Intrepid Mines Limited

Intrepid Mines Limited

May 28, 2015 09:30 ET

Intrepid Mines Limited: Annual General Meeting Chairman's Address

SYDNEY, AUSTRALIA--(Marketwired - May 28, 2015) - Intrepid Mines Limited (ASX:IAU) ("Intrepid", or the "Company"), advises that the Company's Chairman will deliver the attached address at the Annual General Meeting of the Company to be held on 28 May 2015.

Intrepid Mines today is a very different company to the one it was a year ago. The merger between Intrepid and Blackthorn Resources has brought together a company with ample funds but no application for them, and one with an exciting project, and insufficient funds to progress it. The marriage of the two entities, approved by both sets of shareholders late last year, allowed Intrepid to return two thirds of its cash to shareholders, while retaining sufficient funds to not merely complete the feasibility study on the Kitumba Project, but also to withstand an extended period of depressed market, in which conditions did not encourage new project development.

As it eventuated, we saw a sharp decline in commodity prices almost immediately following the merger, and while copper was not the most heavily affected commodity, nevertheless we saw spot prices decline by around 25%. The immediate impact was to depress the returns on the Kitumba project as a result of lower medium term price expectations, and of course this has had a major impact on Intrepid's share price, as potential investors re-evaluate the likely timing of Kitumba development. Let me make it clear that your board remains confident that Kitumba will be developed, and your company has more than sufficient funds to cope with any reasonably foreseeable delay in development that may be incurred as a result of price volatility.

Meanwhile, there are several opportunities to enhance the Kitumba project, and to make it more robust in a lower price environment. One of the things that attracted Intrepid to Blackthorn was that in addition to the Kitumba discovery, it had extensive holdings of highly prospective territory in the immediate vicinity, but had been unable to fund further exploration.

While Kitumba as it stands is a viable development at long term copper price estimates, its economics are highly sensitive to mine life, and additional discoveries in the exploration licence areas would significantly enhance the project. We consider it a judicious use of available funds to do further work on the high priority targets already identified, over the next year, as success would increase the chances of the project being slated for early development in the current price environment.

Elsewhere, your management team is focused on limiting cash consumption to those things that substantially enhance business outcomes. Work on the feasibility study for Kitumba is being progressed selectively, with careful staging, and priority given to work that could either significantly reduce capital, or significantly increase revenue from the project. The merger resulted in a short-term increase in corporate costs, which has now been eliminated with the closure of Intrepid's previous offices, and the departure of a number of staff. I note in this context the departure of our CEO Mark Mitchell, who left the company at the end of March to pursue other business interests. We were sorry to lose someone of Mark's talents, and wish him well, however we are fortunate to have had Intrepid's previous CEO Scott Lowe already on board, and able to step into the role.

The Board made its first visit to Zambia last month, and was encouraged by what we saw. The targeted exploration program is now under way following the end of the wet season, and we remain encouraged by the prospects for success. We took the opportunity to meet with senior Zambian officials, and were also encouraged by the level of support for the project, and the relative political stability of the country. As you may know, the Zambian mining royalty regime has been a source of frustration for much of the local mining community, and the government shortly after our visit outlined a new compromise proposal. While it substantially relieved the burden on open cut miners, unfortunately it removed the preferential rate for underground mines. The result is that the rate that would apply to Kitumba increases by 1%, from what was previously proposed. While not a huge change, it makes the challenge of developing the project in the current price environment that little bit more difficult.

While some of the commodity price decline I mentioned earlier has been retraced, uncertainty remains about the trajectory of the Chinese economy, and its impact on global copper demand, and in our view this leaves open the possibility of ongoing price volatility. In these circumstances your directors felt that it was wise to retain as much flexibility in capital management as possible. In addition to undertaking careful cost management, we will be seeking approval at today's meeting to give us the capacity to increase shareholder value via a share buyback, should circumstances make that option an attractive application of funds.

While the market outlook remains uncertain, your directors are confident that the company is well placed to weather any storms, and has the capacity to take advantage of opportunities that may arise.

Ian McMaster (Chairman)
Mike Oppenheimer (Deputy Chairman)
Scott Lowe (Managing Director)
Alan Roberts (Non-executive Director)
Derek Carter (Non-executive Director)
Nicole Bowman (Non-executive Director)
Vanessa Chidrawi (Company Secretary)
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ASX symbol: IAU
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