In the case of Portman Ltd, that moment may not be far off as the market begins to absorb the value-adding potential of the Perth-based company’s iron growth strategy, coupled with a commitment to target a diverse range of assets “that will provide a real return for our shareholders”

For Portman, the words are more than just a hollow promise. After all, the company has already proved itself once before in the project development and management stakes with the Burton coking coal project in Queensland, which was sold last year for $163 million to the German coal conglomerate RAG Coal International.

 

 

Portman's chairman, George Jones: "There is no doubt we'll have to deliver on what we say, but every quarter from now on you will see progress."

While things have moved on since that transaction, the principles which underpinned Portman’s celebrated success in the coal industry have not been forgotten: a lean approach focused on its core skills in project development, management and marketing.

In fact, Portman is doing it all over again at its Koolyanobbing iron ore project in Western Australia. For many years too small to generate a decent return, the Koolyanobbing project has emerged as a key to Portman’s future.

“One of the most difficult problems for Portman in the past has been that we were constrained by capital,” Portman’s chairman, George Jones, told RESOURCESTOCKS. “We had a rights issue last year to do bigger and better things in coal, but we couldn’t find the opportunities.”

Koolyanobbing is a good illustration of the principle of ‘get-big-or-get-out’ in the mining industry. As a 2 million tonnes per annum producer originally developed by BHP, the operation, located near Southern Cross in WA’s wheatbelt, could not achieve the economies of scale required to be a profitable producer, or a significant force in the iron ore market.

Portman is already well down the track towards remedying that situation, having launched a long-term strategy to quadruple annual output to 8Mtpa over the next 5 years.

That may not quite put Portman in the same league as the major iron ore producers of the Pilbara, but nevertheless will establish it firmly on the global iron ore map. What’s more, the looming rationalisation of the Australian industry — which at press time was further unfolding through a bidding war between Rio Tinto and Anglo American for North Ltd — has highlighted the significant role that independent, smaller producers could play in the eyes of customers.

Jones believes that consolidation of ownership will make it relatively easier for Portman to increase sales to Japan, diversifying its traditional association with the Chinese market.

Of course, global iron ore businesses — even moderate-sized ones — are not built in a day, but Portman has already laid most of the foundations for propelling Koolyanobbing to a new level.

Attractive areas to the north — Mt Jackson, Windarling and Bungalbin — have been acquired. A $6 million exploration and development program aimed at lifting resources from around 24 million tonnes to more than 160Mt has started. A new marketing team has been formed. Contracts have been signed to restructure the Koolyanobbing Iron Ore Joint Venture (between Portman and its current 40% partner, China’s Anshan Iron and Steel Complex) to give Portman 100% ownership. A major expansion of the Esperance port is being undertaken by the Esperance Port Authority. And the railway line is being upgraded to make way for bigger trains and in order to speed up cycle times.

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Cockatoo Island ... under a 50:50 joint venture with Henry Walker Eltin, Portman is confident of extracting a final 1.6Mt of high-grade ore from the remnant operation.