Christmas Island rock phosphate stalwart CI Resources eyes wider opportunities, both home and abroad
Perth-headquartered rock phosphate producer CI Resources has a unique claim to fame: it’s the only ASX-listed entity to operate on Christmas Island, the remote Australian territory in the Indian Ocean that is much closer to Jakarta than Canberra.
For more than three decades, the Christmas Island Phosphate (CIP) mine has generated a continuous flow of high-quality phosphate, exported from the port facility to fertiliser markets in the region.
But that doesn’t stop the company – soon to be known as PRL Global – from seeking to diversify into other activities, including value added fertilisers, energy, services, logistics and trading plus tourism and agricultural development on the Island.
Christmas Island – and its phosphate mining - has a colourful history.
The Island itself was first claimed by the British, ceded to Australia and then Singapore before ending back in Australian hands.
After the Australian Government, closed the mine in 1987, the Union of Christmas Island Workers and the community fought a three-year court battle which resulted in the mine being re-opened in the 1990s, under the auspices of Phosphate Resources Ltd.
After some unwelcome takeover attempts the mine was consolidated as CI Resources Ltd, which merged with Phosphate Resources Ltd in 2013.
CI Resources managing director Lai Ah Hong says “while few investors have heard of CI Resources, the company is solidly profitable and has a not insignificant $175 million market capitalisation”.
He adds: “the company has had an interesting history and we have come a long way since our humble beginnings.”
The mine has operated continuously for 33 years, producing at more than 16 million tonnes at an annual run rate of 500,000 to 600,000 tonnes.
Phosphate mining continues to employ roughly half the island’s workforce, directly and indirectly and accounts for about half of the territory’s economic output.
The company also contributes $20 million a year in Commonwealth taxes and royalties – but no resource project is infinite.
“It makes sense to build on our mining business and subsidiaries by diversifying into other activities we are familiar with,” Lai says.
“These include fertilisers and logistics but also tourism, agriculture and accommodation on Christmas Island.”
Paradoxically, CI Resources’ diversification push involves a divestment. At the company’s November 22 AGM to be held in Malaysia, shareholders will be asked to approve the $51.5 million sale of its Malaysian based palm oil business, Cheekah-Kemayan Plantations (CKP).
(They will also be asked to approve the name change).
CKP consists of 4000 acres of plantations and processing facilities in Pahang, on the Malaysian peninsula.
CI Resources chairman David Somerville says owning the CKP operation was linked to a strategy to grow Malaysian demand for our fertiliser product – which the company has achieved.
Somerville says the company is now focused on securing new markets and improving its fertiliser logistics supply chain, including building two purpose-built Malaysian warehouses at Port Klang and at Bintulu on Borneo’s west coast.
“We are also creating our own fertiliser products in Malaysia, both as inputs sold to other downstream fertiliser manufacturers, or our own specialist fertilisers for direct application on crops.”
As part of its downstream expansion, CI Resources in July last year acquired a 60 per cent controlling stake in Liven Nutrients, a Singapore-based fertiliser trader which moved 900,000 tonne of product in the last financial year.
A year earlier the company bought the majority interest in Swiss-based logistics and trading business, Kemoil.
Of the CKP proceeds, one-third is earmarked for shareholders in the form of two special franked dividends of 5 cents each and a share buyback of up to $5 million.
The remainder has been set aside for balance sheet management and supporting the company’s already active diversification quest.
While the phosphate mine improved on the previous year, the logistics business propelled CI Resources to a buoyant 2022-23 financial year.
Revenue grew 114 per cent to $1.15 billion, powered mainly by Liven and Kemoil – while net profit surged 233 per cent to $25.3 million.
Put another way, logistics accounted for more than $900 million of revenue (78 per cent), with fertilisers contributing 15 per cent. Farming (palm oil) accounted for 4 per cent while other activities chipped in 3 per cent.
Phosphate revenues grew 45 per cent to $125 million, on sales of 558,000 tonnes, compared with 533,000 tonnes in the previous year.
But unseasonal wet weather hampered production and increased costs, while lower global fertiliser prices also contributed to crimped profits.
“The wet weather made it hard to get product off the island,” Somerville says.
“Meanwhile, logistics outperformed. But so far, this financial year, more normal weather has resumed, and our fertiliser tonnages have increased, and we see more normalisation of the split between fertiliser and logistics.”
So far, CI Resources’ on-island diversification has included greenhouse and hydroponic fresh food production, aimed at improving food security for Christmas Islanders and changing its historic reliance on poor-quality high cost imported produce.
The company’s property development side also has a keen eye on the tourist potential of the island, which not only lacks a diversity of tourist accommodation but also adequate housing for its permanent population of 1600 (a roughly equal and harmonious mix of Chinese, Malay and Caucasian ethnicities).
The Island has been synonymous with the infamous Immigration Detention Centre, which is currently on standby so not operational.
A casino operated on the island for five years in the 1990s, servicing Indonesian high rollers before entering administration and then liquidation. Plans to revive the dilapidated facility as a resort have unfortunately foundered.
But there’s plenty to see, including the annual red crab migration when millions of these crustaceans move from the middle of the Island to the sea to breed and spawn.
The Island also has beautiful rainforests, world class diving and fishing and abundant bird life, all protected by the National Park and Marine Parks.
Last year Christmas Island was officially recognised as part of the Northern Australia region and a participant in the $7 billion Northern Australia Infrastructure Facility (NAIF), opening the way for access to development grants and competitive investment finance.
Lai says the island is full of potential that extends beyond mining but realising it can only be achieved in partnership with government, from both a policy and financial perspective.
“It is going to require a concerted effort to improve the Island’s critical infrastructure, and logistics arrangements as well as tourist accommodation and services,” he says. “But it is definitely something we are interested in pursuing in partnership with the Commonwealth.”
Meanwhile, CI Resources tightly held shares have defied the broader market trend, gaining 27 per cent in the last year.
“The company’s planned share buyback tangibly reflects management’s belief that the market still does not recognise the company’s true value,” Somerville says.
Tim Boreham edits The New Criterion. Many readers will remember Boreham as author of the Criterion column in The Australian newspaper, for well over a decade. He also has more than three decades' experience of business reporting across three major publications.