Fox Marble Holdings PLC (LON:FOX) Chief Executive Officer Chris Gilbert caught up with DirectorsTalk for an exclusive interview to discuss the commercial extraction of Alexandrian Blue & their sales agreement.
Q1: Last week you announced the commencement of the commercial extraction of Alexandrian Blue from your Prilep quarry, can you talk us through the sales agreement?
A1: The Prilep quarry is our quarry in Macedonia that produces the Alexandrian White which is as the title suggests is a white marble which is much in demand. This is the marble that was used to build the Sheikh Zayed Grand Mosque in Abu Dhabi.
As we expanded the range of our operation in the quarry over to a previously undeveloped part of the quarry, to the east of the quarry, we came across this material that we call Alexandrian Blue. It’s a proxy for a marble from Italy called Zebrino which has been around a long time and it’s very desirable, people like it a lot and there’s not very much of it around. So, we were quite excited to get this wavy bluey/grey markings through the stone, so it looks a bit like a seascape when you see a big slab of it, it’s very attractive.
Consequently, once we’d got a couple of blocks out of the ground, we obviously processed some samples and started putting it into the marketplace to see what people thought of it and we got a very very positive response. The reason that we, understandably, are being very positive is that the companies that came back to us first and the most quickly were Italian companies. So, we wind up in conversations with really the crème-de la crème in terms of culturally where the marble industry comes from and Italy is the gold strand.
We wound up in conversation with a company in northern Italy who said when you get commercial quantities out of the ground, call us. So, we did, the blocks started coming out of the ground very nicely and getting quantity and when we got just over 400 tonnes out of the ground, we called them, and they came back straight away. They said this is 441 tonnes of this material, we’ll take it all. We then, of course, came to “here’s an invoice for it, we’d like you to pay us before it leaves the quarry which is our standard policy and they said no problem and paid us on the spot, and they came along and took the 441 tonnes away, this was extraordinarily encouraging for us. When a company does that, this will be about 30 blocks just to put it into context, they’re clearly doing it on the basis that they have a project for this. People don’t stock in that level of inventory unless they absolutely have to, and we think this is all driven by demand and by customer desire.
Shortly after that they came back and said what they really want is a secure, consistent supply of this, we would like a quantity of this every month for the next 12 months and we said, subject to the fact that January is a little slow for us because we’re under 10 foot of snow, that’s absolutely marvellous. They entered into a full sale of purchase agreement for this quantity that they’re taking on a regular monthly basis now throughout the course of the year. This contract is worth around €1 million to us I think and it’s a relatively easy win for us because it’s block marble and they’ve demonstrated their capability and their desire for this.
Obviously, this is the start of penetration of various markets with a new stone for us so from that point of view it’s very exciting.
Q2: Do you think you’ll be able to meet the demand for the year?
A2: We do. One of the nice things about this quarry is that we operate on a large site, we’re not constrained size-wise and we’ve barely scratched the resource of this quarry. Having come across this type of Alexandrian material, with these lovely colours in it, and having opened the bench now and widened it to the point where we can see what the scale of the resource is, we’re completely confident of our abilities to supply not just this company but other companies as they come to take it.
Q3: The company’s focus for the coming months, I understand, is to penetrate markets in Italy, India, China, Turkey and Dubai, what will this entail?
A3: I’m not sure I couched this very well in the announcement. These are markets that we currently operate in, in fact we’ve got a base in Dubai as we have a base in India, and we are very successfully transacting our most popular marble. So, these are Alexandrian White that we just referred to, Illirico Selene which is a silver/grey marble in Malishevë, and as much of this stuff as we can get out of the ground we can sell, in fact we can sell three times over as the demand if so great for this, and an off-white beige in the same Malishevë quarry called Illirico Bianco, for which there is a very big demand.
My point in the RNS is that we are going to take the base that we’ve built from these materials in these major markets for us to infiltrate that market with our other materials. So, the darker grey Grigio Argento for which we’ve had a lot of success in Europe, particularly in London and our very highly-coloured Breccia’s which we believe will become very popular in these areas.
These are the materials that we are now going to get into the market on the wave of success that we’re having with the lead materials that I’ve just referred to. When you’ve got a base, that you’ve established a foothold, you’ve got a continuing consistent business with some of your materials, it’s much easier, you’ve opened the door to come back and say take a look at this, this might be good for some of your other things that you’re doing.
So, we expect, through the course of this year, to be able to talk about some of our other materials penetrating these markets.
Q4: You’ve said you expect to see growth in your sales in 2019, is that based on what we’ve just said, that you’re going to expand on these materials?
A4: It is but it’s more based on our fundamental core current existing relationships where we’ve got people that have established these lead materials; the silver/grey, the white, the off-white, in these marketplaces and are coming back not just for continuing demand but continuing growing demand. One of the things that we’re very encouraged by is that these are regions where frankly this is coal to Newcastle, we’re selling our materials to Italy, we’re selling our material to Turkey who, until recently, were the biggest exporters of marble in the world, in terms of volume they’ve been very successful.
What we’re managing to do is we are managing to not just penetrate these markets but grow our business because the increasing demand for these materials as they grow in popularity, as people become familiar with them and they get used in projects and they happen to fall within the colour range that is in the longtail fashion cycle in the marble industry right now. Grey is the new what the ever old was, grey is the new black, and a lot of our material is grey-based and people like it a great deal because it is very very high quality, it competes very successfully in terms of its physical qualities with Italian marble %, of course, we’re a third of the price.
So, that’s good for us and we’re getting the benefits of that. Our fundamental sales growth is coming from business that we already transact and already conduct that is growing and then it’s a bit of a virtual circle because what we’re getting is, we’re able to say to our customers in these regions “take a look at this as well”. So, I think we’re in a pretty good place.
Q5: Just in terms of news flow, what can investors expect to see over the coming months?
A5: We will be talking about not just the growth of our existing customer relationships that we talked about so, for example, this new contract with Alexandrian Blue and our Italian customer, we would expect to be turning around in relatively short order and saying we have another customer on board taking the same material in a similar sort of fashion. People want consistency and they want to know that the supply chain is robust, and they’ll continue to get it so that they can provide this material into these projects that go on for quite a long time. We’ll be announcing a lot more of these through the course of the year.
Q6: It sounds to me like you can’t get the materials out of the ground fast enough, what do you have in mind for changing this?
A6: Well, of course, that is a focus of attention for Fox Marble at the moment. Our current capacity and capability to extract the quantity that we get out of the ground we’ve got to increase so we are paying attention to that and we’re focussing on that. We expect to be able to let people know throughout the course of this year how we’ve managed that and how we’re able to basically fulfil demand as the demand grows, that’s part of our current focus.
We were developed from a start-up and a company looking for markets and establishing its material in these markets to a company that’s now on a bit of a roll and has to address the grade of extraction and the quantities that we can get out of the ground.
