Mining in the Tarkine
Eureka Report this week published an article on Venture Minerals’ three proposed mines in the Tarkine (Big hopes for a Tassie small cap, by Tim Treadgold, March 23). Venture’s shares rose 4.29%. Unfortunately, in the torrent of praise and recommendation, the author did not mention that the proposed mines fall inside the Tarkine, that they are within existing reserves (the Meredith Ranges Regional Reserve) and are subject to the Tarkine National Heritage nomination, nor that the Australian Heritage Council recommended the inclusion of all three proposed sites in a 433,000 hectare Tarkine National Heritage Area. It also didn't mention that the environmental assessment for the Mt Lindsay mine has been effectively stalled, with the Environment Department being three months overdue in announcing an assessment approach. No mention of projected impacts on the endangered Tasmanian devil, spotted tailed quoll or wedge-tailed eagle, or the devastation of 420 MCGs’ worth of rainforest at Mt Lindsay (with similar impacts likely at Stanley River and Riley Creek), or of the enormous damage already done to these areas in the name of "exploration". And no mention of the determination from the environment movement's opposition to this company's plans, and how this fight is shaping up to be Tasmania's most intense conservation battle since the Franklin River in 1983.
– Scott Jordan
Tarkine National Coalition
It’s that time of year once again for gearing strategies, enhanced by the continued crow of "value in the market" from distributors I’m sure. I’m not quite sure, however, about the cash flow examples in Tony's road test. I was unable to replicate Tony's numbers in testing (partly because I don’t know the shares and other options selected). My quick numbers suggest that a return of at least 8.31% pa is required to break even on a portfolio of six common stocks, plus 50% in the Macquarie cash fund (assuming interest of 8.9%).
Structured products have been covered on a more broad basis previously and I suggested that while the underlying structure and flexibility are critical product issues, so is the understanding of what return (or return range) is required to both break even and generate a decent relative profit on these investments; what assumptions are baked into those calculations; and lastly, how investors feel about the probability of such returns going forward (especially over a tight time horizon of just five years).
– B Bevan
I was interested in Alan's positive view of mining services companies in preference to 'digging it out of the ground'. My simple thinking about this is that although obviously busy, the mining services sector must be very competitive and a likely victim to wages and other cost pressures. My feeling is that where the relevant infrastructure is in place, the major profitability still arises from 'digging it out'. Are holdings in BHP and Rio to be trimmed to release profits tied up in these stocks for alternative investment? Probably yes, but retaining strong holdings.
– J Hallpik
To read this week’s letters, click here.