May 2015 VOLUME 1. ISSUE 227 $11.95
front and back cover
• Latin America Down Under preview • South Australia conference review
• Sirius gets moving at Nova • Specialty metals ISSN 1445-3436
9 771445 343007
PAYDIRT (ISSN 1445-3436) 10 NEWSThe Australian junior iron ore sector is
Paydirt Media Pty Ltd. on its knees but some within it still retain
A.C.N. 063 985 133 optimism. Michael Washbourne spoke to
BC Iron Ltd managing director Morgan
Head Office: Ball about how his company is dealing
Suite 9, 1297 Hay St, West Perth with the seeming end of the Iron Age
Western Australia 6005
P.O. Box 1589, West Perth 14 NOVAIt is one of the great modern-day success 18
Western Australia 6872 24
Phone: (+61 8) 9321 0355 stories and Sirius Resources NL contin- 46
Facsimile: (+61 8) 9321 0426 ues to defy expectations. The company
[email protected] is in development at its Nova-Bollinger
www.paydirt.com.au nickel-copper project and is now finding
success with gold exploration thanks to
Editorial: its Baloo discovery. Mark Andrews trav-
Editor: Dominic Piper elled with the company’s managing direc-
Deputy editor: Mark Andrews tor Mark Bennett to the Fraser Range to
Journalists: Michael Washbourne, see exactly why he is so happy
Graphics: Marian Noonan 18 COVER
Contributors: Oz Minerals Ltd released a strategic
Keith Goode (Sydney), Brendan Ryan review in April, designed to redraw the
(Johannesburg) company’s growth ambitions. It appears
the South Australian miner is no longer
Advertising: content to sit on the sidelines of the M&A
Advertising executive: Tony Mwarey dance and may be preparing to take the
Subscriptions: Magda Thibaut floor. Dominic Piper spoke with newly
Phone: (+61 8) 9321 0355 installed managing director Andrew Cole
Facsimile: (+61 8) 9321 0426 about the new direction and his own
plans for the company
Pre-press and printing:
Vanguard Press 26 John St, 24 LATIN AMERICA
Northbridge WA 6003 PREVIEW
Member of: The fourth Latin America Down Under
Paydirt Media Conference will take place on May 20-21.
Executive chairman: Bill Repard
Finance manager: Giovanny Jefferson As 300 delegates prepare to descend
Heather Melling on the Sheraton-on-the-Park, Sydney,
Conferences: Tammy Caldwell,
Melita Fogarty Paydirt looks at the state of the sector in
Cover image: Oz Minerals Ltd the region and asks whether Australia’s
managing director Andrew Cole after
speaking at the SAREIC conference in juniors have been able to find the suc-
cess they crossed the Pacific in search of
46 SAREIC REVIEW
Registered by Australia Post PP 643938/0071. Delegates came away from this year’s
No pages or articles in this publication may be South Australian Resources & Energy
reproduced in any form without the consent of Investment Conference more convinced
the publisher. This includes photographs either than ever that the State’s mining sector
taken by Paydirt Media staff or provided by other is unique. It has Olympic Dam, one of
parties the world’s largest orebodies, within its
borders, ample opportunity for further
discovery and a State Government which
offers unparalleled policy and regula-
tory support to the sector. We cover the
conference over 16 pages
The quick and the undead
revealed in quarterly season
Team spirit is only a fleeting concept in times Australian. “This is our iron ore. The companies are inclined to forget
when you are winning.” – Tony Woodcock, that – as to who actually owns the iron ore.
England international. “They don’t legally own it until it’s loaded on the ship. That’s my un-
There was a time when everybody in derstanding.”
the mining industry was winning, every- What did he expect the two companies would do when he approved
one was friends and everyone associated their massive expansion plans?
with it was welcoming. After years of singing their praises for being the backbone of WA’s
Unfortunately, those times are long rapid growth, Barnett is now sounding more like a left-leaning African
gone. In the scrabble to secure individual president, accusing the two iron ore heavyweights of being... well iron
futures, camaraderie has gone, replaced by accusations, threats and ore heavyweights.
demands. Old allegiances have been broken. I wonder how Barnett’s rhetoric is going down in China, a country he
Nowhere is this more apparent than in the West Australian Govern- suggests WA has a “special relationship” with and one that the State
ment. Just a year ago, WA Premier Colin Barnett was lauding BHP Bil- would look for more economic engagement with if the GST impasse
liton Ltd and Rio Tinto Ltd for the role they played in the State. continues?
He was the leading advocate for the industry when the mining tax I’m certain Chinese steel mills would be quick to make judgement on
was introduced and he has travelled the world extolling the virtues of the WA Government using “levers” to artificially inflate the iron ore price.
the mining sector and at the same time taking the praise for WA’s re- All those friendships and team spirit carefully built over the last dec-
markable economic performance. ade appear to be crashing down as quickly as the spot price itself.
How times have changed. In hindsight, everyone associated with the resources industry; wheth-
In Canberra last month, there was the unedifying sight of Barnett er business, investor, government or media got carried away with the
stamping up and down in the COAG meeting about what would hap- entire “commodity super-cycle” illusion.
pen if the Federal Government didn’t increase his State’s share of GST In an effort to find a place on the bandwagon, investors and execu-
revenue. tives abandoned the traditional notion of an investment exit strategy,
Prior to the meeting, Barnett suggested in an interview with The Aus- choosing instead to ride out any minor bumps because China would
always come along again to save the day.
When one of those minor bumps
turned out to be a major correction
to Chinese growth, nobody could
find the door on the bandwagon.
What we are left with is an ASX
board which has more of the un-
dead than a Bela Lugosi film.
tralian that if the GST distribution was not altered, WA would economi-
cally detach from the rest of the
“Western Australia’s future is
Those companies who arenot with the rest of Australia in a
surviving on their wits arefinancial or economic sense. Our
future then shifts to Asia even
“the ones most likely to turn thingsmore strongly than it is now,” he
said. around when markets defrost. In these times the parlance is
It was an embarrassing outburst all about survival and you will read
from the Premier. It is an unenvi- much in this issue about compa-
able position that he finds himself nies’ survival strategy.
in but I have little sympathy. Yes, WA has been caught short by the way However; there’s survival – as in hanging on – and, survival – as in
GST revenue is carved up because of the rapid fall in iron ore royalties making the most of your current environment, no matter how hostile.
but although WA has been the economic ascendency for the last dec- With March quarterly reports due out as Paydirt went to print, you
ade, the times in the past when it has leant on its Eastern cousins far will have ample opportunity to see those companies that are simply
outweigh that contribution. “hanging on”. They are the ones with total costs for the quarter of only
So, it is not unfair and neither is it the fault of anyone other than suc- $250,000 and an Activities Report that barely stretches half a page.
cessive WA governments of both political persuasions. These are the undead; the zombies who claim to be in hibernation but
Throughout the last decade, the WA economy has enjoyed unprec- who are really only hanging on in the hope there is a biotech company
edented growth on the back of the iron ore sector. The problem is, all around that needs a shell company.
those royalty receipts have been fritted away by both Coalition and La- Those companies who are surviving on their wits are the ones most
bor governments who saw the once-in-a-generation windfall as nothing likely to turn things around when markets defrost.
more than a poll boost opportunity, adding the unexpected cash straight They are still spending money on exploration and are still striving
into the budge. The idea of a sovereign wealth fund – so successful to keep momentum in their projects. They may have had to farm-out
elsewhere – not even considered. large percentages of assets on unenviable terms or be forced into gold
The WA economy was always going to come off the boil once the streams and other less favourable debt instruments but they will still
massive iron ore and gas construction phases came to their natural have light when the sun shines again.
end, but the landing will be unnecessarily harder because the State For the others, it may take too long to get over their zombie state to
Government has failed to adequately prepare for it. ever recover.
Instead of coming out of this boom with big surpluses ready to be de-
ployed to lessen the fall, WA is now facing a credit rerating and budget
deficits into the future.
And still he continues to shift blame, latterly to Rio Tinto and BHP
Billiton and their “flooding of the iron ore market”.
In late April, The West Australian reported the Premier was consider-
ing using “levers” to curb Rio Tinto and BHP Billiton’s export capacity.
“They need my approval to expand output,” Barnett told The West [email protected] @DominicPiper
PAGE 4 MAY 2015 AUSTRALIA’S PAYDIRT
Evolution equipped to strike
The potential of a perfect economic storm,
seemingly risk-free growth and temptation
of a $100 million future funding commitment
enticed Evolution Mining Ltd to go from sleep-
ing giant to gold monster last month.
On April 21, the company announced a
monumental deal to acquire 100% of Egyptian
Naguib Sawiri’s La Mancha Resources’ Aus-
tralian operations in a $300 million all-scrip
transfer, which if approved by shareholders,
will give the billionaire a 31% stake in the Aus-
Evolution will also inherit $114 million worth
of La Mancha’s debt as part of the agreement.
La Mancha’s Australian assets comprise
the high-grade Frog’s Leg underground gold
mine, adjacent to the White Foil open pit gold
mine and the recently constructed 1.5 mtpa
Mungari CIL processing plant – all located a
stone’s throw from Kalgoorlie, Western Aus-
Evolution executive chairman Jake Klein
said the La Mancha acquisition had the com-
pany well placed to snap up other assets, as
poor sentiment within the gold equities market
had forced many majors to unload valuable
assets to recapitalise.
“There is undoubtedly further scope to im-
prove the scale and quality of the combined
portfolio due to the opportunities thrown up by
the industry dynamics,” he said.
“We are now in a much stronger position to Jake Klein
capitalise on these opportunities. We believe
the combination of a high quality asset with EBITDA margin of 48%. marked the end of a nine-month search for
a long term strategic shareholder is a terrific “The improved EBITDA margin position an Australian partner, which would free up the
outcome for Evolution shareholders.” and the declining capital expenditure profile private miner to explore early stage gold plays
The two projects will contribute immediate provide Evolution with confidence that we will in Africa.
production of 130,000-160,000 ozpa at all be generating stronger cash flows moving for- “We have absolute confidence in [Evolu-
“in sustaining costs of $950-1,000/oz, which
ward.” tion’s] ability to manage and grow the busi-
would bump Evolution’s ness,” de Montessus said.
existing production base to In terms of La Mancha, formation “We very much share a
530,000-600,000 ozpa at a vision of building a major
competitive price of $960- of this Australian partnership will mid-tier gold producer and
1,030/oz. allow us to focus our attention on Africa, look forward to supporting
the combined group in its
Evolution chief financial
officer Lawrie Conway said where we are seeking to develop into a next phase of development,
by the end of the year the significant mid-tier gold producer in that whether that takes shape in
company should increase the form of additional fund-
its production profile by part of the world. I believe now is a good ing support or technical and
a least 60% since its first operational coordination
full year of production in time to acquire high quality assets in between our organisations.
FY2012. Africa, while transferring our Australian In terms of La Mancha,
formation of this Austral-
“The quality of the La
Mancha assets is evi- assets into Evolution hands. ian partnership will allow
denced by their lower cost us to focus our attention on
profile, with all-in sustain- Africa, where we are seek-
ing costs of around $930/ ing to develop into a signifi-
oz, which will reduce the combined unit costs Klein also reiterated the influence Evolu- cant mid-tier gold producer in that part of the
through the group to just around $1,000/oz,” tion’s current hedge; roughly 30% of the com- world. I believe now is a good time to acquire
Conway said. pany’s product is valued at $1,564/oz. high quality assets in Africa, while transferring
“We expect that in time we will be able to in- Conway added: “This will underpin our cash our Australian assets into Evolution hands.”
troduce further cost and productivity improve- flow for the next few years, while still allow- – Rhys Dickinson
ments to bring down the overall cost profile. ing Evolution to have good exposure to spot
The ability of the combined group to gener- prices with the majority of our production, in
ate cash is further evidenced by the improved the range of 65-70%, unhedged.”
EBITDA margins, which will increase by … La Mancha president and chief execu-
about 5% to 44% due to La Mancha’s high tive Sebastian de Montessus said the deal
AUSTRALIA’S PAYDIRT MAY 2015 PAGE 5
Former Xstrata chief under
pressure to make new
More than a year after assets closely. But nobody peat Xstrata’s success – motivated also, the
he launched his private sources said, by some antagonism to Glasen-
fund, former Xstrata boss wanted to sell to them. Vale berg who was a student at the South African
Mick Davis is coming under University of the Witwatersrand when Davis
pressure to build a new min- didn’t want to sell, Rio [Tinto was an accountancy lecturer there.
ing empire with the $US6 bil-
lion in capital he has raised. Ltd] didn’t want to sell, BHP “Mick will want to prove that he can buy as-
sets cheap and turn them around,” another
The renowned dealmaker [Billiton Ltd] didn’t want to banking source said. “You get these jobs at
set up X2 Resources 18 the top because you’re a street fighter.”
months ago after Glencore’s sell,” an industry source
$US46 billion takeover of That said, receiving expressions of interest
Xstrata, when he was passed close to Davis said. from a turnaround king has only encouraged
over for the top job in favour some asset-owners to hang on to them.
of his Glencore counterpart, Ivan Glasenberg. With his portfolio still emp-
BHP Billiton, the world’s largest mining
Davis has since approached most large ty, some sources expressed company, decided for example to spin off its
mining companies looking to buy a variety of unloved assets into a separate firm, South32
assets, banking and industry sources said, concern that some investors’ Ltd, whose shares would be distributed to
but nobody has agreed to sell given a feeling BHP Billiton investors.
that current prices are at rock bottom and may Mick Davis patience with Davis may run
turn up again before long. thin. “You don’t want to look like an idiot in hind-
sight,” a third banker said. “BHP Billiton said
“Mick’s team has been looking at so many A banking source said: to themselves: we think we’re in a trough, but
we can’t be sure. We’ve a pretty good idea
“Not all those investors are stuck on mining. what these assets are worth but we can’t be
wrong if we de-merge.”
So they say: if we can’t spend on this, we’ll go
Davis has not been put off by BHP Billiton’s
buy a bank or a supermarket. action, however, but is still looking at South32,
as well as some of Anglo American plc’s base
“I think Mick is feeling the pressure to do metals and energy assets, according to the
something, but the sector is as cheap as it
The latter deal may be more likely: harder-
gets.” hit than its rivals by the latest downturn in
metals prices, Anglo American wants to raise
The PR company representing X2 declined money through divestments in order to defend
its credit rating and hit profitability targets set
to comment and did not make Davis available by its boss, Mark Cutifani.
for comment. South32, with a book value of about $US12
billion, could be too expensive for X2, once
Davis has gathered debt and a premium are included: investors
estimate X2 could gear up to about $US10-
$US5.6 billion backing 15 billion.
from investors – in- “Maybe it’s a bit of a stretch but that could
still work. Mick is quite clever is terms of
cluding private equity structuring innovative deals,” Investec fund
manager and former Xstrata executive Hanré
group TPG Capital, Rossouw said.
commodities trader While some think Davis’ long wait will lead
to him striking a deal at the best time to benefit
Noble Group and from a turnaround in the market, others argue
he may struggle to repeat his success in such
sovereign wealth and a different environment.
pension funds – who “He was lucky last time around, he did a lot
of deals when prices were on the way up and
have been drawn by China came out of nowhere hungry for met-
als. The trouble is, this time he has to pick
his reputation. the bottom of the market. But where is it?” a
fourth banking source said.
The former Eskom,
– Silvia Antonioli and Freya Berry,
Gencor and Billiton Reuters
executive first set
about building his own
empire in 2002, when
Xstrata first listed, and
acquired a collection
of coal assets from gi-
ant commodity trader
The cash flow from
those mines then
financed a series
of mostly success-
ful deals that over a
Xstrata from a $US500
million minnow into a
$US50 billion FTSE-
100 company until
it was taken over by
Glencore, one of its
Davis set up X2 with
the clear intent to re-
PAGE 6 MAY 2015 AUSTRALIA’S PAYDIRT
Ramatlhodi to tackle
At last; a Minister of Mineral Resourc- at the end of its 10-year empowerment
es with some common sense! agreement.
That’s my reaction to the news that There’s another aspect. Some of the
mines minister Ngoako Ramatlhodi is earliest BEE deals were done on basis
to seek an immediate legal answer to of selling assets at bargain values to
the burning issue of “once empowered BEE entrepreneurs in return for BEE
– always empowered?” in the South Af- credits. Some of those mining compa-
rican mining sector. nies do not now have a BEE partner
Ramatlhodi announced this on March but maintain they have complied with
31 as part of the interim assessment by the Mining Charter. The DMR now de-
the Department of Mineral Resources mands they must have a BEE partner
(DMR) of the mining industry’s compli- on board.
ance with the Mining Charter. In a joint Ramathlodi’s practical approach has
statement, the DMR and the Chamber been widely welcomed by analysts and
of Mines said they had agreed to: “ap- the mining companies.
proach the court to seek clarity on this According to Cooke and Tiwari: “We
matter”. see the agreement between South Af-
The Chamber added: “This will be rican miners and Mineral Resources
done through a declaratory order which Minister advocate Ngoako Ramatlhodi
will provide a ruling on the relevant as a pragmatic step toward resolving
legislation pertaining to the continuing Ngoako Ramatlhodi this long-standing and contentious is-
consequences matter. This is a pro- sue. From an investment perspective,
active and necessary step to promote regu- a clash of ideologies. The State has a trans- a favourable ruling for the industry would be
latory certainty for the mining industry and formation agenda – which is a political agen- ratings positive for South African mining equi-
shows that both the DMR and the Chamber da – and the industry has a profit agenda. Of- ties in our opinion – absent any changes to
recognise the need for the court to provide ten these two don’t meet and the Government existing mining legislation.”
certainty.” appears not prepared to allow any leeway.” The analysts added a favourable ruling
The positive aspects of this from where I sit In a nutshell, the latest dispute centres on would remove the regulatory uncertainty that
are that the South African mining industry has whether an South African mining company has hindered the sector for more than a dec-
finally “found its collective backbone” – as one – having achieved the necessary 26% level ade but pointed out: “There’s a risk that the
disillusioned investor put it a few years back – of black economic ownership (BEE) – has to Government may alter the mining regime after
and that this Minister – appointed in a cabinet repeat the process if the original BEE partici- such an event, since it may remain unsatis-
shake-up last July to replace Susan Shaban- pant decides to sell out. fied that the mining industry has achieved the
gu – has the sense to listen instead of publicly As JP Morgan Cazenove analysts Allan level of transformation intended by the mining
“browbeating” the industry and its key execu- Cooke and Abhishek Tiwari point out; “while law changes made in 2004.”
tives as his predecessors have tended to do. the Mining Charter does not specifically re- They add an unfavourable ruling would
Key point is that over the last two years require a number of mining companies to go
the South African mining companies ap- “back to the drawing board” meaning their
pear to have increasingly lost
patience trying to settle the existing shareholders could be
further diluted by the need to
Over the last two years thematter “behind closed doors” do further BEE transactions.
through tortuous negotiations The analysts singled out
Sibanye Gold Ltd, Aquarius
South African mining companieswith the DMR and have turned Platinum Ltd, AngloGold
“appear to have increasingly lostto the courts where, more of-
quire mining companies to maintain their 26%
BEE ownership level, it also does not contain
ten than not, they have won patience trying to settle the matter Ashanti Ltd and Harmony Gold
their cases. Mining Co Ltd as companies
‘behind closed doors’ through tortuous which would be affected. They
In my column in October
last year I reported some of negotiations with the DMR and have point out AngloGold Ashanti
top mining “legal eagle” Hulme turned to the courts where, more often and Harmony share a BEE
Scholes’ views on the situa- partner, ARMGold, in empow-
tion. They are worth repeating than not, they have won their cases. erment transactions at an as-
because he’s being proven set level.
right in his bottom-line atti- They don’t go into the detail
tude of “sue them... the courts but it should be remembered
work”. the ‘once empowered, always-empowered that it was through those deals that Patrice
Scholes said at the time: “Currently the concept’”. Motsepe – South Africa’s most successful
DMR has at least 1,100 appeals against its The mining industry says yes – once em- black mining businessman who now runs ma-
decisions to deal with. My firm last year took powered, always empowered. The DMR says jor diversified mining house African Rainbow
12 judgements against the minister and other no – you must always have a BEE partner ac- Minerals Ltd – got going.
mining practitioners are doing the same. tive in the business. That’s why Northam Plat- Brendan Ryan is a Johannesburg-based min-
“There’s a lot of litigation against the State. inum Ltd was forced this year to bring in a new ing writer
That should tell you something. It’s almost like partner after its previous BEE partner sold out
AUSTRALIA’S PAYDIRT MAY 2015 PAGE 7
Chinese government set to join
the iron ore price war
The iron ore casualties are piling producers displacing higher-cost
up as the price plumbs ever new
depths. iron ore from opportunistic suppli-
The price of benchmark 62% ore ers who were drawn into the market
as assessed by The Steel Index
(TSI) is now trading below $US50/t when prices were high.
which is the lowest level since TSI
started compiling spot market pric- From a Chinese perspective,
es in 2008.
however, it looks very much like a
Few, if any, expect a sustainable
recovery any time soon. The con- return to the bad old days, when
sensus is for a long war of price
attrition as an over-supplied market iron ore supply was essentially
rebalances by forcing out higher-
cost production. controlled by the “Big Three” pro-
That process is now accelerat- ducers, Rio, BHP Billiton Ltd and
Vale – particularly when the chang-
Just in the last month Canada’s
Labrador Iron Inc has initiated a ing import ratios are viewed in tan-
court-supervised restructuring and
Australia’s Atlas Iron Ltd , an established pro- dem with mass closures of domes-
ducer, has announced it was placing its three
operating mines in the Pilbara on care-and- tic production capacity.
The logical conclusion for Beijing
Such companies are just the publicly-trad-
ed face of producer pain. Across the world, is that unless China itself acts to
many others are quietly failing.
protect its domestic industry, it will
Not entirely surprisingly, governments are
starting to worry about the longer-term costs. face a future which bears uncom-
Western Australia has said it will defer roy- China is planning subsidies in its iron ore sector fortable resemblance to the past
alty payments for smaller producers. “Not a
hand-out”, stressed the state’s mining minis- days of foreign oligopoly.
ter Bill Marmion, just a “temporary relief”.
balance sheet “relief” to keep their mines op- They were far from happy days for either
And now China is getting in on the act, the
Shanghai Securities News reporting that the erating. side.
Government is drawing up unspecified plans
to subsidise parts of its iron ore sector. This is particularly true if mines are ulti- China’s Iron and Steel Association would
China has most to lose from the current mately state-owned, which is often the case regularly lambast what it alleged were mo-
in China. nopolistic tendencies by its big suppliers.
Not just because its iron ore producers are
among the highest-cost in the world. But also There have been no details of what form It was more than just verbal sparring. In
because it is starting to dawn on policymakers
that from the current Darwinian battle of sur- iron ore subsidies might take but a sector 2009 the Chinese authorities arrested Hu
vival is likely to emerge the old supply oligop-
oly against which Beijing railed for so long. such as aluminium smelting provides plenty Stern, an iron ore negotiator for Rio Tinto, on
Government subsidies, however, are only of evidence of what can be achieved if the po- charges of bribery and industrial espionage.
going to make the whole displacement cycle
that much messier and more protracted. litical will is there. He is still serving a 10-year sentence.
Such has been the speed and severity of China’s aluminium smelters are among the It might even be suggested that BHP Bil-
the collapse in iron ore prices that even cost-
curve economics are no longer sufficient to highest-cost in the world and many should, in liton’s careful nurturing of a spot iron ore mar-
theory, have closed years ago in the face of ket was a way of displacing an increasingly
The true metric, as recently spelt out by Rio
Tinto Ltd’s iron ore chief Andrew Harding, is protracted low prices. acrimonious pricing relationship with its main
balance sheet strength.
But most of them haven’t thanks to a range buyer, China.
That means even Fortescue Metals Group
Ltd, the new kid on the Pilbara block boast- of “temporary relief” measures from both cen- It’s ironic that the spot market is now work-
ing cash costs of around $US30/t, is having
to soothe investor fears about its debt repay- tral and local governments, often in the form ing in favour of a return to the bad old days of
of reduced power charges and zero-interest iron ore pricing.
But at times of low commodity pricing, gov-
ernments are incentivised to provide some loans. Chinese subsidies, however predictable,
The result is a chronically over-supplied are only going to make an already ugly market
Chinese aluminium market with surplus seep- that much uglier.
ing out to the detriment of aluminium produc- Because it will mean high-cost supply, or
ers everywhere else. certainly a tranche of it deemed sufficiently
Neither cost-curve nor balance-sheet eco- strategically important, will not exit whatever
nomics work in aluminium because such sub- the price.
sidies have effectively overridden both. With no signs of the big producers back-
It’s possible that China is about to do some- ing down from their expansion plans and with
thing similar with its iron ore mines. every sign that China is already close to “peak
Indeed, given the history of the iron ore steel” production and therefore peak iron ore
market, it would be surprising if China doesn’t consumption, the prospect is for a prolonged
try to intervene in the iron wars. period of super-low prices – a lengthy battle
The chart below shows the split of China’s from which only the fittest will emerge.
iron ore imports by origin country, specifically The likes of Rio, BHP Billiton and Vale are
Australia, Brazil and everywhere else. confident they will be among the survivors,
The key take-away is that even as total im- given their low production costs and balance
port volumes have risen, so too has the share sheet strength.
of Australian and Brazilian ore. But if this really is going to come down to
Imports from other countries have fallen balance sheet strength, none of them is as
from around 30% of the total in January 2013 strong as the Chinese Government.
to just 18% in January 2015. – Andy Home, Reuters
This, of course, is what is supposed to hap-
pen with cheaper iron ore from the biggest
PAGE 8 MAY 2015 AUSTRALIA’S PAYDIRT
Re-imagining work (and the
workplace) to drive productivity
Based on extensive global research and a job done and design roles and structures to coaching, feedback, authenticity and trans-
survey of more than 3,000 business and ensure clarity of purpose, scope and no du- parency, can help employees make their work
HR leaders across 106 countries, Deloitte’s plication of effort are vital when designing. meaningful
2015 Global Human Capital Trends report out- Governance structures which emphasise ac- • Simplifying processes, work and struc-
lines 10 critical trends facing organisations and countability and focus on what matters will tures will help reduce the burden of today’s
the implications for how they navigate a “new also go a long way to achieving simplicity, 24/7 work environment and create a culture
world of work”. as will reducing the number of interfaces be- that is compelling and enjoyable for everyone.
This new world is a bold and innovative one tween functions and teams. Cognitive computing – the use of machines
which challenges existing practices, requires Many mining organisations grew organi- to read, analyse, speak and make decisions
organisations to simplify their work environ- cally and in a semi-controlled way during the – is impacting work at all levels. Automation
ment and practices to reduce the burden on mining boom – now we have the opportunity programmes are already in place for many
overwhelmed employees, and consider how to step back and re-evaluate to deliver a more mining companies across various elements
they leverage technology to redesign work. streamlined and productive way of working. of their supply chain. These have focused
Ultimately, it requires organisations to re- Globally, organisations are recognising the mainly on automating operational elements
imagine how they lead, engage, evaluate and need to focus on culture and dramatically im- of work.
develop their people and how they design prove employee engagement as they face a Cognitive computing is set to automate
their teams and work to drive greater efficien- looming crisis in engagement and retention. and replace knowledge workers and organi-
cy and productivity. Within the mining sector, cost reduction sations need to rethink the design of work,
So, how do mining companies re-imagine and downsizing programmes are having a how employees will work in cooperation with
the future of work with a view to creating more significant impact upon the level of employee computers and the implications for the skills
productive and innovative operations? And engagement with a threat in the longer term to employees will need to succeed.
how do leaders and their HR partners set the organisational culture unless action is taken Key opportunities in this area include:
tone for what is needed in the future? soon. • Exploring and learning – Leaders and
Our 2014 Global Human Capital Trends re- This is not just a HR problem. Nearly 90% HR need to invest time and effort in learning
port highlighted the issue of the “overwhelmed of our report respondents rated culture and about how cognitive technologies can impact
employee” who was struggling to respond to engagement as their top challenge. Due to business, jobs, and productivity. Understand-
the level of access to information that modern greater corporate transparency and work- ing what is currently in use within mining and
technology enabled. This certainly remains force mobility, leaders need to better under- related industries, and exploring what is on
an issue in our 2015 report, with 74% of re- stand the critical role they play in creating a the horizon, allows an understanding of the
spondents describing their work environment culture defined by meaningful work, deep em- implications for work and job design, and
as either “complex” or “highly complex”. Con- ployee engagement and motivational fit. planning now for its implementation
tributing factors to this were explored further Key opportunities include: • Collaborating – While many miners have
and now extend beyond always-on technol- • Realising that engagement and retention innovation partnerships and alliances, given
ogy and global 24/7 demands to also include need to be top priorities for leaders – and cul- the scope and speed of advances in cogni-
complexity in work prac¬tices, business pro- ture and engagement is not just the domain tive technologies and robotics, they should
cesses, and jobs. of the HR team and something to be consid- be constantly evaluating the success of these
To address this problem, organisations ered once a year. HR needs to help leaders programmes and how quickly they are bring-
need to simplify and focus on individual, or- understand what culture is and how it can be ing new developments to reality. Keeping an
ganisational and work-specific programmes influenced eye on thought leadership and developments
that reduce complexity and help people focus • Measuring in real time. Leveraging avail- in these areas will provide dividends in the
on what really matters. able tools to support real-time evaluation and medium term, and collaborations will also pre-
Mining companies are certainly well-posi- assessment of culture to provide time-critical sent valuable opportunities to tap into more
tioned for this by leveraging their key learn- insight into strengths, weaknesses and how flexible talent models
ings where the focus has shifted from “doing employees feel to support more timely action • Experimenting – Looking for opportuni-
more with less” (the common mantra for many • Making work meaningful. This seems ties to test new ways of working with technol-
facing tough market conditions), to “doing obvious, but a focus on leadership, coaching, ogy and evaluating the implications on role
fewer things better”. and performance development, that includes design, productivity and employee engage-
Opportunities for mining companies ment.
could include making the simplification a Productivity will be a critical trend for
business and HR priority, regaining control years to come, and mining organisations
over email and unproductive meetings and need to be bold in imagining a future of
designing processes, roles and structures work which emphasises the value of sim-
to be functional and simple. plicity, leverages emerging technology and
Simplification can be achieved by using delivers a culture that supports employees
a dedicated team focused on simplifying in achieving their desired purpose, mission
the work and the work environment and and work-life integration.
“getting out of your own way” and offer- In an environment which is demanding a
ing employees the chance to identify time dramatic response from many, the timing is
wasting and complex processes ripe for Julie Harrison is a Deloitte Consulting partner, and also right to be considering a simpler and
redesign. Kristy Delaney a director with Deloitte Consulting. Both more productive future.
Ensuring just enough process and tech- specialise in resources sector human capital matters
nology is in place to help people get the and are based in Perth.
AUSTRALIA’S PAYDIRT MAY 2015 PAGE 9
Room to move at BC Iron
BC Iron Ltd managing director Morgan BC Iron reduced C1 cash costs at its Nullagine JV operation to $43/wmt during the month of March
Ball insists his company still has plen-
ty of wriggle room left to stay afloat in the are doing and the oil price.” 2014 to September 2015 quarters, subject to
current market. BC Iron brought an early end to its crushing the FOB received price being less than $90/
dmt in each quarter over that period.
As iron ore prices slumped to 10-year and screening contract with Watpac Ltd in late
lows last month, BC Iron announced it March and the service provider will continue The deferred royalties will be repaid in
had restructured one of its key services to operate at Nullagine until early July. The seven equal quarterly instalments between
contracts at its Nullagine JV operation in contract was due to expire in September. March 2016 and September 2017, effectively
the Pilbara. deferring $8-12 million in royalties over that
The decision came just days after BC Iron timeframe.
BC Iron was also the first recipient of awarded a $40 million crushing and screen-
the new West Australian Government ing contract to a subsidiary of Viento Group “Hopefully it says a little bit about the way
royalty assistance package for strug- Ltd for work at the Warrigal hub, starting last we run our business that the Government was
gling iron ore miners. month. encouraged into entering into that commit-
ment with us,” Ball said.
Strong interim production and finan- BC Iron reported the contract would result
cial returns during the March quarter, in a C1 cash cost reduction of $2-3/wmt at “I’m sure our peers are all in discussion with
which coincides with the Pilbara’s wet Warrigal and a potential $4-6/wmt saving, or the Government and probably not far away
season, was another positive piece of 15-25% overall, if applied to other mining ar- from achieving similar types of objectives.”
news to emerge from the company in eas at Nullagine.
what has otherwise been a bleak time The Nullagine JV (BC Iron 75%, Fortescue
for all iron ore players. “We saw a very com- Metals Group 25%) shipped 1.46 wmt on eight
petitive process with a lot capesize vessels during the March quarter,
BC Iron’s C1 cash costs for the March of top-class contracting up from the 1.22 wmt shipped during the cor-
quarter were $49/wmt FOB, down from companies putting in some responding period in 2014, at a run-rate of
$54/wmt for the corresponding period pretty edgy quotes and we about 5.8 mtpa, also above the standard wet
in 2014. The company also reported C1 are very pleased to have season run-rate of 4.5 mtpa.
cash costs for the month of March were appointed Viento at the end
about $43/wmt. of it all,” Ball said. BC Iron’s share of the ore shipped from Nul-
lagine for the quarter was 1.04 wmt, or 71%
However, questions remain about just how “It’s all part of a broader of the total.
much leaner the Perth-based company can strategy to get our cost
run, particularly at a time when rival juniors base down and in this en- “Ironically we’re running the operations as
are close to shutting their doors for good. vironment every little bit well as we ever have,” Ball said.
helps and obviously we’re
Fellow Pilbara miner Atlas Iron Ltd went into looking for every little bit we “We had some challenges operationally
voluntary market suspension early last month can at the moment. with some clay pods in the second half of
before announcing just a few days later it last year…and since those tweaks have been
would progressively suspend operations at its “We continue to find made we’ve ramped back up to full run rate of
five iron ore mines because it was no longer cost-outs and we’ll con- production.”
viable to continue producing in the low pricing tinue to find cost-outs. You
environment. just need to do that in this BC Iron finished the March quarter with
environment because it’s a cash reserves of $107.5 million, slightly down
Ball acknowledged that if the iron ore price Morgan Ball cyclical industry.” on the $110.1 million the company held at the
continued to tumble his company may have to end of December 2014, and debt of $US35.8
consider its options, but he was adamant that Ball also welcomed the million ($46.9 million).
for now BC Iron can survive the tough times. royalty assistance package from the WA Gov-
ernment which will see 50% of BC Iron’s roy- – Michael Washbourne
“What we need to do first and foremost is alty payments deferred from the December
implement this strategy that
we’ve just taken to the mar-
ket and see where that gets
us,” Ball told Paydirt.
“As I’ve said all along,
we’re constantly revisiting
our mine plan to make sure
it reflects the macroeco-
nomic environment, so we’re
always thinking about doing
things as productively and
as efficiently as possible
from an equipment perspec-
tive and minimising costs
from a financial perspective.
“We will continue to do
what we can and look at
where we can take costs
out because we just have to
in this environment. I don’t
have a particular number in
mind, but there’s a lot of le-
vers to be pulled such as our thinking around
the mine plan, talking to contractors, what the
exchange rate is doing, what shipping freights
PAGE 10 MAY 2015 AUSTRALIA’S PAYDIRT
Triton Minerals Ltd’s Brad Boyle made it Triton managing director Brad Boyle and Yichang Xincheng Graphite chairman Yue Bin
sound so easy. sign the landmark off-take agreement
Less than a month after meeting with
representatives of China’s Yichang ity TMG will not only allow our company to reaped a head grade of up to 22.8% total
Xincheng Graphite Co Ltd for the first develop competitively priced products for the graphitic carbon (TGC) in flake sizes rang-
time, Triton’s managing director secured global markets, but will also contribute, indi- ing from 600μm and 800μm, while the overall
a 20-year binding off-take agreement for rectly, to the long term economic growth of graphite grades across a full range of flake
the company’s flagship Balama North Mozambique.” sizes averaged 16.2% TGC.
graphite project in Mozambique worth a
minimum $US2 billion. Boyle said the security that comes with the Triton’s ability to attract AMG Mining as a
Yichang Xincheng deal now freed up Triton to partner (through its subsidiary GK Ancuabe
An understandably jovial Boyle said in explore other off-take options for graphite with Graphite Mine) to develop Ancuabe further
a recent shareholder webcast Yichang different specifications. endorses the project’s potential.
Xincheng’s eagerness to commit to a
long term supply deal indicated the qual- Triton was already “in discussions with sev- The binding agreement between Triton and
ity of Triton’s Nicanda Hill product. eral groups” about its finer graphite products GK is for an initial two years, during which the
from Nicanda Hill, he said. companies will collaborate on exploration,
“They were so quick to commit and identification and development of graphite at
take as much as we could produce,” Additionally, Boyle is bullish on the future of Ancuabe.
Boyle said. “They have got people waiting its budding Ancuabe project.
up to 12 months and longer for the supply GK already has a mining permit and func-
of product. That’s why they are so keen Preliminary mineralogical test work on a tional processing plant (currently on care-
to lock in a long term, steady supply of 100kg bulk sample from Ancuabe conducted and-maintenance) in the area.
high quality, premium product. Most peo- by Mintek confirmed the strong presence of
ple are in discussions for a long time … jumbo flake graphite in excess of 3mm in “Depending on how successful our explo-
but clearly our graphite fits into Yichang crusher discharge. ration programme becomes … we have a
Xincheng’s needs.” potentially near term prospect going into pro-
Preliminary assay results on the sample
Independent testing of Triton’s Nicanda Hill duction with an alliance with them,”
graphite in March confirmed it could be ex- Boyle said.
panded up to 1,000 times, increasing its value
drastically. “Are we going to form a JV and go
into production? We don’t know the
The expanded graphite, which can fetch answer because we haven’t started
up to $US3,500/t, is used to produce flexible the formal exploration on those li-
graphite sheets and foils conducive to manu- cences. But we feel pretty strongly,
facturing high performance gasket material given the VTEM data and rock chip
for high temperature use, packaging and oth- samples that we’ve received recently
er sealing materials in critical applications of and the results we’ve been able to
high pressure environments. achieve … that there’s huge potential
for growth in that Ancuabe region.”
It can also be used to create a compound
to insulate molten metal in a ladle or red hot – Rhys Dickinson
steel ingots and decrease heat loss, or as a
fire stop fitted around a fire door. Diamond drill core from Nicanda Hill
“A lot of graphite can be expanded, but
most of the time it’s 200 times or 300 times,
but it doesn’t fulfil the needs of that specialty
market,” Boyle said.
“Whereas over 1,000 times and
above it’s a very good performance,
and to me that confirmed that we
have very good quality, Mozambique
graphite and that’s why we believe
the transaction was settled so quick-
Yichang Xincheng chairman Yue
Bin said it was impossible to ignore
the quality of Triton’s graphite.
“Tests in our laboratory in the Triton
Mozambique Graphite (TMG) mate-
rial performed well beyond our high-
est expectations and we feel TMG is
ideally suited to support and build our
diverse range of expandable graphite
products,” he said.
“The long term supply of high qual-
AUSTRALIA’S PAYDIRT MAY 2015 PAGE 11
Cassini lights up West Musgrave
Having completed a robust scoping study at Nebo Babel, Cassini will now aim to complete a PFS by the end of 2015
The hunt continues for the next Nova-like Based on a 4 mtpa operation producing area and we believe we have the best part of
discovery in the Fraser Range and while 174,500t nickel-in-concentrate and 206,700t it locked up,” Bevan said.
nickel hopefuls scurry for vacant ground in the copper-in-concentrate over 15 years, pre-pro-
region, one player is getting the business done duction capital costs have been estimated at “It is a bit more remote and frontier than the
elsewhere. $432 million ($89 million contingency), while Fraser Range and having acquired the project
average cash costs after by-product credits I don’t think we have had the benefit of a dis-
Cassini Resources Ltd may have raised a are $US1.82/lb. covery hole per se. Nova-Bollinger is a first
few eyebrows when it acquired BHP Billiton class project, so it is a bit like comparing your-
Ltd’s West Musgrave project in 2014, how- Also in consideration for Cassini is a staged self to the prettiest girls at the dance... there
ever, some justification for its purchase was development at Nebo Babel, starting at 1.5 has been a lot of people doing exploration
delivered last month via a work out there [in the West Musgrave] but that
scoping study. mtpa (expanding to 4 mtpa has faded in the last 24 months as the explo-
after eight years) costing ration dollar has been hard to find. If we can
“We have actually got $264 million ($55 million show people we can get an operation running
to this point quite quickly, contingency) for the pro- out there then that should entice people to the
in less than 12 months of duction of 8,900 tpa nickel area because there will be a path to realising
having the project,” Cassi- and 8,500 tpa copper at some value in the exploration discovery.”
ni managing director Rich- cash costs of $US2.61/lb.
ard Bevan told Paydirt. Regardless of the actions of others, Cas-
Bevan said the scoping sini’s approach to the West Musgrave project
“It is good to get a ro- study was very much con- will remain two-pronged with development
bust study out there which ducted on the conserva- and exploration efforts to be run in tandem.
answers a lot of the ques- tive side.
tions people had about Bevan is keen to add value through the drill
the project and for us it “There are a lot of op- bit however exploration funds will be dictated
provides a base to move tions to consider and there by the availability of capital in the market.
forward.” are still a number of things
we need to do to optimise The Succoth copper target, also part of
Bevan said proving some of that. We believe the West Musgrave project, is a high priority
good metallurgical recov- that will pretty much take for Cassini with results late last year – 118m
eries (average nickel re- Richard Bevan us to the end of the year to @ 0.66% copper and 82m @ 0.83% copper
covery over 71%) was one complete that. We want to – confirming the potential for a large copper
question Cassini was able to answer in the move into the DFS with a clear strategy and project.
scoping study, while demonstrating a viable nail down our best options, we believe there
route to market was another. are enhancements we can make from where Bevan said Succoth could be added to the
we are at. There is a lot of opportunity for us development model at Nebo Babel.
West Musgrave straddles the borders of to improve and add value plus also reduce our
Western Australia, South Australia and North- capex and opex costs.” “I think investors also want to see explora-
ern Territory, with nickel and copper concen- WorleyParsons led the scoping study and tion upside and I think most people, especially
trates from the flagship Nebo Babel deposit Cassini hopes to have a completed PFS at in our space, are not in there for a yield play.
to be transported 800km by road to Leonora Nebo Babel – 31.2mt @ 0.7% nickel and 0.6% They are in there for a significant return on
then another 500km via rail to the Port of Es- copper for 218,000t nickel and 187,000t cop- capital and I think more recently we have seen
perance. per – by the end of 2015. people are willing to back exploration plays.
First concentrate production is being tar- I think the goal for us is to keep both those
Isolation has never deterred Cassini from geted for late 2018 by which time there may agendas – development and exploration –
chasing Nebo Babel and the company is now be a few more interested parties accessing moving in parallel,” he said.
more confident in the project’s viability, par- ground in the West Musgrave province.
ticularly given the cost assumptions (using an “We definitely think it is a very fertile project – Mark Andrews
exchange rate of 75c to the US dollar) provid-
ed in the scoping study.
PAGE 12 MAY 2015 AUSTRALIA’S PAYDIRT
8 October 2015
Pan Pacific Perth
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Sirius chief operating officer Rob Dennis with managing director Mark Bennett at the Nova box cut. The box cut was expected to
be completed by the end of April, with first ore scheduled to be hit early next year
Not even rain, low nickel prices and poor hosted media on site in April and it appeared And now the masses are also starting to
sentiment in the resources sphere can he could not have been happier. knock Sirius’ door down for jobs, with Bennett
saying some positions were attracting 200-
slow down Sirius Resources NL. The reasons for his mood are plentiful; the 300 applications each.
The company has surged ahead with con- box cut was nearing completion and the un- So, with the best available talent and equip-
ment to choose from, is there any added pres-
struction of the Nova-Bollinger nickel-copper derground decline about to start; handover sure on Sirius now to deliver above and be-
mine, 100km east of Norseman in Western of the 160-man camp is expected this month
“I don’t get the sense there is,” Bennett told
“Australia’s Fraser Range. and the company has access to $695 million Paydirt.
Sirius managing director Mark Bennett (cash and debt).
“We’ve been lucky enough to deliver on all
We are more than happy to be building the our promises so far and a lot of people have
project now having found it when we did. been accustomed to that and assume that we
will continue to deliver which is great. Obvi-
GR Engineering Services won the contract for the design and construction of ously we have to deliver, which we intend to,
the plant and processing facilities at Nova but a lot of people have a degree of comfort
because when we say we can do something,
we do it.”
The plan is for Sirius to bring Nova on
stream late next year, which will hopefully co-
incide with improving prices for nickel.
With Indonesia’s ban on the export of un-
processed ore taking effect, nickel prices
surged above $US21,000/t in 2014.
Bennett is unfazed that such highs have not
lasted, with nickel worth $US12,800/t at the
time of print.
“We are more than happy to be building the
project now having found it when we did,” he
“It should work out as the perfect counter-
cyclical play which is text book, how you really
want it to be. You find it and make the invest-
ment to build it when the price is low and start
producing when the price goes up. That is still
PAGE 14 MAY 2015 AUSTRALIA’S PAYDIRT
the expectation everybody has, the only dif- Sirius believes it is yet to see value for its gold discovery Baloo
ference is what the price will be and exactly
when it will improve but everybody agrees in Bingo...the Nova discovery hole. Sirius managing director Mark Bennett with senior exploration
two or three years time it will be significantly geologist Markus Staubmann, corporate and commercial director Anna Neuling and exploration
higher than it is now which is what we want.
We don’t want high prices now.” general manager John Bartlett
Annoyed that the equity market valued Siri- “Every 10% drop
us in line with the plunging nickel price – down in the exchange
almost $US3,000/t from the start of the year rate adds $450 million
– Bennett said some consideration needed to net cash to our initial
be given to the changing nature of the US dol- 10-year project life
lar exchange rate. and with nickel prices
forecast to go up in two
“Every 10% drop in the exchange rate adds or three years, for every
$450 million net cash to our initial 10-year pro-
ject life and with nickel prices forecast to go dollar per pound that
up in two or three years, for every dollar per the nickel price goes
pound that the nickel price goes up it adds a up it adds a similar
similar amount. So, if in three years’ time the
exchange rate is 75c rather than 90c which amount.
we did our feasibility study on and nickel has
gone up $1/lb; that’s $100 million net cash AUSTRALIA’S PAYDIRT MAY 2015 PAGE 15
flow a year extra,” Bennett said.
At steady state, Nova is poised to be the
12th lowest cost nickel sulphide mine in the
world with all-in sustaining cash costs esti-
mated at $US2.09/lb.
Over an initial 10-year mine life Sirius will
produce 285,000t nickel @ 2%, 118,000t cop-
per @ 0.8% and 10,000t cobalt @ 0.07% at a
processing rate of 1.5 mtpa.
Sirius will truck half of its nickel sulphide
concentrate from Nova to BHP Billiton Ltd’s
Nickel West facilities in Kambalda for the first
three years starting late in 2016, while copper
concentrate off-take is still to be finalised.
It is the company’s preference to ship its
nickel-copper concentrate from Esperance
port, with the company hosting community
consultations in the town at the time of print.
Utilising the Geraldton port is also an op-
tion for Sirius and considering the beating iron
ore players are currently taking and the lack of
mining projects under construction, a project
like Nova-Bollinger is timely for many con-
nected with a resources sector that is devoid
of new developments.
Sirius plans to source its workers from
Norseman and Kalgoorlie and a FIFO contin-
gent out of Perth on a two-and-one roster.
About 200 construction workers were on
site when Paydirt visited in April, with the
160-people room village almost completed
while the box cut was expected to be finished
by the end of the month.
“We would have established the portal and
we will be starting the underground decline at
the start of May,” Bennett said.
“The schedule for hitting first ore is early
next year. Between the first quarter of next
year when we first hit ore and late next year
when we produce first concentrate we will
basically be opening up a lot of development
headings underground. That will allow us,
when we do start production, to bring a num-
ber of headings on stream simultaneously
and keep the mill full.”
While reserves and resources at Nova-
Bollinger will suffice for an initial 10 years,
Sirius has not packed away its exploration kit
and hopes for a long life in the Fraser Range.
Diamond drilling is underway at Crux and
12 deep EM conductors on the Nova mining
“ Nova has progressed rapidly in the four-and-a-half years since its discovery
The Polar Bear and Baloo stuff, neither of
which are Nova or nickel; is pretty much seen
as a sideshow. Once we have done enough work
at Baloo to understand whether it is little, big or
somewhere in between we’ll be able to figure out if it
has the potential to create value in Sirius or not, and
that will then determine what we do with it.
Sirius managing director Mark Bennettz lease are among the targets still to be tested. is pretty much seen as a sideshow. Once we
A total of $20 million has been budgeted have done enough work at Baloo to under-
stand whether it is little, big or somewhere in
drilling this year but not all of it for nickel. between we’ll be able to figure out if it has the
Despite not receiving the plaudits for its potential to create value in Sirius or not, and
that will then determine what we do with it.”
exploration success at the Polar Bear gold
project where it has unearthed the Baloo There is plenty of work ahead for Sirius at
prospect, Sirius is quietly confident it has Baloo, however spinning the gold project into
something special in the offing. another vehicle, going it alone or striking a
toll-treating deal in the Goldfields to generate
“I don’t think we get any real value for the quick cash flow are all being considered.
gold work, mainly because the market values
us primarily on Nova,” Bennett said. After a 15-year application process, Sirius
was granted the Baloo ground late last year
“The Polar Bear and Baloo stuff, neither of
which are Nova or nickel;
PAGE 16 MAY 2015 AUSTRALIA’S PAYDIRT
Wet weather has failed to slow construction at Nova
which it quickly followed up with confirmation drilling to scope out the size of Baloo is un- Sirius is considering whether ownership under
of the discovery in January. derway. a different entity could allow the Baloo gold
project to fly
The company reported thick, high-grade, In a region of 30 moz gold, Sirius is giving
near-surface intersects from wide spaced itself every chance to standout in the explora- There are few up and coming companies
drilling at Baloo, including 33m @ 3.81 g/t tion scene but its interests are not confined emerging in Australia and while Sirius has
gold, earlier this year. to home soil. broadened its exploration scope, Bennett
provided assurances the company would not
Since finding Baloo, 10km from the 3 moz The company has identified a private com- be distracted from its development commit-
Higginsville mine, Sirius has increased its pany in Finland and Sweden headed by well ments.
ground position at Polar Bear from 130sq km credentialed former Anglo American plc and
to 500sq km. Lundin Mining Corp European exploration “What we don’t want to do is have people
managers to invest in. thinking we have taken our eyes off the ball
Sirius has been spurred on to get busy at which is building Nova and exploring our
Baloo by Gold Fields Ltd’s nearby Invincible “We have funded them with $2 million backyard. We are not rushing around to the
discovery, made last year. which will largely go into the ground and we other side of the world and fritting away mon-
will get 67% of their company. Their company ey over there when there is plenty of good
“The interesting thing about Invincible is is the biggest mineral title holder in the key stuff over here. We are not spreading our own
that it is the first example of a really signifi- district in Finland and the second biggest in people too thinly. To go to another country
cant gold deposit in that different geology. It the key district in Sweden. Instantly, for a $2 usually takes a long time and a lot of money to
has proven that you can get gold in those million investment we can get good people, learn enough about the place,” Bennett said.
other areas and raises the question what discoveries, infrastructure, big ground hold-
else is there? Finding Baloo in a similar sort ings and lots of local knowledge,” Bennett – Mark Andrews
of geological setting is another example and said.
suggests Invincible might not be a one off.
There might be quite a lot of gold in this sort of
geology which hasn’t really been checked out
before,” Bennett said.
Baloo is situated on Lake Cowan, with min-
eralisation occurring beneath a thin veneer of
salt lake sediment.
To optimise its drilling programmes, Sirius
has purpose-made rigs effective for operating
on a salt lake.
RC drill testing the oxide zone and diamond
The 2km airstrip at Nova is within walking distance of the accommodation village
AUSTRALIA’S PAYDIRT MAY 2015 PAGE 17
Opening up new opportunities: Oz Minerals’ recent strategic review has seen it refocus efforts in the Malu underground mine at
Prominent Hill as well as preparing for a widening of horizons in the M&A space
Once a solid but uninspiring domestic ties as they arise,” Cole said on release of the NL, suspending exploration at the Fremantle
light heavyweight, Oz Minerals Ltd has review’s findings. Doctor copper project and revising the min-
stripped itself back in an effort to turn itself into “This new strategy is not business as usual ing plan.
a leaner and keener international copper mid- nor is it about cost cutting. It is about position- Cole had foreshadowed the review’s re-
dleweight. ing the company for growth in the down cycle. lease a week earlier in his first major public
“In an effort to position itself for growth, the There is a need for Oz to behave quite dif- appearance as Oz managing director Andrew
company has pared back its Cole at the South Australian
corporate structure, changed This new strategy is not business Resources & Energy Invest-
key aspects of its mining pro- as usual nor is it about cost cutting. ment Conference (SAREIC).
file at its flagship Prominent
Hill copper-gold mine and Despite refusing to release
details of the review, Cole’s
redrawn its M&A strategy to It is about positioning the company for address to the conference
ensure it considers more op- growth in the down cycle. There is a need did reveal the rationale be-
portunities. hind it.
New managing director for Oz to behave quite differently. “To survive, businesses
Andrew Cole announced the need to be decisive, ag-
new direction on April 20, fol- ile and prepared to try new
lowing the release of findings things,” Cole said in Ad-
from a three-month strategic review into the ferently and decisions already taken are evi- elaide. “The question is then, what culture
company. dence of the decisive approach the company does the company need to survive through
He said the company would be set to pros- will be taking.” any copper price?”
per in the current downturn. The decisions taken prior to the release of In an interview with Paydirt following his
“As a result of the review Oz will be a lean the strategic review included relocating the address, Cole said implementing the review’s
business with copper at the core across mul- corporate head office from Melbourne to Ad- findings would allow Oz to position itself to not
tiple assets. It will be fit-for-purpose today but elaide, restructuring the whole of business, di- only survive but thrive among the currently
agile enough to take advantage of opportuni- vesting its 19% interest in Sandfire Resources hostile market conditions.
PAGE 18 MAY 2015 AUSTRALIA’S PAYDIRT
“The key is to not only prepare the
business for prices going down but
also to be ready to take advantage
when they go up,” he said.
While the review included much
talk about “strong values” it has at its
core tangible changes to the way the
company intends to operate, nowhere
more so than in the area of M&A. “Cole said copper processing would remain Prominent Hill’s priority with gold continuing to be secondary
The review heralds a major re- Oz showed good discipline and is rightly proud
of not destroying value by M&A in the past but
invention of the company’s growth the environment is different now. We will not grow
strategy, one that many investors for growth’s sake [but] the current cycle offers an
have been calling on for years. opportunity to carefully and selectively acquire assets.
Oz was founded in 2007 through
the merger of the two leading Austral-
ian mid-tier base metal miners; Oxi-
ana and Zinifex. The deal was typical
of the brash nature of the junior and
mid-tier resources sector in the mid-
2000s – two junior companies com-
ing together to create a company its
management thought capable of taking full months of the merger, the GFC was buffeting The original deal was for the entire com-
advantage of the commodities “super-cycle” base metals prices to such an extent that the pany but when the Australian Foreign Invest-
many analysts and commentators were pre- merged Oz fell into financial trouble, only res- ment Review Board refused to grant Minmet-
dicting. cued by a takeover bid from China Minmetals als ownership of Prominent Hill due to its
The optimism did not last long. Within in 2009. location within the Defence Force-controlled
AUSTRALIA’S PAYDIRT MAY 2015 PAGE 19
“The Prominent Hill copper-gold mine has been a solid performer for five years but with a barren project pipeline, Oz is cognisant it needs to find
new in-production or near-production assets
We have changed the investment
criteria substantially. There will be
no limits on size, scale and geographic
location. We will broaden our portfolio to
include base metals and gold.
Oz has reduced exploration expenditure by $10 million, largely by Woomera Prohibited Area, per projects in low to medium sovereign risk
suspending drilling at the Fremantle Doctor Oz was left as a one-asset jurisdictions.
prospect near Carrapateena company with a war chest
of nearly $1 billion. “We have changed the investment crite-
ria substantially. There will be no limits on
The market eagerly size, scale and geographic location. We will
awaited Oz’s deployment broaden our portfolio to include base metals
of these funds but it made and gold.”
only one headline acquisi-
tion; that of the Carrapa- The net may be cast wider but Oz retains
teena copper project, also a clear focus; filling up a frustratingly barren
in South Australia. development pipeline which has only Carra-
pateena, stalled at the PFS stage, coming in
Investors were disap- after Prominent Hill.
pointed by the company’s
failure to invest those envi- “Mature resource companies must have
able cash reserves, believ- balanced development pipelines. In reality,
ing it to be too picky with its our projects are many years from develop-
investment criteria. ment and Carrapateena can never be the only
asset in the portfolio,” Cole said.
However, Cole is far from
critical of his predeces- “The focus is on the front half of the devel-
sor Terry Burgess, instead opment pipeline; in production or near-term
thanking him for providing production assets. But, if there are great op-
the platform for his own portunities further down the development
growth intentions. pipeline and we have a clear path to cash
generation, we will pursue them.”
“Oz showed good disci-
pline and is rightly proud There has been perhaps no better time in
of not destroying value by the last decade to be shopping for in-produc-
M&A in the past but the en- tion assets. The recent downturn has left the
vironment is different now,” majors restructuring and mid-tier and junior
Cole said. “We will not grow miners desperately trying to survive, meaning
for growth’s sake [but] the there are new assets, both unwanted and dis-
current cycle offers an op- tressed, becoming available every week.
portunity to carefully and
selectively acquire assets.” “The market certainly presents opportuni-
ties with some companies looking to divest
To do so, the company and some companies in distress,” Cole said.
has revised its investment
criteria, previously focused Oz hasn’t waited for the public release of
only on large, long-life cop- the review.
“I can’t tell you which assets we are looking
at but we are doing active due diligence on a
PAGE 20 MAY 2015 AUSTRALIA’S PAYDIRT
number of projects at the moment,” he said.
With African and Latin American countries
making great strides in the copper space this
century, Oz’s reluctance to take on higher risk
jurisdictions reduced its options but Cole will
not be bound by geography.
“The globe is open to us but we are not go-
ing to put our people at risk. So, where there
is a risk they might get shot at or hurt; we will
not go. If we have to work unethically; we will
not go there. However, there won’t just be a
blanket ban on a list of countries.
“It is about how you structure your ap-
proach. If you can manage cash and the pay-
back is short enough you can manage the
risk, as long as it is safe for our people.”
Neither will the company be restricting itself
to Tier 1 assets. Instead, the focus will be on
a project’s ability to be profitable, no matter
“I have no pre-conceived requirements
about size. What the focus will be on is the
value generated. The minimum 50,000 tpa
copper hurdle the company previously had Oz has chosen to accelerate mining rates through to mid-2017 in the Prominent Hill open pit. From
was an artificial one in my mind. The focus 2018, the mining fleet will be switched to smaller – primarily Oz owned/Thiess operated – mining
needs to be on value and cash flow. fleet equipment
“It depends on the structure of the deal but
we will consider all sorts of things. I have no exceptionally. Oz has skills that translate well nent Hill was Oz’s solid, straight jab.
problem with acquiring companies or pro- from copper to base metals in both mining “Prominent Hill is the engine room so must
jects, participating in JVs or farm-ins; if you and processing and we already produce gold be predictable and reliable,” Cole said of
can create value and manage risk.” with a similar flow sheet.” Oz’s flagship asset. “Oz has an enormous re-
The switch to a wider commodity focus is However, if a boxer is going to fulfil interna- source base in copper [at Prominent Hill and
also a manageable transition for Cole. tional ambitions they have to have their funda- Carrapateena] and the future of the company
“Any commodity can make good money mentals in place and another of the strategic will have copper as the backbone. But if you
“if the asset is very good and you operate it can build diversity in your asset base then
review’s key objectives was to ensure Promi- they can complement that.”
The focus is on the front half of the Among the review’s findings was a recom-
development pipeline; in production or mendation that open pit mining at Prominent
Hill should be accelerated in coming years.
near-term production assets. But, if there are
great opportunities further down the development “We looked at both slowing it [open pit min-
pipeline and we have a clear path to cash ing] down and speeding it up and it was [ap-
generation, we will pursue them. parent] going as fast as we could was the best
current strategy,” Cole said. “It lowers total ex-
penditure and delivers the highest NPV. It ob-
viously gets the ore out faster and that gives
flexibility to the marketing team.”
AUSTRALIA’S PAYDIRT MAY 2015 PAGE 21
“ Lifting development rates will be Oz’s focus at both the Ankata and Malu underground mines this year
We will take those study outputs back into the PFS and will then
restart the tender process. The JV process remains in suspension
until [we] improve the value proposition for Carrapateena. We will only
partner on fair value terms and if that takes longer, so be it.
The mine itself has been per- Malu can deliver incremental val-
forming strongly on its current Former Oz managing director Terry Burgess ue and it is already providing high-
course. Cole said he was “encour- grade ore.”
aged” by the March quarterly fig-
ures which saw below guidance While Cole was happy the work
costs and above guidance produc- has been done to ensure Promi-
tion for copper of $US0.63/lb and nent Hill continues to perform,
31,160t respectively with a further there was acceptance that the
32,874oz gold produced. company’s sole development pro-
ject, Carrapateena, was still some
The performance and changes way from reaching the decision-
to the mining plan have led to a to-mine milestone.
revised guidance of 110-120,000t
copper and 100-110,000oz gold “The review of Carrapateena
for 2015. has shown that it cannot be our
only asset and it must have a part-
“That is with less equipment and ner before it is built but also that
less people,” he said. it could easily be a multi-decade
operation,” he said.
With the Malu underground
mine still ramping up towards its In February, Oz launched a
full 1.6 mtpa capacity, the focus new series of studies designed
will be on improving underground to maximise value at Carrapa-
performance. teena, including development of
a demonstration plant to test its
“This year the focus for the un- hydrometallurgical process and a
derground will be on continuing im- rail study which will consider the
provement of development rates,” value in railing ore from Carrapa-
Cole said. “We are convinced
PAGE 22 MAY 2015 AUSTRALIA’S PAYDIRT
teena to Prominent Hill for processing.
Cole said the studies would be completed
in the next 12 months with results being in-
corporated into a revised PFS for the 1.2bt @
0.8% copper and 0.3 g/t gold project.
“The work we are doing this year is value-
adding and de-risking the project,” he said.
Once incorporated into the PFS, Oz will
restart the hunt for a JV partner which was
suspended when the strategic review was ini-
“We will take those study outputs back
into the PFS and will then restart the tender
process. The JV process remains in suspen-
sion until [we] improve the value proposition
for Carrapateena. We will only partner on fair
value terms and if that takes longer, so be it.”
Perhaps most intriguing of Oz’s work at
Carrapateena is the hydrometallurgical study,
being conducted in partnership with the South
Designed to investigate ways of improving
copper concentrate grades, South Austral-
ian Treasurer Tom Koutsantonis hailed the
research partnership as vital for the future of
copper production in SA.
“Through this partnership we have sup-
ported Oz Minerals to begin hydrometallur-
gical research that we hope will provide the
breakthrough technology to improve the op-
portunities to develop our copper resources,”
Koutsantonis said at SAREIC. “Oz Minerals
is working with the University of Adelaide to
analyse the work of a demonstration plant to
determine whether the process can be used
at scale with the information available to other
would-be copper producers.”
The hydrometallurgical partnership is part
of a wider engagement with South Australian
education institutions and the SA Govern-
ment. Oz is working through another MoU with
the University of Adelaide “to explore win-win
partnership opportunities” and is signed on to
participate in the State Government’s Copper
Summit this month.
“There is a depth of skill and capacity in
South Australia which we can leverage off,”
Cole told journalists following his presentation
at SAREIC. “And, we’ve also got a role to play
in that. It can help generate value in the busi-
ness, the educational capacity of the State
and the opportunities for individual students.”
Such statements prove that for the change
of direction within the company, copper and
South Australia will remain home. For Cole,
the success the company has had in the State
is the very thing that will allow it to grow.
“We have built a strong reputation in South
Australia and commitments will be honoured
and improved and we will maintain that integ-
rity everywhere we go and use it to gain op-
– Dominic Piper
Prominent Hill produced 31,000t copper at $US0.63/lb C1 cash costs
AUSTRALIA’S PAYDIRT MAY 2015 PAGE 23
LATIN AMERICA DOWN UNDER PREVIEW
Aussie winter may turn
into northern spring
Australia’s equity markets may be as barren as the Atacama Desert but ASX-listed
juniors are beginning to find warmer welcomes from investors further north
The fourth Latin America Down Under Conference will take place at the Sheraton-on-the-Park, Sydney, on
May 20-21. More than 300 delegates are expected at an event that has attracted widespread interest on both
sides of the Pacific since starting in 2012. Ahead of the conference, Paydirt looks at the state of the sector in
the region and the progress of Australia’s Latin explorers
The local equity markets may be shut to further beyond. Gold Ltd are among a dozen Australian jun-
them but Australia’s Latin American explor- But now, with the ASX resources index iors who, while retaining their ASX listing,
ers are far from finished on the continent. In- have headed elsewhere for funding. Some
stead, they are branching out to new markets plummeting and junior explorers in particular have tapped equity investors in New York and
and new funding sources. struggling to get any oxygen, companies are London while others have chosen less tradi-
beginning to investigate new sources of fund- tional methods.
The ASX’s exposure to Latin America grew ing.
rapidly between 2009 and 2013 as Australian Peruvian junior gold miner Minera has
explorers cast off previous doubts about their Once this would have meant treading the struck a series of innovative deals including a
ability to do business in the region. The num- familiar path to Toronto but with the TSX and gold stream with Silver Stream Inc and in April
ber of ASX-listed companies with exposure to TSX-V even more hostile to junior exploration announced a new $1.1 million debt facility to
Latin America grew from less than 20 in 2008 stories than the ASX, Latin American-focused stay afloat. Meanwhile, Metallum used con-
to more than 80 in 2014, as executives and in- juniors are increasingly looking to the United vertible notes to keep its work programmes in
vestors began to recognise the opportunities States and Britain for investors with friendlier Chile funded.
still on offer in Brazil, Chile, Peru and even faces and deeper pockets.
Latin Resources Ltd is another Aussie jun-
Metminco Ltd, Metallum Ltd and Minera
PAGE 24 MAY 2015 AUSTRALIA’S PAYDIRT
Twelve months ago the company signed an
agreement with local private company Zahe-
na over the Ilo Norte project. Under the terms
of the farm-in, Zahena can earn a 70% inter-
est in the project by spending $9 million.
“In this environment, who can afford to drill
a project that quickly and aggressively? There
are not many companies recently who have
got a deal which brings cash into the com-
pany and ensures dollars are going into the
ground,” Gale said at the time of the deal.
So happy has the company been with the
Zahena JV, it has extended the strategy into
its other Ilo ground. In February, Latin signed
an MoU with First Quantum Minerals Ltd over
the Ilo Sur project.
Under the deal, the two companies’ local
subsidiaries will collaborate together exclu-
sively for 12 months on exploring for deposits
worthy of further exploration and develop-
Gale told Paydirt the two agreements were
examples of the kind of deals companies had
to do to ensure their survival.
“The capital markets are closed for junior Chris Gale
explorers so we have to look at innovative where the market has bottomed.
“London, for example, likes copper and
ways of funding our work,” Gale said. “We
likes South America and many of the inves-
have built a very good project pipeline and tors there see this as an opportune time to
spent a lot of money on getting the projects to
However, such markets were not open to
the development stage. We drilled all of them every company.
with our own money during the good years “You must have projects which are close
to development; funding for pure greenfields
and we used it wisely. projects is still not there.”
“Ideally, we would have raised more capi- Gale believes Latin is there and said the
company was planning for an AIM listing this
tal and taken projects to the resource stage northern summer.
but the market is just not there at the moment. At its Guadlupito heavy minerals project,
the company is investigating potential new
Instead, we have joint ventured the projects markets.
out and now we are at a point where we have “At Guadalupito, one option we are inves-
tigating is developing products for the gas
Zahena drilling at Ilo Norte and First Quantum fracking and proppant industry. Andalusite is
used extensively in fracking and we are inves-
working on Ilo Sur. tigating low cost possibilities for supplying to
“Ok, we have to give up 70% of the project
“But the key is to not spend money until we
in the case of Zahena. But having 30% of secure a JV partner for the project,” he said.
something is much better than 100% of noth- Just as important as finding an inflow of
cash is managing outflow and Gale said Latin
ing.” was doing all it could to ensure expenditure
was kept to a minimum while maintaining pro-
The company also raised $1.125 million in ject momentum.
November through a convertible bond issued “You can’t control the market. Three years
ago our market cap was $50 million but we
to Lind Partners Australia. Gale said it was had an inferior portfolio to what we have to-
day. All we can ensure is that the projects
another example of finding alternatives when continue to be worked and add value to them
and when the market turns, we’ll get a rerat-
capital markets were shut. ing.”
“We pay that convertible note back on a – Dominic Piper
monthly basis in shares. If we get success
in that time, it means we are not diluting our
shareholders. The key to everything is sur-
vival; all juniors are in that mode.”
He does see some light on the equity hori-
ior finding more encouragement away from zon however and is ploughing a familiar fur-
domestic markets. row to the one his fellow South American-fo-
The explorer has a 1bt andalusite resource cused ASX executives have in recent months.
in northern Peru and a 140,000ha package “I’ve spent some time in London and New
of ground in the highly prospective Ilo copper York as well as Australia recently and while
district in the country’s south, but with inves- domestically the markets are well and truly
tors shy about exploration stories, the com- closed, New York and London are now open
“pany has turned elsewhere for investment. again,” Gale said. “They see an opportunity
I’ve spent some time in London and New
York as well as Australia recently and while
domestically the markets are well and truly closed,
New York and London are now open again. They
see an opportunity where the market has bottomed.
AUSTRALIA’S PAYDIRT MAY 2015 PAGE 25
20-21 May 2015, Sydney
To present, exhibit or attend as a delegate please contact
Melita Fogarty on (+61) 8 9321 0355 or email [email protected]
Keynote Presentations to date:
HE Mr Robert Montgomery HE Mr Guillermo Shinno Natalia Gutierrez Mario Alfonso Cantú Suárez Jose Blanco
HE Mr Robert Montgomery Persaud, Minister of Natural Resources and the Environment,
The Co-operative Republic of Guyana
HE Mr Guillermo Shinno, Vice Minister of Mines, Ministry of Energy and Mines of Peru
Natalia Gutierrez, President, National Mining Agency Colombia
Mario Alfonso Cantú Suárez, General Coordinator of Mining, Ministry of Economy of Mexico
Mr Esau Garza, Senior Advisor, Trade & Investment for Strategic Markets, Promexico
Ignacio Celorrio, Partner, Natural Resources Group, Quevado Law Firm, Argentina
Diego Temperley, Managing Director, Capital Agroindustrial, Argentina
Gloria Prieto, Director of Mineral Resources, Colombian Geological Survey
Jock Cormack, Partner, DLA Piper
Tony Rovira, Managing Director, Azure Minerals Ltd
Liam Twigger, Managing Director, PCF Capital Group
Jose Blanco, Chairman, ALABC
Chris Gale, Chairman, Council on Australian Latin American Relations (COLAR)
Peter Dowd, Executive Director, Mining Education Australia - University of Adelaide
Professor Andy Fourie and Professor Caroline Baillie, UWA
Alan Martin, Chief Executive Officer, Solgold
Brant Peters, General Manager - South America, MEC Mining
Trevor Woolfe, Managing Director, Oro Verde
Christian Easterday, Managing Director, Hot Chili
Tim McLennan, Chief Executive Officer, Australian Water Recycing
Chris Moran, Director of Suistainable Minerals Institute, University of Queensland
Leith Boully, Non-Executive Director, National Water Commission
Rob Grant, Former CEO Pacific Hydro (2005-2014) & Current Managing Director of LATAM Investors
Sponsors to date:
LATIN AMERICA DOWN UNDER PREVIEW
Azure finds cash and momentum
Azure’s JV partner Rio Tinto plans to begin airborne geophysical work at the Promontorio project in Chihuahua State, Mexico, during this quarter
The market may not have taken notice yet ico, the company is preparing its maiden up to 500,000 shares to Teck. Teck retains a
but Azure Minerals Ltd managing director programmes for the newly acquired Alacran clause which will allow it to regain a 65% inter-
Tony Rovira is convinced his company is in a copper project in Sonora State. est in the project.
better position than at any time in the last five
years. Azure picked up the project in January from Rovira said both the structure of the deal
Teck Resources Ltd which intends to fully exit and the project itself were exactly the kind
A robust bank balance which allows Azure Mexico. Under the farm-in agreement, Azure of opportunities Azure had been looking for
to set out on a full 2015 exploration programme can acquire 100% of Alacran by spending since handing over control of Promontorio to
at its recently acquired copper project and the $US5 million within four years and issuing new JV partner Rio Tinto Ltd.
knowledge the company’s flagship project is
funded by a JV partner with deep pockets is Tony Rovira “Once we did the Promontorio deal with Rio
reason why Rovira is so confident. we decided we needed another project. Teck
was withdrawing from Mexico and Alacran
“For the first time in a few years we have was a project we wanted. It was a competi-
got sufficient money in the bank to do the high tive tender process and we won it which says
quality, substantial exploration we want to do,” something about our desire to secure it and
Rovira told Paydirt. Teck’s confidence in our ability.”
Azure’s bank balance was down to just over Alacran is adjacent to the Southern Cop-
$500,000 by December 31, a situation which per Corp-owned 8bt @ 0.33% copper Cana-
forced the company to begin searching for nea mine on the Sonora-Arizona copper belt.
top-up funds. Despite the tough market condi- Rovira said despite its location in a region
tions for juniors, Rovira was surprised by the renowned for its copper endowment, Alacran
reception the company’s plans received. had been only lightly explored.
“We went to Patersons for $1 million; just “The project is inside one of the best cop-
to keep us going,” he said. “They agreed to per producing provinces in the world and
underwrite the $1 million share purchase plan there has been historical copper and base
[SPP] and that gave us confidence we could metal mining on the property but very little
keep going for another year. But then our exploration has actually been undertaken,”
own shareholders jumped in and we eventu- he said. “I would describe Alacran as the best
ally raised $2.25 million from the SPP before under-explored copper project in Mexico.”
Patersons brought in another $100,000 from
additional clients.” The area has seen little previous work
although the one drilling programme un-
Azure intends to deploy some of the cash dertaken at Alacran, by Grupo Mexico, did
immediately but having spent the last three identify large-scale copper oxide mineralisa-
years focused on the Promontorio copper- tion. However, with that drilling having been
gold-silver project in Chihuahua State, Mex- restricted to a 1km by 500m area within the
PAGE 28 MAY 2015 AUSTRALIA’S PAYDIRT
55sq km land package, numerous other op- One of the historical copper mining areas on Azure’s La Morita prospect in Sonora State, Mexico
with the acquisition of the Telix graphite pro- earn-ins, Telix adds further to the asset mix
Rovira said that while the mineralisation ject in southern Mexico. Azure has been missing for so long. Rovira
outlined by previous drilling remained open said the company was happy to concentrate
and untested along strike and at depth, Azure Graphite’s profile has risen immensely in on its current portfolio but didn’t completely
would be setting its sights on other targets. the last three years with ASX-listed compa- rule out further acquisitions.
nies picking up projects across the globe.
“We could do more drilling on that large- Mexico itself has a long history of graphite “We have stopped actively looking for other
scale, low-grade mineralised zone and get mining but Rovira said Telix did not represent projects but there are always opportunities
a JORC-complaint resource quickly but we a desire to change commodity focus. being put to us by distressed companies and
recognise the potential capex for that kind of if it doesn’t impact our ability to fund explora-
project is very large. For a company of Az- “The graphite was an opportunity for stak- tion at Alacran we will look. The graphite pro-
ure’s size, the best return will come from the ing something with strategic importance. It ject was an example of that because it cost us
discovery of high-grade deposits.” surrounds the El Tejon graphite mine and mill virtually nothing. Those sorts of deals are the
soon to be restarted by TSX-listed Big North ones we are looking for.”
To that end, the company is looking for Graphite Inc.
high-grade, epithermal and breccia-hosted, He said opportunities remained in Mexico.
polymetallic sulphide deposits and low-grade, “The best strategy for Azure is to focus “There are both TSX and Mexican compa-
supergene, leachable chalcocite copper de- on discovery and progress of high-grade re- nies offering project all the time. They are re-
posits as well as the medium-grade copper sources because that means you are looking ally hurting at the moment.”
porphyries. at small capex but with Telix, there could be
opportunity in the future for some comple- – Dominic Piper
It has already found compelling evidence to mentary relationships,” he said.
support its theories.
Added to a portfolio of copper JVs and
“There are deposits mined out nearby
which grade more than 7% copper; that is the
style we are searching for with a number of
similar targets in the region.”
In the project area itself, Azure has already
found smoke at several historical mines, in-
cluding the Pal Seco, El Alacran and La Mori-
Following the acquisition, Azure announced
surface and underground sampling at Palo
Seco and El Alacran had returned values of
up to 14.9% zinc, 309 g/t silver and 1.5 g/t
gold while in March, the company announced
it had found six historical mine workings at La
Morita, all showing potential for high-grade
Rovira said the mapping and sampling
campaign would continue across the entire
project area while the attention at the three
main prospects would turn to geophysics.
“The sampling will continue throughout the
year but we will be focusing on those two ar-
eas [Palo Seco and La Morita] where there is
greatest potential for high-grade discoveries.
“Next up will be an IP survey at La Morita in
April which will give us drilling targets that we
could possibly test as early as June.”
While Azure builds its understanding of
Alacran, Rio Tinto is beginning to come to
grips with Azure’s Promontorio project.
The two parties signed a JV over Promon-
torio in December 2014, in which Rio subsidi-
ary Kennecott Exploration must spend $US2
million this year.
Rovira said much of the 2015 works pro-
gramme agreed by the JV partners would
comprise geophysical work.
“We have completed the contracts for air-
borne geophysics and should start that work
in the next few weeks with IP and a Lidar sur-
vey which will allow us to build a digital terrain
model of the project area.
“Geological mapping and sampling over the
regional tenements will also begin with the
goal of defining the different intrusives, styles
of alteration and age of rocks present in the
entire project area. The regional prospects
were previously ignored as we focused on the
epithermal, breccia and porphyry prospects in
the central 200ha of the project.”
Elsewhere, Azure has moved into graphite
AUSTRALIA’S PAYDIRT MAY 2015 PAGE 29
LATIN AMERICA DOWN UNDER PREVIEW
Hot Chili’s new take
Hot Chili Ltd is primed to become one
of the few copper producers on the
ASX in the next few years, but just what
shape its flagship Productora project
will take is still being determined.
Mineral resources at Productora in-
clude over 1mt contained copper and
Updated resources and reserves are
expected to be released soon which
will include a maiden resource esti-
mate from the Alice porphyry discov-
ery, about 400m from the Central pit at
Hot Chili managing director Chris-
tian Easterday said the company was
hoping to confirm Alice was growing by
striking more intercepts along the por-
phyry centre thus exciting the market.
“Alice is a proof of concept play. It is
only small now but we haven’t actually
tackled the bigger play. We probably
want to have a look at that before the
PFS because the PFS might just be a
stage one PFS on the main zone and
we could be looking at a much bigger
project,” Easterday said. The Alice discovery has changed the scope at Productora
“It is quite clearly going to go into our
reserves. We are planning to do a small pro- nally thought to be pre-strip waste, will poten- is three years worth? Three years worth could
gramme, convert that into indicated, captur- tially increase production resulting in overall be the best copper pricing environment at the
ing it into the reserve and including it as part cost reductions and improve pre-strip capex start of the project and the difference between
of the PFS that we will deliver mid-year. What requirements. bringing the project on in 2017/18 or 2021/22
Alice is really representing is a new push im- No doubt there will be many observers wait- and missing the window of high commodity
mediately adjacent to the 9km orebody which ing for finer details to emerge from Hot Chili’s prices,” Easterday said.
we have defined over the last four years. We PFS, expected for release mid-year, with a Hot Chili has recommended the CMP
spent a lot of money defining 1mt of copper DFS kick-started in the second half of 2015. transaction be approved while independent
over four years and in one fell swoop little Al- The PFS will follow formalisation of the in- experts – BDO – believe the deal to be “not
ice, with a very small amount of drilling, has frastructure deal and JV to develop Produc- fair but reasonable”.
just made a significant impact on our metal tora with Chilean resources major Compania BDO noted its assessment of Produc-
growth.” Minera del Pacifico S.A. (CMP). tora was in the absence of feasibility studies
Easterday said further success in the corri- Hot Chili directors and major shareholders which made it difficult to determine the future
dor which hosts Alice could transform the pro- have unanimously supported the deal which value of a project currently boasting 90.5mt
ject into something Hot Chili had never before will see CMP increase its stake in Productora @ 0.48% copper, 0.1 g/t gold and 172 ppm
contemplated at Productora. from 17.5% to 50.1%. molybdenum for 350,000t copper, 152,000oz
“It [Productora] was already Shareholders were set to gold and 9,000t molybdenum. Based on
positioned as one of the big- vote on the JV agreement on these numbers, the mine life is expected to be
gest [projects] on the ASX April 30. in excess of nine years.
but now it actually might take For its part, CMP will con- The value BDO has given Productora (as of
another leap with a little bit tribute surface rights, ease- March 2015) was $245-297 million, consider-
of luck and drilling success,” ments and interests in some ably higher than Hot Chili’s market capitalisa-
Easterday said. Productora tenements, which tion of $42 million.
Hot Chili will also add a cuts out much of the time Hot “We expect the deal to be consummated by
copper oxide component in Chili would have needed to be the end of April and the initiation of the JV in
the Productora PFS after a granted regulatory approvals the weeks following,” Easterday said.
scoping study on resources of for such access. “This will really allow us to get our head
25.6mt @ 0.52% copper, in- “We would estimate, par- down and get this PFS going as we move
cluding 15.4mt @ 0.58% cop- ticularly being involved in through the process of engaging with a major
per within the Central pit, indi- the port study to convert the partner at Productora and building this pro-
cated it could produce 10,000 Huasco terminal into a copper ject.”
tpa copper via a conventional concentrate terminal, about – Mark Andrews
heap leach process. three years in regulatory time-
The oxide resource, origi- Christian Easterday frames. The question is what
PAGE 30 MAY 2015 AUSTRALIA’S PAYDIRT
Orinoco to go underground
Orinoco Gold Ltd received a boost in April tion upon the start of commercial production. The immediate focus of production is Cas-
when its board approved the underground Chancery’s participation will be for a period cavel and Mestre, however, Orinoco sees oth-
er potential sources of mill feed along strike
development of the Cascavel gold mine in Bra- of three years or until Orinoco has delivered a and down dip at Cascavel, while a number of
other targets are also expected to bear gold.
zil. minimum of 16,000oz gold.
A 2.7t bulk sample from Cuca, 350m from
The development of the main incline shaft, The focus of production will be on the Cas- the initial underground operation, returned 27
g/t gold, while 0.33m @ 119 g/t gold has also
which will allow access to the high-grade cavel and Mestre areas of the deposit which excited Orinoco at the historic Sertao target.
zones, was expected to start in early May, at have been delineated by surface drilling and Sertao was mined from 2003-2006, pro-
ducing 256,000oz @ 24.95 g/t gold. A granted
which time Orinoco can proceed with the or- underground bulk sampling along 500m of mining lease exists at Sertao, where drilling
has revealed down dip continuity of gold bear-
dering of plant equipment. strike. ing lodes and opportunities for cut backs and
Plant commissioning is scheduled to start One of the latest samples collected by Ori-
In addition to Sertao, Orinoco has also pin-
in November, marking Orinoco’s transition noco returned 15m @ 88 g/t gold. pointed Garimpo, 1.5km from Cascavel, as
another potential target to source ore from.
from explorer to gold producer. Currently there are no JORC standard re-
All rock chip samples from artisanal work-
A funding package of $14 million has been sources at Cascavel, with Orinoco planning ings have returned gold so far.
arranged to bring Cas- to release a development Cascavel, in the Faina Goldfields, central
Brazil, is essentially the launching pad for Ori-
cavel into production. timetable at the time of noco to unearth large scale, long life assets
in the region.
The cornerstone of print.
the project funding is Initially the compa-
an $US8 million gold ny will work towards a
sharing arrangement, 40,000 tpa operation at
whereby Orinoco’s Cascavel using a simple
Singaporean funding gravity circuit for process-
partner – Chancery As- ing, costing an estimated
set Management – will Development of the main incline shaft at $US6.6 million at Sertao,
share in gold produc- Cascavel was expected to start in early May within 8km of Cascavel.
AUSTRALIA’S PAYDIRT MAY 2015 PAGE 31
LATIN AMERICA DOWN UNDER PREVIEW
Juruena provides market upside
Crusader Resources Ltd be- agement have taken the view
lieves it has found an upside it is a project better suited to a
to the downturn in the mining higher gold price environment
sector in the form of the Juruena of at least $US1,300/oz.
gold project in Brazil. “Borborema has 2.4 moz
Juruena was acquired from @ 1.2 g/t gold and is in a situ-
TSX-listed Lago Dourado Inc in ation where it is now ready to
July last year for just $C650,000 be funded and developed, but
and 2 million fully paid shares in what we’re reluctant to do is
Crusader – a deal that briefly fund it using the wrong financial
saw the company’s stocks peak mechanisms,” Stephen said.
at 47c/share amid all the doom “Internally we see Borborema
and gloom for junior gold hope- as a project that needs a slightly
fuls. higher gold price to make it re-
Crusader has started an ally attractive and we’re in the
8,000m drilling programme at fortunate position of being able
the project in the hope of defin- to look for those circumstances
ing a maiden resource over the to occur over 2016.”
447sq km of prospective ground Crusader raised $3.3 million
before the end of the year. via a placement in early April to
The Perth-based company is Crusader is completing an 8,000m drilling programme over Juruena in a bid to assist with the planned explo-
looking at Juruena as a near- define a resource over the project later this year ration at Juruena and Stephen
term producing asset that it can believed that was a sign there
get up and running much quicker in the cur- campaign at Juruena at the time of print. was still plenty of market interest in the com-
rent economic climate than its flagship Bor- Recent drilling at Juruena has returned pany despite its stocks sliding to 17c/share
borema gold project. encouraging hits of 8m @ 6.27 g/t gold from later in the month.
Crusader executive director Paul Stephen 80m, 2m @ 17.62 g/t gold from 84m and 3m The company also continues to generate
said Juruena had all the attributes of a small, @ 26.35 g/t gold from 73m, including 0.5m @ healthy cash from its Posse iron ore mine in
high-grade gold mine. 150.57 g/t gold. Brazil, reporting sale revenue of $16.9 million
“The previous owners were focused on “We’re looking for a relatively small but and gross profit of $6.3 million for the 2014
finding an absolutely enormous, world class very high-grade resource that we can put a calendar year.
system and while there is nothing to say that’s 100,000-200,000 tpa plant on, so only a small “At the moment our iron ore project is mak-
not there, it’s not our focus,” Stephen told operation but one that can be done relatively ing money and it’s making money because we
Paydirt. quickly and simply,” Stephen said. were able to be very flexible in dealing with
“Our focus is very much on taking the work “This is an area that is screaming out to be the locals,” Stephen said.
that they did and thinking about it as almost a geologically understood and there’s no doubt “Our pricing is affected by the international
start-up project from which you can get into in my mind that by drilling it we will continue to price, but in some ways it’s protected because
quick, early cash flow and self-fund over the improve it. The project will just get better and we don’t deal with any of the export markets,
rest of the project area.” better the more holes that are put into it.” only the Brazilian pig iron smelters.”
More than 44,000m of drilling has been Crusader’s purchase of Juruena was in line The team which helped licence and com-
completed over the Juruena tenements by with the company’s corporate strategy of ac- mission the Posse mine for Crusader is also
previous explorers, yet the property which quiring projects capable of being brought into working on developing the same controls for
borders the southern boundary of the Ama- production for less than $US50 million in capi- the Juruena project and is currently assess-
zon does not have a defined resource. tal costs and operating below $US500/oz C1 ing the potential of second-hand plants in the
Crusader currently has two rigs on the cash costs. region.
ground in Brazil and the company was ea- Borborema has long been the company’s Stephen said it had been a difficult time
gerly awaiting the results of a previous drilling main focus in Brazil, but the board and man- for all junior explorers, particularly in Brazil,
over the last two years but he believed Cru-
sader was well-positioned to emerge from
the downturn in a strong position because the
company had remained active on the ground.
“We see a lot of people get into tough mar-
kets and they’re forced into a position where
they need to shut down operations, having
taken the view they can save money by inac-
tivity,” Stephen said.
“It’s always a lot more enjoyable when times
are more buoyant, but we believe we can be
successful in a depressed environment and
stand out from the crowd by being active and,
heaven forbid, actually develop projects at a
time when a lot of people are really struggling
to see a path forward.”
– Michael Washbourne
The Posse iron ore mine generated $16.3 million in sales revenue for Crusader in 2014
PAGE 32 MAY 2015 AUSTRALIA’S PAYDIRT
Codelco sees annual copper
output rising to 2mt
Chilean state-run copper miner not considering buying new assets,
Codelco expects its annual copper Pizarro said.
production to reach about 2mt by 2026 “Codelco has all its resources
as it invests $US25 billion in new mines placed in the development of its struc-
and expansion projects to boost output. tural projects,” he said.
Codelco produced 1.67mt of copper Fundamentals for the base metal
in 2014 from its 100%-owned mines, remained strong, Pizarro said, adding
but its position as the world’s No. 1 pro- that economic growth in China and
ducer is being threatened by declining India “assured permanent demand for
ore grades, high energy costs, and per- copper” in coming years.
mitting delays for new projects. Mirroring the comments other min-
Cash costs are seen as relatively ers have made during the CESCO/
stable, averaging around $US1.51/lb CRU conference, Codelco sees a
between 2015 and 2019, marginally previously forecast copper market
higher than last year’s $US1.50/lb, chief surplus for 2015 essentially disap-
executive Nelson Pizarro told journal- pearing.
ists at a meeting during the CESCO/ Codelco’s $US25 billion investment in new copper mines in Chile The market will likely have a slight
CRU copper conference in Chile during will boost production in the next decade surplus of 50,000t in 2015 before bal-
ancing out in 2016, according to Victor
Pizarro shrugged off suggestions that such as converting open pit Chuquicamata Perez, head of Codelco’s commercial plan-
Codelco could soon lose its top spot to a min- into an underground mine, and adding a new ning and markets.
er such as Freeport-McMoRan Inc. Codelco level to century-old El Teniente, the world’s – Anthony Esposito and
is betting on a $US25 billion investment plan biggest underground copper mine. Fabian Cambero, Reuters
over the next five years, led by giant projects
With all that on its plate, Codelco was
AUSTRALIA’S PAYDIRT MAY 2015 PAGE 33
LATIN AMERICA DOWN UNDER PREVIEW
Minera makes most of cash boost
Minera Gold Ltd has welcomed cash injec- Up to $US2.5 million of working capital will better operations in southern Peru in terms of
tions of up to $US2.5 million to advance its set-up and diversity,” Pattison said.
its copper-gold operations in southern Peru. be tipped into Minera Gold’s San Santiago
“Diversity of the processing plant is key and
The company’s two largest shareholders processing plant in southern Peru we do have optionality there with the three dif-
recently tipped in $US1.05 million in con- ferent circuits to really mix the product going
vertible notes and a new investor committed getting access to working capital would be through the plant, whether it be gold, copper
$US500,000 for working capital purposes at an entirely different challenge,” Pattison told sulphide or copper oxide.
the San Santiago processing plant. Paydirt.
“There’s no regrets in terms of buying the
An option also exists for the incoming “Initially we sought that money from off-take asset. The only regret is we weren’t able to
high net worth investor to contribute another providers on the copper side of the business, bed down the working capital to enable us
$US500,000 within the next six months, sub- but obviously there are challenges in that eve- to take advantage of that over the last six
ject to a range of conditions. rybody wants the copper concentrate but no- months or so.”
body wants to pay for it.
Minera is also poised to claw back Minera has tasted some success with ex-
$US490,000 from the vendor of San Santiago “It just shows how tough the financing sec- ploration around San Santiago, particularly
after it was approved for release from an es- tor is when those big traders are really slow- within the Brasil vein at Cobrepampa.
crow account following the final review of the ing down the lending. Access to product is
acquisition package. their number one priority, but they’re not will- Recent mapping and channel sampling
ing to do a lot of financing to get access to the returned a number of encouraging assay
Working capital has proved to be the big- product.” results, including 0.32m @ 25.11% copper,
gest hurdle for Minera since acquiring the pro- 4.16 g/t gold and 16.4 g/t silver and 0.4m @
cessing plant and associated tenements last Processing gold for third parties at San 22.84% copper, 4.04 g/t gold and 45 g/t silver.
year as the corporate financing sector tight- Santiago remains Minera’s primary cash flow
ened the screws on lending criteria. generator, but purchasing the ore requires a Of the 28 channel sample assays received
by late March, 18 returned copper grades
Minera managing director Ashley Pattison substantial working greater than 5%, 13 samples greater than 2
praised his company’s major shareholders for capital commitment g/t gold and 15 samples greater than 7 g/t sil-
coming to the table at a time of need and said from this most recent ver.
the vital cash injection may just be the market raising.
boost his business has been craving. “Some people have been critical of how
About $US360,000 narrow the veins are at Brasil, but as our guys
“We’ve always made it clear to the mar- will also be set aside in Peru will tell you they’ll take a 1m wide vein
ket that buying the asset was one thing, but for the company’s tail- and 10-12% copper any day of the week,” Pat-
ings dam expansion tison said.
“We’re back in the field doing a second
Minera finalised round of work now, not only on the Brasil num-
the acquisition of San ber one vein but also testing the number two
Santiago, including and three veins which previously have had
mining rights and con- very little work done on them.
cessions to 9,000ha
of ground in the Co- “They’re not just exploration results for
brepampa area, in us. We view them as a potential production
September last year source in the next 3-6 months as opposed to
for $US5.5 million. something that’s going to be 2-3 years away.”
Pattison said the Gold production from the company’s origi-
company had no re- nal asset at Torrecillas, about 180km from
grets about the ac- San Santiago, was scaled back late last year
quisition despite its due to working capital constraints but Pattison
market struggles since insists the underground operation remains a
first flagging the deal vital part of Minera’s immediate plans.
in July. Minera was
trading at just 0.2c/ “We can buy third party material at an av-
share at the time of erage of 28-31 g/t gold and that’s obviously
print. far more competitive than us filling the 110 tpd
capacity in the gold circuit with ore from Tor-
“There’s been a recillas,” Pattison said.
number of groups that
have looked at techni- “As a 110 tpd project, the toll treatment
cal due diligence on strategy is economically the right strategy for
what we’ve acquired, now, but as an expanded plant – one capable
both financiers and of doing 220 tpd – Torrecillas all of a sudden
shareholders, and becomes very important.”
everyone comes to
the conclusion it’s Minera officially began the search for a
probably one of the Peruvian-based chief executive last month in
a move that will ultimately see Pattison’s posi-
tion made redundant. However, he will remain
on the company’s board as an Australian-
Alex Losada-Calderon also stepped down
as chairman last month and has been re-
placed in the interim by executive director
Ryan Welker, while company secretary Ange-
line Hicks has filled the vacant board position.
– Michael Washbourne
PAGE 34 MAY 2015 AUSTRALIA’S PAYDIRT
Chile cuts copper production
forecast for 2015
World No. 1 copper exporter Chile is ex- Ongoing drought will have an impact on copper production in Chile this year
pected to produce 5.94mt of the metal in
2015, state copper commission Cochilco said mission said in a statement. than five-year lows, however, cutting into both
in April, slightly lowering its forecast. Chile, which produces around a third of the company profits and Chile’s main source of
Cochilco estimated in January that output world’s copper, is facing dwindling ore grades
would be around 6mt, up from 5.78mt last at many of its ageing deposits, although new The copper price is expected to average
year. mines such as Codelco’s Ministro Hales are $US2.85/lb this year, Cochilco said, main-
helping to boost output. taining its previous forecast. It sees the price
The cut in the forecast was mostly due to dropping to $US2.80/lb next year.
a lower estimate from projects run by Anglo Concerns over slowing demand in key buy-
American plc and at the Zaldivar mine, which er China have pulled the copper price to more
is operated by Barrick Gold Corp, Cochilco
Anglo said in March that an ongoing
drought in Chile had affected its operating
performance late last year and could have an
impact at its Los Bronces mine in central Chile
Extreme weather conditions in the north of
the country earlier this month have also taken
a toll, Cochilco said.
“There is an effect, albeit of low signifi-
cance, from operations temporarily halted
(mostly Codelco’s Salvador and JX Nippon’s
Caserones) due to the heavy rains,” the com-
AUSTRALIA’S PAYDIRT MAY 2015 PAGE 35
LATIN AMERICA DOWN UNDER PREVIEW
Cash comes to Cleveland
Cleveland Mining Company Ltd managing “I think [my feelings] are a combination of Mendelawitz said the restructure had come
director David Mendelawitz is both nerv- nerve-racking and excitement. We’re selling at a price to both him and his company, but
ous and excited about the prospect of his busi- gold and to be able to start getting money that cost was insignificant in comparison to
ness finally generating cash from the Premier from that will be fantastic and allows us to the value it could bring to the project in the
gold mine in Brazil. stand on our own two feet. long run.
Production is ramping up at a steady rate “Everything appears to be going for us, but “What we’re doing is pushing back the debt
on the back of some operational improve- I’ve thought this the last two years just when to free up cash that we can then put into the
ments and the company expects to see the we’re right on the cusp, so you can never get expansion and because it will deliver such a
benefits of that work start to roll through the too excited and I guess we’ll just have to wait high level of tonnes, it really underpins the
door over the coming months. and see what happens next.” ability to repay the debt by spending more on
the site,” Mendelawitz said.
Cash flow has been a long time coming for Cleveland unveiled its plans to improve
Cleveland in Brazil where the company has plant reliability late last year and has since “We just needed time to stabilise things be-
been focused since listing in 2010 via a re- started work to install a new 100 tph crush- cause we could see we were going to be able
verse takeover of Western Kingfish Ltd. ing and grinding circuit to run in parallel to the to do it, but we just didn’t need the debt star-
existing 40 tph circuit at Premier. ing down our throat from both a debt servicing
Issues with the processing plant coupled point of view and a market sentiment point of
with financing setbacks in a tough market Installation of a new 100 tph flotation circuit view.
have threatened to bring the company’s plans to help increase recoveries and improve pro-
to become a low-cost gold producer unstuck, duction rates is also under way and the entire “If we needed extra cash, we didn’t want
but it now appears the majority of those prob- scope of work is expected to be completed people thinking we were going to be bank-
lems are fixed and unlikely to cause further before the end of this year. rupt at some stage because we couldn’t pay
issues. off this debt. What people don’t realise is that
Cleveland was able to push the button on debt providers are quite comfortable working
Mendelawitz, who has been with the com- the expansion plan through a strategic re- that way because it’s either that or they don’t
pany since its inception, expressed mixed structure of its $US6.8 million debt facility with get their money.”
emotions about the approaching milestone. principal financier Platinum Capital Partners.
The $8.3 million expansion will increase
“It’s a bit like wondering whether you’re Platinum agreed to extend the maturity gold production to 40,000 ozpa for an all-
going to get for Christmas what you’ve been date of the facility by 12 months to Septem- in sustaining cost of $507/oz and also see
wishing for because you’ve been waiting for ber 2016 in return for a 2% NSR which can be Cleveland’s stake in the project rise to 60%
it for so long,” Mendelawitz told Paydirt at his repurchased at any time within the next two equity.
company’s Subiaco offices. years for $US1.5 million.
PAGE 36 MAY 2015 AUSTRALIA’S PAYDIRT
About $1.5 million will also Cleveland also remains
be set aside for regional explo- hopeful of reviving its iron ore
ration in a bid to increase the interests in the country after
resource base to 250,000oz putting the Bahia and Minas
gold and support a six-year Novis projects on hold until the
mine life. price of the bulk commodity
Cleveland announced in late improves.
March it had discovered an ex- Brazil is the world’s largest
tensive zone of primary gold producer of pig iron and Cleve-
mineralisation less than 1km land has retained a desire to
from the Premier site and along enter that market with Chinese
the same structure which hosts demand increasing due to en-
AngloGold Ashanti Ltd’s 7 moz vironmental controls placing
Serra Grande gold mine. restrictions on domestic sinter-
Mendelawitz, a former ing plants.
Fortescue Metals Group Ltd “The metrics are very com-
executive, openly admits gold pelling because we’ve got
is not his favourite commodity access to all the other inputs
but said working with the pre- we need – charcoal, lime-
cious metal in the current mar- stone, quartz – and we’re in
ket made good business sense. discussion with a group at
“I’m not in love with gold, the moment about putting
but at this scale in this country some things together to help
[Brazil] you can make money The Premier gold mine is finally about to start making money for Cleveland strengthen that,” Mendelawitz
out of it and there are also not a after years of frustrating setbacks said.
lot of barriers to entry to selling “Our metrics are for about
it,” Mendelawitz said. sues left for his company to overcome, Men- $20 million we can build a blast furnace that
“What I can see from people is a growing delawitz hopes the upcoming production will make about $20 million profit per annum. I
desire to get into gold and now it’s my abso- phases are “boring” and will ultimately put think we’ll get a lot more support in Brazil if we
lute belief that there are very, very few true Cleveland in the black before too long. go down that path.”
value propositions left in the world, apart from Mendelawitz even flagged the possibility of – Michael Washbourne
gold, to restructure the whole global econom- acquiring further Brazilian operations for the
ic system.” right price and provided the company’s finan-
With all but a small handful of “fixable” is- cials will allow it.
AUSTRALIA’S PAYDIRT MAY 2015 PAGE 37
LATIN AMERICA DOWN UNDER PREVIEW
Metallum to stack the ore pile
Metallum Ltd managing director Zeff
Reeves has welcomed the Chilean Gov-
ernment’s support for copper miners.
In March, it was announced that ENAMI –
the state-owned enterprise which processes
much of the ore produced by small-scale min-
ers such as Metallum – would offer compa-
nies $US0.30c above the spot price for their
material when copper drops below $US2.73/
The payment is somewhat of a repayable
subsidy to be repaid by discounting future
sales once copper prices reach higher levels.
“I think it is a good thing from the Chilean
Government as it shows there is support for
the mining industry. The Government under-
stands small-to-medium producers are the
ones who keep their mills supplied with mate-
rial and we are major employers across the
country. It is good to see that the Government
is not only looking after big companies but the
small-to-medium companies which are be-
coming quite active in the area we are operat-
ing in,” Reeves told Paydirt.
The timing of the Government’s “price
smoothing mechanism” could not have been
better considering the unusual rain event in Metallum managing director Zeff Reeves at the company’s El Roble copper project in Chile
the country’s north.
At the time of print, it was reported that two the company working towards bringing anoth- shaping to be a valuable source of ore for
people had been killed and many remained er stope into play. Metallum.
unaccounted for after torrential rain fell in Ore treated from San Sebastian to date is Development of a decline ramp to ac-
March. averaging almost 5% copper, providing good cess the high-grade Viuda vein intersected
One of the hardest hit areas was Copiapo – margins for Metallum, even at a $US2.50/lb a 1.5m-wide zone below historic mine work-
a major mining services hub in Chile – which spot price. ings. While material had already started to be
is within 80km of Metallum’s El Roble project An exploration target at San Sebastian of stockpiled for processing in Copiapo, Metal-
in the Atacama Desert. 280,000-360,000t @ 2.9-4.75% copper over lum was waiting on assay results to confirm
As a result of the rains, access to El Roble 400m of a potential 6km strike length was an- grades.
was difficult, while major companies in the re- nounced by Metallum last month. Developing horizontally along strike was
gion were forced to suspend operations. “As additional levels are established at the the plan at Viuda and together with ore from
In early April, some companies had reo- San Sebastian mine, we believe we will then Paraguay and San Sebastian, Metallum
pened mines, while Metallum was setting up have sufficient data and geological confi- hoped to start hauling greater tonnages in the
its mines so that it could deliver a continuous dence to calculate a maiden mineral resource near future.
flow of ore for processing to boost cash flow. for San Sebastian,” Reeves said in a state- In the December quarter, 1,500t was mined
Blasting of the stope at San Sebastian – ment. at San Sebastian, with production of 720t @
part of El Roble – was progressing well, with In addition to San Sebastian, Viuda is also 4.72% at an average sale price of $239.43/t,
while preparation for mining at Paraguay had
Reeves said there was a good amount of
ore stockpiled at Paraguay with shafts being
driven into the ore at the time of print.
“We have made good advances in the
last three months and I think the next three
months will finally see us steer the boat in the
right direction and start to become cash flow
positive,” Reeves said.
“We’re maintaining our position in Chile but
we would have liked to expand a lot quicker.
It is fair to say that over the last 3-6 months
we probably haven’t done the project justice
because of capital limitations. We have had to
navigate our way through that and we are on
the cusp of getting ourselves where we should
be which is probably 3-4 months slower than
we would have hoped. However, in this envi-
ronment to get there at all is probably a fair
The Chilean mining services centre of Copiapo was devastated by severe rains earlier this year – Mark Andrews
PAGE 38 MAY 2015 AUSTRALIA’S PAYDIRT
RMG plans Chilean triple play
Amix of good and bad fortune easily. The whole process be-
led to RMG Ltd’s move to
Chile in 2013. comes much easier. Plus, it’s not
The company first set eyes on a lot of money. Early indications
its Tuina copper project in 2010
when it was asked by a major are that we are talking $2-2.5 mil-
shareholder to offer some tech-
nical advice on a deal that had lion to get this up and running.”
gone “pear shaped”, according to
executive director Robert Kirtlan. Kirtlan said RMG is currently
Having offered its two cents working with Brisbane and San-
worth, RMG went back to work
on its flagship Karmarga zinc tiago-based MEC Mining to de-
project in Queensland, but when
the zinc price stalled in early sign the plant.
2013 the company cast its eye
back to Tuina and cut a deal to All in all, he saw Tuina as a
get a stake in the promising cop-
per play. three-part play: the cash, the
Located just 55km from Codelco’s Chuqui- dash and the teaser.
camata mines – the world’s largest open pit
copper operation – Tuina comprises 55 per- “Stage one is oxide production
mits controlled by two major faults: San Jose
and San Martin, which Kirtlan said created a cash flow; not huge, but hope-
perfect environment for manto-style minerali-
sation. fully meaningful,” he said.
“The manto style is characterised by near- “Stage 2 is sulphides (where
by deposits,” Kirtlan told Paydirt.
the) opportunity is quite large for
“There’s Mantos Blancos located near our
lease, which was 500mt @ 1-1.2% copper. High grade oxide core from Tuina a small company. With the ox-
They can be big, high-grade and a lot of the
time they are at surface.” ides you’re talking about a couple
Kirtlan said Tuina’s potential hadn’t been the sulphides. We were thinking something thousand tonnes of production a year, with an
realised before as previous explorers failed to
properly age date its rocks. big, open pittable, with some underground opportunity to expand. But the sulphides are a
“Former explorers thought the rocks were components. We think the sulphide opportu- 20,000 tpa-plus play. Stage 3 is really asking
much older compared to the younger rocks
west where the much bigger manto plays nity is real and substantial, but that costs a what’s going on in this system. We’ve made
were,” he said.
lot of money. The market has gone away from that release on La Teca, which is a teaser, or
“They got that wrong and they are the same
age, perhaps even younger.” us a little bit too. So we started looking at and a hint to the market, that there’s potentially
RMG’s initial plan was to drill down-dip at talking to our investors about what we were something very big going on in this area.”
its highest priority copper oxide zones to de-
termine the extent of the sulphide mineralisa- doing and … now we’ve started looking at the – Rhys Dickinson
tion at depth. oxide story and considering whether or not we
The company negotiated a deal with neigh- can make money out of mining several leach
bouring miner Porvenir to investigate its San
Jose open pit mine; with historical data reveal- dumps that we’ve
ing a standout intercept of 107.7m @ 1.2%
copper and 19 g/t silver from 243m, including been doing work on.
21m @ 2% copper and 38 g/t silver.
“There’s a lot of in-
RMG also had a look at Porvenir’s San
Martin pit; a 110m @ 1.07% from 2m histori- situ grade or reason-
cal intersection confirming the prospectivity of
the land. ably high-grade oxide
In early 2014, RMG announced the dis- ore which has been
covery of three new copper and copper-gold
anomalies at Tuina, most notably the La Teca left behind and there’s
prospect, which returned rock chip samples of
up to 15 g/t gold, 4% copper and 104 g/t silver. also unexploited oxide
But just when it looked like RMG was go- that [previous miners]
ing to roll out the drill rigs and chase Tuina’s
treasures at depth, the company took a step haven’t got at. Plus, of
back to look at the big picture.
course, lying around
“Our business model … has changed a lit-
tle,” Kirtlan said. the property are all
“Initially our business model was to chase these … waste dumps
that are probably run-
ning at 1% oxide ore.
We think there’s at
least 1-2mt of that.”
At the time of print,
RMG was in the midst
of producing a busi-
ness case study fo-
cused on the poten-
tial of developing a
60,000 tpa oxide plant
which could process
ore from the leach
dumps first and take
feed from surrounding
“The reason we
have a magic number
of 60,000 tpa is that at
5,000 tpm it requires a
very low level of per-
mitting,” Kirtlan said.
“From there, once
we are in operation,
we can expand it quite
AUSTRALIA’S PAYDIRT MAY 2015 PAGE 39
LATIN AMERICA DOWN UNDER PREVIEW
Platypus hatches new
terms at Chanape
Platypus Minerals Ltd has not Platypus has successfully revised terms for its Chanape project in Peru’s San Mateo district
escaped the capital crunch
junior explorers are experiencing to farm-in or JV,” Dukovcic said. those tenement boundaries off Inca, you
however it is not all gloom for the Either way, Dukovcic knows large sums of have continuity of the geology into our ground
company. which makes our ground as prospective and
money will be required to conduct efficient and as demanding of detailed exploration requir-
Originally targeting $1.6 million worthwhile exploration as has been shown by ing lots of dollars,” Dukovcic said.
through a rights issue at the start its neighbour and ASX peer Inca Minerals Ltd.
of this year, Platypus fell short of “The logical thing would be to have a major
its mark, raising only $750,000. So far, Inca has managed to demonstrate come in and do the work. If everything goes
extensive porphyry-style mineralisation over the way it should, the district is host to more
Payments of $740,000 – in- 1.3km (vertical depth) which remains open in than one mineralised porphyry deposit. That
cluding those to the vendors of all directions. would require $50-100 million in exploration
the company’s Chanape project drilling in the next 2-3 years.”
near Lima – were due by March Inca is one of the few companies in Peru
and would have further stretched with a granted semi-detailed Environmental – Mark Andrews
Platypus’s purse strings but it was Impact Assessment and is on the cusp of re-
able to re-negotiate terms with the starting drilling at its Chanape project which
vendors, which involved dropping is surrounded by Platypus’s Central project.
ground in the east and north-east,
including the Shullac area. Therefore, as Platypus redefines its path-
way it will be keep-
Platypus managing director ing a close check on
Tom Dukovcic told Paydirt the Inca’s progress.
company retained first rights of
refusal over this ground for two “Essentially our
years. ground requires a
drill out. If you lifted
“A bit of good has come from a
bad situation in that the agreement we have Tom Dukovcic Platypus is a significant landholder in the Chanape area
now is much more manageable for us and we
are concentrated around the key ground in the
Chanape area. We retain first rights of refusal
on Shullac and peripheral areas that we ex-
cluded from the new agreement. It now gives
us a greater focus in being able to spread our-
selves and the exploration dollar as far as we
can and conduct more meaningful exploration
work once we are on the ground,” Dukovcic
By not being able to complete the full $1.6
million rights issue Platypus has been pre-
vented from “hitting Peru in the big way we
had hoped”, Dukovcic said.
However, he said the $750,000 it did con-
jure better positioned the company compared
to six months ago.
At time of the print, Dukovcic was heading
to Singapore with chairman Rick Crabb to test
the investment waters there, while
also contemplating the company’s
next exploration efforts in Peru and
Western Australia, where the com-
pany has the Gobbos copper and Cy-
clops nickel sulphide projects.
“At this stage, all three are kind of
in the air but hopefully we will be in
a position where we can get on the
ground and implement work on all
our projects and by the latter part of
the year be drilling at all three sites,”
“The options are; do we go in and
do a small programme [in Peru] to
show our presence on the ground or
do we potentially look for a third party
PAGE 40 MAY 2015 AUSTRALIA’S PAYDIRT
String shortens for drilling
Almost two years after the Chana- we have found already is a smaller
pe discovery, Inca Minerals Ltd is
preparing to restart drilling at its flag- satellite porphyry and that’s similar
ship project in Peru.
to what some of the majors have
The company has been eagerly
awaiting the approval of a semi- been telling us when looking at the
detailed Environmental Impact As-
sessment (sdEIA) permit which was data and having visited the field.”
received during March.
Upon discovery hole CH-DD001:
Inca managing director Ross
Brown said the application process 108m @ 2 g/t gold, 41 g/t silver from
was time consuming and arduous
as the Ministerio de Energia y Minas surface and 220m @ 0.13% copper,
(MEM) rigorously appraised the com-
pany’s permit request. 120 ppm molybdenum from 380m-
“The approval of the sdEIA is a big 600m (open) and follow up confirma-
step forward for us and it has come at
the end of a long process getting our tion holes, interest from major mining
drill permit in place. It does pave the
way for the resumption of drilling which is a houses was perked.
great step forward for us,” Brown said.
While the lag in attaining a drilling
While the sdEIA assessment process was
completed towards the end of March, Inca permit and the softening of commod-
was waiting on a final grant and certificate be-
fore resuming drilling. ity markets has seen some interest
With the approval of the sdEIA taking con- taper off, Brown said there was at
siderable time, Brown was reluctant to pro-
vide a concrete date for the restart of drilling least one major active in Inca’s data
Ross Brown room.
“I’m nervous about timelines,” he said. “The negotiations have mainly
“However we are moving towards finalising
this permitting process. A lot of the assess- line breccia, including 10m @ 5.35% copper, been about majors farming in via a drill spend,
ment of the permit is behind us now, with a
lot of red tape and rubber stamping. There is 0.015% molybdenum, 0.96 g/t gold, 83.68 g/t so we are now very focused on getting a per-
also a new impost – Certificate to Commence
Work – which was introduced on January 6 silver from 186m including 4m @ 8.9% cop- mit. I can now imagine that negotiations will
this year, however we anticipate drilling soon.”
per, 0.025% molybdenum, 1.14 g/t gold and recommence in earnest. We have talked
Brown likened the frequently changing per-
mit system in Peru – which is designed to ex- 130.5 g/t silver, Inca remains anxious to drill about [companies] earning in through drilling
tend the rights of permit holders and tighten
protection for communities and environment – more at Chanape. and now the drilling permit is so much closer
to the operating environment
in Australia. “Despite the frustrations of not actively drill- I expect that there will be renewed interest,”
Clearly it has been a frus- ing we have refined our targets and we have Brown said.
trating time for Inca and its
shareholders however the some ripper targets now. Our last hole was The drilling permit will allow Inca to drill
size of the prize at Chanape
has remained front of mind. our best hole and that was 55m @ 2.3% cop- 22,500m and build 59 platforms however the
Once fully permitted Inca per, so we are going back there. We are not company has always known carrying out such
can execute 22,500m of un-
interrupted drilling over two going to reinvent the wheel but we will prob- a substantial programme is beyond its current
years at Chanape in Peru’s
San Mateo district. ably approach this mineralisation from a dif- capacity.
Keeping the company’s ferent angle. We feel it is sublimed breccia “There is some low hanging fruit for us to
appetite healthy for more
drilling at Chanape is best pipe and we want to get some width to this drill and add value to the property for our long
ever results struck in hole:
CH-DDH012 where an inter- system,” Brown said. suffering shareholders and we are confident
val of 55m @ 2.3% copper,
0.6 g/t gold, 42.9 g/t silver “Then we will follow up on all these strong we can get some immediate reward for their
with zones of 0.025% molyb-
denum from 155m in tourma- gold anomalies up in the Summit which have patience once we start drilling again,” Brown
not been drilled before. We have strong geo- said.
physics, strong alterations, great geology and “We are going to divide the capacity of that
topography, in fact we think that the Summit permit into five sections – 2,000m programme
is the centre of the system. The porphyry that to focus on the Summit epithermal gold and
then four additional 5,000m
programmes staggered over
two years. We will design
those as we go and it is an
organic process to deter-
mine the best holes.”
Pending permit approvals
and subsequent positive re-
sults, Brown said best case
scenario was producing a
maiden resource sometime
To help its cause, Inca
has a controlled placement
agreement in place with
The agreement provides
Inca with option of raising up
to $3 million over a 12-month
period at its own discretion.
Drilling is set to restart drilling at Chanape soon – Mark Andrews
AUSTRALIA’S PAYDIRT MAY 2015 PAGE 41
LATIN AMERICA DOWN UNDER PREVIEW
Pacifico grows in Colombia
Pacifico Minerals Ltd has bucked the trend Simon Noon $US3 million on a smaller package when ex-
of most juniors in the current market and ploration over the last 12 months has shown
picked up more ground to explore in Colombia. “AngloGold are quite a big player in Colom- us the mineralisation extends beyond the
bia and they have a lot of the country secured, boundaries and into the ground that we’ve just
Pacifico entered into a binding agreement but I guess as a result of the pressure in the picked up,” Noon said.
with a Colombian subsidiary of AngloGold market at the moment they have decided to let
Ashanti Ltd to acquire 100% interest in a suite projects go which they perhaps haven’t had “There’s no doubt it’s a high-grade project,
of tenements surrounding Pacifico’s Berrio the chance to explore. but obviously we needed the acreage to really
gold project. show the market that we could have a poten-
“It was absolutely tial world class resource on our hands here.”
The acquisition will take Pacifico’s total key for us to get the
ground holding in the South American country deal done and we did Reconnaissance work was completed over
to 14,318ha – a huge increase from the 62ha so at a good price. the new ground last quarter with grab samples
of tenure the company held under application. Again it’s reflective of at the faulted contact returning several prom-
the market so to ac- ising assays, including 240 g/t gold, 1,178 g/t
Pacifico will acquire the extra ground at the quire 100% of those silver and 2.02% zinc and 46.88 g/t gold, 166
bargain price of $US600,000 – to be paid in titles was a real win g/t silver and 1.12% zinc.
staged increments – and has wasted no time for the company and
getting to work on a new exploration pro- gives us an opportu- Sampling of shears within the Berrio sedi-
gramme. nity to prove up some- ments also generated encouraging assay re-
thing significant with sults, including 94.97 g/t gold, 215 g/t silver
The company’s decision to pursue the more funds going into and 4.95% lead and 11.76 g/t gold, 343 g/t
AngloGold Ashanti tenure was based on the ground.” silver, 13.58% lead and 24.19% zinc.
previous exploration results at Berrio which
showed the mineralisation extended well be- Pacifico recently More reconnaissance work will continue
yond its boundaries. terminated an op- over the coming months and Noon was hope-
tion agreement with ful his company would start drilling the newly
Pacifico managing director Simon Noon the vendor of the acquired ground before the end of the third
described the acquisition as a landmark mo- original 62ha tenure quarter.
ment for his small company. it was exploring and
as such will not be re- “Post mapping and some additional sam-
“It was quite a unique opportunity in that it’s quired to fork out the pling we’ll look to firm up some drill targets
arguably one of the last frontiers when look- $US750,000 acquisi- with a view towards testing those later in the
ing for large scale ore deposits,” Noon told tion fee or any other year,” Noon said.
Paydirt. payment in relation to
this ground. “It’s a big property and there is a lot going
on, so we need to get across the ground and
Instead the focus get the basics done before we can start drill-
will now be on explor- ing.”
ing the new tenure
where recent work Elsewhere in Colombia, Pacifico has con-
has identified 14km of tinued reconnaissance work at the Natagai-
strike potential along ma copper-silver project and reported assays
the contact between with copper grades of almost 5% from the
the batholith and the most recent programme.
However, Noon is not expecting too much
“It didn’t make activity on this property for the rest of 2015
sense in this market despite its potential as the company plans
to spend an additional to focus heavily on exploring the new tenure
Pacifico has been exploring in Colombia
for four years now and Noon said he was
surprised other ASX-listed companies had
shown little interest in the country’s mineral
“Colombia is very open to foreign invest-
ment and has been the focus of a lot of in-
vestment from the US and Canada over the
last decade, but Australians are sort of a little
behind,” Noon said.
“Fortunately for us, we have a good under-
standing of the country, the people and the
mining code. There’s still progress that needs
to be made, but I think the country is definitely
heading in the right direction.”
Meanwhile, Pacifico is on track to earn a
51% interest in the Borroloola West copper-
manganese project in the Northern Territory
from Cliffs Natural Resources Inc by mid-
– Michael Washbourne
PAGE 42 MAY 2015 AUSTRALIA’S PAYDIRT
Colombia’s golden opportunities
Colombia was not missed at the height of Colombia is not endowed with an array of mineral The Government has worked to increase
the global commodities boom. resources however there is an abundance of gold the appeal of its mining sector, with President
Gold and coal have been the mainstays Juan Santos providing a fillip for industry by
of the country’s resources sector and not so for Colombia’s industry, as San Ramon will be supporting a law that ensures environmen-
long ago almost 60 projects were being ac- the country’s largest mine and the first fully tal permitting could be processed within 180
tively explored, with the Colombian Gold Let- permitted under modern environmental legis- days.
ter estimating 102 moz gold has been discov- lation.
ered in the past few years. “In the past, permitting of projects of na-
Fellow Canadian gold hopeful Continental tional importance were in the hands of a local
Exploration activity has dried up recently, Gold Ltd hopes to follow suit with expecta- entity and now the Government is working to
in-line with global trends, and it is believed the tions that its Buritica project will receive envi- bring that back to Federal level,” Butta said.
number junior projects being worked on has ronmental permitting sometime this year.
dwindled considerably, according to Mining The National Mining Agency, Colombia’s
Capital Resources (MCR) managing director “Nothing has been permitted [under modern mining promotional arm and figurehead for
Ryan Butta. environmental legislation] and this year Red implementing the new system, has also dem-
Eagle has done it and we expect Continental onstrated its willingness to enhance the sec-
“There were 58 junior projects [in active Gold in probably May/June to be permitted as tor by signing off on new mining titles this
exploration] a few years ago and I’d say that well,” Butta told Paydirt from Bogota. year, according to Butta.
today only about four or five of those are being
worked,” Butta said. “I think they are milestone events which sig- “The Agency itself will tell you it needs to
nal to other investors that they can come in improve the application process which needs
“That is mainly as a result of the Canadian here and explore and you can get into produc- to be a bit more efficient and transparent.
markets drying up and maybe the quality of tion which is the main signal that the market The Agency is active in promoting Colombia
the juniors that came through weren’t that needs to see.” to global audiences and it has a presence
great and a lot of cash was burnt.” around the world. I’d say that Colombia is
Butta said the permitting process was still trying to find its way, it is by no means an
Many juniors remain cash strapped mean- starting to improve, with better articulation easy jurisdiction but they are trying to set it
ing exploration programmes remain on ice. between the mining and environmental min- up and encourage people to come here and
istries being a driver. make it as easy as possible for them. There is
However there still remains interest on the still a way to go but there are people out there
ground in Colombia with 9 ASX-listed compa- promoting Colombia. Colombia sees mining
nies, 14 TSX and 33 TSX-V listed companies as an important part of the country’s future,”
holding titles in the country. Butta said.
AngloGold Ashanti Ltd and B2 Gold Corp Currently, MCR – a Bogota-based private
are notable players in Colombia, with the pair deal making group focused on infrastructure,
recently completing a PEA at the Gramalote energy and mining – is bullish on Colombia’s
project (317,500 ozpa @ $US664/oz over 14 metallurgical coal sector.
years) and an EIS is under way.
Much of the country’s met coal is inland and
At current gold prices the Gramalote JV is infrastructure needs to be established to ac-
not an immediate concern for B2Gold, while cess the resources.
AngloGold has not dismissed similar partner-
ships to Gramalote at its other Colombian The Government has outlined a $US27 bil-
projects, including its greenfields discovery lion road, rail and port investment programme
La Colosa and high-grade Nuevo Chaquiro which Butta believes is crucial in unlocking
copper-gold asset. the met coal sector.
AngloGold released a maiden inferred re- “A lot of the prospective individual projects
source at Nuevo Chaquiro (604mt @ 0.65% a few years ago now look quite interesting,”
copper, 0.32 g/t gold, 4.38 g/t silver and 116 Butta said.
ppm molybdenum for 3.95mt copper, 6.13
moz gold, 85.2 moz silver and 70,000t molyb- “Colombia is a low cost producer and when
denum) last year. prices boomed a couple of years ago a lot
Onlookers will be interested in of people came here but the big
AngloGold’s progress however question was around infrastruc-
greater attention will be cast on ture. The infrastructure problem is
more advanced companies and not solved but has improved a lot.
projects this year. The coal quality here is amazing,
particularly the met coal, hope-
For instance, TSX-V entity Red fully we are at the right part of the
Eagle Mining Corp received final curve...we are quietly confident in
approval for its San Ramon mine in the projects right now.”
Antioquia during March.
The attraction for investors in
Construction was on track to Colombia is the low-cost nature
start soon after Red Eagle secured of coal and gold production which
a $US60 million credit facility to juniors, particularly Australian
build the $US74 million San Ra- ones familiar with the cost of doing
mon mine within the Santa Rosa business on home soil, may start
gold project. to consider if the depressed envi-
ronment in today’s resources sec-
Production at the 50,000 ozpa tor lingers any longer.
@ $US596/oz, eight-year project
is scheduled to start in 2016. – Mark Andrews
Internally, Red Eagle’s achieve- Exploration has dwindled in Colombia in the past few years
ments are significant however its
feats represent a massive stride
AUSTRALIA’S PAYDIRT MAY 2015 PAGE 43
LATIN AMERICA DOWN UNDER PREVIEW
Paradigm dreams big in Brazil
Paradigm Metals Ltd’s move to Bra- Outcropping graphite in a drill pad cutting
zil late last year was not just one of
choice, but also necessity, according to sults we get back from the rest of the holes,” quickly as possible whether it is commercial
Anthony Reilly. he said. or not,” he said.
The managing director told Paydirt the “I don’t want to pre-empt what they will “We need to be able to put a JORC-compli-
poor state of the Australian market and a be however to drill straight through a layer ant resource around it. Having said that, the
grim outlook for its New South Wales and of massive graphite in our first hole is very other targets need to be dealt with, but that’s a
Queensland copper-gold projects forced encouraging. It gives us a flag there that we function of the money available, being able to
Paradigm to look abroad in 2014. are on the right spot. From a planning point of put another exploration team out and do one
view we’re waiting for the next round of work or two projects side-by-side. Our strategy is to
“When I came in two years ago those and we should commence that straight off the analyse what we’ve got and go to the market
projects had been fairly well worked over back of the receipt of the results.” with that. If it’s accepted and has some poten-
and … the understanding was there tial we can raise some money off the back of
wasn’t a lot there,” Reilly said. Reilly said should the remaining assays that and hopefully add another target on to it.”
deliver the goods Paradigm would likely keep
“With the existing package of projects working on Pedra Preta. Such is Paradigm’s confidence in Caninde,
the company did have, the ability to raise Reilly confirmed the company has already
further capital and eek out any potential “We’d like to be able to say to the market as started an assessment into the feasibility of a
was limited, so a new start and fresh small-scale trial mining operation.
project and fresh jurisdiction to work A drill rig intersecting the graphite layer at Caninde
in sounded right. At the time, given the He said if Paradigm could identify an ex-
company had spent several years going tension along strike at Pedra Preta, it might
over them, we had to make a decision … be feasible to get some early money from the
as to where our next exploration project project by the way of a surface-to-20m shal-
or development project would be and low mining operation.
what commodity we would be looking at.
“Once we know what the metallurgical
“We decided that graphite was a new characteristics of the graphite are we can go
age commodity and it was in the spot- and talk to Brazilian off-takers and internal
light, having had a bit of a run. Even end users of the graphite with the view to do
though it had come off its highs and the this trial mine operation just to one; provide
market had come off the boil to some ex- a chunk of what the potential orebody would
tent, it was very much a commodity that had a look like to the market and two; establish a re-
lot of potential in terms of a market that hadn’t lationship with internal counterparties to take
been well supplied in the past.” that project on,” Reilly said.
On November 4, the Paradigm board an- “There is also some potential to generate
nounced it had acquired 80% of the Caninde some revenue out of an operation like that.
graphite project in Ceara State, Brazil. For instance, if you were to mine 10,000t of
graphite, at current market rates that’s north
Caninde offered a large 15,614ha project of $10 million gross revenue.”
area comprising 17 individual tenements lying
within the Paleoproterozoic Ceara complex. – Rhys Dickinson
Historical exploration included regional
mapping with 1,200 geo stations along
10,000ha, 144 soil samples, 160 rock chip
samples, 458 samples from 686 shallow to
bedrock pits and 538m of trenches, which
identified 12 moderate- to high-grade graph-
Although Paradigm had no history of oper-
ating outside Australia, the company’s fresh-
faced board and advisors, Perth’s Garrison
Capital, boasted a wealth of Brazilian experi-
In Paradigm’s eyes, Caninde had four prior-
ity targets, and they decided to head for its
standout prospect first, Pedra Preta, which
had historical trenching results of up to 25m
@ 13.29% graphite.
The company kick-started a conserva-
tive eight-hole, near-500m diamond drilling
campaign at Pedra Preta in January and was
rewarded instantly with a first hole intersect
of 13.69m @ 18.38% graphite from 3.09m,
including 0.58m @ 31.49% graphite from
Despite waiting on the remainder of results
from the drilling campaign at the time of print,
Reilly said Paradigm wasn’t afraid to dream of
a prosperous future at Caninde.
“[The future] will be determined by the re-
PAGE 44 MAY 2015 AUSTRALIA’S PAYDIRT
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SA continues to set
the pace for
Areinvigoration of the much-lauded Plan building sector, the Government has re-
for Accelerated Exploration (PACE), tained its focus on resources and energy
the initiation of a copper summit and the as a catalyst for growth.
launch of the Royal Commission into ura- “In South Australia, this Government’s
nium mining and the nuclear fuel cycle; number one economic priority is to unlock
South Australian Treasurer Tom Koutsan- the full potential of the State’s resources,
tonis’ opening address to this year’s SA- energy and renewable assets,” he told
REIC left delegates in little doubt that his SAREIC delegates in his opening ad-
Government remains the most proactive dress.
and mining friendly in Australia and per- He admitted the global economic head-
haps the world. winds meant unlocking that potential in
Governments are usually the target of the short term would be difficult but he
widespread criticism at industry confer- reiterated the Government’s support for
ences but at SAREIC, it was once again the sector.
difficult to make a case against a govern- “Quite frankly, the pathway ahead is
ment that has the almost unanimous sup- challenging. Yet it is the work we do now
port of industry in the State. that will determine the scale of our suc-
And while other state governments cess when the inevitable upswing gathers
grapple with the consequences of the pace. The South Australian Government
current downturn, SA continues to throw won’t be abandoning you during this cycli-
its support, both financial and regulatory, cal downturn.
behind its resources sector and is setting “Instead, we will continue to work on
the tempo for government engagement the strategic planning that is required to
with the resource industry in Australia. ensure South Australia takes its rightful
The industry was quick to congratulate place among the titans of mining.”
the Government for its achievements. A look at the numbers on mineral in-
Ian Gould, chair of the South Australian vestment and expenditure in SA leave lit-
Minerals and Petroleum Expert Group tle doubt as to why the Treasurer would
(SAMPEG) which advises the Govern- be keen to continue support to the sector.
ment on minerals and energy policy Treasurer and Minister for Mineral Resources and Energy, Tom The annual value of mineral and ener-
,praised Koutsantonis for his continued Koutsantonis, during his opening address to the 2015 South gy resources production output increased
commitment to the sector. Australia Resources and Energy Investment Conference to $7.5 billion in 2013/14. This was thanks
to private capital investment of $11.8 bil-
“We as a state have got the resources,
we have got the people and we have got the when handed the State’s second-most impor- lion and private exploration expenditure of
Government and that makes South Australia tant job last year. For Koutsantonis, the two $4.2 billion over the last decade.
a very special place to be,” Gould said. portfolios go hand-in-hand. The Government’s PACE programme has
Fellow SAMPEG board member Derek With the State’s economy undergoing ma- been widely lauded as a major catalyst for
Carter agreed, saying the Government had jor readjustment thanks to the closure of the this increase and Koutsantonis said the pro-
port explorers needed to““got it right”, providing the above-ground sup- car industry and uncertain future of its ship- gramme had reaped major economic benefitsfor SA.
realise the State’s below- Quite frankly, the pathway ahead is “During the past decade,
ground potential. challenging. Yet it is the work we PACE has facilitated additional
state mineral production of $2.4
Koutsantonis has been billion – a return on taxpayer’s in-
SA’s Treasurer for just
over a year now, com- do now that will determine the scale of vestment of 20 to 1.”
bining those fiscal duties our success when the inevitable upswing The next step is to establish
with his continued lead-
SA as a leading producer and the
ership of the Mineral Re- gathers pace. The South Australian Government has identified cop-
sources and Energy port- Government won’t be abandoning you per and uranium as the two com-
folio he inherited in 2010. modities in which it is most likely
during this cyclical downturn. to achieve this.
He insisted on retain-
ing the minerals portfolio Among the Government’s
PAGE 46 MAY 2015 AUSTRALIA’S PAYDIRT
“Almost 300 people attended SAREIC 2015 which included the ever popular technical forum on day three
most recent initiatives is the es- I want to encourage the industry SA is Australia’s largest ura-
tablishment of a copper summit, and stakeholders to engage nium producer but with envi-
to be held in Adelaide in May, ous glances to Canada where
which is designed to find the with us so that together we can 20,000 people are employed
best path towards SA becoming develop a copper strategy that helps in a nuclear industry which
one of the world’s most prolific contributes almost $7 billion to
copper-producing jurisdictions. us realise this State’s full potential... GDP, the Government is con-
“Australia has the second sidering ways to expand its ca-
largest economic demonstrat- pabilities.
ed resources of copper at 13% after Chile’s “South Australians are now being asked to
28%, and of the national total, SA hosts 68%. consider whether we simply remain a supplier
And yet while Chile produces more than 5.8 of uranium, only exporting our commodities
mtpa of copper, South Australia produces just to the world, or whether like Canada, we cap-
300,000 tpa,” Koutsantonis said. ture further opportunities in the sector, which
“Our aim must be to translate our world- could generate considerable wealth at home,”
class resource potential into a step-change Koutsantonis said.
in copper production. I think we need to be “The findings of a Royal Commission will
ambitious and set ourselves a target... That is better equip South Australians to answer
why I recently invited the State’s major copper those questions through a robust examination
producers and explorers targeting copper to of the facts.”
attend a summit in Adelaide in early May. Engagement is also set to continue in the
“I want to encourage the industry and stake- oil and gas sector where Koutsantonis reiter-
holders to engage with us so that together we ated his Government’s support for exploration
can develop a copper strategy that helps us and access.
realise this State’s full potential and what that “Unlike the Northern Territory, Victoria and
means for jobs, investment and prosperity in Tasmania we have resisted pressure from the
South Australia.” Lock the Gate movement to impose a mora-
On the uranium front, Koutsantonis said the torium on fracture stimulation and we are op-
establishment of a Royal Commission into the posed to calls for a domestic gas reservation.”
nuclear fuel cycle would “provide an oppor- – Dominic Piper
tunity for informed discussion with our com-
munity on what role our state can, and should
play in the fuel cycle for the peaceful use of
nuclear energy, beyond our success in mining
uranium.” Ian Gould
AUSTRALIA’S PAYDIRT MAY 2015 PAGE 47
Gloom or not, mining
still reigns in SA
South Australia should be and gloom in the global re- join the graphite party on the Eyre Peninsula.
celebrating the growing Among the other notable highlights was
number of industry highlights sources industry, the local
rather than worrying about Havilah Resources Ltd’s move from explorer
when the downturn in the economy in SA was prosper- to producer at Portia and Adelaide Resourc-
resources sector will end, es Ltd’s ongoing exploration success at the
according to Department of ing on the back of its mineral Moonta copper project.
State Development deputy
chief executive Paul Heither- and energy exploits. Heithersay reserved special praise for Iron
say. Road Ltd’s efforts in increasing the resource
“About 39% of our exports base at the Central Eyre iron project by 26%
Resources production in in what has been a difficult period for the en-
SA totalled a record $7.5 bil- are minerals and energy re- tire iron ore sector.
lion in the last financial year,
including a $5.6 billion contri- lated and that now makes “These guys are really in a very tough mar-
bution from the minerals sec- ket, but still punching well above their weight
tor, while exports from the us a material part of the in my view and we’re very encouraged by
mining-friendly state topped what they’re doing,” Heithersay said.
$4.5 billion, including $4.3 South Australian economy,”
billion from minerals, in the 12 months to last “We agree with their views around magnet-
January. Heithersay told the SAREIC ite as the iron ore of the future. We have a
really large magnetite resource in this state
Heithersay used his time at the lectern at audience. and it’s not going away so we need to work
this year’s SAREIC to highlight the many mile- together to find a way to make that economic.”
stones the industry passed in 2014, including “Resources production
more than half ($157.4 million) of the State’s Heithersay said the department was con-
royalties. was only $1 billion about 10 tinuing to work on improving land access for
exploration companies and revealed a new
It was a presentation which reminded del- years ago and now we’re on framework was under consideration by gov-
egates that despite all the perceived doom ernment authorities.
Paul Heithersay a pretty steady growth path.”
Heithersay singled out a – Michael Washbourne
number of SA-based compa-
ny achievements over the past year, including
the first ore railed from Iron Knob (now oper-
ated by Arrium Mining Ltd) for the first time in
Graphite producer Valence Industries Ltd
was also praised for the successful restart
of operations at the Uley mine, while Lincoln
Minerals Ltd and Archer Exploration Ltd have
recently lodged mining proposals in a bid to
Collaboration the key to success
Acollaborative approach will be required to Paul Goiak the Centre of Excellence, which lists collabo-
help unlock the full potential of South Aus- ration as a core principle.
tralia’s resources sector, according to a senior make this vision a reality.”
figure from the Department of State Develop- MIPO’s Minerals and Petroleum Centre of Goiak said for every $1 the department had
ment. put into the collaborative programme, $5 had
Excellence, an innovation fund dedicated to come straight back out of the industry.
Establishing SA as a national mining ser- developing globally competitive supply chain
vices hub is Premier Jay Weatherill’s top eco- capabilities, has been assigned $10 million to “Innovation through collaboration is what
nomic priority and his fourth term in office will spend over five years on expanding mineral will make us globally competitive,” Goiak said.
be judged on his government’s ability to meet and energy supply chain capabilities.
that objective. Goiak highlighted the success of several
Mining companies such as BHP Billiton Ltd, collaborative initiatives, including the super
The Mining Industry Participation Office Oz Minerals Ltd and Arrium Mining Ltd plus fine crusher, remote operations centre and
(MIPO) is a state-owned body formed to help services providers such as Thiess Australia the real time drill site
facilitate that objective. Pty Ltd and research institutions such as Uni-
versity of South Australia and Deep Explora- The onshore petroleum centre of excel-
MIPO director Paul Goiak said a collabora- tion Technologies CRC have all committed to lence – a partnership between Santos Ltd,
tive approach between suppliers, researchers Beach Energy Ltd, Senex Energy Ltd and
and mining companies would go a long way to TafeSA – was one of the first initiatives to re-
achieving the SA Premier’s primary objective. ceive assistance from MIPO.
“Collaboration is essential because you The SA Government has tipped about
need to understand your customer’s require- $500,000 into the onshore petroleum pro-
ments and you need to understand what tech- gramme and to date the received industry
nologies are available to help you commer- contribution has totalled more than $2 million.
cialise your idea,” Goiak said.
“The initiative came as a direct result of oil
“In order to do this we need to continue to and gas operators requesting a combined ap-
develop supply chains with capabilities and proach to onshore training,” Goiak said.
capacities that are truly world class and glob-
ally competitive. With some 500 service com- “The facility delivers training in a fully im-
panies with a presence here in South Aus- mersive environment using equipment do-
tralia and a long-standing heritage of mining nated by oil and gas operators located in the
in the State, we are extremely well placed to Cooper Basin and refurbished and installed
by local suppliers.”
– Michael Washbourne
PAGE 48 MAY 2015 AUSTRALIA’S PAYDIRT
Full nuclear cycle can only
benefit uranium: panel
Australia’s uranium in-
dustry could benefit im-
mensely if the South Austral-
ian Royal Commission into
the nuclear fuel cycle results
in the establishment of a nu-
clear industry in Australia.
The South Australia Gov-
ernment caught many ura-
nium industry insiders by
surprise in February when
it launched the Royal Com-
mission which will consider
what role the State could and
should play in the nuclear in-
The Royal Commission is
focusing on four areas; ex-
ploration and mining, stor-
age, upgrading and power
production and this year’s
SAREIC brought together
a panel of uranium and nu- Ben Heard Vanessa Guthrie
clear experts to discuss what
impact each area could have on Australia’s the SA Royal Commission had been greeted petitive advantage of consistent uranium ex-
uranium mining sector and nuclear future. warmly across the border. ploration and mining we have enjoyed in this
For ThinkClimate Consulting director Ben “It has certainly had a very positive impact State. It has recognised it has to keep that
Heard, the State Government’s decision cre- in Western Australia. The Government wel- competitive advantage and from an explorer’s
ated a “massive opportunity” for the uranium comed the proposal and even the WA Opposi- point of view, it has had the short-term impact
industry in a country which has seen decades tion quietly welcomed it because SA became of raising SA on the international uranium
of emotive debate over nuclear fuel. the first Labor Government to do it.” stage.”
“In particular, I think it is very important it Minerals Council of Australia executive di- While uranium exploration and mining com-
came from an ALP Government, the Left,” rector – uranium, Daniel Zavatierro, said the panies may be far removed from notions of
Heard said. “That creates a massive oppor- domestic storage and upgrading, Heard be-
tunity to avoid all of the local politicking which lieves the benefits to the sector from Australia
usually goes on in these
scenarios. building such capabilities
would be tangible.
One of the ways to increase demand“It also gives us an op-
“At the moment the
portunity to deal with nu- demand curves could be
better for Australian ura-
for your uranium product is to provideclear with a clean slate. nium producers,” Heard,
“secure storage for the spent fuel. This couldHaving observed the nu-
SA Royal Commission was part of a wider
acceptance of the merits of debating uranium
clear industry for 60 years be an enormous confidence boost for the a nuclear advocate, said.
we can consider its merits Australian uranium industry. Customers “One of the ways to in-
without having had skin in crease demand for your
the game. It will allow us are likely to be much more approachable uranium product is to pro-
to say: ‘How would we do for uranium sales if they know the selling vide secure storage for
nuclear?’” country will also take the spent fuel back. the spent fuel. This could
be an enormous confi-
Toro Energy Ltd man- dence boost for the Aus-
aging director Vanessa
Guthrie agreed, saying it tralian uranium industry.
provided a platform for a Customers are likely to be
sensible debate about the future of the nu- and nuclear across Australian state govern- much more approachable for uranium sales if
clear fuel cycle in Australia. ments. they know the selling country will also take the
“It opens up and permits a mature dis- “In the long-run direction is one-way; spent fuel back.”
cussion based on fact and evidence to take Queensland [with its recently announced Such a scenario would be welcomed by
place,” Guthrie said. plans to ban uranium mining in the State] is a local uranium industry which has failed to
Guthrie’s Toro is trying to develop its now the outlier,” Zavatierro said. meet the expectations placed on it a decade
Wiluna uranium project in Western Australia. Core Exploration Ltd managing director ago. When uranium spot prices started their
Although it has received approvals from the Stephen Biggins said the local uranium in- rapid ascent in 2005, predictions were for an
State Government, there is still unease within dustry had received a boost from the Govern- entire new generation of mines to join the es-
WA over the merits of uranium mining and ment’s announcement. tablished operations at Ranger, Olympic Dam
nuclear. However, Guthrie said the launch of “The Government is building on the com- and Beverley.
PAGE 50 MAY 2015 AUSTRALIA’S PAYDIRT