base metals leverage (particularly to copper), is in a very strong cash position, and still maintains exposure to bulk commodities through its remaining 40% interest in SBI.
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Quarterly Activities Report, March 2009
The cash proceeds of the Transaction provide SRL with the necessary financial resources to pursue attractive opportunities in the current market. The SRL management team have a solid track record of seeking and applying capital and expertise to undervalued resource opportunities to generate superior returns and Straits intends to focus on this strategy more intently going forward.
The total cash consideration of up to US$335m (approximately A$500m, equivalent to approximately A$2.14 per SRL share) comprises an upfront payment of US$220m which has been paid on completion and a performance payment of up to US$115m payable post completion. The performance payment relates to certain matters in connection with reserve upgrades in relation to the mine located on Sebuku Island, South Kalimantan, Indonesia owned by SAR or as otherwise agreed between PTT and SRL. The performance payment is expected to be realised during 2009.
The Board of Directors of SRL is currently reviewing the funding requirements of SRL going forward and its strategy with respect to the use of the Transaction proceeds. Approximately one fifth of the total consideration received by SRL in relation to the Transaction will be returned to shareholders via two separate instalments. The Board of Directors will provide an update on any proposed return of capital to Shareholders at the appropriate time.
Convertible Note On January 30th 2009 Straits announced that it had completed a Convertible, Unsecured Note issue with Standard Chartered Private Equity Limited (SCPEL). SCPEL is the wholly owned direct equity arm of Standard Chartered Bank. The issue comprised a first tranche of A$48.6 million and a second tranche of $31.2 million which was approved by shareholders at a General Meeting on 20th April 2009.
The four year term notes have a face value of A$1.45, which represented a 53% premium over the closing price on 29th January and a coupon rate of 4% payable annually in arrears.
An alliance with SCPEL brings a number of benefits to the company including:
Further strengthening of the balance sheet that allows Straits to continue with its key development plans whilst working through a volatile phase in the market cycle. The addition of a supportive cornerstone investor on the share register. Additional input from a highly experienced and internationally active private equity team through Board representation.
The issue of the Notes introduces a stakeholder that understands and supports the Company s growth oriented outlook and strategy to continue to develop and realize undervalued resource assets. SRL and SCPEL are fundamentally aligned in respect of pursuing a strategy to maximise total shareholder returns over the medium to longer term
Hedging There was no commodity or currency hedging in place at 31 March 2009.
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Quarterly Activities Report, March 2009
By Order of the Board
Milan Jerkovic Chief Executive 29 April 2009
For further information contact: Mr Milan Jerkovic Chief Executive Officer (08) 9480 0500 or
Mr Dave Greenwood Corporate Affairs (08) 9480 0500 or go to our website at www.straits.com.au
References in this report to StraitsResources Limited , Straits and Company include, where applicable, its subsidiaries.
About Straits Resources Straits is an ASX200 diversified resources company focussed on generating strong and sustainable earnings for its shareholders from a balanced portfolio of resource projects and investments. Based in Perth, the company has a management team with an impressive track record of advancing resource projects through to full-production. Straits controls and operates the Whim Creek Copper Operation in WA, the Tritton Copper and Hillgrove antimony/gold mines in NSW and the Mt Muro gold mine in Indonesia.. Straits also holds 40% of Straits Bulk & Industrial Pty Limited (SBI) which holds 47.1% of Straits Asia Resources which is listed on the Singapore Exchange. Straits Asia controls and operates the Sebuku and Jembayan coal mines in Indonesia. In addition Straits has an exposure to an outstanding portfolio of mining investments, development projects and exploration ground throughout Australia, Indonesia, Madagascar & Brunei. Straits also own GfE and Magontec, a European based specialty metals businesses.
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Quarterly Activities Report, March 2009
PROJECT LOCATIONS
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