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Jamaica Producers to offload Four Rivers Mining by midyear

Published:Friday | May 6, 2016 | 12:00 AMNeville Graham
Jeffrey Hall, managing director of Jamaica Producers Group.

Jamaica Producers Group (JP) is revisiting the business model of its loss-making mining subsidiary/ business, with the intent to position the business for sale.

JP expects to exit its investment in Four Rivers Mining Company by June, according to Managing Director Jeffrey Hall. It owns 51 per cent of the mining business alongside minority partners Lydford Mining with 35 per cent, and The Irons Mountain Mining Company, which holds the other 14 per cent.

"We're looking at all the options and that does not exclude our minority partners," Hall said.

Four Rivers mines and processes construction aggregates. Hall says the business has not performed in line with expectations, and that it now falls outside JP's core areas of strategic focus - food, fresh produce and logistics.

He says JP is on track for an orderly exit from Four Rivers.

"We're engaged in a process that is fairly methodical," Hall said.

JP took a hard look at the mining company's numbers last year. The directors reported to shareholders in JP's newly released annual report that "losses arose from increased costs and challenges in securing river aggregates as a result of their depletion due to the ongoing drought".

JP also pointed to "significant challenges with the efficiency and reliability of plant and equipment" at the Agualta Vale, St Mary-based operation.

The business was idled in early March.

Jamaica Producers is looking at transitioning Four Rivers to a business model that generates value from aggregate deposits primarily through royalties from third-party operators. It is looking for a buyer with a proven track record.

"What we are trying to do is to identify a suitable operator for the price and ... (with) excellent credentials in the mining business," Hall said. "So we're going to review our potential candidates to make a decision by the middle of the year."

Jamaica Producers sustained a big hit to the bottom line at the end of 2015. The company reported an exceptional charge of $197 million due to asset write-down and restructuring charges in the fourth quarter in connection with the move to transition Four Rivers. The writedown was the major part of the $224 million in restructuring costs that JP reported for 2015.

Hall was non-committal on the expected returns from the sale of JP's Four Rivers interest, citing the need to be discreet ahead of negotiations with prospective buyers.

"We're looking at two factors - one is the price for the plant and equipment and the other is the suitability of the candidate or the acquirer to continue to drive the operations and to grow the business," he said.

JP entered the business back in 2010 with a reported $150-million investment, with the aim of commercialising the deposits of river aggregates available on its land holdings in St Mary and St Thomas.

There is no activity at the mining sites right now, Hall confirmed, but he says the operation can quickly ramp up when the new operator is identified.

"We've positioned the business for sale. It is a functioning, operating facility ... but we're only holding it there for sale," Hall said.

During 2015, JP generated total revenues of $8.7 billion. This was a decrease of one per cent relative to 2014. The group made a net profit of $614 million or double its profits of $319 million the previous year.