CNMC GOLDMINE: Seeks Concessions, Buffer Amidst Gold Surge

CNMC CEO Chris Lim at mine site. (Photo: Company)

Operating excavators and bulldozers, drilling and blasting rocks – this is the stuff of every boy’s dreams.

For CNMC Goldmine Holdings Ltd Chief Executive Officer Chris Lim, the fascination with mining began early.

“I’ve always wanted to be involved in the mining business,” said Lim, 42.

“You get to blow rocks up, play with chemicals, and ride in helicopters to transport the gold – it’s a boy thing! Is there any other job that is cooler? I don’t think so,” he added with a laugh.

In the initial years, the family business revolved around the mining of dimension stones, including granite and marble. But this segment was plagued by stiff competition and pricing pressure.

In 2004, the opportunity to mine gold surfaced with the Sokor project, located in the state of Kelantan, Malaysia. It started out as a government-to-government venture between the Kelantan state government and a Chinese state-owned enterprise (SOE), a relationship that was facilitated by Lim’s father and CNMC Chairman, Professor Lin Xiang Xiong.

When this arrangement fell through, Lim, who is the chief advisor on Kelantan-China International Trade for the Malaysian state government, took Sokor private and CNMC began operations in 2006.

It was a grueling journey. Father and son faced a barrage of criticism from sceptics.

“Malaysia was not known for its gold mining industry then. The burning question on everyone’s lips was: Could we deliver? But we took all the criticism in our stride and turned it into a source of encouragement.”

“The success of Sokor today is the success of the group as a whole – everyone in CNMC has put in effort over the years as a team, and as a family,” Lim said.

The Group has been able to build a strong production team because of its people-centred focus.

“We are one big family, regardless whether you are an excavator operator, a mechanic, a security guard or an accounts executive. On site, the staff all eat together – there is no such thing as an executive dining area.”

In October 2011, CNMC was the first gold producer to list on Catalist. Wilton Resources Corp followed suit in December 2013, while Anchor Resources Ltd made its debut in March this year.

Of the 18 mining plays listed on SGX, these three are focused on gold production within the ASEAN region.

Across the Asia-Pacific region, there are about 110 listed gold miners, with the majority in Australia, followed by China.

Between 2011 and 2015, CNMC revenues grew from US$5.1 million to US$36.5 million. The company reported a net loss of US$5.1 million in 2011, and has now generated US$13.4 million (S$18.2 million) in profits after tax, according to annual reports.

CNMC has a current market capitalisation of S$124 million. Its shares hit an intraday 12-month high of 32 Singapore cents on 4 May. In the year thus far, the stock has generated a total return of 61.4%, compared with a decline of about 3.0% for the benchmark Straits Times Index.

Gold jumped to a 15-month high last week, crossing the US$1,300/oz mark briefly on 2 May. The metal has rebounded more than 20% from its December 2015 low of US$1,051.10/oz.

Looking ahead, CNMC aims to continue boosting its gold output and resources. Exploration continues apace at Sokor to extend the life of the mine and identify fresh targets for production. In addition to gold, it aims to develop silver, lead and zinc resources that have already been discovered in the Project.

The Sokor Project’s gold resources rose to 618,000 oz at the end of 2015, from 506,000 oz at the end of 2014, despite extracting more than 31,000 oz last year.

CNMC’s all-in cost for FY2015 – which includes the cost of mining operations, the capital spending required for exploration and production, and other costs not directly related to operations – stood at US$608/oz.

This is lower than many producers in Australia, US and Africa, and gives the Group an all-in margin – defined as the all-in cost of output versus the realised selling price – of 48%. This provides a significant cushion against any decline in gold prices.

“Our costs are relatively low because Sokor is an open-pit mine – the mineralisation starts near the surface, and the ore is very leachable,” he added.

“The deeper you go, or the more complicated the geochemistry of the rock, the higher the costs of extraction.” 

Given the volatile outlook for commodities, Lim has taken to watching gold prices like a hawk. “I’m always checking the gold price through an app on my phone – it’s the first thing I do when I wake up, and the last thing I look at before I go to bed.” Needless to say, the Business Administration graduate from Australia’s Deakin University is no stranger to challenges.

“One thing I learnt from Chairman – my dad – is that never-say-die attitude. If you want something, you need to pursue it relentlessly, regardless of how many times you fail,” he said.

And in business dealings, always maintain your integrity. “That’s the legacy my dad created, and that’s what I want to pass on to my kids as well,” said Lim, who has a one-year old son.

Lim still maintains a strong bond with his father, 71, a Chinese ink-and-brush artist of international repute.

“My dad also taught me to expect problems in life – not every day will be a fair weather day,” he added.

“The key is learning to solve the problems, anticipating them before they arise, preventing them from developing further, and managing them well when they do crop up.”

• Expanding Gold Production – The Group is able to process approximately one million tonnes of ores per annum currently. It intends to increase its leaching capacity and enhance its gold recovery process with increased output.
• Cost Optimisation Programs – The Group is always streamlining production processes to reduce raw material wastage, so as to cut costs and enhance profitability. It is also leveraging economies of scale from increased production capacity to lower material costs from key suppliers.
• Accelerate Exploration Activities – To boost gold resources and reserves, as well as increase silver, lead and zinc resources and reserves, in the Sokor Gold Project.
• Portfolio Expansion Programs – To explore opportunities in the acquisition and development of other mining projects in Malaysia, as well as highly prospective exploration and mining projects in SE Asia and Australasia.