APG 0.00% 0.2¢ austpac resources nl

Chairmans' Address

  1. 653 Posts.
    Well I used to be one of the true believers. I sold at the beginning of this year at a significant loss. It's all pretty sad. I'm guessing that this year it is sink or swim for APG.



    Ladies and Gentlemen

    The 2001 - 2002 financial year to 30 June 2002 together with the
    period to date, has been a tough one for the company in terms of
    progressing Austpac's strategic policies, namely: -

    - The commercial application of the ERMS and EARS technologies
    through a new synthetic rutile project using our technology and in
    which Austpac has an equity interest.

    - The implementation of programs for continuing development and
    advancement of the company's mineral sands processing technologies -
    our core business.

    - The enhancement of the Kooragang Island pilot plant including the
    incorporation of our proprietary continuous leaching system.

    - The continuation and broadening of ilmenite roasting programs for
    client companies as well as ourselves.

    - The generation of income streams and future cash flows for the
    company as part of corporate financial stability.

    The 2002 Annual Report has been sent to shareholders, copies are
    available at this meeting and the Managing Director in his address
    will enlarge on the company's activities.

    At last year's Annual General Meeting I stated that planning for the
    AusRutile 10,000 tonnes per annum demonstration plant at Orissa was
    on hold pending the approval by the Indian Government of foreign
    capital investment into the AusRutile joint venture project.

    At that time and in order to progress a synthetic rutile project,
    Austpac and Ticor were also evaluating sites in the Murray Basin for
    a demonstration plant of 5,000 tonne capacity and this was contingent
    upon Austpac and Ticor gaining access to a long term ilmenite
    resource, in the Basin. We were on track to complete the evaluation
    by January 2002, and expected to proceed with this project during the
    first half of the year.

    However early this year Ticor decided to shelve these plans and
    essentially ceased funding the Austpac-Ticor Joint Venture. This
    resulted in protracted negotiations to replace the exclusive
    world-wide arrangement with Ticor for the development of our
    synthetic rutile technologies, with a new non-exclusive arrangement.
    The new agreement was eventually signed by the two parties in
    September 2002.

    The AusRutile three-party agreement (Austpac-Ticor-Indian Rare
    Earths) is also being varied to move straight to a 100,000 tonne per
    annum commercial operation in India, at an appropriate time in the
    future, by-passing the 10,000 tonne demonstration plant.

    Austpac therefore continues to have an interest, funded by Ticor
    until the project commences, in an enlarged AusRutile project in
    India. Austpac will also have a similarly funded interest in any
    projects that Ticor initiates in the future that use our

    As shareholders are well aware, these changes freed Austpac from the
    exclusive agreement with Ticor, only recently enabling the company to
    seek new partners for a synthetic rutile plant.

    This leads me to talk about Austpac's plans in the present capital
    raising environment.

    Small equity placements and the occasional rights issue have thus far
    been our vehicle to obtain funds to sustain the company in order to
    develop its processes. However this approach has become more
    difficult in recent years, and our last placement took five months.
    Austpac cannot achieve its strategic objectives whilst living from
    hand to mouth financially.

    On the positive side, we are undertaking an increasing number of
    contract test programs at Kooragang island for client companies.
    These have assisted us to offset costs and, while the current year
    has been the best yet in terms of revenue generation, it does not
    satisfy our financial requirements.

    The difficulty in raising equity funds in today's uncertain capital
    market is now inhibiting the next technical development stages of our
    ERMS and EARS processes. For example, we have yet to incorporate a
    full scale version of our patented continuous leaching system at the
    pilot plant, and we need to enlarge the EARS pyrohydrolysis roaster
    to reduce the scale-up risk before we move to a commercial ERMS SR
    plant. These developments have a capital cost of around $1 million
    and are on hold until funds are available.

    Over the past two years we have been working closely with the
    Brisbane-based process engineering and construction group, Ausenco
    Limited, to develop the flowsheets, design criteria and costs for a
    range of SR plants. A pleasing outcome of this is that Ausenco now
    have sufficient confidence in our technologies to assist us with
    performance guarantees. This will be a boon for future plant

    With our changed circumstances following the withdrawal of Ticor
    funding for a demonstration plant we commenced evaluating other
    options. Using the data bank we developed with Ausenco, we consider
    that an ERMS synthetic rutile plant of between 30,000 to 50,000
    tonnes annual capacity would be an attractive economic entity and
    would suit the production capacity of many ilmenite deposits.

    Austpac, in order to progress, will only succeed by participating in
    some way with its technology and ownership in a future synthetic
    rutile development.

    We have identified a number of potential partnership opportunities,
    and these are being pursued by the company. Geographically, they
    range from the Murray Basin to other Australian deposits and to a
    spread of overseas locations. Negotiations are continuing.

    A crucial factor for the company to move ahead is a stable financial
    position for the next few years until our first ERMS SR project is
    underway. Your board is well aware that small placements will not
    achieve this stability, and they absorb a disproportionate amount of
    management time and cost.

    Austpac has not geared its capital funding with external debt,
    primarily because of the uncertainty of meeting scheduled repayment
    obligations before achieving a cash flow.

    We are therefore examining a number of options to achieve longer term
    corporate stability, including forms of financial gearing,
    significant capital injection by a new partner and merger or

    In summary, Austpac's future is dependent upon the commercial
    application of the company's technologies, preferably through joint
    venture partnerships with companies with good quality ilmenite
    deposits ready for development. We recognise the need for a new
    approach to raising capital and are addressing this issue as a matter
    of urgency. We have a number of formative projects and partners in
    the wings, some of which our Managing Director will touch on in his
    review. We have an excellent synthetic rutile technology "ready to
    go", and we can't wait to get our teeth into the right project.
    Despite our setbacks in 2002, I am looking forward to a much better
    year in 2003.

    A L Paton

    ends - AAP

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