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Resources sector backs smelter decision

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State Government underwriting of the Port Pirie smelter transition project sends the right signals to resources investors says one of the state’s prominent explorers and developers.

The underwriting and similar state funding of the resources sector is a signal to global investment markets about South Australia’s delegates to the Paydirt 2014 South Australian Resources and Energy Investment Conference at the Adelaide Convention Centre were told.

The Federal Government, however, has confirmed it won’t be an underwriting partner in the project.

SA Minerals and Petroleum Expert Group (SAMPEG) Board member, Derek Carter, said South Australia – despite global equities market taking flight with their capital from junior and mid-tier explorers and developers – had the potential for at least four areas of Tier One investment projects.

Carter is a director of three ASX-listed resource companies, Mithril Resources Ltd, Toro Energy Ltd and Petratherm Ltd.

He is also chairman of the Federal Government’s Minerals Exploration Advisory Group and was the 2003 Prospector of the Year for the discovery of Prominent Hill.

“South Australia has to get a tick for its Tier One potential for its lead-zinc, copper, tight gas and offshore gas opportunities,” Carter said.

“It will remain very difficult for junior miners and explorers to raise money unless they have a project that really has an interesting perspective or already has mineralisation.

“There is a lot of cash out there, a huge amount of cash – it is now just risk adverse.

“Unless you have a deposit that you are at the stage of doing financial analysis and NPV projections on and able to demonstrate a 15-20% return on your money from a mining investment, you will not be able to raise capital to put into mining plant or infrastructure where risk is high.

“To go back to the good old days and propose a project which was interesting but didn’t have that ‘little bit of extra’, those sort of projects will no longer attract funding.”

Carter said the South Australian Government’s decision to underwrite an upgrade of a smelter project at Port Pirie was a plus.

“This is unheard of in Australia and that is a confidence boost and a signal to global investment markets about South Australia’s hidden resources investment appeal.

“That is a big tick for South Australia – a government supportive of the industry.”

The Belgian-based Board of Nyrstar last week conditionally approved a $350 million redevelopment of its smelter at Port Pirie.

The State Government has backed the decision, committing to support third party contingent liabilities estimated at around $300 million for the upgrade.

The deal was part of a commitment made to Port Pirie independent MP Geoff Brock in exchange for his support of a minority Labor Government after the March state election.

Up until that deal, the Federal Government had been considering making its own commitment of $150 million in contingent liability funding, subject to an assessment of the project by the Export Finance and Insurance Corporation.

Yesterday, however, Premier Jay Weatherill confirmed that the Federal Government had withdrawn its support, leaving all the liability with the state.

The upgrade will enable the smelter to emerge as an advanced metals recovery and refining facility.

Final execution of the enabling documents is expected within the next two weeks.

Carter also praised the State Government’s decision to invest $32 million in a new core farm for the South Australian mining industry.

“This again has to be a first in Australia and the move will deliver the state a highly competitive advantage in attracting investment dollars,” he said.

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