September 2016 VOLUME 1. ISSUE 242 $11.95
front and back cover
Diggers & Dealers review... Gold and lithium lead the rebound
Base Metals... Zinc back in the spotlight ISSN 1445-3436
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PAYDIRT (ISSN 1445-3436) 5 NEWS 5
Published by Another chapter in the unpredictable 20
Paydirt Media Pty Ltd. Wiluna gold story is about to start. Under 26
A.C.N. 063 985 133 the leadership of managing director Bryan
Dixon, Blackham Resources Ltd is on the
Head Office: cusp of first production from the project it
Suite 9, 1297 Hay St, West Perth has rejuvenated. The company is looking
Western Australia 6005 to pour in excess of 100,000 ozpa gold
P.O. Box 1589, West Perth over an initial eight years, however, there
Western Australia 6872 is scope to double output. Mark Andrews
Phone: (+61 8) 9321 0355 was on hand at the WA Mining Club to
Facsimile: (+61 8) 9321 0426 hear how Blackham aims to achieve its
[email protected] ambitions
Editorial: 20 COVER
Editor: Dominic Piper It has been a quick rise for Doray Minerals
Deputy editor: Mark Andrews Ltd, with the Perth-based gold producer
Journalist: Michael Washbourne going from a single operation in 2013
Graphics: Marian Noonan to now being a multi-mine, ASX-listed
Contributors: company. The latest mine to come on
Keith Goode (Sydney), Brendan Ryan stream – Deflector – was shown off to
(Johannesburg), Ross Louthean media, analysts, investors and the like
pre-Diggers & Dealers this year. Michael
Advertising: Washbourne travelled to Deflector, 170km
Advertising manager: Tony Mwarey east of Geraldton, to see how the start of
Subscriptions: Mitchelle Matambo production was progressing
Phone: (+61 8) 9321 0355
Facsimile: (+61 8) 9321 0426 26 DIGGERS REVIEW
Diggers & Dealers returned to the confer-
Pre-press and printing: ence of old in 2016, with delegates much
Vanguard Press 26 John St, more upbeat than in previous years. Over
Northbridge WA 6003 1,900 delegates turned out for the 25th
Member of: edition of the forum and while gold and
lithium stocks were at the forefront of
Paydirt Media enthusiastic investors’ minds, the general
Executive chairman: Bill Repard sentiment towards other sections of the in-
Finance manager: Giovanny Jefferson dustry was also positive. Paydirt was out in
Accounts/administration: force and has dedicated a 22-page review
Heather Melling of the conference this month
Conferences: Tammy Caldwell,
Melita Fogarty, Kale Nakazwe, 48 BASE METALS
Christine Oelschlaeger The closure of the Century and Lisheen
zinc mines has had a major impact on
the base metals sector. Zinc prices have
shot up 50% since the start of the year in
response to a pending supply shortage.
Paydirt takes a look at the ASX-listed play-
ers angling towards helping fill the void
Cover image: Doray managing direc- 64 REGIONAL ROUND-UP
tor Allan Kelly at the company’s new- Paydirt has closely followed the progress
est producing gold mine, Deflector, in Gryphon Minerals Ltd has made at the
Western Australia’s Mid West Banfora gold project in Burkina Faso for
many years. Now the company has done a
Member of: deal which will see Banfora developed by
Australia-Africa Minerals & Energy Group Canadian outfit Teranga Gold Corp. Mark
Andrews spoke with Gryphon managing
Registered by Australia Post PP 643938/0071. director Steve Parsons about how the
No pages or articles in this publication may be transaction will play out
reproduced in any form without the consent of
the publisher. This includes photographs either
taken by Paydirt Media staff or provided by other
Major disconnect plays
into juniors’ hands
Sometimes it feels like the junior re- The rate of change is such that we could be looking at another
sources industry is completely dis- exploration boom in the second half of 2016 and while gold and
connected from the sector’s major lithium have led the way so far, there are also stirrings in the
companies and the wider Australian base metals sector. Nickel and zinc prices have been buoyant
economy. this year and while copper still appears to have some way to
In August, while the mainstream travel, explorers and developers are beginning to get their sto-
media pored over the headline losses ries across to investors once again.
in BHP Billiton Ltd’s financial results
and what they meant for the future of both the company and Whichever commodity or jurisdiction is under discussion, it is
the national economy, the junior mining sector was enjoying the the junior and mid-tier players who are leading the conversation.
best conditions of the last four years or more. There is widespread agreement that a large amount of money is
For the wider population, the BHP Billiton results were the still sitting on the sidelines, waiting to be deployed on the majors
clearest signal yet that the mining boom was over. This is some- but while their balance sheets continue to be hampered by nec-
what ironic given that having suffered a post-boom hangover for essary asset write-downs, junior and mid-tier miners are provid-
four years, the junior end of town is currently enjoying the best ing good value for smaller institutional and retail investors.
investment conditions in half a decade.
The recovery was brought into sharp relief during the annual While the post-boom crash is still playing out at the major end
Diggers & Dealers forum in Kalgoorlie in August. I headed to the of town, smaller companies are fleet-footed enough to react al-
Eastern Goldfields with my usual supply of scepticism for opti- most instantaneously. That is why they are able to capture the
mism about a turnaround being ‘always’ around the corner when lithium boom and why the likes of Energia Minerals Ltd, Heron
you are talking market sentiment during Diggers week. Even in Resources Ltd and Red River Resources Ltd suddenly appear
the toughest years, there were always plenty of delegates willing ready to take advantage of the zinc supply gap despite spend-
to force themselves into a positive frame of mind and declare the ing much of the last five years desperately scraping together
market had bottomed. enough money to keep the lights on.
However, this year there appeared to be more substance to
the optimism. So, while the rest of the country questions the future of mining
Companies were not only talking about investor interest, they and its contribution to the economy, the junior sector and those
had the proof. Successful capital raisings – which were almost investors keen on it can at last enjoy some good times once
non-existent last year – were everywhere and there was even again.
talk of spinning out assets into new IPOs, the kind of conversa-
tion that hasn’t been heard for six or seven years. We’ve heard it all before Brendon
The change in sentiment is apparent in PCF Capital’s Ther-
mometer report for July. The report highlighted the extent that I wasn’t sure whether to be surprised, confused or just disap-
companies have embraced the warmer market climate with 65 pointed by Brendon Grylls’ proposal to place an additional $5/t
ASX-listed resource companies identified as undertaking equity tax on BHP Billiton and Rio Tinto Ltd’s iron ore production.
raisings in July.
The turnaround has undoubtedly been led by gold and lithium. Australia has been down this path so often in the past it comes
Iron ore may be the revenue earner for Australia’s resources as a surprise – even to someone with cynical views about the
sector but it is gold which controls the fortunes of much of the populism of the current generation of Australian politicians –
junior sector and nowhere is this more obvious than in gold that a senior member of the West Australian Government, and
M&A. leader of one of the State’s three largest political parties, should
While Evolution Mining Ltd and Northern Star Resources Ltd raise the prospect again.
have moved to shift assets (Pajingo and Plutonic respectively)
out of their maturing portfolios, other companies are taking ad- Grylls may have garnered wider support for such a proposal
vantage of stronger share prices to pick up new projects or find when iron ore was touching $200/t but with the current state of
greater value for existing assets. the sector, there is little to be gained by such stunts.
Metals X Ltd has flagged a spin-out of its gold assets and fur-
ther down the gold development chain, the likes of Dacian Gold It may be part of a wider plan to place himself at the centre of
Ltd, Primary Gold Ltd and Middle Island Resources Ltd were the GST reform debate but such a parochial strategy will only
able to generate plenty of interest at Diggers for projects that see Grylls create more uncertainty in WA at a time when stability
were seemingly forgotten just a few years ago. is the key to investment returning to the State’s resources sector.
The M&A and project trading is set to continue as explorers
manage to raise funds and re-evaluate projects based on new [email protected] @DominicPiper
gold price forecasts. And, as asset prices rise, companies will
inevitably head back to the drill rig to find value, particularly as
drilling rates have fallen significantly since the heady days of
PAGE 4 SEPTEMBER 2016 AUSTRALIA’S PAYDIRT
Blackham claims gold
While Australians were for $39 million which fundamentally got Bryan Dixon
transfixed with how us to the position we are in today. We
much gold its athletes won have also looked at other alternative fi- At Wiluna, open pit and underground
at the Olympics in Rio De nancing sources over the last four years sulphide resources totalling 18mt @ 5.8
Janeiro, Blackham Re- as well; sometimes the traditional places g/t for 3.5 moz gold have been confirmed
sources Ltd was gearing up to go aren’t there when the cycle is bad,” to be economic at AISC of $1,140/oz.
for a golden moment of its Dixon said.
own which many believed Despite an increased effort at Wiluna
wouldn’t happen. At the end of June, Blackham had in the past 12 months, 46% of resources
$32.1 million in cash, debt of $29.3 mil- are in the indicated category, however,
“We always believed in lion and $8 million in debt available to Dixon is confident Blackham can realise
the project, the problem drawdown, while at the time of print the true value from the mine through explo-
was funding it. We have company had a market cap of $232 mil- ration and by capitalising on near-mine
had some well documented lion and a share price of 91c. and plant M&A opportunities.
issues in funding it over the
last three years, but once Provided commissioning and ramp-up “We are getting the benefit of the mon-
we found some strong fi- proceed on-song, there could be further ey that is put down the hole. When we
nancial backers we were upside in the company’s stock, particu- bought Wiluna we didn’t see a lot of value
able to go and do the work larly with more clarity on expansion stud- there beyond the plant and infrastruc-
and de-risk it and come up ies expected to be provided to market ture, the operators over the years have
with something that people soon. created a lot of value but it was too far
believe in,” Blackham man- out to monetise. Having that plant turned
aging director Bryan Dixon Up until now, Blackham has been fo- off has given us the opportunity to really
told media at the WA Min- cused on bedding down the free milling come up with a meaningful mine plan
ing Club. story from Matilda ores – 9.3mt @ 2.9 g/t that allows you to drag money out of the
for 873,000oz containing reserves of 7mt hole,” Dixon said.
Dixon was of course talk- @ 2.5 g/t for 560,000oz gold – however,
ing about the start of pro- with exploration coming up trumps – Expanding the Wiluna plant capacity to
duction at the Matilda gold courtesy of 55,000m of drilling complet- 2.2-2.7 mtpa will enable annual produc-
project within the Wiluna ed in 2015 – resources across the Mat- tion of 175,000-230,000oz gold from Ma-
goldfield in Western Aus- ilda and Wiluna hubs total about 8 moz. tilda and Wiluna.
The expansion study remains very
Mining started at the Ma- much a work in progress, however, it
tilda mine in July and with
that milestone hit, Black-
ham became Australia’s newest gold
miner and in early September it will join
the growing throng of gold producers on
First production through the 1.7 mtpa
Wiluna plant is expected this month, with
initial forecasts having Blackham pour-
ing in excess of 100,000 ozpa gold over
eight years at an EBITDA of $60-70 mil-
lion a year.
A total of 25,000oz gold is set to be
produced in the December quarter.
Throughput of soft, free milling ore ex-
tracted from oxides and high-grade reefs
at the Matilda open pit and Golden Age
underground, respectively, will be the
initial focus for the first 18 months to two
years of operations, as Blackham aims to
pay down the debt incurred to refurbish
the historic gold centre.
The company completed a $38.5 mil-
lion deal with Orion Mine Finance in June
2015, with total capex required to rejuve-
nate the project totalling $32 million.
“Sometimes you have to look beyond
the traditional methods of financing
means and that is what we have had to
do. We have done a private equity deal
AUSTRALIA’S PAYDIRT SEPTEMBER 2016 PAGE 5
Blackham has raised $25 million for work at Wiluna, including fast-tracking of an expansion study
has been forecast that throughput of deliver an additional $45-70 million placement at $1/share last month.
600,000t-1 mtpa for 75,000-130,000 EBITDA for Blackham. Canaccord Genuity (Australia) Ltd was
ozpa @ 4.9 g/t gold from Wiluna would
“There is excess capacity in the crush- lead manager and bookrunner, with Pe-
ing circuit and ex- tra Capital participating as co-manager
cess capacity in of the placement.
the back end biox
circuit, so the bottle- The raising will strengthen the compa-
neck is really milling ny’s balance sheet and increase its gen-
capacity and grind- eral working capital, allowing Blackham
ing capacity,” Dixon to start expanding the oxide and free mill-
said. ing resources and reserves and grow the
“It [biox plant] sulphide open pit and underground mine
does need a bit of plan and reserves.
work and we have
earmarked about Blackham has enjoyed some recent
$15 million to spend drilling success at the Bulletin under-
on that, probably ground mine, which forms part of the 9
within the first 18 moz Matilda-Wiluna gold project.
months to two years
[of production from The reserve estimate at Bulletin is
Matilda].” 938,000t @ 4.7 g/t for 142,000oz gold,
Assuming Black- with diamond drilling from the decline in-
ham continues to dicating a significant upgrade to the re-
hit its targets, the source is likely.
company could well
be a plus-200,000 Blackham believes the pending Bulle-
ozpa gold producer tin resource update will complement the
generating in ex- Wiluna open pits, with both feed sources
cess of $100 million to be integrated into the Wiluna expan-
EBITDA in 2018. sion study.
To fast-track the
plant expansion Results such as 6m @ 26.4 g/t gold,
study and sulphide including 1.8m @ 83.3 g/t, 15.6m @ 7.51
circuit refurbish- g/t, including 9.5m @ 8.27 g/t and 8m @
ment, Blackham rat- 7.05 g/t, including 2.5m @ 9.75 g/t, have
tled the tin for $25 provided excitement for the company at
million through a Bulletin, where resources will be upgrad-
ed from inferred to indicated, leading to
the addition of further ore reserves in the
– Mark Andrews
PAGE 6 SEPTEMBER 2016 AUSTRALIA’S PAYDIRT
Eskom continues to muddy
Eskom is slapping itself on the back inefficient Eskom is. Speculation is
over not having to shed power for
a whole year but the state-owned util- that Molefe wants to promote a major
ity – which has a monopoly on power
supply in South Africa – is currently nuclear build programme – which will
involved in confrontations with coal
suppliers and future independent be under Eskom’s control – to meet
power producers (IPPs) which spell
big trouble ahead. the bulk of the country’s future power
Call me a cynic, and I reckon I am, needs.
but I will continue to keep my gas
cookers and lamps handy and my Next, Eskom power is expensive
generator well maintained.
and unreliable. That’s why many
The main reason is the business
strategy being slammed on the table companies – for example gold major
by aggressive chief executive Brian
Molefe which is highly likely to cause Sibanye Gold Ltd – are looking at IPP
upheavals down the road. Latest
development is Molefe’s stance that schemes to source their own power
Eskom does not want to buy power
generated from IPPs beyond its cur- while coal major Exxaro Resources
rent limited commitments.
Ltd wants to set up a big IPP scheme
That triggered a widespread burst of
concern from South African industry as in the Waterberg region which would
well as two apparent rebukes from the
cabinet ministers from whom Molefe supply power to large-scale industrial
should be taking instructions.
Energy minister Tina Joematt-Pet-
terson subsequently stated her depart- The net effect would be that Es-
ment’s imperative was to diversify South
Africa’s energy mix by including greater kom would start to lose a number of
use of renewable energy and IPPs.
its biggest paying customers further
Finance minister Pravin Gordhan stat-
ed that, “It [the programme] is an impor- Brian Molefe denting its revenue streams which
tant part [of the energy mix] going into
the future …the policy still stands and are already under pressure from de-
the Eskom CEO is not qualified to make
a policy statement …but I think they have IPP companies – Ipsa Group Plc and clining demand for power in South Africa.
released a statement to clarify [their po-
sition].” CIC Energy. That, according to many executives
Eskom did release a statement, Both took at face value the cries for including Exxaro chief executive Mxolisi
spokesman Khulu Phasiwe telling South
African national daily Business Day: “All help from the Government and Eskom Mgojo, is the real reason why Eskom has
that Eskom has done was to write a letter
to the Department of Energy asking for in the wake of the country’s power crisis not had to load-shed for the past year.
clarity or a dialogue regarding the next
contracting phase of independent power from 2008 and plunged into major IPP Mgojo points to former major users such
producers. That does not mean that a
decision has been taken to abandon the projects – CIC Energy in Botswana and as the ferro-alloy smelters that have shut
Ipsa in South Africa. Both subsequently down but this is flatly denied by Molefe.
The problem is that when it comes
down to the nitty-gritty, the IPPs have paid a high price as their respective pro- Instead, Eskom attributes its better
to deal with Eskom – not the ministers
of energy and finance – and Eskom has jects were destroyed by a combination of performance to improved maintenance
shown previously it is a law unto itself
able to get away with – if not murder – Eskom intransigence and lack of govern- schedules and the fact the first gener-
then actions that led to the demise of two
ment action to establish a regulatory op- ating set at the Medupi power station is
erating framework in time. now on stream. Eskom does not like to
It would seem not much has changed, be reminded that the first Medupi gener-
according to South African economist ating set came on stream five years late.
Mike Schussler. The huge problem is that any new IPP
“The economy is being held hostage scheme will have to come to terms with
once again by our monopoly electricity Eskom to get the power generated sent
producer. The more Eskom wants to do to the consumers over Eskom’s trans-
itself, the more expensive electricity be- mission network.
comes,” Schussler said. So, could Molefe defy his political mas-
“Now Eskom wants to protect its high- ters? The short answer is... maybe. Cur-
cost investments at the expense of pri- rently, Eskom is insisting that new coal
vate producers. Eskom wants the rules to suppliers be 50% plus one share black
change. This sends the wrong message empowered to qualify for Eskom busi-
to investors who want to invest with pol- ness. The country’s mining legislation
icy certainty. South Africa cannot allow only requires a 26% BEE stake.
policy changes to suit one player. That Despite this, Eskom is getting away
will destroy investment.” with its BEE demands. That’s the bottom
Schussler hits a number of key points line reason Anglo American plc is selling
on which he does not elaborate so allow out of its South African coal business.
me to pitch in with my take on the situa- Brendan Ryan is a Johannesburg-based
tion. mining writer
Eskom is a monopoly and it likes being
a monopoly. Too much competition from
more efficient IPPs will show up just how
AUSTRALIA’S PAYDIRT SEPTEMBER 2016 PAGE 7
Are you a buyer or a finder?
The stratigraphical BIF sequence at Dacian’s Millionaires/Westralia area of the Mt Morgans gold project
In gold exploration, companies are either North Queensland Metals (for Pajingo), up of the Avoca team which discovered
buyers or finders. For some companies, Catalpa (for Edna May and Cracow), La Trident at Higginsville, and re-interpreted
no matter how much they spend, they Mancha (for Frogs Leg/Mungari), Phoe- the Copler deposit in Turkey to become
simply do not make new discoveries, and nix Gold and the Cowal mine from Bar- Alacer Gold Corp’s major operation.
instead have to buy them. rick Gold Corp.
But what makes a company a buyer
Troy Resources Ltd has clearly been a Northern Star Resources Ltd has made or a finder? It has often been said that
buyer, as was Normandy Mining but on significant progress on most of whatever the most successful geologists are those
the other hand Delta Gold was a classic it has acquired (e.g. Kundana, Kanowna who were chief geologists trained by Roy
finder; Granny Smith, Kanowna Belle, Belle and Jundee) in addition to what it Woodall at Western Mining. There, geol-
Wallaby, and the Zimbabwean Great originally discovered at Paulsens. ogists were exposed to international ore-
Dyke are all among its discoveries. One bodies and encouraged to think laterally.
of the Delta geologists, Alistair Cowden, In contrast, Gold Road Resources
went on to discover the Nimbus silver Ltd is a finder through the discovery of As a general observation, both Gold
mine under Archaean, next to Kalgoorlie Gruyere and other gold deposits in the Road and Dacian empower their geolo-
(now owned by MacPhersons Ltd) and Yamarna greenstone belt, geology which gists, regardless of seniority, to be re-
establish Vulcan Resources and then Al- had previously had a reputation for “too sponsible for a project, or part of an ore-
tona Mining Ltd adjacent to Outokumpu many sniffs, doesn’t tie together”. body and then meet regularly with them
in Finland. Cowden is now developing to ensure cross-pollination of ideas. But
the Little Eva copper project near Clon- Dacian Gold Ltd is another which is sometimes such geologists simply ob-
curry, Queensland. clearly a finder. How many companies serve. Take one of the ex-Avoca team,
(including the majors such as Barrick) Glen Brown, who was contracted to Da-
Interestingly, Vulcan once held the had Mt Morgans and Jupiter and walked cian to help with core logging (because
Lords prospects’ tenement (Lord Henry away from them? The last holder at Mt he is very knowledgeable, fast and ef-
and Lord Nelson) at Sandstone; while an- Morgans, Range River Resources, im- ficient). Glen noticed there appeared to
other Delta geologist discovered Nimary ploded but Dacian has applied sound be regularities in the BIF (banded-iron-
when with Eagle Mining. geology and re-interpreted the orebod- formation) package he was logging at Mt
ies and as a result has made significant Morgans’ Westralia, especially at the Mil-
Of the current crop, Evolution Mining discoveries. lionaires pit.
Ltd has mostly been a buyer; acquiring
And, the Dacian team is mostly made
PAGE 8 SEPTEMBER 2016 AUSTRALIA’S PAYDIRT
Among the current crop of Australian gold companies, Evolution Mining has been a buyer rather than a finder of assets
As Dacian geologist Dan Baldwin de- Apart from plunging north downwards, magnetised and magnetised areas pro-
scribed to me: “Brownie put up these the perceived higher grade shoots are spective with 3D magnetics generating
black and white drill-hole logs for four being tracked up plunge southwards, a number of additional targets in three
holes and we thought ‘so what?’” which has opened up potential links corridors.
through to the Millionaires pit, towards
Brown then marked them with col- the old underground workings of Wes- While more detailed 3D magnetics
oured pens and did the same on the plan tralia, and above Morgans underground. show Heffernans potentially plunging
and as Baldwin said at the time: “No way, steeply to a depth of about 800m below
it can’t be that easy”. The announcement on July 25 of infill surface, there are drawn sections of Hef-
and extension drilling with 10m @ 11.6 fernans (1120N) with around 100m-wide
But yes, the BIFs at Westonia have g/t gold from 5m, 1m @ 128 g/t from 32m, syenite extending to a depth of 600m,
identifiable colours and the rock units be- 34m @ 3.7 g/t from 139m and 17m @ 2.2 and of Doublejay (2040N) with around
tween the distinctly coloured or located g/t above the known underground areas 100m-wide syenite extending to a depth
BIFs are common from drill-hole to drill- adds further potential and illustrates the of more than 600m. The deepest dia-
hole as shown in the image. shallow plunging ore shoot concept, to- mond-drilled syenite at Jupiter appears
gether with quartz veins in hangingwall to be 300-400m below surface.
The regularity among the BIF pack- basalt above the target BIFs.
age can be observed and hence it can One of the most spectacular presenta-
be determined where the higher grades Dacian has also been measuring the tions I encountered relating to new dis-
are likely to be. magnetic susceptibility of its drill-holes covery at this year’s “buzzing” Diggers
at Jupiter for the possibility of the syen-
I always thought that BIFs were BIFs, ites extending at depth, as similar work & Dealers was by TSX-listed Newmar-
but after this experience, I then looked at Wallaby apparently resulted in Wallaby ket Gold Inc, which has discovered the
more closely at the BIFs while visiting being extended to depths of more than Eagle zone at the Fosterville gold mine
Alto Metals Ltd’s Indomitable prospect 1km (it now extends to around 2km). in Victoria. Newmarket reported visible
at Sandstone and noticed they appeared gold intersections such as 9m @ 386 g/t
to closely resemble the same colour and The broad magnetics in 3D show a gap from a depth of around 800m, and 3.4m
banding style in the spoil of the histori- under the Doublejay orebody partly be- @ 645 g/t at 1,000m.
cal Indomitable mine and an outcrop 3km cause the historical drill-holes were not
further west. measured. However, the syenites of the For those that don’t know, Fosterville
Doublejay and Heffernans orebodies ap- had a reputation for having refractory
The game-changer for Dacian has pear to link at around 500m deep. There gold in its sulphide/fresh rock that was
been the discovery of a shallow north- also appears to be a fairly close visual almost untreatable, until a chemical pro-
erly plunging thrust earlier this year by correlation between the syenites and the cess was developed in addition to the
a geologist using stereonets in the Mor- magnetics as can be seen in the dark autoclave. Now, whoever would have
gans underground to assert the higher blue demag pools correlating to Double- thought that the refractory Fosterville ore
grade ore shoots within Westralia could jay, and the red magnetic highs to Hef- could change to conventional visible gold
be plunging shallowly north instead of fernans and Ganymede, illustrating that in quartz at depth, with the Lower Phoe-
steeply south. The theory has since been the syenites can also be non-magnetic. nix and Harrier areas being depth exten-
proven through drilling and announced sions of existing workings?
with high-grade intersections by Dacian. The reason for non-magnetism is be-
cause it is thought the syenites were in- So are you an exploration buyer or a
Shallow plunging north directions had truded at a time when the earth’s mag- finder, and if you are a buyer, can you
been identified previously – by Dominion netism was switching from the North pole change?
Mining in 1995 and later Plutonic – based to the South pole and vice versa, which
on the behaviour of the Millionaires shoot would result in apparent demagnetised Keith Goode is managing director of
in the open-cut and even Barrick in 2009 zones. Eagle Research Advisory Pty Ltd
noted a “possible high-grade shoot” but
it conflicted with the historical perceived This consequently makes both the de-
steep southerly shoots.
AUSTRALIA’S PAYDIRT SEPTEMBER 2016 PAGE 9
Diatreme de-risks Cyclone threat
Diatreme’s Cyclone zircon project has been recommended for development and operation
While gold and lithium stocks have “It’s long overdue. Perhaps unusually amongst the regulatory stakeholders
soared this year, interest in mineral for a company of our size in the small cap was broadened somewhat because it
sands has been quietly on the rise. sector, we have some projects of genu- was also within the Department of Parks
ine merit and mineral endowment. We’ve and Wildlife mandate.
Mineral sands was the best-performing seen a bit of a run in our share price
global sub-sector for resources stocks and we think that will continue with the “As far as we’re aware, it’s a first cer-
on the ASX in July and researchers from stream of news that’s potentially going to tainly in Western Australia – and maybe
Beer & Co recently forecast zircon prices be coming up.” even in Australia – for a mining company
could reach $US1,500/t by 2018. to get a haul road approved through a
Cyclone, 25km west of the WA/South nature reserve. It’s quite unusual, but it
A number of ASX-listed mineral sands Australia border, was recommended for attests to the level of studies we had to
companies have enjoyed strong share development and operational approval run to have those discussions.”
price runs this year, including Base Re-
sources Ltd (up 226%), last month by the EPA. Sedgman Ltd completed an independ-
Mineral Deposits Ltd (up Only ministerial consent is ent project enhancement and update
139%) and Sheffield Re- required for the project to study on Cyclone in June, flagging a
sources Ltd (up 73%). get the full green light. NPV of $121 million, an IRR of 23% and
Major producers Iluka payback within 2.8 years, based on an
Resources Ltd (up 29%) According to McIntyre, it updated estimate of processing plant
and Rio Tinto Ltd (up 33%) marks the final step in Dia- capital and operating costs and shipping
have also seen timely treme’s de-risking process and diesel costs.
gains in their stock. for the project during which
the company also signed Other key financials from the inde-
Diatreme Resources an agreement with the Tra- pendent study were a project capex of
Ltd is one mineral sands ditional Owners and identi- $161 million (2012 PFS estimate was
hopeful to experience a fied suitable water supplies. $223 million) and a $72 million average
price spike (up 60%) on Neil McIntyre “It’s taken a long time annual operating cost.
the back of sector support on the EPA approval and I
and solid news flow from suppose that had a lot to do “This really confirmed our view that the
its Cyclone zircon project in Western with the nature of the approval that we project is extremely viable and quite ro-
Australia’s Eucla Basin. were seeking,” McIntyre said. bust,” McIntyre said. “That coupled with
“Part of the EPA process was ap- final EPA approval has enabled us to –
“I think we’re starting to see some un- proving a mine access road which actu- only in the last few weeks on the back of
locking of the value in Diatreme, repre- ally stretches over 100km through a na- those approvals and studies – re-engage
sented in our share price,” managing di- ture reserve, so the level of discussion with a number of major parties who are
rector Neil McIntyre told Paydirt. interested in transitioning us through the
PAGE 10 SEPTEMBER 2016 AUSTRALIA’S PAYDIRT
next steps, which will ultimately 96% through cyanide leaching.
see the project come to fruition.”
However, capital and operat-
Armed with a measured and
indicated resource of 211mt @ ing costs were relatively high
2.3% heavy minerals contain-
ing 4.8mt (based on a 1% cut- despite a forecast gold price of
off grade), Cyclone is the largest
undeveloped zircon project in $1,467/oz.
the Eucla Basin and is on the
same mineral belt that hosts Diatreme and JV partner
Iluka’s Jacinth-Ambrosia mine.
Superior Resources Ltd have
Iluka suspended mining and
concentrating activities at Ja- begun a second phase of test
cinth-Ambrosia, which at times
accounts for 25-30% of global work to assess the viability of
zircon supply, on April 16 in a
bid to lift flailing mineral sands a gravity separation circuit in-
stead of a conventional CIL/
Prices for mineral sands, in-
cluding titanium, have improved since CIP operation at Tick Hill.
then, but McIntyre said the market was
only just starting to react. “If those results come back
“I think it tends to creep up rather than favourable, we would then
have massive leaps,” he said. “Indus-
try players see it happening over a pe- embark on some trial mining
riod of six months and then externally it
becomes obvious. Once that gets ob- or some larger bulk testing on
served, the sector starts to get more at-
tention. Recent test work has reduced the opex and capex site, which will dovetail into the
estimates for the Tick Hill gold project actual gold extraction process,”
“There’s limited supply coming on- McIntyre said.
stream. The older mines that Iluka and
others operate are getting towards the “We’d be targeting to have that in place
end of their useful lives, so there’s going by the end of the year and hopefully by
to be a period of replenishment of sup- the first quarter next year getting some
ply.” revenue streams from the sale of the
Meanwhile, recent test work has iden- gold product.”
tified potential opex and capex reduc- McIntyre said the low capex placed on
tions at Diatreme’s Tick Hill gold tailings Tick Hill made for an attractive invest-
reprocessing project in Queensland, us- ment proposition.
ing a simpler recovery process with no – Michael Washbourne
regrinding or CIL/CIP operation.
It followed an earlier scoping study
which flagged gold recoveries of up to
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AUSTRALIA’S PAYDIRT SEPTEMBER 2016 PAGE 11
Record loss for BHP Billiton
The world’s biggest miner BHP Billiton BHP Billiton’s share price has rallied nearly oil prices. Like other commodities, oil has
Ltd has said deep cost cuts and a 14% so far this year rallied from multi-year lows hit early this
steady elimination of oversupply will bol- year.
ster its business following a record loss but better than analysts’ expectations of
caused by a bad bet on shale and a dam about $1.1 billion, underpinned by iron Mackenzie said the company remains
disaster in Brazil. ore and copper. “While the headline loss committed to holding the onshore US
is horrific, BHP is performing well on an petroleum business, alongside its mining
The firm’s share price has rallied near- underlying basis,” Jefferies analyst Chris assets.
ly 14% since the start of the year, driven LaFemina said in a note.
by a recovery in commodity prices. “There are many who choose to hold
BHP Billiton has underperformed ri- our bonds and our shares who see that
Many investors are wary of the com- vals. Rio Tinto Ltd’s share price is up that combination provides a dampening
modity price rally, saying it has been about 25% this year while the sector as of long-range volatility that attracts them
fuelled by Chinese financial stimulus a whole has gained nearly 70%, though to invest. It’s a fundamental part of how
rather than a real recovery in demand or in many cases, the gains are from a very we work,” Mackenzie said.
any output curbs from the big producers. low base.
Shoring itself up against tough mar-
BHP Billiton chief executive Andrew The petroleum business, which sets kets, BHP Billiton, like rival Rio Tinto, in
Mackenzie, however, told reporters he BHP Billiton apart from its peers, slipped February abandoned its long-held policy
saw signs of a fundamental change and to a loss, as it cut output from its US of never cutting dividends, and flagged
there was no longer a sense that com- shale wells in response to a steep fall in instead it would pay out at least 50% of
modity prices were “in free fall”. underlying profit from then on.
“Steadily, the end of the supply crea- It announced a full-year dividend of
tion on the back of the China boom is 30c, which it said was more than the
coming to an end, product by product, minimum under its new payout policy, but
and that’s putting more of a floor under just below analysts’ forecasts of about
price than perhaps perceptibly existed 32c.
maybe a year ago,” he told a news con-
ference in London. Net debt rose slightly from December
to $26.1 billion, which was higher than
Commodity markets hit multi-year lows the $25 billion analysts had expected, but
in January following a realisation Chi- BHP Billiton said it expects it to fall in the
nese demand was weaker than thought 2017 financial year.
and supplies of raw materials could be in
surplus for the foreseeable future. – Sonali Paul, Barbara Lewis and
James Regan, Reuters
In response, miners have focused on
lowering costs and reducing debt levels. Comment
BHP Billiton said it was on track for pro-
ductivity gains of $2.2 billion over the two BHP Billiton reaches earnings nadir
financial years to the end of June 2017.
BHP Billiton Ltd can finally see a ray of light at the end of the tunnel. Write-downs and
The efforts should see it double its free two years of weak commodity prices have culminated in a record $6.4 billion full-year
cash flow to more than $7 billion this year net loss, but the worst may now have passed for the Anglo-Australian mining giant.
at current prices for its major commodi-
ties; iron ore, copper, coal, and oil and Granted, much depends on chief executive Andrew Mackenzie being right when he
gas. predicts that a “free fall” in commodity prices is now over. Despite a rebound in demand
for key commodities since the beginning of the year, revenue based on realised prices
For the year to the end of June, BHP was still down 31% to $30.1 billion for the full year ending June 30. And while it has now
Billiton reported a record $6.4 billion net completely written-off the value of its investment in the Samarco iron ore JV in Brazil
loss after $7.7 billion in write-downs and after a dam burst earlier this year, it may have to increase the related $1.2 billion provi-
charges while underlying profit slumped sion.
81% to $1.2 billion.
But the miner is leaving as little to chance as possible. After spending the beginning
Disappointed as he was by the loss, of the decade splurging on mine expansions, or pricey acquisitions such as its $12.1 bil-
Mackenzie said the exceptional causes lion takeover of US gas producer Petrohawk in 2011, BHP Billiton is now a tighter ship.
would not be repeated. BHP Billiton has Capital expenditure fell 42% to $6.9 billion and is set to drop further through to 2018.
booked $12.8 billion in write-downs over And a ruthless efficiency drive has made the company one of the lowest-cost produc-
the past four years on its shale business ers of coal and iron ore, making it a little less sensitive to swings in Chinese demand
as it has cut its oil and gas price assump- for these raw materials.
tions. It also in July flagged a provision
of $1.1 billion to $1.3 billion to cover the If BHP Billiton can keep its promise to cut costs further and boost output over the next
costs of a dam disaster in November at year, shareholders could be in line for more cash after seeing dividends slashed by
the Samarco iron ore mine in Brazil. three-quarters. The miner expects operating free cash flow to double to $7 billion next
year, as long as commodity prices don’t slump anew. While the price of raw materials is
“The underlying business I think re- out of BHP Billiton’s hands, it’s done everything else to give shareholders some reason
mains strong, getting stronger,” Macken- for optimism.
– Andy Critchlow, Reuters
Underlying profit was the weakest
since BHP and Billiton merged in 2001,
PAGE 12 SEPTEMBER 2016 AUSTRALIA’S PAYDIRT
Oz aid for West Musgrave
Oz Minerals Ltd is set to breathe Oz Minerals has formed a JV with Cassini at the West Musgrave nickel-copper project
new life into the West Musgrave
region after entering into a JV with been in the chair for about 18 months tion of a hybrid diesel-wind power station.
Cassini Resources Ltd last month. now, and left with a high level of comfort The optimised study also found that
that he was really interested in develop-
The resurgent copper-gold pro- ing projects and getting things into pro- the project’s C1 cash costs of $US3.40/
ducer will fork out up to $36 million duction,” Bevan said. lb were comfortably below the spot price
to earn as much as 70% of Cassini’s range $US3.75-4/lb at the time the inde-
West Musgrave nickel-copper project, “They’re very strong on finding the pendent analysis was completed.
120km east of Warburton in Western right team and backing them in, so for
Australia. us that’s a real positive because we feel “If we were up and running now we
we’ve got some good technical expertise would be making good money, but it’s
The agreement includes funding to bring to the JV.” still a struggle to build a new project in
for continued studies on the flagship today’s market,” Bevan said.
Nebo-Babel deposit as well as a re- Oz’s support could not have come at
gional exploration spend of up to $8 a better time for Cassini, with signs the “There still needs to be some structural
million to advance prospects such as nickel market is now in recovery. Since change in the nickel market. Whilst the
Succoth. its February lows, the LME nickel price is LME stockpiles are running down, the
up 40% and was trading at $10,320/t at Shanghai stockpiles are going up and
Cassini will manage the JV, with Oz the time of print. some of these high-cost laterite produc-
to provide the services of two full-time ers are still in the market, so until there’s
technical employees. Cassini has also enjoyed a share price some structural change on the supply
boost since the Oz deal was announced, side, it’s hard to see the nickel funda-
First works under the JV will begin with the junior’s stock up 41% to 4.8c/ mentals really changing significantly.
next month and will include drilling, share since the start of August.
metallurgical test work and engineering “But I think that’s the great thing about
studies. Bevan said the project, acquired from our funding. It lets us develop the project
BHP Billiton Ltd in 2014, was the big win- at a time of low nickel prices and get to
Cassini managing director Richard ner from Cassini’s tie-up with Oz. a point where we can make a decision to
Bevan said flat base metals prices, par- mine and time it with the upswing. If we
ticularly for nickel, meant his company “We believe with Oz on board and with were to hold the project in our own right,
had no option but to find a funding part- the funding more secure, we’ll end up there would be a risk that as that upswing
ner or risk diluting shareholders. with a better project,” he said. comes and we start to get some ability
to fund the project, by the time it’s con-
“We felt that was preferable and would “Not only that, I think the bigger picture structed we’re on the downswing again.”
give us better value and more certainty in the Musgrave area is that we’re in a
than just holding it ourselves and diluting mining camp. We’ve already identified With programmes at West Musgrave
at a corporate level, given the vagaries of three deposits and we believe there’s funded for the next 3.5 years, Cassini will
base metal prices,” Bevan told Paydirt. more upside to be found, so having a use some of its existing cash reserves,
partner who is funding some of that re- including a recent EIS drilling grant, to
“We were approached by Oz and they gional exploration is really important. continue exploration work at its nearby
really are the perfect partner for us. It Mount Squires gold project and the West
was good to find a partner who was not “We’ve always believed that if we can Arunta zinc project in the Gibson Desert.
only bringing funding, but also bringing get one project up and running, there’s
strong development and technical exper- lot of other opportunity out there.” – Michael Washbourne
tise to the deal.
Cassini released a scoping study up-
“I think it’s a good deal for Oz Minerals date earlier this year, reporting a 24%
and I think it’s a great deal for us.” reduction in pre-production capex and a
30% drop in power costs through adop-
Under the terms of the agreement, Oz
will fund an initial spend of at least $3 mil-
lion within the first 12 months to earn a
51% stake of the project. The company
will then put up another $15 million for
PFS and DFS work, as well as $4 mil-
lion for regional exploration, within an
Oz then has 12 months and a $14 mil-
lion expenditure commitment – $10 mil-
lion towards completing the DFS and $4
million on regional exploration – to lift its
interest to 70%.
The Cassini deal is the fifth partner-
ship the Andrew Cole-led Oz has formed
in the last 12 months following JVs with
Toro Energy Ltd, PepinNini Minerals Ltd,
Minotaur Exploration Ltd and Mithril Re-
“We met with Andrew Cole, who has
AUSTRALIA’S PAYDIRT SEPTEMBER 2016 PAGE 13
Pinnacle exposure for Nexus
Nexus Minerals Ltd has topped up its
cash reserves to continue its fast-
tracking of the Pinnacles gold project,
about 130km north-east of Kalgoorlie.
Just days after completing an exten-
sional drill programme, the little-known
explorer rattled the tin for $2.3 million via
a placement to sophisticated and profes-
sional clients of Hartleys Ltd.
Nexus reported a cash balance of $5.1
million at the end of the June quarter.
Initial results from the six-hole, 2,244m
programme are expected early this
month, with the company seeking to an-
nounce a resource upgrade for Pinna-
cles during the December quarter.
Pinnacles currently hosts a resource of
413,000t @ 2.1 g/t gold for 28,000oz.
Nexus recently took control of 50%
of the project, having entered into a JV Nexus is targeting a resource upgrade for Pinnacles in the December quarter
with Saracen Gold Mines Pty Ltd, a sub-
sidiary of Saracen Mineral Holdings Ltd, work. Initial results are expected later shareholders. It appears his initial efforts
over the 100sq km tenement package in this month. to put Nexus on the map are paying off.
September last year. The company can Nexus has previously completed aero- Since the start of July, the company’s
earn up to 85% of the ground. magnetics and a ground IP programme share price has jumped 168%, hitting a
The JV includes an ore sale and pur- over its regional tenements and Tudor, high of 24.5c/share in mid-August.
chase agreement whereby any future ore an exploration geologist, is excited by the “We’ve been below the radar up until
mined from Pinnacles will be purchased potential on offer. now because there hasn’t been any-
by Saracen for processing through its 2.4 “The regional ground has been held thing to sing about, but we’re now the
mtpa CIL processing plant at Carosue by juniors and prospectors for about 30 third largest landholder in the district, on
Dam, 13km north of the project. years and has had virtually no explora- ground which has fantastic heritage and
“We want to work up the Pinnacles tion done on it, considering its proximity fantastic results, and with a JV partner
resource to a point where it becomes a to the Carosue Dam project area,” Tudor who wants nothing more than to see us
mineable proposition and because we said. “We’re more or less just starting to succeed,” Tudor said.
have access to the mill and the Saracen work our way out and cover the ground. “The cash balance we have obviously
infrastructure, we’re expecting a very low “We’ve also been having discussions allows us to keep exploration alive and
capex and a very short timeframe for with Saracen, who have been exploring well and we’re looking at other projects
studies,” Nexus managing director Andy in the region for many years, about the at the same time, all within the region.
Tudor told Paydirt.
main vectors or indicators of mineralisa- We’re constantly reviewing and looking
“If everything goes to plan, we’re look- tion in the whole rock package they’ve at other projects to turn Nexus into a
ing at the September quarter next year got because we don’t want to reinvent meaningful player. That’s certainly where
to dig it out of the ground. Saracen will the wheel. We just want to follow on from I want to see the company going.”
be our 15% contributing partner at that what works.” With gold back in favour in the eyes of
point and then obviously all of the assis- Tudor was promoted to the managing investors, Tudor knows the opportunity
tance we would need to director’s chair in early for juniors is there for the taking, par-
get a successful mining July, having served as ticularly for a company like Nexus which
operation up and go- the company’s chief seemingly has an infrastructure solution
ing in the district is sig- executive for almost locked away.
nificantly de-risked by two years prior. “If you’re going to do meaningful explo-
having a partner who is One of Tudor’s main ration and discovery, you need access to
already out there mining corporate goals is to infrastructure and access to a mill,” Tudor
and has been doing it lift the company’s pro- said.
for many years success- file and he hopes his “A lot of mills in the district have capac-
fully.” knowledge of the re- ity and they’re quite happy to be talking to
A separate six-hole, gion and the proxim- juniors about it. Anybody who is serious
825m regional drilling ity of Pinnacles to as- about exploration and discovery should
programme was ongo- sets owned by more be having these kinds of discussions.”
ing at the time of print prominent neighbours – Michael Washbourne
to test two targets gen- Nexus managing director Andy in Saracen and St Bar-
erated from recent geo- Tudor inspects core from the bara Ltd becomes an
logical and geophysical recent drilling programme advantage for Nexus
PAGE 14 SEPTEMBER 2016 AUSTRALIA’S PAYDIRT
Rules and regulations bite industry
Despite the better conditions
for the mining sector so far
this year, it is clear that ASIC’s
tougher stance on reporting
standards for mining compa-
nies is worrying many in the
Although nothing new has
been introduced, ASIC regu-
lators earlier this year an-
nounced it would take a hard-
line approach on the disclosure
of scoping studies and other
economics related to projects.
ASIC’s motivation for the
clamp down is to protect mum-
and-dad investors who in
the past have been stung by
companies which have over-
promised, but essentially un-
der-delivered. The annual Pitcher & Partners mining luncheon was once again hosted at Frasers, Kings Park, Perth,
There has been a severe in August. This year’s panel included managing director of Pitcher Partners Bryan Hughes, Hedley
Widdup, John Welborn, Vanessa Guthrie and Michael Fotios. MC Liam Bartlett is also pictured
backlash from listed compa-
nies in Australia to ASIC’s ap-
proach and the topic was a
point of discussion at this year’s annual “We have had to survive a very low invest in was on the horizon.
Pitcher & Partners mining luncheon. downturn, and that extra regulation does “I think there is at least another dozen
Resolute Mining Ltd chief executive make it so much harder,” Guthrie said. ready to go later this year or into next
John Welborn was particularly direct in “To demonstrate and secure funding year,” he said.
his comments on the issue. before you put out economics; the pur- Widdup said there was definitely a
“It is an inherent insult to the intelli- pose of this [releasing studies] is to se- change of sentiment in the resources
gence of the investment community that cure funding. It is nonsensical. sector, which had capitulated in the re-
market participants are not sophisticated “Australia is falling behind in attracting cent past.
enough to understand the difference be- investment capital and Canada is run- The gold industry has been the front-
tween a scoping study or JORC resource ning streets ahead because of their cor- runner for commodities on the rebound
or exploration target or feasibility study,” porate tax regime, their capitalisation re- and Widdup believes the shine from the
Welborn said. gime. There is potential we will fall away precious metal has only just started to
“Therefore, this information is not al- from being what was this year the No.1 appear.
lowed to be out in the public domain and investment country in the world.” “It does feel that gold is in its infancy in
therefore companies are not able to get Popular industry figure Michael Fotios terms of the enthusiasm towards it from
into various funding windows. It is intrin- said disclosure in Australia had gone too investors who are using it as some sort of
sically an insult to the investment com- far and believed the ASX and ASIC were risk aversion,” he said.
munity.” not operating on the same page. “I don’t think it is the only [commodity]
Generally, the view from industry par- “It is creating a confusing environ- one, [but] gold is a big market. There is
ticipants is that ASIC’s attempt to en- ment,” Fotios said. great sentiment to lithium at the moment
force more stringent reporting guidelines “It is pretty impossible for a junior de- but that is a small market and there are
for mining companies to create a higher velopment company to go out and raise very few companies in it.
level of certainty for investors is stymie- capital.” “If you compare gold over the last 15
ing investment in the sector. Despite the added pressure on mining years compared to just about any other
“The next cab off the rank will be companies to prepare forward looking metal, supply has grown in gold by about
the brokers and they will be essentially statements, particularly studies which 20% in 15 years. You look at anything
gagged from interpreting what these previously used economic parameters else, copper, iron ore is about 220%,
results are, so I think there is a bigger within 25-30%, to a higher level, the turn- supply is wherever the demand is. The
agenda,” PCF Capital Group managing around in some commodity prices has other thing that has changed in gold is
director Liam Twigger said. seen resources hopefuls driven back to there is a completely new customer set
For a company like Toro Energy Ltd, the ASX. in the Middle East and Far East who are
being in the uranium space is a chal- Hedley Widdup, executive director of buying physical gold with a veracious ap-
lenge enough. Not being able to provide Lion Selection Group, said the IPO mar- petite. We saw that last year, overturn the
the market with tentative project eco- ket was now wide open and despite only short position...I think gold is massive.”
nomics to a certain level virtually hinders three companies listing on the ASX so far – Mark Andrews
its chance of attracting investors. in 2016, a resurgence of new vehicles to
AUSTRALIA’S PAYDIRT SEPTEMBER 2016 PAGE 15
Padbury directors hit for three
Gary Stokes and Terry Quinn have It was a case of too good to be true when Padbury announced it had secured
been banned from managing corpo- $6 billion to fund the Oakajee port and rail project
rations for three years for breaching their
duties as directors of Padbury Mining Ltd. over 5c with 200 million shares traded. er Padbury was entitled to receive the
Two years later and the court found funding, and which conditions Padbury
The Federal Court in Perth also hand- was not in a position to satisfy at the time
ed the pair $25,000 fines with respect to the announcement “Oakajee Funding of the announcement. It also breached
their disclosure obligations for their part Secured” was misleading and deceptive its obligations by failing to disclose the
in misleading the market regarding se- and in breach of section 1041H of the identity of the party which had promised
curing $6 billion to fund the Oakajee port Corporations Act. to provide the funding (Superkite Pty Ltd,
and rail project in Western Australia’s since placed into liquidation).
Mid West. The court’s findings concluded that
Padbury breached its continuous disclo- “The making of the declarations [of
For decades, various companies and sure obligations by failing to disclose to breach] serves to vindicate ASIC’s
groups have tried to nail a funding solu- the market the existence of conditions claims that the defendants have engaged
tion for a deepwater port and related in- precedent which would determine wheth- in contravening conduct and … serves
frastructure to be built at Oakajee which to deter other corporations and direc-
would have the potential to unlock the Gary Stokes (pictured) and Terry Quinn will tors from engaging in unlawful conduct,”
vast iron ore resources in the State’s Mid together pay $200,000 towards ASIC’s costs Judge Antony Siopis said when handing
West. incurred for the court proceedings in its case down the verdict.
Therefore, when Padbury announced against the pair He also added that the conduct of the
on April 11, 2014 that it had secured the two directors “was a serious departure
necessary funding for Oakajee, the an- from the standards expected of directors
nouncement was met with both excite- of a public company in a like situation”,
ment and trepidation. which was recognised by both Quinn and
Shortly after the April 2014 announce-
ment, Stokes told Paydirt the deal took a Meanwhile, ASIC Commissioner John
good 18 months to put together. Price said: “It is crucial to the mainte-
nance of confidence in the Australian
“It’s like having a baby I guess, when market that company directors ensure
the day comes it’s all excitement and you announcements made by their compa-
think ‘Wow we have got there!’. We went nies are not misleading, and contain all
looking for a strategic partner that was in material information relevant to investors’
the same position as us and was looking assessment of deals being announced.
at this as a long-term investment. This
project is going to be 50, 60, 100 years “In this case the omission of signifi-
[long]. There will be reasonable turnover cant conditions precedent and the iden-
in that period of time and with that profile tity of the funder were held to constitute
we were confident that we could marry breaches of the laws applying to listed
up and fortunately that is what we have companies.”
found,” Stokes said at the time.
“We have found someone that had the
same vision who was prepared to take
a return over the long term because the
danger is that if you try and extract all of
the return out of the infrastructure in too
short a time it makes the mines marginal
or unviable which we have always been
At that stage, it was reported that Pad-
bury had been engaged in discussions
with Korean EPCs and other groups in-
tent on updating the PFS and completing
other tasks ahead of civil works.
The initial budget was set at $US470
million to conduct these activities, which
was expected to be provided under the
first tranche of financing followed by
$US3.45 billion in a second tranche and
another $US2.55 billion in a third tranche
to have Oakajee developed by 2018.
In the four hours between the an-
nouncement and the trading halt, Pad-
bury’s share price rose from 2c/share to
PAGE 16 SEPTEMBER 2016 AUSTRALIA’S PAYDIRT
Kasbah rocks with Asian Mineral
Kasbah Resources Ltd sur- ing launched within 12 months of
prised the market last month the transaction being completed,
with the announcement it had en- subject to decision to mine and a
tered a scheme implementation financing package to build the pro-
agreement (SIA) with Vietnamese ject is sought.
nickel producer Asian Mineral Re- Should all milestones be
sources Ltd. achieved, Asian Mineral could be-
In the absence of a superior come a multi-jurisdictional, multi-
proposal, the Kasbah board has commodity miner in two years.
unanimously recommended Asian Mineral started production
shareholders vote in favour of the at the Ban Phuc nickel sulphide
transaction which will see Asian mine in Vietnam in 2013.
Mineral acquire all the outstand- For the year ended December 31
ing ordinary shares in Kasbah. 2015, Asian Mineral milled 447,746t
The proposed deal has been for 8,607t nickel contained metal
supported by major sharehold- in concentrate and 4,011t copper
ers of Morocco-focused Kasbah, contained metal in concentrate at
which make up over 26% of the The Achmmach tin project could potentially be brought an average realised nickel price of
register, including Lion Selection on line in early 2018 $6.24/lb.
Group (African Lion Fund), Traxys C1 unit operating cash costs
Projects L.P. and Thailand Smelting and tin is suffice for 10.5 years, with a capital pre-net of copper and cobalt by-product
Refining Company. cost of $US61.7 million estimated to get credits was $US3.58/lb, after net copper
Assuming the deal proceeds accord- started. and cobalt product credits $US2.69/lb
ingly, closure is expected during Novem- Kasbah owns 75% of Achmmach, with and after royalty, export tax and environ-
ber. JV partners Toyota Tsusho Corp and ment protection fee $US4.30/lb.
When the deal was made public on Nittetsu Mining Co Ltd responsible to fi- Operational cash flow for 2015 was
August 5 Asian Mineral shares on the nance the remaining 25%. $25.3 million.
TSX-V were trading at $C0.025c/share Project financing discussions and Having managed to sustain produc-
and using an exchange rate of $0.9965 off-take arrangements remain ongoing, tion at the underground Ban Phuc pro-
to the $C1.00, the offer valued Kasbah however, with various contractors, in- ject, despite a challenging nickel market,
at 3.8c/share; a 15% premium over the cluding underground contractors, engi- Asian Mineral is confident it has the skill
60-day VWAP and 19.6% premium over neering support, equipment and skilled set to repeat the success at Achmmach,
the 90-day VWAP. personnel on hand, Kasbah indicated if according to chairman Jim Askew.
Upon completion of the transaction a decision to mine was made this year, “AMR has done an excellent job in
and on a fully diluted basis, Kasbah construction could start in 2017 and first bringing to production the Ban Phuc nick-
shareholders will hold about 52.2% of tin concentrates could be available to el mine and operating under a challeng-
the total issued share capital of Asian market in 2018. ing nickel price environment,” he said in
Mineral, with the latter’s shareholders Pala, a cornerstone investor of the a statement.
holding the remainder. combined entity, has already thrown “We are very excited about the oppor-
The deal was announced shortly after its support behind any capital rais- tunity to team up with proven explorers
Kasbah released details of a and resource developers like
DFS into a small start-up op- Kasbah, as well as strategic
tion at its flagship Achmmach players such as Toyota Tsu-
tin project, about 140km south- sho Corporation and Nittetsu
east of the capital Rabat. Mining Co Ltd, and transfer
Kasbah opted to assess a our operating experience
staged approach to the project, and know-how to the suc-
based on a 500,000 tpa high- cessful development of the
grade underground operation. Achmmach tin project. Fol-
Stage one production of lowing completion and the
1.89mt @ 0.96% tin will be fol- positive results of the DFS,
lowed by stage two – 4.67mt @ as a matter of first priority the
0.8% tin from. combined company will pro-
Average production is esti- ceed with considering project
mated at about 3,970t at AISC financing options for the Ach-
of $US11,507/t, which would mmach tin project.”
generate life-of-mine free cash At the time of print, tin
flow of $US120 million based was trading at $US18,380/t
on a price of $US17,830/t. and nickel was worth
The ore reserve of 6.56mt @ Asian Mineral chief executive Evan Spencer will remain in the $US10,235/t.
position upon completion of the combination with Kasbah
0.85% tin for 55,000t contained
PAGE 18 SEPTEMBER 2016 AUSTRALIA’S PAYDIRT
Diggers & Dealers shines in 2016
Some ill-directed criticism of the Dig- The Exchange Hotel is one of only a handful of pubs in Kalgoorlie that has “skimpies”
gers & Dealers Mining Forum has
failed to take the gloss off one of the most ing but there’s absolutely no way. We as To avoid any issues and cater for the
successful resources events in recent ever-growing diverse mix of mining peo-
times. leaders just have to tell everyone it’s un- ple in the industry, the Traditional Bash
on the Tuesday evening of the confer-
Delegate numbers of 1,910 at the 25th acceptable.” ence was shifted many years ago from
edition of the forum surpassed that of the famed Palace Hotel, which has a
previous years; 1,665 in 2015 and 1,700 Department of Local Government skimpy bar, to the makeshift exhibition
in 2014. arena.
director-general Jennifer Mathews also
While still below record numbers of “Where people choose to go after-
over 2,300 not so long ago, the uptick in chimed in on the debate saying that in wards is their choice. But, to talk to other
attendees at this year’s conference re- people and suggest that the whole indus-
flects the changing sentiment in the re- her role 10 years ago as DFAT State Di- try should now boycott Diggers & Deal-
sources sector. ers based on complete misled informa-
rector that: “...we were there with all these tion... the guy that made the comments
“Probably the best thing about the has never been there, the lady that spoke
conference was the mood,” Diggers & girls in their little gold bikinis handing out out actually went to a mining expo which
Dealers chairman Nick Giorgetta told has nothing to do with Diggers & Deal-
Paydirt. brochures and then this bell rang and out ers. I think it would be fair of them to say
‘we got it wrong’,” Giorgetta said.
“The last couple of years it has been came the women’s mud-wrestling,” she
very subdued, with concerns about the was quoted in The West Australian as “We have just written a letter and
whole industry; share prices and the like, asked them to please retract their state-
but I think the general feeling was that saying. ment because it is not based on facts.
we must have got to the bottom in De- We are waiting to see...we don’t want to
cember/January and things have started Such comments have make a huge issue of it other than the
to pick up. It was a very positive mood fact people should recognise they made
which made for a very good conference.” disappointed Giorgetta the comments out of context, they should
not have made them.”
With the iron ore price hovering above and his fellow Diggers
the $US60/t mark, Australian gold play- There is little time for Giorgetta and
ers thriving on $1,800/oz gold price, lithi- & Dealers organisers his committee to dwell on this issue as
um companies rejuvenating the explora- preparations for Diggers & Dealers 2017
tion sector and junior prospectors being who have asked for such will start shortly.
able attract decent investment, it was no
wonder there was a re- statements to be retract- “By about October/November we start
turn of positive energy looking for the keynote speaker and start
to the Kalgoorlie-based ed. speaking with sponsors and generally
conference in 2016. from November onwards we start to get
“I think it is completely going again,” Giorgetta said.
However, in the
wash-up, some busi- unnecessary. If you cast – Mark Andrews
ness leaders in the
community took a shot your mind back, Diggers Paydirt’s full review of Diggers & Deal-
at Diggers & Dealers ers starts on page 26
for the role “skimpies” has been going for 25
played as part of the
conference. years and when it start-
Having attended the Nick Giorgetta ed it was a very small
conference for six of show. It has been a very
the past seven years,
one can confirm that serious conference for
skimpies have played no part in the ex-
hibition at Australia’s biggest mining con- the last 10 years,” Giorgetta said.
“Some of the comments that were
Nevertheless, managing partner for
Australia and New Zealand at global made were from people that don’t really
management and consulting firm, McK-
insey & Co, John Lydon, was quoted in know. There are no signs of skimpies at
the The West Australian newspaper say-
ing: “It’s completely unacceptable and the conference; we don’t hold the confer-
I’m sorry to anyone who was there or
thinks that’s acceptable, it’s not,” he said. ence in Kalgoorlie for the skimpies in the
“We won’t go to an event like that. We pub. Kalgoorlie is the centre of mining in
present at all sorts of conferences in min-
Australia, so the fact that there are some
pubs with skimpies really has nothing to
do with Diggers & Dealers. There are
only seven pubs that have skimpies, from
what I know, and there are 35 pubs, so
there are other places for people to go.”
AUSTRALIA’S PAYDIRT SEPTEMBER 2016 PAGE 19
delivers once again
PAGE 20 SEPTEMBER 2016 AUSTRALIA’S PAYDIRT
Few companies can lay claim
to having built two high-grade
gold mines inside four years, yet
the Doray Minerals Ltd story was
almost over before it began.
Doray’s proposed ASX float was de-
layed by three months as the company
scrapped to raise $4.6 million and meet
the minimum subscription requirements
for an IPO in early 2010.
Upon admission to the bourse, Doray’s
stock slipped to 15c/share and the vul-
tures in the investment community quick-
ly circled. However, a major discovery
at its Andy Well project in April 2010
ensured the company’s beleaguered be-
ginning would only serve as an intrigu-
ing prologue to a fast-paced tale about t
he rise of Australia’s newest multi-asset
Doray has since successfully funded,
developed and commissioned two gold
mines in Western Australia, including the
Deflector gold-copper project it acquired
from its takeover of Mutiny Gold. First
concentrate from Deflector was shipped
on July 4 and a second shipment fol-
lowed early last month.
Founded by exploration geologists Al-
lan Kelly and Heath Hellewell, Doray is
now recognised as an emerging mid-tier
gold producer and has already started
searching for a third mine to add to its
Hellewell left the company in 2014 to
pursue other interests in his field of ex-
pertise, but Kelly remains at the helm
of Doray and the managing director has
embraced life as a “mining guy”.
“I didn’t expect to be where I am today Deflector’s new 480,000 tpa processing plant has separate gravity and flotation circuits
and I didn’t expect the company to be
where it is today,” Kelly told Paydirt. “I
The first gold pour at Deflector, 170km According to Kelly, previous opera-
thought we were probably going to have east of Geraldton, on May 31 came just tors of the project had unsuccessfully
a bit of exploration success [at Andy 14 months after Doray completed its tried to process the gold-copper orebody
Well] and then maybe sell the project takeover of Mutiny and effectively put through a CIL plant at Gullewa, about
and move on to another one and try to to bed any lingering concerns about the 6km south of Deflector.
drill that out. project’s metallurgy. Doray has constructed a new 480,000
“I’m an exploration geologist. I’m happy Deflector had long been viewed as a tpa processing plant with separate grav-
to admit when I don’t know stuff because troubled asset by some sections of the ity and flotation circuits at Deflector and
I’m not a mining guy, I’m not a process- market given the number of companies expects to produce about 60,000 ozpa
ing guy. I recognised pretty quickly that I it had chewed up and spat out prior to gold (plus copper and silver credits) over
“needed to bring those skill-sets into the Doray’s involvement. the initial six-year mine life, lifting the
company. company’s total production to be-
“We definitely don’t take it for We definitely don’t take it yond 130,000 ozpa and positioning
for granted where we are
granted where we are because Doray among the top 15 gold pro-
exploration is a pretty fickle busi- ducers in Australia.
ness and we could have quite
Kelly said having more certainty
easily not had the results we got because exploration is a pretty in the company’s production profile
at Andy Well and been in the fickle business and we could would be a boon for both existing
same position as a lot of explor- shareholders and potential new in-
ers; with a couple of million in the have quite easily not had the vestors in Doray.
bank and working out what to do results we got at Andy Well. “When you’re a single-mine pro-
for your next meal.”
ducer, you’re always seen as a bit
AUSTRALIA’S PAYDIRT SEPTEMBER 2016 PAGE 21
Doray shipped first concentrate from Deflector in July
flector are significant, even production. So this project does a lot of
things for the company.”
at the current copper price.
Like many other Australian gold pro-
Roughly speaking, Deflec- ducers, Doray saw its share price jump
111% in the first half of 2016, peaking at
tor is a $1,100-1,200/oz AISC $1.25/share soon after the start of pro-
duction at Deflector.
Previous operators of Deflector struggled to under- project, similar to Andy Well,
stand the intricacies of the gold-copper orebody but the silver and copper cred- As Kelly noted earlier, a high-cost June
its are worth about $300/oz, quarter at Andy Well prompted a nega-
tive reaction from investors and Doray’s
risky having all your eggs in one basket, so you take them off and you’re talking share price slipped as low as 86c/share
in early August.
so to speak, and that was obvious from $800-900/oz, which makes it one of the
Kelly said the increased costs included
our last quarterly,” Kelly said. lowest cost projects going around, espe- some necessary development capital
at Andy Well as the mine transitions to
“We had some high costs from Andy cially from an underground point of view. processing only underground ore, but
reminded his shareholders the company
Well for a quarter and everyone starts You then put that cost profile next to Andy had still met guidance for both production
and costs in FY2016.
to panic, so with multiple assets you get Well’s and you have a nice, blended cost
to smooth out your production and your profile of $1,000-1,100/oz, which is pretty
costs and that’s really important for un- great.
derground mining, compared to open-pit “Deflector has got really good explo-
mining, because you’re restricted in how ration upside too, so it’s just another
you can change direction. opportunity for some further explora-
“The other thing is that along with the tion success and the ability to increase
increase in the [gold] production profile,
the by-product credits you get from De-
Allan Kelly Underground development at Deflector began in June
PAGE 22 SEPTEMBER 2016 AUSTRALIA’S PAYDIRT
“It’s swings and roundabouts,” he said. Andy Well has exceeded BFS expectations for a third straight year
“The first half was lower cost and the sec-
ond half was higher cost because there The newly installed Wilfley table allows free gold to be separated from the native
was a difference between some open-pit copper and improve gravity gold recoveries
mining and underground mining.
Doray is chasing southern extensions to the Deflector pit
“We give guidance on an annual basis AUSTRALIA’S PAYDIRT SEPTEMBER 2016 PAGE 23
so that gives us the opportunity to man-
age production and costs over the 12
months – and we achieved that – so it’s a
“I guess the other thing from a timing
point of view, the market probably want-
ed to see a bit more information on how
Deflector is going, but that’s still in the
“It’s a combination of two things – a
higher cost quarter at Andy Well and a
lack of information on Deflector – but that
will be resolved over the next few months
and hopefully at the end of the Septem-
ber quarter we’ll be able to give the mar-
ket a bit more clarity.”
Kelly himself drew the ire of some mar-
ket commentators and industry peers for
selling 1.65 million Doray shares prior to
the release of the quarterly, but the man-
aging director insisted his decision to re-
duce his stake to 3.4% was purely for tax
“I had a tax bill that I need to sort out,
so I sold some shares back in late June/
early July well before I had any indication
of what the quarterly results were going
to be and the board was well aware of
that,” Kelly said.
“I haven’t sold any shares in the com-
pany since 2012. In fact, I actually in-
creased my holding when we did the
raising for Deflector in October last year
and I’m still one of the company’s largest
“Tax bills are tax bills. There’s never a
Open pit mining activities at Deflector are two-thirds complete
good time for directors to sell shares, but Andy Well, 45km north of Meekatharra, to go from being an explorer that was
I had a tax bill that I needed to sort out. I was crowned Australian Mine of the Year very dependent on the market to raise
had no inside information or anything like at last year’s Australian Mining Prospect money to being a self-funded explorer, at
that.” Awards. It is the third major accolade the very least, and then use that to get
Open-pit mining at Deflector was about Doray has received for the project along- into cash flow, get into production, build
two-thirds complete at the time of print side the 2014 AMEC Prospector Award a team of operating people, get a track
and is expected to continue until Decem- and Gold Mining Journal’s Explorer of record with banks and investors and use
“ber, although Doray is seeking to extend the Year in 2011. it to do the next one. And that’s exactly
the oxide mineralisation at the what we’ve done now.”
southern end of the pit. We’ll continue to spend a The BFS estimated a 3.5-
reasonable amount of money
Underground development year mine life for Andy Well,
began in June following the but Doray has continued to
completion of the portal ac- replace mined ounces and the
cess, with the decline down on exploration because we think project looks set to remain op-
to 1,200m (about 70m below that’s where the best opportunities erational for at least another
surface) in early August. First three years.
underground development are to create value pretty quickly. Gnaweeda, 15km from the
ore is due in November, with Andy Well processing plant,
first stoping ore to follow in is yet to be factored into the
early 2017. “Apart from the fact it was going to mine plan. Doray recently announced a
The signs at Andy Well are also prom- make a bit of cash, we always thought we maiden resource estimate of 4.6mt @
ising, despite the increased costs re- could use Andy Well as a bit of a spring- 1.8 g/t gold for 266,000oz for the region-
ported in the June quarter, with a third board for the company,” Kelly said. al discovery following a number of high-
straight year of production above the “It’s not a Tropicana, it’s not a long- grade drill hits, including 10m @ 18.9 g/t
BFS estimate of 74,000 ozpa. life project, but it gave us an opportunity gold, 7m @ 41.6 g/t, 41m @ 4.8 g/t and
9m @ 10.4 g/t.
Kelly said further exploration success
at Gnaweeda could fast-track a decision
on increasing the processing capacity at
“Depending on what we find in terms
of an ultimate resource and reserve, that
will have some implications for the mill at
Andy Well,” Kelly said.
“The mill is pretty much running at full
capacity now, about 50% over what it
was designed at…we could quite easily
lift that throughput up to 500,000 tpa by
the installation of a new mill and a couple
of extra tanks, but we don’t want to do
Doray has increased its exploration budget for FY2017 to $15.5 million that unless we have the ore supply.”
PAGE 24 SEPTEMBER 2016 AUSTRALIA’S PAYDIRT
Doray had commissioned two new gold plants in the past four years Andy Well produced first gold just 3.5 years after its discovery
Staying true to its roots, Doray has pany’s life were dedicated to discovering to be building a project,” Kelly said. “Go
upped its exploration budget for FY2017 and developing Andy Well and the last forward two years and it was even better
by 50% to $15.5 million. It is the biggest three years were focused on acquiring because a lot of that pressure had come
allocation of exploration funding in the and constructing a second asset in De- off the contractors, fabricators and peo-
company’s six-year history. flector. So what’s in store for the next ple like that, so this is probably the best
About $6 million will be spent at Andy three? I’ve seen it.
Well and $3.5-4 million will be tipped into Doray’s track record is sure to hold the “The amount we’re paying for aircore
a maiden exploration programme at De- company in good stead as it chases a drilling at the moment, which is the drill-
flector. The remaining funds will be dedi- third mine and although there is no time- ing we’re using for regional projects, is
cated to Doray’s suite of greenfields and frame for a purchase or discovery, Kelly at a similar level to when I was working
brownfields projects, including the Horse is keen to pounce while Australian gold for Western Mining in 1994. If you’ve
Well JV with Alloy Resources Ltd, the Mt remains in favour. got money to explore, especially region-
Fisher JV with Rox Resources Ltd and “When we built Andy Well in 2012/13, ally, you’re getting really good value for
West Gawler JV with Iluka Resources Ltd we thought that was a pretty good time money.”
in South Australia. While there is still plenty
more to be told in the Doray
Unlike some of its peers, A brief history of Doray
Doray is backing its explo- narrative, Kelly has no plans
ration team to discover that Feb 2010: Listed on the ASX to skew from the intended
third producing asset rather April 2010: Discovers Wilber lode at Andy Well plot of running a success-
than chase a near-term de- ful gold business poised to
velopment project through Feb 2011: Maiden resource announced for Wilber soon join the ASX300 list.
M&A, although Kelly remains Feb 2012: Native Title agreement signed “We say we’re going to do
open to the latter. April 2012: Andy Well mining licence granted something and we get on
“We’ll continue to spend with it without a lot of pomp,”
a reasonable amount of Sept 2012: Secures project debt and equity funding he said. “We’ve got a track
money on exploration be- Nov 2012: Open-pit mining begins at Andy Well record of saying we’re going
cause we think that’s where to build a project and we’re
the best opportunities are to May 2013: Underground mining begins going to get the funding, re-
create value pretty quickly,” July 2013: Andy Well processing plant commissioned gardless of what happens to
Kelly said. “We’ve also got the share price in the short
a business development Aug 2013: First gold pour at Andy Well term or how the market re-
programme of trying to find May 2014: Enters into JV at Horse Well acts.
where the next one might “There’s not too many
come from. July 2014: 76,785oz produced in first year of operation at Andy Well
companies that have fund-
“All the Australian gold pro- Aug 2014: Picks up Gnaweeda tenements ed and built two gold mines
ducers have had a nice run, from scratch in four years.
but the problem with doing a Oct 2014: Announces takeover of Mutiny Gold Hopefully that’s what peo-
deal on a producing asset in Mar 2015: Completes takeover and acquires Deflector ple remember; that we’re
Australia right now is they’re July 2015: 88,736oz produced at Andy Well in second year a good business that does
all trading at pretty good val- what it says it’s going to do
uations, so we’re looking fur- Aug 2015: Secures funding for Deflector and has a steady growth
ther afield and seeing what Feb 2016: Open-pit mining begins at Deflector, secures off-take profile rather than going
else is out there. That’s go- out and overextending our-
ing to be a big focus now that May 2016: Enters JV at Mt Fisher selves too much.”
Deflector is up and running.” June 2016: Underground mining begins, first shipment from Deflector – Michael Washbourne
Three appears to be a
lucky number at Doray. The July 2016: 84,135oz produced at Andy Well in third year, first gold
first three years of the com- pour at Deflector
AUSTRALIA’S PAYDIRT SEPTEMBER 2016 PAGE 25
DIGGERS & DEALERS REVIEW
All eyes on G20
More than 1,900 delegates attended the 25th Diggers & Dealers Mining Forum in Kalgoorlie
Ahead of this month’s G20 Summit in China, former deputy chief nism for follow-up to see if they actually
executive of the International Monetary Fund, John Lipsky, has implemented [actions] as planned,” Lip-
urged the world’s media to ensure the leaders are held to account sky told the media throng at Diggers &
on agreements made at the gathering in Hangzhou, Zhejiang. Dealers.
Delivering the keynote address at the strongly on the economic front, particu- “Hopefully, the media and specialist
25th Diggers & Dealers Mining Forum larly the emerging economies. media will take the lead in making sure
in Kalgoorlie in August, Lipsky said the that people are informed about what has
intended goals for global growth set out China aside, growth in emerging mar- been agreed and what is in fact going to
eight years ago at the inaugural G20 kets is below long-term averages, with take place. My experience suggests that
Leader’s Summit had not been met. global growth remaining “both weak there has been too little accountability
and fragile, that it is uneven, and that it or too little demand for consistency from
Despite a considerable amount of work is subject to substantial downside risks”, the G20 leaders to implement what they
completed under the auspices of the G20 according to Lipsky. have agreed to.”
covering a broad range of topics, Lipsky
said political support to implement a co- The coming summit in China (Septem- The G20 Summit has become the key
operative and coherent approach to in- ber 4-5) will be the 11th meeting of G20 platform for finance ministers and central
ternational economic policy was lacking. leaders, however, the drive towards inter- bank governors to strengthen bonds and
national economic cooperation to speed develop global economic reform govern-
With the trauma of the GFC remaining, up the global recovery and growth is still ance.
houses comprising the G20 – Argentina, very much a work in progress, Lipsky
Australia, Brazil, Canada, China, France, said. As president of G20, China has set the
Germany, India, Indonesia, Italy, Ja- agenda for the summit and hopes to en-
pan, Mexico, Republic of Korea, Russia, “In terms of economic policy, you are gage all members in working towards a
Saudi Arabia, South Africa, Turkey, UK, going to find something called the ‘Hang- theme of an “innovative, invigorated, in-
US and EU – have failed to bounce back zhou Action Plan’ with specific commit- terconnected and inclusive world econ-
ments to specific measures to a mecha- omy”.
Members of the G20 account for 85%
of world GDP, 75% of global trade and
PAGE 26 SEPTEMBER 2016 AUSTRALIA’S PAYDIRT
65% of the population. are some challenges to come for the John Lipsky
A grouping of this kind strictly focused Chinese economy,” Lipsky said.
prices may well be governments and pri-
on global economic and financial policy Although producing at a much lower vate enterprise taking advantage of his-
has never been compiled before and Lip- GDP rate than China, India was a “bright torically low interest rates to build critical
sky has high expectations of what should performer”, but also had to clean up state infrastructure now.
be achieved by the G20. bank balances sheets, make reforms in
the agriculture sector, introduce meas- However, Lipsky said there was no
“If they act together with focus, tre- ures for financial inclusion and increase “magic answer” as to which projects gov-
mendous things can be accomplished,” local manufacturing for plus-2% GDP ernments should pursue in the current
Lipsky said. growth rate to be sustained, Lipsky said. context, but warned it was critical that big
economy-moving infrastructure projects
“The hallmark, the underpinning of that While the Chinese and Indian econo- needed to produce returns.
cooperative effort is not the notion, as mies continue to grow positively, the eco-
many people would say, that we ought to nomic situation in Lipsky’s native United “If you are talking about very long life
sacrifice for the common good. If we all States is reportedly “moving along stead- investments – 20, 30, 50 years – you
act in a coherent way and a consistent ily”. need to use more of a notional long-term
way it will produce general benefits.” interest rate to make sure they are go-
Meanwhile, the economies in the euro ing to produce the return that should be
Despite some challenges to overcome, zone have recovered in the last few required,” Lipsky said.
including strengthening its banking sys- years, not spectacularly, but positively
tem, controlling pollution, enhancing ex- nonetheless. He said it was a matter of confidence
change rate flexibility, increasing data for governments to push the button on
availability and improving communica- Of more concern has been the per- country-shaping projects.
tions, China’s GDP growth is 6%; a rate formance of countries in Latin America,
the IMF believes is sustainable with fu- particularly the continent’s largest econ- Right now, there appears no better
ture reforms. omy, Brazil. place to build confidence than at the G20
“But, without future reforms, it seems “The good news is it looks like that may
unlikely they can sustain this without pro- be coming to an end,” Lipsky said of the “We are all better off if we agree on a
ducing some serious balances. There poor economic growth in the region. coherent approach and actually do what
we say we are going to do, that is the
“The bad news is that this is still very main point,” Lipsky said.
low growth for a relatively poor continent
which should have room for much rapid “I would also say that I think there is too
growth. It looks like the worst is over and little attention paid to the specifics of what
there is potential for big change in poli- they [G20] have undertaken and perhaps
cies coming from the change of govern- too little effort on the part of many to in-
ment in the biggest economies, nonethe- sist that they carry through on those pro-
less this remains a work in progress.” grammes. [I’m] not trying to belittle or in
any way denigrate what is about to hap-
As many countries return to moderate pen, I can assure you that there is a very
growth in the face of lingering uncertain- serious effort to try and find a consensus
ty and volatility in global markets, gold document that everyone can agree to.
prices are expected to remain strong, But, this is an organisation that has [the]
however, “it’s hard to imagine a big up- possibility of quite strong action if they
turn in commodity prices”, according to can reach consensus.”
– Mark Andrews
What could drive a surge in commodity
AUSTRALIA’S PAYDIRT SEPTEMBER 2016 PAGE 27
DIGGERS & DEALERS REVIEW
Metals X comes out to play
As usual, Metals X Ltd Aditya Birla’s major share- environmental approval earlier this year;
chief executive Peter holder, had parted with its plus a host of other base metals oppor-
Cook provided a colour- remnant 6.81% holding it tunities, and there is no shortage of work
ful presentation at this had in Metals X. to keep Warren Hallam busy managing
year’s Diggers & Deal- Metals X’s base metals division.
ers. Metals X had managed
to pull its share price Cook will become managing director of
However, behind the back to $1.83c/share at the gold division, subject to shareholder
jokes and the North Mel- the time of print, which and regulatory approvals, which has
bourne Football Club at- is some justification for been built up in recent times to include
tire, Cook was all busi- persisting with the Aditya three operating mines (one soon to be
ness, putting the final Birla acquisition. under way), four processing plants with
touches on a $100.6 capacity of 5.5 mtpa and resources total-
million placement to do- “The market hated it,” ling 15.4 moz and 2.9 moz in reserve.
mestic and institutional Peter Cook Cook said. “We were a
investors and a $15 mil- At the end of the June quarter, gold
lion SPP to existing shareholders. Both gold company and this lu- production was at a rate of 220,000 ozpa
placements were offered at $1.48c/ natic Cook decided to go at an average AISC of $1,250/oz.
share. and buy a copper play. But, we weren’t
just buying a copper company; we were By the end of the calendar year, Metals
Cannacord Genuity is running the buying another mine we believed we X plans to be producing at 300,000 ozpa
book for the placement, with Bell Potter could make significant improvement in gold, with 400,000 ozpa targeted at the
acting as co-manager, allowing Metals X and money for our shareholders as we end of FY2018.
to operate separate gold and base met- have done 25 times before.
als businesses. “Nifty was another acquisition where The capital raisings announced in Au-
we were buying a massive amount of gust will enable Metals X to achieve its
“Metals X is a growing gold miner and plant and infrastructure at a fraction of near-term ambitions and pursue other
it is partially ignored in the current pure its replacement cost. It was an under- growth opportunities, including more ac-
play gold up surge, but we are consider- performing mine on an ongoing concern quisitions.
ing doing something about that,” he said. basis, but with good upside and a lot of
potential to find more. There hasn’t been Immediate work earmarked by the
“It is a diversified company where its any drilling for about four years around company includes enhancing the eco-
revenue and profits are split across mul- Nifty. It was a bargain. We paid just nomics and scope of the Fortnum gold
tiple metals now. The increase in pro- above net cash and working capital,” he project, bringing production at the Comet
duction and expanding margin is fiscally said. and Great Southern underground mines,
strong, it has sufficient reserves to fund “What’s dumb about buying an asset at within the Central Murchison gold pro-
its growth – its current growth plans any- a fraction of its replacement cost and just ject, to a steady state, mine development
way. It is an ASX300 company with good above net cash and working capital?” and exploration drilling at Nifty and de-
liquidity and it is a dividend payer. Formerly producing 60,000 tpa copper, velopment of the Mt Henry gold project.
Nifty is still a significant mine producing
“There are plenty of growth options in 35,000 tpa copper from a modern owner- Mt Henry was acquired last year, with
gold, tin and copper. It has a world-class, operated underground mine scenario at ore to be treated at Metals X’s Higgins-
mega nickel-cobalt-iron project, it is a a rate of 1.7 mtpa. ville plant. Modifications may be needed
successful and aggressive mine devel- There is a further 800,000 tpa capacity to be made to the plant to cater for supply
oper and explorer and positioned to un- in the copper concentrator at Nifty, which from Mt Henry, Cook said.
ravel this and simplify this into what is a has resources of 31.1mt @ 1.74% copper
rich pool of assets.” and reserves of 5.24mt @ 1.85% copper. With the Trident underground at Hig-
Nifty expansion options include bring- ginsville becoming quite deep and seis-
With a series of operating base met- ing on the nearby virgin Maroochydore mic, the fundamental problem for Metals
als mines generating about $350 million discovery which boasts mineral resourc- X is relying on a consistent supply of ore.
in revenue and $65 million EBITDA plus es of 48.6mt @ 1% copper and 0.04%
options to bring more mines on stream, cobalt. Therefore, the company will look to
the copper, tin and nickel projects within While Nifty is a new addition, Cook place the mine on care-and-mainte-
the Metals X portfolio are strong enough was eager to remind people that Metals nance in the latter part of this year.
to warrant a standalone business. X remains one of the few listed tin pro-
ducers in the Western world, courtesy of “The [Trident] orebody is continuous at
This didn’t appear to be the case a production from the Renison tin mine in depth, there is a lower grade depth within
short while ago, with Metals X’s takeover Tasmania. it which is like a whole new capital invest-
of Aditya Birla turning into a messy affair, Add the Renison tailings retreatment ment facility,” Cook said.
for which the company was “punished”, project, which is development ready and
according to Cook. could double the company’s tin output “We’ve replaced the main source feed
(subject to tin prices); the world’s largest from Higginsville from that deeper under-
The company’s share price plunged undeveloped nickel project at Wingellina ground mine to an open pit source from
from above $1.25c/share when the take- in the Central Musgrave, which received the Mt Henry group of assets we bought,
over was announced towards the back which is effectively 5-7 years of bulk low-
end of 2015 and continued to fall to well grade feed. The remainder of the Trident
below $1/share. mine and the underground opportunities
there will become swing feed in addition
At the time of print, the takeover was to that project.”
being completed and Hindalco, formerly
– Mark Andrews
PAGE 28 SEPTEMBER 2016 AUSTRALIA’S PAYDIRT
The market black dog has
some wag in its tail
About 1,900 people survived Dig- Cosmos nickel belt projects acquired
gers & Dealers 2016 better than
they did in previous years in Kalgoor- cheaply from Glencore – complete
lie and the reason was not that they
necessarily went to bed earlier or with well-stored plant, buildings and
imbibed less but they were more con-
vinced commodity prices were in bet- unused machinery and equipment.
ter shape and moving north.
Also helping boost confidence in
Gold bugs didn’t need prompting,
particularly as two-thirds of the pres- nickel was Independence Group NL
entations involved gold prospects or
mines, but there was an uplift of sen- chief executive Peter Bradford who
timent for nickel – which had taken a
real belting earlier this year – lithium showed how well the gold and nickel
was still a hot topic, graphite retained
some enthusiasm and there were miner was performing, and the soon-
some fanciful thoughts about zinc
with two of the world’s big mines be- to-be-producing nickel-copper mine
at Nova Bollinger.
Diggers & Dealers also helped in
pushing the iron ore revival – something Again, a master entertainer at Dig-
Canberra and the West Australian Gov-
ernment hopes will continue – by giving gers & Dealers proved to be Metals
the Diggers Award to Fortescue Metals
Group Ltd. X Ltd chief executive Peter Cook.
A surprise for some, but then again Cook outlined plans to spin-off the
one year ago Fortescue was looking at
rock bottom like other new wave iron The Dealer of the Year award was claimed by company’s gold assets into a new
ore miners feeling the chill winds of an
iron ore price being in the basement, in Evolution Mining’s Jake Klein company and undertook a costume
part thanks to the three supply giants
BHP Billiton Ltd, Rio Tinto Ltd and Vale change on stage to once again trum-
SA maintaining high production until re-
cently. Since that time Fortescue has salutary warning for the gold buffs – that pet his allegiance to the North Melbourne
introduced massive cost savings and re-
turned to a healthy balance sheet. market conditions could change again Football Club. Pity it did not inspire the
In recent months Fortescue has be- just when it was least expected. Kangaroos to improve their slightly pre-
come an example for the Australian min-
ing sector on introducing efficiencies Klein picked up the Dealer Award for carious position in the AFL’s top eight.
while taking bold steps.
Evolution, well deserved for its acquisi- Cook can take the mickey out of peo-
While there was strong investor inter-
est in advanced gold explorers, several tion of good gold assets in the flat times ple and companies in good spirits and he
of the veteran analysts indicated to this
writer that they considered some of the of 2015, dramatically lifting production on chose a few after the costume change.
Australian gold stocks were now well
priced. its Australia-wide mines (largely due to It’s a pity that he didn’t realise that one
But the market indicated Australian- the Cowal mine acquisition) and also be- of his old sparring partners, Harmony
based gold miners were performing, and
few better than Evolution Mining Ltd, ing able to rapidly reduce the bank debt Gold Mining Company Ltd, had taken up
Northern Star Resources Ltd, Doray Min-
erals Ltd and South African miner Gold incurred through the purchases. a booth in the big exhibition tent.
Klein proudly showed that the Victo- One of the good signs for Diggers &
In recent years Jake Klein has been
the cheerleader for gold – and there was rian Racing Club was using gold from the Dealers 2016 was that the calibre of
plenty of need for cheer. He didn’t need
to pep up depressed spirits this time, Cowal mine for the 2016 Melbourne Cup; presentations by contenders for the Best
though his presentation did contain a
the race that stops the nation on the first Emerging Company Award showed great
Tuesday of November. depth and that in the past year some re-
Until recently, it was nickel in the dol- sourceful exploration took place.
drums, with Kambalda’s 50th anniversa- Pantoro Ltd, formerly Pacific Niugini,
ry being a mute affair earlier this year at a has reopened the Nicholsons Find gold
time that Panoramic Resources Ltd and project near Halls Creek in WA and is
Mincor Resources NL were shedding accelerating regional exploration. The
staff and mothballing mines because of company has a red bull as its logo, so the
the then-appalling nickel price. presentation finished with the bull drop-
So rather than Klein this year it was ping gold ingots instead of bullsh…
Dan Lougher, chief executive of Western There were two uranium companies
Areas Ltd, who was the soothsayer, for as candidates for these awards, and
the nickel price was up more than $1/lb they were two of the likely contenders for
since the anniversary. He made it clear whenever the uranium price recovers to
there was a stronger future for nickel. open up new mines.
One point he made about the evolving The gala dinner again didn’t disappoint,
new batteries that has turned many Aus- though the comedian was more for the
tralian juniors into nickel explorers, was younger set than the veterans of Diggers.
that while lithium was a component, nick- One of the biggest cheers came with the
el also had a prime role in the make-up of announcement of the GJ Stokes Memo-
these batteries. rial Award which went to the founding
Western Areas is blessed with high- chief executive of Independence, Chris
grade mines at Forrestania that have Bonwick, who has since retired.
withstood the nickel price blight, and the – Ross Louthean
company is now pushing ahead with the
AUSTRALIA’S PAYDIRT SEPTEMBER 2016 PAGE 29
DIGGERS & DEALERS REVIEW
Rio ready to expand its junior
Rio Titnto Ltd is hoping a mix of new Stephen McIntosh analysts” over the years but powerful
technology and junior exploration in- new analytical technology could allow
genuity will provide the impetus needed McIntosh said the Antipa deal – in the company to redress that balance.
to make Australia’s next Tier 1 mineral which Rio Tinto can earn up to 75% of
discovery. the Citadel copper project by spending “Computing power is beginning to
$60 million – was an example of the com- transform mineral exploration by using
Speaking just a few weeks after be- pany’s willingness to partner with juniors new analytical technology. Imagine tak-
ing made group executive of the major’s to find Australia’s next Tier 1 copper ore- ing decades of field work and testing it
growth and innovation division, Stephen body. for indicator minerals and building a new
McIntosh urged junior miners and explor- geophysical and geochemical datasets
ers to partner with Rio Tinto in an effort to “Last year, I said here that we wanted to create 3D models.”
find new world-class deposits. to partner with juniors to deliver [a new
discovery] but we now want to build it fur- Rio Tinto’s new analytics excellence
“Australia is long overdue a Tier 1 dis- ther,” McIntosh said. centre – established in Pune, India in
covery,” McIntosh said. “I have an explo- 2015 – will play a role, assessing mas-
ration cheque book for quality projects Rio Tinto spoke with around 30 jun- sive volumes of data and using predictive
and our door is open.” ior explorers with Australian copper as- mathematics to improve target selection.
sets before signing the agreement with
The new group is responsible for ex- Antipa and McIntosh suspects there are “Rio Tinto has access to the 8 million
ploration and development across all more explorers who would benefit from samples of public surface data and 2.7
commodities. the major’s support in targets which were million Rio Tinto samples. The company
expensive to test. has invested heavily in organisational
“We are looking at opportunities legacy physical samples.”
through the entire life cycle of Rio Tinto’s “A lot of juniors may have targets but
mines and assets and we are responsi- they are hard to find funding for; they are By adopting and adapting the kimber-
ble for finding, shaping, developing and conceptual targets, often of a big scale litic indicator minerals identification tech-
delivering a portfolio of options for Tier and deeper. We have the expertise to niques honed in diamond exploration,
1 assets,” McIntosh said, pointing to the help.” the exploration division has also refined
likes of Tom Price, Weipa, Argyle and its mineral identification methods to de-
Century as evidence of the company’s Further refining that expertise is anoth- velop sophisticated vectoring and fertility
“rich heritage” of exploration success in er major responsibility of the growth and assessment of prospects based on trace
Australia. innovation division. element mineral chemistry.
He said the company’s exploration di- McIntosh said the division had set itself “We are using KIMs [kimberlitic indica-
vision had continued to “pay its own way” the task of bringing a new approach to tor minerals] and RIMs [resistate indica-
since 2000 – making 14 major discover- target generation. tor minerals] for porphyry identification.
ies – but the corporate restructure would Using the technology we can potentially
allow his group to redouble efforts to find “Despite new technology and comput- find porphyry orebodies up to 4km out-
the world’s next great mine. ing power, we have not seen an observ- side the porphyry halo. We see it as a
able lift in discovery rates,” he said. “We competitive advantage,” McIntosh said.
Rio Tinto is spending $US200 million can do better in traditional areas but en-
annually across the globe in its search hancing new technology and reanalysing He said Rio Tinto and its exploration
for new opportunities but with less than legacy data is as important.” partners could use this technology to im-
1% of targets it generates ever likely to prove their chances of success.
become a discovery, the rate of discov- He said Rio Tinto’s exploration teams
ery continues to wane. had been “reasonable data hoarders, McIntosh also suggested Rio Tinto’s
poor data managers and very poor data expertise in other areas could assist jun-
“There has been a general decrease in ior explorers, pointing to the labyrinthine
the quality and size of greenfields discov- approvals process as a particular hurdle
eries,” McIntosh said. “In the last decade, to exploration success.
there was a ninefold increase in explo-
ration expenditure [across the industry] “In many cases, the first year of ex-
but discovery rates continue to fall. The ploration is exhausted by the approv-
industry is busy being busy, not being als process,” he said. “This is not about
successful.” circumnavigating the proper regula-
tory framework and best practice but
To solve the conundrum, Rio Tinto is we need to work with regulators to find
looking to “partnerships and technology ways to streamline the system. Juniors
to get a better bang for our buck”. should look to partner through the ups
and downs of the regulatory system as
Ten JV deals have been signed with well as the commodity cycle.”
junior and mid-tier miners in the last 12
months; the agreement with Antipa Min- – Dominic Piper
erals Ltd over the Paterson Province pro-
ject in Western Australia being among
the most prominent.
PAGE 30 SEPTEMBER 2016 AUSTRALIA’S PAYDIRT
DIGGERS & DEALERS REVIEW
Chinese power-play excites FMG
Fortescue Metals Group Ltd is champ- costs were just $14.31/t – a 35% reduc- Nev Power
ing at the bit to take advantage of the tion on the same time last year – and the
proposed consolidation between major company is now only marginally behind a business, predominantly from the US
Chinese steel mills. Rio Tinto Ltd as the industry’s lowest capital markets.
cost iron ore producer.
Reports emerged from China early last “We finished the drawdown by around
month flagging the potential union of four Full-year results were not available at 2012/13 and we’re now in the paydown
of the country’s biggest steel producers the time of print, but the company has stage where we’re continuing to repay
in a bid to reinvigorate an industry crip- guided shipments of 165-170mt and C1 debt. We paid back $US2.9 billion from
pled by surplus capacity in recent years. costs of $US12-13/t for FY2017. cash flow from operations [in FY2016]
and since the peak we’ve paid back
It is proposed Hebei Iron and Steel “A lot of people have commented of late around $US6 billion. We’ll continue to do
Group Co Ltd join forces with Shou- that our cost reduction journey has been that and at today’s iron ore prices – par-
gang Corp to create Northern China a fantastic overnight success, but like ticularly today’s iron ore prices – we’re
Steel Group and Baosteel Group partner most overnight successes it took about generating very strong cash margins and
with Wuhan Iron and Steel Corp to form four or five years to achieve,” Power said. applying that to debt paydown.”
Southern China Steel Group. All four are
Fortescue customers. “That’s down to a combination of Power said his company had expand-
things. The low cost Solomon mines ed four times its size since he arrived at
Responding to an audience question of Firetail and Kings has provided new the helm in 2011, including the recent
following his presentation at Diggers & blends for us to optimise both the Firetail consolidation of its mines into two cen-
Dealers, Fortescue chief executive Nev mine and the Chichester mines. That’s tralised processing hubs – Solomon and
Power said his company would not be been an incredibly important part of re- Chichester – but he insisted further ex-
the only one to benefit from the mooted structuring our market offer and optimis- pansion was not on the agenda.
consolidation plans. ing the value from those resources.
Instead, exploration will have a bigger
“Anything that helps our customers be- “We’ve guided $US12-13/t for C1 for the focus in FY2017 and beyond.
come more efficient and stronger finan- next 12 months, but we’ll also be working
cially is good for us as a supplier,” Power on the non-C1 components of our cost “We started as an exploration compa-
said. “We have seen the Chinese steel to reduce our overall cash breakeven, ny and we still are, very much at heart,
industry suffer from low profitability over which today is under $US30/t.” an exploration company,” Power said.
the last year or so and I think that consol- “We’ve got almost 12bt of hematite re-
idation will help to improve asset utilisa- With net gearing now below 40% and source and around 5.5bt of magnetite
tion for them, consolidate their plans and $US1.6 billion cash on hand at the end resource.
to become more product efficient. of June, Fortescue is expected to further
reduce its net debt position of $US5.2 bil- “We have significant tenements that
“I also think it’s worth noting that the lion during this financial year. are still being explored in the Pilbara and
Chinese steel industry is probably one of it is truly the world’s best address for iron
the very few steel industries in the world “We have used debt to fund the expan- ore as far as we’re concerned and we’re
that is heavily investing in new produc- sion and development of our business,” continuing to develop new pipelines of
tion that is highly efficient, highly produc- Power said. “This was a very deliberate projects.”
tive, low cost, low energy, low emission strategy because debt was the fastest,
production, and they will be a formidable lowest cost and most flexible way to fund – Michael Washbourne
producer of steel going forward.
“They’re already very competitive
globally and I think the heavy investment
they’re making in new steel-making tech-
nology will continue that trend. Today
they produce around 50% of world steel
and if you think about the growth in their
economy and in the surrounding Asian
economies through projects like One
Belt, One Road it’s easy to see where
that demand is going to come from.”
Power was in a particularly buoyant
mood in Kalgoorlie this year, not just
because of the proposed consolidation
in China, with iron ore crashing back
through the $US60/t price barrier.
Fortescue also picked up the prestig-
ious Digger of the Year award for emerg-
ing from a tumultuous period for iron ore
producers to be in a strong market posi-
tion after stripping huge costs from the
At the end of June, Fortescue’s C1
PAGE 32 SEPTEMBER 2016 AUSTRALIA’S PAYDIRT
Lynas prepares to assume rare title
It has been a long road but Lynas Cor- able producer of rare earths and close to internal target
poration Ltd managing director Amanda
Lacaze believes her trailblazing rare outside China. It reported levels.
earths company has finally achieved
some stability. record production volumes The challenge of separation
The rare earths market is not for the and sales from Mt Weld – in had also been addressed. An
fainthearted given both the unstable pric-
ing environment witnessed since 2011 the Eastern Goldfields – with advanced materials plant is
and the processing challenges inherent
in production. However, Lacaze is con- neodymium-praseodymium being constructed in Kuan-
fident Lynas has finally achieved a sus-
tainable operating model at its Mt Weld production up 36% and tan, Malaysia comprising four
operation in Western Australia.
sales values up 30% for the rotary kilns, 928m of kilns
“Our resource/material behaves differ-
ently to those that feed the Chinese in- period. and tunnel furnaces, 44 high-
dustry,” Lacaze told Diggers delegates.
“We have had to learn about processing Lacaze said such achieve- speed centrifuges, 1,000 sol-
our own rare earths. Rare earths pro-
cessing can be a very complex beast and ments were particularly Amanda Lacaze vent extraction stages, eight
the Lynas team has had to solve many notable given the failure of tunnel furnaces and 46 plate
challenges. There are no off-the-shelf
solutions for many of the problems. The other rare earths projects to and frame pressure filters.
solutions were found by our own team.”
break China’s monopoly on production. The plant is unique in Western rare
The June quarter was the clearest in-
dication yet that Lynas is nearing its goal “There are special challenges in the earths production but Lacaze said it was
of becoming the world’s first sustain-
rare earths market; it is the most frustrat- similar to a nickel laterite processing fa-
ing I’ve ever faced,” she said. “It is about cility.
monetising as much material as pos- Lynas hopes the successful commis-
sible; managing the logistics and water sioning of the plant will allow it to become
management.” the kind of reliable, sustainable Western
Lynas has overcome each of those supply of rare earths products countries
challenges, according to Lacaze, through such as Japan have been crying out for
its own ingenuity. since China imposed export restrictions
She said water management costs had on the material in 2011.
been driven down 300% with water us- – Dominic Piper
age now below design capacity levels
AUSTRALIA’S PAYDIRT SEPTEMBER 2016 PAGE 33
DIGGERS & DEALERS REVIEW
Pilbara makes its point
Despite enormous interest in the $184 million could be achieved within
lithium battery sector, Pilbara two years.
Minerals Ltd managing director The PFS was based on life-of-mine
Ken Brinsden believes the industry cash costs of $US205/t and FOB av-
is still misunderstood. erage spodumene price of $US456/t
“There are battery factories be- from a 2 mtpa operation.
ing constructed in the US, they are The DFS is targeting mining inven-
being constructed in broader Asia, tory in excess of 65mt from a current
ex-China, and broader Europe, and resource of 128mt, which would dou-
that is all great news, but I would ble mine life to about 30 years.
suggest that they are going to pale Assuming a Native Title agree-
into insignificance in comparison to ment, mine approvals, financing and
what is happening in China,” Brin- construction and operating contracts
sden said. can be locked in soon, Pilbara hopes
“To my mind, this is a point that to start building the Pilgangoora pro-
is being missed by the Western ject later this year.
world and in particular the West- “And we will be commissioning the
ern analysts. Our observation, as Ken Brinsden Pilgangoora site in late 2017 and in
we get more deeply integrated with 2018/19 we will be ramping up pro-
the lithium industry in China, is that there and the raw materials supply to China in duction at the Pilgangoora site,” Brin-
is much more development and growth terms of iron ore. The price got discon- sden said.
going on all the way through the lithium- nected internally, it took a long time for “We will be serving our Chinese cus-
ion supply chain than the Western world global seaborne trade to catch up and I tomers and likely participating in deliv-
imagines.” think the same phenomenon is unfolding eries to our own chemical facilities for
Having experienced the steel-making today. China is going to become a big which we ultimately sell both carbonate
boom in China through roles with iron ore dominant player in the lithium-ion scene.” and hydroxide. It is a fantastic opportu-
producer Atlas Iron Ltd in the last dec- Pilbara is positioned to be one of the nity for the company and incredible lever-
ade, Brinsden can see similarities hap- suppliers of choice of raw material to age to a really high-quality resource. For
pening in the lithium sector. China from its Pilgangoora spodumene all those reasons we believe we have a
“As the Chinese Government starts to project in Western Australia.
truly exciting project, it is one of the good
push towards cleaner en- ones and one of the lithium
ergy initiatives to curb its Prices today are incredibly high. raw material supply bases
dire pollution situation, The domestic price in China is that is going to be important
electric vehicles and pow- for many decades to come.”
er storage units requiring grossly disconnected with respect
lithium-ion batteries are A JV with Chinese com-
pany General Lithium Cor-
becoming more prevalent to what is happening with seaborne poration is Pilbara’s entry to
throughout the country. the downstream side of the
The result of this activ- trade. Does that sound familiar? That is lithium business.
ity has led to a surge in exactly what happened with respect to General Lithium – a major
prices for lithium, partly
producer of lithium chemi-
due to an incredibly short the steel industry and the raw materials cals and battery grade lithi-
supply of the element in supply to China in terms of iron ore. um carbonate in China – is
China. the cornerstone off-taker for
Brinsden expects China Pilbara’s spodumene.
to be a long-term partici- Pilbara can leverage from
pant in the lithium sector and is the mar- With the current spodumene spot price General Lithium’s expertise, with the lat-
ket Pilbara is initially targeting. of $US600/t and with further upside an- ter to provide designs and operate a pro-
“China is the real deal, it has taken off ticipated, it is a good time to be conduct- posed JV chemical plant.
and it is catching people by surprise,” ing detailed studies on company-making The partnership will help Pilbara dip
Brinsden said. projects. its toes into chemical processing and al-
“Prices today are incredibly high. The At the time of print, Pilbara was close low it to diversify its Pilgangoora product
domestic price in China is grossly dis- to finishing a DFS on Pilgangoora after and be a key supplier of lithium carbon-
connected with respect to what is hap- a PFS indicated it had a robust project ate and hydroxide beyond the borders of
pening with seaborne trade. Does that which could produce EBITDA of $120 China.
sound familiar? That is exactly what hap- million per year over the first five years of – Mark Andrews
pened with respect to the steel industry operations and capital cost pay back of
PAGE 34 SEPTEMBER 2016 AUSTRALIA’S PAYDIRT
Darlot in good
Highlighting a single
behind the turnaround
in the Darlot gold
mine’s performance is
difficult, however, what
is undeniable is the
major influence female
employees at the Gold
Fields Ltd-owned mine
Over a third of the
team at Darlot are fe-
male which has trans-
lated to a great repre-
sentation of women Kelly Carter
across all operational
disciplines on site.
“This is an operation that many would have written off three
years ago, but it has achieved massive cultural change, it has
become a profit making mine and it has the best safety perfor-
mance in our organisation,” Gold Fields Australia vice presi-
dent, legal and compliance, Kelly Carter said.
“While it remains hard to pinpoint what lies at the heart of
this transformation it includes an exceptionally strong focus
on safety, well being, Gold Fields’ values and the ability to
hold courageous conversations. This is caring about our peo-
ple and finding meaning in what we do. We are also starting
to see more women speak up and be heard on site and this
helps reinforce the positive culture.”
Carter was one of three female presenters at Diggers &
Dealers this year – Lynas Corporation Ltd managing director
Amanda Lacaze and Sipa Resources Ltd’s Lynda Burnett the
others – and the first to take the podium since Nanette Ander-
son, who represented Southern Gold Ltd five years ago.
The great strides made by Gold Fields at Darlot started
with the company listening to its people and engaging with
as many of its female employees across the region. And,
while some of the conversations had made for uncomfortable
listening at times, Carter said the process had opened Gold
Fields’ eyes to the opportunities to attract and better utilise
female talent in its business.
“We have committed to a 20% improvement in our female
participation rates year-on-year; a target that forms part of the
personal KPIs of our corporate and site management teams,”
“In adopting those targets we continue to peel away the
layers of the onion and look at all the areas of the business
that this impacts, whether that be our recruitment practices,
performance management, our succession planning and de-
velopment to name but a few. Whilst we are in no doubt at the
start of this journey, we think we have set a solid foundation
on which to build.”
– Mark Andrews
AUSTRALIA’S PAYDIRT SEPTEMBER 2016 PAGE 35
DIGGERS & DEALERS REVIEW
Evolution staying grounded
Evolution Mining Ltd executive chair- gral part of an “organisation’s DNA”. Jake Klein
man Jake Klein has cautioned his Evolution announced in late June it
gold industry peers not to succumb to the the world stage and attract global invest-
sins of the past. was doubling its dividend payout to 4% ment into the sector.”
of its revenue in a sign of increased con-
Acknowledging that gold mining ex- fidence in the future cash generation ca- The market is keeping a close eye on
ecutives were treated like “rock stars” at pacity of the business. Evolution, awaiting the company’s next
Diggers & Dealers this year, Klein was move, including further acquisitions.
quick to put things into perspective de- “We observed the point gold compa-
spite the rising sentiment for the precious nies didn’t tend to be dividend payers and “We recognise that we work in an in-
metal. we wanted to get it into our organisation’s dustry where standing still is not an op-
DNA that dividends are not an optional tion, but if we are true to what we have
“From the peak in 2011 to late 2015, thing,” Klein told media on the sidelines been talking about then we have to be
we [the gold industry] lost 81% of inves- of the conference. very selective about our next move, as
tors’ money,” Klein said. “Yes, we are up I think the company has been to date,”
145% this year, but it is off a pretty low “If we put it as a royalty, then it ef- Klein said. “There will be a next move for
base.” fectively goes above the line and when Evolution, that is for certain, but we just
we’re doing our forecasts and budgets, don’t know what it is and when it will be.”
Klein had every reason to feel like a it’s an expense item that is there and it’s
rock star in Kalgoorlie last month on the there before anything else. Meanwhile, Evolution has entered into
back of his company’s success in the a binding agreement with Minjar Gold Pty
past year, even joking that he and his “It was around this discipline that al- Ltd to sell its Pajingo mine in Queensland
colleagues had “upgraded” their accom- lowed us to make it a core part of our for up to $52 million, comprising a $42
modation from the cosy surrounds of the business. It wasn’t going to be something million upfront cash payment and a 1%
local caravan park to plush suites at the we looked at at the end of the day and NSR royalty of up to $10 million for pro-
Ibis. said ‘let’s spend some more money on duction above 130,000oz.
exploration rather than a dividend’. I think
Evolution was presented with the pres- it’s reflective of where shareholders want “Pajingo has made a very important
tigious Dealer Award for its acquisitions it to be.” contribution to our business over the
of the Mungari and Cowal gold mines – last six years,” Klein said. “Evolution has
deals which boosted the company’s mar- Evolution has emerged as the second grown significantly in the past 18 months
ket cap to $4.1 billion and confirmed the largest gold producer on the ASX in the and it now makes strategic sense for the
Sydney-based miner’s standing among past 12 months – a position Klein de- asset to be operated by an emerging
mid-tier gold producers. scribed as “strange” given the portfolios gold producer that can provide the right
of some rival gold companies – and is level of focus on further extending the
But Klein is staying grounded despite forecasting to churn out at least 800,000 mine’s operating life.”
Evolution’s recent rise to prominence, re- ozpa over the next three years from its
calling the sage advice he received from seven Australian operations. Evolution will book a loss on the sale
former Gold Fields Ltd executive Craig of $77.3 million, based on the carrying
Nelson at Diggers & Dealers in 2003. “Undoubtedly the Australian sector value of the asset.
has an opportunity which it hasn’t had for
Klein had just listed Sino Gold Mining many years,” Klein said. “We have de- As a result of the sale, Evolution has
and the investors were craving stocks in veloped a number of interesting globally revised its FY2017 guidance to 745,000-
gold companies when Nelson pulled him competitive mid-tier gold companies and 800,000oz at an AISC of $970-$1,030/
aside and said: “Jake, be careful, you’re we have an opportunity to get back on oz.
in Hollywood now.”
– Michael Washbourne
“I thought, ‘what’s so bad about be-
ing in Hollywood? What’s there to worry
about?’,” Klein said.
“Well, at the moment, probably not
much, except for the fact that you and I
have been coming to Diggers for many
years and through this time we have
seen the nickel producers, iron ore pro-
ducers, the coal producers, the rare
earths producers, the copper producers
all have their moment in Hollywood and
feel as good as us gold producers feel
today, believing that the music will go on
forever, only to find that it doesn’t, and
when it stops, it stops abruptly.
“For us gold producers, the music last
stopped with a thud in 2011.”
Klein said it was now crucial for gold
companies to put shareholder interest at
the forefront of their business strategies,
declaring that dividends must be an inte-
PAGE 36 SEPTEMBER 2016 AUSTRALIA’S PAYDIRT
Nova on the way
Construction of Nova was 93% complete in early August
Before hosting a select group of visi- The company plans to spend about $33 deposits and results from the drilling
tors out on site at Nova, Independ- million on greenfields and brownfields programme would be collated with other
ence Group NL managing director Peter exploration in the coming 12 months data to define priority exploration targets.
Bradford presented the company’s story across its portfolio, which includes JVs
at Diggers & Dealers. with ABM Resources NL in the Northern Meanwhile, with nickel prices rebound-
Territory at Lake Mackay and Alchemy ing somewhat – $US10,730/t at the time
Bradford was happy to inform dele- Resources Ltd in the Bryah Basin, WA. of print – and Nova just about complete,
gates that Nova-Bollinger nickel-copper Bradford said there would be a renewed
project in Western Australia was 93% Last month, Independence started exploration effort at the Long nickel mine
complete. a 7,500m aircore drilling programme at in Kambalda.
the Bryah Basin project, 40km west of
“Nova is currently on time and on Sandfire Resources NL’s DeGrussa and In response to low nickel prices at the
budget and we’d expect commission- Monty gold-copper deposits. end of last year, structural changes made
ing in the coming weeks and to produce at Long essentially curtailed production
first concentrate in December, just five The purpose of the programme is to by about 15% against a lower cost struc-
months from now,” he said. follow-up on multi-element geochemical ture at the mine. Guidance from Long for
anomalies at the Neptune prospect along FY2017 is 8,750t nickel @ $US2.74/lb.
“Work both underground and at sur- the Karalundi-Narracoota sequence
face is at a very advanced stage of readi- which hosts DeGrussa and Monty. “We also discontinued investment in
ness. Since acquiring Nova our teams exploration at Long as we prioritised our
have worked continuously to optimise Bradford said he considered the Bryah investment dollars into the development
the business. This has resulted in the re- Basin project to host belt-scale oppor- of Nova and into the expansion and mine
lease of an optimisation study in Decem- tunity prospective for VMS copper-gold life extension work at Tropicana,” Brad-
ber 2015 and a decision to commence ford said.
the early development of Bollinger in late
June 2016.” “Exploration is the life blood of a mine
such as Long and without this ongoing
With the emphasis on building the investment there is no replacement of
$443 million project, drilling has tended production with new reserves. Therefore
to focus on grade control of the initial we are pleased to say that this quarter
stopes at Nova. However, according to we have recommenced a limited explora-
Bradford, testing for potential extensions tion programme at Long.”
to the Nova-Bollinger orebodies and fur-
ther work on untested EM conductors – Mark Andrews
A feature length story on Independ-
The Nova-Tropicana belt – which ex- ence Group will appear in next month’s
tends over 200km and hosts two of Aus- edition of Australia’s Paydirt
tralia’s best discoveries in the last 15
years – is an area of exploration focus Peter Bradford
AUSTRALIA’S PAYDIRT SEPTEMBER 2016 PAGE 37
DIGGERS & DEALERS REVIEW
Organic growth drives
1 mozpa bid
Northern Star Resources Ltd be started under the new banner.
managing director Bill Beament
believes the remaining assets in his A maiden reserve of 205,000oz
company’s portfolio are capable of
collectively producing 1 mozpa gold for Millennium will underpin the first
in the coming years.
four years of production. The mine,
On the eve of Diggers & Deal-
ers, Northern Star announced it had which opened three months ahead
reached an in-principle agreement
to sell its Plutonic mine in Western of schedule, is forecast to produce
Australia to Billabong Gold Pty Ltd,
a wholly owned Australian subsidiary 50,000 ozpa.
of a Canadian company controlled
by prolific Toronto-based mining ex- Beament said Millennium would
ecutive Chris Bradbrook.
give his company access to several
The removal of Plutonic from
Northern Star’s portfolio reduces historic mines at Kundana, including
its forecast production guidance for
FY2017 to 485,000-515,000oz, al- Barkers, Strzelecki, Centenary and
though cost guidance also reduces
to $1,000-1,050/oz. Australia’s third Pope John, which collectively yield-
largest gold producer churned out
611,288oz at $1,041/oz AISC in ed 1.25 moz @ 6 g/t between 1990
However, Beament expects organic
growth from both existing and upcoming “Historically when those mines
mines will lift production back to 600,000
ozpa as early as 2018 and is confident were operating they produced
output will continue to increase rapidly
thereafter. 50,000-60,000 ozpa,” he said. “Mil-
“We believe there is potential inside lennium gives us access back into
our concentrated centres for organic
growth to drive that [annual production] five of those ore sources and we own
figure closer to 1 mozpa,” Beament told
delegates on the final day of the confer- them all 100%.”
Beament was equally excited about
“By the time I present at this confer-
ence next year, we will have a very good the Velvet discovery at Kanowna
idea of just where we are in that range
and the time at which we will arrive there. Bill Beament Belle. The headline drill hit of 47.9m
What we already know is that the cost of
those ounces will be low.” @ 83.1 g/t is reportedly the best ever
Northern Star has allocated $130 mil- Reserves at Jundee are up 21% to intercept in the Kanowna Belle system.
lion of investment capital for FY2017 to
bring Beament’s 1 mozpa dream closer 720,000oz, even after depletion of Other highlights from FY2016 for
to reality. That spend will be split into $60
million for targeted drilling to bring more 228,144oz gold in FY2016, and a num- Northern Star include record cash flow at
resources into mine plans and convert
discoveries into resources and $70 mil- ber of recent discoveries are yet to be Paulsens – the company’s original oper-
lion for investing/expansion capital ex-
penditure to bring future deposits online factored into the mine plan, including ating asset – and the seamless linkage
and lift group production.
Armada, where hits of 4.6m @ 10.9 g/t, of the Rubicon, Hornet and Pegasus ore-
In the last financial year, Northern Star
lifted its total reserves by 33% to 2 moz 1.8m @ 11.5 g/t and 0.5m @ 17.1 g/t bodies at the Kundana JV.
for a discovery cost of $50/oz despite
mining more than 600,000oz gold over have been recorded. Central Tanami in the Northern Terri-
that 12-month period.
Other impressive intercepts recently tory is expected to come online in 2018,
announced from Jundee include 2.8m producing about 120,000-130,000 ozpa
@ 598 g/t, 0.7m @ 469 g/t, 1.1 @ 283 gold, having previously churned out
g/t and 15.5m @ 25.7 g/t at Gateway- 610,000oz @ 4.3 g/t over four years for
Gringotts and 0.8m @ 3,933 g/t, 0.4m @ Newmont Mining Corp early last decade.
1,400 g/t, 0.3m @ 154 g/t and 0.5m @ Northern Star will receive $66.2 million
100 g/t at Westside. cash and scrip from the sale of Plutonic
Jundee is slated to produce 220,000- and become a 33% shareholder in Bil-
230,000oz in FY2017 and Beament said labong. At completion of the sale – tar-
there was no reason why the mine would geted for September 30 – the company
not hit 300,000 ozpa sometime in the intends to declare a special fully franked
next few years. dividend of 3c/share.
“The opportunities to expand that pro- “The decision to sell Plutonic reflects
duction come from known sources and our policy of maximising financial re-
we’re going to look at increasing our mill turns, not headline production numbers,
capacity at Jundee,” Beament said. “We and this was demonstrated by our sector-
currently have 40,000oz sitting on stock- leading 39% return on equity,” Beament
piles at that moment waiting for process- said.
ing and we’re growing that every day with “Northern Star is well established as
how the mine is performing.” one of the lowest cost producers in the
Northern Star has grouped its three list of top 25 global gold miners. This sale
neighbouring operations – Kundana, will cement our position in the lowest cost
Kundana JV and Kanowna Belle – into quartile of this group.”
one central Kalgoorlie hub, with Millen- – Michael Washbourne
nium recently becoming the first mine to
PAGE 38 SEPTEMBER 2016 AUSTRALIA’S PAYDIRT
Grade not always king
Gascoyne Resources Ltd is emerging Mike Dunbar is starting to shape up well for the com-
as one of the ASX’s hottest gold de- pany.
velopers. company making profits from 229,000oz
gold produced at 1.6 g/t. A 550m extension further to the south
Starting the year at 12c/share, the of the Gilbey’s deposit from aircore drill-
company’s rise to 79.5c at the time of “Obviously we have seen a lot of gold ing has been identified, while diamond
print is testament to the value being dem- price movement since then and also cost drilling at Gilbey’s has returned 43m @ 1
onstrated at the Dalgaranga project, out- movement, but certainly the unique char- g/t gold from 262m; 22m @ 1.2 g/t from
side of Mt Magnet in Western Australia’s acteristics of that orebody means it does 182m and 14m @ 1.3 g/t from 215m;
Murchison region. lend itself to high margin operations,” 13.54m @ 1.4 g/t from 256.19m.
Although the Australian dollar gold “There is very good continuity down
price is helping many local players at the “There is very deep weathering, we’ve dip, that is in the north part of the de-
moment, Gascoyne managing director got all this operating data that Equigold posit. In the central part, infill drilling has
Mike Dunbar and his team have still had had from that operation, so we have got exceeded expectations with wider zones
to deal with the misconception that grade information down to daily information on and mineralisation intersected within me-
is king. how to treat this orebody.” tres of where predicted,” Dunbar said.
Dunbar is not dismissing the impor- Gilbey’s, which has a resource of RC drilling at Gilbey’s South, about
tance of grade to the overall attractive- 948,000oz, will be the second pit mined 150m from the existing open pit, has
ness of a project, however, a snapshot of with Gascoyne planning a staged cut- identified continuation of the zone to the
Australian gold producers’ March quar- back to access ore. south with assay results such as 28m @
terly performance best illustrates the 3.5 g/t gold from 105m, including 16m @
angle Gascoyne is taking at Dalgaranga. The higher grade 101,000oz Golden 5.1 g/t and 17m @ 3.2 g/t from 73m, in-
Wings deposit, 3.5km north-east of Gil- cluding 6m @ 7 g/t providing some cer-
Based on an AISC of $913/oz used bey’s, is where Gascoyne plans to start tainty for Gascoyne.
in its March 2016 PFS and assuming a life as a gold producer.
gold price of $1,770/oz, margins at Dal- “We have identified a slightly shal-
garanga of $856/oz compare favourably “We are about halfway through a fea- lower dipping zone than what was previ-
with Northern Star Resources Ltd’s 6.1 sibility study and that is on schedule for ously known and it is certainly open to
g/t Jundee mine, which reported AISC of completion by the end of the year,” Dun- the south-west. RC drilling is continu-
$914/oz. bar said. ing there and we have got a couple of
rigs drilling and 25 RC holes completed
Further emphasising the point that “Our approvals are also on track for which we are waiting on results for,” Dun-
grade is not always necessarily king, completion before the end of the year bar said.
Regis Resources Ltd managed a margin and financing discussions are under way.
of $1,120/oz from AISC of $650/oz at its With $15 million in the bank we have an In addition to news flow from Dalgar-
1.5 g/t Rosemont mine in WA, while Evo- aggressive exploration push going for- anga, the market can also expect to hear
lution Mining Ltd delivered a margin of ward, but also securing long lead items more about Gascoyne’s other project,
$992/oz from AISC of $778/oz from the where appropriate and following a devel- Glenburgh.
equally low-grade Cowal mine in New opment decision late this year/early next.
South Wales. We’re looking at construction next year Results from recent drilling are expect-
and gold [production] late next year and ed soon, with the company continuing
“As you can see there is no correla- into 2018.” with RC drilling, surface sampling and
tion in grade and profitability and where evaluation of regional targets, as Gas-
Dalgaranga sits – 1.4 g/t average head The total current resource at Dalgaran- coyne looks to beef up its second near-
grade for life of mine – and given a very ga is 23.7mt @ 1.4 g/t gold for 1.05 moz, term development opportunity.
competitive AISC [we can deliver] very however, indications are Gascoyne is on
high margins,” Dunbar said. the right track to improve its position. Glenburgh, inland from Carnarvon,
has similar geological settings to the 8
The PFS on Dalgaranga completed Recent infill and extensional drilling moz Tropicana gold mine.
earlier this year indicated the potential beneath the Gilbey’s pit and to the south
for a 100,000 ozpa project over an initial Gascoyne is currently updating the
six-year period from defined proven and 2013 PFS on Glenburgh which outlined
probable reserves of 442,000oz based the potential for a five-year operation
on $1,470/oz gold price. producing 320,000oz gold from a capital
cost of $75 million.
Gascoyne has the advantage of lever-
aging from existing infrastructure, mean- Key infrastructure items are in place
ing capital costs required have been esti- to support Glenburgh and with no en-
mated at $75 million. vironmental issues to contend with and
a granted mining lease and Native Title
“We will build a new 2.5 mtpa process- agreement in place, Gascoyne can see
ing plant, there will be a camp and air- potential to quickly become a 200,000
strip effectively put back where it was ozpa gold producer.
originally and a tailings dam next to Gil-
bey’s,” Dunbar said. – Mark Andrews
Gilbey’s was the deposit mined by
Equigold NL from 1996-2001 when gold
was worth less than $350/oz, with the
AUSTRALIA’S PAYDIRT SEPTEMBER 2016 PAGE 39
DIGGERS & DEALERS REVIEW
Western Areas readies itself
for nickel spotlight
There is little doubt in Dan Lougher’s working for 2019.”
mind; Western Areas Ltd is a more The period up to 2019 looms as a de-
investor-friendly company with a balance
fining one for much of the nickel sector.
sheet free of debt. After five years of heavy surpluses, a
deficit of 70,000-75,000t is predicted for
“When we moved to being debt-free, this year as LME stockpiles continue to
shrink. The recent closure of nickel lat-
we had a lot more shareholders come on erite mines in the Philippines has placed
further strain on stockpiles.
the register,” the nickel miner’s managing
Lougher is enthusiastic about the me-
director said. “We will be driving towards dium-term outlook for nickel prices but
warned against overoptimism.
debt-free in the future.”
“For the first time in five years we
The move to simplify the balance sheet are looking at a supply deficit,” he said.
“But a word of caution, it is not just the
came in 2015 at a time when other nickel LME we should look at now but also the
[Shanghai Futures Exchange] SHFE – or
miners were deciding to shutter opera- the ‘Shifty’ as we call it. You have to be
careful because there is a lot of transfer
tions. However, thanks to the high-grade between the two.”
nature of its Forrestania operations, Regardless of the movement between
the LME and its emerging rival, deficits
Western Areas was instead able to fo- are predicted to continue after nickel’s
barren spell and Western Areas hopes
cus on delivering consistency; achieving Dan Lougher the acquisition of Cosmos will allow it to
take advantage of any subsequent price
record mine production of 15,175t nickel lift.
from Spotted Quoll and delivering record “We have gone six years without a Cosmos – once the highest grade
nickel mine in the world – has been on
throughput of 616,279t at the Cosmic guidance miss,” he said. “It is boring but care-and-maintenance for three years.
Western Areas is currently revamping a
Boy concentrator. This consistency is that is what investors want.” PFS completed on the Odysseus ore-
body and is set to ramp up exploration on
another attribute Lougher believes works That may be the case while the nickel the prolific belt.
in the company’s favour. sector negotiates its way through a lull “It is brownfields but it is underex-
plored, we know it has the right rock
but with signs the package.” Lougher said. “It is hard to be-
lieve a major company didn’t explore the
market is now in re- belt properly. We will be putting money
into this established area over the next
covery – the LME two years and hope to start drilling in
nickel price has re-
The initial focus will be on the Neptune
bounded more than tenements at Lake Miranda. A review of
Xstrata drilling data has revealed hits of
40% since its Feb- 4.2m @ 12.5% nickel and 4.5m @ 12.3%
which require follow-up work.
ruary lows – share-
At Odysseus, the PFS review has al-
8 October 2015 holders are also ready identified capex savings of 30%.
Pan Pacific Perth beginning to look for Lougher said the revised PFS would be
nickel miners with released before the end of 2016. Further
exploration was also likely once the de-
growth opportuni- cline was dewatered.
ties. “We will follow up on those hits that are
too hard to drill from surface,” he said.
– Dominic Piper
Areas is well placed.
It has reinitiated the
New Morning de-
velopment and mill
ment projects and
in April made the
final payment in the
$24.5 million acqui-
sition of the Cos-
The CD-Rom of the 2015 mos nickel complex
Australian Nickel Conference “We want to po-
is available sition the portfolio
to be in the driving
seat when nickel
CD-Rom for conference delegates – $60 (inc.GST) moves,” Lougher
CD-Rom for non-conference delegates – $85 (inc.GST) said. “We think it is
prudent to do our
Phone (+61) 8 9321 0355 or email [email protected] homework and get
an organic pipeline
PAGE 40 SEPTEMBER 2016 AUSTRALIA’S PAYDIRT
Newmarket the trendsetter
In what could become an increasingly “The company still pro- ise that goal as investors
regular occurrence over the next few vides an opportunity ver-
years, a TSX-listed gold miner took to sus our peers on the TSX begin to recognise the sol-
the Diggers stage this year to describe who are fully valued,” Du-
the warmth it had been shown by North four said. id performances coming
American investors for its Australian port-
folio. North American inves- from Fosterville, Stawell
tors’ positive sentiment to-
Newmarket Gold Inc arrived in Aus- wards Australian ventures and Cosmos.
tralia in July 2015 thanks to its takeover was further solidified fol-
of fellow TSXV-listed Crocodile Gold lowing Diggers & Dealers Fosterville, the com-
Corp, a deal which saw it take control of when Northern Star Re-
the Fosterville and Stawell gold mines in sources Ltd announced it pany’s flagship operation,
Victoria and the Cosmos gold mine in the was selling its Plutonic gold mine in West-
Northern Territory. ern Australia to Billabong Gold Pty Ltd, has proven a challenging
a company controlled by Toronto-based
The company’s shares have since per- mining executive Chris Bradbrook. Brad- asset for past owners but
formed admirably, rising nearly 300% on brook, who was founder of both TSX-
the back of three assets largely ignored listed New Gold Inc and Crocodile Gold, Robert Dufour was “coming into its own”,
by domestic gold producers. The power- said he intended to list Billabong’s parent according to Dufour.
ful Canadian analyst community has also company on the TSX or TSXV following
taken an interest, with the company pick- completion of the transaction. Production was
ing up coverage from 11 analysts in the
last year, having previously witnessed no Dufour said Newmarket was consid- 123,095oz in 2015, up nearly 18,000oz
coverage. ering its own listing options, including a
dual listing on the ASX. on 2014, with forecasts for 110-120,000oz
Group production for 2016 is forecast
at 225-235,000oz and with a further “We continue to look at an ASX listing for this calendar year. Dufour said recov-
$US69.9 million in the bank, Newmarket but just listing doesn’t make sense,” he
chief financial officer Robert Dufour be- said. “As part of a transaction, it would eries through the Fosterville plant had
lieves there is still plenty of room for the make sense but step one is to achieve
company to grow its $C700 million mar- full value on the TSX.” increased to 91% in the last year.
Dufour believes the company will real- “That is pretty impressive and it is
driven by the installation of the gravity
circuit,” he said.
The increased recoveries have contrib-
uted to driving Fosterville’s AISC down
from $US1,186/oz in 2014 to $US837/oz
in 2015, with further reductions expected
this year. Dufour said Fosterville’s AISC
numbers for the March 2016 quarter
were better than other Australian under-
ground operations such as Andy Well,
Carosue Dam and Pajingo.
– Dominic Piper
Clear forecast for Sunrise Dam
AngloGold Ashanti Ltd’s Sunrise Dam almost two years, is assessing the viabil- “We’re also considering pre-oxidation
mine is celebrating 20 years of op- ity of the materials handling system in the of the concentrate prior to CIL leaching,”
erations in 2016 and is showing no signs underground mine. Erickson said. “Initial test work indicates
of slowing down. this could deliver us significant additional
“This project, which we plan to take to recovery uplift and potentially reduce the
Sunrise Dam has churned out more feasibility early next year, involves under- current variability in metallurgical recov-
than 9 moz gold over the past two dec- ground crushing and conveyor haulage ery across the many different ore zones.”
ades but successful exploration at the of ore to the surface ROM pad,” Erickson
mine continues to replace depleted said. AngloGold’s other Australian opera-
ounces in quick time. The current inven- tion, Tropicana, has produced 1.3 moz
tory stands at 4.3 moz. “Should it prove viable, the materials gold since the mine went live in late 2013
handling project would reduce the han- and continues to meet all expectations,
“Over the past two years, both under- dling and trucking costs, maximise pro- according to Erikson.
ground resources and reserves have duction rates and enable us to unlock
increased by more than 40%, which is the full potential of the orebody, further Processing throughput hit 6.8 mtpa
testament to Sunrise Dam’s track record extending the life of the mine.” during the June quarter – 1 mtpa above
of exploration success,” AngloGold Aus- nameplate capacity – and $25 million
tralia senior vice-president Michael Er- A feasibility study on recovery en- has been put forward to increase it to 7.5
ickson told Diggers & Dealers. hancement at Sunrise Dam is due for mtpa by year’s end.
completion in the next quarter. If the
AngloGold has two major studies numbers stack up, construction and More than 100,000m of RC and dia-
under way focused on productivity im- commissioning will begin in early 2017. mond drilling was completed in the Tropi-
provements at the mine, 55km south of cana district over the past 12 months and
Laverton, Western Australia. It follows Test work to date has indicated Anglo- Erikson said investors should keep an
previous efforts which have seen mining Gold can achieve at least a 6% improve- eye out for more exploration news in the
rates gradually lift to close to 3 mtpa and ment in recovery for flotation of the fine- December quarter, including an update
unit costs reduced by 65% since 2010. grind circuit. All ore sources from the on the Long Island development study.
mine have reportedly responded well to
One study, which has been ongoing for this treatment. – Michael Washbourne
AUSTRALIA’S PAYDIRT SEPTEMBER 2016 PAGE 41
DIGGERS & DEALERS REVIEW
Regis regains its thirst
Regis Resources Ltd is firmly back Gloster is the next of a string of sat-
to what it does best; extracting high ellite deposits Regis is incorporating in
margins from an increasing number of forward guidance figures. The company
has traditionally provided only 12-month
low-grade discoveries. guidance updates but as well as a 300-
330,000oz forecast for FY2017, it has
Having overcome its 2014 wobble, Re- also recently published guidance for
FY2018 (320-350,000oz) and FY2019
gis has strung together five consecutive (340-370,000oz).
quarters of increased gold production The extended guidance reflects Re-
gis’ growing confidence in the satellite
from its Duketon operations, producing deposits. As well as Gloster and the
136,000oz Baneygo deposit at Rose-
305,000oz at $927/oz ASIC for FY2016 mont, the company appears excited by
the Tooheys Well discovery near the
for $223 million of operating cash flow. Garden Well processing plant.
The company is far from the only turn- Tooheys Well has an inferred resource
of 14.6mt @ 1.16 g/t for 547,000oz (at a
around performance in the international Mark Clark 0.4 g/t cut-off) and Clark pointed to the
resource above 1 g/t – 6.7mt @ 1.77 g/t
gold sector but executive chairman Mark for 379,000oz – as an indication of the
higher grade, low-cost opportunities
Clark believes the manner in which it has are now embedded.” Duketon was still offering.
been achieved sets Regis’ performance Much of this industry-wide improve- “The plan is to get Tooheys Well
through Garden Well as quickly as possi-
apart. ment came from a focus on high-margin ble as it is only 2.5km from the plant and
on the mining lease,” Clark said. “Then,
“For the first time in a while the gold ounces and while Regis retains the same there is another 40km of Garden Well
shear under our control and the bulk of
industry is investible,” Clark told Diggers focus, Clark said it was not simply a mat- drilling is only 50-100m below surface.
With Tooheys Well having a $6/oz dis-
& Dealers delegates. ter of grade profiles. covery cost, there is a compelling oppor-
tunity for cost-effective growth and con-
“In the period 2012-2015 the gold price “For the June quarter, Rosemont had firmation of our aggressive exploration
strategy at Duketon.”
was down 30% but EBITDA was down the second lowest cash costs in Australia
The company spent $15 million in total
only 28%. Hopefully those cost benefits and our other two operations were in the at Duketon last financial year, deliver-
ing a further 1.4 moz in either added or
second quartile, but upgraded resources, as well as an addi-
tional 400,000oz in reserves. Clark said
that does not come he expected the exploration success to
from grade,” he
“That is the reason why there is 10
said. “On a dollar- mtpa capacity there in the first place,” he
Away from Duketon, Regis continues
metric, Regis is in to press ahead with PFS work on its
McPhillamys gold project in New South
the lowest quartile. Wales.
Grade is only part Clark said conceptual studies had
shown the 2.2 moz gold project was vi-
20 April 2016 – Hilton Adelaide of the solution; it is able.
also about manage-
“The focus now is on securing key
ment, execution and infrastructure, most prominently a long-
term water supply. We are not there as
scale.” yet but we are moving towards it.”
Clark pointed to – Dominic Piper
the impending de-
velopment of the
Gloster deposit as
evidence of the im-
portance of scale
to ensuring strong
“When it was ac-
quired from a pri-
vate individual, it
was a stranded as-
set. Twelve months
The CD-Rom of the 2016 later we have a
South Australian Resources and 226,000oz resource
and it will contrib-
Energy Investment Conference ute 50,000 ozpa at
is available less than $1,000/
oz AISC. The pull of
CD-Rom – $60 (inc. GST) the 10 mtpa of sunk-
en infrastructure at
Phone (+61) 8 9321 0355 or email [email protected] Moolart Well makes
PAGE 42 SEPTEMBER 2016 AUSTRALIA’S PAYDIRT
Millennium’s run continues
Millennium Minerals Ltd continues to verted into reserves… amid fears the debt
taste success with the drill bit at its and they’re great num-
Nullagine gold project in the Pilbara. bers too. would not be wiped.
The emerging gold producer an- “We know we’ve got to Millennium an-
nounced a series of impressive drilling continue drilling. We’re
results from its brownfields development probably going to put nounced a 27% in-
programme in late July ahead of an an- more money in this year,
ticipated resource and reserve update not because we’re not crease to its reserve
later this month. finding anything, but be-
cause we’re not actually base, currently 3.52mt
Some of the best hits included 12m @ able to close anything off.
8.54 g/t gold, including 4m @ 24.19 g/t, Every time we do another @ 1.4 g/t gold for
at the All Nations prospect, 4m @ 43 g/t, programme, we’re finding
including 1m @ 171 g/t, at Anne de Vidia, more so we’ve got to con- 159,000oz, in April af-
22m @ 3.08 g/t, including 1m @ 17.55 tinue on with that.”
g/t, at Majuba Hill, 14m @ 2.7 g/t, includ- ter only four months of
ing 2m @ 7.53 g/t, at Mundalla and 6m @ A deep drilling programme also started
10 g/t, including 1m @ 55 g/t, at Golden in July as part of a scoping study to iden- drilling and the market is
Eagle South. tify the best economic solution to pro-
cess fresh ore. The rigs were turning at keenly awaiting the next
Millennium had planned to drill Bartons at the time of print and will soon
110,000m for the programme, but chief be directed to Shearers. update.
executive Glenn Dovaston said his com-
pany had already drilled 120,000m and Millennium’s share price has jumped Glenn Dovaston “We’re pretty confi-
he expected that amount to soon dou- 950% this year to 40.5c/share after com- dent we’ve now got Nul-
ble, such was the exploration success to pleting a remarkable turnaround in op-
date. erational performance which culminated lagine in control, we’ve
in clearing all outstanding debt.
“It’s absolutely amazing what we’ve got a lot of opportunity for growth and,
started to find,” he said. “Of these 10 Up until late last year, Millennium’s
prospects, we’re pretty confident at least lenders would not allow the company to to be totally honest, I think there will be
seven, maybe more, will be actually con- complete any exploration at Nullagine
someone standing up here in 10 years’
time – probably not me – still talking
about Nullagine,” Dovaston said. “This is
just the start of a pretty long journey and
a pretty exciting one at that.”
Millennium is tracking ahead of its
2016 production guidance of 80,000-
85,000oz at an AISC of $1,180-1,220/oz,
having churned out 45,926oz at $1,193/
oz in the first half.
– Michael Washbourne
Hanking abandons ASX float
Hanking Gold Pty Ltd’s bid to list on the got shorted on the market, so the shares Hanking has increased the resource
ASX is all but over after the compa- were low. So that’s out of our control, un- at Southern Cross from 2.4 moz to 4.63
ny hit a regulatory hurdle with the Hong fortunately.” moz @ 4.1 g/t gold, including 3.3 moz @
Kong Stock Exchange (HKEX). 4.1 g/t measured and indicated resourc-
China Hanking operates several iron es and a 1 moz @ 3.3 g/t reserve which
Since acquiring the mothballed South- ore mines in its homeland and multiple underpins a seven-year mine life, but Qiu
ern Cross gold operations from St Bar- nickel projects in Indonesia. considers that estimate to be conserva-
bara Ltd in 2013, Hanking has been pre- tive.
paring an IPO to run independently of In the lead-up to Diggers & Dealers, it
China Hanking Holdings Ltd. was revealed Hanking was considering a “Over the past three years, we have
sale of Southern Cross, which it picked doubled the resource, including deple-
Hanking had even enlisted the likes of up for $25 million and has tipped $138 tion, so that shows you the potential of
Macquarie Bank, KPMG and CSA Global million into over the last three years. this belt,” he said.
to assist with the proposed float.
Qiu said his company had received Not included in the current mine plan
But just as Hanking was set to launch several unsolicited offers for Southern is the historic Copperhead mine, which
its prospectus in April, China Hanking Cross in recent months, enticing the hosts a resource of 590,000oz @ 5.2 g/t
suffered a calamitous share price plunge board to consider a potential sale of the gold, having produced about 1.5 moz un-
and the HKEX stepped in and vetoed the asset instead of the doomed IPO. til the late 1980s.
proposed Australian spin-off.
It has been speculated Southern Cross Current mining activities are focused
“The HKEX wanted to make sure under is on the market for more than $400 mil- on Axehandle (open-pit reserves of
their rules that if we spin off, the remain- lion, but Qiu declined to comment on 214,000oz) and Nevoria (underground
ing business should be a $HK2 billion what price the 160,000 ozpa gold opera- resource of 420,000oz @ 3.4 g/t). Yil-
market cap,” Hanking managing director tion could fetch. garn Star (resource of 1 moz @ 6.1 g/t) is
Mark Qiu told media on the sidelines of also in the pipeline.
Diggers & Dealers. Qiu said the buyer would need to put
forward a majority cash offer because – Michael Washbourne
“The company at the moment cannot of HKEX restrictions on how much scrip
meet that requirement. The main reason China Hanking can hold in a company
is that in late April the company’s shares listed on another exchange.
AUSTRALIA’S PAYDIRT SEPTEMBER 2016 PAGE 43
DIGGERS & DEALERS REVIEW
Monty moving with vigour
When Sandfire Resources NL man- Karl Simich 13c dividend for FY2015.
aging director Karl Simich takes to “We have been a dividend-paying com-
the lectern at next year’s Diggers & Deal- Sandfire announced record annual pro-
ers, he hopes to be updating delegates duction of 68,202t copper at C1 costs of pany since our second year of produc-
on the progress of mining at the new $US0.95/lb for FY2016. tion,” Simich said. “We have now been in
Monty resource. solid production for four full years, with
Total outstanding debt has been re- revenue in the order of magnitude of $2
Monty, 10km east of the company’s duced to $50 million and the company is billion and out of the operations it has
DeGrussa copper mine, is the next cab now net cash positive, holding $62 mil- produced, give or take, about $1 billion
off the rank for Sandfire in Western Aus- lion cash and deposits at the end of the free cash flow.”
tralia’s Doolgunna region and is currently last financial year.
subject to a feasibility study which is While it is not the only project in Sand-
“moving along with some vigour”, ac- Sandfire paid a 2c interim dividend fire’s burgeoning portfolio, which now in-
cording to Simich. during FY2016 and at the time of print cludes the Black Butte copper project in
was set to confirm its full-year payout to Montana, DeGrussa will continue to be
Sandfire and JV partner Talisman Min- shareholders. The company dished out a the main focus of capital.
ing Ltd have applied for a mining lease
for Monty, which hosts a 1.05mt @ 9.4% “We will spend somewhere in the or-
copper and 1.6 g/t gold for 99,000t cop- der of $20 million, probably exploring as
per and 55,000oz gold resource. aggressively as we have ever explored,
with far better technology and far more
“We would like to think that we will be information, having been on the ground
breaking ground well and truly by the some time now at DeGrussa,” Simich
middle of next year and then – all things said.
being equal and if the studies determine
such – we will be looking at blending the “From my perspective, no stone will be
Monty material with the DeGrussa ma- left unturned in terms of our exploration
terial and have that average increase quest in this region. There’s no better
in grade going through the DeGrussa place in the world to look for high-grade
plant,” Simich said. copper mineralisation than right where
Simich was beaming – more so than
usual – in Kalgoorlie last month after – Michael Washbourne
Miners face innovation challenge
Australian mining companies must em- companies, to not only be acknowledged the gold mining industry was back in
brace innovation and become world as leaders on the global stage for min- the 1980s when there was the develop-
leaders at bringing new ideas to the in- ing but also leaders outright across Aus- ment of the CIL processing technology
dustry, according to a panel of experts. tralia.” and that enabled mines to go from being
generally narrow, underground mines to
Following on from Deloitte’s recent In- Some companies, however, are re- being able to mine low-grade, open-pit
novation in Mining report, which found luctant to embrace change due to long- deposits,” Kelly said.
miners understood the concept of in- standing cultures and that presented a
novation but struggled to successfully potential barrier to innovation, according “What we’re seeing now is techniques
implement those ideas, questions have to Gold Fields Ltd Australia executive come from other industries. One that
been asked why resource-laden Austral- vice-president Richard Weston. comes to mind is using 3D seismic from
ia is also not a leader in that area. the petroleum industry. Companies like
“Certainly in my view, the best way Evolution [Mining Ltd], Northern Star
Australia ranks 17th on the Global In- to overcome those barriers is to have [Resources Ltd] and others have used
novation Index behind several resource- a highly educated and communicative proven techniques like that in a differ-
limited countries, including Switzerland, workforce,” Weston said. ent plane for a different outcome. That’s
Sweden and the Netherlands. There are the sort of innovation that enables you to
also no mining companies in BRW’s Top “It’s very easy for senior people to say take big steps forward in the industry.”
50 Most Innovative list. ‘we’re going to be the most innovative
company in the world’, but if you don’t Kelly said companies were increasing-
Speaking at a breakfast event on the have your workforce behind you then it ly using more drone technologies on site
sidelines of Diggers & Dealers, Deloitte will drop dead very quickly.” and he expected mining methods would
Consulting national mining leader David be vastly different in 2025 as more and
Cormack challenged Australia’s resourc- Doray Minerals Ltd managing director more miners embrace innovation.
es industry to prove the rankings wrong. Allan Kelly said mining companies tend-
ed to embrace innovation on a needs-on- – Michael Washbourne
“As miners, we are immensely proud of ly basis, but cited several examples from
the way we do solve problems, it’s built the past 30 years where new ideas have
into our DNA,” Cormack said. reaped rewards.
“I think that’s the challenge for mining “One of the biggest innovations in
PAGE 44 SEPTEMBER 2016 AUSTRALIA’S PAYDIRT
Silver Lake turns around
The last two years have been littered The first example came in July when Luke Tonkin
with turnaround stories in the gold Silver Lake began mining in the Santa
space; Silver Lake Resources Ltd man- Area pit at the Imperial/Majestic project gold and 0.2m @ 22 g/t gold and poten-
aging director Luke Tonkin took the Dig- in Mt Monger. The mine has a two-year tial new lodes in the footwall of Lode 40
gers & Dealers podium hoping to con- mine life based on a reserve of 1.16mt @ where intercepts of 0.2m @ 606 g/t gold
vince delegates his company is in the 3.12 g/t for 116,000oz with cash costs an- and 0.2m @ 147 g/t gold have been re-
midst of another one. ticipated to be lower than group average. ported.
There also exists potential to increase
Silver Lake suffered more than most in the mine life by converting 250,000oz @ There are further targets on the pro-
the local sector when gold took its down- 2.78 g/t gold in resources. spective gold trends to the north-west of
ward turn in 2013. Saddled with debt and the Daisy Complex deposits. In the June
high-cost ounces, the once rising star Tonkin said capex for the project was quarter, more than 50 plus-200 ppb gold
of the Eastern Goldfields was forced to $7 million with $3.8 million spent on pre- anomalies were identified during aircore
shutter mines and divest non-core as- development capital works to the end of drilling.
“We will be following these up with
Tonkin said the strategy over the last Development has also started at Max- RC and diamond drilling,” Tonkin said.
18 months had been to focus solely on wells – which Tonkin hailed as an “out- “We need to be methodical and patient
the company’s Mt Monger gold camp standing success” – where the company because there is no significant surface
east of Kalgoorlie. is spending $7 million to bring the under- footprint in the area.”
ground mine – based on a resource of
“There has been a relentless drive to 1.69mt @ 5.67 g/t for 307,000oz gold – At Cock-eyed Bob, inferred resource
reduce operating costs and improve pro- into production this year. extensions underneath the 345 level are
ductivity, strengthen the balance sheet being targeted. Three additional drilling
and extract value from non-core assets,” With myriad exploration targets still in programmes have started with first re-
he said. the stripped back portfolio, Silver Lake sults including hits of 2.55m @ 13.8 g/t,
intends to devote its entire explora- 2.78m @ 15.8 g/t and 2.3m @ 19.5 g/t
The process could be deemed a suc- tion budget to Mt Monger this year. The gold.
cess. The company produced 132,400oz company spent $15.5 million in FY2016
at $1,281/oz AISC in FY2016, a 7% in- across three regions and is spending $14 Additional drilling has also started at
crease and 4% decrease respectively. million this financial year on exploration Maxwells where the company is hoping
The subsequent 49% improvement to at Mt Monger alone. repeat lodes down-dip to both the east
EBITDA to $56.8 million allowed Silver and west could even increase the 45,000
Lake to tidy its balance sheet; repaying The first priority is to find additions and ozpa it is currently set to produce.
the total $6.8 million bank debt and in- extensions of the known mineral systems
creasing cash and bullion to $42.6 mil- around Mt Monger. Outside existing operations, Silver
lion. Lake is putting together a complete
At Daisy Milano, the company is confi- structural picture of the Mt Monger dis-
The sale of the Great Southern gold dent a 13,000m resource definition pro- trict, including Mt Belches where it has at
project to ACH Minerals Pty Ltd gener- gramme will extend lodes at both deeper least four BIF targets worthy of follow up.
ated $5 million in cash while Metals X and shallower depths. Among the targets
Ltd’s purchase of the Comet project and to follow up on are auriferous ptygmatic – Dominic Piper
assets delivered $3 million to Silver Lake. vein intersections of 0.25m @ 1,570 g/t
Additionally, the company has farmed
out its Cue project in the Murchison,
Western Australia, to Musgrave Minerals
Ltd which will see the explorer spend $5
million over four years to acquire an 80%
Investors have responded positively to
Silver Lake’s improved margins and bal-
ance sheet restructure.
“In the last 12 months the share price
has gone from 14c to 52c. That is a re-
flection of the market and recognition
that the business is back in order,” Tonkin
The repair job complete, Tonkin is now
focused on delivering sustained low-cost
production at Mt Monger centred on find-
ing sources of ore which can be mined
for less than $1,000/oz.
“Exploration is focused on the discov-
ery of low-cost ounces,” he said. “Not
just ounces but ounces which can deliver
AUSTRALIA’S PAYDIRT SEPTEMBER 2016 PAGE 45
DIGGERS & DEALERS REVIEW
Carbine clean-up job ready to start
While former col- hampton, was a prolific eration was the copper. It was a problem
leagues are mak- for cyanide consumption and recovery.”
ing the most of missed producer for nearly 100
deeper opportunities at Mt Carbine is set to overcome the copper
Morgans in the west, Tony years before mining challenge by using a resin-in-pulp leach
James is focused on what’s circuit to produce a copper sulphate
above-ground at a similarly stopped in 1980. Some product, a standard concentrate flotation
named goldfield on the oth- circuit to produce a pyrite concentrate
er side of the country. 8 moz gold and 400,000t and a CIL circuit for the gold extraction.
Rohan Williams and copper was produced at a The adapted flow sheet has resulted
other ex-Avoca Resources in Carbine gold recoveries outperform-
executives have turned head grade of around 15 ing Geopeko’s historical recoveries (76%
Dacian Gold Ltd into one versus 50-55%) as well as producing two
of the ASX’s strongest g/t during that period and by-products previously neglected.
performers this year on
the back of a reinvented exploration when Geopeko under- “There is nothing hi-tech about it, it is
strategy at the Mt Morgans gold camp in just optimising the process,” James said.
Western Australia’s Eastern Goldfields. took tailings retreatment “Cash costs are around $1,000/oz for the
Meanwhile, James – who was integral gold but the pyrite and copper give by-
to Avoca’s underground mining success over the next decade, product credits which reduce it to $500/
at the Higginsville gold mine – is pursu- oz cash costs.”
ing his own Mt Morgan resurrection in it processed 25mt at a
Queensland. But, instead of finding gold There is also the benefit of producing
left behind by the drill rig, his Carbine Tony James head grade of 1.1 g/t. the environmentally benign gold tailings, cru-
Resources Ltd is targeting opportunities Carbine acquired cial on a project for which the Queens-
missed by the processing plant. land Government holds full environmen-
project in November tal liability.
“People ask me why an underground
miner is into tailings; I simply looked at 2014 with an existing resource of 8.35mt Carbine raised $7 million in July to fund
the numbers and they were so compel- the DFS work and has already reached
ling,” James said at Diggers & Dealers. @ 1.23 g/t gold and 0.15% copper for agreement for off-take of 250,000 tpa
pyrite concentrate and 5,000 tpa copper
Mt Morgan, 50km south-west of Rock- 329,000oz and 12,300t respectively and sulphate.
in August this year increased the con- – Dominic Piper
tained precious metal to 394,000oz.
The new resource will be plugged into
a DFS on a 31,000 ozpa gold operation
which James said would be completed in
“coming months”. Most tailings retreat-
ment projects require simplistic mining
techniques but James said Mt Morgan
stood out because of the simplistic na-
ture of its processing.
“The point of difference is... that there
is no complex processing,” he said. “The
issue in the old tailings retreatment op-
Pantoro happy with grade uptick
Such is the growing confidence in the since redrawn the reserve grade to 9.9 remains open in all directions. Cmrlec
resource-to-reserve conversion rates g/t gold. explained underground drilling had only
at the operation, Pantoro Ltd is flagging started in earnest this year.
a likely increase in production to 50,000 “We have more than doubled the re-
ozpa in the next year at its Nicholsons source grade to 17 g/t and had better “As part of the development strategy
Find gold mine. than 100% conversion on the overall re- we didn’t start drilling underground until
source to reserve. And, we haven’t de- March this year and starting to see some
Speaking at Diggers & Dealers, Pan- veloped the southern and northern ends good results,” he said.
toro managing director Paul Cmrlec said of the reserve yet,” Cmrlec said.
the company’s own development and Pantoro spent just $12 million bringing
drilling on Nicholsons Find – near the Pantoro’s feasibility study was based Nicholsons Find onstream with most of
town of Halls Creek in Western Australia on a production rate of 30,000 ozpa but the finance secured through a $9.2 mil-
– had produced a near doubling of previ- with open-pit mining starting at the near- lion gold prepayment facility with Com-
ously reported resources and reserves. by Rowdies and Wagtail deposits (com- monwealth Bank. Pantoro also took a
bined reserve of 96,500t @ 5.55 g/t gold) 15,076oz hedge position as part of the
“The mineralisation is narrow quartz this quarter, the company is now lifting its facility and in July announced it had
veins and we quickly realised the RC target to 50,000 ozpa. hedged a further 7,000oz at an aver-
drilling was under-calling the grade by a age price of $1,845/oz. Commonwealth
long way. We put some diamond holes in “We were just below the 30,000 ozpa Bank converted 2,000oz of the hedged
to check the resource and got narrower mark in the last quarter so ramp-up is gold into a prepayment facility, delivering
ore zones but much higher grades,” Cm- complete and we expect to increase pro- a further $3.2 million to Pantoro’s cash
rlec said. duction over the coming quarters. The position.
start of open-pit mining has been the cat-
When it acquired the project in May alyst for plant expansion [from 150,000 – Dominic Piper
2014, Pantoro thought it was dealing with tpa to 200,000 tpa] and there are addi-
resource grades of 6.6 g/t and reserve tional pit opportunities.”
grades of 6.2 g/t but the company has
The Nicholsons Find orebody also
PAGE 46 SEPTEMBER 2016 AUSTRALIA’S PAYDIRT
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Zinc juniors galvanised
by closures and
Following a year dominated by market support for gold and lithium stories, the last three months
have seen base metals hopefuls begin to emerge from the harshest of winters. An increasing
supply-demand gap in zinc has increased the development opportunities for companies focused
on the galvanising metal however for those juniors in copper, negative price outlooks continue to
weigh on market sentiment. Paydirt looks at the differing fortunes of the two major base metals.
The consensus is absolute; there is a zinc supply deficit com- charges – payments made by miners to
ing. The question now is whether this will translate into stronger smelters to have their concentrate turned
share prices for the ASX’s growing group of base metal developers. into metal – had fallen towards $US100/t
from $US205/t in April 2015.
Zinc prices have risen nearly 60% saw output reduced as miners adjusted
since the start of 2016 on the back of to the prolonged downturn in zinc prices. The charges increase when supplies
worries over the future of supply with the rise as mining groups compete to find
recent closures of the giant Century mine “The rally was ultimately triggered by smelters to process their material.
in Queensland and the Lisheen mine in a tightening concentrates market on the
Ireland putting further pressure on al- back of permanent, as well as tempo- Neither of Century or Lisheen is like-
ready dwindling LME zinc stocks. In late rary, mine closures,” Bank of America ly to be restarted but two of the world’s
2012 LME zinc stockpiles were at nearly Merrill Lynch analyst Michael Widmer largest zinc producers, Glencore and
1.25mt but four years later this figure has said in a note. Nyrstar, do have the ability to reintroduce
fallen to just 450,000t. With the world’s capacity, leaving lingering fears that
biggest base metals miners continuing The impact of those closures is now zinc’s rebound will be brief.
to review their portfolios, it appears the being felt. At the same time, Chinese in-
zinc market is heading into a prolonged dustrial and manufacturing data is show- However, the recent closure of 150-
period of supply shortfall. ing signs of a rebound and the Asian 200,000 tpa of zinc mine capacity in
country’s zinc smelters have responded China’s Hunan province in August has
“I wouldn’t be surprised to see zinc accordingly. placed further strain on stockpiles.
prices strengthen further, mining supply
is unlikely to come back any time soon,” “Treatment charges [at smelters] have Matt Gauci – managing director of
Commerzbank analyst Eugen Weinberg also dropped hard, a dynamic that pro- Metalicity Ltd, the owner of Australia’s
told Reuters last month. vides imminent headwinds for those largest undeveloped zinc project – be-
smelters, many of which are Chinese, lieves zinc prices are set to move up-
As well as the closure of Century and that purchase ore on the spot market and wards again before the end of the year.
Lisheen, a number of other operations not through contracts,” Widmer said.
“Our outlook for zinc hasn’t really
The analyst added that treatment changed since we started looking at the
Admiral Bay zinc project three years ago,”
Gauci told Paydirt. “The price actually
PAGE 48 SEPTEMBER 2016 AUSTRALIA’S PAYDIRT
MMG’s closure of the Century zinc mine in Queensland has contributed to a widening gap in global supply of the base metal
tanked when we listed but once the pro- projects, the question is whether the battle a looming supply glut.
ducers began their cuts, the price recov- deficit will have the longevity required for Recent surveys of Chinese industrial
ered and it has now got a run on. them to make it to production. and manufacturing conditions suggest
“We expect another big run on zinc in While Metalicity’s Admiral Bay will take demand for copper has picked up on the
the next six to nine months as the market up to a decade to develop, the likes of back of a 10% year-on-year increase in
reacts to the environmental-based shut- Heron Resources Ltd, Energia Minerals the production of electronic goods. How-
downs in Hunnan province.” Ltd and Venturex Resources Ltd all be- ever, while demand has increased slight-
Analysts are increasingly confident the lieve they could be in production within ly, it is in danger of being swamped by
market will be unable to respond quickly two years, thus capturing the current cy- a new generation of supply from opera-
enough to the deficit. cle. tions years in the making.
“Even if we allow for a major correc- While each of the projects are still ro- With a slew of large new copper mines
tion in Q1 2017 triggered by Glencore/ bust below current spot prices, market in South America hitting the market over
Nyrstar capacity restarts, we think a sentiment towards zinc will be crucial to the last 18 months (see page 59) and
“680,000t [refined metal] deficit over securing funding for their development.
Chinese demand still sluggish, analysts
 will propel prices to an expect the copper market to be
average of $US3,900/t by Q4 We expect another big subdued until at least 2018.
2017, on route towards record According to CRU, Chinese
highs in 2018,” ICBC Standard run on zinc in the next six demand for copper, rose 2.6%
Bank said in a research note to nine months as the market in the first half of the year com-
last month. pared to the same period last
ICBC expects zinc prices to reacts to the environmental-based year, and global demand grew
surge more than 20% by year- shutdowns in Hunnan province. 1.3%.
end to $US2,750/t. The catalyst
for the next leg up will be any But without further help,
weaker demand growth in Chi-
signs of falling global stocks of na, which accounts for nearly
the metal, such as rising premiums paid “A lot of people are telling us they want half of global copper demand estimated
on top of market benchmarks for physical to be in zinc,” Heron managing director at around 22 mtpa, will reinforce bur-
delivery. Wayne Taylor says on page 52. “To them, geoning supplies.
The question now is how sustained the it’s not a case of if [the market turns], it’s “There is no real demand growth in
supply deficit will be. when. Just by going through the Heron China, just more stimulus supporting de-
Goldman Sachs analysts said in a re- story and the story of Woodlawn, there mand and copper,” Tiberius Asset Man-
search note last month that a price of seems to be a good level of enthusiasm agement chief executive, Christoph Eibl,
$US2,500/t “should be enough to result to get behind it and support it.” told Reuters. “We need prices to be lower
in a sufficient global supply response”. While zinc developers prepare to take for longer to see significant output cuts.”
For the ASX-listed juniors who are fi- advantage of a structural deficit, their
nally experiencing support for their zinc copper cousins on the ASX continue to
AUSTRALIA’S PAYDIRT SEPTEMBER 2016 PAGE 49
Marindi rewarded for late bid
Marindi Metals Ltd has trumped a pro- Rox managing director Ian Mulholland (left) and his team have accepted a superior
posed backdoor listing from IM Med- $21 million offer from Marindi Metals for the Reward zinc-lead project
ical Ltd to acquire Rox Resources Ltd’s
interest in the Reward zinc-lead project, The Perth-based company also holds week later, allowing Rox to focus on its
Northern Territory. extensive zinc tenure in the Northern flagship Fisher East nickel project, about
Territory, including Yalco North (Teck 150km north-east of Leinster.
In a surprise twist, Marindi put in a late is earning 70%) and Caranbirini, which
bid for the project, which hosts the prized abuts Reward to the north. “Monetising the Reward project has
Teena deposit, after Rox looked set to fi- been a long process, however, I’m de-
nalise a deal with IM Medical and its sub- “The zinc price is already up around lighted with this outcome,” Rox managing
sidiary IMI Zinc Exploration Pty Ltd. 50% this year and most analysts believe director Ian Mulholland said.
the spate of recent mine closures is only
But Marindi’s superior offer of $21 mil- now just beginning to bite,” Treacy said. “If either the Marindi offer success-
lion tempted Rox to reconsider its initial fully completes or Teck pre-empts, Rox
plans to divest its 49% stake in the pro- “Zinc has one of the most favourable will be funded for the foreseeable future
ject. Teck Australia Pty Ltd holds the re- outlooks of any commodity and Marindi and under the Marindi offer [we] will have
maining 51%. is extremely well placed to be a key play- a substantial investment in a company
er in this market, both through the Teena with a first-class board and management
Marindi’s offer includes a cash pay- deposit and through our Newman project team, together with a high-quality zinc
ment of $8 million – underwritten by Ar- in the Pilbara region.” portfolio.”
gonaut Securities Pty Ltd – and $4 mil-
lion worth of shares to be escrowed for a The deal is subject to Teck not exer- However, Rox has been threatened
minimum of 12 months. cising its pre-emptive right to match with legal action by the directors of IM
Marindi’s offer before October 17. If the Medical, with accusations the former
A series of milestone payments, some Canadian major elects not to make a bid, breached the terms of the exclusivity
in the form of convertible redeemable Rox and Marindi have 90 days to com- agreement signed on July 19.
notes, are included in the offer. Rox will plete the transaction.
also gain a set on Marindi’s board. IM Medical said it had made a revised
Teck has spent just over $14 million on offer to Rox which included a proposed
Marindi managing director Joe Treacy exploration at Reward since entering into equity consideration, but ASX listing
said the acquisition of Reward was part the JV in 2010. Another $1 million spend rules prevented it from offering more
of his company’s strategy to become a before the end of August 2018 will lift than $2 million reimbursement of ex-
near-term zinc developer. Teck’s stake to 70%. penditure as the cash component of the
offer due to Rox being a related party in
“This is a company-making opportu- Rox announced on July 19 it had en- the transaction.
nity for Marindi which would immediately tered into an exclusivity agreement with
put us on the global stage as one of the IMI Zinc to house Reward in a new vehi- “The directors of IMI are disappointed
most significant ASX-listed players in the cle in a bid to realise more value from the with the outcome of the offer process,”
zinc industry,” Treacy said. project for shareholders. the company said in a statement.
“For our shareholders, this is a tremen- The backdoor listing appeared fait ac- “IMI will now consider its options and
dous opportunity to gain a significant compli until August 9 when Rox revealed will continue to look for a suitable busi-
strategic position in one of the best Aus- it had received an unsolicited offer from ness or project for future investment.”
tralian base metal discoveries of recent Marindi and was considering its options.
years, outside of the Nova-Bollinger nick- A deal with the latter was confirmed a – Michael Washbourne
el deposit, and to become a leading par-
ticipant in the global zinc industry ahead
of what most analysts expect is looming
as a significant supply crunch.”
Teena (58mt @ 11.1% zinc and 1.6%
lead for 6.5mt contained zinc and
900,000t lead) is the seventh largest
zinc deposit in Australia behind Broken
Hill, McArthur River, Hilton, Mount Isa,
George Fisher and Century.
Reward also hosts the Myrtle deposit
which has inferred and indicated re-
sources of 44mt @ 4.1% zinc and 1%
lead for 2.2mt contained zinc and lead. It
was the first deposit explored under the
Marindi, formerly a private company,
listed on the ASX in August 2015 after
merging with Brumby Resources, with a
focus on the Newman zinc project in the
Pilbara. Newman hosts indicated and in-
ferred resources totalling 3mt @ 4.94%
zinc, 1.59% lead and 15 g/t silver.
PAGE 50 SEPTEMBER 2016 AUSTRALIA’S PAYDIRT