pd223 Dec14 - Jan15 magWEB

INDABA PREVIEW

Universal: a different coal story

ASX-listed coal players have been trounced Universal will look to bring a second mine into production within a year of Kangala
in the market this year, despite any
achievements made. Having brought the Kangala colliery into The funds raised will also help part-fund
production on schedule in 2014, Universal re- the development of Roodekop as Universal
“From an Australian point of view, when I ported operating cash flow for the six months looks to bring a second mine into production
say coal is dead I am not exaggerating. It is to September 30 of $9.6 million. 12 months after its first at Kanagala.
a very negative space at the moment,” South
African coal-focused Universal Coal plc chief Weber said despite a few teething prob- The integrated NCC-Roodekop project is
executive Tony Weber told Paydirt. lems, production was now in a steady state poised to export 600,000 tpa, while Universal
and Universal has forecast higher operating will deliver about 800,000 tpa to Eskom and
“I think a lot of the guys have been burnt in cash flow for the first half of 2015. other domestic clients.
the junior sector of the market. It is very tight
on the financing side and you only have to see Kangala, in Delmas in South Africa’s Mpu- First coal production from NCC is sched-
where the origin of funds are coming from to malanga province, has ROM production of 2.4 uled for the first quarter of 2015, which will
see that. mtpa. be followed by the restart of existing under-
ground operations later in the year.
“Although we differentiate from Australian South African power provider Eskom is
producers, we tend to get coated with the locked in as an off-taker of 1.7 mtpa, while With equity funding for the 2 mtpa NCC ac-
same brush and put into the same basket as 100,000 tpa is exported. quisition, Universal continues to work on debt
exporters back in Australia who are having a funding and off-take arrangements.
hard time of it. Operationally, on the ground, Bedding down Kangala has not slowed
we are not having it as tough as Australian Universal from bolstering its business, with “We are concentrating on the second op-
producers.” the company lining up its next asset stream, eration and you can see that the two are con-
the integrated NCC (New Clydesdale Colliery) tinuous and one leads into the other, stamping
At the time of print Australian thermal coal Roodekop. down production into a 2.2 mtpa operation,
prices were about $US62/t and coking coal which takes us to about 5 mtpa on the back of
$US111/t. All regulatory approvals have been granted two operations,” Weber said.
and development started at Roodekop, with
Cost cutting by Australian coal producers open-cast development expected to start at Although Weber has ambitions to grow
in the last two years has failed to stop the the time of print. production further, creating a sustainable
closure of some mines and the resulting job company and value for shareholders is his im-
losses. Therefore any ASX-listed company In October, Universal secured a $24.5 mil- mediate concern.
striving to be the next mid-tier, multi-mine coal lion strategic investment from IchorCoal NV to
operator will have to be prepared for the slog complete financing the acquisition of the NCC “Growing a company for the sake of it is a
ahead in promoting the company if it wants from Exxaro Coal Mpumalanga Pty Ltd. dangerous thing to do but we do have growth
any traction in current market conditions. ambitions,” Weber said.

“Long term, I don’t think it is as doom and “South Africa it is a market dominated by
gloom as people make it out to be. The cur- the big guys – BHP Billiton [Ltd], Glencore,
rent depression is inevitably not going to last Anglo American [plc] – and to say we are go-
either. Yes, there is the big green movement ing to grow into one of them is a bit presump-
against coal but there are parts of the world tuous.”
that depend on it, like India, China and in Eu-
rope it’s coming back,” Weber said. Weber said the company would assess
expansion opportunities and other mining op-
“It’s always the darkest before dawn. I am tions, while beefing up its portfolio is also a
not saying that coal is going to run away to consideration.
those heyday prices but at the same time we
shouldn’t be where we are at the moment. I do “As the world changes and market condi-
see a recovery in the next few years; when, I tions change we will gradually bring other pro-
don’t know. I still think there will be a little bit jects in. There are opportunities and its times
more pain to come, but we are conditioned to like these – counter cyclical times – that you
ride out the pain. We are well positioned as have to go out and make acquisitions, so we’ll
a company so it doesn’t affect us as it does keep our eyes and ears open,” Weber said.
some other guys,” he said.

– Mark Andrews

Operating cash flow from Kangala to the end of September was $9.6 million

PAGE 52 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT

Blackthorn, Intrepid meet
under the mistletoe

Blackthorn Resources Ltd’s merger with In- “We appreciate the guys in Zambia project over an 11-year mine life.
trepid Mines Ltd was in the throes of com- that kept the process moving while they
pletion at the time of print. have been going through the mourning A resource of 34.7mt @
period of the late President Sata.”
A key condition of the proposed scheme 2.29% copper for 795,000t cop-
of arrangement between the two compa- The Kitumba DFS is expected to be
nies was the granting of a mining licence at completed by the end of 2015, with per stands at Kitumba, which
Blackthorn’s flagship Kitumba copper project, Blackthorn using the next 12 months to
200km north-west of Zambia’s capital, Lu- assess its best option for the project. Blackthorn is looking to add to.
saka.
“Through the course of next year The merger with Intrepid pro-
With that in hand, Blackthorn managing di- [2015] we will decide on what is the right
rector Mark Mitchell said the deal would be thing for us to do in terms of maximising vides Blackthorn with enough
“done and dusted” by mid-December. returns for our shareholders. At the end of
that process we will have to decide if getting capital to get through the next
Despite it being a difficult time in country a funding solution together and constructing
as Zambians mourn the passing of their late it, or do we look at bringing in a JV partner. Mark Mitchell phase at Kitumba, without hav-
President Michael Sata, the Government There are a whole range of options open to us ing to tap a non-responsive mar-
granted Blackthorn a mining licence for Kitu- once we finish the DFS and we are keeping
mba on November 18. all options open because it is about us getting ket for cash.
the right value for that asset and for our share-
The large-scale mining licence has been holders at that point in time,” Mitchell said. “We are well funded through the next phase
granted for the development and operation of
Kitumba which is valid for an initial 25 years. Blackthorn released an optimised PFS at as the market sorts itself out in the next 12-18
Kitumba in April 2014, with the study indicat-
“The mining licence puts us in a good posi- ing a capex of $US680 million would be re- months. We’re looking to add mineral invento-
tion next year to keep our programme moving quired to build a 3 mtpa for 58,000 tpa copper
along,” Mitchell told Paydirt after attending ry which is all positive but we need the market
Intrepid’s AGM.
to decide it is time to get back into investing in

resources projects,” Mitchell said.

Whatever the outcome Blackthorn decides

for Kitumba, Mitchell said the project would be

in a position to come on stream around 2018,

about the time that a supply deficit in the cop-

per market is forecast to open up.

– Mark Andrews

AUSTRALIA’S PAYDIRT DECEMBER 2014 - JANUARY 2015 PAGE 53

INDABA PREVIEW

Coal future still grey in SA

The future for South Africa’s He commented, “I would
coal industry has become
somewhat clearer following like to see what happens when
commitments by Transnet on
providing infrastructure to rail Eskom hits its 60 mtpa supply
more coal from the Waterberg,
as well as on planned future de- ‘cliff’ which is expected from
velopments at Richards Bay.
about 2016. The mining com-
The state-owned transport
utility is now committed to ex- panies needed to supply that
panding rail capacity to shift
coal on the existing Waterberg coal deficit should be on the
line from the current 2 mtpa to
27 mtpa in a series of phases ground now but they are not.
with an initial target of 6 mtpa to
be achieved by early 2016. “What is Eskom going to do

Transnet has also agreed to – let the lights go out because
shelve construction of its own
proposed export terminal at it cannot source enough coal
Richards Bay because it has
negotiated greater access for from black-controlled suppliers
black-owned coal companies to
the Richards Bay Coal Terminal or will they buy from anyone at
and is supporting the new RBT-
Grindrod Navitrade terminal . that stage?” Boje said.

However, as of November, The reason new coal min-
there was still major uncertainty
over how possible pending ing companies are “not on the
amendments to the country’s
mining legislation – the Miner- ground” results from the poor
als and Petroleum Resources
Development Act (MPRDA) state of the coal business, with
might affect the coal sector if
coal is declared a “strategic export prices at five-year lows
mineral”.
and the extreme difficulty in
That action is a distinct pos-
sibility given Eskom’s concerns raising funding which has been
over the future security of sup-
ply of coal to a number of its made worse by the investment
power stations which is the main reason that
Transnet has acted to expand rail capacity to uncertainty affecting SA mining
shift coal from the Waterberg to Mpumalanga.
projects.
That’s where a number of Eskom power
stations face looming supply shortages within “There are no new juniors
the next five years through what has been
termed a coal supply “cliff”. coming. You need R10 million

A number of existing long-term coal supply upfront just to complete a busi-
contracts will come to an end starting from
next year resulting in a situation where Eskom ness feasibility study. Which
has “significant uncontracted” coal require-
ments that could reach 60 mtpa “or more” by junior has that money to layout
2025.
upfront before you can start
That’s according to Ian Hall – chairman of
the steering committee for the South African building a mine?” Boje said.
Coal Road Map – a joint government and in-
dustry body which published a comprehen- The biggest outstanding coal
sive review on the state of the country’s coal
and energy sectors in 2013. supply contract still to be re-

Hall repeated some of the findings, citing in solved is that for Eskom’s Ku-
particular the extended period of time it takes
to get a mining permit, at the 2014 McCloskey sile power station.
South African Coal Exports conference held
in Cape Town in January. Kusile is under construction

That triggered an immediate confrontation but the utility has yet to agree
with then Minister of Mineral Resources Su-
san Shabangu who shared the stage with him Susan Shabangu a supply contract with Anglo
at the conference.
American plc precisely be-

She chided Hall for being negative saying, cause of the 50% plus one share BEE stipula-

“there’s a lot that has been done. The regula- tion concerning ownership of the New Largo

tions will be defined soon. I am disappointed colliery which will supply the coal.

that you continue to present a gloomy picture Asked about this Boje replied, “that’s a

of South Africa when we have made so much contract for a life-of-mine supply. Anglo ap-

progress in this space.” pears to be in a far better bargaining position

By November, it was clear that Hall was than we were because Eskom has already in-

right and the Minister wrong. vested more than R20 billion in building the

Publication of the draft MPRDA was held power station but does not have a coal supply

back and the permitting issue remains unre- contract for it. “

solved. Turning to the MPRDA amendment bill and

In November, Andre Boje – chief executive the possibility of coal being declared strategic

of coal junior miner and trader Wescoal – put Boje said, “we don’t yet know what’s coming.

a question mark over how Eskom is going to We are not concerned about coal being de-

source the coal it needs in particular given clared strategic because we are happy to sell

Eskom’s requirements that its new coal con- to the domestic market but controls on pricing

tracts should be supplied by companies that are of concern to us.

are 50% plus 1 share black-owned. “If they were to try and force down coal pric-

That is a major sticking point given that es by [about] 20% then you would stop busi-

the MPRDA as it stands only requires mining ness and lock up the mine because it would

companies to be 26% BEE owned to comply not be worth carrying on.”

with regulations for a mining permit. – Brendan Ryan
Boje said Wescoal had just signed a coal

supply contract for Eskom from its new Eland-

spruit mine but only for around 1 mtpa over

a three year contract using an SPV (special

purpose vehicle) structure which would not

penalise existing shareholders.

PAGE 54 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT



INDABA PREVIEW

Lemur plans for endemic
growth in Madagascar

Lemur Resources Ltd has come up with an Lemur Resources has defined a 136mt coal resource at its Imaloto project on Madagascar
innovative approach to the currently tur-
bulent international coal markets: avoid them to fund transport solutions for a project that is major blackouts and energy is a big issue be-
altogether if it can. 200km from the coast on the infrastructure- cause of that,” Viljoen said.
poor island.
Lemur is developing the Imaloto coal pro- The power shortages are particularly crip-
ject on Madagascar, and while the 136mt coal “Madagascar is very underdeveloped and pling for Madagascar’s industrial sector,
resource has proven to be of export quality, with the deposit so far from the coast access based largely in the island’s south-east. The
managing director Anthony Viljoen told Pay- to market is limited, so we looked at what op- country’s two largest industrial projects are
dirt domestic power supply could prove a lu- tions we had and came up with the IPP route,” the Rio Tinto Ltd-owned QMM mineral sands
crative market for the project’s product. Viljoen said. project and the recently opened Ambatovy
nickel laterite mine, majority owned by Sher-
“We understand the market dynamics in On the political front, developing its own ritt International Corporation.
coal at the moment and building a power sta- power station will allow Lemur to tap straight
tion and becoming an independent power into the newly elected government’s need for “As well as the local power company, there
producer in Madagascar would mean we more power in the country. is also plenty of industry needs, in particular
wouldn’t be subject to international coal pric- the mining projects being developed,” Viljoen
es,” Viljoen said. “It means we will be able to Investment in Madagascar has essentially said. “There is a lot of potential to open up the
accurately predict the revenue we will be re- been on hold for four years as political dead- south-east of the island and Imaloto is ideally
ceiving, which is a very nice situation to be in.” lock gripped the country following an army placed to provide power to such projects.”
coup against the former democratically elect-
Last year, Lemur revealed an updated ed president, Marc Ravalomanana. Lemur announced in its September quar-
scoping study that pointed to a domestic- terly report that it had begun discussions
export mix for Imaloto. The company is now The appointment of Hery Rajaonarimam- with the newly created Ministry of Strategic
considering a 21-year mine life for the pro- pianina as President following free and fair Resources, the Ministry of Energy and State-
ject – in the south-west corner of the Indian elections earlier this year has opened the owned power company Jirama over an IPP
Ocean island. The first 10 years would see an door to investment, and solving the country’s licence.
open-pit mine produce 400,000 tpa of coal for ailing power provisions is near top of the inter-
three 15MW power stations. A second phase national community’s to-do list. The licence will give Lemur the right to build,
would see underground operations start in own and operate a coal-fired power plant of
Year 11 with increased domestic production “We have had to sit on our hands for four three by 15MW within 10km of Imaloto.
of 500,000 tpa to be accompanied by 1 mtpa years but now that the new Government is in-
of exports. stalled with a president who is a technocrat, “We completed a PFS and submitted it to
we’ve seen an uptick in the mood and a lot of the Government in late October. We have had
Lemur can point to both political and practi- donors are starting to come in,” Viljoen said. meetings with the President and the Minis-
cal reasons why the independent power pro- “There are a number of development finance ter for Energy and Imaloto has been well re-
ducer (IPP) route may be the most convenient institutions showing interest in power projects ceived.”
for the company. so Imaloto fits perfectly.”
Jirama would likely become the base off-
On a practical level, finding a local custom- All of Madagascar’s current power capac- take partner for the Imaloto power station, ac-
er for Imaloto’s output will eliminate the need ity comes from diesel generators with some cording to Viljoen.
limited hydropower, but if it is to increase in-
The Imaloto resource has an export-domestic dustrial capacity, cheaper power options will “We have discussed the possibilities with
coal mix have to be sourced. the Government regarding their participation
in the power station and the mine. All stake-
“The capital Antananarivo is suffering from holders must benefit from any deal and we

PAGE 56 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT

are happy with their involvement as long as Lemur has the advantage of owning its own drilling firm, Pan-African Drilling
they understand the level of risk we are taking
on. They know the pressing need for power in From an exploration project perspective, In Pan African Drilling, Lemur has a wholly
Madagascar.” Imaloto is the only asset on Lemur’s books but owned subsidiary Viljoen is keen to use to
with $15 million in the bank, Viljoen is actively scope out new projects.
With the Government keen to see the pro- hunting other opportunities.
ject developed, Lemur is pressing ahead with “We have moved into East Africa and we
a BFS on the power station. “We have been looking at other assets be- intend to use that company to buy into pro-
cause we see a lot more opportunities in the jects and see if we can create greenfield op-
“We are trying to finalise the feasibility next six months for companies with cash,” he portunities.”
study for the IPP. With Antananarivo 200km said. “We are looking at other coal projects in
away, transmission may be the big challenge.” Africa but also gold.” – Dominic Piper

Viljoen has little concern about the coal
mining project itself, saying it is technically
sound and low-cost in nature.

“It has very consistent blocks of export-
quality coal with a significant open-pit portion
to it,” he said. “The project definitely stacks
up technically and we want to get the mine up
and running as soon as possible.

“The capex for a nine-year mine life is only
$9 million and we have $15 million in the bank
so we can fund it in a straightforward way off
our balance sheet.”

However, the mine alone is little more than
a stranded asset and Viljoen is conscious of
the greater capital requirements associated
with export infrastructure and power station
construction.

“Being a junior, our intent is to bring in a
strategic partner and we are in discussions
with a number of Chinese groups – who have
all approached us unsolicited – over possible
partnerships for the project.”

The arrival of a strategic partner would also
allow the company to pursue other projects.

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AUSTRALIA’S PAYDIRT DECEMBER 2014 - JANUARY 2015 PAGE 57

INDABA PREVIEW

Mozambique double play

Metals of Africa Ltd will make the Cherie Leeden on site at Metals of Africa’s Montepuez graphite project
most of its majority landholding
in Mozambique this quarter, accord- als Ltd’s burgeoning Balama North prospect, lect Exploration Ltd in April and Leeden said
ing to new managing director Cherie Montepuez could be a company-maker for the company would likely make a move on the
Leeden. Metals of Africa. lead-zinc-silver-copper-barium prospect (of
which Metals of Africa has 90% equity) during
At the time of print the company The project hosts outcropping graphite the onset of Mozambique’s wet season.
was on the cusp of two drilling cam- mineralisation with a coincident 10km long
paigns at its flagship Rio Mazoe VTEM anomaly within 100% owned tenure. A reconnaissance programme last quarter
base metals project and Montepuez confirmed the potential of Kroussou, netting
graphite play. “When I pegged Montepuez [Balama and rock chip samples with zinc grades ranging
Balama North] weren’t even projects,” Leeden from 3.58-35.01% zinc and lead grades of up
Leeden told Paydirt Metals of Af- said. “We pegged them on outcropping to 23.06%.
rica had contracted Mitchell Drilling graphite mineralisation. Now I guess the rea-
to conduct the two-month, 5,000m son why we have advanced them so rapidly is “It is just phenomenal to get those sorts of
programme at Rio Mazoe, in which because of the success of Triton and Syrah.” zinc and lead grades at surface,” Leeden said.
two drill rigs – one diamond core
and one RC – will simultaneously Metals of Africa also has an ace up its “We are really excited and we view the pro-
drill the project to test the depth ex- sleeve in the form of its budding Kroussou ject as a drill target for next year. Because we
tent of a number of untapped Broken project in Gabon. are fully committed in Mozambique, with two
Hill Type (BHT) zinc-copper-lead drill programmes running in parallel between
targets. The company acquired Kroussou from Se-
now and Christmas, we just don’t
“It’s been a really systematic two- have the personnel to be in two
year approach for us to find these countries at once.
prospects. It’s included detailed soil
sampling on a really close spacing of “So, we are going to stay fo-
50m by 50m in conjunction with de- cused on Mozambique between
tailed geological mapping,” Leeden now and Christmas. Between
said. January and April, during Mo-
zambique’s wet season, we will
“We’ve spent more than $100,000 attack Gabon. During those first
on ground geophysics programmes fourth months of next year we’ll
– VTEM, EM and aeromagnetic – be … advancing the project to a
and engaged some prominent, high- stage of readiness for drilling to
profile BHP [Billiton Ltd] geologists commence sometime in the mid-
to help us with this work; most recently Iain dle of next year.”
Groves. Combining this knowledge base of
BHT mineralisation with the sites we’ve identi- – Rhys Dickinson
fied in the form of mapping and geophysics
has come up with the targets.” Twenty per cent combined lead and zinc in drill core from
Rio Mazoe’s Meque prospect’s maiden drill programme
That work identified 39 targets at Rio Ma-
zoe, with Cassidy Shea, Rhondite Hill and
Downeaster the standout prospects.

Cassidy Shea, Metals of Africa’s priority
target, exhibits multiple zones of outcropping
zinc and copper mineralisation, with recent
rock chip samples returning up to 11.9% cop-
per and 4.37% zinc.

“We will start at Cassidy Shea, because
that’s the one that looks the best at the sur-
face, and if we have exploration success we’ll
probably stay there,” Leeden
said.

“If it’s not to our expectations,
that’s when the drill rig will move
on to the other prospects. How
many prospects we drill really
depends on what we get in our
drilling results.”

Leeden said Metals of Africa
was also ready to roll out the drill
rigs at Montepuez, having almost
completed a VTEM survey on the
prospect’s three targets at the
time of print.

Located in the graphite-rich
Cabo Delgado province of Mo-
zambique and geologically along
strike to Syrah Resources Ltd’s
Balama project and Triton Miner-

PAGE 58 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT

Botswana: Africa’s diamond
risks losing its sparkle

When environmental scientist Bakang Bo- Botswana is being urged by economists to expand mond industry is catching up with the south-
gopa graduated first in his class from other industries – including tourism – in order to ern African country.
the University of Botswana two years ago he relieve its reliance on the diamond sector
did not expect that his first job would be mov- Diamond revenues have enabled it to build
ing furniture or that he would still be living off a much-admired education system, but also
handouts from his mother. allowed the ruling Botswana Democratic
Party (BDP), in power since independence in
Bogopa, who studied on a government 1966, to secure economic growth without di-
scholarship, is among thousands of unem- versifying into newer industries or implement-
ployed graduates in Botswana who exemplify ing reforms to develop the private sector.
both the country’s swift economic progress
in the five decades since independence from As a result, the economy is not sophisticat-
Britain, and the challenges it now faces. ed enough to employ many of the country’s
expanding stream of highly skilled graduates,
One of the world’s poorest countries in the such as Bogopa.
1970s, Botswana transformed into one of its
fastest-growing economies by harnessing As diamond prices are now falling, eco-
around $US3 billion a year in diamond sales, nomic growth has slowed to just 1.6% year-
to become the world’s biggest producer, and on-year in the second quarter and unem-
gained middle-income status. ployment is stuck at around 20%, with youth
joblessness believed to be much higher.
The landlocked country of just 2 million has
also been heralded as a beacon for African President Ian Khama, the son of Botswa-
democracy, avoiding the conflict and corrup- na’s first president, won a second five-year
tion that has ravaged resource-rich countries term in elections in October but with a reduced
across the continent. majority for his BDP party as many young and

But dependence on its wealth from the dia- To page 60

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AUSTRALIA’S PAYDIRT DECEMBER 2014 - JANUARY 2015 PAGE 59

INDABA PREVIEW

From page 59 A bulk sample pit at African Energy Resources’ 2bt Sese coal project near Francistown in
Botswana. Developing the country’s substantial coal resources could be a key plank
urban middle-class voted for change. in economic diversification for Botswana
The IMF does expect the economy to grow
Keith Jefferis said. his editor was briefly held by the police and
by 5% annually until 2015, but that is down “I think the Government knows what it data was confiscated.
from last year’s 5.4% and well below growth
rates of 8-10% in earlier decades. needs to do but some of the reforms that are “Recent developments have revealed a sig-
needed are quite painful. The longer you put nificant gap between Botswana’s reputation
Botswana’s budget moved back into the them off, the harder it becomes.” and reality,” Poteete wrote.
black last year, but the surplus of 0.7% of
GDP was down from 4.8% in 2008 before the Critics also say the country’s squeaky Khama counters these claims by pointing to
global financial crisis hit. clean image is outdated, with accusations positive feedback from independent bodies.
of increased government corruption and vio-
“We are mindful of the fact we’ve had it lence used against politicians and the press. Transparency International has ranked
good and we’re far better off than most places Botswana the least corrupt African country
in Africa,” Bogopa, 27, said, breaking off from Opposition parties have proposed a free- for 18 years in a row. It is also rated third on
discussing the economy with friends in a lively dom of information bill and regulations forc- the Mo Ibrahim Index of African Governance,
bar tucked away in a dusty suburb of Gabo- ing politicians to declare their assets in recent ahead of South Africa, the continent’s most
rone. years but they have been blocked by the BDP, developed economy, but behind the islands of
which also faces accusations from opponents Mauritius and Cape Verde.
“But we’re being led by people stuck in the and analysts of dubious tendering of govern-
past, using outdated ideas, who can’t see our ment projects. “I think the positive indicators are a curse
regression,” he said. for Botswana in some ways,” a Western diplo-
“Abuse of state resources has become mat in Gaborone told Reuters.
The BDP still has a solid base of loyal sup- more blatant,” Amy Poteete, a Botswana ex-
porters who appreciate the generous welfare pert and professor at Canada’s Concordia “The signs are there that successes are
benefits they receive, but economists say re- University said in a Washington Post editorial taken for granted.”
lying on gem revenues is unsustainable. in October.
Whether Botswana’s success story con-
With almost $US7 billion in foreign ex- Khama, a former army general, has also tinues could have wider implications for in-
change reserves, a $US5.5 billion public pen- been criticised for his perceived authoritar- vestment confidence in the sustainability of
sion fund and the highest sovereign credit ian style: notably for imposing a 50% tax on growth policies across Africa.
rating in Africa, there is room to drive more alcohol, given that he is teetotal, and evict-
diverse growth. ing bushmen from their traditional hunting “Botswana in many ways has been a victim
grounds in the Kalahari Desert. of its own success, but for it to flip backwards
“It can’t be good for the Government to con- would be disastrous both for the country and
tinue being so dominant in the economy, it’s The media has also complained of harass- more widely for Africa,” Jefferis said.
just not logical to rely on handouts anymore,” ment. One journalist fled to South Africa in
Martin Makgatlhe, head of Gabarone-based October saying his life was in danger after “It’s crucial that its record is preserved.”
stockbroker Motswedi Securities, said. writing a critical article about Khama, while
– Tiisetso Motsoeneng and Joe Brock,
“We got comfortable. Now we need to take Reuters
the quantum leap from the successes of the
past to the growth of the future.”

The Government has talked about creating
jobs and new revenue streams, by investing
more in safari tourism, agriculture and im-
proving poor water and electricity supply, but
action has been less forthcoming.

Botswana’s sole power station shut down
this month, forcing it to rely entirely on import-
ed electricity from South Africa.

Economists say Khama is failing to provide
incentives to attract foreign investment, relies
too much on imports from neighbouring South
Africa and needs to make tough choices on
cutting public spending. The public sector
probably accounts for 40% of employment
and wages were 21% higher than in the pri-
vate sector as of 2011, according to the IMF.

Economists urge the Government to free
up funds to lend to small businesses and
support areas of the economy outside the
diamond industry, which accounts for around
40% of GDP.

Foreign investors complain about pro-
tectionist labour policies and uncompetitive
taxes, but economists say if the Government
improved the ease of doing business, Gabo-
rone could be a regional hub for areas like
manufacturing and call centres.

The country also has growth potential in
dairy farming, financial services and tourism
beyond its current luxury market.

“Botswana has to work quite aggressively
to be a successful open economy, sort of fol-
lowing the examples of Singapore or Mauri-
tius,” Botswana’s former deputy central bank
governor and Econsult managing director

PAGE 60 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT

OPINION

New dawn for Africa in 2015

Africa as an investment region has faced local employment, which often increases over tried to create transparent legislative, regula-
many challenges during 2014. However, time, and is designed to incentivise local train- tory and contractual frameworks to encour-

as we move into 2015, we strongly believe ing. age private investment. As well as the intro-

the continent will reaffirm its place as one of • State participation requirements – State duction of improved legal regimes to promote

the world’s most desirable investment destina- participation rights are now relatively exten- international investment, we have seen a shift

tions. sive in Africa as governments rely on partici- in the mix of foreign investors. While China

Mining Indaba 2015 could not come at a pation rights to ensure that the state and lo- has dominated in recent years, there is now

better time as many are glad to see the last cal population can share in the benefits that growing interest from India, Japan, Korea, the

months of 2014. Rather than focus on the flow from mining projects in their country. Gulf and Latin America, as well as Europe,

highly-publicised Ebola outbreak, lower than State participation can include free-carried the US and Australia.

expected commodity prices and ongoing dif- interests, preferential rights to production, Notably, investment in Africa brings differ-

ficulties in project financing, African partici- pre-emption of off-take and first rights of re- ent challenges from some more developed

pants are ready to look towards the future. fusal in relation to the sale of an interest in the regions, with Ebola obviously a recent high-

Newer African resource regimes are ac- project itself. The two most common forms of profile risk. Most mining operations have con-

tively seeking to attract further foreign invest- state participation in newer mining codes are tinued in affected areas of West Africa while

ment and the overall trends in the African a free-carried interest in the project (ranges managing the practical, financial and humani-

mining sector are positive. The global finan- from 5-20% are common), together with the tarian risks.

cial downturn and increasing costs of mining right to product, ensuring the state’s access Mining costs have risen as supplies have
“in other parts of the globe saw companies
to raw materials. been delayed and the labour force has been

turn towards Africa as a significantly disrupted as local

prospective region for min- Mining Indaba 2015 could not come workers remain at home or in
ing investment. Fundamen- quarantine and some foreign

tally, the growth in African at a better time as many are glad workers attempt to leave the
investment is only set to to see the last months of 2014. Rather country. At this stage, quanti-
continue and 2015 brings a than focus on the highly-publicised Ebola fying the long-term impact of
renewed confidence in the outbreak, lower than expected commodity Ebola is difficult.
future of African mining. prices and ongoing difficulties in project
Political risk and govern-

Many African states have ment instability also remain
adopted (or are adopting) important considerations, as
new mining laws contain- recent events in Burkina Faso

ing provisions that facili- financing, African participants are ready have demonstrated.
tate mining investment and to look towards the future. Infrastructure remains a
create a more prescriptive
regime for local and state practical challenge for min-
ing companies investing and

participation in mining pro- operating in Africa and is a

jects and community development. Some key • Stabilisation provisions – In the newer significant portion of any capital allocated to

features of these new regimes relate to: mining regimes the stabilisation provisions a mining project. This challenge may be al-

• Local content requirements – These have become much more limited in applica- leviated over time, as many African countries

laws mandate the use of specified levels of tion. For example, the 2014 Mozambique Min- are using government resources and private

the country’s citizens for various types of ing Code does not contain a tax stabilisation investment to fund essential power and infra-

jobs or local companies for the provision of provision and Guinea’s code limits stabilisa- structure.

goods and services. For example, the 2014 tion to a term of 15 years. Interestingly, the Understanding the risks of your project in

Mozambique Mining Code mandates that all shift towards flexible or narrower stabilisa- its particular stage of development remains

companies wishing to provide services to for- tion clauses appears to be becoming more crucial and each stage of development comes

eign mining companies must ‘associate with acceptable for financiers and sponsors. with its own challenges and opportunities. Al-

a Mozambican firm’. Preference must also The trend has been to move away from full len & Overy, having recently opened an office

be given to local firms and goods, subject to freezing clauses to limited freezing clauses in Johannesburg and acted in many African

requirements relating to pricing, quality of ma- and balancing provisions, often restricted to jurisdictions, has the strategic links and local

terials, time of delivery and availability. Other changes in fiscal laws. knowledge to help investors understand and

countries like Guinea require a certain level of African governments have increasingly respond to those risks.

Meredith Campion, Allen & Overy Partner – Perth Tim Scales, Allen & Overy Partner – Paris

Meredith practises in the areas Tim heads the firm’s Africa Group and
of corporate, commercial and en- has been working day-to-day on projects
ergy and resources law and has in Africa for over 15 years. He has exten-
advised on a wide range of com- sive experience of project development
mercial transactions, including and finance in the mining, power (includ-
takeovers, mergers, acquisitions, ing renewables), oil & gas, petrochemical,
disposals, capital raisings and telecoms and other industrial sectors and
joint ventures. She has consider- particular experience of multi-lateral, de-
able experience in African trans- velopment finance institution and export
actions, having advised clients in credit agency backed financings. Tim is
relation to transactions involving recognised as a leading lawyer in the field
Africa for over 15 years. of African Energy & Projects by Chambers
and IFLR1000.

AUSTRALIA’S PAYDIRT DECEMBER 2014 - JANUARY 2015 PAGE 61

INDABA PREVIEW

Potash is Elemental for Sanders

Elemental Minerals Ltd managing Kola is the most advanced of the
director John Sanders has enjoyed three and a PFS was completed on the

a whirlwind return to the African-based company’s flagship deposit in 2012.

potash hopeful. However, a start-up capex of $US1.85

In the four months since Sanders billion was always going to be a chal-

stepped into the top executive role, lenge for a company of Elemental’s

the ASX-listed company has raised al- size (market cap of $75 million at the

most $10 million, completed a phased time of print) and it prompted a review

implementation study for one of its key of the development plan.

prospects and unearthed a candidate Elemental assessed the viability of

for one of the world’s highest-grading a phased production strategy for the

potash seams. deposit, with an initial rate of 1 mtpa for

A change of management saw the first four years of production, start-

Sanders return to the company in July ing in 2018, before hitting 2 mtpa total

after previously serving as both gen- nameplate capacity thereafter.

eral manager and an executive direc- The phased strategy also proposes

tor for three years until 2012. using an overland conveyor for ROM

Speaking to Paydirt from his com- ore transport instead of the dedicated

pany’s office in Johannesburg, Sand- Elemental is focusing on three prospects – Kola, Dougou and Yangala haul road and trucking scenario slated
ers said the triple set of good news – at the Sintoukola potash project in the Republic of Congo in the PFS, as well as construction

from the Sintoukola potash project in of the processing plant in two 1 mtpa

the Republic of Congo had made his return all challenging, I think we’ve achieved what we phases.

the more satisfying. set out to achieve in these first few months.” As a result, the initial capital reduced by

“I must say we’ve got a great technical team The Sintoukola project covers about 51% to $US908 million while the overall pro-

and field team on site in the Republic of Con- 1,400sq km of ground on the west coast of ject capex totalled $US1.59 billion, excluding

go and that really has allowed us to get to the the Republic of Congo and Elemental is cur- sustaining capital costs.

position we are now,” Sanders said. rently focusing on three specific areas – Kola Sanders said the revised operating param-

“We’re fully funded, we have three great (sylvinite), Dougou (carnallitite) and Yangala eters would position Kola as one of the world’s

project opportunities and while it has been (sylvinite). lowest cost potash sources and flagged the

PAGE 62 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT

potential for the free cash flow from the first go up significantly.” October 8 and Sanders said those funds
phase of the new strategy to fund the second
phase capital requirements. Elemental is also working on a scoping would keep the company in a strong financial

“When the original PFS was brought out, study for the Dougou deposit and results are position until at least the first quarter of 2016
we were going to be required to fund it up
front to get debt and equity, but we realised due before the end of the calendar year and when the full feasibility study update for Kola
fairly early on that for us to get into production
we had to re-engineer the project to allow us will be factored into a resource update slated is expected to be completed.
to have a lower capital requirement,” Sanders
said. for early 2015. A maiden resource of 1.29bt “The other leg the financing stands on is we

“This is really what the last two years have @ 13.71% potash, including 520mt @ 15.52% can accelerate our search for a strategic part-
been about and we were working on that in-
ternally before reaching out to our consultants potash within the hangingwall seam, was an- ner, and we’re pretty advanced on that side of
to get a signed off study on the phased imple-
mentation.” nounced for Dougou in early July. things,” Sanders said.

Some of the parameters in the phased im- Recent drilling at Dougou returned a com- “For me, the catalyst for this project is at-
plementation update were escalated to reflect
pricing forecasts for 2016, including NPV bined thickness of 43m of carnallitite in one tracting that strategic partner and I think once
(now $US1.835 billion, down from $US2.97
billion), IRR (now 24%, down from 29.3%) and hole, with individual seams grading between that happens the market will respond very
the average life-of-mine operating costs (now
$US91/t, up from $US80/t). 17.8% and 24.7% sylvite (between 11.2% and positively because all the other elements are

But Sanders was still confident about the 15.6% potash). in place.”
margins likely to be produced, highlighting the
difference in the potash pricing forecast two But the most striking result came from the – Michael Washbourne
years ago for the PFS ($US585/t) compared drilling programme at the nearby Yangala
to today’s actual pricing ($US350/t).
prospect where 4.2m @
“With a 10% discount rate, you’re looking at
an NPV of $US1.8 billion and an IRR of 24% – 59.48% sylvite (37.56% pot-
and that’s unleveraged,” he said.
ash) was intersected at one of
“Obviously we can’t include leveraged num-
bers in the study until we get through feasibil- the hangingwall seams.
ity level and then into the financing stage, but
if you were to leave it like that the IRR would “I’ll stand corrected, but I’m

not sure there’s been too many

of those intersections over the

last 30 years anywhere in the

world,” Sanders said.

“It’s early days for Yangala,

but we have very high-grade

sylvinite in our hangingwall

there, close to 60% sylvite, so

that gives you an idea of the

continuity of the grade in the

area.” A scoping study and resource

Elemental also closed a update for the Dougou carnallitite

$9.47 million rights issue on deposit is due in early 2015

AUSTRALIA’S PAYDIRT DECEMBER 2014 - JANUARY 2015 PAGE 63

INDABA PREVIEW

IMX given a second chance

Few companies would be able to re- pretty quickly, and over the wet season
cover from the horror year IMX Re- [December through April] we’ll continue

sources Ltd endured in 2014. to assess our data and make plans for

Business was going swimmingly for the next field season,” Hoskins said.

IMX in March when the Perth-based “I don’t know how many of these oth-

company confirmed plans to extend er projects are going to end up in pro-

the life of the Cairn Hill iron ore mine in duction, but what you’re going to need is

South Australia into a fifth year of op- guaranteed off-take and I’d like to think

eration. we could have an off-taker investing

A new managing director was also on alongside us so that they have a vested

his way in and the lucrative partnership interest in the project’s success.”

with MMG Exploration Holdings Ltd Gold is another new string IMX is

over the Nachingwea property in Tan- looking to add to its bow following the

zania was off to a flying start. discovery of the Kishugu prospect,

Then the iron ore price started to 20km west of Ntaka Hill.

plummet and the operators of Cairn Hill, The company recently completed

of which IMX held 51% interest, entered an infill soil sampling programme over

voluntary administration on June 19 and Kishugu, returning peak values of 440

the mine was closed. ppb gold, 360 ppb gold and 102 ppb

Adding salt to the company’s fresh gold, while the entire anomaly was re-

wounds, MMG withdrew from the JV defined as 5.5km long by 600m wide at

agreement at Nachingwea in July, greater than 10 ppb gold.

bringing an early end to the proposed A maiden drilling programme of at

deal to earn up to 60% interest in the least 12 holes was due to start at the

property by spending $US60 million on time of print and results are expected

nickel sulphide exploration over a five- before the end of 2014.

year period. IMX remains undecided on the fu-

With IMX facing an uncertain future, ture of Ntaka Hill, where an inferred

a light then emerged at the end of what resource of 36mt @ 0.66% nickel and

was shaping as a very dark and gloomy 0.14% copper for 238,500t of contained

tunnel. nickel has been defined.

MMG’s initial exploration programme IMX will complete drilling programmes at both the Chilalo and The company has spent about $60
had unearthed some rather promis- Kishugu prospects before the wet season begins million on nickel exploration at Nach-
ing graphite and gold prospects on ingwea over the past nine years and the

the large 6,800sq km Nachingwea property, cluding 14m @ 14.6% TGC) from 16m. MMG deal was seen as the catalyst to push

breathing new life into IMX as a Tanzania- Rock chip samples from previous explora- the project into production.

focused junior explorer. tion – collected through VTEM surveys dur- “I feel, as an asset, it underwrites IMX’s

IMX acting chief executive Phil Hoskins ing IMX’s search for potential nickel sulphide market cap and it’s not far away from being

told Paydirt he was confident investors would deposits in 2012 – also returned grades of up economic, but it probably needs a little bit

warm to the company’s new streamlined ap- to 29.6% carbon. more exploration,” Hoskins said.

proach. “There’s no shortage of potential graphite “The level of intersections MMG had

“Having iron ore in the same company as supply in the area so for us it was a case of weren’t fantastic, but they were looking for

the Tanzanian exploration was probably never trying to find the highest-quality deposit we a different style of mineralisation, so that

the best fit from an investor point of view, but could because we want to be able to stack up doesn’t mean what’s there couldn’t potentially

now that we are a pure-play Tanzanian ex- with the best in the world,” Hoskins said. be a mine one day.

plorer, I think brokers and investors alike will “Anything above 10% TGC people are “We’re assessing where it sits with us stra-

understand the story a bit more, as it’s a lot calling high-grade, so the grades are quite tegically at the moment, but there certainly

cleaner,” Hoskins said. good. Generally most Tanzanian deposits are is a lot of interest out there and we’ve had a

“We still haven’t recovered to the level we’d coarse flake, but have slightly lower grades, number of unsolicited approaches on the as-

like from a couple of those events, but we so it’s very encouraging to see grades as set so we just need to assess the data that

are doing some good things, irrespective of good as this so early in the programme.” MMG collected and decide what we want to

where the share price is at, and I think that A visual estimate of the first diamond hole do next.”

speaks wonders about the individuals we’ve drilled at Chilalo also appears to have inter- The sale of the Mt Woods tenements, which

got driving the company forward.” sected high-grade, coarse-flake graphite. house the Cairn Hill mine, were sold to Cu-

The Chilalo graphite prospect, about 25km Further assay results are expected to be River Mining Australia Pty Ltd in September

north-west of the Ntaka Hill nickel project released into early 2015 and the company for $3.68 million – a good result for an iron

where MMG was primarily focused, has hopes to define a resource at the prospect by ore transaction in the current climate – and

emerged as IMX’s best chance of boarding the end of the first quarter, if not sooner. handover was due to be completed at the time

the fast-moving graphite train with other po- IMX has also appointed a technical graph- of print.

tential developers along the renowned Mo- ite specialist and a marketing consultant in a IMX also launched a rights issue on No-

zambique Belt. bid to secure an early off-take agreement and vember 17 to raise $3 million to help the

Assay results from the initial six RC holes stand alongside other potential graphite pro- company move past a number of upcoming

drilled at Chilalo returned a number of promis- ducers out of Africa. milestones, including the maiden resource

ing hits for graphite, including 24m @ 11.7% “There are certainly a lot of graphite com- estimate for Chilalo.

TGC (including 14m @ 14.9% TGC) from 28m, panies out there all trying to push forward as – Michael Washbourne
15m @ 11.9% TGC (including 10m @ 13.7% quickly as possible, while capturing a small

TGC) from 58m and 18m @ 12.7% TGC (in- market, but I feel we’ve caught up to the pack

PAGE 64 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT



INDABA PREVIEW

Azumah up for funding fight

Azumah Resources Ltd managing director Managing director Stephen Stone (centre) with members of Azumah’s field team in Ghana
Stephen Stone is gearing up for a fight that
would make his company’s namesake proud. called for a different approach and we saw posit, is slated for the first half of 2016.
bringing the people who were going to partici- The Ghanaian Government has granted
Stone will go into battle for his company pate in the project directly in [to the company]
over the next few months as he looks to se- as something we could all benefit from,” Stone two 15-year mining licences to the company.
cure vital development funds for the Wa gold said. Other operating permits are being progressed
project in Ghana, ahead of the likely start of via the updated environmental and social im-
construction in the second quarter of 2015. “We thought it was important that they also pact studies.
become shareholders of the company and
It might pale in comparison to any of the they’ve embraced that and it’s worked very “Operating cash costs and capital costs are
world title bouts legendary Ghanaian boxer well so far. By being a shareholder in the pretty much where we’re expecting them to be
Azumah Nelson contended during his deco- company, we’ve now got some key owners all and we’ve worked hard to minimise those as
rated boxing career, but locking down project with an interest in the project proceeding and much as we can, so it’s really now a question
finance will be an epic tussle given the current therefore their interests are aligned with ours of sitting down with the Ghana Government
lack of sentiment towards gold juniors in West and our shareholders. Now it’s just a matter of and working in partnership with them to see
Africa. how we go forward from here.” how we can get the project up and running
and bring a new industry to what’s a relatively
The enormity of the task is certainly not lost Azumah is expected to release the results underdeveloped part of Ghana,” Stone said.
on Stone, but he is determined to break the of an updated feasibility study for the Wa pro-
shackles of a tough equity market in a bid to ject before the end of the calendar year. “We’ve had nothing but support from the
keep the proposed 100,000 ozpa operation Government, both locally and nationally, and
on track for first production in mid-2016. The company is targeting C1 cash costs of everybody is keen to see the project proceed.
about $US718/oz and gold recoveries of 92% There’s been no pushback from any groups
“The elephant in the room – both for us over the initial seven-year mine life, based on at all.”
and other intending developers – is financ- ore reserves of 624,000oz @ 2.14 g/t gold
ing these projects and, in particular, obtain- as well as an additional mining inventory of Azumah is also in advanced discussions
ing the non-debt component when the market 28,000oz of inferred mineralisation. with private sector electricity providers and
doesn’t have a lot of equity available for the the company intends to open talks with road
junior end and when share prices are a frac- Commissioning of the nominal 1.2 mtpa regulators to obtain the approvals required for
tion of what they were a few years ago,” Stone CIL plant, adjacent to the flagship Kunche de- a haul road to the Julie deposit.
told Paydirt.
Further exploration is also on
“We think the project will attract a fair pro- the cards to see out 2014, in-
portion of debt and we’re looking at a whole cluding a drilling programme to
cocktail of other financing options, but we test high-priority targets north
don’t see those secondary options as the real and south of the Kunche and
solution. The reality in this market is we need Bepkong deposits.
to deal at the project level with a party who
can help us fund that equity gap in some way.” “I think when the market
comes back – and it always
One key piece of the financing puzzle was does – it will see the Wa gold
secured in September when Azumah raised project as a totally de-risked
$1.2 million through the placement of 30 mil- project, in a very safe African ju-
lion new ordinary shares at 4c/share to exist- risdiction, where there is a good
ing shareholder Caitlyn Ltd, a private invest- track record of projects being
ment company chaired by Indian industrialist established,” Stone said.
Agnivesh Agarwal.
“The company is in a good
Caitlyn is now Azumah’s largest share- position in a challenging mar-
holder (12.89%) and has also ket, so investors shouldn’t panic
entered into a subscription but instead stay along for what
agreement with the ASX-listed should be a very interesting
company to potentially partici- ride.”
pate in a project development
funding package. – Michael Washbourne

The proposal also includes Azumah is expected to release an updated feasibility study for
an anti-dilution provision which the Wa gold project before the end of 2014
allows Caitlyn to maintain its
equity position for the next 12
months, while a standstill under-
taking prevents the firm exceed-
ing a 19.99% holding for three
years.

It follows similar arrange-
ments Azumah has structured
with other project partners Aus-
drill Ltd and Macquarie Bank
over the past year. The compa-
ny also holds a 15% strategic in-
vestment in Castle Minerals Ltd,
another Australian junior with a
neighbouring asset in Ghana.

“I think the difficult market has

PAGE 66 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT



INDABA PREVIEW

Gold’s contribution more
than tax and royalties

Anew report published by the World Gold
Council could provide the data needed
to build a blueprint for maximising the impact

mining has on social development in emerging

economies.

How best to capture the benefits of mining

development has been a key topic of discus-

sion at the last three Mining Indabas and as

the debate around suitable tax regimes, local

content requirements and beneficiation legis-

lation rolls on in a number of African countries,

it is likely to be at the fore again in February.

At a time when companies and govern-

ments are under pressure to prove mining

operations are having a material impact on

the wealth and welfare of host communities,

Terry Heymann – managing director of Gold

for Development at the World Gold Council

– believes the council’s latest report, entitled

Responsible gold mining and value distribu-

tion, could play a role in helping governments

design policies that maximise benefits for all

stakeholders.

Heymann told Paydirt it was time the value A new report from the World Gold Council reveals its 15 members paid out $US47 billion in 2013.

distribution conversation was framed around Almost 80% of that total spend was incurred in the country of operation
data rather than emotion, and that the Re-
sponsible gold mining and value namely employees, suppliers,
government, communities and
In the past, there has been adistribution report could provide investors.

much of that data. “In the past, there has been a
data deficiency and that can lead
data deficiency and that can“What we need is to have a to a lack of transparency. This
report helps build trust as it can
data-driven discussion on value

lead to a lack of transparency. Thisdistribution,” Heymann said.

“report helps build trust as it can help“And the primary focus of this
report is the money spent by interested parties better understand help interested parties better un-
gold mining companies and an the economics of mining. derstand the economics of min-
analysis of how this money is ing, increase the ability of citizens

split between the stakeholders, to hold governments to account

in how they use the proceeds of resource

revenues, and ultimately contribute to better

development outcomes.”

Heymann said the report and associated

data could allow governments to design poli-

cies that maximised their countries’ develop-

ment potential.

“For policymakers at the national and local

level it is good to understand what and how

money is spent by industry. It can inform them

when developing their own policies around

taxation, local content, beneficiation and the

like.”

The report was launched at the Intergov-

ernmental Forum on Mining, Minerals, Metals

and Sustainable Development (IGF), held in

Geneva in October. Created in 2005, the IGF

now has 48 member states and focuses on is-

sues related to the sustainable management

and development of the mining sector, partic-

ularly in the developing world. It attracts mem-

ber-country governments, mining companies

and international development organisations.

Heymann said the response to the report

The council’s report highlights the investment the gold industry makes in local suppliers from forum attendees had been very positive.

PAGE 68 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT

“The Geneva meeting was very important shows that of the $US47 billion

because it hosted representatives from min- paid out in 2013, almost 80% of

ing ministries around the world, development that total spend ($US37.4 bil-

agencies, institutions such as the World Bank lion) was incurred in the country

and IMF and they all really engaged with the of operation. From that spend,

report,” he said. $US26.4 billion (71%) went to

The IGF has played a key role in advanc- suppliers, $US6.3 billion (17%)

ing the overall discussion on value distribution on wages and $US4.7 billion

from simply measuring tax receipts to gaining (12%) to government in taxes

a better understanding of how mining can be and royalties. An additional

a driver of broad-based economic growth. $US3.8 billion was paid to pro-

In outlining the agenda for the forum, IGF viders of capital (including divi-

chairperson Glenn Gemerts said: “Social dends and interest).

benefits and community engagement in the As well as providing policy-

minerals sector are the subject of increasing makers with a greater under-

global attention. standing of mining’s diverse

“Meaningful engagement and tangible contribution to economies, the

benefits for the population are crucial to the report is also encouraging com-

sustainable development and management of panies to give more thought to

the mineral sector, for both governments and where and how they spend their

industry. money, according to Heymann.

“A critical component of responsible re- “Value distribution is an area Just 12% of the gold sector’s in-country payments go to
source development is ensuring effective of increased focus for compa- government in the shape of taxes and royalties. The rest
sectoral governance and transparent and ac- nies but nobody is there yet,”
countable local revenue management, as well he said. “However, more atten- is distributed to suppliers and employees

as the inclusion of vulnerable and marginal- tion is being paid and this report helps that in order to provide it to us. They can now use

ised sectors of society that are traditionally process.” it themselves to measure how much is spent

excluded from decision-making spheres.” Heymann said compiling the report had led and analyse it.”

The forum covered a variety of topics – in- the council to generate a common “guidance He said such progress was part of a wider

cluding the role of women in mining and oper- note on expenditure definitions”, which was push by the World Gold Council for greater

ational security and human rights in the sec- used to develop the data in the report. transparency in the sector. The push has al-

“We have companies that have had to work ready seen member companies adopt the all-
out how to access this data for the first time in-sustaining-cost reporting model and other
tor – but Heymann said issues around local
content and building sustainable economies initiatives designed to make
through mining were high the economics of gold mining
on the agenda. clearer.

For policymakers at the national and“There was lots of dis- “It is continuing the theme
of understanding the eco-
cussion around local con- nomics of the industry and

local level it is good to understandtent and other aspects of improving the dialogue about
how this contribution is equi-
“what and how money is spent by industry.integration of mining into
local economies,” he said. It can inform them when developing
“The challenge is that their own policies around taxation, local

to make that happen the tably distributed.

laws, incentives and op- content, beneficiation and the like. “By developing a consist-
portunities need to be in ent and transparent approach

place. to reporting costs and provid-

“The question should be how Global expenditure summary 2013 ing comprehensive insights on the
to use things like local content monies paid to governments, busi-

policy as a catalyst for devel- Based on a survey of 15 members of the World Gold Council. nesses and employees, the report

opment. Countries like Ghana Total number of employees and contractors: 161,916 seeks to address concerns of a ‘trust

are thinking about local content $6.1bn $47.3bn $3.8bn and data deficit’ and highlight the
and the Ghanaian representa- contribution gold mining companies
tive in Geneva spoke at length 13% Total 8% are making to national economies,”
about the potential the Govern- Other out-of-country expenditure Payments to providers he said.
ment has identified. For exam-
ple, Ghana is now producing the payments of capital Heymann admitted the gold indus-
try still needed to improve its public

ball bearings for ball mills in the communication.

country, rather than importing “The gold industry has made big

them from China. strides in the last few years in being

“We see ample opportunity $37.4bn more open and accessible but there
in other areas, such as agricul- is still much work to be done, particu-
ture for food and catering for in- 79% larly in areas of social media.
stance.”
Total global in-country “But the widespread adoption of
expenditure

Heymann said the council’s the all-in-sustaining-cash-cost model

report laid bare many of the facts is an example of the progress being

about mining’s contribution to lo- made; it means companies are talk-

cal economies. ing about costs in a way that helps

“It is clear from the report people understand the dynamics of

that tax is just one element of the industry.”

mining’s overall contribution to – Dominic Piper
economies,” Heymann said.

Based on data from 15 of the All figures are in USD 71% 17% 12%
council’s members, the report
Payments to People and Payments to
suppliers communities government

AUSTRALIA’S PAYDIRT DECEMBER 2014 - JANUARY 2015 PAGE 69

INDABA PREVIEW

Records tumble for Endeavour

Continued strong performance serves to push out the time when
from the new Agbaou gold mine
in Cote d’Ivoire helped Endeavour we would otherwise be bringing in
Mining Corp achieve record annual
group production from just nine the fresh material.”
months of operations.
The Youga (Burkina Faso) and
The ASX/TSX-listed company
produced 346,021oz of gold across Nzema (Ghana) mines are both on
its four operating mines in West
Africa over the first three quarters track to meet or better guidance
and is almost certain to exceed
the full-year guidance of 400,000- for 2014, but Tabakoto (Mali) faces
440,000oz for 2014.
an uphill battle to reach its mini-
Even if the Canadian-based min-
er was to produce the least amount mum full-year production target of
of gold from the preceding three
quarters (106,000oz in Q1) it would 140,000oz.
still finish the year above the upper
end of the guidance. However, Tabakoto will remain

The Agbaou mine has been the the focus of the company’s opera-
company’s standout performer since entering
commercial production on January 27, pro- tions team ahead of the likely start
ducing just shy of 100,000oz in the first nine
months of operation and already exceeding of commercial production at the
the original guidance of 85,000-95,000oz.
new Segala underground mine be-
Endeavour senior vice-president of busi-
ness development, Doug Reddy, said the fore the end of the year.
mine was recovering 55% more gold than was
outlined in the feasibility study, while through- Reddy predicted the operation
put was 37% higher than the original plant de-
sign of 1.6 mtpa (now up to 2.2 mtpa). Agbaou exceeded full-year production guidance in would start to experience produc-
the first nine months of operation tivity improvements during the
“The guys at the mine have been able to quarter as a result of the ramp-up,
consistently feed at a higher rate than origi-
nally anticipated and that’s in part because of in a bid to expand Agbaou’s reserve base and including an increase in ore production from
the softness of the ore,” Reddy told Paydirt.
extend the mine life. the underground sources.
“We also found both the density and grade
of the ore was much higher than we originally Mineralisation was intersected in 88% of “We’re trying to get the Kofi North permit
thought and that has allowed us to have a
higher tonnage going through the plant. the 165 holes drilled as part of the 15,000m established so we can go and mine from the

“That, combined with the fact recoveries campaign, which also returned hits of 5.6m @ Kofi deposits and bring those into the sched-
[97%] are much higher than the more con-
servative number [93%] we assumed, has 32.5 g/t gold and 8.8m @ 8.2 g/t gold at the ule,” Reddy said.
really contributed to all that additional gold
coming out.” P4 target. “We’re also switching over from contractor

Agbaou has also benefited from Cote Two holes at the P2 target also hit miner- to owner-mining in the underground and we’re
d’Ivoire having abundant hydroelectric power
and one of the cheapest power rates in West alisation with high gold grades over very wide building the road out to Kofi at the moment.”
Africa, just 8c/kWh.
intersections, including 77m @ 8.6 g/t gold A second project in Burkina Faso, Houndé,
Endeavour recently carried out exploration
on ground adjacent to the north and west pits (including 5m @ 22.1 g/t gold) and 27m @ 7.2 was going through the various permitting

g/t gold (including 4m @ 34.7 g/t gold). stages at the time of print and is set to be-

“That programme was specifically geared come the company’s fifth operating mine in

towards drilling of oxide resources right be- early 2017.

side the north and south pits [because] it is Endeavour remains one of the few gold

important to add more oxides given that we’ve producers in Africa to prosper in the current

been burning through our oxide reserves at market and Reddy credited the company’s

a higher rate than originally contemplated,” success to a cost-reduction programme that

Reddy said. preceded the downturn in the precious met-

“In the original production plan we have als space.

oxides for years one and two and also con- Reddy also threw his support behind Cote

tinue to have the oxide material slated to go d’Ivoire as a destination for future mining in-

through to year five and we would gradually vestment after several ASX-listed companies

start transitioning the fresh material in years were awarded prospecting tenements in the

three and four. West African nation earlier this year.

“Obviously if we keep this production rate There are currently 24 Australian-based

up, we need to add more oxides or we would companies exploring ground in the French-

be introducing the fresh material sooner, so speaking country, but only one – Newcrest

we’re countering that by doing this additional Mining Ltd – is producing alongside Endeav-

exploration and drilling off resources and re- our.

“I’m sure it’s in part because groups like

ourselves and Randgold [Resources Ltd]

have been saying that Cote d’Ivoire is one

of our favourite countries to be operating in,”

Reddy said.

“It has a very supportive government, good

infrastructure and the power rates of 8c/kWh

are lower than in any of the neighbouring

countries, so it really makes for a good situ-

ation.

“It would be great if we could have another

project in Cote d’Ivoire that we could go and

build tomorrow.”

– Michael Washbourne

Endeavour is continuing to explore around Agbaou in a bid to expand
the reserve base and extend the mine life

PAGE 70 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT

Case histories of discovery

The world’s pre-eminent
gold exploration event

Pan Pacific Perth $A141aE,v2Aaa9riull5ayg.bu0Bls0eitridu2nn0crt1.ai5ltGeST
November 17-18

www.newgengold.com

Presentations will include:

Gruyere (Australia) – Gold Road Ltd Yaramoko (Burkina Faso) Roxgold Inc.
Didipio (Philippines) OceanaGold Corp Galat Sufar South (Sudan) Orca Gold Inc.
Salares Norte (Chile) Gold Fields Ltd
Invincible (Australia) Gold Fields Ltd Aurora (Guyana) Guyana Goldfields Inc.
Natougou (Burkina Faso) Orbis Gold Ltd Cukaru Peki (Bosnia) Reservoir Minerals Inc./
Freeport McMoran Inc.
Kiaka (Burkina Faso) B2Gold Corp
Petowal (Senegal) Toro Gold Ltd

Pan Pacific Perth
November 17-18

Jointly organised by:

Keith Yates & Associates Pty Ltd

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

INDABA PREVIEW

Bongou just the beginning

Predictive began an exploration programme to find the next Bongou last month

Predictive Discovery Ltd ticked off a mile- a resource or not, but we finally decided that the company, the other thing a resource dem-
stone achievement at its flagship Bongou putting out great drilling results doesn’t cut it onstrates is that this is a belt that can produce

prospect in Burkina Faso recently, announcing in terms of persuading people that they are really good grades and nice deposits.”

a maiden mineral resource estimate of 2.2mt actually investing in something concrete,” Roberts said although Bongou was “on the

“@ 2.6 g/t gold. Roberts said. small side”, the prospect was advantaged by

But managing director Paul Roberts told “Apart from providing basis for valuation of its composition, losing little gold as its cut-off

Paydirt the company grades increased.

very nearly steered clear We debated as to whether we should do “What that means is
of confirming Bongou’s a resource or not, but we finally decided the intrinsic grade of the
current resource after deposit – the grade that

completing its last drill- that putting out great drilling results doesn’t cut you would seek to mine
ing campaign at the – would be a lot closer
it in terms of persuading people that they are to 3 g/t,” he said.
prospect in February.

“We debated as to actually investing in something concrete. “For example, when
whether we should do you go from the 0.4

PAGE 72 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT

g/t cut-off to 0.8 g/t cut-off you lose Under the agreement, Toro will be
6,000oz and the grade goes up by
more than 0.2 g/t. What that’s telling required to spend $US1 million to earn
you is that in the block model of the
deposit the blocks that have a grade 51% in four prospects controlled by Pre-
of between 0.4 and 0.8 g/t only have
6,000oz in them, so you can lose them dictive’s subsidiary, Predictive Discov-
without actually losing very much
grade. The key will then be, when we ery Cote d’Ivoire SARL.
go to do a mine plan, to look at ways
of getting the resource grade close to “The first $US1 million they’ll spend in
3 g/t while minimising dilution. That re-
duces capital costs and also increases a year or so and I’m hopeful that will lead
the cash flow a lot.”
to drilling … next year,” Roberts said.
Roberts said Bongou’s maiden re-
source served as a launching pad for “We’ll have the opportunity after the
near-site exploration, which the com-
pany commenced last month. first $US1 million to re-contribute at 49%

At the time of print, Predictive was and if we decide not to [Toro] will need
in the midst of raising $1.85 million by
way of an underwritten rights issue to spend another $US2.5 million to get
to embark on a programme to identify addi-
tional high-grade gold deposits within 20km of 65%. At that point we’ll have a very clear
Bongou, starting at the Laterite Hill Goldfield
10km south of its flagship asset. idea of just how good those permits are

Roberts said there were about 20 immedi- and we’ll still have a good chunk of eq-
ate targets the company wanted to test.
uity.”
“We want to do some geological mapping
… then we’ll be doing some geophysics on Like many juniors, Predictive is doing
the best looking of those, followed by some
geochemical drilling with a power auger drill its best to cut back on costs to ensure
and then on the best of those we’ll do RAB
drilling … and then we’ll do RC drilling,” he every available penny is invested in the
said.
Paul Roberts ground at Bongou.
“The purpose of this is to make sure the
more expensive methods are only used to Roberts, the lone Australian-based
tackle the most attractive targets.”
the managing director couldn’t help but smile Predictive employee, said the company re-
Roberts said Predictive had drilled down to
the limit of an open pit at Bongou, but there at the prospect of a big find below Bongou’s cently cut its staff back to just five in Burkina
was “potentially a whole story at depth”.
current resource. Faso.
Though the company’s short-term future
lies in finding more open-pittable deposits, “The thing about these deposits is that The retrenched employees were essen-

they’re orogenic,” Roberts said. “They can be tially on standby and would return, albeit at a

hugely vertically extensive; they can go down lower rate of pay, when necessary.

1km or more. Roberts firmly believes Predictive is on the

“If you look at the cross-section it looks a cusp of a big discovery in Burkina Faso, and

bit narrow and people say it is pinching out. backs the company to be in production within

But the thing to remember is it is granite and the next three years.

granite forms from below. You’d expect it to “What will really determine that are our re-

expand at depth. It’s in a very good structural sults and the market,” he said.

position, it’s producing very nice grade and “It’s a tough market out there, but we will go

there’s grade right at the bottom. So if you can as fast as we can towards that goal and we

find much more of that material we think that are completely focused on that.”

is a bulk underground mine proposition. And – Rhys Dickinson
there could be 1 moz down there.”

Predictive confirmed its Bongou focus on

October 22 when it signed a heads of agree-

ment deal with Toro Gold Ltd on its Cote

d’Ivoire projects.

Burkina Faso hurt by falsities

At times, unearthing economic gold inter- have high grade deposits and Burkina Faso be solved as various vaccines are being de-
sects seemed to be the easiest part of has increasingly demonstrated … that it has veloped and in the meantime we will do what
Predictive Discovery Ltd’s job in Burkina Faso, many high grade deposits. You look at Orbis is prudent and safe.”
according to managing director Paul Roberts. (Gold Ltd) who has a resource grade of 3.5 g/t
… and then there’s Yaramoko, a Canadian as- At the time of print, Burkina Faso was in the
Not only has the junior endured a roller- set owned by Roxgold Inc, which has a nearly midst of a leadership transition.
coaster gold market of late, it is in a constant 15 g/t underground mineable grade. That’ll
battle to dispel the false perception that West make buckets of money. SEMAFO … are min- A people’s uprising resulted in the military
Africa is unsafe and devoid of high-grade as- ing a deposit called Siou and it is high grade overthrowing President Blaise Compaoré’s
sets. and open pittable. So there are all these neg- Congress for Democracy and Progress par-
atives in people’s minds, but if they were to ty’s rule and former foreign minister Michel
And now, on top of those long-standing in- focus specifically on Burkina Faso they would Kafando was appointed as the country’s in-
vestor concerns, it is tasked with downplaying see it’s a good destination.” terim president.
the threat of Ebola and political instability to
its operations in Burkina Faso. On the encroachment of Ebola, Roberts Roberts, who spoke to Paydirt before the
said it was no threat to Burkina Faso at pre- coup, said Compaore had been a good friend
Roberts said it had been particularly diffi- sent. to the mining industry during his 27 years as
cult for Predictive to shake the broader West leader.
Africa tag and get investors focused on Burki- “It hasn’t been an issue at all, but there is
na Faso, a country steeped in gold discovery always a chance Ebola could reach Burkina “From an industry point of view he’s been
history. Faso and then we would have to operate in a terrific,” Roberts said.
different way,” he said.
“We’ve had a bit of a hard time … because – Rhys Dickinson
there was a perception that (West Africa) was “I doubt very much that it would get to the
a low grade area,” he said. point where we stop work. The problem will

“But in fact all of the countries in the area

AUSTRALIA’S PAYDIRT DECEMBER 2014 - JANUARY 2015 PAGE 73

INDABA PREVIEW

No slowdown for Birimian
in West Africa

Despite the heat coming off West Afri- West African gold opportunities remain enticing for Birimian Gold
can stocks, and a low gold price en-
vironment, Birimian Gold Ltd still has one Joyce said. mineralised trend, within which we think there
eye on increasing its interests in the area. “We have been getting on with the job of should be pods of open-pit mineable miner-
alisation, and that is what we are testing with
Birimian managing director Kevin exploring our key project areas with a view to RC drilling at the moment. We have a solid
Joyce said West Africa was underex- finding resources and developing them over programme of RC drilling to do, which will be
plored and still highly prospective, par- time. It has been a relatively busy year, it is fair the first test over Viper, so it should be quite
ticularly in Mali, where the company is to say, not without its challenges.” exciting,” Joyce said.
currently focused.
The path ahead is clear for Birimian in Mali, With almost $2 million at the end of the
“The opportunities in gold in West Af- where recent drill results from the Viper pros- September quarter, Birimian has enough
rica are still very real,” Joyce said. pect at Massigui included 8m @ 2.92 g/t gold cash to follow up drilling success at Viper and
from surface and 16m @ 1.68 g/t from 8m, also work up new targets into the New Year.
“It is a region that can rapidly and cost including 8m @ 2.98 g/t, 8m @ 1.64 g/t from
effectively be explored using well-known 24m and 18m @ 1.05 g/t from 24m. In addition to infill drilling and extending
and well-developed exploration tech- drill coverage along strike and adjacent to Vi-
niques. It is a good space for juniors to “What we have done there is defined a per, Birimian is keen to chase up prospects
be in. We have spread the net but Mali – Koble, Koting and Koura – identified through
is where we have excellent capacity and aircore and auger drilling.
good relationships, so we would initially
focus our efforts here, but we are open to “We’re also focused on additional new pro-
investigating areas with similar geology ject generation work. We see some opportu-
and exploration projects more broadly in nities in Mali and more broadly in West Africa
West Africa.” at the current time. We are focusing some of
our attention on that as well,” Joyce said.
Outside of its Massigui and Dankassa
gold projects in southern Mali, Birimian In Mali, Birimian finds itself in the right ad-
also has the Bassawa gold project in Li- dress.
beria.
Massigui, which hosts Birimian’s Ntiola
With the Ebola virus severely affect- deposit, is 25km from the Morila JV between
ing Liberia, Birimian has slowed work in the Randgold Resources Ltd and AngloGold
country. Ashanti Ltd.

When conditions allow, the company will be “We think we have really quality assets in
keen to get back to Bassawa, where multiple Mali, particularly around the Morila mine. Our
gold prospects extending over a 15km strike neighbours there are Randgold and Anglo,
have been identified in the Bafawehn region. so we’d like to see some potential synergies
there over time, and that is something that we
“The practicalities of getting the job done in are working towards.”
Liberia now are very difficult. The feeling from
talking to other groups is that the Ebola situ-
ation has started to stabilise and will resolve
itself in time but at this stage we are taking a
wait-and-see approach and we wouldn’t ex-
pect to be on the ground until the New Year,”

RC drilling is being conducted at Viper to define the prospect’s open pit potential – Mark Andrews

PAGE 74 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT

Peak on top after funding boost

Peak Resources Ltd managing director Dar- Darren Townsend getting the IFC involved and also helping out
ren Townsend expects his company’s part- with the due diligence.”
nership with investment firm Appian Natural Townsend said. “This is IFC’s first introduc-
Resources Fund to bring more than just capital tion into rare earths and we’re pretty proud of Appian has raised more than $US200 bil-
to the Ngualla rare earths project in Tanzania. that. We have Appian to thank because they lion for various mining projects around the
certainly put in a lot of hard work in terms of world, but the financial specialists also boast
Appian will pump $US25 million into Peak a strong operational branch, including a host
over the next 12 months, effectively funding of former Anglo American plc, BHP Billiton Ltd
the company’s BFS through to a development and Rio Tinto Ltd employees who have built
decision in early 2016. and managed in excess of 30 mines in Africa.

The first tranche of a $US3 million bridge “They’re a very good partner to have, not
loan facility was received in October and the just in terms of the financial benefits but also
second and final tranche was due at the time in terms of the technical capabilities on of-
of print. Appian was expected to close the fer, so we’re pretty happy to be working with
principal transaction on or before November them,” Townsend said.
30.
“I think a lot of investors in Peak can take
Townsend told Paydirt his company first comfort from the fact we’ve been through this
held talks with the Jersey-based firm in May very thorough process with Appian and suc-
and the partnership, announced in Septem- cessfully come out the other end.”
ber, was already opening doors to new sec-
tions of the investment community. With the major financing component locked
away, Peak’s attention will now turn to com-
The International Finance Corporation pleting the BFS and building on the robust re-
(IFC), a member of the World Bank Group, sults from the PFS released in March.
has emerged as a potential cornerstone in-
vestor after proposing to contribute 20% of Peak has spent just $US16 million on
Appian’s total investment in Peak. Ngualla since picking up the project in south-
east Tanzania, originally as a phosphate pros-
“The introduction of the IFC was really an pect, before making the initial rare earths dis-
Appian introduction and I think it just signals covery in August 2010.
some of the very good connections that Ap-
pian bring to the table through this deal,” To page 76

AUSTRALIA’S PAYDIRT DECEMBER 2014 - JANUARY 2015 PAGE 75

INDABA PREVIEW

A $US25 million investment from Appian will ensure Peak remains fully funded through the BFS

From page 75 over time there will be good availability of “We’re hoping by early January we should
some reagents … but really the main thing have most of that work done and we can then
“We have some peer companies that spend for us now is to confirm and further optimise get into the study proper after that. It’s nice to
close to that every quarter and I think that’s this beneficiation breakthrough. We’ve got have the money to be able to get up and start
testament to the mineralogy being much programmes happening here in Australia and doing these things.”
simpler and testament to the team at Peak,” we’re about to embark on a couple of pro-
Townsend said. grammes in China as well to look at further Unfortunately for Peak, negative sentiment
optimising that process. towards the rare earths market has prevented
“We’ve taken this project from discovery the company’s share price from lifting to dou-
in August 2010 through to getting our
PFS finished in March, and we’re now ble figures despite the flood of recent
fully funded for the BFS. That’s a very good news.
short period of time, particularly for a
rare earths project, and in Africa too, However, there is still a strong de-
and the company is very proud of that.” mand for the high-value magnet met-
als neodymium and praseodymium
The PFS estimated development Peak plans to mine. Both are expected
of Ngualla would cost $US367 million to account for 71% of the company’s
(including a 30% contingency) and revenue once in production.
achieve payback in the third year of full
production. Other key project econom- “It’s a $US3.8 billion a year market
ics include an NPV of $US1 billion, an and half of that market is for the two
IRR of 39% and average annual oper- magnet metals, and that’s not well
ating free cash flow of $US121 million. understood in the market,” Townsend
said. “They are actually light rare
What is yet to be factored into the earths, but that’s where the value op-
project economics is the “game-chang- portunities lie, and we are very heavily
ing” beneficiation breakthrough Peak’s aligned to those magnet metals.
field team achieved following the re-
lease of the PFS. “There is this tarnishing that rare
earths are no good, but it’s not right.
A specifically designed beneficia- Fifty percent of the market is neodym-
tion process helped produce a mineral ium and praseodymium, it’s enjoying
concentrate of 34.4% rare earths, more a 7% compound annual growth in de-
than double the PFS concentrate grade mand and the prices for those two are
of 16.3% rare earths, and containing quite stable and reasonably positive.”
just 6.2% iron in the feed total, com-
pared to 29% in the original estimate. – Michael Washbourne

“That’s a game changer for us be- A beneficiation breakthrough has more than doubled the
cause we can now explore options to concentrate grade estimated in the Ngualla PFS
take this material and locate it closer
to where the reagents are,” Townsend
said.

“Tanzania has developing and
emerging oil and gas opportunities so

PAGE 76 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT

Harmony Gold considers
South African job cuts as

gold price slumps

South African mining firm Harmony Gold With potential job cuts in South Africa on the way, Harmony is hoping an update on the
Mining Company Ltd reported a further Golpu PFS will deliver better news in December
quarterly loss in November and suggested
it might have to cut jobs as it contends with Association of Mineworkers and Construc- However, no acquisition is in immediate
depressed prices and operational problems tion Union (AMCU), whose members have prospect. “This quarter, next quarter, it is un-
which include an escalating battle with illegal downed tools in the past at Anglo American likely that anything will happen,” he said.
miners. Platinum plc in protest at planned lay-offs.
Rival AngloGold Ashanti Ltd Africa’s top
Unveiling its results for the three months to AMCU represents about 72% of Kusa- producer of the precious metal, has said it
end-September, it said losses narrowed by salethu’s miners. could sell assets to reduce its debts of almost
78% to $US21 million, as output rose 6% to $US3 billion.
over 303,000oz gold. Gold producers in general are caught in a
bind as prices tumble and costs climb. Briggs also said the market would get an
But the current quarter will be a tough one update in December on the PFS at Harmony’s
as the company said it was closing its key The spot price fell to fresh four-year lows flagship Golpu project in Papua New Guinea,
Kusasalethu mine west of Johannesburg for early November at below $US1,200/oz – a with new estimates on capital expenditure.
two weeks, to try to remove illegal miners who critical level that many analysts see as a “tip-
are believed to be starting fires in the mine. ping point” that will cause shaft closures. Harmony has already said it expects “sig-
nificantly lower” investment than previous
“The decision comes after a third under- But Briggs said Harmony remained on the estimates which called for spending of almost
ground fire in October was started by illegal look-out for potential bargains as other pro- $US6 billion to develop the mine. Costs will be
miners. Although no one was harmed in any ducers shed operations in the face of falling shared with JV partner Newcrest Mining Ltd.
of these fires, it did result in 10 production prices.
days lost in October,” Harmony said in its Sep- The company’s said its net debt had fallen
tember quarterly results statement. “We continue to keep our eyes on what’s to $US68 million.
happening. The one area that is the most
The company is especially sensitive about likely at the moment is when companies sell – Ed Stoddard and Peroshni Govender,
safety after nine employees died in a fire in assets to assist their balance sheet,” Briggs Reuters
February 2014 at its Doornkop mine. told Reuters.

Harmony has also struggled to get Kusa-
salethu back to full output after shutting the
mine for several weeks at the start of 2013
because of labour violence rooted in union
rivalry.

“Kusasalethu’s production has continued
to be problematic and management is work-
ing on an alternative plan to return the mine to
profitability,” the company said.

Chief executive Graham Briggs implied that
any restructuring at the mine was likely to in-
clude job cuts.

“The plans at Kusasalethu we will be sign-
ing off in the next few weeks. We will have
to go through a negotiating process with un-
ions,” he said on a conference call.

Under South African labour law companies
have to hold talks with unions if they plan lay-
offs.

“If we look at job cuts, 50% of our costs are
on labour, so any major restructuring always
involves jobs and we have to look carefully at
that,” Briggs said.

He said Kusasalethu had not made a profit
since 2012 and the company had been “throw-
ing a lot of resources at it to try and improve
the situation there.”

The company said it currently employs
6,441 people at Kusasalethu, including con-
tractors.

Any move to cut jobs at Kusasalethu could
be met with stiff labour resistance given the
heavy presence at the mine of the hardline

AUSTRALIA’S PAYDIRT DECEMBER 2014 - JANUARY 2015 PAGE 77

INDABA PREVIEW

Harmony agreement for Creasy

The Creasy Group’s Perth-based private exploration outfit, WRE, signed a JV with Harmony Gold in South Africa’s Free State in October

Mark Creasy’s White Riv- 2013, said the company source for the EJV sometime in 2015.
ers Exploration Pty Ltd was formed in 2007 on About $7 million has been spent so far by
(WRE) is eyeing production the back of South Africa’s
from its JV with Harmony introduction of the “use it WRE acquiring borehole databases that have
Gold Mining Company Ltd or lose it” policy under the given the company 1,700 drill holes at an av-
by 2020. current mining law and is erage depth of about 2.5km, sourced from 20
now the second-largest different entities throughout South Africa.
WRE, majority-owned landholder in one of the
(64%) by the Creasy Group, most prospective gold “To drill those 1,700 holes would have prob-
entered the EJV partner- Mark Creasy belts in the world. ably cost about $500 million in drilling and as-
ship with South Africa’s say,” Warburton said.
third-largest gold miner in “Like he has done in
October. Fraser Range and In- Neil Warburton
dia, Mark [Creasy] pegged large amounts of
The EJV covers WRE’s Beisa project and ground [in South Africa] mainly adjacent or
exploration areas near Harmony’s adjacent abutting existing operations. Part of the strat-
operations in the Free State. egy is that we don’t mind spending explora-
tion dollars to determine whether the ground
WRE will manage and fund exploration ac- is prospective for gold, silver or uranium, as
tivities through to a PFS, with both parties to long as we have a direct route or possible
contribute to the BFS based on their interests route to development and mine production,”
– WRE 65%, Harmony 35% – under the JV. Warburton said.
The ground concerning the EJV is next to
Upon completion of the BFS, a mining JV Harmony’s Target mine, where established
will be formalised, at which point Harmony will infrastructure can be leveraged when produc-
increase its stake to 51%, taking WRE to 49%. tion scenarios come into consideration.
Target produced almost 4t gold @ 5.53 g/t
WRE is headed by former Barminco chief in 2013.
executive Neil Warburton, who is also in- Warburton said WRE hoped to have a re-
volved with Sirius Resources NL, Red Moun-
tain Mining Ltd and Peninsula Energy Ltd in
non-executive capacities.

Warburton, who joined WRE in August

PAGE 78 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT

“A lot of the information is not in digital form Jaco Boshoff, executive – mineral resources development and growth, at Harmony, Graham Briggs,
and it will take about six to nine months to col- chief executive at Harmony, Neil Warburton, executive chairman at WRE signing the EJV agreement
late that information. After that, we are going
to have a geological model and, we believe, hannesburg … it is booming at the moment. assets into holding companies to capitalise on
a very large JORC compliant resource. We It is like Perth, in the sense that there are each of its commodities.
have something like 70km of underground cranes everywhere, there is a lot of develop-
diamond drilling located on our property. We ment going on, there is a lot of expansion, a “Doing that will maximise returns to share-
have about 1,600 plans and sections [to as- lot of the big service companies that are ser- holders, in the sense that if gold is running
sess] and we have SRK on board as the con- vicing the world are based in Johannesburg, and there is an appetite in the marketplace
sultants.” and the population is growing at a rate.” we can float the gold off. The place we would
most likely do that is the London Stock Ex-
WRE could be in a position to release a re- WRE owns 31 tenements in South Africa change, AIM or JSE,” Warburton said.
source in 10 months, and with the amount of covering gold, uranium, coal, gas, diamonds
drilling completed, early indications from SRK and manganese. – Mark Andrews
are that some of the areas will be in the meas-
ured category. Therefore the company will look to split its

“With Harmony’s infrastructure we have the
opportunity to be a part of a very profitable
mine, with production potentially in 2019,”
Warburton said.

“Harmony has capacity in their shafts and
treatment facilities at the moment and we
hopefully have a major gold orebody sitting
on our tenement.”

As the EJV gathers momentum, WRE will
contemplate listing on the JSE, AIM or LSE.

Despite its management and ownership
ties in Australia, Warburton said an ASX list-
ing is not an option at the moment.

“We have been talking to a lot of companies
in Australia, and generally speaking South Af-
rica to them is on the nose for whatever rea-
son,” he said.

“A lot of people aren’t fully informed of what
is happening in South Africa. If you go to Jo-

AUSTRALIA’S PAYDIRT DECEMBER 2014 - JANUARY 2015 PAGE 79

INDABA PREVIEW

DRA keeps its head while all
around it others lose theirs

For DRA chief executive Paul Thomson, Competitiveness in the engineering sector by building an understanding of clients’ de-
adapting to the new realities of the mining has heightened in recent years as firms take mands.
sector will be crucial if the engineering house is increasingly desperate measures to win their
to stay relevant in a changing industry. share of the dwindling jobs market. “Every business has to be introspective and
I think we are becoming more of a listening
While other engineering firms have strug- “There is so much competition out there. organisation. Traditionally, engineers dictate
gled to adjust to the end of the mining invest- We are seeing firms undertake projects at the conversation, telling the client what is
ment boom, shedding jobs, profits and, in cost and even take equity in projects to en- possible and how it should be done but that
some cases, solvency in the process, DRA sure they get the work. It is a highly competi- is changing and there is a lot more talking to
has continued to grow. tive space.” clients about feasible solutions.”

Thomson said a combination of long-dura- Thomson said DRA retained its relevance He said the difficulty in finding project fi-
tion projects and a diverse commodity spread nance meant clients were prioritising cost
had somewhat sheltered DRA from the rav- Paul Thomson over the most complete engineering solutions.
ages of the downturn. However, he remains
highly conscious of the need for the firm to “It is an adjustment engineers have to make.
adapt to the new climate. You always want to deliver the best product
but the current market does not necessarily
“It is true that we have fared better than allow for that. Clients are asking for fit-for-
some of our rivals but we have to make sure purpose solutions. They are more inclined to
we are flexible and can adapt to clients’ de- pursue staged developments in which early
mands,” he told Paydirt. production is favoured and the latter stages of
development are self-funded.”
According to Thomson, the role of the engi-
neering firm has changed in recent years with Work is also coming from clients keen to
DRA now offering advice on funding, permit- get everything they can out of assets without
ting and community relations. committing more capital, Thomson said.

“We used to just engineer a project, now Despite making the leap into Australia and
we are assisting with funding streams, help- North America, Africa remains DRA’s primary
ing with licencing issues and other aspects as market. Competition on the continent has in-
well.” creased markedly in the last decade with the

PAGE 80 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT

entry of several Australian engineering hous- “We embrace good corporate citizenship,” 200km away but along with the client we iden-
es but Thomson is adamant African-based he said. “We set up local companies and we tified and then managed the risk associated
firms still offer the best services for African pay local taxes because sustainable growth in with that.”
projects. Africa is dependent on companies doing the
right thing, being good corporate citizens and The latest challenge to the company’s risk
“I think it is a crime when an Australian the appropriate paying taxes.” mitigation strategy comes from Liberia where
company builds a project in Africa,” he said. DRA is working with Aureus Mining Inc on
“They have done well because it is not an Ensuring business opportunities are cre- construction of the New Liberty gold mine.
easy task but we have the local experience ated from mine developments is also part of
and use that to our clients’ advantage. We the shared benefits debate and Thomson said Along with Guinea and Sierra Leone, Li-
understand the logistics, transport, import/ex- DRA was conscious of the mentoring role it beria is ground zero for the recent Ebola out-
port restrictions – all things which can delay a could play in host communities. break but Thomson said the company’s em-
project – in Africa very well. We have a track- ployees were comfortable with their working
record of working in different environments “In South Africa, most of the equipment can environment.
and have been in remote places where basics be procured locally but for the rest of Africa
like telecommunications are hard to come by.” it is much more difficult to do that,” he said. “We have a robust infectious disease policy
“These mines are often the first major indus- in place for any project in any country and in
There are few places in Africa DRA wouldn’t trial projects to be built in the area and the conjunction with Aureus we have created a
work in and Thomson believes that pioneering size of them can affect local companies. policy and protocols for coming to site, moni-
spirit is part of the South African character. toring employees – both onsite and when they
“We try to take on a mentoring role in this return home – and communicating and edu-
“We are quite willing to go to inhospitable situation, identifying local contractors to help cating staff on the disease.
places,” he said. “If you empower an engineer with construction and then identify people
with responsibility for a project, it forces an who can run the mine long after DRA has “It is an ongoing process and we consult
approach of overcoming challenges and find- left. It is part of our sustainable development with a top epidemiologist on changes; we
ing solutions on the ground and I think that is model.” can’t afford to drop our guard.
particularly innate in South Africans.”
DRA has taken on work in a number of “Our employees are there voluntarily. If
The company also works hard to ingratiate challenging locations and Thomson believes Ebola takes hold in our area we will review
itself into host communities. In an era when its ability to work in sometimes harsh environ- again but we are comfortable at this stage
governments, communities and international ments comes down to its risk mitigation strat- that what we have done is best for the project,
agencies are looking intently at the contri- egies. our employees and for the Liberian economy,
bution mining is making to local economies, because if everybody pulls out now, that does
DRA is trying hard to establish itself as a good “At Kibali [the 400,000 ozpa gold mine DRA more harm to the country than the disease
corporate citizen, according to Thomson. built for Randgold Resources Ltd and An- itself.”
gloGold Ashanti Ltd] we had the M26 rebels
– Dominic Piper

AUSTRALIA’S PAYDIRT DECEMBER 2014 - JANUARY 2015 PAGE 81

INDABA PREVIEW

Ebola: Urgent need for
early-response capability

The Ebola outbreak in West Africa, which is identify and prevent at source, the spread of risk by engaging in preventive activity such as
devastating many local communities, high- emerging infectious diseases. Under this pro- health education programmes and disease
lights the importance of host governments, gram, a set of risk-mitigation toolkits has been surveillance and alert networks, as well as in
industry and the international community hav- co-developed by FHI 360 (a non-profit human outbreak preparedness and response activi-
ing an immediate, first-response capability in development organisation) and Ecology & En- ties by jointly establishing an early-response
place. vironment (a global network of professionals capability with appropriate PPE (personal
and industry leaders). protective equipment), strategically located
The absence of this capability in Guinea, in-country, and a capable management team
Sierra Leone and Liberia has likely contrib- These toolkits are an integral component at-the-ready.
uted greatly to the recent rapid spread of the of the IDRAM Initiative, a programme led by
disease. Chatham House, and again funded by USAID, This team should include medical and para-
that supports companies in the extractive in- medical people from the various mines within
Previous outbreaks of the viral haemor- dustry in emerging infectious disease risk as- a mining region, as well as representatives
rhagic fevers Ebola and Marburg have gen- sessment and management. Field testing of from the provincial health authorities. The
erally been easier to contain because they the toolkits in the Katanga Copperbelt was team should be capable of reacting within
have been in remote rural areas with lower undertaken in mid-2014, project managed by hours of the notification of an outbreak, not
population densities and lower population International SOS, and involved four copper days or weeks. Regular simulation exercises
mobility. Under such circumstances, risk miti- mining companies; Freeport McMoRan Inc held in collaboration between mining compa-
gation measures have been much easier to (Tenke Fungurume Mine), MMG Ltd (Kinse- nies and health authorities can ensure that
implement. Once the disease gets into higher vere Mine), Tiger Resources Ltd (Kipoi Mine) staff skill levels are maintained and manage-
population centres, which are more mobile, and Mawson West Ltd (Dikulushi and Kipoi ment processes continually refined to opti-
the disease can easily spread locally and to Mines). mise the response to a real outbreak when
international destinations. The mortality rate one occurs.
for Ebola infections is 60-80%. Professor David Heymann, head of the
Centre on Global Health Security at Chatham Directors and senior officers of resource
Mining companies often develop projects House and one of the experts overseeing the companies have a duty-of-care responsibil-
in relatively remote and undisturbed animal IDRAM Initiative, has many years field experi- ity to provide a safe working environment for
habitats. The deforestation that accompanies ence responding to Ebola outbreaks and as employees, no matter where in the world they
the building of new roads and power lines, the with previous outbreaks recommends a three- happen to be deployed. This becomes more
installation of processing plant and buildings pronged response strategy. of an issue when the deployment is to remote
and the inevitable expansion of the footprint locations characterised by increased levels of
of local communities and agriculture tend Firstly, patients are identified and isolated; health risk on the African continent.
to fragment wildlife habitats and increase and protective clothing provided to health
the chances of zoonotic disease transfer to workers. Directors and senior officers of compa-
humans. As more than 75% of emerging in- nies also have a responsibility to provide an
fectious diseases in tropical “hotspots” are Secondly, contacts of all patients with appropriate level of guidance and training
known to have originated from animal reser- Ebola are monitored, and their temperature to employees before deployment to projects
voirs, the threat to human life in the vicinity of taken twice a day for three weeks (the maxi- and mine sites in Africa. This training must be
remote mining operations is obvious. mum incubation period). Those with fever are consistent with the employee’s experience in
isolated until diagnosis can be confirmed and dealing the risks likely to be encountered.
The animal groups considered most likely those with Ebola hospitalised.
to spread new Ebola and Marburg infections Rather than companies doing their “own
to humans include bats and non-human pri- Thirdly, individuals are informed on how to thing in isolation” at individual mine sites,
mates (apes and monkeys). Eating infected protect themselves and their families and a a coordinated industry approach which in-
game meat is the common transmission route system for safe burials is instituted in commu- cludes the host government health authori-
for the local population. The common per- nities that have been affected. ties is more likely to deliver a better result.
son-to-person transmission route is through Mining companies within a particular region
blood, body fluids and tissues of an infected Unfortunately, local customs, particularly could contribute to the cost of the PPE equip-
person. It is the potential for new outbreaks of those associated with burial rites, are often ment and other prevention and response in-
Ebola and Marburg that resource companies responsible for the rapid transmission of dis- terventions deemed appropriate on the basis
are currently focussed on. ease. Had this three-pronged procedure been of company size or production level, so that
implemented at the first signs of the outbreak costs are equitably shared. Such an approach
The issue of emerging infectious diseas- in Guinea, perhaps the current situation could is not only likely to be considerably more cost-
es in the tropical “hot spots” has attracted a have been largely avoided. effective, but more importantly, may be more
great deal of research work in recent years effective at mitigating the devastating health
under the Emerging Pandemic Threats Pro- Resource companies operating in regions risks associated with such disease outbreaks.
gram funded by USAID, the aim of which is to of Africa where emerging infectious diseases
are known to be an issue need to work togeth-
er and with local health authorities to minimise

Trish O’Reilly is chief executive of AAMIG. She Bill Turner is chairman of the Australian African
has over 30 years’ experience across the public, Mining Industry Group (AAMIG). He has worked
private and not-for-profit sectors, working with a internationally at a senior level in Africa, the Mid-
range of communities and population groups in dle East, the Former Soviet Union and South-East
South Africa, England and Australia. Her most re- Asia for more than 30 years. He has been involved
cent role with the Department for Communites in at all levels, from grass-roots exploration through
the Government of Western Australia included time to mine development and metal production and his
as manager of policy and planning and manager most recent position was as chief executive of Anvil
active ageing strategy. Mining Ltd.

PAGE 82 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT

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INDABA PREVIEW

At last … uranium set to
glow again for Paladin

Paladin completed the 25% divestment of Langer Heinrich in July, providing a timely cash boost for the company

The embattled uranium sector is set for a 2011 to 43c/share at the time of print. facility and $US1.3 million for syndicated loan
reprieve, according to Paladin Energy Ltd Paladin ended the September quarter with facility costs.

managing director John Borshoff. $US209.5 million cash and cash equivalents, It was a timely cash injection for the com-

As the spot uranium price continues to with the 25% divestment of the Langer Hein- pany, as extended maintenance and an un-

show signs of improvement – $US43.50/lb rich mine in Namibia a key component to its expected scaling issue at Langer Heinrich

balance sheet recovery. pegged sales revenue back by 44% to $US39
at the time of print – Borshoff said promising million, compared with September
times are ahead for yellow cake 2013 quarterly results.
players. Gross profits were also down on
the corresponding 2013 quarter,
“We are starting to sense with Paladin reporting $1.4 million
– a gross loss of $US14.9 million.
We are starting to senseamongst all the doom and gloom “In the three months since the
amongst all the doom andof previously favoured commodities completion of the Langer Heinrich

such as iron ore, coal, gold and the

gloom of previously favouredlike, that at long last uranium and

“commodities such as iron ore,nuclear is on another more posi-
tive trajectory, with a lot of upside coal, gold and the like, that at long JV, Paladin has focused on nego-
to come,” Borshoff said during a last uranium and nuclear is on tiations with several nuclear parties
presentation of the company’s Sep- offering a diverse range of com-
tember quarter results. another more positive trajectory, plementary options for association
and all possible because of the high
“The door to the pre-Fukushima

period is at long last starting to with a lot of upside to come. value Paladin has to offer for lever-
open and those supply shortages age and growth,” Borshoff said.

that I have for so long been talking “This process is well under way

about will now start becoming the and in the coming months choices

real issue and the fundamental catalyst for The Langer Heinrich sale to China National will have to be made by management and

driving price increases. Nuclear Corp (CNNC) was completed mid- board as to which set of options present value

“This is the positive backdrop which com- 2014. It saw Paladin receive $US170 million and opportunities for Paladin shareholders.

panies in the uranium industry now find them- – $US30.8 million of which was reserved for Our primary focus remains deleveraging our

selves and sentiment is starting to turn and I repayment of Langer Heinrich project finance balance sheet and the current funding initia-

do believe at long last we are starting to come tives that we have on the table are designed

back from the cold.” to meet these objectives.”

Uranium prices had started to recover from By September 30 2015, Paladin must meet

the depths of $US28/lb (mid-2014), well be- further repayments totalling $US40.4 million

fore Japan restarted its nuclear programme, in secured bank loan principal repayments

while the US and China’s declaration of nu- and interest repayments for syndicated loan

clear as a key technology to help reduce and facility and convertible bonds.

manage climate change emissions generated Borshoff did not go into the specifics of the

by fossil fuels was another boost for the in- financing options being considered by man-

dustry, Borshoff said. agement, with a rights issue unlikely.

While these developments have taken A decision on financing is expected in the

place, Paladin has continued its efforts to short-term to allow Paladin to repay $US300

consolidate its business. million of unsecured convertible bonds matur-

The company, like many uranium outfits ing on November 5 2015.

across the globe, has endured a torrid time “I can assure you discussions are well ad-

since 2010, with Paladin’s share price plum- vanced to achieving positive outcomes in this

meting from about $5.50/share at the start of John Borshoff regard,” Borshoff said.

PAGE 84 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT

“With a more speedy uranium recovery “This is considered an important objec-
and our ability to expand production with
speedy delivery through the Kayelekera tive to finalise to be fully ready for project
re-start and the Langer Heinrich stage
four expansion, I truly believe we are well start-up when prices recover sufficiently.
positioned to take full advantage of the
positive future we foresee in this industry.” All operational parameters are known for

Paladin is looking to make up for its this project start-up, which has minimum
lower than expected uranium sales per-
formance in the September quarter (1.25 risk associated. It is an important docu-
mlb sold at $US31.16/lb) with 1.9 mlb fore-
cast to be sold in the December quarter. ment of what will, in effect, be a start-up

With maintenance and scaling issues manual along with obtaining better defini-
eradicated at Langer Heinrich, Borshoff
said the mine was operating at design ca- tion of feasibility factors and asset value,”
pacity, and uranium production of 5.4-5.8
mlb was guided for financial year 2015. Borshoff said.

During this period, Borshoff expects Kayelekera was placed on care-and-
uranium supply to tighten even further,
resulting in upward pressure on uranium maintenance in May 2014, stripping global
prices.
uranium supply of 3.3 mlb per annum.
“It is clear now that what happened in
2014 – the production cutbacks because There is strong government support for
of low uranium prices – is starting to have
an effect on supply, particularly the spot mar- operations at Kayelekera to be switched
ket for 2015,” Borshoff said.
back on and while Paladin endeavours
“Production cutbacks that have occurred
are well documented and according to our to do so, it is also on the ball in Western
estimates this amounts to about 6-8 mlb. Add
to this 4 mlb that has permanently been re- Australia.
moved from the spot market to term contracts
and you have a total of 12 mlb per annum now The company is advancing towards a
not available to the spot market that was avail-
able for FY2014.” field leach trial at its 24 mlb Manyingee

However, the consequent price rises driv- project, where a low-cost ISR 2 mtpa de-
en by a shortfall in supply will not be great
enough to encourage the on-stream of new Paladin is getting closer to field leach trials at velopment is being planned, subject to
production. Manyingee in Western Australia further improvements in uranium prices.
Field leach testing is planned for
“The irony is that even these prices will
be totally inefficient to incentivise new start- growth that is needed in supply to satisfy the 2015/16, with Paladin targeting resources of
ups to accommodate the extraordinary
growing demand,” Borshoff said. 40 mlb.

“With each year that the building of new Pricing dependent, production is slated for

mines is delayed, the greater the price reac- 2018, which could be followed by the Michelin

tion – this is inevitable.” project, Canada, in 2021.

Paladin has previously stated that a urani- Drilling completed at Michelin in March suc-

um price of about $US75/lb would be needed cessfully upgraded the resource by 25% to 84

for it to bring Kayelekera in Malawi back on- mlb (measured and indicated) with 23 mlb re-

line. maining inferred.

While the industry is currently enjoy- From its tenements in Canada, Paladin is

ing sharp increases in uranium spot prices, targeting a global resource of 200 mlb ura-

just when prices will reach that incentivised nium.

$US70-80/lb is difficult to forecast. – Mark Andrews
Nevertheless, Paladin is moving now to

ensure Kayelekera is positioned to take ad-

vantage of high times in the uranium market.

During the September quarter, Paladin initi-

ated the Kayelekera project’s restart feasibil-

ity study.

Kayelekera will be switched back on when uranium prices move towards the vicinity of $US75/lb
AUSTRALIA’S PAYDIRT DECEMBER 2014 - JANUARY 2015 PAGE 85

INDABA PREVIEW

Mankarga 5 delivers a
nice surprise

They say fortune favours the brave, but @ 2.58 g/t from 30m, including 7m @ 4.54
often in the exploration game, it also fa-
vours the lucky. g/t gold.

Richard Hyde is the first to admit that the The same programme later returned a
cards started to fall his way upon West Af-
rican Resources Ltd’s (WAF) acquisition of 15m @ 4.69 g/t gold from 17m, including 7m
the Burkina Faso Tanlouka project.
@ 9.15 g/t gold, intercept.
But the managing director made a point
to Paydirt that it was also good manage- Such was the company’s confidence in
ment that helped the company to make the
most of its opportunity. Mankarga, in February it purchased a sec-

WAF acquired TSX-listed neighbour ond-hand 1.6 mtpa heap leach plant from
Channel Resources Ltd in January follow-
ing the collapse of the longstanding Burki- Ghana.
na Faso explorer and in turn took control of
its Tanlouka project, which already had a “It was an opportunity that was there and
resource and bordered the company’s exist-
ing Boulsa project. the plant was in reasonable condition and it

Hyde said although Channel failed to have was at the right price,” Hyde said.
success at Tanlouka, WAF saw a lot of poten-
tial in the project, particularly its Mankarga 5 “It just happened that the project suited a
target.
plant of that size.”
“One of the things we identified was that the
project needed more drilling density in the ox- Contract drillers on site at Mankarga 5 Just a month later, following the comple-

tion of the initial drilling campaign, WAF re-

ide zone,” Hyde said. leased a new resource for Mankarga 5, boost-

“The historical work done by Channel in- ing the deposit’s indicated resource to 10.8mt

dicated they were chasing deeper structures @ 1.3 g/t gold containing 437,000oz (a bump

with drilling … but we thought we should focus of 12%) and inferred resource to 32.7mt @ 1

on the oxide to lift gold grades near surface.” g/t containing 1.05 moz (up 74%).

The company went to work at Mankarga 5 The company also confirmed a near-sur-

in late January, with a 7,500m drilling cam- face oxide and transitional zone indicated

paign returning shallow gold intersects of 16m resource of 6.6mt @ 1.2 g/t gold containing

PAGE 86 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT

252,000oz and similar inferred figure of At the time of print, work was on hold
2.7 mt @ 0.9 g/t containing 252,000oz.
at Mankarga 5 following a peaceful mili-
As it stands, Mankarga likely has a
five-year mine life, but Hyde said ideally tary coup resulting in the overthrow of
WAF would like to bump that to seven
years, making it more attractive to fi- President Blaise Compaoré.
nancers.
Hyde said although the situation
“That gives us enough tail on the pro-
ject that it’ll make it more attractive for seemed dire to outsiders, he believed it
banks to fund us,” he said.
could be the best thing for the country.
Hyde said although it was once com-
monplace to have a 1 moz deposit, he When Paydirt went to print, former
felt smaller projects like WAF’s were far
more attractive to the frugal investor. foreign minister Michel Kafando had

“If you have a small project that pays been appointed as Burkina Faso’s in-
back capex in 12-18 months it’s a much
more attractive funding scenario for terim president.
banks because their money is at risk for
a much shorter period of time,” he said. “The timing was difficult as we were

“The bigger the project, the longer their talking to a few groups about funding
money is at risk.”
and those discussions are ongoing,”
WAF garnered the financial backing of
Macquarie Bank Ltd in October, signing a Hyde said.
committed term sheet with its Metals & En-
ergy Capital Division to provide a two-year “I think given what’s happened re-
$US5 million convertible loan facility to fund
the completion of Makarga’s feasibility study. West African Resources has had success near surface cently we might have a few delays on
and at depth at Mankarga 5 our timeline but I don’t see them being
Hyde credited the project’s metallurgy for major delays.”
getting Macquarie on board.
dised ore – the type most likely to be mined Hyde said WAF was committed to achiev-
WAF achieved gold recoveries of up to 90%
by the way of column test work in October, during the early stages of the project – ex- ing production in 2016 and was in the process
confirming the company’s heap leach starter
development approach. ceeded recovery expectations, with 75% gold of compiling a PFS and EISA.

In a bonus for the company, strongly oxi- recuperated within just seven days. “We need the ESIA completed so we can

The company’s most recent work was con- apply for our environmental permit and once

ducted at the deposit’s south western zone at we’ve got that then the Government can grant

depth, returning a 72m @ 2.2 g/t gold inter- the mining permit,” he said.

cept from 231m. “Once we have got both of those in place

“That 800m zone hangs together really well we can complete the mining convention with

over 30-50m true width and within it there are the Government and effectively start moving

some higher grade zones as well,” he said. dirt.”

“With the quality of these grades there is – Rhys Dickinson
potential for underground mining. You could

look at a developing a decline off the bottom

of the pit.”

AUSTRALIA’S PAYDIRT DECEMBER 2014 - JANUARY 2015 PAGE 87

INDABA PREVIEW

Namdini a catalyst for Cardinal

It might still be early days for Cardinal Re-
sources NL in Ghana, but managing director
Archie Koimtsidis has the company’s game

plan all laid out in his head: get mining early

and keep on exploring.

Koimtsidis’ vision was first conceived when

the West Australian-based explorer acquired

100% interest in four targets in one of Ghana’s

most prospective gold regions in August 2012.

Located in a Paleoproterozoic granite-

greenstone belt in the north-east of Ghana,

close to the border of Burkina Faso, Koimtsi-

dis said Cardinal had an eye on the prospects

that now make up the company’s Bolgatanga

project.

“Myself and our exploration manager Paul

Abbott have been working in West Africa for

the past 25 years and we picked up the Bol-

gatanga project at a time when the northern

sector of Ghana was not being looked at due

to lack of infrastructure, power and water,” Ko-

imtsidis told Paydirt.

“We came out to the northern area of the

country almost 20 years ago and identified

gold then. We knew the geology was there

and it had a resemblance to the early days at Drill testing of the northern extension of Namdini is under way
Kalgoorlie.”

Cardinal’s early exploration work focused September served as a launching pad for fur- of confidence to start scoping it out for near

on Bolgatanga’s Ndongo target, which was ther work at Namdini. term mining,” he said.

the subject of a geochemical and airborne The rights issue helped fund drilling in No- “What we’d like to do in the big picture is

geophysical survey in mid-2013 and targeted vember, with one intercept returning 43m @ mine that one for cash flow, because there’s

with multiple drilling campaigns early in 2014. 2.27 g/t gold from 87m (including 3m @ 11.71 a mill approximately 6km away. So we’ll have

But recently the company’s focus has shift- g/t) and 2m @ 6.96 g/t. high-grade, shallow gold to take to a mill up

ed to the project’s Namdini target. Despite good drill results, Koimtsidis said the road that is underutilised. What we are

“There hadn’t been any substantial, pub- there was still more work to be done at Nam- hoping to do is use the ore out of that pros-

licly available data on Namdini, so it was very dini. pect to draw out cash flow which will then fund

green,” Koimtsidis said. “We hope to drill it out to a reasonable level us for exploration on another few kilometres

“We had a methodical ap- of strike. The orebody runs along

proach and it took time to estab- strike for at least another kilome-

lish geophysics, geology, soils tre ahead of us, you can see it on

and sampling programmes be- the surface. Looking north, we’re

fore we started drilling it.” actually drilling into the orebody

That methodical approach from the surface.”

proved its value though, as Car- At the time of print, Cardi-

dinal’s first run at Namdini in July nal had two drill rigs testing the

netted intercepts of 40m @ 1.37 northern extension of Namdini.

g/t gold from 14m vertical depth, Koimtsidis said work at Cardi-

18m @ 3.12 g/t from 16m (includ- nal’s other Ghanaian acquisition;

ing 1m @ 24 g/t from 26m) and the Subranum project – south of

17m @ 3.77 g/t from 30m (includ- Bolgatanga and the subject of

ing 1m @ 44.3 g/t from 37m). an airborne survey in January –

Subsequent drilling cam- would play second fiddle to work

paigns ensured good news flow at Namdini.

for Cardinal – another six RC But he expected the company

holes drilled in August intercept- to revisit the target mid-2015.

ed 6m @ 4.5 g/t gold from 65m, “We need to do some more

10m @ 4.17 g/t from 47m and 5m work on the ground with some

@ 4.16 g/t from 50m. ground geophysics to confirm it,”

Soon after, Cardinal an- he said.

nounced the discovery of a sec- “In another six months we’ll go

ond and third sub-parallel zone back to it. It has an internal re-

at Namdini, which Koimtsidis source … but we can’t go public

said was encouragement to con- on that just yet.”

tinue work at the prospect. – Rhys Dickinson
A $900,000 non-renounceable

rights issue from sophisticated

and professional investors in Namdini neighbours China’s Shaanxi Mining Company Ltd’s Ghanaian gold play

PAGE 88 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT



INDABA PREVIEW

Kwale proves Base camp
for Kenya

While there is a host of interna-
tional resources companies now
considering entering Kenya’s nascent

but rapidly evolving mining sector,

Australian company Base Resources

Ltd made the decision years ago.

The company’s Kwale mineral

sands project, near the coastal city of

Mombasa, represents the first direct

major foreign investment in Kenya’s

modern mining sector and is seen as

a test case for its future growth.

Kenya offers promising mineral

potential, which includes rare earths,

gold, copper, iron ore and coal.

The Kenyan Government is in the

process of replacing its 74-year old

colonial mining act to attract other in-

ternational mining companies; many

of which have been eager to invest

in the largely unexplored region, but

unwilling to enter a market with uncer-

tain regulations.

Base entered the market in 2010,

taking over the Kwale project from

Canada’s Tiomin Resources, which

was languishing due to land disputes

and financing issues. After finding export permits difficult to come by, Base is now ramping up delivery of its mineral
Mining at the operation, with a total sands product to shipping facilities in Mombasa

project capital cost of $US350 million

and an estimated 13-year mine life, began last The project is expected to contribute an es- 35% of mining companies be held by local

October and achieved first production later in timated $US225 million in tax revenues to the shareholders; a move which was subsequent-

the year. Government over its mine life. ly abandoned.

The company’s local subsidiary, Base Ti- Base is also investing heavily in community Only months after completing its first ex-

tanium Ltd, exported its first shipments of il- and social infrastructure in Kwale County. ports, Base received an invoice from the

menite, rutile and zircon early this year and Mining, alongside the nation’s emerging oil Kwale County Government demanding a

achieved a maiden cash flow-positive quarter and gas sector, has now been recognised as $US57/t levy on exports, an extra cost which

in June. a key future wealth creator for Kenya. would weigh heavily on the project’s financial
“Base Titanium’s general manager of exter-
However, expectations of a burgeoning viability.

nal affairs and development, Base is confident the de-
mand is unlawful and will
Joe Schwarz, who was born It is true to say, that because eventually be dropped.
in Kenya before migrating to
“It’s unconstitutional. The
Australia, has overseen the there’s been little experience of constitution very clearly
project’s development. this scale of project in the country’s places the administration and
ownership of minerals with
“Our experience has not the National Government and

been straight forward, in the mining sector, the Government has really
sense that we represent a been learning as much as we have.

pioneering project in the min- it is not a function devolved to
erals sector,” he said. the counties at all,” Schwarz

“It is true to say, that be- said.

cause there’s been little experience of this extractives sector have sparked disputes be- “We are totally confident in our position that

scale of project in the country’s mining sector, tween Kenya’s national and county govern- it can’t be applied. That’s been confirmed by

the Government has really been learning as ments, as well as community stakeholders; all the relevant National Government authorities

much as we have.” eager to lock in their share of future revenues. responsible for devolution and legal affairs.”

Kenya is East Africa’s largest economy, but The issue is made more complicated by the It’s this regulatory uncertainty that Kenya’s

its resources sector has been left relatively fact the nation is still thrashing out the working new Mining Bill is attempting to address.

undeveloped compared to its neighbour Tan- details of its new 2010 constitution, which led The Bill stipulates a clear 70%-20%-10%

zania. to the devolution of certain national govern- royalty split between the National Govern-

Before the Kwale project, mining in Kenya ment powers to county governments. ment, county governments and the local

accounted for only around 0.7% of the na- Base’s share price temporarily tumbled community; while also offering more stable

tion’s GDP. The project aims to more than in 2012 after the National Government an- and transparent mineral rights and licensing

double that figure. nounced it was introducing laws requiring that provisions.

PAGE 90 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT

The 35% local equity require-

ment has also been replaced with

a new provision enabling the Na-

tional Government to acquire a 10%

free-carried interest in new mining

operations.

Despite the new regulatory

framework, Schwarz expects

Base’s existing rights and licenses

to remain unchanged.

“The major feature of any change

in legislation, particularly in a long-

term investment environment like

minerals, is that it must provide

stability. It needs to provide continu-

ity of pre-existing rights for current

licenses and leases going forward

and that really has been the main

focus of concern in this mining bill

for us. It looks like this will occur.”

However, Schwarz believes the

new regulations will help prevent

complications for future projects.

“The radically new system of

government will take a bit of time to

bed down. The counties do need

to see benefit from their own natu-

ral resources. This is going to take The Kwale mineral sands mine near Mombasa in Kenya. The mine is the country’s first
time to evolve properly, but the new commercial-scale minerals operation
Mining Bill provides for a sharing of

mineral royalties to the counties and a portion county governments to ensure they don’t re- first of many large-scale projects in the nation.

to the communities as well. That will go a long strict the growth of their own company.” “Being the first large mining project in the

way to redressing the view that the counties Despite many of the inevitable challenges, country, it has brought mining into the lime-

are being deprived of any benefit from ‘their’ Gladys Kianji – chair of mineral exploration in- light and Kenyans have realised we have re-

mineral resources.” dustry group, the Geological Society of Kenya sources.

While the new regulations are more certain, – is confident about the sector’s future. “There have been some teething problems,

the politics surrounding them are anything “I see minerals and mining as being one of but again I attribute this to unclear legislation.

but. the top income earners for this country. I be- With clear rules and regulations, such issues

The Bill, which was passed by parliament in lieve that in five years we’ll begin to see the can be avoided.”

late October and at the time of print is awaiting change and in 10 years it will be clear that As for Base’s Kwale project, Schwarz said

President Uhuru Kenyatta’s assent, has reig- this country has become a mineral economy the operation is in good shape.

nited a power struggle between the County country like several other countries around “We are on schedule against our ramp up
“Senate and the National Assembly.
Senate members, who the world,” she said. projections and in some areas ahead of tar-
want a greater percent-
age of royalties directed get. We are confident of
to counties and local com-
munities, said they weren’t A lot of the sentiments around meeting or beating our key
adequately consulted during performance parameters.”
the parliamentary process
and demanded the Bill be politics with the community can Despite the past challeng-
be managed well, in other words we es he’s also confident about
the future of Kenya’s mining

can de-politicise community issues. sector.
The community can act as lobbyist with “The potential is there,
county governments to ensure they don’t
sent back to parliament for purely because of the lack of
further review. historical exploration in this
country. Minerals have real-
Investment banker, Amish

Gupta of Standard Invest- restrict the growth of their own company. ly been ignored historically;
ment Bank in East Africa, the focus has traditionally

said while there was strong been on agriculture and lat-

global interest in Kenya’s terly tourism, but I think our

mineral sector, political and community insta- Kianji believes the National Government’s project has spurred interest in the potential of

bility puts it at risk. initiative to conduct a national airborne geo- minerals.”

He believes if mining companies chose to physical survey will encourage further explo- And his advice for prospective miners con-

make local community members direct share- ration, adding to the healthy level of current sidering entering the sector: “It’s not easy,

holders it could help avoid damaging disputes. activity. you need determination, constant, open and

“The co-operative society movement is “There are companies like Acacia Mining transparent dialogue with government and

very strong in Kenya. There are many ways in exploring for gold. communities and if you get that formula right,

structuring, in how you can get the community “There is exploration in rare earths, copper, then you are on the way to a successful pro-

involved in shareholding,” Gupta said. iron ore, limestone, gemstones, as well as in ject.”

“A lot of the sentiments around politics with other prospective areas for mineral sands,” – Andrew Thompson, Nairobi
the community can be managed well, in other she said.

words we can de-politicise community is- “That’s combined with exploration in oil and

sues,” he said. gas.”

“The community can act as lobbyist with She believes the Kwale project will be the

AUSTRALIA’S PAYDIRT DECEMBER 2014 - JANUARY 2015 PAGE 91

INDABA PREVIEW

African exploration down and
more support is needed

Africa retained its 16% share of ior sector with Canada replacing
global nonferrous exploration it as the most popular destination

expenditure this year but it was for juniors.

16% of a dwindling pie. MSA Group managing director

Africa was the third most popu- Keith Scott said there was little

lar destination for exploration ex- doubt the exploration sector in Af-

penditure in the 2013/14 financial rica – like elsewhere – was strug-

year, according to SNL Metals gling, and he didn’t expect the

& Mining, with $US1.72 billion situation to improve in 2015.

spent on the continent, placing “Due to its reliance on public

it ahead of the likes of Canada, equity, African exploration pos-

Australia, the US and the Pacific/ sibly suffers more than most dur-

South-East Asia region. Only ing a downturn when markets are

Latin America and the Rest of the soft,” Scott said.

World (comprised largely of Rus- MSA is one of the leading geo-

sia and China) reported larger ex- logical consultants on the con-

ploration expenditure. tinent and Scott said the explo-

According to SNL’s Corporate ration sector would continue to

Exploration Strategies report, suffer while markets were soft and

Democratic Republic of Congo commodity prices low.

(DRC), South Africa, Burkina “I think it will be 2017-2018 be-

Faso, Zambia, and Ghana were fore we see a strong return to ex-

the most popular African coun- ploration investment,” he said.

tries for exploration with the The SNL report highlighted the

continued focus on West Africa juniors’ shift from greenfields ex-

leading to gold remaining the ploration to a mine site and late-

dominant commodity for explora- stage focus and Scott said the

tion on the continent, with 41% of lack of appetite for risk also count-

budgets dedicated to searches for ed against African exploration.

the precious metal. “When equity markets are go-

However, it was the acute de- ing up it is easy to be brave to

creases in global exploration fund exploration because you can

budgets that were most starkly make discoveries for $US20/oz

displayed in the report. Based on and sell them for $US50-60/oz.

the exploration budgets of 1,961 However, when they are down it

companies, spending for 2014 to- is difficult to raise funding and the

talled $US19.7 billion, down 26% focus shifts.

from 2013, which itself recorded “We are seeing global explora-

a 30% decrease from the record tion increasingly rely on private

levels of 2012. equity and funding from other

The figures will come as lit- sources – most notably China –

tle surprise to many involved in and because those groups don’t

the exploration sector as global A MSA Group geologist on site at the Kitumba copper project in Zambia. MSA generally invest in greenfields

economic volatility, falling metal has been involved with the Kitumba project for eight years exploration, you see companies

prices and skittish investors have switching strategy.”

combined to make raising equity for explo- The SNL report does not cover iron ore
Title: Africa’s share of global exploration budgets and coal, two commodities that have re-
ration increasingly difficult.

This is particularly the case for junior ex- Year Value ($US million) Global share ceived much attention in Africa in the last

plorers who are so reliant on public equity 2005 832.6 16.4% decade.
markets for exploration funding. 2006 1,234.8 16.4% That increase has led to the discovery of

According to the report, juniors – who a series of world-class deposits but Scott

from 2003 to 2012 accounted for the larg- 2007 1,763.4 16.1% said the fall in spot prices for both iron ore
est share of exploration budgets – lost fur- 2008 2,047.8 14.9% and coal and a lack of project development
ther ground on the majors, with their 29% beyond the exploration stage had meant

decline leaving a total of $US3.47 billion for 2009 1,218.8 15.3% bulk commodity exploration was also on

2014. 2010 1,585.5 13.8% the wane.
The majors – keen to cut costs and return 2011 2,603.2 15.1% “Outside of South Africa, exploration ex-

more capital to shareholders – also cut their penditure in the last decade has been driv-

exploration budgets but only by 25%, re- 2012 3,405.9 16.6% en by gold, iron ore and coal but for the bulk
sulting in them winning 48% of total global 2013 2,376.9 16.5% commodities there has actually been very
exploration budgets. little development because of other factors

Africa in particular lost ground in the jun- 2014 1,719.5 16.0% including poor infrastructure, political risk

PAGE 92 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT

and the rise of resource nationalism.” they understand the importance of
Scott said that when it came to attracting
the issues because they have a
mining investment, many African countries
still suffered from a lack of political stability sophisticated management team
and robust regulatory framework.
with strong corporate govern-
“When considering investing in jurisdic-
tions, the regulatory regime is where you start ance.
and it is an area in which Africa has had to
suffer good and bad times,” Scott said. “But “They built a local clinic,
increasingly countries understand the impor-
tance of the regulatory framework.” set up a programme to track

With most African mining sectors still in a poachers and have assisted
fledgling state, investors must assist host gov-
ernments and host communities in developing local schools. You have to
strong minerals policy foundations.
have a good social pro-
“Look at the recent gas discoveries [on the
east coast of Africa]. For Mozambique alone gramme because without
they are talking about $US50-60 billion worth
of LNG discoveries but even with all the will in one you run the risk of
the world, the lack of capacity means that is
unlikely to be fully exploited. creating unstable communi-

“So, the onus sits with investors. If they em- ties,” Scott said.
power their counterparts and help increase
capacity, development can be achieved. If Australian, Canadian, British and
they don’t then they will be liable to suffer
things like severe resource nationalism.” South African companies have become

He said MSA’s experience showed that adept at building such social contracts
even at the early stage of projects, engaging
with local communities proved beneficial. in recent years but investors from other

“If your engagement is done properly and cultures, most notably China, have at
you are transparent you can reap significant
benefits. Australian company Blackthorn [Re- times struggled.
sources Ltd] is a good example of that. Even
though they are still in the exploration stage Chinese companies have suffered

several labour and community dis-

ruptions on African projects in recent

years but Scott puts this down to a lack

of experience. African countries’ global share of exploration in 2013/14

“Western investors have been much

more sophisticated in recent years because that regard,” Scott said.

the companies are listed and can no longer “Africa can be a very cheap place to do

afford to take chances. The Eastern investors business but it takes time. African societies

have struggled to some extent through lack are relationship-based and companies need

of experience and they often fall foul of local to develop things patiently if they are to have

communities. They may have the politics cov- success.”

ered but don’t have the support of the local – Dominic Piper
communities, so they need more education in

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AUSTRALIA’S PAYDIRT DECEMBER 2014 - JANUARY 2015 PAGE 93

INDABA PREVIEW

South Boulder to reveal
new-look Colluli

Funding large capex pro- risks and improve A completed DFS is expected
jects is difficult at the best fundability. There are
of times, which is why South very few potash pro- at Colluli mid-2015
Boulder Mines Ltd is preparing jects available that
a decidedly unfamiliar version you can finance for known shortly. At the time of print
of its Colluli potash project. less than $1 billion,” South Boulder was in the throes of
Donaldson said. completing the Colluli PFS.
Originally, Colluli, 300km
south-east of Eritrea’s capital While South Boulder’s change of direc- A big push through the hotter
city Asmara and 180km from tion at Colluli has been a work in progress for months in Eritrea helped the company com-
the port of Massawa, was be- some time now, the company has purposely plete PFS drilling ahead of schedule in Octo-
ing set up as a potassium kept a low profile on the marketing front. ber and it is now in the midst of DFS drilling.
chloride project likely to cost
almost $1 billion to build. “The last 12-18 months we have been The Colluli PFS is expected to be released
quite quiet as we have been trying to make in February and with $10 million in the bank,
Realising the enormity of sure we have the right development path [in South Boulder has enough money to com-
attracting financing for such place] and that we are going through in a very plete a DFS.
a project, South Boulder has pragmatic way ticking all the boxes as we go
opted to develop a potassium along,” Donaldson said. “Finishing the PFS in February is the top
sulphate project instead. Po- priority,” Donaldson said.
tassium sulphate is a high- “It has probably been a conservative pro-
quality fertiliser carrying a cess relative to how the previous team went “I have always viewed that as a scale exer-
premium price over potassium about it but our confidence in the project has cise. The PFS and DFS work have effectively
chloride, managing director Paul Donaldson grown immensely. That certainly serves as a been running in parallel, so we can basically
told Paydirt. platform to go out there and really push it out get an idea of size versus capital and get a
to the market to say it has a good solid future sense of the returns, fundability, economic re-
Donaldson said the salt composition of the ahead of it.” turns and risk management. It is a very tight
Colluli resource – 60% kainitite, which is the window between PFS and DFS, so we are
most important potassium-bearing salt for A better idea of Colluli’s future will be working hard to make sure that we have got
potassium sulphate production – was better all of the drilling done well ahead of the DFS,
suited to high yield conversion of potassium Paul Donaldson getting the scale logged in and then delivering
sulphate through flotation. the DFS on time in mid-2015.”

In 2014, metallurgical and processing test Donaldson said the company had started
programmes were conducted at Colluli, with initiating funding discussions and would use
commercial-grade potassium sulphate (SOP) PFS results as a point to engage the broader
produced from a combination of decomposed market around funding.
kainitite and sylvinite.
South Boulder hopes to start phase one
The resource at Colluli stands at over 1bt, construction activities at Colluli at the end of
with potassium-bearing salts comprised of 2016, and with a coastal road running within
110mt sylvinite, 309mt carnallitite and 597mt 60km of the project, access to site is not an
kainitite. issue.

“When you look at how other people make it, Furthermore, there are no communities
it is mostly made from potassium-rich brines. within the exploration tenements and no
So it starts with about 5kg of potassium and clearing will be required at Colluli, which is
1t of water, which all has to get evaporated off a 50:50 JV with the Eritrean National Mining
to make it a salt before it is processed But at Company (ENAMCO).
Colluli it is already a salt. So you bypass all of
that and run it through a flotation circuit and – Mark Andrews
you get potassium sulphate,” Donaldson said.

Essentially, South Boulder hopes to design
a project with a low strip ratio “so you get a
massive reduction in mining costs and you
can make a product which is actually worth
$400/t more at the moment”.

The results from South Boulder’s review
of Colluli that prompted the change in direc-
tion from potassium chloride to potassium
sulphate included a lower strip ratio from 14:1
to 2.3:1, mine cost reduction from $224/t to
$75/t and potentially a longer mine life, from
17 years to 200 years.

“That is the thing that allows you to scale
the project back: you don’t have to go in with
a 1 mtpa, $800 million investment, you can
actually scale start-up right back and mitigate

PAGE 94 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT

Meet the
team at Mining
Indaba 2015

Dominic Piper Bill Repard Tammy Caldwell
Editor Executive Chairman Africa Downunder
Mobile: (+61) 418 768 578 Mobile: (+61) 413 085 536
Mobile: (+61) 424 934 494 Email: [email protected] Email: [email protected]
Email: [email protected]

Mark Andrews Tony Mwarey Lauren Carey
Deputy editor Advertising Executive Marketing & Conference Manager
Mobile: (+61) 407 477 697 Mobile: (+61) 451 280 482
Email: [email protected] Email: [email protected] Mobile: (+61) 432 055 654
Email: [email protected]

2 - 4 September 2015
Pan Pacific Perth

Novotel Perth Langley

INDABA PREVIEW

Panda promise excites Cradle

Faced with an uncertain supply future and Cradle’s recent work was
little diversity, the global niobium market is focused on testing each of its

crying out for a new producer. major material types through

It’s a scenario that has Cradle Resources multiple flotation processes, in-

Ltd’s managing director Grant Davey licking cluding a two-stage process as

his lips given the steady progress of the com- used in the scoping study and a

pany’s Panda Hill project in Tanzania. simplified one-stage float.

Davey told Paydirt that with more than 92% It also trialled a gravity circuit

of the world’s niobium supply coming from to eject some gangue minerals

Brazil, the market was more than ready for the prior to direct flotation.

commodity’s first African producer. “More importantly, we’re op-

“We believe that the steel mills want to see timising the reagent usage and

diversity of supply – geographically, as well as trying to get our concentrates

from more suppliers,” Davey said. up as high as possible, which

“We see a definite path to production for a is important for the conversion

new producer.” phase,” Davey said.

Cradle picked up 50% of Panda Hill from a “The higher you get those,

UK-based metals trader for just over $3.5 mil- the cheaper it is to convert.

lion in March last year and went to work on site In this regard we benchmark

in August with a 1,500m drilling programme to very favourably to current pro-

confirm historic assay results (Panda Hill was ducers and based on what we

mined by various companies between 1950- see there aren’t any niobium

1990), gather bulk samples for metallurgical developers that have the same

testwork and start drilling the core of the re- simple metallurgy that Panda

source with a goal to establishing a JORC Hill has.”

compliant resource. At the time of print, Cradle

That initial campaign confirmed Cradle was was showing no signs of slow-

on to a winner, returning notable intercepts of ing down at Panda Hill, with a

116m @ 0.76% niobium and 67.1m @ 0.54%. single hole from the project’s

Panda Hill continued to produce palpable budding high-grade Angel

results in subsequent programmes: a Sep- Zone – located in the pros-

tember 2013 campaign netted hits of 48m @ pect’s southern section – net-

1.09% niobium and 59m @ 0.77%. ting intercepts of 59m @ 0.09%

On November 8 last year Cradle upgraded niobium and 10m @ 0.92%. Cradle’s current drilling programme is focused on developing
Panda Hill’s resource to 82mt @ 0.52% niobi- That same hole was extend- a measured resource for the Angel zone
um but Davey said what the company had on
ed to 280m with XRF readings

the books was merely the tip of the Tanzania indicating strong mineralisation to the end of boxes from both a metallurgical point of view

asset’s iceberg. it. where our recoveries are in line, if not bet-

“The 82mt we have is only a resource that’s Davey said the company’s immediate goal ter, than current producers as well as having

drilled out to 100m,” he said. was to produce a measured resource for the world class grades,” he said.

“It’s open at depth and along strike to the Angel Zone, while also exploring Panda Hill’s “We can also extract it economically be-

north-east and south-west. We know there is northern area, which has a history of produc- cause there is a low strip ratio open pit.”

more niobium in the ground.” ing metallurgically sound rock. Davey said Cradle had the full support of

The managing director was also buoyed by “The PFS is on schedule for release in the the Tanzanian Government, which for some

the project’s metallurgical results, with recent first quarter of 2015,” Davey said. time has been advocating diversification with-

locked cycle tests confirming recoveries of “Our push is to do a high quality PFS so that in its mining sector to minimise the country’s

approximately 62% niobium. we can run straight into a DFS.” dependence on gold.

The managing director The project also has a strong JV partner in

said now was the perfect Tremont Investments Ltd, an African-focused

time to fast track Panda Hill mining platform backed by Denham Capital

to production. Management, which has an option to acquire

A critical and strategic 50% of the project for $US20 million.

metal, niobium is one of the Davey said he was confident Cradle would

market’s most consistent become Africa’s first niobium miner in 2016.

commodities – and it only “We want to achieve shareholder growth

has three current producers. and support through ensuring that this busi-

The highest-grade opera- ness comes into production and our develop-

tion in the world is Brazil’s ment strategy for that is to complete a PFS

CBMM, producing about by the first quarter of 2015 and have our DFS

85% of the world’s niobium. completed by the third quarter of 2015,” he

The other miners are Anglo said.

American plc with its Bra- “And then we will run into the construction

zil-based project and IAM- phase, which will be somewhere between 12-

GOLD Corp’s Niobec mine 16 months.”

in Quebec. – Rhys Dickinson
“We are fortunate enough

Panda Hill core samples that our project ticks the

PAGE 96 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT

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PAGE 98 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT

AUSTRALIA’S PAYDIRT DECEMBER 2014 - JANUARY 2015 PAGE 99

REGIONAL ROUNDUP LATIN AMERICA

Nicaragua excites Oro Verde

Nicaragua’s mining industry might trail its B2 Gold has two of the three operating mines in Nicaragua. Oro Verde is looking
counterparts in Latin America, however to join the party in Central America
it is a jurisdiction on the up, according to Oro
Verde Ltd company secretary Brett Dickson. sively promoting the mining industry.” managed to make an impact.
Dickson said there remained opportunities “It was one of the top 10 gold-producing
“It’s our first step into what we think is going
to be an emerging Latin American country,” similar to Topacio in Nicaragua, however he is countries in the 1950s, however there was no
Dickson told Paydirt upon acquiring an option confident that projects of a much larger scale exploration in the 1990s. There has been no
over the Topacio gold project in November. can be found. exploration in the last five years and because
the Canadians have pulled out there is an op-
The company has four months to complete “We’re like every company and want to find portunity there,” Dickson said.
its legal and technical due diligence review of a big 1 moz gold deposit, which we think there
the project. is in Nicaragua. However, getting something Dickson said road networks were good
that will produce for very little cost so we can in the country, however like many emerging
“Obviously we have been on site and done sustain exploration through production/cash economies there remained challenges with
technical due diligence and we’re pretty hap- flow is what we want to do,” Dickson said. infrastructure, particularly power.
py with it, otherwise we wouldn’t have got to
this stage,” Dickson said. “We’ll be looking at small-scale production Infrastructure issues have not been seen
to generate cash flow that can cover all future as a barrier for Oro Verde, which decided to
Terms of the agreement for Oro Verde to exploration and admin costs going forward, expand into Nicaragua when it acquired pri-
purchase 100% of the project include a mini- so we can spend that looking for the big one.” vate Australian outfit Goldcap Resources Ltd
mum exploration spend of $2 million over in August.
three years, $40,000 payable to the vendor Internal conflict from the 1960s through to
each six months during the agreement pe- the 1980s held back exploration in Nicaragua. Before the Goldcap transaction, Oro Verde
riod for a total of $240,000, while Oro Verde was working on interests in Chile and Argenti-
can exercise its option to purchase by paying Canadian explorers have dabbled in Nica- na, however largely disappointing exploration
$US1.5 million plus, at the vendor’s election, ragua but apart from B2 Gold no one has
either a 2% NSR royalty or payout of $US1/ results forced a shift in focus to
oz gold for JORC or NI43-101 compliant re- Nicaragua.
sources.
By acquiring Goldcap, Oro
At the time of entering the option to acquire Verde tied up 100% of the 25sq
Topacio, there was an NI43-101 inferred re- km San Isidro gold exploration
source of 2.7mt @ 3.9 g/t for 340,345oz gold project, 70km north of Nicara-
(1.5 g/t cut-off grade) over the 93sq km con- gua’s capital Managua.
cession.
San Isidro is in the La In-
“The first thing we will do is turn this re- dia gold mining district, which
source into a JORC resource,” Dickson said. hosts the namesake mine
“Because it is largely defined we think we can where nearly 600,000oz gold
get it up [into production] with limited capital in was produced between 1938
12-18 months. It looks like a good opportunity. and 1956.

“It [Nicaragua] is starting to open up again AIM-listed Condor Gold plc
and this is a rare opportunity. It is not often you now has the (unmined) 16.2mt
come across a project that has 350,000oz of @ 4.6 g/t for 2.4 moz La India
a quality resource which is 43-101 at a rela- gold project, which hosts the
tively modest price.” Cristalito deposit (340,000oz
@ 5.3 g/t gold), near San
There are currently three operating mines Isidro.
in Nicaragua, two of which are owned by Ca-
nadian giants B2 Gold Corp, and one by a lo- – Mark Andrews
cal operator.
Production from Topacio could start in 12-18 months
Oro Verde wants to join this
group, and is being encour-
aged by the Government to do
so.

Dickson said the Govern-
ment is promoting small-scale
mining operations whereby ore
is sent to a privately held re-
gional processing plant, similar
to the ENAMI model set up in
Chile by the Government.

“Nicaragua likes that very
same idea and there are a
couple of operations like that,
where small-scale miners
bring it into a regional plant
owned by private enterprise,
not by government,” Dickson
said.

“The Government recognis-
es what foreign money can do
and they are out there aggres-

PAGE 100 DECEMBER 2014 - JANUARY 2015 AUSTRALIA’S PAYDIRT