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December 2014 - January 2015 VOLUME 1. ISSUE 223 $11.95

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Drought proof:

African gold proves hardy

Plus: ISSN 1445-3436
11
Mining Indaba 2015... full event preview
9 771445 343007
Gold M&A.... This is Mutiny Mr Kelly
Regional round-up... Chile, Peru, Cambodia



CONTENTS

PAYDIRT (ISSN 1445-3436) 5 NEWS 20
Published by Doray Minerals Ltd is not easing into the 28
Paydirt Media Pty Ltd. end of the year. The West Australian jun-
A.C.N. 063 985 133 ior gold miner has declared its intention
to grow in 2015 through the acquisition
Head Office: of Mutiny Gold Ltd and a farm-in over
Suite 9, 1297 Hay St, West Perth Central and Western Grawler Craton
Western Australia 6005 tenements with Iluka Resources Ltd
P.O. Box 1589, West Perth
Western Australia 6872 8 OPINION
Phone: (+61 8) 9321 0355 It may have done it by stealth but the
Facsimile: (+61 8) 9321 0426 world’s largest consumer of metals,
[email protected] China, appears to have taken an iron
www.paydirt.com.au grip on commodity prices. Should we be
surprised? Probably not but as columnist
Editorial: Keith Goode suggests, this new world
Editor: Dominic Piper order is not necessarily bad news for the
Deputy editor: Mark Andrews world’s miners
Journalists: Michael Washbourne,
Rhys Dickinson 20 COVER
Sub-editor: Lisa Shearon From problem child to sector leader, Afri-
Graphics: Marian Noonan can Barrick Gold plc’s turnaround in the
Contributors: last two years has been remarkable. The
Keith Goode (Sydney), Brendan Ryan company is now set to re-badge itself
(Johannesburg) Acacia Mining plc to reflect its independ-
ence and focus on Africa. Ahead of the
Advertising: name change, Dominic Piper spoke to
Advertising executive: Tony Mwarey chief executive Brad Gordon about how
Subscriptions: Harriette Smith the company had resurrected itself
Phone: (+61 8) 9321 0355
Facsimile: (+61 8) 9321 0426 28 INDABA PREVIEW
The Investing in African Mining Indaba
Pre-press and printing: returns to Cape Town on February 9-12,
Vanguard Press 26 John St, 2015. As part of Paydirt’s annual preview
Northbridge WA 6003 to the conference, we look at the stories,
Member of: themes and personalities likely to be
attracting attention at Africa’s largest
Paydirt Media mining conference
Executive chairman: Bill Repard
Finance manager: Giovanny Jefferson 100 REGIONAL
Accounts/administration:
Heather Melling ROUND-UP
Conferences: Tammy Caldwell,
Lauren Carey This month’s regional round-up takes
us to Cambodia, Poland, Nicaragua and
France as we follow the intrepid Aussie
juniors traversing the planet in search of
bankable projects

Cover image: Acacia Mining chief ex- 100
ecutive Brad Gordon at the company’s
London headquarters

Member of:

Registered by Australia Post PP 643938/0071.
No pages or articles in this publication may be
reproduced in any form without the consent of
the publisher. This includes photographs either
taken by Paydirt Media staff or provided by other
parties

EDITORIAL

Put the report down and
get on the ground

Following on from a theme I pursued in our But the approach is too prescriptive and when relations with host
November edition, the need to go beyond communities do hit problems, no amount of reporting is going to help

minimum reporting requirements when it companies get projects back on track.

comes to corporate governance, compli- Instead, there is a growing acceptance that companies actual on-

ance and corporate social responsibility is the-ground community relations are more important than producing a

more pertinent than ever, particularly when flowery statement in a CSR report.

working in Africa. The subject of our cover story, Acacia Mining plc, is a case in point.

My points on the topic last month were The company’s North Mara operation has been continually blighted by

prompted by the Australian National Uni- community opposition and illegal mining incursions for more than a dec-

versity’s (ANU) decision to divest its shareholdings in seven resources ade.

companies because an independent consultant deemed the companies Yet, as chief executive Brad Gordon told Paydirt, things are now im-

to have failed an ethical standards test. proving thanks to a change in approach.

The problem with the decision was that the test was based on inad- “We are... adopting a very different approach,” Gordon said. “We are

equate information; in many cases the consultants only visited a com- now focusing on a community relations approach rather than having a

pany’s website to measure whether it was reporting on socially respon- security focus. We have changed the security model and along with the

sible activities in a standardised manner. support the Government is offering the situation has improved.”

Most of the companies blacklisted were juniors who don’t have the Gordon even gave an example of how simple engagement with a lo-

time, money or resources to put together glossy CSR reports with wide-
ranging declarations of their in-
tentions and achievements and

Making overarching statementshow they fit in with the Millen-

nium Development Goals.

about CSR goals, publishingThey are instead focused on

finding practical solutions to

nice pictures of cute kids in aboth operational and social de-

“classroom and hardworking womenvelopment matters.
cal community can produce remarkable results.
The company installed a big-

screen television in the local vil-
lage in June to allow villagers to
watch the World Cup in Brazil.

“For the 30 days of the World
Cup we had zero incursions,”
Gordon said, still surprised by
the impact. “In many ways, it

The ANU case is part of a on farmland may be enough to get the was unfortunate the World Cup
wider problem for the corporate nod of approval from governments had to end at all.”
world. One in which initiative
Helping villagers watch a few

and practical decision-making and ethical investors in New York, football matches is not going to
is stifled by the need to fulfil the London or Sydney but they do little to look particularly impressive in a
win favour with the host communities
requirements of compliance re- CSR report but it is an example
ports and KPIs. of how, by engaging with a com-
munity at the micro level, com-
In October, Deloitte released

its Get out of your own way: in which companies operate. panies can not only meet guide-
Unleashing productivity report lines but also achieve practical

which estimated the annual bur- outcomes and a stronger rela-

den on the Australian economy of rules and compliance by both govern- tionship with the people they work with.

ments and businesses to be $250 billion. Some $155 billion of this came It won’t please many of the NGOs who so enjoy prescribing exactly

from complying with rules the private sector imposes on itself. what it is miners should be doing; it is about being practical. No matter

It is understandable why the corporate red tape has increased. In how well engineered a project is, how strong the financials are or how

these highly litigious times, companies and their executives are desper- deep-rooted relations with governments are, projects in Africa will never

ate to ensure they are seen to have mitigated against any perceivable reach their full potential unless local communities are onside.

risk. Community engagement is about risk mitigation as much as good

The problem is; all the reporting and box-ticking leaves little time for corporate citizenship.

companies to ascertain whether their actions are actually working from The same argument can be made for another theme running through

a business perspective. this issue; value distribution the need for local content.

Nowhere is this more the case than in the mining industry’s attitude As the World Gold Council highlights in its recent report on the sub-

towards CSR compliance. ject (see pages 68-69), 80% of the gold sector’s total spend was in-

If there was ever an area that suffers when companies focus only on curred in the country of operation with 71% going to suppliers and 17%

prescriptive guidelines, it is in CSR in Africa. on wages. Only 12% was incurred through taxes and royalties.

There is a realisation dawning on the industry that simply following This is a compelling argument for mining companies to make and

standardised CSR models for community engagement will never be one that can potentially help stem the rise in resource nationalism if

enough to ensure operations exist in harmony with local communities. promulgated effectively.

Making overarching statements about CSR goals, publishing nice If companies can help build the capacity of local businesses to pro-

pictures of cute kids in a classroom and hardworking women on farm- vide supplies and services to their operations, value distribution be-

land may be enough to get the nod of approval from governments and comes more sustainable, providing less opportunity for politicians to

ethical investors in New York, London or Sydney but they do little to win spout rhetoric about “fair value”.

favour with the host communities in which companies operate. If Africa is to ever fulfil the potential of its mineral resources, such

By producing such reports companies can fulfil the obligations im- notions must be built on.

posed by themselves, the Millennium Development Goals or some

other Developed World organisation or institution. – Dominic Piper

PAGE 4 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT

NEWS

Doray takes Deflector

Mutiny’s Deflector project will be a key plank in Doray’s growth strategy

Mark it down. Make a note of it. Q4, 2014 of interest from the banks for debt funding and plant and we think we can deliver this project
might just be the making of Doray Miner- we think the combined company should be on time and on budget like we did with Andy
als Ltd. able to get better interest from the banks. Well,” he said.”

On October 28 the Andy Well gold miner “In the medium-to-long term the increased Less than three weeks after the merger an-
announced a milestone merger with Mutiny size of the company and the increased liquid- nouncement, Doray also made public a farm-
Gold Ltd in what chief executive Allan Kelly ity should result in increased interest from in- in arrangement with Iluka Resources Ltd to
described as the creation of a “new, leading vestors. Doray has always had a very strong explore the mineral sands miner’s Central and
West Australian mid-tier gold company”. institutional register and Mutiny has a sub- Western Grawler Craton tenement portfolio in
stantial retail component – so the two of those South Australia.
Kelly, who admitted to having had his eye together creates quite a nice combination.”
on Mutiny for some time, said the catalyst for Doray has the right to earn up to 80% of
the “friendly merger” was a recent string of As part of the transaction, Doray will pro- any gold resources discovered within the pro-
standout results from exploration in the De- vide $3 million by the way of a short-term ject area should it spend $7 million within six
flector corridor. facility to enable early development work on years, with a minimum $1 million commitment
Deflector. the first year to earn 20%.
On August 27, Mutiny announced inter-
cepts of 3.08m @ 9.9 g/t gold, 7.5% copper Kelly believed the experience of Doray’s However, Iluka will retain all rights to dis-
and 56.5 g/t silver from 96.51m down hole in board and management team coupled with its coveries of other commodities made by
an area 300m south and 200m west of the ex- newfound financial prowess made a 2016 De- Doray, unless it elects otherwise.
isting Deflector resource. flector production target attainable.
Doray believes the project area, which
A simultaneous drilling project also identi- “We’ve got a development team in place, covers 21,000sq km, contains one of the last
fied mineralisation 30m below Deflector, with we built a very similar project and processing untested Archaen/Proterozoic boundaries in
a notable hit of 5.76m @ 4.6 g/t gold, including Australia, with similarities to the Yilgarn Cra-
0.23m @ 92.9 g/t. Allan Kelly ton/Albany-Fraser province of WA.

Kelly said the merger, by way of an off-mar- Kelly said the agreement with Iluka repre-
ket takeover in which Mutiny shareholders will sented a strategic, first-mover opportunity for
receive one new Doray share for every 9.5 the company, given the landholding and high-
Mutiny shares, would provide a clear growth ly prospective and underexplored geology of
strategy for the company while boosting its the region.
access to capital.
“We are very pleased that Iluka has rec-
“The combined company will have a signifi- ognised the potential that collaboration with
cantly larger resource base over 1 moz at a Doray represents for them,” he said.
nice grade of 8 g/t with a significant amount of
copper,” he said. “Our enthusiastic and proven exploration
approach will see the project area explored
“There’s also an enhanced financial efficiently and effectively and we now look
strength. In the short term it should result in forward to commencing this exciting oppor-
optimised funding of the Deflector project. tunity.”
Mutiny has already had a lot of expressions
– Rhys Dickinson

AUSTRALIA’S PAYDIRT DECEMBER 2014 - JANUARY 2015 PAGE 5

NEWS

Ticking boxes can be
risky business

Deloitte’s recent report on productivity in nies on risk management for 17 years and
corporate Australia highlighted the un-
necessary burden companies are placing believes embedding policies and protocols
on themselves in order to satisfy corporate
compliance requirements. into everyday work is vital if companies

The report – Get out of your own way: are to develop effective risk management
unleashing productivity (see November
Paydirt) – found that complying with pub- strategies and eliminate excessive red
lic and private sector bureaucracy is cost-
ing the country $250 billion every year. tape.

Even more remarkably, the majority He told Paydirt that while resources
of those compliance costs – $155 billion
– come from rules the private sector im- companies had built much more robust
poses on itself.
corporate governance and risk manage-
Deloitte surveyed corporate Australia
for the report and found that the time ment policies in the last two decades, the
required for employees to comply with
self-imposed rules has become a crip- systems too often sat on the side of the
pling burden. Middle managers and senior
executives spend up to 8.9 hours a week business.
complying with the rules that firms set for
themselves, with other staff spending 6.4 “There has been a big shift in corporate
hours.
Australia and companies are taking risk
These rules cost $21 billion a year to ad-
minister, and generate $134 billion a year management, and corporate governance

more generally, much more seriously,”

Moore said. “But there is much more that

could be done.

“In my advisory work with mining com-

panies, I often find that while they have

risk management strategies in place, they

have made them too complicated and bur-

densome.

“That means a lot of my work is about

Peter Moore dismantling and reengineering risk-man-

agement frameworks.”

in compliance costs. He said the extra effort to meet the re-

For the resources quirements of risk management models could

sector, corporate gov- also make them less effective tools.

ernance is a major “The requirements are seen as extra work

source of excess com- and too onerous because management and

pliance. The industry employees don’t fully understand what it

has made remarkable means but risk management is actually about

strides in cleaning up creating value. By embedding the framework

its governance image into the business, companies can show that

since 30 years ago, such strategies are part of how you run the

when the sector, par- business; a decision support system to help

ticularly at the junior the company make better decisions.”

end, was synonymous Ensuring the risk management framework

with shady deals, is part of the business will also make it more

mates’ pacts and effective, according to Moore, who recom-

questionable prac- mends a quarterly review of a company’s risk

tices. management strategy.

However, in an ef- “By just ticking a few boxes once a year, a

fort to sort out its act, company will fail every ASIC and ASX govern-

the industry has also ance test but doing it once a quarter gives the

managed to stifle it- board assurance that any reasonable risk in

self in red tape, rely- that 90-day period has been identified.”

ing too often on pre- While junior explorers with just a few senior

scriptive approaches staff may not need full risk management strat-

that require extensive egies, any company contemplating the leap

“box-ticking” and end from explorer to producer needs to have such

up filling the 8.9 and policies in place.

6.4 hours in employee “Companies must have these policies and

time Deloitte identified protocols in place at the feasibility study stage

in its report. at least,” Moore said. “At the BFS stage you

Risk management have to prove to financiers and investors that

expert Peter Moore is your project stands up and they need to be

familiar with such sce- satisfied the business is being run appropri-

narios. ately.”

Moore has consult- – Dominic Piper
ed to mining compa-

PAGE 6 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT

BUSH TELEGRAPH

Lefkochrysos offers Chinese
a few takeaways

Ioften think some mines are just like Chinese consortium Hebei Zhongbo Platinum Company will be the latest international group to tackle
some restaurants........no matter how the notoriously tricky UG2 and Merensky reefs of the Bushveld Complex
many times one of them gets shut down
there’s always some optimist who buys it Hans Merensky back in 1923. the nearby – and hugely successful – Eland
because he thinks he can do better than Since then the platinum business has been platinum mine which he sold for R7.25 billion
the previous owner. in 2007 to the then Xstrata group.
through a series of boom and busts of which
Case in point; Eastern Platinum Ltd the current bust is the latest – but by no means Barplats became Eastplats and has sol-
(Eastplats) which announced in early the worst – despite the volume of “blood in the diered on since then trying to keep the Croco-
November that it was selling its South streets” currently pouring out of the platinum dile River operation cash positive while look-
African mining assets to a Chinese juniors and majors alike. ing to grow its overall size by bringing some of
consortium – Hebei Zhongbo Platinum the operations on the Eastern Limb into play.
Company – for $US225 million. Lefkochyrsos was originally set up by Pour-
oulis in the late 1980s near the town of Brits As the platinum market weakened post
That’s the fifth time this particular set on the Western Limb of the Bushveld. 2008 Eastplats tried to keep everything going
of assets has changed hands since the but, in June 2012 it shut down the Marees-
original mine – Lefkochrysos Platinum The company and mine was taken over by burg project on the Eastern Limb. Eastplats
– was established in the late 1980s by the former Rand Mines in about 1990 after management then closed the Crocodile River
entrepreneur Loucas Pouroulis. Pouroulis was forced to sell out following a mine in June 2013 to preserve the company’s
series of technical and financial setbacks. remaining cash resources.
Pouroulis – arguably South Africa’s
most famous mining entrepreneur who is Rand Mines merged Lefkochyrsos with it According to chief executive Ian Rozier:
now in his 70s and still going strong – is a the platinum assets it owned on the Eastern “The capital needed to advance the Eastplats
Greek Cypriot by birth and had called the Limb of the Bushveld – the Kennedy’s Vale assets into production is not available in the
mine “Lefkochrysos” because it means mine which was then under construction – public markets at this time... closing the trans-
“white gold” in Greek. and other nearby deposits. action will leave Eastplats extremely well cap-
italised to take advantage of the considerable
Sadly, within a few years it was be- The new group was called Barplats but opportunities in the weak market.”
ing widely referred to in South African Rand Mines too ran into fatal financial and
investment circles as “lefkocrisis” as it technical difficulties and was forced to sell So, assuming the deal closes, Eastplats
lurched from one disaster to the next. out to Impala Platinum Ltd (Implats) for next is going to come out of this in good financial
to nothing. shape with its powder dry. Eat your hearts out
This, of course, is history and history Nkwe Platinum Ltd and Platinum Australia
– so I get told time and again particularly by Implats immediately shut the Crocodile Riv- Ltd.
people a lot younger than me – is “boring” and er mine (named after the nearby river which
“uncool”. runs past Lefkochrysos) for nearly a decade. As for Hebei Zhongbo; anybody know what
It re-opened the mine in about 2001 only to “good luck” is in Chinese? They are going to
My attitude is that history is highly relevant. shut it down once more in 2003 because it need it.
I fully agree with the saying that runs “those could not run it at a profit.
who cannot remember the past are doomed Brendan Ryan is a Johannesburg-based min-
to repeat it” or “those who don’t know history Pouroulis then bought back Barplats with
are doomed to repeat it” depending on which the help of Canadian backers with whom he ing writer
source you believe is the original one. subsequently fell out.

Some analysts/fund managers do get it. Pouroulis went off on his own to establish
Responding to the Hebei Zhongbo sale In-
vestec Global Natural Resources comment-
ed: “We wish the new owners of the Crocodile
River well, but caution that this mine has a
reputation for opening and closing more times
than a crocodile’s jaws.”

Others? Well, it would seem that many fund
managers have short memories – or maybe
it’s just that most of the older experienced
ones are gone – retrenched or retired wealthy
– and their much younger replacements can-
not be bothered with lessons from the past.

Bottom line on the assets just bought by
Hebei Zhongbo is that they are low grade
and difficult to mine, resulting in the operating
costs being at the upper end of the platinum
industry cost curve.

That means they are fully exposed to cost
and revenue pressures once the platinum
market goes into a downturn.

A cursory look at the history of the plati-
num business shows that the platinum price
has been incredibly volatile since the major
deposits in South Africa were discovered by

AUSTRALIA’S PAYDIRT DECEMBER 2014 - JANUARY 2015 PAGE 7

GOODE NEWS

China grabs its chance
on commodities

China appears to have taken was asked whether China in-
control of the commodity tended to dump iron ore on the

price markets. Through actions or market to keep the price down.

words, that has mostly resulted in The reply was that China

lower commodity prices, most ob- would not be dumping iron ore

viously in gold and iron ore. on the market and yes, China’s

In gold, China clearly “stuck import requirements are only

its foot in the door” in September 800-900mtpa (for its domes-

2014 and caused the gold price to tic consumption), the rest is for

stabilise at about $US1,220/oz, crude steel exports. And, ap-

before removing its foot and see- parently, in 2014 crude steel

ing gold almost free fall in early exports are expected to be 80-

November to around $US1,135/ 100mt or more.

oz, stabilise at $US1,140/oz and It is the first time that a Chi-

then on November 7 and 8 power nese presenter has used the

up to a close in Hong Kong of al- words “domestic consumption”

most $US1,180/oz. and a fellow delegate who is

As for gold in 2015, the most an iron ore specialist confirmed

recent forecast I have en- they had never heard it before.

countered was $US1,100/oz to In the uranium session at the

$US1,400/oz that was made by conference, China stated that it

China Gold Inc at the China Min- China has grown into the world’s premier builder of high speed rail firmly believed the uranium price
ing Conference in Tianjin in late with projects in Africa, Russia, Europe and Latin America had bottomed. It has commis-
October. sioned three nuclear plants in

At that conference, the CGA (China Gold that growth and iron ore imports have peaked the past year, leaving 31 under construction.

Association) stated that it thought China’s CB or are peaking – or “make noise in the east, Most of them appear to be small at possibly

gold reserves were more than 5,000t, and attack in the west”. And then China has 0.5 mKw to 1 mKw and located among the 11

confirmed China’s gold consumption in 2013 scored even more because the RMB has ap- eastern coastal provinces. This is reflected

was around 2,199t, which is almost double the preciated against the US dollar, so it now pays in the jump in nuclear’s contribution to power

World Gold Council’s estimate of 1,100t. half the cost in US dollars and even less in production.

In doing so, the CGA has exposed the flaw RMB terms. China forecast iron ore prices to The 31 new reactors were expected to

that has existed in the gold supply/demand be about $US80/t in 2015 and in fact expected add a further 28.4 mKw taking capacity up to

table since it was started by the GFMS in the them to stay at that kind of level for the fore- 58 mKw, and there are another 60 reactors

early 1970s, namely the investment balance seeable future (more than 10 years). planned. Uranium demand was forecast to be

“fudge factor”. Some supply and demand It was also commented that the iron ore 68,000t in 2012 increasing to 72,000t in 2015
factors can be nailed down in detail, but “the
balance” could easily be plus and 87,000t in 2020, being met by supply of
and minus 200-1,000t in any 50,000t in 2012, 59,000t in 2015
and 76,000t by 2020.
Imagine if China had stated ingiven year. Or to put it anoth- The 6,500 tpa Husab uranium
project being built for $US2.5 bil-
er way, a central bank could lion by China General Nuclear in
Namibia will fill part of that supply
2008 that it expected its ironsell or swap 200t or more of gap when it starts production from
October 2015.
gold to another central bank

ore imports to double in about thein any year, and no one need

“next five years (what a fully developednecessarily know.
price could occasionally drop to – possibly

CPM stated at the China western world country would likely Japan is also considering re-
Gold Congress in Septem- have done); the iron price would most starting its ageing nuclear reac-
ber 2014 that the supply/ tors to help solve its power crisis

demand gold equation was certainly not have halved. issues.
about 6,200t gold out due to The increase in nuclear power

the way forwards and hedg- is of course at the expense of

ing had been handled (see coal-fired power stations, in order

page 8 of the October 2014 ERA “Comment” and said with a laugh – around $US70/t, but to reduce the levels of pollution in the coastal

report on the www.eagleres.com.au website). it wouldn’t stay there and would soon recover cities. The coal-fired power stations are to be

However, in the case of iron ore, China has to $US80/t. in the centre and especially in the west of Chi-

shown that it is very clearly a master trader. Imagine if China had stated in 2008 that na, with electricity transferred with relatively

China has increased its iron ore imports every it expected its iron ore imports to double in less loss (due to a new innovation) for up to

year, and those imports have doubled from about the next five years (what a fully devel- 2,000km to the eastern provinces, and hence

435mt in 2008, to more than 870mt (in Octo- oped western world country would likely have the growth in power imports.

ber 2014, they were reputedly around 77,000 done); the iron price would most certainly not China estimates that power can be pro-

tpm). Yet, at $US80/t it is paying less than half have halved. duced from hydro or coal in the west and

the price it did in 2008. In the Q&A after the main iron ore commod- transferred by wire to the east for less than it

How? Quite simply by stating each year ity session at China Mining 2014, a question costs to produce coal-fired power in the east.

PAGE 8 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT

Coal in the east was more likely Tianjin alone spent $US200 billion on infrastructure projects in 2013
to be converted to gas/liquids
for use. Coal-fired power in the eventually rise significantly because it tells its Russia and Mexico and is bidding for high
eastern provinces was expected banks in the conference that China tells its speed networks in the US, Europe, Asia and
to have fallen from 80% to 65% banks to lend money to state-owned enter- Africa.
and then less than 50% within prises (SOEs), resulting in some SOEs having
five years. debt of 60-90%. It also expects to construct an east-west
gas pipeline through Russia under the $400bn
It was commented that the MMG Ltd’s $US7 billion acquisition of the agreement signed earlier in 2014.
greatest impact was expected to Las Bambas copper project in Peru is such
be on the coal mining industries an example. However, such funding has to be And, if that’s not enough its own infrastruc-
of Australia and Indonesia; un- for material production with long life potential ture plans continue to grow.
less they produced products that resource assets, (based on profits being re-
could be transported over large alised from future higher commodity prices). It has established a new $US40 billion in-
distances inland. However, one frastructure and development fund (for the
positive for the Australian coal Although some commodity analysts now Mainland Silk Road connection and the Asian
industry is that Japan is reputedly focus more on China’s PMI statistics, great Development bank has estimated that it could
looking for additional sources of emphasis is still being placed on GDP num- require up to $US730 billion per year by 2020
coal. bers even though China has stated it uses a for infrastructure development.
basket of over 40 indicators as indicative of
In base metals, Indonesia was growth. When it was stated that infrastructure
perceived as scoring significantly spending would have to grow at 15% p.a. for
from its decision to insist that re- At $US9.2 trillion, China’s GDP is now the next 10 years to meet the Government’s
fineries and smelters have to be second only to the US ($US15.8 trillion) but goals, I thought I’d misheard until I encoun-
constructed in-country. the market is still missing the point. While tered data on Tianjin showing it alone spent
investors have been focusing on China slow- $US200 billion on infrastructure in 2013, of
Hanking Mining said refin- ing down resulting in less GDP growth, they which $US30 billion was on transport, $US26
ery approval had taken about have missed the fact that some parts of China billion on real estate and $US2 billion on rail-
two years during which time it (Tianjin, Wuhan, possibly Xian) are in fran- way construction.
has spent $US150 million on tic growth mode. Coupled with this, China is
infrastructure for its 10,000 tpa “building the world”, especially Russia. China has shown that it now effectively
to 15,000 tpa nickel refinery. A controls the commodity price markets, by
power plant has also to be built in Even if China’s GDP growth falls to 7% or word, action or inaction; a situation that had
addition to the expected $US500- lower that means another $US700 billion in to eventually develop due to China’s majority
700 million refinery with comple- growth in 2014. And in terms of metal con- consumption or production of almost all com-
tion expected in possibly three years. When sumption, China is going to have possibly an modities.
it has completed the first refinery, it expects additional 1% or so in “export GDP”, external
to start on a second. There are apparently to China. It was remarked at the conference It has, after all, often stated that producing
at least two other small Chinese built nickel that China now has over a million citizens companies should be able to be profitable but
smelters/refineries at various stages of con- working in Africa. not make mega profits at its expense.
struction.
It has completed hydro power projects in Keith Goode is managing director of Eagle
Shandong Nashan (China’s second biggest Ghana and the DRC and has won contracts to
aluminium producer) has started construction construct a high speed rail link from Mombasa Research Advisory Pty Ltd
of its $US5 billion aluminium smelter to pro- to Nairobi in Kenya.
duce 2.1 mtpa of alumina and 570 tpa of alu-
minium ingots, together with a 300MW power As the world leader in high speed rail con-
plant on Bintan Island. Another Chinese alu- struction, it also has contracts for projects in
minium producer, China Hongqiao, has also
stated that it intends to build an aluminium
refinery in Ketapang to start production pos-
sibly in 2015.

Freeport McMoRan Inc has come to an
agreement with the Indonesian Govern-
ment to export 1.1mt of copper concentrates
at higher royalty rates for the remainder of
2014; provided that it starts construction of a
400,000 tpa copper cathode smelter in Gresik
for $US2.3 billion.

Such a smelter could involve China, as Chi-
na’s costs are much less than western world
costs. Newmont Mining Corp has also been
allowed to ship copper concentrates from its
Batu Hijau operation since October, but no
details of a refinery/smelter have yet been
released.

The Philippines was not expected to fol-
low Indonesia’s ban on unprocessed exports
any time soon given that the plans were first
raised by Indonesia as far back as 2009.

The general expectation of western world
presenters at the conference was that base
metals were currently in a down cycle and ex-
pected to level out as an “L” shape for up to
another two years.

China does expect commodity prices to

AUSTRALIA’S PAYDIRT DECEMBER 2014 - JANUARY 2015 PAGE 9

NEWS

Big raise for Northern
Minerals’ rare project

The simple mineralogy at Browns Range has held Northern Minerals in good stead so far, with production targeted in 2016

Northern Minerals Ltd managing director are countries where funding is likely to come You have to systematically drill and it costs
George Bauk says there is nothing “junior” from, while a number of scenarios, includ- money.”
about his company. ing part sell down of the asset and pre-sale
of production will be considered by Northern Bauk said the market realises the unlimited
With a market cap of $110 million, share Minerals to lock in a deal. exploration potential at the Browns Range
price of 27c at the time of print, and cash bal- Dome (on the WA/Northern Territory border),
ance of almost $7 million (at the end of Sep- Ideally the company would like to hold on to which was discovered by Northern Minerals
tember), Northern Minerals is arguably unlike at least 51% of the project, which is slated to in 2010.
many other junior companies floating around produce 279,000kg per annum of dysprosium
these days, except for the fact that it is in the over an initial 10 years. The rare earths hopeful has moved quickly
market looking for money. since then and was ranked 60th largest (by
In October, Northern Minerals announced a market cap) in Gresham’s recent Top 100 list
In September, the company received a $9 resource increase at Browns Range to 8.47mt of ASX mining and mineral exploration com-
million research and development rebate for @ 0.62% total rare earth oxides (TREO) com- panies.
the 2013/14 financial year. It applied the cash prised of 52,372t contained TREO @ 0.15%
directly to feasibility study work and the retire- cut-off grade. Northern Minerals further enhanced its cre-
ment of its $6 million drawdown facility with dentials this year as an emerging resources
Macquarie Bank Ltd. The resource is compiled from six of the 13 outfit by completing a Native Title Agreement
targets identified by Northern Minerals, which with the Jaru people and the WA Government
Northern Minerals’ largest shareholder – all remain open at depth. granting primary environmental approval for
Australian Conglin Investment the proposed mine and ore processing facility
Group – has listed options at “There is an internal at Browns Range.
30c/share that expire in March strategy within the board
2015 and, if converted, will inject about how to execute it [ex- “Receiving the primary environmental ap-
about $20 million into the com- ploration strategy]. It comes proval is a significant step forward in the pro-
pany. down to funding. Right now, ject’s development and clears the path for
we’re in that value proposi- Browns Range to become the first significant
However, the bigger picture tion in the market where dysprosium producer outside of China,” Bauk
for the rare earths hopeful is people are looking at cash said in October.
raising the $400 million needed flow and they don’t want to
to bring its flagship Browns see an exploration story go “The focus is now on finalising the project’s
Range project in Western Aus- on for 20 years and get big- feasibility study and securing off-take and fi-
tralia into production. ger and theoretical,” Bauk nancing to progress the project through con-
said. struction in 2015 and commissioning in 2016.”
A PFS completed in 2014
indicated pre-production capi- “It is a fine line; a lot of With China imposing export quotas on its
tal costs of $314 million will be people would like us to rare earths, Bauk said the rare earths sector
required to kick-start the mixed double our resource to 20 had re-emerged outside of China, and with
rare earths oxide project in 2016. George Bauk years, but that will cost us the advanced-stage Browns Range project
plus-$30 million. It’s a hy- in its keep, Northern Minerals was well posi-
Bauk expects to release a fea- drothermal style system; it is not a dissemi- tioned to take advantage of forecast demand
sibility study in February and hopes to present nated carbonatite system where you can put for rare earths.
a funding solution to the board in quarter one. in big spaced holes and have this big system.
– Mark Andrews
China, Hong Kong, Singapore and the US

PAGE 10 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT

PLD revives Admiral Bay

Base metals hopeful PLD Corporation Ltd PLD has signed an option agreement to acquire the Admiral Bay zinc project,
has emerged as a potential saviour of the about 140km south of Broome in Western Australia
forgotten Admiral Bay zinc project in Western
Australia’s Canning Basin. the early days of its discovery. prices so what this does for us is allow us to

PLD signed an option agreement to acquire If the company chooses to exercise the op- get access to $35 million worth of data and
the project, about 140km south of Broome,
and has until the end of January to decide tion to acquire the project, it will fork out $1 then potentially put in our own planning pro-
whether or not to pursue development.
million in cash and convertible notes to Kaga- cess and design a programme which we think
Admiral Bay has remained untouched since
Kagara Ltd entered administration in April ra, followed by up to $6 million in various mile- we can create more value out of.”
2012 despite it being widely considered one
of the world’s best undeveloped zinc deposits. stone payments, where PLD can buy back a Gauci was equally not put off by the techni-

PLD managing director Matt Gauci told 1.5% NSR issued to Kagara. cal and financial challenges that have cloud-
Paydirt his company, which also has an
option over the Rocky Gully nickel-copper- During the option period, PLD will also have ed Admiral Bay’s colourful history, as well as
graphite project in the Fraser Range, had
been evaluating zinc projects for the past 12 access to Admiral Bay’s data room, valued at the potential long line of critics who believe
months in a bid to take advantage of the ex-
pected pricing highs in the base metals mar- $35 million. a company of PLD’s size cannot develop the
ket over the next 5-10 years.
Gauci said his company was not deterred project.
“Three of the world’s largest zinc mines are
coming to the end of their life and from what by the fact that neither of the previous own- “There are always going to be people that
we can see there’s no large tonnage zinc op-
portunities anywhere in the world that have ers, both considerably larger companies than are really excited and there are always going
the potential to replace those top five pro-
jects,” Gauci said. PLD, were able to push the project through to to be sectors of the finance community that

“We evaluated projects in a lot of distant development. are sceptical, but that’s just part and parcel of
lands and also evaluated our own copper-zinc
prospect at Rocky Gully, but we felt [acquiring] “Rio Tinto clearly developed it to a certain the game,” Gauci said.
Admiral Bay was a deal that was achievable
for us to chase down through the liquidators. stage and then through all intents and purpos- “It’s a once-in-a-lifetime opportunity to get

“We believe it has the potential to be one es exited zinc because it’s just not their com- your hands on a project that can potentially
of the world’s top five zinc projects at a time
when zinc prices are moving in the right di- modity, and then Kagara bought it off them run for 30 years so cheaply.
rection, and that’s been supported by a num-
ber of industry-leading analysts such as CRU and developed it to a certain stage before “We’ve had constant calls and we’re mak-
Group.”
they went into administration,” he said. ing constant calls to private equity groups and
Admiral Bay was discovered in 1981 by
Meridian Oil NL before it was acquired by the “Neither one of those companies had a re- end-users in the zinc space and people who
exploration arm of CRA Ltd (now Rio Tinto
Ltd) in 1986. Kagara then took control of the ally good crack at the project during solid zinc know the project really well and want to get
deposit in 2004 and published a resource and
PFS before financial woes hit the company. involved.”

The inferred resource of 72mt @ 3.1% zinc, Gauci acknowledged his company
2.9% lead, 18 g/t silver and 11% barium, with-
in a 2.1km zone of an 18km strike extent is not was too small to develop Admiral Bay on
compliant with the JORC 2012 code and an
update will be one of the first things on PLD’s its own and flagged project equity sales,
agenda if the company proceeds with the
option. JVs and off-take agreements as potential

PLD was completing due diligence over pathways to development and production.
the project at the time of print and appoint-
ed technical consulting firm CSA Global Meanwhile, the initial RC drilling pro-
Pty Ltd in early November to assist with
that process. gramme at Rocky Gully has returned as-

“They’ve got four or five of the better says of up to 2.05% nickel while providing
MVT geologists in the world that have ei-
ther contributed to PhDs on the project or further evidence of a potential nickel sul-
have actually drilled holes in the project
themselves,” Gauci said. phide system.

“It’s a crack team of geologists that are PLD holds a 1,200sq km tenement
actually doing the due diligence for us at
the moment and once we’re financed we’ll package on the Albany Fraser Belt, which
look to build the team around that.”
has been brought to life in recent years
Newly appointed PLD director Mathew
Longworth is also familiar with the project, following the discovery of the large Nova-
having contributed to a paper on it during
Bollinger nickel sulphide deposit by Sirius

Resources NL.

PLD managing director Matt Gauci at the Rocky Gully – Michael Washbourne
nickel-copper-graphite project in the Fraser Range

AUSTRALIA’S PAYDIRT DECEMBER 2014 - JANUARY 2015 PAGE 11

NEWS

Flinders finds the cash
for Pilbara BFS

A BFS is expected to be completed at Flinders Mines’ Pilbara iron ore project by the end of June 2015

Mine closures, job losses and cost cutting through New Zealand-based Todd Corpora- their investment so, whilst the market is ter-
have been unfortunate shared experi- tion Ltd, Flinders has an investor who is confi- rible for iron ore at the moment they see it as
ences for many iron ore players during this low dent in the long-term future for iron ore and is a project worth investing in.”
point in the sector. prepared to back the Pilbara project.
Gordon, the former long-time Ramelius Re-
Iron ore producers have felt the brunt of In November, Todd agreed on a $4.7 mil- sources Ltd chief executive, was unsure how
falling spot prices, which hovered just above lion placement at 1.5c/share, which Flinders the $2 million SPP would be taken up in the
$US70/t at the time of print. looked to top up with a $2 million SPP to so- current market, but he was hopeful that senti-
phisticated and professional investors under ment would have changed by the time Flin-
While the situation is dire for companies the same terms. ders delivered its Pilbara BFS by the end of
in production right now, Flinders Mines Ltd is June 2015.
watching on and hoping the current lull in iron Todd maintains a 19% shareholding in Flin-
ore will be reversed when it is ready to join ders and can nominate a person to the board, In September, the company released an
the throng of producers in Western Australia’s subject to compliance regulations. updated capital cost estimate of $726 million
Pilbara region. for the Pilbara iron ore project, with more than
The placement is set to be completed by half – $384 million – required for the process-
“If it [iron ore prices] stays where it is for Christmas and funds will go towards finalising ing plant and associated infrastructure.
the next 12 months, a lot of production at the a new global resource at the Pilbara project
higher end of cost will come out of the mar- which mine planning, plant design and feasi- The company hopes to refine these costs
ket for sure,” Flinders managing director Ian bility studies can be based around. in the BFS.
Gordon said.
“Once we have done the BFS and we have A positive BFS will also trigger the alliance
“If that does happen that will create a bet- got a reserve, we can understand what the agreement signed with the Balla Balla JV
ter outlook going forward. We are looking at next step might be,” Gordon said. (formed between Rutila Resources Ltd and
production towards 2018, so that is the market Todd Minerals Ltd) allowing Flinders access
we are looking forward to and “There are other investors, and Todd is one to transport and export services for the Pil-
we expect that hopefully growth of them, that take the long view bara project.
has picked up by then and we and going forward they see
can get it back up. Our long- that our project can produce at Subject to the BFS confirming the viability
term price for our project is at a significant rate and at a very of Pilbara and project go-ahead decided, the
about the $US90/t mark.” good grade and that’s why they Balla Balla JV will provide rail services, port
made the investment. handling and ship loading services to Flin-
Flinders is currently doing “It is always an arduous task ders.
a BFS on its Pilbara iron ore [raising money] in a down mar-
project which is expected to be ket that is for sure, but Todd The Pilbara iron ore project – 917mt @ 55%
completed mid-2015. was there in our previous rais- iron (resource) – is being billed to produce
ing. We have a very good re- plus-25 mtpa, with potential for first produc-
Extracting funding from the source and Todd see it that way tion in 2017.
market for any resources pro-
ject has been difficult, however Ian Gordon and they have a long horizon on – Mark Andrews

PAGE 12 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT

11 March 2015

Novotel Perth Langley

www.paydirtsgoldconference.com

For all presenter, exhibitor and sponsorship enquiries please contact
Tammy Caldwell on (+61) 8 9321 0355 or email [email protected]

OPINION

Reality starting to bite as
margins squeezed

The continued decline in iron ore price, miners reacted swiftly. Recruitment freezes individual stock keeping unit levels), consid-
lower cost operators increasing production and redundancy programmes were launched ered the specifications required to complete

volumes, a long-term decline in grade, and an and work on non-essential projects stopped. tasks, reviewed demand management, con-

increase in the level impurities being extracted The major corporates also either appointed sidered alternative sourcing, and worked to-

by Australian junior miners are, on their own, their own chief procurement officers or ap- wards maximising efficiencies by economies

let alone in combination, having an impact on pointed one of the large consulting firms to of scale.

Australian exporters. review their procurement practices and drive We have seen this cause significant disrup-

With a lot of the heavy lifting of change to out excess costs. This included the first wave tion within the industry, with mining compa-

address these issues already implemented by of rapid sourcing programmes, where the nies aggressively targeting spend reductions

the majors, junior miners and mining service majors told all suppliers they had to cut costs through avenues the industry had not consid-

companies now need to build in sustainable
policies for operational efficiency
and cost rationalisation if they
intend to remain profitable in an

They will need to become partenvironment of declining margins
of industry culture – especiallyand a shift in focus from con-

struction to production.

“now that the market is signallingSince 2012, we have seen re-
by 15-20%. To realise this level of savings, ered before. For example, a renewed focus on
cross-project supply consolida-
tion and fewer, longer term stra-
tegic supplier relationships have
been driving outcomes.
Miners transitioning to owner-
operator models, mining con-
tractors working collaboratively
another decline in prices to five-year with miners to reduce rates and
sponse programmes, including

redundancies, capital expendi- lows – so that operational efficiency, improve productivity, capital ex-
ture rationalisation, forced rate penditure scrutinised as the life

reductions and strategic sourcing management effectiveness and of assets are extended longer
becoming the norm as compa- sourcing efficiencies become inbuilt than they were previously, and
nies seek to remain viable. non-core activities are all being

They will need to become part behaviour rather than reactive. rationalised.
of industry culture – especially These measures have, of

now that the market is signalling course, been seen before. But

another decline in prices to five- now the Australian market is also

year lows – so that operational efficiency, sourcing levers were utilised – including vol- evolving in response to the new threats to

management effectiveness and sourcing effi- ume aggregation, specification change and profitability, with changes in services supply

ciencies become inbuilt behaviour rather than demand management – along with changes contracts and a shift linking risk and reward

reactive. to existing procurement operating models. towards an average quarterly spot price.

Historically, iron ore contract prices were Since those initial reactions, we have seen We are now seeing supply contracts shift-

set on an annual basis. Based on Japanese the behaviour of most miners and services op- ing towards miners actively encouraging

demand, this practice continued as Chinese erators change, with rate reductions pushed higher levels of collaboration by those that

demand, processing and stockpiling to meet down the supply chain, but with smaller sav- contribute to the pit-to-port process, with the

domestic and commercial needs increased. ings achieved as margins for smaller provid- introduction of cost recovery with margin KPIs

Most Australian miners were able to set ers become tighter. in an effort to drive efficiencies, accountability

their own terms and plan or budget based on The industry has also started to look for and making sure the mine and the whole sup-

the annual contracted prices entered into for more sustainable approaches to control- ply chain is sustainable.

exports. In 2009 the market began to shift, ling costs, including strategic sourcing pro- This means that an efficient supply chain

with contracts moving from annual to quar- grammes. This is not a new form of cost and lower overall cost base is becoming in-

terly pricing, before shifting again in 2012 as rationalisation, but one the industry hadn’t creasingly important for successful compa-

pricing moved to monthly, which increased the needed until the shift in 2012. Operators have nies.

volatility of the commodity markets and shift- reviewed all critical spend in detail (down to Operational efficiency, management ef-

ed control away from fectiveness and strate-

Australia. The impact of gic sourcing will need

this shift in demand was to become business as

felt in September of that usual rather than one-off

year, when prices for programmes to reduce

iron ore dropped below costs.

$US90/t. An important con-

Now in 2014 we are sideration in a volatile

seeing prices shift environment is to en-

downwards again due to sure that change is not

an oversupply of ore in just implemented, but

the market. imbedded within a com-

In 2012, the market pany’s culture to ensure

reacted in shock, de- Gary Doran Nicki Ivory realised savings lead to
spite China signalling for a long-term and sustain-

some time that demand Gary Doran is a Deloitte Restructuring Services partner. Nicki Ivory is a Deloitte Corporate able junior iron ore min-

was slowing. But the big Finance Partner and the firm’s National Mining Leader – West. Both are based in Perth ing sector.

PAGE 14 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT

NEWS

Iron ore and the dangers of
living by the sword

The price of spot iron ore had sunk to The iron ore price recently dropped to $US75/t, September 10). Closures cost money too and
$US75.50/t at the time of print, its lowest come with a loss of option value.
level since 2009. its lowest level since 2009
Supply, in other words, can take a lot longer
The scale of the price collapse has been As Australia’s share of China’s imports in- to adjust than the theory says.
breathtaking. Iron ore has dropped by over exorably rises, it is clear that other marginal
35% since the start of the year, a significantly suppliers must be suffering too. Secondly and much more surprisingly, it
worse performance than any other industrial turns out that Chinese demand growth is not
metal. But the price still “shouldn’t” be as low as it the given it was assumed to be.
is. So what’s gone wrong?
But what’s really shocking is that the price Its steel juggernaut has shuddered to a
is now at a level that until recently was collec- Quite a lot, it seems. standstill. Official figures show year-on-year
tively deemed impossibly low. Firstly, cost curve arguments are just fine production growth of exactly zero in Septem-
in theory, but reality often turns out to be a ber. Alternative figures from the China Iron
It was only in April that José Carlos Martins, messier affair. and Steel Association show its members’ out-
executive officer of ferrous and strategy at Commodity prices have an annoying habit put actually fell over the last couple of months.
Vale SA, the world’s largest producer of iron in periods of oversupply of not only falling be-
ore, told analysts that “one thing is for sure, low the consensus equilibrium price but also Analysts will hotly contest the accuracy of
the price will not go below $US110/t on a sus- staying there longer than expected. both data series, but the trend is a more re-
tainable basis”. Iron ore is proving no exception. liable friend when it comes to Chinese steel
A host of small, un-mechanised, low-grade sector statistics, and the trend is flat to down.
This was not irrational producer exuber- mines in China may well have exited the mar-
ance. Martins was only voicing the prevailing ketplace, just as they have done in the past The big iron ore producers still talk of peak
consensus view when he went on to argue during periods of price weakness. Chinese steel production coming only in the
that “we have many times seen the price go- The scale of the current supply surge, how- next decade, but the really uncomfortable
ing below this level but recovering very fast”. ever, means that cost curve displacement truth is that a mini-peak has already arrived.
must move well beyond such easy targets.
Well, here we are with the price trading not And others may be in no mood to surrender Not exactly the best backdrop against
just below $US110/t but a lot lower still. so easily. Chinese producers are no different which to be engaged in a pricing war.
from those anywhere else. Faced with low
And sustainably so. prices, they will try to cut costs. “War does not determine who is right, only
That tells you that something has gone very Macquarie Bank’s annual commodities who is left,” British philosopher Bertrand Rus-
wrong with the iron ore narrative. This market conference in China heard how the whole sell said.
is in a place it was not supposed to be. Chinese iron ore sector is now lowering strip
And while big producers such as Vale, Rio ratios, trimming labour costs and seeking tax That pretty much sums up the attitude of
Tinto plc and BHP Billiton Ltd are sticking to reductions in a collective effort to move down the world’s big three iron ore producers.
that narrative, they are now facing the unpre- the cost curve.
dictable consequences of a pricing war they Some will soldier on even if they’re losing They may have already been proved wrong
collectively started. money, a counterintuitive but ultimately ra- in their assumptions about how the market
The “Big Three”, which have some of the tional producer response, according to ana- would absorb their extra supply. At issue now
lowest-cost operations in the world, are bring- lysts at Goldman Sachs. (“Rocks and Ores”, is whether they have bet correctly that they
ing an unprecedented amount of new supply will be the last men standing, however low the
to the market. price gets.
Between them they lifted production by
almost 12% over the first nine months of this The problem with wars is that they tend to
year, and the ramp-ups and expansions are take unpredictable turns.
continuing.
They all knew that there would be an impact One such turn was Glencore’s approach
on price, but the theory, as expounded back to Rio Tinto to see if it might be interested in
in April by Vale, was that it would be limited. “some form of merger”, a word that seems to
After all, they could argue, the market for have a different meaning for the Swiss com-
iron ore will still expand for many more years modities giant than for the rest of us, judging
as the world’s biggest buyer, China, pumps by its previous “merger of equals” with Xstra-
out ever more steel to build infrastructure and ta.
new houses.
And lower-cost production from Brazil and The approach was quickly and entirely pre-
Australia’s Pilbara will displace higher-cost dictably rebuffed.
production, not least in China itself.
Or as Sam Walsh, chief executive at Rio But Glencore’s chief executive, Ivan
Tinto expressed it, “now is the time for others Glasenberg, a man with strong views on pro-
to really feel the consequences of the price ducers’ past failures to recognise market re-
against their operating costs and for them to alities, has thrown down a far marker.
make decisions”.
There’s plenty of anecdotal evidence that Rio Tinto may well be able to keep produc-
small higher-cost iron ore mines in China are ing iron ore at a price below the pain thresh-
indeed closing en masse, even if corrobora- old of most others, but at what cost to its own
tion from its notoriously unreliable iron ore margins and its own shareholders? The com-
statistics is still sadly lacking. pany, with over 90% of profits coming from the
sector, has turned itself into a play on the iron
ore price, which is now trading at a level no-
one predicted even a few months ago.

Well, at least it can’t go any lower, right?
That would be ... well ... impossible.

– Andy Home, Reuters

AUSTRALIA’S PAYDIRT DECEMBER 2014 - JANUARY 2015 PAGE 15

NEWS

Diamond glint for Monax in
South Australia

Focused on unearthing South Australia’s IOCG exploration at Margaret Dam has turned into a potential diamond hunt
next big IOCG deposit, Monax Mining Ltd for Monax in South Australia
has fallen into a potential diamond find in
South Australia’s north. South Australia. the results and a decision will be made on
However the company is perhaps better further drilling by the technical committee,”
A review of aeromagnetic data encompass- Ferris said.
ing its Margaret Dam exploration licence, placed than its peers in the junior exploration
south of William Creek in the Gawler Craton, sector, having attracted interest in its portfolio Meanwhile, Western Areas Ltd has started
revealed two circular features consistent with from bigger players in the game. work under the farm-in agreement on the
that of a kimberlite intrusion. Western Gawler Craton project.
Monax has engaged with Antofagasta plc
Detailed ground magnetic and gravity sur- on three of its projects, with the Chilean cop- The farm-in covers three tenements over
veys have been completed over the circular per giant recently completing drilling at the an area of 2,046sq km in an area demonstrat-
features, with geophysical modelling outlining Punt Hill JV. ing similar tectonic and lithological similarities
a magnetic body at a depth of about 80m. to the Thompson nickel belt in Canada.
Antofagasta has a 51% stake in Punt Hill
“We had this little blip that we were picking and can increase its share to 70% by spend- By spending an initial $800,000 within 2.5
up on the magnetics and we really didn’t think ing another $US5 million over four years. years Western Areas can earn an initial 75%
too much of it, but our geophysicist had done interest and can up its interest to 90% by com-
a bit of work up in that area with kimberlites Antofagasta is funding drilling at Punt Hill, mitting a further $400,000 within 1.5 years.
and he said if he was a betting man it looked with results from the recent two-hole pro-
like a kimberlite,” Monax managing director gramme expected mid-December. Western Areas started a hi-resolution aero-
Gary Ferris said. magnetic survey – 100m-spaced flight lines
“We will meet with Antofagasta to discuss covering most of the project area – in Novem-
“We thought it looked interesting and decid- ber to help identify drill targets.
ed to do some more work on it, more detailed Gary Ferris
ground magnetics and gravity survey over it. “We’re really excited about that project and
We thought once we get on the ground we will I think the first round of data is going to be
either see something that will explain it or the fantastic. They are flying detailed aeromag-
data will show something worth chasing.” netics and it is just like looking at kimberlites,”
Ferris said.
With regional magnetics being broadly
spaced and not ideal for identifying kimber- “I’m happy with our direction, we have
lites, Monax has come up with a few targets some interesting exploration plays. We have
and is looking to acquire some more ground three projects funded by Antofagasta and one
nearby to determine whether there is potential by Western Areas. We have a couple of other
worth pursuing in the area. projects that Monax can spend its money on
and the plan for us is to keep exploring and
“Initially we’re looking at a one- or two-hole keep trying to make that discovery drill hole
test to test the two targets which are relatively because you can’t actually make that discov-
shallow. Modelling is 80m below the surface ery unless you are putting the lie detector in
so it is not like drilling for IOCG; it is relatively the ground,” Ferris said.
shallow drilling. We have not made the deci-
sion whether we are going to chase this; it is – Mark Andrews
definitely very interesting and opportunistic
and at the early stage it is relatively cheap ex-
ploration,” Ferris said.

Drilling is planned for early in the New Year
to confirm whether the target is a diamondifer-
ous kimberlite, while the company is also as-
sessing the potential of attracting a JV partner
for the project.

Macrodiamonds and kimberlitic indicator
minerals have been found near Margaret Dam
before, with a single carat diamond discov-
ered at Peake Creek, north of William Creek,
in 1894.

Several companies have investigated Mar-
garet Dam for diamonds in the past, however
a “lack of attention to available geophysics”
has stymied previous explorers from making
any meaningful discoveries of kimberlite ore-
bodies, according to Monax.

Flinders Diamonds Ltd drilled 65 holes for
1,690m but no discoveries resulted.

Monax hopes to have better success, and
despite its share price – 1.4c/share at the time
of print – remains committed to exploration in

PAGE 16 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT

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NEWS

FIFO induction must include
mental health advice: Mitchell

Renowned broadcaster and mental into the physical dangers, but a lot of
health advocate Glenn Mitchell has those physical dangers can be amplified

called for a greater emphasis on suicide if someone is not in the right mental space

prevention and mental wellbeing during and that should be one of the big triggers

the induction process for FIFO workers. for that industry.”

Mitchell’s plea comes in the wake of Mitchell has been encouraged by some

a parliamentary inquiry into the mental of the processes put in place by bigger

health impacts of FIFO work arrange- mining companies such as Rio Tinto Ltd,

ments in Western Australia following the BHP Billiton Ltd and Fortescue Metals

suicide deaths of nine FIFO workers in Group Ltd in recent years, including the

the last 12 months. introduction of peer support groups and

The inquiry was ongoing at the time confidential employee assistance pro-

of print, with an initial report due in De- grammes.

cember and the full report expected to be However, there is still plenty of work to

delivered by March. be done in his eyes, particularly when it

Mitchell conducts regular mental comes to rosters and social isolation.

health and suicide prevention talks “These people have got to be engaged

across several mine sites in WA and he when they’re not working and I know a lot

believes it is imperative for mining com- of them are tired from working 12 hours in

panies to educate new employees about the heat, but you’ve still got to be able to

the mental pitfalls of a FIFO lifestyle be- give them those options to do something,”

fore they start their first swing. Mitchell said.

“Because it’s such a bizarre way of “If you’re driving a haul-pack truck, you

working, I really think they need to do might be air-conditioned but you’re sitting

something at the pointy end to actually in a box by yourself for maybe 9.5 hours

explain to these blokes and women about of a 12-hour shift and then after that might

the industry they’re going into and what have a bite to eat and go back to your

the challenges will be to their family envi- room, so you’re not really having any in-

ronment and what the challenges will be teraction and being able to talk about any

to them personally,” Mitchell told Paydirt. issues you’ve got in your life.”

“They need to be told right from the Mitchell also questioned why mining

beginning that these are the feelings you Mental health advocate Glenn Mitchell has called companies were not required to report
are likely to experience, this is how these for changes to the FIFO induction process suicide deaths as is the case when there
feelings will manifest and this is what will is a fatality on a mine site due to an indus-

happen when you go home. A lot of things “If you’re doing 30 hours of induction – six trial incident.

can be put in place before a person gets on a hours a day for five days – you should be able “These nine suicides are only stats that

plane for the first time.” to find one hour somewhere in all of that to be have been made public as a result of this in-

A sports journalist and broadcaster for able to get a psychologist in to talk about the quiry being launched,” Mitchell said.

more than 30 years, Mitchell has become a effects of FIFO on the worker and the family,” “What we don’t know – and will probably

“strong advocate for mental health and suicide Mitchell said. never be quantified – is if a bloke who is due

prevention since resigning to go back on a swing to-

from his position at the Aus- If you’re doing 30 hours of induction morrow, if he takes his life
tralian Broadcasting Cor- in Perth, that’s not a FIFO

poration in 2011 following a – six hours a day for five days death, although it might be
mental breakdown and an – you should be able to find one hour totally predicated on the
attempt on his own life. somewhere in all of that to be able to get a fact he just can’t face going
back to work, so the nine
The 51-year-old now deaths in camp could well
shares his story in a bid

to remove the stigma at- psychologist in to talk about the effects of be 15 if there are five or six
tached to talking openly FIFO on the worker and the family. others out there we don’t
about mental illness. yet know about.

It has been brought to “You hear all sorts of sto-

Mitchell’s attention that ries about how FIFO work is

very little – if any – education about the impact “I have a real big issue that if the only way disruptive to family life and how FIFO work-

of a FIFO lifestyle is included in a worker’s in- you can make a profit is to have people flying ers have a higher level of depression, but

duction programme. in and flying out, then don’t spend 20% of the you never hear about any suicides and that’s

One mining company even told Mitchell 30 hours on physical safety and 0% of it on something that needs to change for us to win

there was not enough time in the induction what’s happening with their mental wellbeing. the battle.”

process for such a discussion amongst the It’s prudent because FIFO is going to have a – Michael Washbourne
raft of safety procedures which need to be bigger impact on mental wellbeing than most

drilled into new FIFO employees before they other workforces in the country.

start working on a mine site. “So much time, money and effort is put

PAGE 18 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT

OPINION

Are our tailings dams safe?
How technology can aid in a
superior monitoring programme

With the collapse on August 4 mercially available geotechnical
of Imperial Metal Inc’s Mount
Polley mine tailings dam in British and structural vibrating wire (VW)
Colombia, Canada it is time to con-
template the safety of tailings dams sensors and optional thermistor
in general. The Mount Polley col-
lapse has released 10 billion litres temperature sensors, communi-
of water and 4.5 million cubic me-
tres of metals-laden fine sand, con- cating via GPRS.
taminating several lakes, creeks
and rivers in the Cariboo region. The software included easily

A BMO Nesbitt Burns Inc. anal- enables the user to set-up the log-
ysis pegged the cost to the com-
pany at $US200 million. That does ger configuration file, parameters
not include legal damages that
could double that amount. and schedules before uploading to

Every year between two and the user’s FTP site, making the de-
five of the more than 3,500 tail-
ings dams in the world experience vice completely adaptable to site-
major failures. They are 10 times
more likely to fail than conventional hydro or specific changes.
irrigation dams, yet their failures are poten-
tially more dangerous because of the toxic The VWlog8 GPRS will auto-
substances they contain.
matically use these settings when
The breach of Mount Polley dam took place
in the early hours of the morning when no it performs its scheduled synchro-
one was on site to provide any warning down-
stream. With the advances in technology to- nisation.
day the responsible parties should have been
alerted immediately. Numerous other multiple chan-

The importance of monitoring programmes nel dataloggers are available that
for dam safety is widely accepted. There are
many historical cases of dam failures where A tailings dam failure at the Kolontar mine in Hungary enable alarm functions via email
the early warning signs of failure might have
been detected if a good dam safety monitor- or text. The more complex the sys-
ing programme had been in place.
Getting the data from the sensor to the tem, the more costs are involved.
An instrumentation and monitoring plan
provides the information that is needed to de- engineers’ desktop with alarms and visuals Wireless mesh networked intelligent data-
velop a better understanding of the ongoing
performance of the dam. if required is now infinitely more achievable loggers are suitable to situations where the

The instrumentation is typically provided at and the costs are being drastically reduced. sensors are spread out with distances up to
a dam to deal with informational needs that
are most efficiently and effectively addressed More importantly, so is having the automated 300m apart. A wireless system saves costs
by installing and reading instruments.
alarms put in place to send an email or text to on the supply and installation of cable. The
The instrumentation is of course used in
conjunction with other available information various engineers who can immediately take load sensing wireless system for all kinds
gathering approaches. The collection of in-
strumentation data can be automated, which action to avoid a potential disaster. of sensors is an intelligent mesh networked
allows for monitoring on a more frequent
(near real-time) basis. Automated monitoring Some of the recent developments to enable system with the choice of single and multiple
systems can be used to initiate alarms for no-
tifying dam monitoring personnel of sudden an early warning system include: channel nodes. Quick and easy to install, the
changes in the instrument data values due to
normal or extreme loading conditions such as • Standalone single sensor dataloggers data is sent to a dedicated software via a tel-
earthquakes or flooding. As the technology
improves, the capability of having an early with GPRS transmission directly to the inter- ephone modem.
warning system becomes even more easily
attainable. net An example of the real time monitoring

• Standalone multiple sensor dataloggers web-based software with alarm functions, the

with GPRS transmission directly to the inter- ARGUS monitoring software is a data man-

net using 2G or 3G transmission directly to agement, calculation and presentation tool.

the internet It is simple to use with easy interpretation of

• Wireless mesh networked intelligent da- large amounts of instrumentation data from a

talogging system variety of sources. Alarms can be generated

• Real time monitoring web based soft- once a reading exceeds a preset parameter,

ware with alarm functions providing an early warning that something is

Inexpensive single sensor dataloggers with not right. Typically three alarm levels are used

2G or 3G transmission directly to the internet and the engineer is able to change these re-

are low-cost, waterproof with an internal SIM motely.

card and ultra long-life batteries. Given the technology that is available to the

Small enough to fit inside a 50mm bore- tailings dam manager today, the situation that

hole, to save on battery power the RIPPA occurred at Mount Polley is avoidable.

unit takes readings ever 15 minutes and then Kim Malcolm is managing director of ITM-Soil

uploads the data to the web site every 12 or Pty Ltd, which supplies leading geotechnical and

24 hours. In this way the battery has a life of structural monitoring systems

over five years. The web site is password pro-

tected and allows the results to be graphically

represented. This allows you to access your

data from anywhere there is an internet con-

nection.

Standalone multiple channel loggers in-

clude the VWlog8 GPRS, which is an eight

channel datalogger which reads most com-

AUSTRALIA’S PAYDIRT DECEMBER 2014 - JANUARY 2015 PAGE 19

COVER

Acacia to bloom from
Barrick’s bud

The transformation of African Barrick Gold plc from problem child to gold industry role model is one step closer
after the company announced in November that it would change its name to Acacia Mining plc.

The name change is designed to break some of the ties with parent company Barrick Gold Corp.
“It is part of the changing in company culture,” Africa Barrick Gold chief executive Brad Gordon told Paydirt. “It is
a new beginning as a new independent, African-focused mining company.”
The move comes five years after the company was spun out of Canadian major Barrick. So, why now? Paydirt
editor Dominic Piper speaks to Gordon about the reasons for the change and Acacia’s coming of age.

When, in 2010, Barrick Gold Corp an- Growth is no longer the main driver for in- and better returns to shareholders.
nounced intentions to spin out its Tanza- dustry majors. Instead, the prevailing mantra But while its peers are still in the early
nian assets into a new vehicle, it was widely is lower costs, larger margins, more cash flow
interpreted as a move to ring-fence highly stages of asset reviews and operational over-
problematic assets in a geopolitically sensitive Acacia chief executive Brad Gordon hauls, Acacia is beginning to reap the rewards
jurisdiction. of its early switch to parsimony.

When the new vehicle – African Barrick Chief executive Brad Gordon is proud of the
Gold – struggled in its formative years against progress the company has made but admits
rising cash costs, increasing capital require- its early adoption of the austere strategy was
ments and social unrest around its opera- forced upon the company.
tions, Barrick’s move to distance itself from
Tanzania appeared highly prescient. As far back as 2011 Barrick had been inves-
tigating ways of divesting its 73.9% holding in
Nearly five years on, however, and instead Acacia, and when China Gold Inc broke off
of being viewed as a symbol of the failures discussions over a deal in December 2012,
of gold miners the world over – and specifi- the future looked bleak.
cally those on the African continent – Acacia
now finds itself as a pin-up for the newly aus- “The company definitely reacted earlier
tere times. Today, the entire gold industry is than the other majors to the new gold environ-
gripped by cost-reduction fever as miners be- ment but it was certainly a case of necessity,”
latedly respond to a falling gold price and the Gordon told Paydirt. “Rome was burning and
decade-long criticisms of investors frustrated the company couldn’t stand idle.”
by their failure to provide adequate returns on
investment. Following China Gold’s withdrawal from
negotiations, Acacia launched an operational
review, identifying $US184 million in potential
savings across the business.

PAGE 20 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT

Despite its operational issues, Bulyanhulu remains Acacia’s flagship asset
and Gordon is confident it is about to finally fulfil its potential

Launched by Gordon’s predecessor, Greg “ Acacia has reduced expat numbers on its operations from 500 to 200 in the last year
Hawkins, the review targeted operating cost The company definitely reacted earlier than
reductions, capital discipline, organisational the other majors to the new gold environment
structures, corporate overheads and mine but it was certainly a case of necessity. Rome was
planning as the key areas in which savings burning and the company couldn’t stand idle.
could be realised.

By the end of 2013, more than $US100 mil-
lion of those savings had been achieved and
Gordon is confident the total figure will be
reached by the close of 2014.

The turnaround is reflected in the compa-
ny’s financials.

Since the nadir of the September 2012
quarter, when the company produced just
147,786oz at cash costs of $US965/oz,
Acacia has enjoyed eight consecutive quar-
ters of cash-cost reductions, culminating in
the September 2014 quarter with an all-in
sustaining cash cost of $US1,098/oz, 14%
lower year-on-year and 1% lower than the
previous quarter. The cost reductions came
on the back of a 16% increase in gold pro-
duction, to 190,986oz, a rate that will see
Acacia reach 700,000oz group production
for the year.

AUSTRALIA’S PAYDIRT DECEMBER 2014 - JANUARY 2015 PAGE 21

COVER

On his arrival in August 2013, Gordon was “I think I probably see more potential in “That is certainly one of the first questions

impressed with the progress that had been these assets than others see in them. That I get asked: ‘Have you cut too far?’ But I can

made. He believes it allowed him to impart his was the main attraction to this job; I could see tell you that these savings are sustainable

own expertise on driving costs down further. an opportunity to fix the assets and grow the and not only are they sustainable but you will

“The company was well down the path to company. Once on the inside, I became even see more of them.

the $US185 million target when I arrived,” he more optimistic about our prospects. I knew “We are not high grading the assets. In fact,

said. “But it was all from non-mining related North Mara well from my days with Placer at Bulyanhulu we have been mining under the

Dome and I saw Bulyanhulu as one of the reserve grade for its entire existence.”
best deposits in Africa.” It is Bulyanhulu to which Gordon is most
savings. That is why I am confident we will ex- obviously referring when
ceed the $US185 million target; we are only he speaks of “unlocking the
just beginning to focus on the potential” latent in Acacia’s
actual physical mining costs portfolio. The flagship oper-
ation has already undergone
That was the main attraction toand the reengineering of the changes to its mine plan and

mines themselves.”

this job; I could see an opportunityGordon’s 30-year career as

“to fix the assets and grow the company.a mining engineer and execu-
tive has spanned operations Once on the inside, I became even more Gordon expects the rede-
in Australia, Asia and Africa, optimistic about our prospects. sign to begin delivering over

with the likes of Placer Dome the coming six months.

Inc, Emperor Mines Ltd and Just 56km south of the

most recently Intrepid Mines spectacular Lake Victoria,

Ltd. It is this operational experience that he However, with an already dramatic im- and 153km from the Tanzanian north-western

believes will be of immense benefit to Acacia. provement in operating costs, some analysts regional capital of Mwanza, Bulyanhulu was

“I come from an operations background are beginning to question whether further hailed as one of Africa’s great discoveries

and that is the area in which I can add value cuts would be in the long-term interests of the when it was unearthed by Placer Dome in

for this company,” he said. company. 1990, but it has always been tainted with un-

For Gordon, the Acacia assets were ripe for Gordon is emphatic in his rebuttal. derperformance.

reappraisal.

PAGE 22 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT

Even when Barrick paid Sutton Resourc- signing the mine plan and reengineering the success.

es $US500 million for the project in 1999 it entire operation. Speaking at the Denver Gold Forum in Sep-

was deemed overpriced and since then has “What we are trying to do is match the de- tember, Gordon said jumbos underground

summarily failed to quell the doubters, who sign and the plants to the geological assets had gone from completing 50m a day to 100m

pointed to consistently high operating and and the benefits of that strategy are only now “and they will be at 200m of development a

sustaining capital costs and under-delivery of being reached. day by the end of 2014”.

produced ounces. “In the original mine plan we weren’t due to The improvements are being reflected in
It is in this underperformance that Gordon
sees opportunity.

“That is the challenge which is

It is one of the best depositsdriving me,” he said. “It would be

good to be the first to truly unlock the

in Africa, in the world even,potential of Bulyanhulu because it re-
and it should therefore be one ofally hasn’t delivered as it should have

in its first 15 years.”

“the best mines in Africa.Despite its history of disappoint-
reach the average reserve grade at Bulyan- production figures. For the September quar-
ter, the company reported gold
production of 63,333oz (up from
52,126oz in September 2013),
cash costs of $US752/oz (down
from $US769/oz in September
2013) and a head grade of 8.8
g/t gold (September 2013: 7.8 g/t
gold).

ment, there is much in the 54.44mt “We have Byrnecut in there

@ 8.93 g/t for 15.63 moz orebody for an en- hulu until 2024; our revised plan will see us now and that is helping us achieve a rapid

gineer such as Gordon to get excited about. get there next year. We should be mining at increase in development rates. That gives us

“It is one of the best deposits in Africa, in 10 g/t because it is a 10 g/t mine. It should be much more flexibility with the amount of faces

the world even, and it should therefore be one one of the best operations in the world.” we have open, which allows us to become

of the best mines in Africa.” The effects are already becoming appar- much more productive as a result. We have

The operational review produced some op- ent. Underground, Acacia brought in Austral- also changed our stoping method from cut-

erating cost savings for the mine, but since ian mining contractor Byrnecut to improve and-fill to long-hole mechanised stoping and

Gordon’s arrival the focus has been on rede- mining rates with almost immediate

Acacia still sees room for further expansion at Bulyanhulu but
only when the operation is performing to capacity

AUSTRALIA’S PAYDIRT DECEMBER 2014 - JANUARY 2015 PAGE 23

COVER

Byrnecut has been brought in to improve underground mining rates at Bulyanhulu

that is already having a positive impact.” but we are already seeing the benefits. There on November 27, but what you are going to
The changes are set to increase production are still improvements to be made, particularly see are big improvements from what is a big
on the operating cost side, and we are very mine,” Gordon said.
to more than 300,000oz for the 2014 calen- confident we will get all-in costs to less than
dar year and Gordon’s focus now is on driv- $US900/oz. As the company’s flagship mine, Bulyan-
ing down the all-in sustaining operating cost hulu is the most obvious place to start the
($US1,350/oz in the September quarter). “It will become more apparent when we re- company’s turnaround, but Acacia’s other two
lease five-year production and cost guidance assets also remain largely mendicant.
“The transition will be complete next year
Gordon admits the Buzwagi mine – 97km
Acacia expects to bring Bulyanhulu’s all-in cash costs under the $US900/oz mark in 2015 from Bulyanhulu – should perhaps have been
stifled at birth, but with all major capital now
sunk into the operation, it could have a bright
end to its existence.

“In hindsight, Buzwagi probably shouldn’t
have been built, but the next five years will be
very positive for the mine,” he said. “We have
shortened the mine life from 10 years to five
and it will generate cash over that period.”

The changes were apparent in the Sep-
tember quarter, with production from Buzwagi
reaching 63,321oz at all-in sustaining cash
costs of $US950/oz compared to 44,408oz at
$US1,436/oz in the September 2013 period.
Mill optimisation alone contributed to a 7% in-
crease in recoveries to 94.8% for the quarter.

While Buzwagi’s future may be making the
best out of a bad situation, Gordon’s hopes for
North Mara remain intact.

Acacia’s largest producer in the last five
years, North Mara is also a microcosm of the
company’s challenges in Tanzania. Situated
100km east of Lake Victoria and 20km south
of the Kenyan border in the country’s Mara re-
gion, the mine is both revered and forsaken in
equal measure.

It contributed 41% of group gold production
in 2013 and has surprised many analysts with

PAGE 24 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT

“North Mara has been the outstanding performer in the Acacia portfolio over the last two years. It accounted for 41% of group production in 2013
We do have a policy to promote local procurement and we have increased
that local content figure already this year. We have also hired a new head
of supply and he is very good at what he does in that regard.
its performance over the last two years, but situations from my time at Porgera [in Papua are now focusing on a community relations

while technical problems appear to have been New Guinea].” approach rather than having a security focus.

ironed out, operations have been continually “Opening up the underground means there “We have changed the security model and

blighted by social issues. is less opportunity for incursion but we are along with the support the Government is of-

Gordon, however, retains his enthusiasm also adopting a very different approach. We fering the situation has improved.”

for the asset.

“I’ve always liked North Mara and be-

lieve it is one of the best assets in Africa,”

he said. “It has been performing well and

we have had some improvements on the

cost side.”

The biggest change at North Mara will

come as operations move underground

through the Gokona cut.

“The feasibility is nearly complete on

the underground. It has reacted really well

to the initial changes following the opera-

tional review but we will see further chang-

es when we move to underground, both in

terms of capex and operating costs.”

Gordon said the change to underground

will also “take the heat” out of much of the

social unrest.

Many of the social issues stem from in-

cursions into the mining lease from artisa-

nal miners. Incursions increased steadily

between 2008 and 2012 but Gordon tells

Paydirt the trend has been reversed in the

last 18 months.

“It has been relatively quiet recently

but it is still not what you would describe The move from open pit to underground operations at North Mara will reduce capital and operating costs.

as a normal operating environment. I do, The company also hopes it will take “some of the heat” out of the illegal mining incursions which

though, have experience of these kinds of have blighted the operation

AUSTRALIA’S PAYDIRT DECEMBER 2014 - JANUARY 2015 PAGE 25

COVER

The new “community approach” was high- tries I have worked in. One of the pleasant employer in the country, the largest power
lighted in June when the company installed a surprises for me when I came to the company consumer and one the largest tax payers. Our
big screen television in the local village and was just how good it is. I spoke to the Prime contribution represents 3% of GDP so we are
televised the entire World Cup. Minister and outlined the top three issues we very prominent player in this economy.”
perceived; we have since seen good progress
“For the 30 days of the World Cup we had on all three and they are very supportive of The report also showed that for each of
zero incursions,” Gordon said, still surprised what we are doing on the community side of Acacia’s employees, a further 11 jobs are cre-
by the impact. “In many ways, it was unfortu- things.” ated within the Tanzanian economy, which
nate the World Cup had to end at all.” means that Acacia’s operations are support-
The company is also working to better ing more than 62,000 jobs across Tanzania.
The change in approach at North Mara is communicate the role it plays in Tanzania’s
consistent with Acacia’s attitude shift across development. In July, the company released The company also spent $US448 million on
its government and community relations strat- a reported conducted by EY that showed it goods and services from suppliers based in
egy. Gordon said strengthening those rela- contributed $US850 million to the country’s Tanzania, which represented nearly 60% of
tions is one of the key pillars of the company’s economy in 2013. the total spend in supply chain.
growth strategy. He dismissed any sugges-
tion that Tanzania has proven too difficult to “I don’t think miners are good at commu- Increasing local procurement and foster-
establish a fully functioning mining industry. nicating what benefits they inject into the lo- ing stronger relations with local businesses is
cal economy. But the company is the largest high on Gordon’s agenda.
“Tanzania is actually one of the better coun-
“We do have a policy to promote local pro-
Although the company slashed $US25 million out of its exploration budget in 2013’s curement and we have increased that local
operational review, it is now actively hunting exploration ground in West Africa content figure already this year. We have also
hired a new head of supply and he is very
good at what he does in that regard.”

The local content policy is part of a wider
strategy to ensure Acacia is embedded as
an African miner. The operational review
prompted a reduction in expat numbers from
550 to fewer than 200 with the trend expected
to continue.

“But that is not the focus,” Gordon said.
“The focus is on making sure our leaders
know what is demanded of them and what we
are trying to create.

“The culture of the company was holding us
back. Now we are encouraging new kinds of
behaviour; a focus on planning, accountabil-
ity, urgency, safety and developing people.
It has been an interesting journey but we are
now seeing a momentum shift and our people
are beginning to get it.”

The name change to Acacia also hints at
a broadening of horizons. There is nothing in
the name that binds the company to its roots.

“There is no mention of gold or Tanzania,”
Gordon said.

While that does not suggest the company

PAGE 26 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT

“ The board is expected to announce its decision on the Gokona underground expansion at North Mara before the end of 2014
Some of the other majors are pulling out of Africa and there are not
many companies with the capability of playing in that space. And, there
is not a lot of capacity for exploration for juniors so we are looking to be
counter-cyclical, but only once the current portfolio is performing.”
is contemplating abandoning its East African of the West African gold bubble. sets are looking cheaper than exploration at
base, it does encourage rumours that expan- “Some of the other majors are pulling out of the moment but it is also the time to be look-
sion westwards is imminent. ing for ground in Africa. The opportunity to set
Africa and there are not many companies with ourselves up for the next 10-15 years is now.”
Gordon does not deny the suggestion. the capability of playing in that space. And,
“There are opportunities on offer through- there is not a lot of capacity for exploration Before then, however, Gordon knows the
out Africa,” he said. “We said the operational for juniors so we are looking to be counter- newly independent Acacia must prove its har-
turnaround would be an 18-month process cyclical, but only once the current portfolio is diness.
and we are now 12 months into that so from performing.”
next year you may see something begin to “The operational improvements come first,”
happen.” It appears likely that any Acacia West Afri- he said. “We must earn the right to grow.”
The company already has ground in West can portfolio would ideally be built on a mix of
Kenya – acquired from ASX-listed junior Aviva producing and exploration assets. – Dominic Piper
Corp in 2012 – but the gold hub of West Africa
is another logical destination. “There is no doubt that the producing as-
“We are looking for quality exploration
ground in West Africa and we are pretty close Gordon has implemented a change in community relations since taking the helm of Acacia
to putting our foot on something there,” Gor- last August. He said relations were already improving as a result
don said.
Market value may have been corrected with
the burst in the West African gold bubble but
there is still a paucity of high-quality assets
on offer in the region. Gordon said Acacia
would not be hasty in acquiring a foothold in
the region.
“When we do look around we will be looking
for assets which are at least as good as North
Mara and Bulyanhulu. We definitely don’t
want to dilute ourselves in any way. It has to
be the right asset to expand. And if we can’t
find value we will look to return more cash to
shareholders.”
However, options continue to arise in a
West African gold space that is in a state of
flux with North American majors reconsider-
ing their African strategies and juniors strug-
gling to make headway following the bursting

AUSTRALIA’S PAYDIRT DECEMBER 2014 - JANUARY 2015 PAGE 27

INDABA PREVIEW

Indaba ready for
mining’s cash injection

Cape Town will open its doors to the international mining community again on February 9-12 for the annual Investing in African Mining Indaba conference

The Investing in African Mining Indaba re- growth, there is little doubt the sector on the given the continent’s industry is still at a large-
turns to Cape Town on February 9-12, and African continent has stalled in recent years ly nascent phase, the halt to investment has

the question at the forefront of all 7,000 del- as commodity price falls and negative inves- perhaps been more shuddering than else-

egates’ minds will be: when will the shackles tor sentiment conspire to strangle the new where.

be broken and capital start flowing back into generation of development projects before There is, however, a wealth of cash ready

the resources market? they get off the ground. to be deployed. Former Xstrata plc boss Mick

As one of the most iconic conferences The problems are not specific to Africa and Davis has nearly $US5 billion in his X2 Re-

on the international mining calendar, Mining every mining jurisdiction in the world has suf- sources shell ready to invest in resources

Indaba is often taken as a bellwether for in- projects, while his former adversary, Ivan
dustry sentiment. The last two years Glasenberg, is still seemingly plot-
have been downbeat but not bleak (it ting the next move for Glencore
plc. Elsewhere, Chinese investment
That is the big question foris very difficult to be bleak when you is on the rise again, particularly in
the South African precious metals
are enjoying this most beautiful of cit- space, and Indian firm Vedanta Min-
erals has committed nearly $US1
everyone at the moment:ies in the middle of summer) but can billion to building the Gamsberg zinc

blind optimism be replaced by some-

‘What is going to be the catalystthing more tangible?

“for getting capital freed up?’After a decade of unprecedented
fered from the taps being turned. However,

PAGE 28 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT

project in South Africa’s Northern Cape. Most of the Indaba delegates would hope Former British Prime Minister Tony Blair will be
Mining Indaba managing director Jonathan this to be the case and many miners are ach-
ing for it to happen. the headline keynote speaker at the conference
Moore expects the when, why and how of the
return of mining investment to be the hot topic After a prolonged downturn, Moore is cer- the work he has specifically done in Africa and
of discussion, both at the conference and in tainly cognisant of the realities facing the in- this sector in particular, he brings so much in-
Cape Town’s many upmarket venues. dustry. put and experience to that conversation.

“That is the big question for everyone at the Having welcomed new owners earlier this “As well as being a global leader, it has
moment: ‘What is going to be the catalyst for year – EuroMoney Institutional Investor plc through the charity he founded in 2008, the
getting capital freed up?’” Moore told Paydirt acquired the conference in July – Moore said Africa Governance Initiative, that he worked
in November. “That will be discussed on stage Indaba organisers were determined to ensure with African governments to improve regula-
and around the event in general. What are the conference offered sponsors, delegates tion and investment oversight. As a result, he
the constraints which are holding this capital and participants the best experience possible. will provide unique and charismatic insights to
back? Look at the amount of money that has our global delegation.”
been raised in recent years but is yet to be ap- “The event is shaping up very well,” Moore
plied. Is it a situation that once it starts, there said. “We work with mining companies with The Ebola crisis is also likely to be high on
will be significant volumes of capital going to the recognition of what they are up against in the conference agenda but Moore was quick
work?” this market. EuroMoney is looking at the long- to allay any fears the virus would affect the
term for this conference and wants to deliver conference.
the best event possible and we are working
hard to manage what is a very challenging “This is obviously a very serious and tragic
market as best as we can. issue going on in West Africa and one that
specifically impacts our sector,” he said. “But
“I think the conference’s acquisition by for the event itself, there are no travel restric-
Euromoney is a good thing. It will allow us to tions coming into South Africa; security and
reinforce our core values of bringing mining screening has been heightened but no re-
companies, investors and mines ministers to- strictions are in place. And, we continue to be
gether into an excellent future.” guided by the policies and commentary of the
World Health Organisation.”
Moore said attendees would see an obvi-
ous return to those core values and would The Ebola outbreak has been treated with
also witness more investor-specific content. hysteria in some Western countries. Moore is
confident not only in South Africa’s ability to
“There has been a real narrowing of focus manage what risk does exist but also in In-
in this regard. We will have a series of investor daba attendees having a more sophisticated
panels on the main stage and we are build- understanding of the virus and what is driving
ing a number of other initiatives specifically the crisis.
around investors.”
“I think most people who know the event
These initiatives include country-specific understand the situation and are comfortable
investor clinics, designed to allow investors to and confident that South Africa is a very safe
drill deep into a country’s mining environment. place to visit.”

“These clinics will have participation from As usual, Team Australia will be one of
companies, experts, mines ministers and the most visible of the foreign delegations at
chambers of mines and industry in order to Mining Indaba. Austrade is set to continue its
provide detailed information about the invest- highly successful Australian Lounge concept
ment climate, geological potential and ease of while Australian Minister for Trade, Andrew
doing business in specific countries,” Moore Robb, will also visit the event for the first time.
said.
Paydirt will be present at the 2015 Invest-
The new clinics will reflect Mining Indaba’s ing in African Mining Indaba. Look out for our
return to its roots as an all-African event. March edition for full coverage of the event

“We will look at the totality of Africa from
a mining perspective,” Moore said. “In 2014,
thanks to the 20th anniversary of the event
and the 20th anniversary of South African de-
mocracy, the conference was unashamedly
focused on the South African industry. This
year we will be back to a truly Pan-African
event and all the stories associated with that.”

The main programme itself has been bol-
stered by some heavyweight speakers includ-
ing the man Moore describes as the industry’s
most pervasive deal-maker, Robert Friedland
of Ivanhoe Mines Ltd, as well as global econo-
mist Dr Dambisa Moyo, the creator of the ac-
ronym BRIC and former Goldman Sachs chair
Jim O’Neill, the World Bank Group’s emerging
regions expert Anita Marangoly George, and
a host of other government leaders, mining
chief executives and international commodi-
ties analysts.

However, it is the presence of former British
Prime Minister Tony Blair that is the real coup
for the conference.

“Even if I do say so myself, the team has
done a fantastic job of putting together a very
powerful programme, led of course by Tony
Blair,” Moore said. “If you just look at Blair and

AUSTRALIA’S PAYDIRT DECEMBER 2014 - JANUARY 2015 PAGE 29

INDABA PREVIEW

Resolute tops up for
final oxide push

Resolute Mining Ltd was set to for expensive diesel-generated
raise $25 million through a con- power.

vertible bond note issue in Novem- “We are tidying up various

ber as it looks to complete a series agreements before we start on

of key expansion projects in West the grid power project. We have

Africa. $40 million left to spend; $28

The ASX-listed gold producer an- million on the line itself and $12

nounced on November 7 that it is- million on regional connections,”

sued 15 million convertible notes at Sullivan said.

$1/note with the ability to accept $10 Across the border in Ghana,

million in oversubscriptions. The Resolute also plans to complete

maturity date is three years from the feasibility work on its Bibiani

date of issue of the first note. gold project in 2015. Resolute

The company said money raised acquired the 1.7 moz gold pro-

in the issue would be applied to ject from failed ASX junior Noble

drilling and feasibility work on its Mineral Resources Ltd. Sullivan

Bibiani, Syama and Buck Reef said Resolute’s plans for the

West gold projects and to advance project were based on an under-

works on the connection of the Sy- ground operation rather than No-

ama project to the main power grid ble’s open pit strategy and drill-

in Mali. ing would be directed towards

Chief executive Peter Sullivan that vision.

told Paydirt the convertible note al- “We have not got access to

lowed the company to raise funds the tenement and we have start-

without diluting shareholders. Peter Sullivan ed drilling the underground,” he

“We have money [$39 million said. “It is a major drill out and we

at the end of the September quarter] but we gets in the Syama district which will now be expect to have a resource out this year. We

still have some spending to undertake,” Sul- “in-play” for low-cost development. will finish the drilling and then move into feasi-

livan said. “So, with the market tightening as “We have 70km of shear structure which is bility study with a view to reaching a decision

it has we thought the convertible note was the unexplored and that is where most of the ex- point before the end of the year.”

most appropriate way to do so. The convert- ploration budget is going,” Sullivan said. “We By then the company may also have com-

ible price is well out of the money [Resolute have already started looking at the oxide tar- pleted a scoping study on the Buck Reef

shares were trading at 25c/share at time of
print] so it is essentially a debt
instrument.”

There is definitely a lot moreThe first recipient of the

money will be the oxide ex-

value out there but the questionpansion project at the compa-

ny’s Syama gold mine in Mali.

is how do you acquire anything andThe 1 mtpa expansion is set

“then fund its development. Share pricesto deliver 70,000 ozpa over
gets and we are finding with the few holes we West project at its Ravenswood gold mine in
Queensland, Australia.
“Buck Reef West could
come online just as Mt Wright
is closing,” Sullivan said.
With plenty on its develop-
ment plate, it is no surprise
Resolute has little appetite for
any corporate activity but Sul-

seven years at cash costs of have been smashed up so shareholders livan admitted the company
around $US700/oz. Sullivan are not likely to support anything that always kept abreast of devel-
said the project was an impor- opments.

tant one for the company. would be dilutive to their position. “We have got plenty to do
“It is one of the key points in our own backyard but we

for raising this money. It will are always on the lookout,”

add 70,000 ozpa to Syama’s production and have drilled under 100m that they are going he said. “There is definitely a lot more value

is a big thing for the company,” he said. into the fresh rock at depth.” out there but the question is how do you

The project is on schedule to begin com- Back in the main Syama pit, Resolute will acquire anything and then fund its develop-

missioning in January after enjoying a near- continue to drill the Syama Deeps project as it ment. Share prices have been smashed up

faultless construction. contemplates an underground expansion. so shareholders are not likely to support any-

“We may even be a bit ahead of the game “We know the Syama main pit well and we thing that would be dilutive to their position.

and we are on budget. The environment is expect to have the underground feasibility “We keep looking in Australia, but we are

much changed from when we started looking study started in 2015. It is a fantastic orebody much better positioned to take advantage of

at the project,” Sullivan said. “Contractors are [recent results included hits of 42m @ 3.17 g/t, opportunities in Africa and you still see better

keen to get work and prices are no longer at 55m @ 3.17 g/t and 88m @ 2.73 g/t gold] and value in Africa.”

the levels we saw a few years ago.” it doesn’t need more exploration, just devel- – Dominic Piper
The opening of the oxide circuit at Syama opment drilling now,” Sullivan said.

will prove a boost to Resolute’s exploration Syama’s economics will be further en-

team in West Africa. hanced when its plant is connected to the

The company has a plethora of oxide tar- main power grid in 2015, eliminating the need

PAGE 30 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT

REGISTER NOW

www.africadownunderconference.com

For all enquiries please contact Tammy Caldwell on (+61) 8 9321 0355
or email [email protected]

INDABA PREVIEW

MOD hits the ground running

MOD Resources Ltd managing
director Julian Hanna expects
his company to be kept busy on the

ground in Botswana until at least the

end of the first quarter after the first

batch of assays from drilling at the Ma-

humo copper-silver project returned

encouraging results.

Six of the seven shallow drill holes

sent for analysis from the West Zone

deposit intersected vein-style miner-

alisation averaging between 1.68%

and 3.55% copper equivalent, includ-

ing one high-grade intersection of 1m

@ 3.85% copper and 106 g/t silver

(5.23% copper equivalent) from 42m.

Other promising hits from the first

batch of assays included 3m @ 2.61%

copper and 72.7 g/t silver (3.55% MOD exploration manager Jacques Janse van Rensburg and
copper equivalent) from 41m, 3.1m Orbit Drilling director Brian Johnson on site at Mahumo where
@ 2.05% copper and 59.3 g/t sil-
ver (2.82% copper equivalent) from recent drilling returned some encouraging copper hits

44.9m and 3.2m @ 1.58% copper and 41.5 g/t Results from this work programme, includ-

silver (2.12% copper equivalent) from 28.8m. ing all metallurgical testwork, will be directed

A further eight holes all intersected visible towards a conceptual mining study assessing

copper sulphides at shallow depth. The sec- the potential of two shallow pits as an access into its copper-silver prospects in Botswana –

ond batch of assays were on their way to the point to an underground mining operation at and also for the well-travelled Hanna to ven-

lab at the time of print. Mahumo. ture into African exploration for the first time.

MOD raised $2 million for this drilling pro- It might still be early days, but Hanna is So far, the experience has been a good one

gramme via a share placement in August and confident his company can replicate the suc- and Hanna was full of praise for Botswana as

the extensive campaign, which kicked off in cess of its neighbours Discovery Metals Ltd a mining jurisdiction.

September, is expected to run for about six and Cupric Canyon on the Kalahari copper “As people keep reminding me, this is five-

months. belt. star Africa,” Hanna said. “Botswana is very

“This drilling is to follow up the idea that “These are stunning metallurgical results easy to operate in, it’s a friendly place and

we may have, even at very shallow depth, an and because of the very high chalcocite con- we’ve had no issues operating there so far.

open-pittable resource potentially at both the tent of the mineralisation, even at shallow “I think it’s a great time to be in Botswana.

East Zone and West Zone,” Hanna told Pay- depth, we’re actually seeing very high con- We just don’t encounter some of the same

dirt. centrate grades,” Hanna said. problems other companies are facing in plac-

“We’ve already had a Perth consultant de- “The Kalahari copper belt has particularly es like West Africa.

fine a conceptual pit shell down to about 40m high concentrate grades because the chal- “Botswana is really encouraging diver-

and we’re now doing some infill drilling on cocite and the bornite are the dominant cop- sification of its mainly diamond-dominated

100m sections within both of those pit shells. per minerals here, so you tend to get greater economy and copper is seen as an obvious

“At the same time we’re also drilling below than 40% copper in concentrate. opportunity … and that’s demonstrated by the

the limit of previous drilling at the West Zone, “The overall grade of the resources in the fact one of the Government’s highest priori-

currently on broad spacing between 200m belt is about 1.3% copper, however the lat- ties is expanding the power grid into this cop-

and 400m vertical depth, and what we’re hop- est discovery by Cupric Canyon, an unlisted per belt.”

ing to do is define a high-grade resource there company, showed far higher grades than that Hanna has set his sights on bringing Ma-

initially and then do the same thing at the East in terms of copper and what we’re seeing at humo up to a feasibility level by the end of

Zone.” Mahumo is not only very high copper grades 2015 and has his fingers crossed his geology

The company’s initial success with the but very high silver grades as well.” team can unearth another major discovery at

drilling followed a series of metallurgical test- Hanna, the founding director of nickel pro- the project.

work that confirmed high concentrate grades ducer Western Areas Ltd, joined MOD as Exploration programmes are also planned

at Mahumo, sourced from managing director in March for some of the company’s other targets in

composite samples of previ- 2013 to help advance the Botswana, including the Molelo, Marthie and

ous drilling intersections be- Sams Creek gold project in his Boseto West prospects, as part of this current

tween 40m and 60m depth at native New Zealand. campaign.

both the West Zone and East But the downturn in the gold “Even though we’re focused on Mahumo,

Zone deposits. market has forced MOD to put there are expenditure obligations and we’re

Hanna described as “stun- all plans for that project on meeting those by doing work on some of the

ning” a concentrate grade of hold until the precious metals other tenements as we go along,” Hanna said.

59% copper and 1,900 g/t space improves enough for the “But we don’t want to dissipate our efforts

silver (87% copper recovery) company to push ahead with a in the current market so we need to stay really

recorded at the West Zone Stage 3 drilling programme. focused and that’s why we’ve got three rigs

and a concentrate grade of However, the struggles in at Mahumo and we’re eagerly waiting for the

57% copper and 1,550 g/t sil- the gold sector, particularly next batch assays to come back.”

ver (73% copper recovery) at at the junior end, opened the – Michael Washbourne
the East Zone. Julian Hanna door for MOD to put more time

PAGE 32 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT

Off-take key to graphite
future: Spinks

With a scoping study our company and our ability to
completed, the board deliver,” Spinks said.

restructured and a letter- The LOI with ThyssenKrupp

of-intent for a second off- is Kibaran’s second off-take

take agreement received, agreement, following on from

Kibaran Resources Ltd a 10,000 tpa deal struck with

managing director Andrew a European trader earlier this

Spinks is revelling in the year.

pace his company is gather- The two deals represent

ing at its Mahenge graphite three-quarters of Mahenge’s

project in Tanzania. proposed 40,000 tpa produc-
“We have had a few ma- Andrew Spinks tion profile, but market reac-

jor events take place in the tion to the LOI was not as

last few months and the momentum within the strong as Spinks’. He does, however, Kibaran is among the most advanced of the

company is really increasing thanks to that,” remain confident investors will come to Tanzanian graphite plays

Spinks told Paydirt over the phone from the understand the importance of putting Mahenge in October. Spinks said much of the
study work would be focused on metallurgy
Tanzanian capital, Dar es Salaam. “We have off-take in place. and mineralogy.

a robust scoping study for Mahenge now and “In graphite, marketing and sales are ex- “The graphite endowment is there; what
we are doing now is getting to understand the
the board changes have really strengthened tremely important. I see it as the most chal- mineralogy in more detail, particularly about
certain aspects and qualities of the graphite.”
the company for development, with John Park lenging part of the sector. If you don’t have an
The market reaction to the scoping study
becoming chairman and Grant Pierce taking off-take agreement, you won’t sell it,” Spinks and off-take agreements may have been
mooted but Spinks retains confidence in the
on the executive director role, based in Dar said. investment outlook for the company.

es Salaam. It gives us an added level of cred- “Base and precious metals markets are “We are significantly undervalued versus
our peers and that is supported on a technical
ibility as we begin to deliver on the company’s very easy; it is simply a matter of tonnes and basis by the scoping study,” he said. “As we
advance the feasibility study, we expect more
strategy.” grade. Industrial minerals are more challeng- interest from European investors. We have a
secondary listing in Frankfurt and we will be
Above all however, it is the letter-of-intent ing because there are no tradeable markets increasingly focused on spreading our expo-
sure in that market in coming months.”
(LOI) from German ThyssenKrupp that has and the pricing isn’t very transparent. Graph-
The company had nearly $3 million in cash
Spinks most excited. ite is tougher still because it is not simply at the end of the September quarter, enough
to see it through its current work programmes,
“It is a very important step. They are a large tonnes plus grade, but you must also consider according to Spinks.

group and it adds another layer of credibility to other factors such as flake size, purity, miner- A capital raising appears likely in 2015 as
the company ramps up the feasibility study.
the project,” he said. alogy, etc.
“We are on the lookout for strong financial
The LOI covers an exclusive long-term “So for Kibaran, it is comforting that as we partners to develop this project,” Spinks said.
“We have been to Hong Kong recently and
commercial agreement between the parties go through the feasibility study we have these we are off to London to promote the company
there.”
for the sale of an initial and minimum 20,000 off-take agreements in place.”
ASX-listed graphite players have seen
tpa of natural flake graphite products in Rus- Attracting an off-take partner of Thyssen- their share prices somewhat deflated of late
but Spinks is adamant there was no bubble
sia, Korea and the EU 27 (excluding Germa- Krupp’s size means financing the estimated to burst.

ny, but including Turkey). $50 million project may also become easier, “Graphite demand from outside of China
is 400,000 tpa and growing. There is room
“Given its scale and international business with the German group prepared to work with for new producers because future demand
is enormous, enough to turn graphite into a
standing, ThyssenKrupp’s involvement with Kibaran on equity and financing options. mainstream commodity, I think, particularly
off the back of the lithium-ion battery market.
Kibaran is a significant vote of confidence in Spinks said ThyssenKrupp’s attraction
“The institutions have not really entered
to Mahenge – which the graphite space yet but they are coming
and we are convinced this is not a bubble,”
is based around the he said.

12.8mt at 10.0% TGC for – Dominic Piper

1.28mt contained graph-

ite Epanko deposit – was

fuelled by the potential

for it to supply a consist-

ent, reliable product.

“It is a very robust pro-

ject. We will be produc-

ing 40,000 tpa of flake

concentrate. It has an

NPV of $213 million and

a capex of $50 million

with payback in two and

a half years. So it is very

attractive financially

and can easily be debt

funded.”

GR Engineering Ser-

vice Ltd started work

Kibaran’s Mahenge project has a resource of 12.8mt @ 10% TGC on a feasibility study for

AUSTRALIA’S PAYDIRT DECEMBER 2014 - JANUARY 2015 PAGE 33

INDABA PREVIEW

Eadie ready to repeat Syrah
success with Jacana

Despite 2014 having been a barren
year for new listings, Jacana Miner-
als Ltd chairman Tom Eadie is confident

goodwill and a high quality portfolio will

be enough to get the company’s float

away.

Jacana is looking to raise $10 million

in IPO ahead of a December listing. The

company is a spin-out of the Tanzanian

assets of Syrah Resources Ltd, whose

success with its Balama graphite pro-

ject in Mozambique has meant its East

African portfolio has been largely ig-

nored.

“We’d had these Tanzanian pro-

jects for three years in Syrah but they

weren’t getting the focus they deserved

because of what was happening in

Mozambique,” Eadie told Paydirt.

“We were running the risk of wasting

it because we would soon be forced to

drop the ground so we looked at ways

of keeping it. We have looked at JVs –

even one with Rio Tinto Ltd – but the

terms were never attractive enough so

we have decided to go our own way.”

When Paydirt spoke to Eadie in Jacana Minerals is keen to get drill rigs on the ground at its Tanga South mineral sands project in Tanzania

November he was on a road show de-

signed to whip up support for the Jacana IPO. At Tanga South the company has inter- 4% and ilmenite 44%.

He said interest was strong given the board’s cepted high-grade mineralisation including While mineral sands will be the initial focus

previous success with Syrah. a hit of 9m @ 12.3% heavy minerals across of exploration, the success of Syrah has Eadie

“We have real confidence in this IPO. We 1km-wide zones. keen to repeat the graphite trick in Tanzania.

have given a lot to Syrah shareholders on a At Fungoni – 30km south-east of Dar es In Chiliogali – 15km south-east of IMX Re-

one-for-one basis, almost 50%, which would Salaam – Jacana can claim a JORC-compli- sources Ltd’s Nachingwea project – he be-

meet the minimum requirements for the IPO. ant indicated resource of 11mt @ 3.1% heavy lieves Jacana may have just the project.

There is also a lot of interest because Syrah minerals with an additional 3mt @ 1.7% heavy “Syrah’s Balama project is in a league of its

made a lot of money for some investors but minerals in inferred resources. Some 22% of own but if you look at all the others in East Af-

there were also a lot who missed out on mak- the resource is zircon with rutile comprising rica, they have pretty similar size and grade.

ing a lot of money from it and they They all have a plus-$50 million

want to get in this time.” market cap but this project hasn’t

The Jacana portfolio is stacked got any value ascribed to it yet,”

with mineral sands, graphite, nick- Eadie said.

el and coal prospects. Eadie rates “So, just based on the graphite

the mineral sands projects as the we have a company worth more

strongest in Jacana and he is par- than the float.”

ticularly keen to begin work on the Eadie said that despite the

rutile-rich Tanga North and Tanga choppy funding waters, investors

South projects. were warming to the Jacana.

“The mineral sands projects are “We’ve already had some ex-

probably the strongest. We have citement from investors and all

huge areas of anomalism that the funds are certainly listening to

have not been drilled yet with 1bt us,” he said.

potential and rutile as the domi- The company is expected to

nant mineral,” he said. close the IPO in early December

Pitting and auger drilling ahead of a listing before the end

has already been completed at of the year.

Tanga, identifying a 14km-long – Dominic Piper
anomalous zone at Tanga North.

The company plans to begin air-

core drilling in January, targeting Jacana is a spin-out from Mozambican graphite explorer Syrah Resources.

grades of 38% ilmenite, 6% zircon The company hopes to repeat Syrah’s graphite success with projects such as

and 17% rutile. Chiliogali where it has already produced trenching results of 31m @ 15.5% TGC

PAGE 34 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT



INDABA PREVIEW OPINION

Stability and certainty the
keys to success

It is often asked – what makes a country at- shifted to projects which generate the best that do not acknowledge and respect the ab-
tractive as a destination for foreign invest- return, in jurisdictions which provide stability solute right for a government, on behalf of its

ment? What can governments do to encour- and certainty. people, to draw benefit from mining projects

age the mining industry to their country? Certainty refers to the comfort that a com- through mechanisms such as the taxation

According to the ASX, there are more than pany has that its contractual rights will be re- system, partial ownership of projects or other

200 Australian-listed mining companies with tained and, if necessary, upheld through the means.

assets or projects in Africa. The past decade legal system. Of critical importance is the The key however is what proportion of the

has seen a meteoric rise in the number of awarding and subsequent honouring of explo- total project value is ascribed to government

Australian companies focused on the African ration and mining permits. Without the rights and what proportion remains for the company.

continent, as Australian miners look to utilise associated with the mining permit a company This is a challenging balance to determine

their exploration, development and operating has no asset. This risk is naturally therefore and maintain, but if it is weighted too far to the

expertise to tap into the under-explored min- an area of high focus. Government, the mining company will be una-

eral potential that exists across vast parts of The ability to demonstrate a sound system ble to generate a return sufficient to justify the

Africa. of permit management, governments abiding risk associated with developing a new project

by the agreed terms of the permits and an in- and therefore the investment will not occur.
dependent and reliable legislative system are The actions of government drive perception
The International Mining for Development of stability. If companies witness
Centre, an Australian Government-funded government honouring agree-
initiative, has identified that Africa ments and not regularly review-
is the continent of choice for Aus- ing or changing taxation rates or
other forms of government take,
During a recent visit to Tanzaniatralian miners looking overseas, this will encourage investment.

with more than double the number

it was raised on a number ofof Australian companies with pro-

“occasions that there had been nojects in Africa, when compared to
any other region of the world. new mining projects approved for Stability, rather than the actual
However, the focus has not construction over the past decade. rates, is more important – all sce-
narios can be fed into the eco-
been spread evenly across the 54

countries – with some countries nomic model which supports the

experiencing significantly higher investment decision.

levels of activity than others. Undoubtedly fundamental. In this area Tanzania, for exam- In Tanzania we have recently seen chang-

mineral prospectivity plays a large part in this ple, has a good historical reputation. es to royalty rates, VAT cash refunds, capital

selection process, with those countries as- If certainty can be established, stability is gains tax rules and the introduction of a vari-

sessed as having the greatest mineral poten- the second key to attracting investment. As able percentage free carry right for the state-

tial benefiting. already noted, mining is an investment with a owned mining company in new projects.

However, beyond mineral endowment, long-term payback. Therefore policy stability, The variability of potential government

there are other factors – which can be influ- particularly in the fiscal regime that governs ownership, which is negotiated on an indi-

enced by governments – that make a country the cost of operating in a country, is key to vidual basis as part of the Mineral Develop-

attractive as an investment destination. reducing project risk to a level which supports ment Agreement, forces companies to factor

During a recent visit to Tanzania it was a positive investment decision. in the worst case scenario to their calculations

raised on a number of occasions that there There are very few remaining companies – potentially reducing the forecast return on a

had been no new mining projects approved project to such a point that investment does

for construction over the past decade. The not go ahead, even though this “worst-case”

past 10 years have been a golden era for the scenario may never actually play out.

mining sector, with prices rising in excess of While the mining industry is currently ex-

400% for some commodities, such as gold periencing tough times, driven by a lower

and iron ore, driven by the rapid industrialisa- commodity price environment, we remain

tion of China and the associated consumption very positive about the future of mining. The

of metals. Many countries around the world vast majority of the world’s population is still

have experienced wealth generation and sub- to experience the industrialisation process

stantial increases in mining investment over and, led by China, it is the demand for metals

this period. that will be generated by this industrialisation

Mining is a long-term game. Companies which will drive the industry for many years

make investment decisions that involve sub- to come.

stantial upfront capital expenditure, for which The cyclical nature of the mining industry,

the returns are generated over years or dec- within that broader setting, will continue to

ades. This long-term nature of the assets present challenges to mining companies. In

drives a company’s approach to considering Ben Gargett is a Partner at PwC. He is re- these times the best thing a government can

its suite of potential projects, countries and, sponsible for connecting the PwC mining do to attract the investment, employment,

ultimately, where to utilise its scarce resourc- network to best support our clients and work- taxes and community benefits of mining is to

es to fund the exploration for and develop- ing with the Mining Leader to develop PwC’s provide stability and certainty.

ment of a mine. strategy for the mining sector. Ben has worked

While mineral deposits are not mobile, the with global and small to mid-cap mining clients

capital which is allocated to fund construction across a range of community groups, including

of the assets is. This capital will naturally be clients who are dual listed on the ASX and TSX

PAGE 36 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT



INDABA PREVIEW

Platinum to boom out of doom

The prices of both platinum metal and plati- Robert Friedland Friedland has hammered the point in his
num equities continued to slump as of No- presentations at the past two Mining Inda-
vember 2014, but there were two positive de- Platinum index delivered returns of around bas that platinum is a critical metal given the
velopments at that point, providing some hope 80% (October 2008 – May 2009) and around unstoppable trend to global urbanisation be-
for the bombed out sector. 50% (June 2013 – November 2013) over the cause of its use in auto catalysts to clean up
six to nine months that followed”. vehicle emissions.
Robert Friedland’s Ivanhoe Mines Ltd was
given final approval for the mining right to the They said that short positions on NYMEX Hebei Zhongo was not the only Chinese
Platreef project and a Chinese consortium – were at near record levels “as speculators consortium to show interest in South African
Hebei Zhongo Platinum Company – agreed bet on further declines in the metal price” but platinum assets last year.
to buy out Eastern Platinum for $225 million added “for longer-term investors we see all
in cash. the equities (except for Atlatsa) showing value Aquarius Platinum Ltd had agreed to sell
at our long-term PGM price forecasts (or a its Blue Ridge and Sheba’s Ridge projects
That aside, it’s been a miserable year for rand PGM basket that is around 40% above for $37 million to a consortium led by China
South Africa’s platinum mines which have spot levels). National Arts and Crafts Corporation but that
been hammered by the lower price and plung- fell through in October after a series of delays
ing production thanks to the five-month long The analysts do not provide details on their in getting regulatory approvals from the South
strike called by the Association of Minework- negative valuation for Atlatsa but the com- African Government.
ers and Construction Union (AMCU) late in pany runs the Bokoni mine (formerly Lebowa
January 2014. Platinum) it acquired from Amplats in a BEE What is coming is a major restructuring of
deal. the industry led by Amplats which has already
That ended on June 24 after costing the announced it will divest its high cost Union
three main platinum mining groups – Anglo Amplats had to bail out Atlatsa financially Section along with its Rustenburg division
American Platinum plc (Amplats), Impala last year and the fate of the Toronto and JSE and its stake in the Pandora JV which is man-
Platinum Holdings Ltd (Implats) and Lonmin listed junior is hanging in the air pending an aged by Lonmin.
plc – R24 billion in lost revenues and their announcement from Amplats which said in
workers R10.6 billion in lost earnings. July it was “assessing our Bokoni JV asset”. Instead, Amplats is going to focus on grow-
ing its lower cost operation and has already
The full ramifications of that strike will play announced an expansion of its highly-mecha-
out over the next decade as the platinum in- nised, opencast Mogalakwena mine.
dustry restructures into a smaller, more mech-
anised business employing far fewer workers One group that has publicly declared its in-
than it does at present. terest in those assets – at the right price – is
Sibanye Gold Ltd, whose chief executive Neal
In the short-term the most surprising devel- Froneman, is keen to turn it into a diversified
opment has been the continued drop in the precious metals play.
platinum price during 2014 despite the strike.
Other platinum companies which could go
The strike is estimated to have removed after assets which are put “up for grabs” in the
more than 500,000oz from the supply side, restructuring to come include Northam Plati-
after taking into account metal supplied to the num Ltd, Wesizwe Platinum Ltd and Royal
market from inventories held by the mining Bafokeng Holdings Platinum.
companies.
Since March, Northam has been run by
As of early November, the platinum price new chief executive Paul Dunne who joined
had dropped to year lows of around $US1,200/ from Implats, apparently after falling-out with
oz which compares with the all-time high of Implats chief executive Terence Goodlace.
nearly $US2,300/oz reached back in early
March 2008. The new BEE structure announced at the
end of October has also provided Northam
An assessment by JP Morgan Cazenove with a R4 billion cash injection.
analysts Allan Cooke and Abhishek Tiwari in-
dicated the JSE Platinum Index on November Speculation amongst some analysts is that
3 was at its lowest level in eight years but the Northam is about to embark on M&A action
equities still looked “expensive at spot PGM to grow and the obvious target is Aquarius
(platinum group metals) prices”, according to Platinum, whose Everest mine is adjacent
the analysts. the southern end of Northam’s now operating
Booysendal mine.
They commented: “By our estimates around
30% of the industry will be loss-making in But that’s not all. Aquarius’ Marikana mine
2015 at spot prices on a cash cost basis. In- is operating successfully inside Amplats’
cluding maintenance capex, we estimate that Rustenburg division through an existing “pool
over 70% of the industry could lose money and share” operation meaning the company
(75% including all capex) next year.” already has its “boots on the ground” in an as-
set that is up for sale.
So why are Chinese investors and Robert
Friedland looking to get into the business So, while it’s all doom and gloom at present
and why should investors bother with these the South African platinum sector has been
shares in the first place? through this kind of scenario several times be-
fore and recovered explosively.
The answer lies in the positive long-term
fundamentals for the metal and the nature – Brendan Ryan
of the platinum business which is notoriously
volatile, with the markets going through a se- Neal Froneman
ries of dramatic boom and bust cycles since
the mid-1920s.

The JP Morgan analysts pointed out that,
“after the two previous down cycles the JSE

PAGE 38 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT



INDABA PREVIEW OPINION

Finding the right chord in
mining negotiations

The expectations and demands being take this step, they need to have spent time in order to ensure that the head of state is be-
placed upon mining companies in Africa developing a comprehensive understanding ing provided with accurate information.

means that the types of agreements which of the culture, history, religion and political Apart from the obvious fiscal outcome, gov-

companies enter into with host governments system (both government and traditional) ap- ernment will be seeking commitments with

can no longer be negotiated in the way they plicable in the host country. In addition, the respect to local employment, local capacity

used to be. In reaching any agreement the company needs to develop a clear under- building, the environment and corporate so-

range of stakeholders to be considered are standing of the economic drivers for the coun- cial responsibility.

now far greater. try, along with its degree of sophistication and All of these drivers need to be addressed

Today, when negotiating an agreement, it is whether there are any precedents available and at the same time, need to be taken ac-

best to characterise the host government as within the country for dealing with foreign in- count of in determining a fair return for both

your future partner and so the emphasis must vestors along the lines proposed. All of these parties.

be on sustainability and transparency, where factors will help the company build the confi- The agreement that is being negotiated

the benefits of the project are shared. Each dence that it can communicate with its partner needs to satisfy not only the host govern-

partner needs to be able to demonstrate that as an equal, rather than as is often perceived, ment but its various stakeholders such as

what it gets out of the project meets the ex- being a modern day colonial enterprise. international non-government organisations,

pectancy of its constituency. Although not in civil society, donor funders, World Bank and
Africa, the tussling that has gone on increasingly, the local minor-
between Rio Tinto plc and the Gov- ity shareholders or participants.
Shareholder activism is on the
Today, when negotiatingernment of Mongolia over the shar- increase and so the agreement
needs to be viewed from all
ing of the benefits from the under- sides as being fair.
Increasingly, projects are be-
an agreement, it is best toground stage of the Turquoise Hill ing subjected to issues which

project demonstrates the difficulties

characterise the host governmentthat partners can face.

“as your future partner and so theIf the intended relationship is
Out of a company’s engagement process

aligned to a partnership then it must emphasis must be on sustainability demonstrate complexities be-
be built on trust and openness. and transparency, where the yond the physical development
Companies need to assist their gov- of the project. These complexi-

ernment counterpart with negotia- benefits of the project are shared. ties arise out of the desire of
tions which is perhaps counter in- companies to ensure they have

tuitive. The form of assistance may the ability to monetise their in-

largely be financial (so as to ensure vestment, to be tax effective and

the Government has the capacity to seek ex- with the Government, the company needs to to enjoy sovereign protection through the use

ternal advice) and this can be supported by identify a champion within government who of development agreements, investment trea-

developing a financial model for the project will be responsible for ensuring that behind ties and stability arrangements.

which both parties agree with. closed doors, the interests of the project are For its part, the host government can be fo-

When commencing a negotiation with a fairly represented. This champion also needs cussed on local ownership, government par-

host government, the company holds the ini- to have a clear line of sight to the head of state ticipation, repatriation of funds into the coun-

tial advantage as it is the holder of the key try and fiscal responsibility. All of these

information. An immediate reaction can be factors do have a direct impact upon the

to use this advantage to the benefit of the finance-ability of the project and at the end

company. In reply, the Government can im- of the day, both parties need to understand

pose fiscal and social expectations on the the impact of their various requirements on

project which are not sustainable. At the the ability to finance the project.

end of the day, the project only has a finite Finally, the basis for the actual nego-

return and as such, the partners need to get tiation needs to be properly based and

to a position where they can feel comfort- structured. Each side needs to be prop-

able they are obtaining their fair share of erly briefed and empowered. The logistics

the available return from the project. around the negotiation is worthy of serious

To achieve this outcome, the partners thought. When issues arise or agreements

must start with an agreement on what they reached, they should be documented and

believe the total return from the project is. this record can then be used to ensure that

Once they have reached agreement on the no party puts forward an understanding of

project model, each of the partners can the outcome which is different from what in

then objectively see the impact of their de- fact has been agreed.

mands on the return of the other and where This record of agreement or disagree-

the demands are unreasonable, then the ment will remove individual bias and en-

outcome on the other partner is obvious sure that the parties remain focused on

and as such, will prevent the project from Michael Blakiston is a partner in Gilbert + Tobin’s en- agreeing what can be agreed and then

proceeding. ergy and resources group. negotiating those issues which remain out-

For partners to agree on the financial Blakiston is a specialist in mining and resources law, standing.

model, they will need to overcome their and advises in JVs and strategic alliances, development

prejudices and distrust. For companies to agreements and project commercialisation.

PAGE 40 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT







INDABA PREVIEW

Orbis refuses to be distracted

Regardless of the outcome of Semafo
Inc’s hostile bid for the company, Or-
bis Gold Ltd will remain at the top of West

Africa’s most desirable gold takeover tar-

gets, according to managing director Pe-

ter Spiers.

The 2014 Gold Mining Journal Ex-

plorer of the Year has been one of the

West African success stories of recent

years, having taken the Natougou gold

project in Burkina Faso’s south-east

from discovery to a 2 moz resource in

just two years.

The Orbis board unanimously reject-

ed Semafo’s opening 65c/share offer in

October but Spiers admitted to Paydirt

that the paucity of quality development

assets on the market meant Orbis would

likely attract further attention.

“The success we have had means Orbis has launched a new 15,000m drilling programme at its flagship Natougou gold project in Burkina Faso

Orbis will now always be at or near the

top of the most desirable juniors in the West company’s last field campaign. A programme ing study directly to feasibility study seeks to

African gold space,” Spiers told Paydirt. “High of more than 400 holes led to an updated re- minimise those up-front costs and reduce the

quality assets always attract attention and source of 18mt @ 3.4 g/t for 2 moz gold, an- timeframe to development. We are very com-

Natougou, for one, is undeniably a high-qual- nounced in August. fortable with the rate we are progressing.”

ity asset. With its proposed 200,000 ozpa of Importantly for the study, indicated resourc- “A lot of work has been going on in the

gold production and an IRR of 100%, it is at es were increased 700% and have further de- background for the DFS which was not able to

the top of the class.” lineated near-surface, high-grade material. be included in the updated scoping study. We

Semafo’s offer comes at a delicate time “The updated scoping study delivered ex- are still doing a lot of work on the metallurgy,

for Orbis following further slides in the price ceptional project economics all round with infrastructure and pit scheduling that won’t be

of gold and political unrest in Burkina Faso, more gold, a lower strip and increased cash seen until the final DFS.”

where Natougou is situated. However, Spiers flow. Using the updated resource allowed us Confidence levels in the resource will also

remains confident the junior explorer has the to re-optimise the pit design to access the be further enhanced ahead of the DFS. As

capacity to continue developing the project. near-surface, high-grade ounces at an earlier part of a new 15,000m drilling programme

“From the outset we viewed Natougou as stage in the mine plan.” launched in November, Orbis will undertake

a world-class project which that deserved to With Orbis eschewing a PFS in favour of infill drilling in preparation for a maiden re-

be moved forward rapidly. The DFS should moving straight into a DFS, Spiers said the serve at Natougou.

be completed by mid-2015 with a decision-to- updated scoping study would give investors “Our infill drilling programs are aimed at fur-

mine to follow,” he said. surety the company was on the right track. ther lifting the confidence in our resource. A

Orbis’ latest economic projections for Na- As it is such a simple orebody with simple substantial proportion of the current resource

tougou point to the exceptional nature of the geometry and metallurgy, we have been able inventory is already at the indicated level,

project. to advance the project directly from a scoping and therefore capable of conversion to ore

In October, the company released an up- study to a feasibility study,” he said. reserves.”

dated scoping study for the project, which in- “In the current climate, generally investors The new drilling programme will also see

cluded an increase of IRR from 60% to 100% companies to keep development expendi- Orbis expand its focus beyond the main Na-

and $US87 million in NPV to $US533 million tures to a minimum and bring forward projects tougou deposit for the first time. Having fo-

while capex increased just $US1 million to in the shortest timeframe and with the least cused so intently on getting the main deposit

$US234 million. amount of shareholder dilution. So, while you to the DFS stage, the company has largely

The updated study used numbers from the can’t cut corners, our transition from scop- ignored the wider potential at Natougou, but

Spiers said this would be a priority for

the coming months.

“We want to find more ounces and

expand the resource through a combi-

nation of step-out drilling and moving

into the broader project area,” he said.

“Our exploration team has done very

little work on the regional targets across

the broader project area. Now that a

large proportion of the infill drilling has

been completed we can move back into

exploration mode.

“We have a 50sq km soil anomaly

and there is plenty of evidence – from

artisanal workings as well as rock chip

sampling – that gold mineralisation is

Orbis has said operations in Burkina Faso have not been affected by the widespread in the area.”

Peter Spiers civil unrest that prompted the resignation of President Blaise Compaore The company also intends to con-

PAGE 44 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT

tinue with exploration away from Natougou. For the first time in two years, Orbis plans to expand its drilling beyond the main Natougou orebody
Spiers said a scoping study for the 600,000oz
Nabanga project – also in Burkina Faso’s The Burkinabe army took control of the “Along with other residents we did experi-
south-east – would be complete before the country following Campaore’s resignation but ence some minor disruptions in Ouagadou-
end of 2014 while the company is branching a formal path towards democratic elections is gou however this was largely limited to short
out into neighbouring Cote d’Ivoire. yet to be finalised. term restrictions on vehicle and people move-
ments.
“The company’s success has been driven Like most miners and explorers operating
by our capacity to make high-grade discov- in the country, Spiers remains sanguine about “We originally selected Burkina Faso for
eries. Given that track record and the highly the situation. its great prospectivity, the strong support for
prospective permits we hold, we will continue mine development and also its the outlook for
to explore. We have some excellent targets The recent unrest did not have any signifi- stability. We are very comfortable that Burki-
in the Bantou area [in the south-west of the cant impact on our operations in country. For na Faso will continue to be seen one of the
country] with a dedicated team down there example we were still able to start our field world’s best gold investment destinations,” he
and we have a brand new target in Cote programs on schedule. Our projects are re- said.
d’Ivoire that looks like a 30km extension to the mote from the capital and major cities and so
greenstone belts. this does provide a natural separation from – Dominic Piper
events elsewhere in the country.
As far as we are aware it has never had any
exploration work conducted on it.”

Following Semafo’s bid, Orbis dropped a
$US20 million rights issue to Greenstone Re-
sources LP in favour of a similar-sized entitle-
ment issue to all shareholders.

Spiers said with $US10 million still to spend
on the DFS, funds raised from the offer would
be sufficient to fund ongoing exploration and
take Natougou to a decision to mine.

Spiers also played down concerns over
how the political upheaval in Burkina Faso
would affect the company’s efforts.

Burkina’s longstanding President, Blaise
Compaore, resigned on October 31 follow-
ing two days of mass street demonstrations
against his attempts to change the constitu-
tion to extend his presidential term.

AUSTRALIA’S PAYDIRT DECEMBER 2014 - JANUARY 2015 PAGE 45

INDABA PREVIEW

Mali eyes $9.5 billion rail projects

Landlocked Mali aims to diversify its mining tion due to the slump in iron prices and the
sector away from gold with Chinese-built impact of the Ebola virus on its operations.
rail projects worth $US9.5 billion that would
link it to the Atlantic coast, even as slowing “In West Africa, with infrastructure
Chinese growth and falling commodity prices to build – even if it is funded by the
cool investment. Chinese – it will be very demand-
ing in these market conditions,”
The West African nation – the continent’s SNL Metals & Mining’s Chris
third-largest gold producer – said in October Hinde said. “Funding for ex-
it had signed a string of investment deals with ploration and for projects
China totalling $US11 billion, with most of in countries perceived
this going to finance the rail deals. Chinese as less stable re-
authorities, however, have not confirmed the mains very
investment. difficult.”

Mali said $US8 billion would finance a Tom Wilson,
900km railway to Guinea’s port capital Cona-
kry and $US1.5 billion would renovate a rail director of the
link to Senegal’s capital Dakar, Mali’s main
gateway port. Africa Practice con-

The improved transport links would attract sultancy, said he would The Government of Mali has signed an MoU with Chinese groups to
investors to under-explored resources such be surprised if the $US11 build railway lines from Bamako to Dakar and Bamako to Conakry
as iron ore, bauxite and uranium that are billion announced by the
bulkier and more costly to transport than gold.
Government was fully deployed. laboratory.
“The infrastructure will enable Mali to end
its dependency on gold,” Lassana Guindo, an “China has a history of pledging, in non- Aside from Bale, other iron ore deposits in
adviser at the mines ministry, said.
binding MoUs, to make major, multi-billion the same basin are estimated to hold some
President Ibrahim Boubacar Keita is striv-
ing to kick start Mali’s economy after a dollar investments in infrastructure in West 400mt and would all benefit from the rail pro-
brief French-led war in early 2013
against northern Islamist rebels Africa and failing to deliver,” Wilson said. ject, Guindo said.
dragged it into recession. In November it also
became the sixth West African country to be “Chinese parastatals are not spending as Eurasian Natural Resources Company,
touched by the deadly Ebola virus, which has
killed nearly 5,000 people and hammered re- they have done in the past.” which holds the rights to Mali’s estimated
gional trade.
Nevertheless, some plans are already go- 439mt bauxite deposit in Falea, also stands to
No deadline has been set for delivery of the
rail projects but Mohamed Saïba Soumano, ing ahead. benefit from the prospective railway.
an adviser in Mali’s transport ministry, said
talks were underway after the Chinese del- Chinese diversified company CGCOC ENRC country manager Dialla Konate said
egation’s visit to Bamako in October.
Group plans to exploit Mali’s 100mt Bale iron the company was targeting production of
China Railway Engineering Corporation
would build the Bamako-Conakry leg while ore deposit, 220km west of Bamako. “The about 152mt of alumina from Falea and other
China Railway Construction Corporation
would be responsible for Bamako-Dakar, company will build a steel plant and also Malian projects.
Soumano said. He said the parties would sign
tripartite framework deals between Mali-Chi- construct a 400MW power plant,” technical “In our ongoing feasibility study, we plan to
na-Guinea and Mali-China-Senegal.
adviser Ousmane Mamadou Konaté said. Ko- use both rail lines to Conakry and to Dakar,”
“After the framework agreements, the Chi-
nese partner will have up to 12 months to pre- naté was an adviser on a Malian delegation to Konate said.
sent a detailed preliminary project,” Soumano
said. “Thereafter, China will submit financing China in September. – Tiemoko Diallo and Bate Felix,
proposals with Chinese banks to the states.” The firm has not commented on the deal Reuters

Mali’s drive to attract mining investors but its President Ji Weimin signed a deal in
comes at a time of falling prices for many
commodities and weak growth in China and October with Malian Mines Minister Boubou
other leading economies. Iron ore prices, for
instance, have plummeted nearly 40% so far Cisse to modernise Mali’s national mines
this year amid softening demand from China,
the world’s largest consumer of most com-
modities.

With a global surplus of supply, several iron
miners have scaled back on new capital-in-
tensive projects, while leading producers Rio
Tinto Ltd and BHP Billiton Ltd are focusing on
increasing production at their low-cost Aus-
tralian operations.

In Sierra Leone, London Mining plc an-
nounced this month it would enter administra-

PAGE 46 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT

Newcrest prepares for
West Africa

Newcrest Mining Ltd may be about to has increased from 90,000oz in 2013
dust off its West African gold portfo- to 95,000oz in 2014 with 2015 forecast

lio, nearly five years after acquiring it. to produce 110,000oz. This has been

Newcrest, Australia’s largest gold achieved with a falling cost profile with

miner, picked up the Bonikro gold mine all-in sustaining costs being reduced

and associated exploration ground in from $US1,751/oz for 2013 to $US973/oz

Cote d’Ivoire in 2010 as part of its acqui- for the June 2014 quarter.

sition of Lihir Gold Ltd. The company will look to improve pro-

Despite operating the 100,000 ozpa duction at Bonikro this year through mill

Bonikro mine throughout that period, scats rejection, improved drill and blast

Newcrest has largely ignored the West performance and by changing the grav-

African exploration rush of the last five ity screen to increase recovery.

years, instead retaining its focus on its On the exploration front, Newcrest is

Australian and Pacific Island operations. renewing its interest in West Africa.

However, during his presentation to Woodall said the region has fertile ge-

the Newcrest Investor Day in October, The Bonikro mine was under construction when Paydirt visited ology and structural framework, a large
executive general manager – interna- Cote d’Ivoire in 2008. Six years on owner Newcrest has spread of deposit sizes and grade, and
tional operations David Woodall said the sharpened its focus on the operation province-scale targets.
company was now focused on achieving
“Greenfield discoveries are still rela-

Bonikro’s full potential and using it as a “plat- Bonikro – 67km south-west of the Ivorian cap- tively shallow [and] exploration and mine de-

form for potential growth in West Africa”. ital Yamoussoukro – where the emphasis will velopment has the potential to be very cost-

On the operational front, former Discovery be on increasing free cash flow. effective,” he said.

Metals Ltd managing director Brad Sampson Bonikro has enjoyed steady improve- – Dominic Piper
has been brought in as general manager at ment over the last two years. Production

AUSTRALIA’S PAYDIRT DECEMBER 2014 - JANUARY 2015 PAGE 47

INDABA PREVIEW

Tawana shrugs off twin setbacks

The deadly Ebola virus and a depressed Field work at Tawana’s Mofe Creek project in Liberia is on hold after a state of
iron ore market have combined to form a emergency was declared following the Ebola outbreak
dark cloud over Tawana Resources Ltd’s Mofe
Creek project in Liberia, but executive chair- further doubt on Tawana’s ability to advance ramps up to 2 mtpa in the third year, followed
man Wayne Richards is confident his company
will ride out this luckless double storm. the Mofe Creek project in the current invest- by a 10-year steady-state operation of 2.5

Tawana suspended all non-essential field ment climate. mtpa.
activities in the West African country in early
August after Liberian President Ellen Johnson While the company is not yet a producer, Tawana is pushing ahead with plans to have
Sirleaf declared a nationwide state of emer-
gency in a desperate bid to control the spread the iron ore price slump combined with the the results of the PFS, which began in August,
of the infectious disease that has the world on
high alert. Ebola threat has seen Tawana’s stocks slide published during the first half of 2015 despite

More than 5,000 people have died from from a 12-month high of 3.8c/share earlier in field activity remaining on hold indefinitely.
Ebola and at least another 8,000 have been
infected with the virus that has been confined the year to 1.7c/share at the time of print. “There has been no major pullback in the
to parts of Liberia, Sierra Leone and Guinea.
“Unfortunately you’ve generally got to be in deliverables associated with the PFS as all
But Richards has called for calm and is
hopeful that field activities at Mofe Creek can a good macro-economic pricing environment other work not requiring direct field presence
resume in early 2015 as further outside medi-
cal and financial aid begins to take effect. for people to really sit up, listen and invest in is continuing,” Richards said.

“One very positive outcome from such an the iron ore market, and be able to “We’ve kept the market in-
unfortunate persistence of the Ebola virus
is that the world is now far more aware and differentiate your project from the formed of what we’re doing, but
attuned to the potential spread of such a vi-
rus and its methodology for containment and others,” Richards said. the simple fact is we haven’t
eradication,” Richards told Paydirt.
“We’ve held up relatively well stopped and we’ll keep putting
“Countries around the world now have Eb-
ola test kits and have invoked timely and de- with a strong, supportive regis- out good information and results,
finitive reviews of their quarantine procedures
and standards in case of an event where a pa- ter, and on that basis, most peo- even if the drilling has been tem-
tient with Ebola-like symptoms may present at
a border. ple have invested in Tawana for porarily suspended.”

“None of our employees have been ex- the long haul because they know A drilling programme was halt-
posed to the potential of the virus and we’ll
keep monitoring the situation to coordinate what we are about and the type of ed in August when the company
a timely and safe return into Liberia. We’ve
drafted our own safety management plan for project we are going to develop.” suspended all work in Liberia, but
Ebola and we’re liaising with other companies
still operating within country or other neigh- Tawana’s recent share price the assays were progressed and
bouring countries in West Africa to correlate
what information we can share and what les- dip took the gloss off the posi- the initial results have confirmed
sons can be learnt.” tive results from a scoping study Wayne Richards the potential to add more tonnes

The Ebola threat has coincided with a five- released in June when the iron to the overall project resource of
year pricing low in the iron ore market, placing
ore market was showing signs of a potential 61.9mt @ 33% iron, including an indicated re-
Tawana is confident of producing a 64-68% iron
product that can be sold into European markets longer-term recovery. source 16.2mt @ 35.4% iron.

The study proposed a 2.5 mtpa operation Some of the standout drilling results in-

at Mofe Creek with a start-up capital cost of cluded 72.7m @ 39.6% iron from surface,

$US52.9 million to produce a 64-68% iron 29.3m @ 39.6% iron from surface, 45.8m @

“premium fines” product over a 14-year mine 34% iron from 14.3m, 20m @ 38.7% iron from

life. 131.5m and 7.6m @ 45.4% iron from 23m.

Key economics from the study included “The PFS drilling programme was designed

operating costs of $US40.60/t and revenue of to improve resource classification and expand

$2.5 billion over the life of the project, includ- the resource, whilst testing two new targets,”

ing an NPV of $435 million and a pre-tax IRR Richards said.

of 55.8%. “The results from 1,100m of a 7,500m drill-

The total project capital cost staged across ing campaign confirmed the continuity of the

the initial four years of mine production is resource and the interpretation of its mod-

slated at $280 million, including a 20% con- elling. We’re aiming to return to Liberia in

tingency. First production is tipped to start 15 the New Year to complete the outstanding

months after receiving approval of a mining 6,400m of drilling and to expand the resource

licence. to approximately 120mt.”

The first two years of operations are ex- Tawana has appointed Tenova Mining and

pected to run at 1 mtpa before production Minerals Pty Ltd and Engenium Group as joint

PAGE 48 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT

PFS managers and both will be respon- processes within country. Approval
sible for overseeing a number of key
design aspects, including marine infra- of the MDA will result in a signifi-
structure and logistics.
cant re-rating for the company and
The company is also in the process
of finalising the location of the proposed represents an endorsement by the
deep water port and this scope of work
will be factored into the design of the Government of Liberia for Tawana
haul road, which could be no more than
30km from the project to the coast. to build, operate and sustain the pro-

“There are very few projects that have ject.”
a haul road or even a tramming distance
of 30km so we expect to make a number A pilot plant study is also in the
of cost savings there,” Richards said.
pipeline and the company is looking
Tawana has also added an adjoin-
ing tenement, previously held in a JV to progress this potential early start-
with Konblo Bumi Inc, to the company’s
groundholding at Mofe Creek. up scenario, pending the required

The new licence (MEL 1223/14) is known to approvals, when it is deemed safe to
be highly prospective for the same type of fri-
able itabirite mineralisation previously discov- return to site.
ered and drilled at the project and will eventu-
ally be brought into the resource model. Tawana reported $3.3 million cash

Tawana received approval from the Envi- Tawana held a series of meetings with local communities within in the bank at the end of the Septem-
ronmental Protection Agency of Liberia in late the Mofe Creek project area in August and September ber quarter – a sum Richards said
September to proceed with the environmental his company was astutely managing.
and social impact assessment (ESIA) for the
project. the mineral development agreement (MDA) Richards is confident shareholders will

This was preceded by a series of meet- following formal acknowledgment and ap- continue to back his company despite a lack
ings with the local communities. Further key
stakeholder briefings in the Mofe Creek pro- proval from Liberia’s Ministry of Lands, Mines of sentiment in the iron ore sector, as well as
ject area were slated for late November and
December. and Energy. the threat of Ebola to the project’s otherwise

Plenty of attention is also being devoted to The company has held a number of de- bright future.

tailed meetings with representatives from the “We’ve got a good register and a very lucra-

Ministry and members of the Inter-Ministerial tive project, which should result in adequate

Technical Committee (IMTC), who visited the and strategic financing at the right time and

project in July after the release of the scoping cost to advance this project,” he said.

study. “At the end of the day, we’re looking at a

“This is basically your 25-year licence to 64-68% iron product which will attract a price

sustainably operate in-country and it’s one of premium rather than a penalty and it’s a supe-

your key project-enhancing and legally-bind- rior product that can be sold into Europe and

ing documents, ratified through parliament,” not just linked to China.”

Richards said. – Michael Washbourne
“We have been working diligently on this

document and we’re advancing the ministerial

AUSTRALIA’S PAYDIRT DECEMBER 2014 - JANUARY 2015 PAGE 49

INDABA PREVIEW

Waxing information
in West Africa

Stage three of the West African Exploration
Initiative (WAXI) is under way, with the
spotlight to be cast on Cote d’Ivoire.

“We have started a systematic programme

of re-mapping West Africa using modern geo-

physical datasets and at the moment there is

a big hole in our map which is Cote d’Ivoire.

That is going to be a big geographic focus in

the next four years,” Winthrop Professor Mark

Jessell, Western Australian Fellow at the

Centre for Exploration Targeting (CET), Uni-

versity of Western Australia, said.

“It is what everybody wants; it is what re-

searchers want because there is a hole in

their understanding and it is what companies

want because it is an area that has been un-

derexplored for the last 15 years due to politi-

cal instability. Now there is a real opportunity

to open it up.”

AMIRA International Ltd, a member-based

organisation that develops, brokers and fa-

cilitates collaborative research projects in the

mining industry, is the coordinator and broker

of WAXI.

Since WAXI started in 2006 extensive work

has been carried out in Guinea, Ghana, Mali

and Burkina Faso. The initiative aims to cover

the entire Leo-man Shield, which encom-

passes Cote d’Ivoire, Liberia, Senegal, Niger,

Sierra Leone and Togo.

The purpose of the initiative is to help ex-

ploration companies identify areas of high

prospectivity, while assisting geological sur- Centre for Exploration Targeting Winthrop Professor/WA Fellow Mark Jessell

veys in West Africa provide essential pre-

competitive data and information. CET is involved in a number of projects “We hope to have a proposal to potential

“Stage three WAXI is a four-year pro- across Africa, with projects focused on tec- sponsors with this East African project within

gramme and our first meeting was in Septem- tonics and metallogenesis of the West African the next three months and hopefully by Inda-

ber,” Jessell said. Craton. ba we hope to have serious discussions with

“The general theme of WAXI is continuing Funding for its projects is drawn from gov- sponsors about signing up,” Jessell said.

what we have done before: a combination ernment and industry, including AMIRA and “An AMIRA International consortium will do

of a series of research projects, from a field AusAID. the fist publication of the expression of inter-

emphasis together with analysis of old data With West Africa hosting the biggest con- est and if we can get enough companies in-

and integration of our new data sets. Also, a centration of Australian exploration compa- terested we will then come up with a proposal

very strong theme is capacity building. That nies outside of Western Australia, the region and go on from there. It is an interactive pro-

involves training both graduate students, pro- has been a particular emphasis for CET. cess and we probably need to get eight to 10

fessional development of the geologists who However, with WAXI proving to be highly companies onboard.

work for companies and also working with successful, Jessell hopes that a carbon copy “The first stage will be a pilot project, which

universities and geological surveys.” can be emulated in East Africa. is the way we started WAXI, where we just

tried to understand what data

Centre for Exploration Targeting (CET) Winthrop Professor/WA Fellow Mark Jessell said some work planned is available, which research

under the West African Exploration Initiative has been delayed due to the Ebola virus. groups are interested in the

“The countries we have been working in over the last five years haven’t been affected except for Guinea, and area, which companies are

certainly we can’t go to Guinea at the moment because of the restrictions. We wanted to start working in Liberia interested, and once we have

but that is going to be delayed. Cote d’Ivoire so far hasn’t had a single case so we don’t see any reason why we done that we get together and

can’t work there,” Jessell said. write the proposal for a longer-

Ebola has claimed the lives of 5,000 people, with Mali the latest country the virus has spread into. term project.”

A two-year-old girl died in Mali in October and it is believed that the virus was contracted in Guinea, which – Mark Andrews
shares a border with Mali.

At the time of print the World Health Organisation welcomed approval by Swissmedic for a second Swiss trial

of an experimental Ebola vaccine.

The University Hospitals of Geneva (HUG) started the trial of vaccinations in November (results expected at the

time of print) and if judged safe, larger-scale trials are proposed for African countries as early as January 2015.

PAGE 50 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT