Game-changing projects
It’s been about six months since IRJ sat down with Milan Jerkovic, Managing Director of Straits Resources; an ASX-listed miner with a diverse suite of assets, based out of Perth, Western Australia. We have caught Straits at a busy time too, as the company is about six months into a very intensive investment programme aimed at developing a second mine on its Tritton copper project.

“We’re going to go from mining from the top, to mining from the bottom-up,” Jerkovic says. “We are currently installing a paste fill plant at Tritton which will improve extraction rates and consequently increase the mine life by at least three years.”

Of course, this will require some weighty investment and Tritton is really a game-changing project for Straits. In addition, things are coming along well over at the Mount Muro Gold Mine and Goldminco exploration projects too.

Tritton: The company maker

Jerkovic says that Straits has around another six months to finish the investment programme at Tritton, and the company expects to see a steady increase in production volumes coming from the mine starting July.

“That will mean we’re going to go from about 900,000 tonnes of material going into our process plant, to about 1.4 million tonnes annualised when that program is finished which [will be] in the first quarter of calendar year 2011,” he says.

“That should give us a more stable and steady production rate of somewhere between 25,000 and 30,000 tonnes of copper in concentrate—hopefully closer to 30,000 than 25,000.”

After this, Straits will look at opportunities to finish some of the scoping exploration work currently underway on a couple of Tritton ore bodies. In doing this the company will aim to extend the mine life of the operation beyond its current seven-or-so years to 10 years-plus.

“That’ll be the work program that we’ll be able to put together and we should have all of that finished by the end of this financial year. We’re doing reasonably well,” Jerkovic says. “The production rates have been somewhat volatile because [we’re working with] new equipment, contractors, engineers; a total re-haul of the operation.”

These will stabilise and clear up once the mine is fully up and running. Jerkovic says that last quarter, Straits announced an intersection of 100 metres of substantial copper mineralisation and upwards of 50 metres of 2.2 per cent copper from its Tritton Deeps project.

“That will really get some more drilling going in the next six months, and we should be able to see a clear picture of whether that’s a real opportunity or a geological target for further drilling,” he adds.

With Tritton’s investment in place and this latest news acting as a great driver for the project, Straits has also been steadily working away on its other assets.

Updates from Mount Muro

Whilst not commanding attention like Tritton, Mount Muro is moving steadily along and continues to offer great potential for Straits.

“We’re certainly seeing increasing production profiles, the costs are coming down, we’ve started the development of the first underground mine there,” Jerkovic says. “We’re a fair way down the track of pre-stripping a new open pit called Serujan East and we again expect to have increasing production every quarter from now, as well as decreasing operating costs with again an aim to have more repeatable and sustainable production and cost growth files going into the next calendar year.”

Similarly to the investment going on at Tritton, Straits is spending about US$4 million dollars on exploration at Mt Muro and aiming to add to its current resource base.

“[We want] to try and bring to the table another 500,000 to one million ounces of new resources in exploration from the geological systems we know, and convert about half of that—500,000 ounces or so—into further reserves,” Jerkovic says. “That will add to the current 300,000 ounces or so we have in reserves so it stands to change the potential life and size.”

It is possible that the company will look at a work program for Mount Muro aimed at increasing gold production from the 65,000 ounces of gold-equivalent production planned for this year, and taking that to about 100,000 ounces, but this is dependent on the success of the exploration work the company is doing.

Updates from Gold Minco

As one of Straits’ “major exploration projects” drilling is ongoing at Gold Minco’s Temora Project in New South Wales. The current programme should be completed in the next two to three months, then the company will take a look at upgrading the resource.

“We will also be looking at designing the next phase of exploration there around trying to bring in some higher grade zones for initial production areas, to be able to satisfy the capital required for this [project],” Jerkovic says. “There’s a lot of information to put together and we are still awaiting a lot of results from the current drilling programme.”

A crucial time for Straits

Back in the tail-end of 2009, Jerkovic told IRJ about his thoughts on the potential for Straits to move from an ASX-200 to an ASX-100 company. In the light of the developments and highly promising news from the past six months, Jerkovic remains conservative and quietly optimistic about such a possibility.

“The ASX 100 rating will really come from us getting the market to realise the full value of our coal assets, then to give us value for sustainable profits from the copper and gold mines. We’re currently in the top 60 or-so Australian-listed mining companies and we’re in the ASX 200,” he explains.

“For us to be knocking on the door of an ASX-100 company, we need to be able to demonstrate repeatable annual profits approaching the $50 to $100 million mark and to demonstrate to that these results can be sustained for at least five years from longer life assets.”

Jerkovic says that with this in mind, Straits is around halfway through the work program and investments to be able to demonstrate that the company’s assets and opportunities hold that sort of promise.

“I think these 12 months are fairly critical in illustrating that we have the sustainable cash flows to justifiably be able to say we qualify.” he says. “We’re going to define and show that the capital we spend will demonstrate a sustainable platform and/or repeatable operational results. Secondly, we hope that the upside that we’ve flagged and we’re working on in exploration, are going to deliver further results.”

The Straits Resources approach is measured, conservative and promises to deliver a pleasing outcome. The company has already enjoyed great success from its operations, but the key is its continued work to better and build upon what already exists. Surely to be an investor in Straits right now is a very wise move.

straits.com.au