EXCLUSIVE: WAYNE McCRAE ON THE FUTURE OF CUDECO

Written on the 31 August 2010

EXCLUSIVE: WAYNE McCRAE ON THE FUTURE OF CUDECO

CUDECO chairman Wayne McCrae (pictured) is an enigma in corporate Australia, a cowboy-styled figure crafted from the old school. He is also at the helm of a cap $650 million mining company. Tough as nails, he miraculously survived a chopper crash in 1992 when flying near his Rocklands copper project at Cloncurry near Mt Isa.

McCrae is on the crest of a 30-year dream.

But it almost didn’t happen at all after the chopper he was flying crashed, partially severing his legs near a remote drilling rig in 1992. What ensued was a tenacious fight to stay alive while bouncing along in the back of a ute en route to a small hospital at Cloncurry in outback Queensland.

There was one doctor and one pint of blood at the hospital when he arrived an hour later. He spent the next two years in hospital after 13 operations, the longest at a staggering 26 hours where the left tibia was replaced with his hip bone. It altered the course of events and instilled a steely determination.

“I never thought once of failure and knew it was just a matter of time before we found what we were looking for. Although there are many mining companies, very few have the expertise or the ambition to explore. Exploration is an industry all on its own,” he says.

“Most mining companies don’t take exploration really seriously and in most cases are pretenders. Even if some of them found a good property half of them wouldn’t know what to do with it.

“There are a lot of good people in the mining industry and there are a lot of inexperienced and un-blooded people running them. Most would rather have a good red (wine) than a good drill hole. It’s the toughest business in town and pansies don’t last long. The ‘old school campaigners’ who have been in the industry for the past 50 years are slowly dying out and not a lot of the progenies are taking up the reins.”

This month CuDeco (ASX: CDU) will have its resource estimate upgraded. Timing is crucial. Most of the ducks are in a row, except the big fat one holding a permit.

It has been five years since McCrae lodged a mining lease application with the State Government, spelling frustration to CuDeco and its 70 staff. Around $50 million has already been spent preparing Rocklands.

Shareholders want answers as the company prepares to unearth one of the largest copper digs seen in Queensland. But McCrae says the company is at the mercy of bureaucracy in Brisbane.

“When I started mining in Cloncurry 30 years ago, I could pick up a mining lease in five days, now its five to seven years,” says McCrae.

“There are a number of hurdles we have to jump through including Native Title and Indigenous Cultural Heritage and a new one added called European Cultural Heritage as well as Environmental Impact Studies.

“What we try do is to build around a timeframe for long lead items that can sometimes take up to 12 months for construction for the crushers, the grinding mills; they all have to be ordered.

“But when we don’t know when we’re going to get our mining lease, it makes it really awkward and that’s the main problem.

“Unfortunately there is no defined timeframe from government for the grant on the Rocklands mining lease, it makes it really impossible to plan ahead and that’s the main problem that all mining companies have to accept as the common practice.

“It all depends upon the State Government getting approvals through quicker. That’s the problem. Everything just takes forever.”

Digging in

Cloncurry is home to the biggest copper belt in the Southern Hemisphere and the Rocklands project is one of the most comprehensive to be undertaken in the Sunshine State.

McCrae is angling for a production start in September, pending a rubber stamp from the Department of Natural Resources, Mines and Energy Minister Stephen Robertson.

Robertson’s department has given no indication on when that might be and did not respond to requests from Gold Coast Business News to shed light on the issue.

CuDeco meanwhile has spent $2 million on metallurgy alone adding to the existing $50 million already spent. A small community must also be built to cater for the exploration and geological teams.

“The process plant to be established at Rocklands is to be based on a three million tonne per year throughput of ore mined from the ore bodies. To get to this stage is not easy considering the work that needs to be completed before committing to such a large process,” says McCrae.

Export

CuDeco will spend close to $10 million setting up a port facility in Townsville to ship copper out to China.

“The timing is perfect for us; we’re in the right place at the right time. But there are other companies in the area as well like MMC who purchased the Century Zinc Project from OZ Minerals. They are developing a copper play (Dugald River) just north of us and are also keen for some more copper as well,” says McRae.

“I think when the upgraded resource is completed, there’s a possible likelihood that the company will come into play. This is just a personal feeling, nothing else, however, I would have preferred to have completed at least another 12-18 months of drilling before requesting our consultants complete an update resource.

“There is so much more to be drilled and proven up and upgrading on areas and zones already identified as new targets. I personally cannot see the reasoning for bringing out a new updated resource until we had at least drilled out some of these new targets and done some deeper drilling on the zones of mineralisation we had already discovered.

“We set out after the publication of our last resource in 2006 to increase the category of the resource and upgrade the category from inferred to measured and indicated. That is the 30mt already announced to the market.

“I believe that when we go into production in 2012, I firmly believe the copper price will be at its highest price ever and believe that $US8-10 a pound is likely. This is my observation from having spent the last six months in Asia and eyeballing the ongoing and planned infrastructure and building projects being undertaken that are going to require copper and other base metals. After discussions with a number of smelters we have also discovered the dire shortage of copper concentrates required for the ever expanding Chinese smelter industry.”

Pressure

McCrae shoulders a lot of the pressure that comes with being in the hot seat of a listed exploration company, but it’s worth remembering that he has been around the block a few times too. A premature upgrade of the resource was never on the cards.

“If the board really thought there was the possibility of trebling of quadrupling of that initial resource and we believe that someone may try to take it away from us with the limited drilling and take advantage of our hard work, then what was the point of announcing a half completed upgrade of the resource,” he says.

“At the end of the day we could be taken over cheaply, only to watch someone else end up with a major, major deposit for a low ball price. However the pressure on us to bring out an upgraded resource with only limited drilling was overwhelming from a range of quarters and we instructed our geological consultants to prepare an upgraded resource. In my opinion this was a big mistake and not in the interest of all shareholders, however we bowed to the pressure.

“However, we will be reporting an upgraded resource and if someone takes it off us and it ends up being another Mt Isa, then so be it.

“No-one argues that the Rocklands Group Copper Project is unique and the high grade styles of mineral are different to any other deposit in Australia.

“It’s one of the reasons that it is not fully understood by the market, the market analysts and general commentators.”

Shareholders

Considered a rare breed among company directors, McCrae is one of the very few to take calls from shareholders. He once had a call from a disgruntled Chinese investor that told him CuDeco’s falling share price was responsible for the death of his 97-year-old mother.

By his own admission he has ‘created a monster’, but his ode is to the shareholders of the company that demonstrate a continued confidence it its potential.

Pulling no punches, McCrae predicts CuDeco to become a top ASX 100 company by 2012.

“To be honest the only people that matter to me are the shareholders of CuDeco, no-one else matters and as long as I look after them, the rest of the comments by armchair commentators have zero impact on me. The tall poppy syndrome, the negativity and the jealousy is still alive and well in Australia,” he says.

“Shareholders want to know what’s in the ground and I don’t blame them. We have 8500 shareholders, probably 500 that just want to know, maybe traders. They just want to know what’s there so that they can trade out of their stock. They don’t care about CuDeco or me, they just want to know so they can sell their stock. Then you have the other 8000 mums and dads that have been with us from the start, relying on me to get them the best dollar that I can.

“This is just one of the things you have to live with in Australia, some people can handle it and some can’t. Its water off a duck’s back to me.

“I couldn’t give a cold pie what anyone says or thinks about me. I just do the best job I can for shareholders and if shareholders don’t like what I do, the best thing to do is just for them to move on. We have made 1000 of our shareholders millionaires.”

When McCrae took over the operations and management of CuDeco (formerly Australian Mining Investments Ltd) in late 2002 the share price was 0.002c. There were 1000 shareholders, primarily mums and dads.

“We have come from 0.002c. We had some 380 million shares and zero cash. I loaned the company approx $700k at no interest just to keep the doors open,” he says.

Exit

For McCrae the end goal is in sight and will be realised before personal verdigris sets in. It will come after a journey to hell and back, where the antagonist lives, only just, to tell the story. McCrae will soon publish a book titled Blood, Sweat and Gold. It’s almost complete, bar the final chapter of which will be penned following production at the 2200ha Rocklands site.

“I’m 63 years of age, I can’t be hanging around forever,” he says.

“What I intend to do now is two things. Make sure that if it (CuDeco) does get taken over there’s a good transition and if we do go into production and all the wheels are turning perfectly, I will exit a few years after that.”

Legacy

But before any of that can be considered, he plans to give back in buckets to the town that employed the one doctor, with the one pint of blood that ultimately saved his life. He bought the original Flying Doctor Service base out there 31 years ago, which has been converted to CuDeco headquarters.

But it’s the 5000 people that live and work in Cloncurry, who will become the benefactors of his philanthropy.

“I would like to build a decent hospital at Cloncurry, just do something, a specialist thing out there, like a cancer treatment facility, where you can get doctors out there. A serious private hospital.

“You can’t even have a baby at Cloncurry, it’s an outpatients. If you have a heart attack it’s an hour and half in an ambulance to Mt Isa and you’re likely to be dead before you get there,” he says.

“Because I survived there and there was a doctor there at the time, I want to give back. This company is going to make a shitload of money and the least I can do is put up $50 million to build a hospital. If I do that then I’ll be a happy guy.”

THE CHOPPER CRASH THAT ALMOST KILLED HIM

"I had a drilling rig out there at the time that wasn’t supposed to be there. I had just sold my passenger Kevin Maloney (now of Universal Resources) a copper mine half way between Mt Isa and Cloncurry in the middle of nowhere.

When we landed, there was a drill rig working on site and I said to the guys ‘what the hell are you doing here’ and they said they thought they would finish the hole off. I said ‘you were supposed to be gone two weeks ago’.

After 20 minutes having a walk around the site we climbed into the Hughes 300c helicopter. Everything was fine until we went into translational flight.

The copter was acting properly until we started to move forward at about 10m above the ground. The cyclic stick, (the one that sits in front of you and controls the direction of the chopper), pulled itself forward and the chopper started heading for the ground.

I pulled back as hard as I could and broke the top off the cyclic stick. The swash plate arms had come loose and I had no control over the machine. We did a backward air somersault and came down and hit the ground upside down flicking us into trees and things and the blades came up and went through both legs and all my back, wrists, and part of my face was chopped up.

A Rolex saved my hand from being chopped off. I put my hand up to stop the blades hitting my head and it caught under the watch. It lifted the back of the palm of my hand up and lodged the watch band three inches into my hand from my wrist.

By the time it came to an end I was up to 40m away. All the fuel was dumping out. I stood up to go and help Kevin and realised that my legs were shorter. I looked down and saw bones sticking into the ground. It was as if someone had fired a 12 gauge shotgun at point blank range at my legs.

The drillers came running over and picked me up. I thought I was gone, puddles of blood oozing out with red dirt and twigs all through my legs. I said ‘see you later guys’. I didn’t panic or carry on, I didn’t look up and say to God, ‘help’, I thought it would not be the thing to do, because I hadn’t been to church for 30 years.

I just thought, this is it, I’m 60 miles from a hospital, I reckon my six pints of blood was on the ground. Kevin put his hand on my shoulder and said ‘you might be OK’.

I started to believe that I could make it and asked all the guys for their belts to use as tourniquets and not one of the five blokes had a belt. I had a thick khaki army shirt on. Those stories about finding strength to survive in dire situations are true and I tore the shirt into shreds like it was paper. I used the ripped up shirt as tourniquets and tightened the tourniquets with a stick. The drillers picked me up and put me into the front seat of the Toyota ute.

I held myself up holding the guttering on the top of the truck to support myself as my legs were dangling by a piece of skin on each legs. I still had my boots on and they were heavy. I wanted them off because they would have pulled the last remaining skin off holding my feet on.

In a hurry, they slammed the bloody door on my fingers. So I ended up hanging on the inside of the utility by my hands stuck between the roof and the door and my legs hanging below.

We went to a farm house to call 000 and I asked then to find a mattress and lay me down in the back of the ute. A young bloke around 15-years-old was working with one of the drillers. He was there with me and I said keep me awake.

I said don’t let me go unconscious because if I do, I’ll go. The minute I start to close my eyes, you punch and slap me whatever you need to do until we could meet the ambulance that was to meet us half way to Cloncurry.

When I got to the hospital we were informed by the doctor that he only had one pint of blood. I said I’m O positive and he said ‘you will probably die anyway’.

Within a minute after that conversation I went unconscious and they stabilised me until the flying doctor arrived and flew me to Townsville. En route I stopped breathing a number of times. They got me going again by dropping altitude quickly as there was no oxygen in the plane. Whatever blood I had rushed to my head and got me going again.

MCCRAE ON:

WILGAR

Apart from the obvious discovery of the copper, cobalt, gold and other minerals discovered at Rocklands we have what I believe to be a major discovery of an interesting prospect located within the Rocklands tenement know as Wilgar.

It is a polymetallic mineral discovery which appears to contain a whole range of metals. The actual style of the deposit and how it was formed is yet unknown but what we do know is that the way the minerals get to a certain place is formed is from hot fluids generated by granites and through massive heat and pressure force these mineral bearing fluids through the earth via the easiest and most unrestricted passage.

The jury is still out on the style of mineralisation at Wilgar, but it is looking like it may be a large IOCG style of deposit which is the style of mineralisation found at Olympic Dam. However, this is just purely speculation at this stage.

What we do know is that Wilgar has produced assays of up to 39 per cent uranium, gold at more than 1 ounce per tonne, silver at more than 50 ounces per tonne, lead, zinc, rare elements including tellurium and high grade molybdenum. We should have an idea of what is going on over the next 12 months and will update the market as we proceed.

TAKEOVER

I believe we have one of the richest mineral deposits in the world and will take the next 10 years to drill it out. The talk of Xstrata taking us out is just talk.

The commentators have continuously printed that, “Wayne McCrae famously said at the Sydney Mining Club that, I had been in discussions with Xstrata and Xstrata was going to take over CuDeco.” Those words were never spoken by me, but it has been printed no less than 50 times in the press. In fact every time one of the stories is written about CuDeco it is always brought up. I never said it.

What was said after the presentation in Sydney was a question by a journalist from the Dow Jones Wire, who asked, “Have you spoken to Xstrata”, and my exact reply to her in private, was, yes, I have spoken to Xstrata and about 20 other companies.

It was placed on the Dow Jones Newswire that night and all the Sydney papers ran with a story, ‘McCrae said, CuDeco in takeover talks with Xstrata’. To my amazement the ASX asked me to retract the statement.

I told the ASX I had never made the comment so I couldn’t retract it. After the ASX had listened to the transcript of the meeting and realised I never mentioned being taken over, they obviously agreed I had nothing to retract but requested, I say, ‘I am not in discussions at present with Xstrata about a takeover’.

AIR FORCE

I’m from a mining company in WA and married a Queenslander when I was in the air force. I was at Amberley just as the building was completed. It was top secret. I used to come down to the Gold Coast every weekend and I said ‘one day I will live here’. I used to drive my Pontiac with the big chrome strips. One day myself and three mates drove it to the Coast with no brakes.

SEVEN YEARS IN AFRICA

When I got to Tanzania I was the only white guy there (1987). Everyone was wearing hessian bags. Nothing. No roads and in town when it rained your car went under the water.

I went to the government and said I will bring US$200 million in. I brought in the Canadian embassy, set up houses, security and electricity, water and then we started bringing people in. We moved into our offices and I set up the chamber of commerce and the stock exchange.

We did it all and anyone that wanted to come into the country we would lease the properties out to them. We had bullet proof vests and an arsenal of shotguns and rifles. The locals didn’t have guns but would throw rocks through your windows. It was desperation. The worst part about it was when the Rwandan civil war erupted. They started coming in and then they came into Kenya and came over the border and all of a sudden we weren’t the only ones that had guns.

MENTORS

My father was a great bloke and started off in the mines at Kalgoorlie as an electrician. He was an inventive type and finished his time as an electrical engineer with the State Energy Commission. My Grandfather was Billy McCrae who had a tribute on the Perseverance Gold Mine on the Golden Mile at Kalgoorlie. Billy used to bring home sugar bags (formerly used for carrying sugar) loaded with gold nuggets and gold in quartz.

In those days the public wasn’t allowed to hoard gold, everything had to be sold to the Perth Mint. The wardrobes in my bedroom and under my bed were stacked with sugar bags of gold.

My grandfather made a lot of money out of mining and was duped by some sweet talking English lawyers who asked him to put the Perseverance and some other gold mines into a float. They stitched him up properly. Both my father and grandfather were trusting people and both got burnt.

I don’t trust anyone. Never buy a race horse unless your son’s going to ride it.

The guy I did learn from was my great uncle Jack Carroll. Jack told me when I was a kid, “Wayne, the only friend you have in the world is you, the only person in the world you can trust is you. Never take a step back. When you step back once you step back for the rest of your life and finally, always square up.”

This was good advice, but sometimes you need a little diplomacy. Diplomacy is not my best subject. The reason I listened to Jack is because he had life experiences that none of my other family had. He had been to hell and back. Jack was a Victoria Cross recipient and that meant a lot to me.


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