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Connemara cuts its losses in first half

Monday, September 24 10:32:32

Connemara Mining, the Irish AIM list precious metals explorer, has cut its operating losses for the half year to the end of June to Stg178,000 from Stg198,000 compared to the same period last year.

In a statement accompanying the company's Interim Statement , Chairman John Teeling commented, "It is not easy or fashionable to be an explorer in an economic recession. When the recession is as deep and long lasting as the world is currently experiencing the task is even greater. Investing money in high risk long term projects is of little interest to investors".

"Yet the fundamentals for commodities have rarely been better. Over the coming decades billions of people will enter the middle class. Bubbles and shakeouts are normal in a long economic cycle but the march towards consumerism is inexorable. Zinc, lead, copper, gold and diamonds are seeing an increase in demand to meet their needs. Exploration is high risk and long term. If one is lucky enough to make a discovery then the hard work of proving up the size and grade begins followed by various studies to prove financial viability. From discovery to commissioning is eight to ten years at best. Small companies find it very difficult to survive in this game."

He added that Connemara has stretched exploration funds by farming out activities whereby other companies, often multinationals, earn an interest in a project by spending on exploration.

"Success poses a problem. Additional exploration expenditure completes the earn in. Now the minority partner, who is effectively a portfolio investor, must put up cash to maintain their percentage interest or else they dilute their interest. In good times, with an active stock market, funds can be raised to meet expenditure commitments. In tough times, with low share prices, raising new money can be costly and very dilutive. The alternatives are either dilution or sale of the project."

During 2012 Connemara received an expression of interest in acquiring their stake in the Stonepark discovery.

"Our financial advisors were unable to reach a way forward with the interested party. Once the budgets for 2013 are agreed we will know our financial needs. We will then examine the best ways to finance the requirement. Connemara has good ground and good partners. We are in sectors with excellent long term fundamentals. When investor sentiment improves towards junior explorers we will be well placed to benefit," said Mr Teeling.