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In June, Wah Nam International Holdings Limited (ASX: WNI) of Hong Kong acquired a majority share position (currently a 55% interest) in Brockman Resources Ltd (ASX: BRM). What is Wah Nam’s investment objective in Brockman and what has been the impact on Brockman of having Wah Nam as majority shareholder?

Interim CEO Colin Paterson
Wah Nam’s major asset is now its interest in Brockman, but it has some other assets in China and in Hong Kong. It has some significant shareholders who successfully operate businesses in different industries in Hong Kong and throughout Asia. Wah Nam‘s investment objective is to invest in world class resource projects. It wants to contribute to, and benefit from, successfully bringing the Marillana iron ore project (BRM 100%) into production.

Wah Nam is also interested in looking at investment opportunities in mineral-rich Australia and Brockman offers an excellent platform for Wah Nam to leverage the experience and knowledge of the Brockman team.

This new relationship is a positive development for Brockman as Wah Nam broadens the company’s connections with product end-users and investors in China and Hong Kong.

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Brockman recently announced that it will conduct an optimisation study in relation to the proposed development of its 1.05 billion tonne JORC proven and probable ore reserve at the Marillana Project in the Pilbara region of Western Australia. This followed its review of the Front End Engineering and Design (“FEED”) report on the project. What are the broad aims of this study and what impact will it have on the timing of Marillana’s progress through to final investment decision (FID)?

Interim CEO Colin Paterson
The broad aim of the optimisation engineering is to implement potential improvements to the plant design that were identified in a recently completed strategic review. A leading contractor has been appointed to manage this program. The improvements are expected to increase plant operating efficiency and lower the capital and operating costs of the project. This is a necessary step, and will take approximately seven months to complete but, in the opinion of the project team, the significant benefits anticipated from the optimisation program justify the delay.

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Recent changes to the composition of the Board have led to the appointment of six new directors including new Chairman Peter Luk. Are you confident that you have the right mix of directors to progress the development of the Marillana Project and as a result of the Board changes has there been any alteration to Brockman’s strategy?

Interim CEO Colin Paterson
We have a total of six new directors and they bring with them diversified but valuable international banking and mining experience to help guide the management team to develop and bring into production the Marillana Project. We believe these changes have resulted in a strong board to support the company’s business strategy. That strategy remains unchanged and is to bring the Marillana Project into production as quickly as possible while at the same time realising the potential of other tenements held by the company such as the Ophthalmia and West Pilbara exploration projects.

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You have been in the role of Interim CEO since the resignation of former Managing Director Wayne Richards, and an executive search is underway for a permanent replacement. Can you comment on the capacity of the current management team to deliver the Marillana Project? How are you seeking to retain staff following the Board and management changes that have already occurred? When do you anticipate that you will be able to announce a new CEO?

Interim CEO Colin Paterson
We have a strong and stable management team in place. All the senior managers come from strong project related backgrounds and we are well advanced in the search for a new CEO who will be capable of leading the management team in developing the Marillana Project. We expect to be able to announce the appointment of a new CEO soon.

We believe that the Marillana Project is an exciting and promising project, and the management team is committed to the process of change and improvements that is now gathering pace. The management team have also embraced the opportunity to work with Wah Nam to successfully deliver the Marillana Project and to identify and develop other resource opportunities.

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Cash held at the end of the quarter was $43.3 million. In light of the longer time line for the Marillana Project, do you have sufficient funds to progress Marillana through to FID? How is the company progressing on financing for the project?

Interim CEO Colin Paterson
We closely monitor the financial position of the company. According to our latest budget estimates, the cash on hand will take us through to FID, but we also have a number of funding options available to us. We will pursue the funding option that is most beneficial to the company at the time.

Discussions are taking place with potential investors in the Marillana Project. Ideally we would fund the project by forming a joint venture with an end user, which will provide the equity component of the project funding as well as bringing along financial institutions to provide the project loan facility.

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The Definitive Feasibility Study (DFS) on Marillana, which was completed in September 2010, estimated total project cost between $1.3 billion and $1.9 billion, dependent on the rail solution adopted. What funding options will you consider for the Marillana Project and given recent rises in construction and other project development costs, do you expect that the cost will still fall within the DFS estimate range?

Interim CEO Colin Paterson
All funding alternatives are under consideration as mentioned in my previous response. In relation to capital costs, average construction costs in the Pilbara have increased by about 30% since completion of the DFS. However, we are seeking to keep capital increases to a minimum through the improvement opportunities identified during our recent strategic review and by effectively managing our contracting strategy.

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What progress have you made in negotiations with Fortescue Metals Group Limited (ASX: FMG) on a potential rail haulage, port access and marketing services arrangement for the Marillana Project? What outcome are you seeking and when do you expect to be able to announce a rail and port access solution?

Interim CEO Colin Paterson
The discussions with FMG are continuing and as we have reported at our Annual General Meeting last week, we are also considering other possible options for a rail solution.

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Brockman has commenced drilling the bedded hematite mineralisation targets identified at the Ophthalmia Project (BRM 100%), located 15 km north of Newman in the Pilbara, which has the potential to be your second direct shipping ore (DSO) operation. Surface sampling has shown an average grade of 65% Fe from 104 samples taken. When do you expect results from the drill program and what is the likely development path for Ophthalmia?

Interim CEO Colin Paterson
We should start to receive assay results from the first samples from the drilling program any day now, but we will only be getting results for a few holes at a time, so it is likely to be some time before we will be in a position to understand the real potential of Ophthalmia. Also, due to access restrictions, we have had to rely on a heli-portable diamond drill rig to drill at the Sirius prospect, which is the best of the targets identified to date. That drilling has only just commenced, so we will probably not receive results from that drilling program until the new year.

Obviously the development path at Ophthalmia will be dependent on the results obtained, but if they are in line with our expectations, we will proceed to full resource evaluation drilling next year, followed by commencement of scoping studies.

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Thank you Colin.

For more information on Brockman Resources, visit brockman.com.au or call Colin Paterson on 61 8 9389 3000.

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