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Macquarie Harbour Mining one to watch in 2010

Last updated: 05:19 05 Jan 2010 EST, First published: 06:19 05 Jan 2010 EST

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Macquarie Harbour Mining (ASX: MHM) has continued the strong run of positive news, satisfying all remaining conditions to acquire an Aluminium Salt Slag Processing Facility from Sims Aluminium Pty Ltd, a wholly-owned subsidiary of Sims Metal Management Limited (ASX: SGM).

The Aluminium Salt Slag Recovery Project will apply a proprietary technology to process waste from the secondary aluminium industry - resulting in previously landfilled material being processed into valuable commodities of aluminium (10-20%), salt (50%) and non-metallic product or aluminium oxide (30-40%).

MHM's subsidiary Alreco Pty Ltd will process material including Aluminium Salt Slag, Aluminium Non-Salt Slag and Aluminium Dross at the Sims facility.  

Alreco has negotiated to acquire from Sims an Aluminium Salt Slag business, associated plant and equipment and underlying land and buildings. Alreco has also acquired from a third party, the exclusive global rights to a proprietary Salt Slag processing technology.

Importantly for MHM, the Project will generate immediate income for MHM, with significant long term growth opportunities to expand the process globally.

The upgrade of the existing Sims facility will commence immediately upon settlement. The upgrade is due for completion in Q2 2010 and will take 26 weeks, and has been planned so there will be no interruption to ongoing production.

During the upgrade phase the Aluminium Salt Slag landfill will not be processed. During this time, although the plant will run at 40% capacity, the MHM will continue to generate profits from both the Alcoa and Sims processing contracts during this period.

Investors may recall in December, MHM executed an Aluminium Salt Slag processing agreement with Alcoa, for a three year contract for between 33,000 and 39,000 tonnes of material, at $300 per tonne processed. Alreco will receive 60% of the EBIT profits from the Alcoa processing contract.

This will contribute additional revenues to MHM's Australian Salt Slag business.

Settlement of the Sims deal will occur on 15 January 2010, resulting in immediate production and income generation for MHM. The aluminium project will be operated by Alreco Pty Ltd.

MHM has flagged it will earn pre-tax profits (EBITDA) of $230,000 per month from Alreco during the plant upgrade period.

Once the plant upgrade has completed, the company has forecast pre-tax profits will jump to $8,600,000 per annum for Alreco.

Independent Technical Experts to the transaction, the Carnot Group have based these forecasts from projected income from supply contracts that have been finalised with Alcoa and Sims, income from the Alcoa landfill which will commence once the upgrade is completed, and operating expenses.

Ben Mead, executive director of MHM said today, Alreco is progressing discussions for additional processing facilities to be located in the United States - where in excess of 40-times the volume of Aluminium Salt Slag is produced - relative to Australia.

Alreco has also received expressions of interest from parties in Canada, Europe and South Africa for Salt Slag Processing operations.

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