Image for Shree Minerals: Few prospects, even less cash, and virtually no credibility ...

When former Deputy Premier Bryan Green spoke at the opening of Shree Mineral’s Tarkine mine late last year, he wasn’t really telling fibs.

Claims the open-cut pit would generate a waterfall of revenue, creating a region awash with jobs and prosperity were clearly shallow rhetoric to anybody familiar with the foreign-owned company’s operations, but that didn’t stop the media from lapping it up.

In fact any half-baked analysis of Shree Minerals would have confirmed the company had few prospects, even less cash, and virtually no credibility in investment circles.

But Shree had gone to the trouble of engaging a Perth public relations person to write a media release, so one can only assume the Government of the day, together with our print and television media assumed everything was above board.

There are precedents for this of course, and spruiking fanciful projects on behalf of questionable developers is a Tasmanian specialty.  Few people these days would remember the name James Kwok, but just over a decade ago, he was front page news in Tasmania, promoting his billion-dollar magnetite plant at Bell Bay.

He’s out of jail now, and with some failed ventures in green energy and springwater behind him, has become just a postscript in our history.  As such, the media don’t talk about him anymore.

His friend and business partner Peter Chen has also been a media darling, although he’s been quiet lately, possibly because his listed entity Sabina Corporation is broke, and can’t find an auditor.

Readers might know Chen better as the proponent of the $34 million UniVillage in Launceston.  And the $12 million Legana business park.  Not to forget the controversial $30 million Lifestyle Village at South Arm, the Council-backed, albeit rather phallic Lighthouse Hotel in George Town, the $25 million Heritage Village near Geeveston, and the enticing, but perhaps far-fetched $300 million Ming Village near Scottsdale.

Chen’s never built anything – Sabina’s assets in 2005 consisted of a leased Jaguar and a mobile phone, but one must give the guy credit for sheer front.  The Examiner and The Mercury both lapped it up, as did the ABC. 

More recently, the obvious nomination for uninformed media commentary supported by enthusiastic political grandstanding goes to the late Gunns Limited, but with ASIC still cherry picking which breach of the Corporations Law to prosecute next, we’ll leave that one aside.

Those three companies alone, according to the sadly-missed REDI report in 2006, had projects ready to go with a combined value of over $4 billion.  Little wonder the media and our elected representatives get stars in their eyes from time to time.

So back to Shree.  It may operate in a different sector to the previous examples, but the pattern is the same.

First, promote a project that hasn’t been properly evaluated or funded.  Second, massively overstate the benefits to Tasmania, and get a public relations person to tell the media and government of the day.  Finally, keep repeating the second step until your rhetoric is assumed as fact.

Shree Minerals is unique in at least one respect – it is the first minerals exploration company (to my knowledge) that has started mining ore prior to completing a definitive feasibility study.  No doubt the risks were mitigated somewhat by veiled hints of a 30-year mine life which resulted in implied Government support, although the information as released to the ASX suggested the available ore will run out in 15 months.

Like Gunns, Sabina, and Tasmania Magnetite before it, Shree isn’t too concerned about the penalties for breaches of Corporations Law.  That’s the only explanation for the virtual lack of continuous disclosure to financial markets, and breathtaking disregard for keeping shareholders informed.

The company is probably also aware the chance of any scrutiny of its financial affairs in the Tasmania media is on par with The Examiner admitting the pulp mill is dead and buried. 

So here’s a basic synopsis.

Shree Minerals is operationally unviable, and effectively (from a banker’s perspective) insolvent.  Barring an immediate injection in the form of cold, hard cash, there is a real possibility the company will be unable to meet its short-term commitments within weeks.  In investment-speak, that means the workers don’t get paid.  So much for the jobs bonanza.

Longer term, it’s being clearer by the day the initial mine plan was hopelessly optimistic, and subject to a range of factors which have proven incorrect.

I’ll forward a detailed analysis within a few days.  In the meantime, perhaps readers could consider the fact the stock market currently values Shree Minerals, the company supposedly worth $80 million each year to the Tasmanian economy, at around the same as a nice waterfront house in Sydney. 

Except there’s no market at all for Shree shares.  No buyers at all, only sellers.

*Tom Ellison is a financial analyst and consultant specialising in the Tasmanian economy.