Notion Vtec: There’re benefits to be mined from Alcyone deal -
KUALA LUMPUR (Oct 9, 2013): Notion VTec Bhd expects to reap the benefits from its A$4.875 million (RM14.7 million) venture into the silver mining business in Australia via loss-making Alcyone Resources Ltd when the latter turns profitable in three months, said Notion executive chairman Thoo Chow Fah.
He said Australian silver producer's present crusher, with a capacity of 700,000 ounces per year, has been overused. A new crusher, made possible with the proceeds from Notion, will be installed to improve the throughput.
"By January 2014, it (Alcyone) will be cash positive as it is currently work-in-progress. Once the new crusher comes in, Alcyone can increase its silver production capacity to 1.1 million ounces per year and it'll bring the cost down and they can be profitable," Thoo told an analyst and media briefing here yesterday.
Notion is acquiring a 19.9% stake in Alcyone via the subscription of 975 million shares for A$4.875 million (RM14.7 million).
Thoo said the investment in Alcyone represents a turnaround story, with Alcyone projected to have strong cash surpluses by 2015 which in turn will have a positive impact on Notion's financial position.
Alcyone's turnaround plans include mine cost savings initiatives, derived from Notion's A$4.875 million rights take-up. After the final completion of cost savings, Alcyone will see total cost reduction to A$17 per ounce at 1.28 million ounces of silver per year.
Alcyone chairman Paul D'Sylva said its company is going into its third year of operation this year. In 2011, it produced 400,000 ounces of silver and last year, it produced 700,000 ounces, which was the breakeven level for its mining operations.
"We're now sufficiently capitalised to go into a production capacity of 1.2 million ounces of silver per year," said D'Sylva.
With its investment in Alcyone, Thoo said, Notion will look at the opportunity of being a supplier of silver for industrial applications.
However, Thoo stressed that despite having a new segment (silver) to work with, Notion has not lost its main focus of supplying of precision machined parts.
"Our focus is always on our core business of machining and it continues to be our main focus. This (investment into Alcyone) is a seeding for the future.
"It's to give us more options. It doesn't stop us from our current business. As a business, we've to minimise risks," said Thoo.
"It's not that we deliberately look for a silver mine. It's an opportunity that came along and it was a good buy," he added.
He added that the industry is labour intensive, and this is further weighed down by the implementation of the minimum wage policy.
"All these cost pressure on labour is of concern to the company."
He explained that Notion only invested less than RM15 million into the venture for the future, compared with typically spending RM30 million to 100 million in capital expenditure every year.
"The odds are in our favour. We can't predict the prices of silver but (we invested) because of its industrial demand and the precious metal's stored value." Thoo said it is also good for Notion to invest at a time where silver is currently trading at US$22 an ounce, compared with a high of US$48 an ounce.
Publish date: 09/10/13