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Engineering
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• Nickel Conference review • NT focus ISSN 1445-3436
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CONTENTS
PAYDIRT (ISSN 1445-3436) 11 NEWS 18
Published by Things haven’t gone exactly swimmingly 24
Paydirt Media Pty Ltd. for South 32 Ltd since it listed on the 40
A.C.N. 063 985 133 ASX in May. However, at an operational
level the company is starting to find its
Head Office: own identity. Dominic Piper spoke to Rob
Suite 9, 1297 Hay St, West Perth Jackson, asset president for the GEMCO
Western Australia 6005 manganese business in the Northern Terri-
P.O. Box 1589, West Perth tory, about how that division is faring under
Western Australia 6872 the South 32 banner
Phone: (+61 8) 9321 0355
Facsimile: (+61 8) 9321 0426 18 COVER
[email protected] Amid the carnage caused by the worst
www.paydirt.com.au resources downturn in a generation, GR
Engineering Services Ltd stands out like
Editorial: a beacon on the engineering landscape.
Editor: Dominic Piper Mark Andrews speaks to GR managing di-
Deputy editor: Mark Andrews rector Geoff Jones about the reasons why
Journalists: Michael Washbourne, his company has continued to thrive in this
Rhys Dickinson harshest of environments
Graphics: Marian Noonan
Contributors: 24 PILBARA MINERALS
Keith Goode (Sydney), Brendan Ryan In a region more famed for its iron ore en-
(Johannesburg), Ross Louthean dowment, Pilbara Minerals Ltd is carving a
name for itself in two niche sectors; lithium
Advertising: and tantalum. Mark Andrews visited the
Advertising executive: Tony Mwarey company’s operations in the Pilbara and
Subscriptions: Magda Thibaut found a company with a full development
Phone: (+61 8) 9321 0355 pipeline
Facsimile: (+61 8) 9321 0426
30 NORTHERN TERRITORY
Pre-press and printing: Australia’s Top End may be more recognis-
Vanguard Press 26 John St, able as a tourism destination but it retains
Northbridge WA 6003 the interest of resources companies across
Member of: the world. Paydirt takes a look at some
of the developing stories of the Northern
Paydirt Media Territory and analyses the impact they are
Executive chairman: Bill Repard likely to have on the region
Finance manager: Giovanny Jefferson
Accounts/administration: 40 NICKEL CONFERENCE
Heather Melling More than 200 delegates were able to
Conferences: Tammy Caldwell, cast aside the gloom of a faltering spot
Melita Fogarty price to gather in Perth for the 24th Aus-
tralian Nickel Conference. The packed
Cover image: GR Engineering Ser- programme saw the likes of BHP Billiton
vices managing director Geoff Jones Nickel West, Western Areas Ltd and Inde-
at the company’s Belmont offices pendence Group NL joined by the emerg-
ing juniors of the Fraser Range. Paydirt
Member of: provides full coverage of the event across
18 pages
Registered by Australia Post PP 643938/0071.
No pages or articles in this publication may be 58 IRON ORE
reproduced in any form without the consent of There is no escaping the fact 2015 has
the publisher. This includes photographs either been another torrid year for iron ore.
taken by Paydirt Media staff or provided by other Paydirt looks at the state of the junior iron
parties ore sector in Australia and asks how they
are surviving and whether any will soon be
thriving
EDITORIAL
I bet you look good
on the dance floor
School discos; they were always nervous oc- Ltd (up 171%) and Walkabout Resources Ltd (up 125%) – all in differ-
casions. ent commodities and at different stages of development – have each
We’d all gather in the school hall, or gym enjoyed strong share price appreciation.
or parish hall and without the slightest Most encouraging is the four companies have not achieved their
herding from teachers the kids would returns due to outside factors such as commodity price increases but
diligently split into separate groups and thanks to positive announcements.
stand silently on two sides of the hall; girls Where six months ago these companies were struggling to find rec-
on one side, boys on the other. ognition in the market, they are now being heralded as bright spots in
Then the test of nerves began. Who the struggling sector.
would be the first boy to cross the dance floor and ask a girl to dance? While each of these companies has done a fine job, their achieve-
The thing was; you didn’t want to be the first one and risk a humiliating ments have not been so far out of the ordinary that they could be con-
rejection but then again, you didn’t want to be one of the last because sidered exceptional.
that would mean missing out on the kudos that came with being con-
fident and precocious enough to make an advance in the first place.
It was a fine balance and I
admit I was never confident,
The junior resources sector is atcool or precocious enough
to be that first guy across the
the start of the school dance now.dance floor (or more likely a
“Everyone is split between two groupscombination of basketball,
Instead, it is proof that investors are beginning to loosen their purse
strings and see value in the junior sector. And, of course, it is self-per-
petuating. The more success
stories such as Lucapa, Da-
cian, Azure and Walkabout
we see, the more inclined
investors will be to cross the
dance floor.
netball, tennis and volleyball – those with cash and those who want Speaking at last month’s
court). But when the first lad Australian Nickel Conference,
did cross the floor and the girl cash. There are plenty of investors out Poseidon Nickel Ltd manag-
he asked said yes, instantly there with enough money to change ing director David Singleton
they became the coolest kids said recent conversations
in the school. Others soon a company’s trajectory but they are in Britain, Europe and North
followed and within minutes currently holding back for fear of America, had indicated that
those who were too hesitant while investors didn’t want
were left standing and when looking ridiculous when their boldness to miss out on the next up-
you eventually did pluck up turn in resources, they were
the courage to ask a girl to backfires and the hint of a recovery prepared to wait that little bit
dance and she said yes, no- turns into another backlash. But, if this longer to be sure the sector
body noticed how brave and is completely clear of the bot-
cool you were because eve- fear consumes them, they are certain tom.
ryone else was already on the to miss out on the ten-bagger returns “Some of these investors
dance floor. those who do take the risk will receive.
are prepared to give away
This is not a tale about get- some of the upside if it means
ting the good-looking girl. It being certain they don’t lose
didn’t matter whether that first their money,” Singleton said.
couple were good-looking, the This is the current state the
fact they were the first on the dance floor made them cool and the next junior and mid-tier sector finds itself in. The majority of investors are
few couples who braved the iciness and joined them received some of getting ready to cross the dance floor, they just want to make sure a few
that reflected “coolness”. but not too many do it before them for fear of humiliation if it turns out
The junior resources sector is at the start of the school dance now. they have made the wrong move.
Everyone is split between two groups – those with cash and those who
want cash. There are plenty of investors out there with enough money
to change a company’s trajectory but they are currently holding back for
fear of looking ridiculous when their boldness backfires and the hint of
a recovery turns into another backlash. But, if this fear consumes them,
they are certain to miss out on the ten-bagger returns those who do take
the risk will receive.
We have seen evidence of a turn in the investment climate a number
of times in the last 18 months, but it has more often been a case of one
step forward two steps back as another macro event dampens any mo-
mentum that was building.
However, the last six weeks have seen the emergence of narratives
that may hold the junior sector in good stead.
Australia’s gold miners have led the way, as they take advantage of a
strong Australian dollar gold price and their recent cost-cutting strate-
gies to achieve better margins than they have in five years or more.
There are also stories elsewhere. In the last three months, Lucapa
Diamonds Ltd (up 110%), Dacian Gold Ltd (up 107%), Azure Minerals [email protected] @DominicPiper
PAGE 4 NOVEMBER 2015 AUSTRALIA’S PAYDIRT
NEWS
Rio Tinto looks to Antipa
for exploration
Rio Tinto Ltd has sparked some place to deliver some big discover-
excitement in the exploration ies, hopefully in the next 18 months
sector by taking an interest in junior from our point of view,” Mason said.
Antipa Minerals Ltd’s Citadel gold- Before getting its teeth into its
copper project in the Paterson prov- 100%-owned ground, Antipa will
ince, Western Australia. kick off the Citadel JV by complet-
Over time, the deal could be ing up to 30 holes for 5,000m in
worth $60 million, with Rio Tinto three stages at Calibre.
potentially earning a 75% interest East-west extensional RC drilling
in Citadel, 75km north of Newcrest (1,000m) across a 400m strike of
Mining Ltd’s Telfer gold-copper- broad high-grade gold-copper min-
silver mine. eralisation will round off stage one,
Initially, Rio Tinto will spend while the focus of stage two will
$3 million in exploration within 18 be RC drilling (2,200m) of the high
months of the JV being executed priority magnetic target extending
– drilling was set to begin at the 1.2km north of the stage one area.
time of print – and gradually work Stage three will be a recon-
its way to 75% by funding $8 million naissance programme (1,800m),
of exploration within a further three The JV with Rio Tinto will allow Antipa to focus on projects like Minyari dependent on stage one and two
years for 51%; $14 million within a results.
further three years for 65% and $35 million built a good knowledge base of the area,” An- The main objective of the drilling pro-
with a further three-year period for 75%. tipa managing director Roger Mason said. gramme is to extend the limits of the North
Antipa will be project operator for the initial While Newcrest is active in the province Calibre gold-copper mineralisation to 1.6-
18 months, beyond which Rio Tinto can elect and has chosen to persist with Telfer op- 3.9km strike length and identify regions of
to takeover. erations, Antofagasta plc is farming into En- higher grade gold.
Antipa executive chairman Stephen Power counter Minerals Ltd’s Lookout Rocks copper Results from stage one drilling across 400-
said having Rio Tinto as JV partner was a real prospect and Metals X Ltd is making a play for 500m strike has returned 20-30m @ 2-2.5
endorsement for Citadel, which includes the Aditya Birla Minerals Ltd’s Nifty mine, also in g/t gold and 0.15-0.25% copper, with Mason
Magnum, Calibre and Corker deposits. the region. believing the stage two drilling area has a “bit
Calibre hosts an inferred resource of “We don’t feel we need a partner in the more guts to it in grade and volume”.
47.8mt @ 0.56 g/t gold, 0.17% copper, 0.6 g/t southern area at this stage. Patersons is a Calibre was a greenfield discovery made
silver for 867,000oz gold, 81,000t copper and sleeping giant and it is starting to show its cre- by Antipa in the year following its 2011 ASX
918,000oz silver. Antipa’s exploration target dentials now. It is steadily starting to attract listing.
at a 1 g/t gold cut-off is 143-257mt @ 1-1.24 attention from big corporations and demands Mason said he was surprised at how long
g/t gold and 0.13-0.15% copper. some significant exploration. It could be the it had taken the big boys to pay some atten-
“We’ve been looking for a JV partner for tion to the province, with Rio Tinto’s interest
some time, with the feedback from inves- building mid-2015 and spiking post-Diggers &
tors being that they really like the project but Dealers this year.
say it is too low-grade and it’s more of a big Nevertheless, Rio Tinto’s participation in
company asset. That’s not the case but we’ve Citadel has been most welcomed by Antipa
been using all our efforts to JV the project out, with the company’s share price improving
and it basically puts us in a really good posi- from 0.08c/share to more than 2.5c/share in
tion to take the company forward,” Power told light of the JV announcement.
Paydirt. “They are spending pretty much our mar-
“Citadel project funding is taken care of ket cap before the announcement, our market
and allows us to turn our attention to the more cap was about $3.5 million pre-announce-
southerly project. They are good projects with ment and our share price now has reflected
a future and another string to our bow with the [significance of the] deal,” Power said.
3,000sq km [of ground] tied up not subject to “Investors will be comfortable that there is
the Rio JV. There is ample ground for us to a big brother with deep pockets. It allows us to
explore and make discoveries.” look at the bite-sized projects in the southern
The ground Power is referring to is its Pat- tenements and we can prove that we can do
erson and North Telfer projects, north of Tel- something there.”
fer, which has lacked serious exploration for With 95% of the southern project areas
almost 20 years. under young cover of only 1-40m depth and
There are a number of walk-up targets for a 3,000sq km footprint in the area, Antipa is
Antipa to hit, starting with Minyari and WACA confident of making a discovery and bringing
in Q1 2016. a project to fruition at a relatively low cost in
“The whole region lacks effort and has only what is a world-class polymetallic orebody-
been explored with RAB/aircore drilling. We bearing belt.
are prepared to drill a little deeper and are en- Antipa managing director Roger Mason with core – Mark Andrews
tering our fifth year in the region, so we have from the Calibre discovery in 2012
AUSTRALIA’S PAYDIRT NOVEMBER 2015 PAGE 5
NEWS
Friends reunited as Oz opens
door to Minotaur
It may not be a world first, but Oz Min-
erals Ltd opening its database to junior
Minotaur Exploration Ltd is a rare example
of a bigger company welcoming a smaller
counterpart into the room.
“This is unheard of, usually it’s the jun-
iors opening up to the majors, the flow
of information is never the other way
around,” Minotaur managing director An-
drew Woskett said.
Woskett spoke to Paydirt shortly after
it was announced that Oz Minerals and
Minotaur had agreed to collaborate on
copper exploration in South Australia.
The agreement covers tenements held
by Oz Minerals in the Mt Woods area, ex-
cluding the Prominent Hill mining lease.
It is somewhat of a homecoming for Mi- Oz Minerals has given Minotaur access to its Mt Woods database, excluding the Prominent Hill mining lease
notaur, which discovered Prominent Hill
in the Gawler Craton in 2001. Minerals has recognised the need to switch erals retains a buy
Oz Minerals took over Prominent Hill in focus to finding an advanced asset to sup- back option which
2005 and turned it into the current 120,000 plement existing operations, but with its own can be triggered if
tpa copper and 100,000 ozpa gold producer attention to brownfields and greenfields ex- Minotaur defines
it is. ploration limited, Minotaur has been afforded a 200,000t copper
However, with reserves running down, Oz the opportunity to fully interrogate an exten- equivalent resource,
sive exploration data- with Oz Minerals re-
base compiled over 10 verting back to an
years at Mt Woods. 80% interest in the
Woskett said it prospect. Andrew Woskett
would take three to “Oz Minerals is our
six months to as- third largest share-
sess the database, in holder and it is good to be able to do some
which time Minotaur positive work with a shareholder. It may be
will be reimbursed up that we see something that Oz hasn’t and it is
to 80% of its costs on their view that having another set of eyes on it
research by Oz Miner- won’t do any harm,” Woksett said.
als. “Andrew Cole is a lateral thinker and since
Where the two par- he arrived as MD he’s been good. While we
ties agree regards have not been as active in SA, he sees what
on-ground assess- we are doing in Queensland where we have
ment, $3 million (split learnt so much in Cloncurry which is applica-
50/50) will be spent ble in SA.”
on working towards a The nature of cover in the Gawler Craton
proof-of-concept, with means advanced geophysical techniques will
Minotaur as operator. be required to identify prospective targets.
Beyond the proof- While Minotaur mulls over mountains of
of-concept phase, an geophysical data, geochemistry, drill logs and
Oz Minerals/Mino- drill core provided by Oz Minerals, Woskett
taur 80:20 JV will be and his team will have a close eye on the SA
formed, at which point Department of State Development’s (DSD)
the latter can elect to drilling programme on Minotaur’s Gawler
fund an initial $2 mil- Range project.
lion in activity for an Minotaur was one of two companies se-
additional 10% inter- lected under the Mineral Systems Drilling
est. Programme (MSDP), an initiative target-
Should Oz Miner- ing discoveries in the eastern Gawler Cra-
als not take a prospect ton Olympic Dam copper-gold region, in the
into the proof-of-con- northern Eyre Peninsula.
cept phase, Minotaur DSD was about to start drilling at the time
can sole fund $2 mil- of print.
lion in exploration for – Mark Andrews
an 80% stake. Oz Min-
PAGE 6 NOVEMBER 2015 AUSTRALIA’S PAYDIRT
BUSH TELEGRAPH
Froneman takes a bite
into Aquarius
Sibanye Gold Ltd chief execu- especially if it delivers the around R800
tive Neal Froneman has long million per annum operational syner-
been known in the South African gies in the medium term that manage-
mining industry as “Mr Fix-it” but, ment has calculated.
after the events of the past month, “If the cash offer is successful we
a new nickname may be in order: estimate that the Aquarius Platinum
“Pacman”. acquisition would add around R3 a
Froneman acquired the “Mr share – about 8% - to our base case
Fix-it” moniker from his days at DCF [discounted cash valuation] of
Harmony Gold Mining Co Ltd in R38/share for Sibanye without factor-
the mid to late 1990s when he ing in any of the synergies estimated
was the executive that Harmony by management.”
chief executive Bernard Swanep- The second major benefit to Sibanye
oel frequently appointed to turn is more strategic in nature in that it
around the various marginal gold gives the group immediate exposure
mines the company acquired. Neal Froneman (centre) has gone from Harmony’s “Mr Fix-it” to Sibanye’s to Zimbabwe’s platinum sector through
In his new role as “Pacman”, “Pacman”, gobbling up various South African assets Aquarius’ 50% stake in the Mimosa
Froneman has taken over three mine in which the other partner is Im-
mining companies in the past month and di- thinks Sibanye is getting a good deal here. pala Platinum Ltd (Implats) – the world’s sec-
versified his operations from gold into plati- Terms are that Sibanye is making a cash ond largest platinum miner.
num and coal mining. The latest acquisition is offer of R2.66/share for Aquarius which was Mimosa – along with Implats’ sister Zimba-
junior platinum miner Aquarius Platinum Ltd. a premium of 60% to ruling Aquarius share bwean operation Zimplats – have for years
Virtually overnight, the heavyweight gold price the day before the offer was made. The been the best performers in terms of profit
mining group has become a heavyweight offer has been “unanimously” accepted by margins at Implats because the mines are
platinum miner – one of the top five producers the Aquarius board which is recommending low-cost, mechanised operations. It’s abun-
– and also a potentially key player in the de- shareholders vote in favour “in the absence of dantly clear that the Zimbabwean platinum
velopment of the Waterberg coal field which a superior proposal.” miners could “eat South Africa’s lunch” in
is strategically vital for the future of South Af- According to Froneman, the transaction terms of growing future profitable market
rica’s coal sector. “is value accretive, adding low cost and cash share if they got the chance because they are
As I have previously reported in my col- generative operations to Sibanye’s asset port- just that much more efficient operations.
umns for Paydirt and Gold Mining Journal, folio. Importantly, when combined with the For that to happen the basic requirements
Froneman’s first move was to buy the Rusten- adjacent Rustenburg operations, there is very are the return of better times in the platinum
burg division from Anglo American Platinum significant potential to realise additional val- markets and an outbreak of common sense in
plc (Amplats) for R4.5 billion. ue, fully justifying the premium we are offer- the Zimbabwean Government, which seems
“He followed that up with the agreement to ing Aquarius shareholders. At higher platinum currently hell-bent on destroying the platinum
take control of ASX-listed mines through vague – but
Waterberg Coal Com- It’s abundantly clear that the radical – indigenisation and
pany Ltd (WCC), buying Zimbabwean platinum miners could beneficiation demands which
out existing creditors for the mines simply cannot meet.
$22.5 million while kick-
Froneman is clearly optimis-
ing in another $8.5 mil- ‘eat South Africa’s lunch’ in terms of tic on the future of the platinum
lion in working capital and growing future profitable market share if business although recent state-
putting in place an option ments from both Implats and
to subscribe for additional they got the chance because they are just Amplats indicate their manage-
new shares sufficient to that much more efficient operations. ments believe the current de-
take Sibanye’s stake in pressed conditions could last
WCC to 51% within 18 another two years.
months. What’s interesting is that
Justification for the move on WCC is that group metal prices, these assets also offer a Froneman has not gone after Lonmin plc de-
Froneman wants to develop a mine that will substantial increase in earnings and value for spite that group’s rock-bottom share price –
supply coal to an independent power produc- Sibanye shareholders.” most likely because of Lonmin’s loss-making
er (IPP) he intends building in the Waterberg That’s the first major benefit in the deal for position and debt mountain.
to generate the power required by Sibanye’s Sibanye because Aquarius’ existing Kroondal But there is some good news – sort of – for
deep-level gold and platinum mines. This is mine is contiguous with Rustenburg and is, Lonmin. The share price has recovered over
intended to free Sibanye from reliance on in fact, mining on ground previously acquired the past couple of weeks from record lows of
state-owned utility Eskom. from Rustenburg through “pool and share” just above R3 to current levels around R9. I
Aquarius Platinum – like WCC and many agreements. say “sort of” because the 12-month high was
other junior miners – has fallen on hard times According to JP Morgan Cazenove ana- R35/share and back in 2011 Lonmin was trad-
but over the past few years has done a lot lysts Allan Cooke and Abhishek Tiwari: “since ing around R160/share.
Brendan Ryan is a Johannesburg-based min-
to turn its remaining operations around. The the cash offer is at a 40% discount to our base ing writer
Sibanye share price has jumped since Frone- case valuation of Aquarius Platinum of R4.63/
man made the bid, indicating that the market share we see the deal as positive for Sibanye,
AUSTRALIA’S PAYDIRT NOVEMBER 2015 PAGE 7
NEWS
Aeon sets sights on Century
It might not be done mining Aeon hopes to start infill and resource drilling at Walford Creek by April
just yet, but somebody is al-
ready eyeing off MMG Ltd’s sits at 73mt @ 1.43% copper equivalent something work. Quite frankly, without doing
Century mine as a vehicle to containing 296,000t copper, 623,000t zinc, the numbers, it has a 9MW power line and it
take its project to develop- 626,000t lead, 55 moz silver and 60,000t co- has a water bore which services enough wa-
ment. balt. ter for that part of the world. So, clearly, not
having to build power or water and all associ-
Aeon Metals Ltd manag- In May, the company embarked on its 2015 ated infrastructure would be our most cost-ef-
ing director Hamish Collins Walford Creek drilling campaign; a 2,000m fective option. It is still an option to be consid-
told Paydirt Century could be programme targeting four areas over a 10km ered over and above our standalone option.”
the solution to infrastructure strike west of the project’s aforementioned
problems at the company’s resource. Although Walford Creek’s resource by val-
Walford Creek base metals ue was almost 50% copper, Collins said using
project. Aeon’s first target, The Zinc, just 2km from Century could bolster its zinc stocks.
Walford Creek and forward of a hole that
Collins has a long history intersected 11m @ 5.7% zinc last year, pro- “Century actually has a fairly large zinc re-
with Walford Creek, having duced “limited amounts of visual sphalerite”, source in its tailings, which they’re looking at
acquired it for Nathan Tin- while The Jog, located in an area of late fault- monetising,” he said.
kler’s Aston Resources Ltd in ing, intercepted significant amounts of highly
2009. shattered and brecciated ground. A narrow “Clearly, if Century is an option we would
2m-wide mineralised copper intersection was have to look at their tailings as well.”
“I worked for Nathan Tin- intercepted at the Fish River fault at 120m av-
kler with a mandate to procure eraging 1.42% copper. Collins said Aeon’s top priority for the re-
copper and coal assets,” Col- mainder of the year was compiling Walford
lins said. “I started working Hole WFPD195 at The Bend, 1km west of Creek’s PFS.
with him in October 2008 and The Jog, intercepted strong fracturing and as-
acquired a raft of Mt Isa tene- sociated alteration in its Fish River fault zone, That, however, had not taken the compa-
ments in December 2008 but including 18m @ 0.27% copper from 77m. ny’s focus away from exploration opportuni-
that package didn’t include ties at the project.
our main Walford Creek pro- At the time of print, Aeon had not released
ject; I bought that later in 2009 from Copper its drilling results from its fourth prospect, At the time of print, Aeon had called an
Strike Ltd. We walked in and did a deal to buy Lead Hill, which had produced historical hits EGM to consider two resolutions, which if ap-
the remaining 30% we didn’t own because we of 10m @ 5.1% lead from 12m. proved, would secure the company an addi-
were doing a JV. Copper Strike didn’t want it tional $4.85 million of debt on top of the $3.26
because they had one geologist and were in Collins said for all that Walford Creek had million it raised via a rights issue in May to fund
the process of selling mining leases so they going for it the project was mired by its remote Walford Creek’s 2016 drilling programme.
needed the cash.” location and lack of infrastructure – and that’s
where Century came into the mix. “Once that’s approved we will have north of
Collins left Tinkler in early 2012 to join $8 million in our coffers and the main use of
Aeon, where Walford presented itself for the “Infrastructure is probably slowing us down those funds will be for the drilling at Walford
taking again. a bit,” he said. Creek next year, which is to convert a lot of
the inferred into the indicated, as well as to
After pouring upwards of $25 million into “We are looking at a number of options. increase the resource,” Collins said.
the project, Aston Resources was placed into Century is closing down and I believe they are
receivership in September 2013 as the com- putting a stop to processing ore in February. “We want to be on the ground in late April
pany’s coal interests were trampled by the It’s 100km as the crow flies and 136km on a and have two rigs going 24/7 drilling at Wal-
commodities downturn. deserted road. There is that option to look at ford Creek.”
but obviously it’s not ours so we might have
In June 2014, Aeon did a deal with receiver to do some wrangling there to try and make – Rhys Dickinson
Orchard Capital Partners to buy Aston’s debt
at a discount and put it into a $20 million non-
recourse debt package with 12% per annum
interest payable after three years.
Almost immediately after pen was put to
paper, Aeon mobilised its exploration team
at Walford Creek, embarking on a 12,000m
drilling campaign aimed at increasing the pro-
ject’s then 48.3mt resource to at least 70mt.
While some thought the plan bold, Aeon
was confident it was achievable given Collins’
knowledge of the project.
“We knew it was possible because of the
type of mineralisation,” he said.
“They’re continuous geological lenses
and we knew they continued along strike. It’s
a long, 5.5km strike, but it’s all within about
150m of the fault. There hadn’t been a lot of
internal drilling, so we knew we could drill in
between the drill spacings and increase the
resource, just on the shell.”
In March, Aeon made good on its vision, an-
nouncing a 52% increase to Walford Creek’s
inferred and indicated resource, which now
PAGE 8 NOVEMBER 2015 AUSTRALIA’S PAYDIRT
GOODE NEWS
Has the base metal cycle
restarted?
Doom and gloom, and the end of the Meanwhile, The Sydney Morning
resources world nigh: sound famil- Herald reported in October that Glen-
iar? Commodities continue to collapse, core had started a process to sell two
the Australian dollar falls to US60c, and copper producing assets; Cobar copper
Chinese GDP growth continues to slow mine in NSW and Lomas Bayas copper
to only 6% pa within the next two years. mine in Chile.
But hold on, the nickel price rose by I can recall attending a conference
2.1% on October 12 to $US$4.85/lb in Beijing late in 2014, in which the
(and traded as high as $US4.88/lb), in question was asked why was MMG Ltd
Australian dollar terms that’s $6.59/lb at supported by China’s banks to buy the
(US73c exchange rate). A nickel price mega Las Bambas operation in Peru. To
of $US4.85/lb is about the same as it which the reply was that it was “based
was in mid-August 2015, while LME on future higher commodity prices”.
nickel stocks have continued to plum- So has the base metal cycle restart-
met back to the levels they were in early ed? The base metal price cycle has his-
to mid-May 2015, when nickel rose to a The nickel price rebounded in October torically been nickel, then copper, then
recent peak of $US6.50/lb. zinc. The logic was there for nickel to
We all know Australian nickel share prices Plutonic gold mines, recouping its acquisition recover once the iron ore prices started re-
have been gradually increasing, with Western costs of each operation in less than a year covering. As China stated at the China Mining
Areas Ltd up 36% from its September 30 low and extending mine lives on all of them. Conference in Tianjin in October 2014: any
of $2.11 to close October 12 at $2.87. In the In his Diggers & Dealers presentation, Evo- additional iron ore imports above its (peak)
same period, Independence Group Ltd was lution Mining Ltd executive chairman Jake imports for domestic consumption, are used
up 41% to $3.57, Mincor Resources NL 26% Klein stated: “We should not have been al- to produce export steel.
to 29c and Panoramic Resources Ltd 28% to lowed to get it [referring to the Cowal gold Why did commodities get so weak? Quite
36.5c. mine in New South Wales]. But we did and simply, traders were feeding on the gloom
In mid-August, Western Areas was around look at us now!” sentiment of a slowing China, and they ap-
$2.83, Independence $3.38, Mincor 33c and Gold Fields Ltd has been talking up its pur- pear to have overdone it, with China scoring
Panoramic 36.5c. This shows the correlation chase of Wallaby and continued depth and big time, paying for its growth and acquisi-
nickel shares appear to have with the US dol- new lateral extensions there, and the impact tions in 2015 based on even lower commodity
lar nickel price. on recoveries that installing a gravity circuit prices. And now the traders may buy the posi-
However, compared to the early to mid-May (why wasn’t it done earlier?) has had at the tions back again.
peaks, should nickel prices recover based on ageing Granny Smith gold plant. I have also often remarked that possibly
“the level of LME nickel stocks, then: Western
Even Zijin Mining, who missed out on some up to an extra 1% of China’s GDP could be
Areas would be 37% higher export GDP due to the con-
at $3.93, Independence I have often remarked that despite struction projects that China
68% higher at around $6.00, all this doom and gloom, China has in the world. Such as
Mincor 117% higher at 63c the recently completed new
and Panoramic 59% higher 752km electric railway line
at 58c. And that is just the has not been so oversupplied that it has and rolling stock in Ethiopia
prices then, when the Aus- refused any ore or concentrate shipments over from Djibouti to Addis
tralian dollar had risen from Ababa using a workforce
around US76Sc to about and sent them back, and that includes mix of Chinese and local
US80c. iron ore. In fact, it continues to take Ethiopians. China also has a
new railway line that is under
Are there any other in- anything sent to it and has been reaping construction in Tanzania.
dicators? I have often re-
marked that despite all this However, if commodity
doom and gloom, China has the benefits of lower commodity prices prices rise/recover, then the
not been so oversupplied against a relatively strong yuan currency. Australian dollar is probably
that it has refused any ore or going to rise too, and cush-
concentrate shipments and ion some of the increase. As
sent them back, and that such, the forecast of a fall to
includes iron ore. In fact, it continues to take of the Barrick Gold Corp mine sales after dis- US60c may not occur.
anything sent to it and has been reaping the covering that Barrick wanted cash and did not So, with the nickel price picking up, it ap-
benefits of lower commodity prices against a want Norton Gold Fields Ltd paper, then paid pears that nickel may have bottomed and
relatively strong yuan currency. almost $US300 million in cash for 49.5% of is recovering, and could be leading another
And then there are the mega commodity Barrick’s 500,000 ozpa Porgera gold mine in base metal cycle.
producers. Let’s face it, based on observation, Papua New Guinea. It has also been widely Keith Goode is managing director of Eagle Re-
many mega producers have a track record of rumoured to take over the Kalgoorlie Super search Advisory Pty Ltd, (an independent research
buying assets at the top of a market and sell- Pit and cement its position in Kalgoorlie. Zi- company) who is a Financial Services Representa-
ing at the bottom. Northern Star Resources jin also bought some copper mine assets in tive with Taylor Collison Ltd (AFSL 247083)
Ltd has scored big time from its acquisitions the DRC from Ivanhoe Mines Inc at the same
of the Kanowna Belle, Jundee, Kundana and time.
AUSTRALIA’S PAYDIRT NOVEMBER 2015 PAGE 9
NEWS
Highland still tops for
Phosphate Australia
Phosphate Australia Ltd has further con- Phosphate Australia is shopping around for a JV partner to help develop the
firmed its position as a true multi-commod- Highland Plains phosphate project in the Northern Territory
ity player on the ASX with the acquisition of a
diamond project. in Phosphate Australia’s portfolio still belongs us getting the project up,” Richards said.
to its Highland Plains phosphate project in the A scoping study has been initiated with the
The Blina project in West Australia’s El- Northern Territory.
lendale precinct was snapped up cheaply in outcome of an assessment of using existing
October and with more than $20 million spent “We are actively promoting the phosphate infrastructure at Century seen as a potential
on it already, Phosphate Australia has high project. It is clearly a big project and needs a driver for further capital investment. MMG Ltd
hopes, both for the project and that diamonds big partner, so we are in JV mode. We are ac- used a slurry pipeline to transport product
may be the shining light in a gloomy resources tively seeking a JV partner and we have had from Century to Port Karumba, Queensland,
sector. a number of discussions ongoing during the where all necessary facilities are in place.
course of the year and they remain ongoing.
“In 1993/94 there was a terrible recession That would be a company-making deal for us Positive results could be game-changing
then and diamonds actually led the way out of if we manage to put that project to bed and and warrant more attention for Phosphate
the mire. There was a massive diamond boom it would have enormous upside for the com- Australia.
then and it was the only thing that boomed so pany,” Richards said.
maybe it will be the same this time. We have Earlier this year, the company was subject
some diamond expertise on the board and Highland Plains, hosting an inferred re- to an on-market takeover from the Sir Ron
within the company and I have spent many source of 53mt @ 16% phosphate, is 68km Brierley-led Mercantile Investment Company
years of diamond exploration and mining as west of the Century zinc mine in North Ltd.
well,” Phosphate Australia executive chair- Queensland.
man Jim Richards told Paydirt. The bid failed, with Phosphate Australia
Resources have been exhausted at Cen- declaring the attempt “opportunistic and un-
“With the diamond prices for the fancy yel- tury, however, infrastructure remains in place. dervalued”.
lows that you get up there reportedly worth up
to $5,000/ct, it could very well be the time to “There is mains power, beneficiation plant Richards said the company had forged a
give it another look and dust off some of the and slurry pipeline to the coast and we can reputation as a good dealmaker, evidenced
economics on the alluvial paleochannel,” try and utilise that infrastructure one way or by its relevance in a glum resources sector.
another,” Richards said.
Immediate work at Blina will include data “Sir Ron Brierley has a formidable repu-
mining and permitting and once the latter is Phosphate Australia has spent about $8 tation and it was a great feather in the cap
in place, Richards said the task of setting up million developing Highland from the team that I led that we were able to
a modest alluvial operation for a low capex Plains and is conscious of knock it back, without them buying a single
would become easier. spending too much more in the share in our company and I suspect that is the
current market environment. first time it has happened to them. Definitely,
“Once you have permitting in place, you Therefore, being able to I think Ron saw value there but he wasn’t will-
may very well be able to attract partners from potentially access existing in- ing to pay value,” Richards said.
the retail diamond sector interested in the frastructure at Century, plus
very high-quality diamonds that will presum- some of the Federal Govern- Richards said Phosphate Australia would
ably come out of the Terrace 5 gravels,” Rich- ment’s $5 billion Northern Aus- extract maximum value out of Highland Plains
ards said. tralia Infrastructure Facility, and the rest of its portfolio for shareholders
means Highland Plains is well and continue with its strategy of self-funding
While it gets a feel for Blina, the company positioned for development. ground acquisitions and exploration pro-
is clear on its strategy at the Laverton gold “We will be in line for that grammes with its $3 million cash.
project. Northern Australia Infrastruc-
ture Facility for a slurry pipe- – Mark Andrews
“This quarter we intend to drill the Laverton line, roads, power line, etc and
gold project. We have permitting for it and it For more on Northern Territory, turn to our cover-
is still our intention. It will be a maiden recon- Jim Richards it may well be the catalyst for age from page 30
naissance programme, but it has been noted
we are one of the few companies getting into
greenfields stuff, so we will give
it a go and potentially make a big
discovery,” Richards said.
The Laverton project is 2.2km
east of Granny Smith, however,
there are no records of any pre-
vious drilling, Richards said.
“I think it is a great opportu-
nity to spend a modest amount
of money and have access to
enormous upside. The Granny
Smith mill is very underutilised
at the moment, so if we did have
a discovery we’re in business,”
he said.
While the company is bullish
on Blina and Laverton, top billing
PAGE 10 NOVEMBER 2015 AUSTRALIA’S PAYDIRT
South 32 shows its muscle in NT
“We are in a fantastic position in the current market.
In a lot of operations worldwide you are starting to
see companies cutting through the fat and getting into the
muscle which will have longer term ramifications for those.”
– Rob Jackson, South 32 asset president
South 32’s GEMCO operation on Groote Eylandt. GEMCO controls all
logistics on Groote Eylandt, including the 5.3 mtpa port facility
AUSTRALIA’S PAYDIRT NOVEMBER 2015 PAGE 11
NEWS
It is been a baptism of fire for South 32 Ltd, GEMCO increased production and lowered cash costs in FY2015, its first year under the
battling market apathy and plunging com- South 32 banner
modity prices as it looks to justify BHP Billiton
Ltd’s decision to spin out a suite of non-core said. “However, the low-cost nature of this op- capacity added to process mineralised fines
assets. eration means we are not under pressure, we which currently report to tailings. Jackson
can make the best decisions for the operation said its simplicity meant an additional produc-
However, at an operational level, confi- in the long-term. We are not forced into taking tion at little cost.
dence is growing that the company is in good short-term decisions to keep things going.”
shape. In September, South 32 released its “It is just bolting on infrastructure on the
first set of full-year results, showing a group of Instead, Jackson finds himself charting a back of the concentrator and will help lower
assets not quite as unloved as many analysts course for greater prosperity, a course which costs further. When I was in marketing [divi-
and investors had first imagined. will include the expansion of concentrator ca- sion], I couldn’t see the benefits but when you
pacity on Groote Eylandt. are in the operation you see the benefits are
EBIT was $US1 billion with underlying obvious.”
earnings of $US575 million up 56% and 41% South 32 is spending $US139 million on
respectively on FY2014 (when the assets adding an extra 500,000 tpa processing ca- The concentrator expansion project is not
were still housed in BHP Billiton). pacity to the 4.8 mtpa operation. new, having been commissioned by BHP Bil-
liton. Jackson said it was another example of
The figures highlighted a forgotten fact of “The premium concentrate project is on the misconceptions which surround the South
South 32’s creation; the portfolio is stacked schedule and budget and will provide good 32 assets.
with low-cost assets that are far from the un- outcomes for the operation,” he said.
derperformers widely assumed. “In actual fact, this operation has received
The expansion project will see additional $1.1 billion investment over the last decade,
Part of the problem has been a lack of ex- $500 million of it in growth capacity. It has
posure. In the bulging BHP Billiton portfolio, GEMCO asset president Rob Jackson grown from 3.2 mtpa to 4.8 mtpa and the port
assets such as the Cannington lead-zinc-sil- has been up to 5.5 mtpa,” he said.
ver mine in Queensland, the Worsley alumina
mine in Western Australia, the Cerro Matoso “I found it quite amusing that analysts had
nickel smelter in Colombia and the Hillside a view that the South 32 assets had been un-
aluminium operation in South Africa struggled loved and were the poor cousins. GEMCO
for recognition against the company’s assets didn’t need South 32 to come in and dump a
in the “four pillars” of iron ore, coal, oil and load of capital into it.”
copper.
The change in ownership has, however, al-
South 32’s GEMCO subsidiary, which op- lowed for a change in mentality both at man-
erates the Groote Eylandt manganese opera- agement and operational level.
tion off the coast of the Northern Territory, is
another example of a solid asset unable to “GEMCO used to be a small cog in a big
find the limelight. Under the BHP Billiton ban- machine but sometimes it didn’t get the at-
ner, GEMCO was an efficient but low-key op- tention it required. Now we are getting that
erator, producing manganese ore in the first attention in important areas, particularly in
quartile of global operating costs. functional support,” Jackson said.
In FY2014, BHP Billiton’s total manganese “Everything is underpinned by the South 32
operations (including TEMCO in Tasmania strategy. I’ve traditionally been a bit cynical of
and the South African operations) contributed strategy but South 32’s strategy for optimising
a modest $US476 million to the group’s total performance, unlocking potential and identi-
profit from operations (EBIT) of $US23.4 bil- fying new opportunities capable of competing
lion. for capital is beginning to flow through to op-
erations.”
In the South 32 stable, this contribution is
far from modest with GEMCO’s FY2015 per- On establishing South 32, BHP Billiton
formance of $US123 million, accounting for claimed its subsidiary would be better placed
more than 12% of the company’s $US1 billion to get more gains out of established assets
EBIT, despite average realised manganese
prices falling from $US219/t in FY2014 to
$US179/t in FY2015.
For GEMCO asset president, Rob Jackson,
the performance in the face of plummeting
commodity prices is proof that the commonly
held view of South 32 as a company full of
“cast-offs” is a misconception.
“South 32 is actually full of operations in the
first or second operating cost quartiles. GEM-
CO is arguably the lowest cost landed-in-Chi-
na manganese producer in the world. It is an
asset with great resources and great people
right on the doorstep of the major markets.”
Commodity prices have not been kind to
South 32 during its formative years but such
is the quality of the operation, Jackson feels
neither pressure nor inclination to adopt the
siege mentality of many of the company’s
peers.
“We are in a fantastic position in the current
market. In a lot of operations worldwide you
are starting to see companies cutting through
the fat and getting into the muscle which will
have longer term ramifications for those,” he
PAGE 12 NOVEMBER 2015 AUSTRALIA’S PAYDIRT
and Jackson believes GEM- “Manganese is fetching its lowest much publicity but I recently
CO is beginning to show it is price in 10 years and we are still presented at the Mining the
achievable. making good margins. Therefore, we Territory conference and the
have an opportunity to make ourselves response was very interest-
“Partially it comes from the fitter so when the market does swing we ing; so many people were sur-
change in philosophy. A lot prised by the project and its im-
of the people are the same portance to the NT economy.”
but there has been a change
in thinking, in process and it With royalty payments aver-
is as though a light has been can go from good margins to outstanding aging $97 million p.a. and an
switched on,” he said. returns for our shareholders. additional $18 million a year
paid to traditional owners,
“There is more flexibility
now and we are much more GEMCO is one of NT’s leading
nimble and entrepreneurial taxpayers. The South 32 mod-
than under BHP; there is no one-size-fits-all squeezing as much as we can out of what we el has allowed Jackson and his management
strategy any longer. We can analyse the man- have.” team to convey that message more regularly
ganese market and put the planning in place This includes resource expansion within to the NT Government.
at an operational level to ensure we are posi- the operation’s 7,000sq km exploration li- “There is more awareness on both sides
tioned to take advantage of it.” cence area. because we are having regular discussions
The change in company philosophy has “We have delineated resources on the with ministers and collaboration is high,” he
also placed more accountability on individu- eastern leases and are in the process of ap- said.
als on site. plying for a mining licence,” Jackson said. The strong margins GEMCO is generat-
“People are taking more ownership in out- Arnhem Land is a sensitive region from ing play their part here as well. While peers
comes and that has been a driver in safety both environmental and Aboriginal perspec- are dealing with the public relations problems
and production.” tives but Jackson even sees benefits in this of closing operations and making redundan-
The results were laid bare in the 2015 fi- cies, South 32 can set out its plans for future
nancials with GEMCO’s expansions and, therefore,
production up to 2.94mt more employment.
(from 2.86mt in FY2014) It is an advantage that
is reflected throughout the
GEMCO used to be a small cog in aand costs down to $US94/t GEMCO business.
“We have been putting
(from $US97/t). a lot of energy into how we
big machine but sometimes it didn’tAccording to Jackson,
“get the attention it required. Now we arethe lower costs can also be
area from the change to South 32, saying
attributed to the success of getting that attention in important areas, rebuild the cost structure
South 32’s regional operat- particularly in functional support. of our assets,” Jackson
ing model. said. “GEMCO has gener-
Under the model, the ated such fantastic returns
company’s operations are in the last 10 years that we
split into two divisions; Africa and Australia the regional operating model has allowed haven’t needed to do that but this downturn
(which also has responsibility for Cerro Ma- GEMCO to increase engagement with other is a great opportunity to make improvements.
toso in Colombia). Jackson said the regional stakeholders. “Manganese is fetching its lowest price in
model has brought asset managers closer to “The community relations have always 10 years and we are still making good mar-
the decision-making process. been done at the GEMCO level so that hasn’t gins. Therefore, we have an opportunity to
“I wasn’t aware of the benefits the regional really changed but it has been hugely benefi- make ourselves fitter so when the market
model could bring but it has increased the cial regards government relations,” he said. does swing we can go from good margins to
focus on dedicated supply functions and has “GEMCO has flown under the radar a bit outstanding returns for our shareholders.”
resulted in us getting lower costs. In some under BHP Bil- – Dominic Piper
cases we have achieved 15-20% reductions liton’s owner-
on some items from the same vendor.” ship. It never
On the ground, less people and further pro- received
ductivity gains may only be slight changes,
but together have accumulative affect, Jack-
son said.
“There has also been a strong focus on de-
livery. We are seeing stronger performance
on delivery to the plant because we have
been working on executing the planned work.”
Being a larger cog in a smaller machine
also means GEMCO has greater opportunity
to push for expansion.
“We are now looking for incremental pro-
duction improvements and
there is a raft of things on
the drawing board. It is about
A new premium concentrate project is set to increase Groote Eylandt’s capacity by 500,000 tpa
AUSTRALIA’S PAYDIRT NOVEMBER 2015 PAGE 13
Case histories of discovery
The world’s pre-eminent
gold exploration event
stiEllbxaohvoiabtilihtaisbolne
Pan Pacific Perth
November 17-18
www.newgengold.com
Pan Pacific Perth
November 17-18
Jointly organised by:
Keith Yates & Associates Pty Ltd
Sponsors to date: Dinner Sponsor: Closing Drinks Sponsor: Wine Sponsor: Lanyard Sponsor: Gold Nugget Sponsor: Presenter Gifts Sponsor:
Proceedings Sponsor:
Exhibitors to date:
For all enquiries about exhibiting or attending please contact Melita Fogarty
on (+61) 8 9321 0355 or email [email protected]
Conference programme
Monday 16th November Wednesday 18th November
5.00pm Welcome reception and registration 8:00am Registration
Exhibition Area, Pan Pacific Perth 8.30am Guyana Aurora Gold Deposit: Discovery history and
geology of Guyana’s new multi-million ounce
Tuesday 17th November gold mine
7:30am Registration Nathaniel Silvio* and Augusto Flores IV
Guyana Goldfields Inc.
8:30am Welcome and opening
Bill Repard and Keith Yates
9.15am Suriname Geology and Discovery History of the Merian
Au Deposits, Suriname, South America
8.45am Canada The Borden gold deposit: Canada’s most
unexpected gold discovery Sam Anderson*, Jose Wilson, Santjitsing Radjkoemar,
Kirk Schmidt and Daven Mashburn
David Palmer Newmont Mining Corporation/Surgold LLC
Probe Metals Inc. (Goldcorp Inc.)
9.30am USA The Haile gold mine, South Carolina, USA – 10.00am Morning Tea
An Old Tradition and a New Opportunity
10.30am Australia The Discovery and Geology of the Gruyere
James M. Berry *, Reid M. Mobley, Ken A. Gillon and Gold Deposit
C. Cole Bates
Romarco Minerals Inc. Justin Osborne*, Rick Berg and John Donaldson
Gold Road Resources Limited
10.15am Canada Amaruq - A new gold discovery in Nunavut, 11.15am Australia Invincible – discovery to development
Canada Julian Woodcock*, Andrew Foley, Greg Tossel,
Gemma Lavery, Paul Edmonds and David Doutch
Denis Vaillancourt Gold Fields Limited
Agnico Eagle Limited
11.00am Morning Tea 12.00pm Lunch
11.30am Canada The Coffee Creek Gold Deposit, Yukon Territory, 1.00pm Australia The Pegasus Discovery and the Re-Emergence
Canada. A new style of gold deposit in an of the Kundana Goldfield, Western Australia –
historic gold district A Lesson in Critical Thinking and Persistence
in a Mature Brownfields Exploration
Tim Smith Environment
Kaminak Gold Corporation
12.15pm Burkina The Kiaka Gold Deposit, Burkina Faso Darren Cooke*, Glenn Grayson, Jodi Williams and
Faso Victor King*, Andrew Brown, Michael Badie Wanye, Rick Gordon
Ada Koumangdiwe and Ousséini Yameogo Northern Star Resources Limited
B2 Gold Corp.
1.45pm Philippines The Discovery of the Didipio Alkalic Porphyry
1.00pm Lunch Cu-Au Deposit
2.00pm Senegal The discovery and development of the Petowal Cecilio “Boyet” Bautista* and Chito Gozar
gold deposit, eastern Senegal OceanaGold Corporation
Bills J H*, Cocis D, Sow H, Sarr A, Bakhoum I, Tesfu A 2.30pm Afternoon Tea
and Parr R
Toro Gold Limited 3.00pm Colombia The Discovery and Geology of the Nuevo
Chaquiro Copper and Gold Deposit
2.45pm Sudan The Discovery and Geology of the Galat Sufar Paul Bartos, Rex Brommecker*, and Nicholas Winer
South Deposit, Republic of the Sudan AngloGold Ashanti Limited
Emmanuel Abanyin, Bushra Abdel Salam, Erzuah 3.45pm Long Term Trends in Gold Discovery
Ackah, Moses Appiah, Moawia Mohamedy, Stuart Richard Schodde
Mills, Hugh Stuart * MinEx Consulting Pty Ltd
Orca Gold Inc.
4.30pm Forum
3.30pm Afternoon Tea 5.00pm Closure followed by farewell drinks
Lobby Lounge, Pan Pacific
4.00pm Serbia Cukaru Peki Cu-Au deposit, Serbia Discovery
History, Geology and Ore Types
* Presenter
Dejan I. Koželj*, Vertrees M. Canby, and Leon Z. Naftali
Freeport-McMoRan Exploration Corporation/
Reservoir Minerals Inc.
4.45pm Chile The Discovery and Geology of the Salares Norte wwRwer.negegisiwsttgererantNigoonOld/ W.co!m/
Epithermal Gold-Silver Deposit, Northern Chile
6:30pm Francisco Azevedo*, Nathan Brewer*, Diego Huete This programme is subject to change without prior notice
7:30pm Verdugo, Alex Santos, Lisseth Roncal, Regina
Baumgartner, Alex Trueman and Andrew Foley
Gold Fields Limited
Pre-dinner drinks in Lobby Lounge,
Pan Pacific Perth
Dinner in Grand River Ballroom, Pan Pacific Perth
NEWS
Hazer lights up $5 million IPO
The Hazer Process technology has generated multiple graphite structures, including spherical graphite and graphene
Graphite is the flavour of the month and Hazer has somewhat of a connection with cost source of carbon that you can get access
Hazer Group Ltd is heading to the ASX for the resources sector in that it hopes to gain to, you actually have a very low-cost graphite
a taste of the action. exposure to the hydrogen and graphite mar- production technology.
kets through the Hazer Process.
The tech hopeful is looking to secure $5 “Even without taking in to consideration any
million before listing this year, with lead man- The Hazer Process, developed by UWA re- value of the hydrogen you have actually got a
ager Mac Equity Partners helping with the is- searchers, utilises natural gas and iron ore to very low-cost competitive graphite product as
sue of 25 million shares at 20c/share. produce hydrogen and graphite. well,” he said.
Volatility in commodity prices has forced Hydrogen, used largely in industrial chemi- Theoretically, when 1t of hydrogen is made,
potential resources floats to rethink listing pri- cal applications for production of fertilisers 3t of graphite is also produced. Effectively,
orities, which Hazer managing director Geoff and explosives, is a $100 billion market glob- graphite sales will be a credit against the hy-
Pocock sees as an opportunity on which to ally. drogen production.
capitalise.
Via the Hazer Process, low-cost, clean hy- “You don’t need to sell the graphite for very
“People are concerned about the mining drogen production with low CO2 emissions is much, even if it is for a fraction of the market
space and the market has not been kind to the possible which will present a potential oppor- price as soon as it is sold we are effectively
junior exploration sector. From an investment tunity to tap into the clean energy market. becoming the cheapest producer of hydrogen
perspective I think people are still looking for that can be made,” Pocock said.
a return and are comfortable with risk, they A by-product of the Hazer Process is the
are looking at diversifying that risk and that production of synthetic graphite which is The Hazer Process originated at UWA in
is why you are seeing a lot more interest from tipped to be a much sought after product in 2006/07, with Hazer Group established in
the market in the technology space,” Pocock the future as the demand for electric vehicles 2010 to commercialise the tech development.
said. and batteries heightens.
UWA is a current shareholder as is Wes-
“People looking for speculative invest- Hazer aims to produce a synthetic graphite farmers which provided some early seed
ments have historically looked at the junior with high purity and high crystallinity at a low- funding.
mining space and exploration space, but I er cost and higher capacity than players an-
think they are looking to diversify their risk gling towards the spherical graphite market. Hazer intends to spend funds raised in the
away from that.” IPO on ongoing development over the next
“We look at both of these [hydrogen and two years.
When Pocock spoke with Paydirt, the com- graphite] and say the time is right for both,”
pany’s prospectus had been open for 10 days, Pocock said. The IPO offer is scheduled to close on No-
with hundreds of potential investors down- vember 20, with Hazer to boast a market cap
loading the document. “The only commodity people are interested of $12 million when it lists on the ASX soon
in at the moment is graphite and we can get after.
“People are looking at it and are saying ‘it in to the graphite space at significantly lower
is the right time to be selling a company like volumes because we actually have such a low – Mark Andrews
Hazer into the public market’,” Pocock said. price point. Because we are using natural gas
as a benchtop, which is probably the lowest
PAGE 16 NOVEMBER 2015 AUSTRALIA’S PAYDIRT
OPINION
Busting the myth: The time is
right for a company tax cut
In 2014 Deloitte Access Economics produced taxes” to “good taxes”, multiplied by economy more than many other types of tax.
a Minerals Industry Tax Survey report for the B. The gap in economic costs between Company tax changes the decisions busi-
Minerals Council of Australia, and found in the “good” and “bad” taxes. nesses would otherwise make, affecting eve-
most recent survey year (2012-13), the sector The rising gap between “good” and “bad” rything from location, risk and timing ques-
paid nearly half of every dollar of profit as roy- taxes suggests a substantive tax reform pack- tions through to choice of structure, financing
alties and company tax to Australia’s state and age could add some 2% to national income. If and dividend policy and, at its worst, it can
federal governments. achieved, this would rank among the largest lead to investment decisions being delayed,
The total tax take ratio as calculated across reforms ever implemented in Australia. abandoned or substantially altered.
all the surveyed miners was 47.1%, and didn’t We also can’t let spending off the hook. Besides, and as Treasury also notes, the
include takes such as the Minerals Resource Even if tax reform is “revenue neutral”, there’s biggest beneficiary of lower company taxes
Rent Tax (MRRT) and the carbon tax, which still a big Budget repair task to be done. As would be Australian families, as lower com-
were also levied in 2012-13. The survey con- the Deloitte Access Economics analysis pre- pany taxes mean more growth, investment,
firmed FY13 was the third consecutive year pared for the Business Council of Australia jobs and higher wages and living standards.
in which the tax burden had increased on the has shown, policy decisions over the past There’s also a view out there we can’t af-
sector. decade ran at a four-to-one pace of spend- ford a company tax cut now – that the Budget
It therefore comes as no surprise that in re- ing increases outpacing tax cuts, indicating a is too battered, and that tax reform takes time.
cent times many industry pundits have called need to seriously address the other side of the But cutting the company tax rate isn’t an argu-
“for a reduction to Australia’s headline tax rate ledger. ment to cut the overall tax take. Given Aus-
which is currently well above tralia’s lingering Budget
the Organisation for Econom- deficit, any proposal to cut
ic Co-operation and Develop- Yes, to the uninitiated, advocating a the overall tax take should
ment’s (OECD) global aver- company tax cut sounds like welfare be treated with suspicion.
for plutocrats, but all the evidence points
age. But this has been met But company tax re-
with some scepticism. form can and should be
part of a wider package of
Despite the sceptics, min-
ers should have an interest to company tax being an inefficient, ‘bad tax reforms – one in which
in good tax reform and the tax’ that hurts the economy more than Australia would still raise
industry needs to ensure it many other types of tax. the same amount of tax,
continues to have a strong but do so in a way less
voice in the ongoing tax re- damaging to the econo-
form debate. Only then can it my.
achieve an outcome that can We all know that many
improve the economic environment for min- But back to the myths that should be of trading partners have already moved to boost
ing – one that allows for increased investment particular interest to miners; that any cut in the international attractiveness of their com-
and productivity, and positions Australia for company taxes would just be “welfare for plu- pany tax rates, including in Asia and New
future prosperity. tocrats”; and, that a company tax cut has to Zealand, and there’s more in the pipeline,
Done well, tax reform is a goal worth fight- wait. including announced cuts in the United King-
ing for, and Australia owes itself a mature de- Yes, to the uninitiated, advocating a compa- dom, Japan, and India.
bate. ny tax cut sounds like welfare for plutocrats, And the OECD thinks we should do it now,
But the sheer breadth of the reform op- but all the evidence points to company tax noting Australia has a high headline rate, es-
portunities being considered has resulted in being an inefficient, “bad tax” that hurts the pecially for a nation that benefits from foreign
a debate that has been confusing, investment.
contradictory and inflexible. So we have a choice – a race to
To help drive the reform process, the bottom, being competitive, or
Deloitte recently launched the first steadily losing ground. Tax compe-
of two papers designed to address tition will continue to exist as long
some of the myths and misconcep- as countries seek to attract mobile
tions that are a by-product of the capital. Australia doesn’t need to
politics and vested interests that have the lowest rates to keep busi-
tend to dominate the tax reform ness investment here, but we do
debate. need to be comparable to our eco-
We looked at five myths, across nomic and regulatory peers.
fiscal drag, the GST and company Australia is already late to the tax
tax, based on an overriding theme reform table. It’s time to recognise
that taxes have a big impact on the benefits a company tax cut can
prosperity. bring to all Australians, including
But how much prosperity is at our mining industry which we need
stake? The maths is pretty simple to keep strong.
– the extent to which tax reform
makes Australians better off comes
down to: David Ocello is a Deloitte Tax partner, specialising in the energy
A. The dollars shifted from “bad and resources sector. He is based in Perth.
AUSTRALIA’S PAYDIRT NOVEMBER 2015 PAGE 17
COVER
GR stands tall amid
commodity fall
GR Engineering beat a number of rivals in open tender to win $114 million worth of work at the now Independence
Group-owned Nova nickel project in WA’s Fraser Range
In the face of the worst resources downturn Geoff Jones collapse, the continued downturn has left
in a generation, GR Engineering Services Ltd many on their knees.
reported best ever revenues in FY2015. Better
still, there is a rosy outlook for the Perth-based GR has not completely avoided the car-
engineering firm. nage. As recently as 2011/12, it could consist-
ently boast 25 studies on the books, but with
“FY2016 has started well for us and it looks project development financing hard to access
like we are going to have another solid rev- in the current environment, maintaining 12-14
enue year and we also have a tail of earnings studies is the new norm.
into FY2017, which is good,” GR manag-
ing director Geoff Jones told Paydirt. “I am The quantity may be less, however, there
not sure how the market is going to develop is upside in the quality of study now being de-
through FY2016. Obviously we need some manded to prove projects can withstand the
increases in commodity prices for projects to volatility of commodity prices, according to
progress to development but it is difficult to Jones.
determine on an international stage exactly
what is going to be the catalyst to force com- “We tend to maintain a reasonably consist-
modity pricing up.” ent number of projects in the execution phase,
but in the last two years the value of the pro-
The services sector has felt the crunch of jects we are doing has increased and our
tapering commodity prices just as much as completion of EPCM projects has increased.
miners and explorers, in some cases more so. This is reflected in our revenue growth in
Forge Group was the highest profile casualty FY2015 and now FY2016,” Jones said.
and while other firms have avoided complete
GR reported a 90% increase in revenue to
$216.9 million in the 12 months from FY2014
PAGE 18 NOVEMBER 2015 AUSTRALIA’S PAYDIRT
An oxide circuit at Resolute’s Syama mine, Mali, was completed by GR earlier this year
to FY2015, with EBITDA of $20.3 million and growing organically through geographical GR is conducting the Epanko graphite feasibility
cash flow from operations of $42.5 million. diversity. It has since won work in Mali, study. Project owner Kibaran will make part
Cote d’Ivoire, Tanzania, Laos, Mexico, Ar- payment in shares
Net cash was up 72% to $63.5 million, gentina, Indonesia and the UK.
while shareholders revelled in fully franked
dividends of 9.5c/share (7c/share in FY2014). “There are some countries we would
have to think about regarding risk before
Keeping low overheads has been crucial we accepted work, but generally there are
and an area in which GR maintains its disci- no ‘no-go’ zones. We will look at projects
pline to effectively manage its business. as they come and assess them on their
merits,” Jones said.
However, the real key to the company’s
success is its determination to promote an “We are seeing in Australia financing is
EPC fixed, lump sum delivery model. difficult for the juniors and it is the same
in South America. We are looking at the
Across the board commodity prices remain Americas as a market for GR but it is not
depressed, making the functionality of a fixed something that will happen overnight, it is
price contract appealing to juniors and mid- a very slow process, knocking on doors
tiers struggling to raise equity and debt fund-
ing in the market. Britain’s first new metals mine in over 40 years, Hemerdon, was brought online this year.
GR designed, constructed and commissioned the 3 mtpa tungsten and tin processing plant
“Financiers [are] really wanting to lock in
a price,” Jones said. “They are very keen to
understand they are going to pay ‘X’ dollars
for a project and no more, so that plays more
to an EPC delivery model as opposed to an
EPCM. We have historically focused more on
EPC delivery, so I think it gives us an edge in
the current market.
“We tend to complete EPCM work on pro-
jects that may have a higher risk profile, so in
some countries we would look at an EPCM
delivery model opposed to EPC. We recently
completed the oxide circuit for Resolute Min-
ing Ltd in Mali, which was delivered on an
EPCM model.”
Work under way for Finders Resources Ltd
at the Wetar copper project expansion, Indo-
nesia, is being completed under an EPCM
arrangement and includes a 25,000 tpa pro-
cessing plant and associated infrastructure.
Its separate EPC and EPCM delivery lines
allow GR to be nimble in the global contract-
ing space, a characteristic enhanced by its
willingness to work in most jurisdictions.
When it listed in 2011, GR focused on
AUSTRALIA’S PAYDIRT NOVEMBER 2015 PAGE 19
COVER
Funding has dried up for resources projects all over the world, making the and obtaining work. You have to start at the
contracting space extremely competitive bottom and work your way up,” he said.
Breaking new ground is a challenge at
this point in the cycle but with GR’s experi-
ence and growing international reputation, the
company is well placed.
Helping its cause on the world stage was
successful commissioning of Wolf Minerals
Ltd’s Hemerdon tin-tungsten project in Eng-
land’s south-west, which largely contributed
to FY2015 being GR’s best ever on revenue.
The fixed term EPC contract was worth £75
million to GR which completed design, con-
struction and commissioning of the 3 mtpa
tungsten and tin processing plant plus associ-
ated infrastructure at Hemerdon.
“We had a good spread of contracts [in
FY2015], obviously the main contract was the
Hemerdon tungsten project for Wolf Miner-
als and that added quite a lot to our revenue
stream, so that was quite important for us,”
Jones said.
As Britain’s first new metal mine in over 40
years, Hemerdon has garnered widespread
attention both domestically and on the inter-
national mining scene.
More than 200 people are expected to be
employed at the mine over the next decade as
production ramps up towards 5,000 tpa tung-
sten and 1,000 tpa tin.
Whether or not a mining renaissance in
Britain stems from Hemerdon remains to be
seen, however, the recent experience will
surely have GR front of mind for any future
projects on the island nation.
In the meantime, even as capital markets
remain tight and development projects remain
idle due to funding constraints, GR has many
commitments locally to keep it occupied.
MZI Resources Ltd has locked in GR for
EPC work at its Keysbrook mineral sands pro-
ject, 70km from Perth, which is worth $54.6
million, while after completing the Andy Well
project for Doray Minerals Ltd, the company
was again engaged to work on the Deflector
gold-copper project.
Two years in from the commissioning of
Andy Well, Doray managing director Allan
Kelly said the plant was running at a higher
capacity than originally designed.
“They [GR] did a great job at Andy Well on
a fixed price contract and after starting be-
hind schedule they caught up and came in
under budget. Having a fixed price contract
takes out any of the unknowns from a market
point of view and it is important there’s no cost
blowouts,” Kelly said.
“The plant is the single biggest piece of the
Deflector budget and because it is funded by
debt [the fixed price contract] the banks are a
bit more comfortable too.”
Meanwhile, the big domestic fish landed by
GR is the Nova nickel project.
Nova, in Western Australia’s Fraser Range,
has been one of Australia’s most talked about
projects in the last five years and is under
construction. GR is undertaking design and
construction of the mineral processing and
paste fill plant.
GR was awarded the $114 million contract
earlier this year and at the time Jones said:
“Securing this contract ranks highly in the
PAGE 20 NOVEMBER 2015 AUSTRALIA’S PAYDIRT
GR will assess every project on its merits and there are few jurisdictions it won’t consider entering
GR Engineering’s recent and current contracts
Sirius Resources/Independence Award date: March 2013 Details: GR delivered an innovative design
Group NL Status: Completed September 2015 solution with the flexibility to use new belt fil-
Project: Nova nickel, Fraser Range, WA Details: GR was awarded the contract for ters and existing dewatering screens to clas-
Award date: June 2015 a 3 mtpa tungsten and tin processing plant sify and dewater the fines iron ore. The EPC
Status: Completion set for November 2016 and associated infrastructure. Commission- contract included all structural, mechanical,
Details: Nova ranks as one of GR’s finest con- ing was completed in September and GR has piping and electrical works for the installation
tract wins. The company will complete mineral handed the keys over to Wolf. of two 85 sqm horizontal vacuum belt filters
processing plant and paste fill facilities, while to improve the dewatering of fines iron ore
also providing services for all non-process in- Finders Resources Ltd product.
frastructure associated with the project. Project: Wetar copper project, Wetar Island,
Indonesia MZI Resources Ltd
Western Areas Ltd Award Date: October 2014 Project: Keysbrook mineral sands project,
Project: Forrestania mill recovery enhance- Status: In progress near Perth, WA
ment project, Forrestania, WA Details: Finder’s Indonesian subsidiary PT Award date: December 2014
Award date: July 2015 Batutua Tembaga Raya engaged GR’s EPCM Status: Completion set for December 2015
Status: Pending services to refurbish and recommission the Details: A 4.5 mtpa wet concentrator plant
Details: GR has had a long association with 18,000 tpa SX-EW plant formerly operated at to produce 119,000 tpa of HMC which will be
Western Areas having completed the Cosmic Whim Creek in Western Australia. When com- processed further through the existing Doral
Boy processing plant in 2009. Western Areas pleted the processing rate will be increased mineral separation plant is being engineered,
is yet to pull the trigger on the mill enhance- to 1.65 mtpa sulphide ore for production of designed, procured and commissioned by
ment programme but when it does the con- 25,000 tpa LME A grade copper cathode. GR. Annual production of 68,000t leucoxene
tract will be worth $22 million. and 28,000t zircon concentrate for export is
Rio Tinto Ltd being planned by MZI subsidiary Keysbrook
Wolf Minerals Ltd Project: Paraburdoo moisture reduction pro- Leucoxene Pty Ltd.
Project: Hemerdon tungsten-tin project, ject, Paraburdoo, WA
Plymouth, England Status: Completed in April 2015
AUSTRALIA’S PAYDIRT NOVEMBER 2015 PAGE 21
COVER
After successfully commissioning Andy Well, GR was again selected by Doray to build the Deflector gold-copper plant
company’s record of achievements to date. significant Australian base metal resource de- continues to grow or if it needs to apply the
The company is pleased to play an important velopments of recent times.” brakes.
role in the development of one of the more
In July, GR’s participation at Nova was in- “There is a lot of experience in the compa-
Upstream Production creased with the contract award for all non- ny and collectively we have worked through
Solutions contracts process infrastructure worth $12 million. many cycles over a 30-year period, so I think
we have evolved through experience to suc-
Origin Energy Resources Ltd “It is a very competitive market so the cli- cessfully work through any prevailing market,”
Project: Surat Basin, south-west Queensland ent has the upper hand in the negotiation Jones said.
Award date: February 2015 process,” Jones said. “The work we are doing
Status: Current at the Nova nickel project for Independence “It’s not ideal, but when we are cycling with
Details: GR’s wholly owned oil and gas sub- was won in open tender against three other commodity prices as we do, that’s the name
sidiary won a $5 million,12-month contract to bidders. The market is much more competi- of the game.”
complete scheduled and unscheduled me- tive, but we are maintaining our margins. At
chanical maintenance services for Origin En- the end of the day, suppliers that supply to us When the next boom in traditional com-
ergy in Australia. The Master Services Agree- – mill suppliers, screen suppliers, pump sup- modities – gold, iron ore, base metals – will
ment compliments the work already being pliers – are all bidding keenly to us.” come is anybody’s guess, but one thing’s for
carried out for the upstream operator of the sure; Jones won’t be kept up at night waiting
Australia Pacific LNG project, Origin Energy. While the competition is hot, one of GR’s for it to happen.
strengths to handle the heat is involvement
Empire Oil Company Ltd from a lot of major shareholders in the day- Today’s resources sector is much broader
Project: Red Gully gas condensate facility, to-day running of the business which ensures than gold and iron ore and equipped with
Perth Basin, WA precision management of projects and client wide-ranging technical experience, GR has
Award date: September 2015 satisfaction. expanded its credentials in the tech-driven
Status: Current space of graphite and rare earths.
Details: Since the Red Gully processing fa- It is a mantra GR has carried on from the
cility was commissioned in 2012, Upstream early days of JR Engineering (which GR was Last year, GR and Tanzanian graphite
has operated and maintained it. The recent born from) in the mid-1980s. hopeful Kibaran Resources Ltd entered an
two-year contract award is for the provision of agreement whereby the former would conduct
operations and maintenance services to the In a modern era where professionals have a feasibility study on the Epanko deposit and
Red Gully gas condensate facility. chopped and changed roles at will, GR has was willing to accept part payment of Kibaran
been able to retain staff to enable it to continu- shares for its services.
ally meet project goals.
“We like Kibaran because it will be a small-
While many services companies continue ish producer on the world scale and it already
staff cutbacks during one of the worst re- has off-take agreements in place and a pipe-
sources downturns in history, GR has added line of projects, so it has some real potential
about 80 people to its roster since the start of and we are very supportive of that. With ad-
the year, boosting its number of employees to vances in technology commodities like lithi-
approximately 250. um, graphite, rare earths are going to come
into play more,” Jones said.
Commodity prices will dictate whether GR
PAGE 22 NOVEMBER 2015 AUSTRALIA’S PAYDIRT
On Australian shores, GR has a number of projects keeping it busy tztoGahinTndeREGcEoAhenHRlftecltdgohiavotoirewhwnelnkrrEeeoraciilcdPerlwedtkoiirdCnokmoinnbetirMrteGgkePsraasiietoogfndoconuflngetdrrinpsnaacaPdriCiwtgainshenOonruadartrr,lrislwtapedcyGhe.’dmoosetRnoIropIkcssuEiiwouatthsrtnnbosuaigts.srscsrkiitatdnwascaieabtaottaelrreb3trrytht,yhi8enet5Htdhgah,O,eib0seSwlol0lyetaeu0iimtmrsnthvtdp$eipGGci7aoaeionRsfmslgdnGpeoiLelrlxrltsixoddeopetj,eneelayelc.ccedecettadaet.oederd.nd,d
German banks are warming towards help- remains hard to forecast if a surge in activity price that hasn’t worked as well as we would
ing Kibaran with financing options over the is on the horizon. have hoped,” Jones said.
$77 million Epanko project, adding weight to
GR’s decision to back the junior. Nevertheless, GR delivered on its M&A “That business is, however, going very well
plan when a deal was done to create an oil – meeting all our expectations with regard to
The Kibaran deal is not a one-off for GR, and gas subsidiary. revenue and return. It was a very good acqui-
which will pursue equity positions in mining sition, GR is open to look at M&A but at this
companies if propositions meet strict invest- Upstream Production Solutions was stage there is nothing really in the pipeline but
ment criteria. formed in early 2014 and despite oil prices we continue to be open to possibilities.”
falling sharply since it has been a good ad-
Through Mutiny Gold, GR has a small dition for GR. GR’s willingness to pursue opportunities
shareholding in Doray, while the Nebo-Babel and create a variety of work for its people has
project in the Musgrave region of WA com- “We went into oil and gas to diversify the been an important part of its culture.
pelled the company to invest in Cassini Re- business and move away from the mining
sources Ltd. sector cycle, of course with the drop in the oil “Over the years we have maintained a good
work flow, so there has been plenty of work
“We have a small pool of funds that the to keep our people busy. Everyone at GR is
GR board has set aside to invest in compa- committed to the task of getting the best so-
nies that have solid projects and we intend to lution on every project and achieving the tar-
selectively invest. We believe our technical gets that we set and I think this collaborative
expertise and delivery model can add value effort is key to GR’s success,” Jones said.
to any project entering a financing phase and
view our investment as a positive for all stake- “Within Australia our site works are com-
holders,” Jones said. pleted with our own labour. That tends to
stand us apart from our EPC competitors as
Investments won’t be made lightly and will everything from the process engineering, de-
be a topic of conversation during GR’s review tailed engineering and drafting, project man-
into its business strategy. agement and construction is all under one
roof and controlled by one entity. [We offer]
Jones said the strategy for growth – geo- total accountability over the entire project cy-
graphical expansion and organic growth, plus cle by one focused group.”
M&A – set out upon listing on the ASX in 2011
won’t change much. – Mark Andrews
While some services companies are facing GR is bullish on the non-traditional sectors
dire situations due to the drop off in advanc- of graphite, lithium and rare earths
ing projects, the appetite for M&A in the space
hasn’t been whet like many predicted and it
AUSTRALIA’S PAYDIRT NOVEMBER 2015 PAGE 23
SITE VISIT
Pilbara Minerals
all charged up
PAGE 24 NOVEMBER 2015 AUSTRALIA’S PAYDIRT
A modular plant at the Tabba Tabba tantalum project cost Pilbara Minerals $3.5 million
In a landscape dominated by resources heav- product now because they feel 2017/18 is Six agreements with customers in China,
yweights, Pilbara Minerals Ltd is etching a
different tale in the heartland of Australian iron when there will be a big supply gap,” Pilbara Japan, South Korea, Europe and North Amer-
ore mining.
exploration director John Young told Paydirt ica are in place regarding potential off-take,
Lithium, critical in driving technologies and
a budding generation of electric vehicles, is in Port Hedland. indicating the demand for Pilangoora’s qual-
what Pilbara has bucket loads of near Port
Hedland. “We would like to move faster by [address- ity product. The low iron content makes it at-
In fact, Pilbara has the second largest hard ing] permitting and all those other issues tractive to players in the glass and ceramics
rock spodumene – a lithium aluminium ino-
silicate – deposit in the world within 100km of which will make it quite difficult for us to re- industries as well as the lithium ion battery
Port Hedland.
ally push that timeline before June 30, 2017. market.
The company’s Pilgangoora project hosts
indicated and inferred resources of 52.2mt @ We are really aiming to get in to production by Lithium oxide concentrate of about 6%,
1.3% lithium containing 668,000t lithium and
32.9mt @ 0.022% tantalum for 15.7 mlb then, subject to completing the DFS, subject suitable for batteries or chemical use, with low
tantalum.
to permitting and finance, but certainly the iron content can fetch $US450/t. Lower iron
Pilgangoora falls in behind Talison
Lithium’s monster project, Greenbushes buyers are there for the products.” content also makes the product more valu-
in Western Australia’s south-west, in
size, but there’s no playing down its im- Despite a DFS still being months away, able to the glass and ceramics industries.
portance in future lithium-tantalum sup-
ply. customers are waiting at Pilbara’s door to se- In response to a query from the ASX, Pil-
Forecasts are for the global tantalum cure off-take from Pilgangoora. bara had to reissue its latest resource update
market to grow by up to 60% next year
from the current 1,300 tpa to 2,000 tpa. to include iron oxide content, with the
Supply from Pilgangoora won’t be outcome stated in a release mid-Octo-
available by then, but its place in the
market will be known. ber: “Magnetic separation after flota-
Pilbara is busily wrapping a DFS tion reduced the iron oxide content of
around Pilgangoora which is expected to
be released mid next year, with produc- the spodumene concentrate to 0.11%
tion potentially following 12 months later.
Fe2O3. This meets the specifications
“Talking to buyers of the spodumene
concentrate, they are looking to secure of typical glass-grade spodumene
products.”
Young said iron content was never an
issue with the company’s spodumene
at Pilgangoora much sought after.
“We were approached by at least six
or seven individual companies in China
and we are talking about 10-15,000 tpa
producers of lithium carbonate. [Pro-
duction of] 200,000 tpa of spodumene
concentrate equates to about 20,000
tpa of lithium carbonate, so a number
of producers of lithium carbonate hy-
Neil Biddle droxide in China could take all of our
AUSTRALIA’S PAYDIRT NOVEMBER 2015 PAGE 25
SITE VISIT
Reserves at Tabba Tabba will suffice for 14 months of production, however, a longer mine life is the aim
product. North America, Europe, Japan and John Young what Tesla is doing.
Korea all want smaller parcels of high-quality “I think there was a little bubble in 2009/10
spodumene concentrate for their glass and whole world produced in 2013. As well as al-
ceramics industry as well,” Young said. lowing for the mass production of its Series when lithium became a bit of a buzz word
3, Tesla will increase production of battery and everybody got a little bit ahead of them-
A new wave of technology and the emerg- packs for residential and business purposes. selves,” Young said. “I think it took time for
ing importance of lithium ion battery-powered new technology to be developed and I think
electric vehicles have driven demand for lithi- Needless to say, Young and Pilbara execu- now is the time and we are seeing Tesla build-
um, with Tesla at the forefront. tive director Neil Biddle are unabashed fans of ing a power wall and energy storage in your
home which is important for low emissions.
Tesla’s electric motor vehicle range is grow-
ing but most industry analysts believe wide- “All of those things are starting to come
spread acceptance won’t come until prices together whereas four or five years ago a
are competitive with conventional petrol ve- lot of naysayers were questioning whether
hicles. or not global warming was real. Now people
are saying ‘we can reduce emissions by hav-
Tesla’s latest Model X electric SUV – re- ing electric cars’. Technology has evolved to
leased in late September – is selling for about the point where they are becoming feasible. I
$US144,000 but with the company having think everybody is quite accepting of the fact
started construction of its gigafactory in Ne- that one day we are going to go electric which
vada, it believes it can reduce the price tag of drives the market as well.”
is Tesla Series 3 (set for release in 2017) to
around $US36,000. Keep your eyes peeled then for Young
cruising into Pilbara’s North Fremantle head-
By 2020, the gigafactory alone is expected quarters on an E-bike, 30 million of which are
to produce more lithium ion cells than the produced a year in China and are converting
to lithium ion batteries.
Getting the tailings dam permitted took longer than anticipated
And, Pilbara is among just a small group of
potential lithium producers.
Talison Lithium, with Greenbushes, is Aus-
tralia’s most prominent producer, while Pilbara
leads the pack of companies at the advanced
stages of project development.
Altura Mining Ltd also has its own Pilgan-
goora lithium project which abuts Pilbara’s
project.
Altura has a resource of 315,000t contained
lithium from 26mt @ 1.2% lithium, which is
subject to a feasibility study, with a detailed
mining study to be submitted in Q2 2016.
“Lithium products are in high demand and
the sources of lithium products are in high de-
mand,” Biddle said.
“There is constrained supply and there
is not much coming on stream. Apart from
Greenbushes there are no other spodumene
PAGE 26 NOVEMBER 2015 AUSTRALIA’S PAYDIRT
deposits out there that can supply the glass/ about 1.5 hours drive from Port Hedland. Pilgangoora is about 100km from Port Hedland
ceramics market. Pilgangoora is the first new A 30km graded road from Pilgangoora
spodumene deposit that can do that. traditional bank debt funding, plus the hybrid
leads to Great Northern Highway which Pil- financing options open to it.
“It is an important sector and it is not just bara will use to access the Port Hedland port
about batteries, it is a widely used industrial where Qube is engaged in a logistics study. “There are off-take partners who have also
mineral with a whole range of uses that re- been in discussions about providing funding,
quire low iron spodumene; which our product “There is plenty of capacity at the port to so I don’t think we will have any issues [organ-
is.” bundle the product out, it [Pilgangoora] is also ising financing],” Biddle said.
close to gas supply, so it is a really solid pro-
From an engineering perspective, Pilgan- ject,” Biddle said. Biddle’s confidence in capital markets is
goora is not only large and high-grade, but born from a stellar 12 months. The company
also shallow. “When we finish the DFS we’ll know how has managed to raise $13 million during this
much money we will need to raise to build the time “pretty easily”, according to Biddle.
Most of the resource is 100m from surface plant at Pilgangoora. I think it will be some-
and an exploration target of 80-90mt @ 200- where in the order of $100 million to build the Investors would be delighted with their re-
300 ppm tantalum and 1.3-1.5% lithium has first stage and the plant.” turns on Pilbara. The company started the
been set by Pilbara at Pilgangoora. year at 4.6c/share but had blossomed to 39c/
Pilbara is tossing up a variety of funding share at the time of print.
The company owns three mining licences scenarios, includ-
and two exploration licences at Pilgangoora, ing debt and equity, “There is certainly awareness about the
A DFS at Pilgangoora is scheduled for completion mid-2016 Pilbara Minerals has put the rigs to good use at both Tabba Tabba
and Pilgangoora this year
AUSTRALIA’S PAYDIRT NOVEMBER 2015 PAGE 27
SITE VISIT
RC and diamond drilling is aimed at rapid growth of resources and reserves at Pilgangoora
company and I think that is more to do with the er grade material to start with but it is pretty delay, bringing Pilgangoora on in leaps and
lithium discovery at Pilgangoora than Tabba standard stuff.” bounds while exploration at Tabba Tabba has
Tabba. Tabba Tabba is a relatively small pro- been pinpointed. In the meantime, the mining
ject, although it will generate a robust profit,” Nagrom, global specialist in tantalum pro- downturn has meant input costs for Tabba
Biddle said. cessing, will run the plant and Biddle expect- Tabba have come down.
ed it to “nail” the operation quickly.
The Tabba Tabba tantalum project, 55km “We have been able to save a lot of money
from Pilgangoora, is set for production by the Permitting issues, primarily to do with the by the project being delayed, for example the
end of November. structure of the tailings dam, pushed the plant operator costs have halved, our crush-
Tabba Tabba project back, however, Pil- ing costs have come down considerably, and
When Paydirt was hosted on site in Octo- bara has managed to make good use of the our mining costs have reduced in the last 12
ber, the $3.5 million modular plant at Tabba months. It hasn’t affected us, but it has al-
Tabba was 75% completed and on track for At Pilgangoora, Pilbara Minerals has the second lowed us to focus on Pilgangoora which we
the start of commissioning in early November. largest spodumene deposit in the world. Spodumene have been able to advance much more quick-
is a pyroxene mineral consisting of lithium aluminium ly,” Biddle said.
Resources of 666,200lb tantalum pentox-
ide currently exist at Tabba Tabba, with an inosilicate and is a source of lithium “You can almost say it is a positive for us
initial 14 months of mining reserves in place. that Tabba Tabba hasn’t started up.”
Biddle said he expected to increase re- Tabba Tabba – recently fully acquired from
sources suffice for at least a five-year project, GAM – will produce good cash flow for 18
with Global Advanced Metals locked in for off- months and by then Pilbara should know
take for five years from Tabba Tabba. where it stands with regional prospects such
as Strelly.
EBITDA of $18 million is forecast to be gen-
erated in the first year, a good return for Pil- “I’d like to be drilling Strelly by March/April
bara considering the $8 million capex spent to next year, depending on weather. Cyclones
bring Tabba Tabba on stream. tend to pass through around March, but if the
weather is good we hope to be drilling Strelly
Tabba Tabba will produce about 7% of by then,” Biddle said.
global tantalite supply and combined with
output from Pilgangoora, Pilbara has the With activity starting to ramp up, Pilbara
potential to supply 20% of the world’s tan- has appointed experienced metallurgist Greg
talite. The market value of tantalite is about Durack to help with the DFS, while environ-
$US200,000/t, while refined tantalum is about mental and permitting expertise will also be
$US400-500,000/t. added to the team.
Biddle said the Tabba Tabba orebody was The Pilbara Minerals bandwagon is not full
“pretty straightforward” and the operation yet, but with a producing asset on the hori-
would be simple. zon, a large-scale development project in the
pipeline and a runaway share price, it won’t
“The one thing [to get right] is making sure be long.
we get the crushing and grinding right,” Bid-
dle said. – Mark Andrews
“The crush size can’t be too fine or too
coarse, so they will practice with some low-
PAGE 28 NOVEMBER 2015 AUSTRALIA’S PAYDIRT
NORTHERN TERRITORY
Northern Territory:
Star of the north
For all its iconic natural beauty attractions, the Northern Territory remains a popular resources, as well as tourism, destination
It is the highly acclaimed tourism industry on promoting volume through the port, it ap- be enhanced courtesy of the China-Australia
which puts Northern Territory on the map but pears more, not less staff will be required for Free Trade Agreement, while the historic
the NT Government is desperate to highlight port duties. Trans-Pacific Partnership (TPP) – the biggest
the State’s other economic opportunities. global trade agreement in 20 years – involves
Landbridge’s upfront cash commitment is a Japan and Vietnam; two of NT’s most impor-
Record numbers of Australian and in- boon for NT, however, it is the company’s ex- tant trading partners.
ternational visitors flocked to the State in tensive networks in Asia from which the long-
FY2013/14, spending $1.9 billion in the “Top term benefits will be captured. Under the TPP, 98% of tariffs in sectors
End”. About 16,000 Territorians are employed such as resources and energy will be elimi-
in tourism; it is largest employer in the State It is to Asian businesses that Landbridge nated, and it is hoped this will invigorate in-
and has some of Australia’s most popular nat- will be pitching NT’s oil and gas and mineral vestment and “seamless” trade opportunities
ural wonders with the likes of Kakadu National exports as well as other industries such as for NT and its partners.
Park and Uluru featuring on people’s bucket live cattle export and inbound tourism.
lists around the world. While the TPP and China-Australia Free
Exports in 2014/15 generated $6.1 billion Trade Agreement are expected to stimulate
However, recent developments have high- (about 30% GDP), with NT’s top trading part- investment in NT, and other parts of the coun-
lighted that NT’s economic capabilities extend ners being Japan, China, Thailand, Indonesia try for that matter, business prospects in Aus-
far beyond the tourism turnstile. and Vietnam. tralia’s Top End have been given a boost by
In October, the NT Government’s search The relationship with China is only going to
for a private partner to operate the Port of
Darwin culminated in the signing of a deal The Federal Government’s $5 billion Northern Australia Infrastructure Facility
with Chinese firm Landbridge Group. will help mining projects get off the ground
The Government will lease the Darwin port
land and East Arm Wharf facilities to Land-
bridge for 99 years for $506 million.
Landbridge is currently expanding its port
operations in China’s Shandong province
from 30 mtpa to 200 mtpa – 65 times the size
of Port of Darwin.
While Port of Darwin is not expected to ex-
pand to this magnitude, Landbridge will invest
heavily – initial $35 million for new growth
opportunities and $200 million in capital ex-
penditure over the next 25 years – to grow the
port, with the State’s economy and people ex-
pected to reap the benefits.
An Enterprise Agreement (effective to June
2018) means the established workforce won’t
be forced into redundancies and with a focus
PAGE 30 NOVEMBER 2015 AUSTRALIA’S PAYDIRT
Government incentives are driving exploration in the Northern Territory
the four-year Creating Opportunities for Re- ing and processing up until January 2021 and
source Exploration (CORE) initiative of the NT access for rehabilitation purposes until 2026.
Government, which is striving to create more ERA remains committed to fulfilling its
the Federal Government’s $5 billion Northern jobs in the resources industry by investing in duties and obligations and will continue to
Australia Infrastructure Facility. exploration. process ores from existing stockpiles, while
NT, Western Australia and Queensland The Geophysics and Drilling Collabora- undertaking a review of its business after the
governments, along with the private sector, tion programme, whereby the Government Gundjeihmi Aboriginal Corporation handed
can access the concessional loan facility to subsidises 50% of drilling costs (capped at down Mirarr’s decision.
build major roads, ports, railways, pipelines $100,000) and geophysical programmes in While the future of Ranger may be coming
and electricity generation projects. areas of NT lacking geological information, is to an end in NT, new opportunities may be on
The facility is open to Australia’s mining designed to incentivise companies to go out the horizon.
and explore. Earlier this year, the first petroleum explo-
The State is prospective for large scale ration permits on Aboriginal land managed
sector, including those companies seemingly
stranded in the vast landscape by the Northern Land Council were
of NT. granted.
Projects previously con- “My Government is committed
to creating jobs in our regions and
My Government is committedstrained by a lack of infrastruc- breaking the cycle of welfare de-
pendency that has been crippling
ture can now be looked upon as
our communities,” NT chief minister
to creating jobs in ourhaving a half a chance of becom- Adam Giles said in March.
“regions and breaking the cycle ofing an operation with infrastruc- “The resources industry is one
ture funding on its side. welfare dependency that has been key to that process and the granting
However, before NT looks too crippling our communities.
far ahead the issue of unearthing
the mines of tomorrow needs to
be addressed. of these permits is an important step
Members of the Northern Territory Geologi- zinc-lead, bauxite, gold, phosphate and man- in creating private sector employment oppor-
cal Survey (NTGS) spent the dry season car- ganese, as well as significant deposits of iron tunities.”
rying out sampling and mapping objectives in ore, rare earths, tungsten, mineral sands, pot- Meanwhile, Minister for Mines and Energy,
eastern Arnhem Land, Victoria River district ash, oil and gas. David Tollner, said the historic agreement for
and other sites across central Australia to Perhaps the State’s best known mining as- two exploration permits in the McArthur Ba-
learn more about the State’s mineral wealth. set is the Ranger uranium project operated by sin was evidence traditional owners and the
In addition to mapping exercises, the NTGS Energy Resources Australia Ltd (ERA), a Rio resources industry can both win when they
also carried out studies on the formation of Tinto Ltd subsidiary company. worked together.
copper deposits in central Australia and as- Ranger is Australia’s longest continuously “Many indigenous communities are al-
sessed shale deposits in the northern part of running uranium mine, however, its future be- ready benefiting from mining on their land and
the State for oil, gas and base metals poten- yond 2021 is in jeopardy. now the oil and gas industry is set to further
tial. ERA’s requests to extend the Ranger Au- strengthen local economies,” Tollner said.
The NT Government committed extra fund- thority have been knocked back by the tra- – Mark Andrews
ing in “the busiest year for our geological field ditional owners of the land, the Mirarr Tradi-
teams for a decade” in 2015. tional Owners.
A budget of $23.8 million has been set for The existing Ranger permits allow for min-
AUSTRALIA’S PAYDIRT NOVEMBER 2015 PAGE 31
NORTHERN TERRITORY
TNG steels for Mt Peake
funding hunt
ADFS was signed off on TNG Ltd’s Mt port and recently accompanied a delega-
Peake vanadium-titanium-iron project
earlier this year and now attention has tion to China to meet with various agencies
turned to financing.
and help promote the Northern Territory’s
Pre-production capex, which will include
all infrastructure requirements, is estimat- natural resources.
ed at $970 million for stage one mining rate
activities of 3 mtpa. After four years the op- Furthermore, now that the Federal Gov-
eration will ramp up to 6 mtpa, which TNG
plans to fund through revenue. ernment’s $5 billion Northern Australia
Annual production of 17,500t vanadium, Infrastructure Facility has been set up
236,000t pigment titanium and 637,000t
pig iron over 17 years is expected to gen- for companies such as TNG to tap in to,
erate life-of-mine revenue of $27.3 billion,
with $780 million net operating cash flow Northern Territory can expect more of the
incoming to TNG.
spotlight on its resources sector in years
The project, using the trademarked TI-
VAN facility processing route, boasts a to come.
NPV of $4.9 billion and has been awarded
Major Project Status in the Northern Ter- “There has been some neglect for infra-
ritory.
structure development in Northern Aus-
Subject to securing financing, construc-
tion is planned to start next year with produc- tralia which has hampered all of Northern
tion in 2018.
Australia’s development,” Burton said.
Mt Peake’s vanadium pentoxide can be
used to make steel (same as its pig iron), non- “There has always been the criticism in
ferrous alloys, chemicals, catalysts and for
energy storage, while the titanium dioxide pig- a way or a challenge when you go and talk
ment is required for usage in paint, plastics,
paper and inks. to investors, say, in Asia and they look at
Importantly, TNG has a binding off-take the lack of infrastructure. They think with-
agreement with Korea’s WOOJIN Metals for
its vanadium over life-of-mine, while agree- out the infrastructure it is difficult and even
ments are in place with Singapore’s Gunvor
and Global Pacific Partners for the pig iron Paul Burton at Mt Peake there is no way we would be
and titanium pigment respectively.
economic if there wasn’t existing road, rail
“We are working hard to secure further
binding off-take agreements for our products and we are also in advanced discussions with and gas, but that is all there.”
groups on potential finance,” TNG managing Since the release of the Mt Peake DFS
director Paul Burton said. in July, TNG has been solidly engaged with
“There is a whole range of activities hap- major companies and groups in New York,
pening with respect to our permitting in the London and Hong Kong, with respect to the
Northern Territory, so there is a range of po- potential financing.
tential news flow coming. An EIS at Mt Peake Burton said discussions remain ongoing in
has been completed and is to be permitted, so what is a “very interesting time for the com-
we are not expecting any issues or challenges pany” as it looks forward to starting construc-
there. We have agreements with traditional tion in 2016.
owners in the area, which have been cleared, – Mark Andrews
and we expect the mining agreement should
be completed shortly. That means the mining
licence is going to be approved, so we’re not
expecting any issues there at all.”
TNG has enjoyed strong government sup-
Monax heads for NT gold
Noted South Australian explorer Monax Min- “Monax is excited about the new project
ing Ltd has crossed state borders into the and is looking forward to commencing ex-
Northern Territory to take a chance on the Pine ploration with a view to drilling early in 2016,”
Creek gold project. Monax managing director Gary Ferris said in
a statement.
In a landmark acquisition, Monax has
pulled together a number of mining leases “The Pine Creek area is highly prospective
and exploration licences held privately and for gold and was a key area Monax was target-
consolidated in the Mt Ringwood area, 120km ing for a new project. The history of discovery
south of Darwin. and current mining operations suggests the
area still has potential for further discoveries.”
AngloGold Australia explored the eastern
part of the area in the 1990s/early 2000s and Since the gold rush during the 1870s, min-
reported good gold grades in the vicinity of 10 ing in the area has been continuous, with
g/t from rock chip sampling. shallow, high-grade mineralisation a charac-
teristic at Pine Creek.
Monax undertook its own rock chip sam-
pling on the mining leases and also reported Gary Ferris
one sample of 10.4 g/t gold, however, the real
excitement for the company was a 257 g/t
rock chip sample.
PAGE 32 NOVEMBER 2015 AUSTRALIA’S PAYDIRT
Emmerson drills new discovery
Emmerson Resources Ltd hopes erson’s tenement holdings before
its latest high-grade gold discov-
ery in the Tennant Creek mineral field June 2017. The established gold
is the first of many more to come.
producer has an option to spend a
A maiden three-hole drilling pro-
gramme at the Mauretania prospect further $10 million over two years to
returned an enticing intercept of
30m @ 3.22 g/t gold, 13.1 g/t silver, acquire an additional 10% interest.
0.33% copper and 723 ppm bismuth
from 57m, including 15m @ 5.67 g/t Meanwhile, gold production is
gold, 14.7 g/t silver, 0.24% copper
and 0.11% bismuth from 60m and set to restart in the Tennant Creek
3m @ 21.3 g/t gold, 5.01 g/t silver,
0.23% copper and 0.2% bismuth mineral field in the immediate future
from 63m.
after Emmerson signed a tribute
It is the first major discovery to be
made under the JV Emmerson has agreement for small-scale mining
in place with Evolution Mining Ltd
over the junior’s extensive 2,500sq activities on its northern tenements.
km package of tenements in Ten-
nant Creek. Edna Beryl Mining Company
Mauretania was targeted using a (EBMC), a group of specialist nar-
recent aeromagnetic survey which highlight-
ed a number of new, subtle anomalies cor- row vein miners, has received ap-
responding to major structures and historical
mines in the mineral field. proval to begin permitting and, if
Emmerson managing director Rob Bills successful, can look to mine at the
credited a revised exploration model – which
places a greater emphasis on structural styles high-grade Edna Beryl deposit.
and the potential for magnetite destruction by
gold-rich fluids and supergene effects – for No resource is reported for Edna
helping make the new discovery.
Beryl because it is not JORC-com-
“This is a really, really good hit and it’s to-
tally undercover so it’s a blind discovery, no Emmerson continues to taste exploration success pliant, but Emmerson has flagged
outcrop whatsoever,” Bills told Paydirt.
in the Tennant Creek mineral field an exploration target of 5,000-
“There’s an old Mauretania mine about
400m to the north, but it’s taken some really 10,000t @ 20-30 g/t for the deposit
good science and systematic exploration to
find this. We’ve worked really closely with the 162m (including 1m @ 10.6% copper) and 1m which is said to have produced 2,700t @ 53
Evolution geologists and geophysicists so it’s
definitely been a collaborative team effort and @ 2.37% copper from 221m. g/t gold.
it’s a credit to everyone involved.”
Emmerson and Evolution are testing a Bills said the tribute agreement carried a
Drill rigs were being mobilised on site at
the time of print for an immediate follow-up geological model which indicates copper sits number of advantages for Emmerson, includ-
programme which was expected
to coincide with another campaign much higher in the system than gold miner- ing potential near-term cash flow.
at the nearby Gecko and Goanna
prospects. alisation. “In these tight capital markets, it’s obviously
Mauretania is considered to have Bills hoped the JV would continue to carry very difficult to raise money so in terms of an
similar mineralisation to the historic
Nobles Nob mine, about 35km south out further deeper drilling given only 8% of all income stream, this is potentially a very good
of the discovery hole. The former
Nobles Nob open pit mine produced historic drilling in the field has penetrated be- result for us and for our shareholders,” Bills
more than 1.1 moz gold at an aver-
age recovered grade of 17.3 g/t and low 150m. said.
peak grades of up to 130 g/t.
“There’s virtually no drilling below 150m, “The thing we don’t want to do though is get
Emmerson’s exploration success
at Mauretania comes almost three except around the major deposits.” Bills said. distracted by it. The EBMC will be the manag-
months after the company inter-
sected multiple new zones of cop- “You can tend to think Tennant Creek is a ers and operators and they will take care of all
per sulphide mineralisation in the
pre-collar to a deep diamond hole at mature field in terms of exploration, but when the mining and all the risk and we end up with
Goanna.
you think of it in terms of the depth potential a sliding-scale royalty once the gold has been
Recent hits from hole GODD032
include 7m @ 5.98% copper from it’s certainly not and this drill hole has been mined and it doesn’t defocus us from getting
123m (including 3m @ 10.4% cop-
per), 3m @ 4.75% copper from pretty instrumental in opening up that depth on with the job of making the next discovery.”
potential.” The tribute agreement also opens the door
Evolution is sole-funding exploration un- for Emmerson to conduct underground explo-
der the terms of the JV and has completed ration at Edna Beryl and investigate whether
about one-third of its $15 million expenditure the deposit boasts mineralisation similar to
commitment to earn a 65% interest in Emm- White Devil and other nearby historic mines.
Bills said the Northern Territory
Government and local community
groups remained supportive of his
company’s activities in Tennant
Creek and he hoped that would
continue as the project enters vari-
ous development phases.
“I think it’s good to dip your toe
in the water and get some develop-
ment in Tennant Creek happening
now, particularly for the benefit of
the community and the local busi-
nesses,” Bills said.
“The traditional owners all voted
overwhelming in favour of [the trib-
ute agreement] because they all
see it as a big positive for the locals
in Tennant Creek. It certainly paves
the way for bigger and better things
in the future.”
Exploration at Tennant Creek is sole-funded by Emmerson’s – Michael Washbourne
JV partner Evolution Mining
AUSTRALIA’S PAYDIRT NOVEMBER 2015 PAGE 33
NORTHERN TERRITORY
KGL sweetens Jervois
them, with one eye on the ex-
ploration upside.
A prospective 12km strike
length of copper outcropping
needs to be tapped to in-
crease resources at Jervois.
KGL has made a good
start, testing about five loca-
tions which remain open at
depth and along strike.
Milroy said recent results
from Rockface had fed the
company’s confidence in
beefing up Jervois.
At the time of print, KGL
was awaiting results from a
3,500m drilling campaign at
Jervois where mineralisation
over 14m has been intersect-
ed at Rockface from 253.5m.
“Rockface is an area not
included in any economic
analysis in this PFS. We are
currently running down-hole
EM on that hole and then
we will follow up with further
drilling to add to resources.
Rockface was generated
through a 3D IP survey that
we did recently and given
the success of that method
we have decided to extend
KGL doubled lead and zinc resources in the Jervois PFS released in October that 3D IP over the rest of the
area,” Milroy said.
Despite releasing a technical and commer- concentrate, but now what we have decided The resource is comprised of the Marshall,
cially viable PFS on the Jervois copper to make two concentrates. We basically found Reward, Reward East, Sykes, Green Par-
play in 2014, KGL Resources Ltd went back to a gap in the copper plant to produce a bulk rot, Bellbird and Bellbird North deposits at
work on the project this year and has delivered lead-zinc mixed concentrate. We will start Jervois, which is 380km north-east of Alice
an even better outcome. with copper [production] only for the first two Springs by road.
“We set out for the year to add $100-200 years, we then add a lead-zinc cleaning cir- It is an isolated project, but there is com-
million in additional cash flow and we have cuit and we plan to batch process the lead- plimentary infrastructure; the nearby Plenty
well and truly exceeded that,” KGL managing zinc through the copper plant, Highway, underground water
director Simon Milroy told Paydirt. so probably four months of supply and an airstrip south
Based on an exchange rate of 70c to the copper ore then feed the plant of Bell Bird.
US dollar, a $US3.25/lb copper price and with about one month of lead- “We plan to produce pow-
capex of $189.5 million, KGL is estimated to zinc ore on a batch basis.” er on site and we plan to run
net free cash flow of $551 million over an ini- A bulk concentrate of LNG out from Alice Springs
tial 8.25 years. 179,000t @ 43% lead, 17% to site to feed the power sta-
Open pit operations will be followed by un- zinc and 1,069 g/t silver is ex- tion on site,” Milroy said.
derground mining at a rate of 2.2 mtpa from a pected to be produced over “We are going to produce
flotation plant producing 80-100,000 tpa cop- life-of-mine, with the start of a copper concentrate, so
per concentrate. copper production scheduled we will be trucking it to Al-
Life-of-mine production is estimated at for late 2018. ice Springs, load it onto the
754,000t of a 23% copper and 283 g/t silver Achieving that milestone railway line and send it up to
concentrate, equivalent to 21,000 tpa con- will mean starting a DFS in Q1 Darwin for export. There is
tained copper and 1 moz silver at C1 costs of 2016. no question that it is an iso-
$US0.88/lb and C3 costs of $US2.13/lb. “We will have sufficient lated location but the grade
A real kicker for KGL has been the increase funds to kick off the work, and Simon Milroy of ore at Jervois makes up
in the lead-zinc resource to 143,000t lead and now that we have completed for it. We will be feeding [the
47,000t zinc. the PFS we are launching plant] 1.5% copper out of the
The total indicated and inferred resource is a search for a partner. The ideal partner for open pit for the first couple of years. That is a
30.5mt for 327,000t copper, 22.6 moz silver, us is somebody who wants the copper con- pretty good grade and will more than compen-
143,000t lead and 47,000t zinc. centrate and we have commissioned PwC for sate for additional costs due to the 380km by
“We basically doubled the lead-zinc re- that search, to find us a project level equity road to Alice Springs.”
source,” Milroy said. partner. Hopefully we land a partner in the first – Mark Andrews
“Previously, we looked at producing a dif- quarter,” Milroy said.
ferent lead concentrate and a separate zinc Potential partners will see the PFS before
PAGE 34 NOVEMBER 2015 AUSTRALIA’S PAYDIRT
Smaller focus for Rum Jungle
Rum Jungle Resources Ltd Rum Jungle is also assessing
will look to put one of its options for Dingo Hole. Early test
smaller assets into production work has indicated its silica prod-
while weighing up development uct could attract attention from
options for its flagship Ammaroo high purity quartz markets be-
phosphate project in the North- cause of its potential applications
ern Territory. in semiconductors, fibre optics
The ASX-listed junior has and solar panels.
flagged the near-term develop- “We’ve got enough funds to
ment of either the Karinga Lakes push forward one of the smaller-
sulphate of potash (SOP) project scale projects towards develop-
or the Dingo Hole silica project ment, but obviously taking Am-
in a bid to generate cash flow to maroo forward is a much bigger
underpin future plans for Amma- equation,” Tziolis said.
roo, about 200km south-east of “Over time, I think we’ve got all
Tennant Creek. the bones of being a future mid-
Both projects, also in the cap fertiliser and industrial miner-
Northern Territory, are smaller als player.”
in scale and have lower capital Also working in the company’s
requirements than Ammaroo. favour is that all projects are in
Karinga Lakes seems the Rum Jungle is weighing up three different production scenarios for Ammaroo close proximity to the Amadeus
most likely development option gas pipeline and the Central Aus-
given the company has completed a scoping billion for phosphoric acid and fertiliser pro- tralian Railway which runs from Darwin port to
study on the project and is currently work- duction respectively. south-eastern Australia.
ing on a PFS to be released in the first half Rock phosphate production could begin “I hear lots of talk about infrastructure de-
of 2016. in early 2018 while the other two scenarios ficiencies [in the Northern Territory] and lots
A PFS on Ammaroo was released last year would start 15-21 months later. of capital needing to be invested in transport,
and updated in August, reaffirming the project It is expected the JV partner will determine infrastructure and things like that, but the real-
with a resource of 1.145bt @ 14.5% P2O5 (for which production route the company will pur- ity is we’ve got a great, big railway line run-
a 10% P2O5 cut-off) could support at least sue for the BFS. ning up through the middle of the country and
two decades of phosphate production. Tzilolis said the market was still yet to rec- established ports at either end, but they are
However, Rum Jungle – with a current mar- ognise the true value of Ammaroo. underutilised,” Tziolis said.
ket cap of $21 million – will need help from “This is the big challenge for companies like “There’s a number of projects that sit within
a much bigger player to have any chance of us because these projects aren’t exploration 100km of that rail line, so you actually don’t
funding the $755 million price tag attached to plays anymore,” Tziolis said. need a huge amount of infrastructure expend-
the project. “It’s already had its big share price uplift a iture to make things happen.
The company began a global search to couple of years ago, based on its initial explo- “What we’ve got to do now is get the eco-
secure a cornerstone investor for Ammaroo ration results, and we’re now in that part of the nomic and technical settings right to ensure
earlier this year and it is likely that financier life cycle of a company where another round we attract global capital to take our plans for-
will become a JV partner and have associated of hard work has started. We’ve discovered ward.”
off-take agreements. something and now we’ve got to commercial- – Michael Washbourne
Rum Jungle managing director Chris Tzi- ise it, monetise it and get it technically right to
olis said his company was holding talks with attract the capital to fund it through to devel-
fertiliser companies, predominantly from India opment, with a key objective
and North America, as well as Australian pri- being the generation of value
vate equity groups over potential funding ar- for our long-standing share-
rangements. holders.”
“The reality is a small ASX-listed junior with Rum Jungle has started
limited access to capital will find it difficult to work on a PFS for Karinga
take on the Ammaroo project alone,” Tziolis Lakes, targeting 40,000 tpa
told Paydirt. of SOP production for less
“A small scale start-up on either the SOP than $80 million of project
or silica projects are possible for a small com- capital and operating costs
pany to manage on its own, so we’re going to below $300/t.
focus on getting one of those options up and A drilling campaign to con-
running and hopefully start generating some firm the presence of deeper
cash for this company.” potassium salt aquifers to
The Ammaroo PFS assessed the viability increase the resource at Ka-
of three different production scenarios – 2 ringa Lakes is slated to begin
mtpa of phosphate rock concentrate, 500,000 this month.
tpa of phosphoric acid (100% P2O5) and 1.02 Proposed project timelines
mtpa of ammonium phosphate fertilisers. suggest production from Kar-
Each scenario carries an initial mine life inga Lakes could begin in late
of at least 20 years and payback within five 2017, pending finance and all
years of first production. Indicative NPV the necessary approvals, in-
ranges from $790 million in the 2 mtpa rock cluding environment and Na- Ammaroo’s resource stands at 1.145bt @ 14.5% P2O5
phosphate scenario to $1.28 billion and $2.25 tive Title agreements. (for a 10% P2O5 cut-off)
AUSTRALIA’S PAYDIRT NOVEMBER 2015 PAGE 35
NORTHERN TERRITORY
Primary eyes Toms Gully restart
If you catch Primary Gold Ltd managing direc- Primary Gold hopes to restart mining at Toms Gully this time next year
tor Clay Gordon looking skyward, don’t fret,
he’s just waiting for the stars to align. “The Territory had a history of environmen- has been a huge piece of work.”
tal and legacy issues associated with their At the time of print, Primary’s EIS was in an
Despite telling Paydirt the market’s current current and previous mining operations. They
attitude seemed to be “we hate gold”, Gordon are very much focused on stopping any more exhibition period.
is optimistic Primary Gold can pour first gold legacy issues. The project, although it’s been The project’s next phase includes an as-
at its flagship Mt Bundy project late next year. a mine for almost 30 years, has not had to
have an EIS before. That was a new thing for sessment of the EIS by the EPA, followed by
Gordon’s glass half full perspective can us. We aren’t Robinson Crusoe there, but it consideration of findings in a revised mine
probably be attributed to his company’s ability management plan to be submitted by Primary
to raise money in the most dire of markets. and authorised by the Northern Territory De-
While other companies have floundered partment of Mines and Energy.
into mere obscurity, Primary has consistently Primary hopes its EIS gets the EPA’s tick
managed to attract support from its share-
holders. of approval by Christmas.
The company is targeting authorisation
In February, the company raised $1.4 mil-
lion via a share placement and one-to-one of its mine management plan in the first
fully underwritten renounceable rights issue half of 2016.
to fund an EIS for its Toms Gully project.
Although it’s early days, Gordon couldn’t
Primary views Toms Gully as the gunpow- help but wonder what the future might hold
der for a Mt Bundy explosion; an early cash for Primary at Mt Bundy.
flow generator which could help the company
launch a proper assault on the project’s big- A SAM survey earlier this year inter-
ger play, the near 1 moz Rustler’s Roost pros- preted additional north-east/south-west
pect, which operated during the mid-1990s, trending features down dip of the current
producing 110,000oz from 4.71mt of oxide ore Toms Gully mine, providing evidence of
grading about 1.05 g/t gold. further high-grade shoots below the cur-
rent resource.
A 2013 feasibility study on Toms Gully sup-
ported a restart of mining at the high-grade “The exploration upside is very exciting,”
775,000t @ 6.9 g/t gold for 175,000oz pros- Gordon said.
pect.
“If I had a couple of extra million dollars
The study predicted Primary would only we’d be out there testing some of these ar-
have to spend around $19 million to bring eas. We are working out ways in which we
the mine back online given it already had a might be able to bring that forward. The re-
250,000 tpa processing plant, 22kV power serve is only about three years at the mo-
to the mine and mill, 90m deep pit with twin ment. It would be great to be able to de-risk
declines and underground development to the it and extend it out to five or more years.
top of its next high-grade zone. That is something we keep thinking about
how we can do it. It’s a big priority.”
The affordability of mining was also con-
firmed in the study, which forecast C1 costs – Rhys Dickinson
of $664/oz and total C3 costs of $935/oz.
A SAM survey earlier this year identified north-east/south
Gordon said Primary recently revisited west trending structures down dip of Toms Gully
the PFS in an effort to extract more value
using current market indices.
“We’ve gone back and tried to strengthen
the plan and the financials and we’ve given
it one revision, in the meantime while we’ve
been doing the EIS,” he said.
“We will continue to look at improving
that, which will flow out of putting the im-
plementation plan together as we start to
finalise costs and our plans.”
Primary took its first formal step towards
restarting Toms Gully in September when
it submitted its draft EIS to the Northern
Territory Environmental Protection Agency
(EPA).
Gordon said he was relieved to see the
back of the EIS.
“It was a very detailed study; the most
comprehensive environmental study that’s
ever been done for the project,” he said.
“While we were trying to raise money and
list on the stock exchange in 2012 there was
a new government elected in the Northern
Territory and one of the main things they
did was create a stronger and independent
EPA.
PAGE 36 NOVEMBER 2015 AUSTRALIA’S PAYDIRT
Winchester lease a relief
for Korab
It might have taken more than a Korab received three such partner-
year, but Korab Resources Ltd fi-
nally has a mining lease to advance ship offers earlier this year; the first in
its flagship Winchester magnesite
project. February – a binding offtake agree-
Managing director Andrej Karpin- ment for 25% of the magnesite to be
ski told Paydirt a lengthy delay in
the lease approval (the company produced from its mine for a period
applied for it on October 1, 2014)
had put at risk several potential of seven years, plus rights to market
funding partnerships for the project,
but its receipt on October 15 had Winchester’s product – a second in
put all offers back on the table.
June when an unnamed mining con-
Korab seized total control of the
Winchester deposit in 2007 when tractor would fund the project to first
it acquired 100% of the Batchelor
project, adjacent to the historical ore shipment stage and assume con-
Rum Jungle mine.
trol of the Winchester quarry, including
The company’s original plan was
to develop it as a magnesium metal play, but gaining permits for first production of
formative investigations on the 12.2mt @
43.1% magnesium oxide resource indicated magnesite; and, a third in July pitch-
that wasn’t the safe play due to exorbitant
capex costs and magnesium’s high price vola- ing the funding, acquisition of equity
tility at the time.
in the Winchester project and offtake
It was at that point Korab decided to change
its game plan and focus on developing Win- for the magnesite ore to be mined from
chester as a magnesite project.
the quarry.
“Our interest is obviously to keep the oper-
ating cost as low as possible,” Karpinski said. Winchester currently has a 14-year mine life “Korab is pleased to advise that
“Our interest is to export and ship the mate- the discussions with various parties
rial as is, so we do not have to develop the
whole process. Magnesite rock is used for a out for less than $50/t, which will make us regarding funding for the development of the
variety of purposes. One of them is to produce
magnesium metal. It is stiff – stiffer than steel quite competitive thanks to the low Australian Winchester magnesite deposit are at an ad-
– and stronger and lighter. A bigger market is
in metallurgy, for example steel furnaces that dollar. Even if the price was to fall to $US50/t, vanced stage and were primarily slowed down
are lined with bricks made of magnesium ox-
ide. Those bricks are used in steel furnaces which would be equivalent to about $75-80/t, by the hold ups with the grant of the mineral
and as a result you have a fairly steady and
relatively stable market. we would still have a good margin.” lease,” Karpinski said in a market release.
“The biggest growth market is in building Korab does not intend to go it alone how- “Korab expects progress with the funding
materials. Magnesium oxide when mixed
with magnesium chloride, water and phos- ever. and magnesite sales/off take to accelerate
phate produces very strong cement, which
is stronger than concrete but half the weight.” “We are interested in developing a partner- following the grant of the mineral lease.”
A PFS for the DSO operation, released in ship with one of the parties who came to us Karpinski said Winchester’s current 12.2mt
January, confirmed its low-cost credentials,
predicting it could take as little as $4 million to after we published the PFS with an offer to @ 43.1% magnesium oxide resource was
get Winchester into production.
participate in the project on the basis of a roy- merely the tip of the iceberg for the project.
The study tossed up two mining methods
for the project; a shovel and drill/blast sce- alty trade,” Karpinski said. Drilling to date has only targeted a 200m
nario and a continuous mining operation with
wheel loaders and/or conveyors. by 300m section of a 400m wide corridor
The average ratio of all waste-to-ore for the that runs for more than 8km, according to the
entire mining operation was a meagre 0.6:1.
managing director.
“There is potential for a very high revenue
stream, even at currently flat magnesite pric- “For us, the main limiting factor will be the
es,” Karpinski said.
demand for the rock,” Mr Karpinski said.
“We are very close to Darwin, which has
very good shipping infrastructure, and we es- “There is no point planning a mine to supply
timate that we will be able to get the product
20 mtpa if we can only sell 500,000 tpa.”
Korab did much more than play the Win-
chester waiting game in 2015; it advanced off-
take negotiations for its Geolsec phosphate
project, ramped up exploration at its greater
Batchelor base metals project and initiated
investigations into restarting the defunct
Sundance gold mine to generate some forma-
tive cash flow.
While relatively pleased with 2015’s end
result, Karpinski said it would be an extra
special year if Korab could restart work at its
Ukranian Bobrikovo gold project.
“I don’t want to sound like a Miss Universe
pageant contestant, but I would have to say
that I have a wish for peace in Ukraine, not
just because of what it would mean for peo-
ple there, but also because we have a project
there and we would like to get it up-and-run-
ning again,” he said.
– Rhys Dickinson
Drilling to date has only targeted a 200m by
300m section of a greater 400m wide corridor
that runs for more than 8km
AUSTRALIA’S PAYDIRT NOVEMBER 2015 PAGE 37
NORTHERN TERRITORY
Pacifico lifts stake in Borroloola
Pacifico Minerals Ltd has wasted no time Pacifico has acquired a 51% interest in Borroloola West
getting to work on increasing its stake in
the Borroloola West project after claiming a month to ensure the company could complete Cliffs withdrew from the alliance in Febru-
majority interest in the Northern Territory asset. this round of drilling. ary 2014 and Pacifico has sole-funded all ex-
ploration activities since.
The junior explorer acquired a 51% inter- “It was important for us to get out there and
est in the project, about 600km south-east of have the flexibility to drill a second and per- Noon, who has extensive experience in the
Darwin, in late September after completing haps third hole if the results continue to en- Northern Territory from his time managing
the first stage of an earn-in agreement with courage us, and this [raising] gives us the abil- Groote Resources and West Rock Resourc-
Sandfire Resources NL. ity to be able to do that before the wet season es, welcomed the financial support offered to
arrives,” Noon said. junior explorers by government authorities.
Pacifico has spent $1.5 million on explora-
tion at Borroloola West over the last two years “Typically you want to have all of your gear “The recent drilling we did at the Bing Bong
and will look to invest a further $2.5 million out of there by the end of October and certain- prospect was completed under a Collabora-
into the project before September 2017 to in- ly by early November. We expect to get back tions Funding Agreement whereby 50% of
crease its holding to 70%. in there just as soon as the weather permits.” direct drilling costs were covered by the NT
Government,” Noon said.
The company also has an option to lift its Borroloola was one of the projects Sandfire
interest to 80% following this second earn-in used for its IPO in March 2004, but the Karl “It was nice to be able to tap into that and
period. Simich-led company elected to divest it after again it shows the NT is very supportive of ex-
making its breakthrough copper discovery at ploration. Programmes such as these certain-
A diamond drilling campaign – the compa- DeGrussa in 2009. ly encourage explorers like us to keep working
ny’s third such programme at Borroloola West up there.”
– targeting the Coppermine Creek prospect Pacifico, through an alliance with Cliffs
was given the green light early last month to Natural Resources Inc, entered into an earn- Noon was also hopeful his company would
test an airborne EM bullseye anomaly. in agreement over the western tenements in restart drilling at its Berrio gold project in Co-
July 2013. MMG Ltd has a similar farm-in deal lombia in the not too distant future.
One 600m hole will be drilled into the con- with Sandfire over the eastern tenements.
ductor and, if the result is favourable, a sec- Pacifico acquired a suite of tenements from
ond hole of similar depth will be completed Simon Noon AngloGold Ashanti Ltd earlier this year, tak-
nearby, along with some additional down-hole ing the company’s total ground holding in
EM. the South American country from 62ha to
14,318ha.
Previous drilling by the company inter-
sected extensive zones of intense fracturing, New drill targets were identified during the
brecciating and dolomitisation with dissemi- company’s most recent work programme in
nated chalcopyrite, including a best hit of 10m Colombia.
@ 1.3% copper (including 4m @ 4% copper).
“We’re very mindful that market conditions
Pacifico managing director Simon Noon remain very difficult and it’s important that we
said his company would be targeting Mt Isa- continue to be very prudent with the use of
style mineralisation in the current campaign. existing cash reserves,” Noon said.
“Certainly this current round of drilling at “Following this round of drilling at Borrolo-
Coppermine Creek is very important and we’ll ola, we’ll assess the results and plan for our
be hoping to confirm the interpreted geologi- next drilling campaign, whether that is in Aus-
cal model which has evolved from recent ex- tralia or Colombia. We remain extremely ex-
ploration,” Noon told Paydirt. cited by the exploration results to date at Ber-
rio and as you can imagine the team is very
“The style of mineralisation we’ve identi- keen to get a drill rig back on site.”
fied there is very exciting. The grades which
came out of the last drilling campaign were – Michael Washbourne
encouraging, but the most exciting part was
that we confirmed a very interesting geologi-
cal setting and the presence of strata-bound
mineralisation.
“We think we may have drilled the periph-
ery of a large copper system so now we need
to do the work and hopefully confirm this.”
Pacifico is also looking to prepare drill tar-
gets for the nearby Four Mile and Berjaya
prospects. Recent geological mapping has
identified a sparse outcrop of the Barney
Creek formation which hosts the McArthur
River deposits.
Samples of gossanous material from Four
Mile have been sent for assay ahead of an RC
drilling campaign to test for zinc-lead minerali-
sation. No timeframe has been scheduled for
this programme.
Existing VTEM resistivity profiles, along
with other geology and geochemistry work,
will be used to develop targets for RC drilling
at Berjaya.
Pacifico raised $500,000 via a placement
to institutional and sophisticated investors last
PAGE 38 NOVEMBER 2015 AUSTRALIA’S PAYDIRT
Alligator bites into Beatrice
Alligator Energy is looking to define a 75 mlb resource in the Alligator Rivers uranium province
Alligator Energy Ltd has successfully com- ima incident, but for the first time in its public tor since its inception, said there would be no
pleted the first phase of its quest to define life the company is confident of its future. excuses for his company not to delineate a
a 75 mlb uranium resource under cover of the large resource, particularly being so close to
Northern Territory’s Alligator Rivers uranium Drilling under the terms of the second the Ranger uranium mine.
province. phase of the earn-in agreement began in
early September and despite yielding mixed “We’re in the right terrain to do it,” Sowerby
The company acquired a 51% interest of the results, the company is developing a clearer said. “I think it’s time for the industry to deliver
Beatrice uranium project, about 250km east picture of the ground at Beatrice. another one of these big projects.
of Darwin, from Cameco Australia Pty Ltd in
late August and immediately committed to the Eleven shallow aircore holes up to a maxi- “There’s no point whingeing about not be-
second phase of the earn-in agreement. mum of 34m were drilled into three traverse ing able to get money. One of the reasons we
lines to test a sub-audio magnetic geophysi- can’t get any money as a whole is because
Alligator must sole-fund $2 million of explo- cal target at the BT-4 prospect and while drill- we haven’t been as successful as we need to
ration before December 2017 to maintain its ing intersected a fault zone with associated be. That’s the challenge, we’ve got to deliver.”
51% interest. alteration, no significant uranium mineralisa-
tion was identified. Alligator raised $1.6 million via a non-re-
Cameco can then elect to fund exploration nounceable rights issue in mid-September to
work on a pro-rata basis to maintain its 49% Drilling was being carried out at the Bea- ensure the company remained funded for this
interest or dilute its stake in the project, which trice prospect at the time of print to test a po- current round of drilling.
is immediately south of Alligator’s Tin Camp tential southern extension to the company’s
Creek tenement package. best-ever hit of 19m @ 3,626 ppm uranium. Funding is not likely to become an issue un-
til the company enters the study phase. Under
Alligator is targeting a 75 mlb uranium re- The third and final aspect of this extensive the terms of the earn-in agreement, Alligator
source at Beatrice because a smaller play drilling campaign – up to 32 shallow aircore must start a PFS on Beatrice no more than 12
would simply not cut it in today’s market, ac- holes at the BT-1 prospect – were slated for months after defining a 75 mlb resource.
cording to managing director Robert Sowerby. completion before the end of the impending
wet season. Cameco, providing it has maintained its
“Uranium projects receive recognition for 49% interest in the project, has an option to
their strategic value, but they’ve got to be big Alligator will wait until all results are collect- fund 51% of the PFS for a $2 million payment
enough and 20-30 mlb just doesn’t cut it any- ed from the current programme before deter- to Alligator.
more,” Sowerby told Paydirt. mining the direction of next year’s campaign.
The last five years might have been chal-
“A 20-30 mlb resource doesn’t get on the Sowerby said his company was targeting lenging for Alligator, but Sowerby believes his
radar screen of the people who count – the the proterozoic unconformity-style uranium company will emerge from these tough times
people at the reactors. If you can get 70-80 deposits typically found throughout Alligator in far better shape than when it entered the
mlb, or even 100 mlb, that represents 30 Rivers region and Canada’s Athabasca Basin. public arena.
years of electricity supply for 20 million peo-
ple and that’s worth a huge load, particularly if “The unconformity-style deposit we’re after “We haven’t hit the big one, but we’re regu-
it is carbon free.” is essentially the Rolls Royce or Ferrari of all larly hit high-grade in different prospects,”
uranium deposits,” Sowerby said. Sowerby said.
Sowerby cited the $2.2 billion sale of Ex-
tract Resources Ltd to China Guangdong Nu- “They tend to sit geologically under sand- “It has been a learning experience, but we
clear Power Corp less than 12 months after stone cover, either at the interface or into the feel in the last 6-12 months we’ve really re-
the Fukushima nuclear disaster as a prime older metamorphic basement. We think this is fined our techniques, particularly how to look
example of why large uranium plays are such where the larger uranium deposits are most under cover, which is where the real oppor-
highly valuable assets, even if the uranium likely to be preserved. tunity lies.”
spot price is low.
“At the moment we’re just looking at areas Sowerby also welcomed the support of-
Two former Extract directors, John Main where the sandstone has been eroded away, fered to his company and the uranium sector
and Peter McIntyre, now sit on Alligator’s but it’s covered in more recent sediments by the NT Government and heaped praise on
board. where geochem techniques don’t work too the indigenous groups for embracing modern
well so we’re looking at the geophysical tar- exploration on Native Title land.
Alligator has endured more than its fair gets we have and focusing on our shallow
share of lows since listing on the ASX in Feb- geochem testing for now.” – Michael Washbourne
ruary 2011, just five weeks before the Fukush-
Sowerby, who has been involved in Alliga-
AUSTRALIA’S PAYDIRT NOVEMBER 2015 PAGE 39
NICKEL REVIEW
Big nickel unlikely to
shut up shop
The Australian Nickel Conference’s closing panel conceded majors probably wouldn’t wind down their nickel production in the near future
It’s no secret that something has to give in the have to stop palladium mining,” Lougher said. ated with pulling the plug on a mine.
nickel industry. More specifically, somebody “Vale’s biggest, most profitable industry is “Environmental rehabilitation costs are
needs to make a sacrifice for the greater good iron ore, so are they going to stop? No. It’s not
of the sector. a simple equation of a pure nickel miner just higher than the losses being made through
cutting production.” the smelter,” Lougher said.
It is widely acknowledged that the forces
of supply and demand have been working Lougher said nickel’s inner circle now fre- “Experts say…of the production that is un-
against nickel miners of late, but this year’s quently discussed “barriers to exit”, a relative- der water, only 15-20% could actually come
Australian Nickel Conference panel – com- ly new concept centred on the costs associ- off, because of all the structural and com-
prising Western Areas Ltd munity [costs]. If you’ve got a refinery in the
managing director Dan
Lougher, Poseidon Nickel Thompson nickel belt or
Ltd managing director David Kambalda…you can’t just
Singleton, Mincor Resources shut them down. And if you’re
Ltd managing director David part of a large conglomer-
Moore and Alto Capital re- ate, why would you? If you’ve
search analyst Carey Smith got a trading house you can
– said shutting down mines make money on trading, not
or cutting back on production on physical metals or mining.
was easier said than done. It’s tough. It’s not that simple.”
Lougher said the industry A question from the floor
was unlikely to see much querying the Government’s
help from the top, as No- ability to step in and stem
rilsk Nickel and Vale SA, nickel production prompted
the world’s biggest nickel some interesting insight from
producers, mined the metal Singleton.
largely as a by-product.
While Smith clarified Aus-
“Norilsk produces nickel tralia’s government could not
as a by-product credit to pal- intervene, Poseidon boss
ladium, so their cost struc- Singleton said he wouldn’t
ture is zero. Are they going bet against China’s Govern-
to stop nickel mining? No, ment doing something about
because then they would the situation.
“Interestingly, I think the
government most likely to
PAGE 40 NOVEMBER 2015 AUSTRALIA’S PAYDIRT
Paydirt’s Australian Nickel Conference attracted over 220 delegates to what was a surprisingly upbeat forum
do that would be the Chinese Government, think for the longer term…in 4-5 years’ time, opposition, which is 60,000t of nickel. The net
who would see the ability to maintain their we could see a substantial part of the nickel total is 120,000t. They are going to start mov-
resource stocks as strategically more impor- market producing batteries for cars.” ing from 5% to 8% of the market. We focus on
tant,” he said. stainless steel, that’s our business, but I think
Lougher said the emergence of Tesla and we need to start thinking about that non-stain-
“We have seen the Chinese Government its Powerwall home battery technology was less market of nickel because maybe there
do that before.” also a blossoming market. is a growth of 4-6% better than the stainless
market.”
Lougher added: “Russia did that with pal- “When you go to New York and you show a
ladium and platinum back in the 1970s and slide…with Tesla batteries they get really ex- – Rhys Dickinson
1980s and played swing with nickel at that cited,” he said.
stage as well. If it’s a strategic metal in your
country, and nickel is one of those for China, “The Tesla view is that they will match in
then they will certainly come in, as they have volume by 2020 the equivalent volume of its
in the equity markets.”
Another inquisitive delegate questioned
whether or not Australia’s nickel producers
could rely on India taking its product in the
near future.
Smith said at present India typically opted
for chromium-based steels, but that might
change as it “moved up the quality chain”.
“It may change, but I haven’t seen any evi-
dence of it. Unfortunately, I can’t see, at this
stage, India being the saviour,” he said.
Singleton said the burgeoning battery mar-
ket could be nickel’s great white hope.
He said the rise of nickel hydride and lithi-
um ion batteries and electric cars could open
a whole new market for nickel producers.
“There is certainly a thesis that says once
… electric vehicles get to the same price as
petrol vehicles today, and there’s lots of data
that says this is going to happen in the next
few years, there may well be a flick where cit-
ies say we don’t need petrol cars anymore so
we won’t allow petrol cars anymore,” he said.
“That could have quite a stunning affect
on the nickel market and for that market you
would need very high-grade, quality nickel. I
AUSTRALIA’S PAYDIRT NOVEMBER 2015 PAGE 41
NICKEL REVIEW
Western Areas and its
cautious optimism
Western Areas Ltd may have postponed Jubilee assets in 2007 and even two years
its capital expenditure programmes ago they had a $130 million price tag,” he
but managing director Dan Lougher was said.
at pains to insist the company was still Ramp-up, Lougher said, would not be
heading into 2016 with growth very much arduous.
in mind. “We have everything needed to start. It
Australia’s largest independent nickel is just a dust-off project,” he said. “But, at
producer, Western Areas reported a net a $US4.50/lb nickel price, we will bide our
profit after tax of $35 million for FY2015, time.”
but with the nickel price continuing its Exploration rather than development
descent, the company has pulled in the will be the initial priority, with Western Ar-
spending reins. eas planning a new round of geophysical
The day prior to Lougher’s presenta- work in the Lake Miranda area in coming
tion at the Australian Nickel Conference, months.
Western Areas announced it was deferring “We are looking hard across the entire
construction of its $25 million mill recovery belt and diamond drilling will start in the
enhancement project at its Forrestania op- new year,” Lougher said.
erations in Western Australia. It also chose The Odysseus resource (7.3mt @ 2.4%
to defer $11 million of sustaining capital Dan Lougher nickel) will also be taken into feasibility
expenditure and $4 million of exploration study once the nickel price rebounds.
at Forrestania and shave $1 million off feasi- inventory, therefore increasing it from 25,000t “There is a decline about two-thirds of the
bility and exploration programmes at its newly of contained nickel to 45,000t.” way down but it is flooded. In the meantime,
acquired Cosmos asset as it battles a turgid Western Areas’ growth prospects come we will work on engineering studies in the
nickel price. background.”
Lougher, however, was adamant the com- Despite the exploration cut-backs, West-
ern Areas has retained a $12 million
pany remained committed to budget for Forrestania.
growth. “That is money well spent,” Lough-
er said.
“We are cutting back on capex Further afield, the company is
hoping to be at the vanguard of ex-
We are cutting back onbut it is not a totally negative move
capex but it is not a totallyand we have got good growth
“negative move and we have gotprojects and we don’t want to be
from the continuing exploration potential at
Forrestania and the opportunities on offer
the guys who miss the upswing in good growth projects and we ploration in the remote west of South
nickel prices,” Lougher said. Australia. It is earning into the West
Shareholder reaction, he said, don’t want to be the guys who Gawler JV with Monax Mining Ltd
had also been positive “especially miss the upswing in nickel prices. and Strandline Resources Ltd and
because we are debt free”. How- remains keen on what has been in-
ever, such projects would remain terpreted as a reflection of the Fraser
on hold until significant improve- Range in WA.
ments were seen in a nickel price which fell at the Cosmos nickel complex, recently ac- “We found magmatic sulphides in the first
more than 30% in the first nine months of quired from Glencore. reconnaissance drilling and this belt will de-
2015. Lougher said the $24 million paid for Cos- liver good news for Western Areas although it
“The growth projects are driven by the mos (near Leinster in WA) was a fraction of will be a five to seven year play,” Lougher said.
nickel price but if you believe anything about the value ascribed to it just a few years ago. – Dominic Piper
consensus opinion, they will make it into the “Glencore paid $3.3 billion to acquire these
8 October 2015 The CD-Rom of the 2015
Pan Pacific Perth Australian Nickel Conference
is available
CD-Rom for conference delegates – $60 (inc.GST)
CD-Rom for non-conference delegates – $85 (inc.GST)
Phone (+61) 8 9321 0355 or email [email protected]
PAGE 42 NOVEMBER 2015 AUSTRALIA’S PAYDIRT
Nickel West:
A BHP testing house
In a rare public appearance for the BHP Bil- included an intersection of would never again play a
liton Ltd subsidiary, Nickel West asset presi-
dent Eduard Haegel outlined the company’s 5% nickel in March.” major role in a BHP Billiton
plans to act with a junior company mindset
inside a major mining house. More than 15,000m has dominated by the “four pil-
At the heart of this new strategy is an insist- since been drilled with a lars” of iron ore, coal, oil and
ence that each component of the integrated
Nickel West business (mines, concentrators, further 15,000m to be com- copper, he said Nickel West
smelter and refinery) is accountable for im-
proved performance. pleted by June 2016. Three could continue to provide
“One of the unique challenges of an inte- development drives have value for the group.
grated business is that there can be diminu-
tion in accountability because financial results been opened to aid the drill- “BHP Billiton recognises
are aggregate, making it less clear at a local
level of the impact each part of the business ing and the discovery of the margin-challenged busi-
makes,” Haegel said.
southern extension at Cliffs nesses like Nickel West also
“To address this, Nickel West now uses an
enterprise model approach with the business has led to an entire reinter- enhance dynamism in other
broken into each of its requisite parts. Each
enterprise within the group is accountable to pretation of the nearby Cer- parts of our company by the
create earnings at an enterprise level by re-
ducing costs and/or safely increasing produc- berus orebody. Eduard Haegel quick repetition of our learn-
tivity or by creating more or new products that “The remodelling sug- ing,” Haegel said. “Nickel
are of higher value.”
gested there may be con- West’s particular circum-
Coupled with a renewed focus on earn-
ings and world-class performance rather than tinuity between Cliffs and Cerberus and our stances provide the opportunity to road-test
simply cost-cutting – “Nickel West will not be
cost-cutting to oblivion” Haegel said – the new first hole was successful. We are growing in new ideas and new ways of thinking which
structure had already delivered “some early
wins” for the company. our confidence of continuity,” Haegel said. could generate significantly more value when
On the operational front, this has meant At Leinster, exploration is focused on the leveraged across other areas of the business.
changing the mining methods at Nickel West’s
largest mine, Mt Keith. 1A orebody next to Perseverance. “Nickel West’s transformation [strategy]
“We have completely reinvented the min- “It was always a poor cousin to Persever- was subsequently adopted across BHP Bil-
ing process; they’ve been cutting and pasting
the BHP Billiton Iron Ore mining process into ance but we are assessing the geotechnical liton, creating more value than it ever could
Mt Keith. The performance improvement was
outstanding and speed of delivery most im- aspects of it.” have in Nickel West alone.”
pressive,” Haegel said.
Leinster is also undergoing changes on the – Dominic Piper
Increasing blast sizes has also increased operational front with the Rocky’s Reward
efficiency at Mt Keith with interruptions to min-
ing becoming less frequent. mine being reopened
At Nickel West’s other main mining opera- for the first time since The CD-Rom of Paydirt’s 2015
tion – Cliffs – the focus has been on stope a second cut-back
turnaround times with average turnaround
reduced from around 55 days last year to less was suspended in Africa Down Under Conference
than 40 days since February. 2008. is available
“This improvement has allowed the team to Haegel said a new
move towards double height stopes and has contract model, which
resulted in record stoping production which
has affected an increase in mine production.” sees mining contrac-
Haegel said the enterprise model had also tor Thiess carry the
driven the Cliffs team to identify the discov-
ery of mineralisation as the key value driver waste stripping cost,
for the operation with southern extensions to
the orebody recently identified as a potential had allowed Nickel
source.
West to reopen the
“The southern end of Cliffs was believed to
hold little prospectivity but in January 2015 a mine.
young exploration geologist suggested that
there may be remobilisation of mineralisation “As a consequence, Perth,Western Australia
along the fault. An initial drilling programme Nickel West was able
to secure 38,000t of
additional nickel ore to
be delivered to Lein-
ster and it is expected
that Rocky’s Reward
will be one of the low-
est cost ore inputs into
the Leinster concen-
trator for the next two
or three years,” he
said.
The company is
also assessing its
downstream opera-
tions with a new agi-
tator technology at CD Rom includes
the Kwinana nickel
smelter set to increase • Over 60 presentations • Conference media coverage
capacity from 66,000 • Australia’s Paydirt preview and review reports • Conference Sponsors
tpa to 72,000 tpa. CD-Rom – $160 (inc.GST)
And while Haegel Phone (+61) 8 9321 0355 or email [email protected]
admitted the division
AUSTRALIA’S PAYDIRT NOVEMBER 2015 PAGE 43
NICKEL REVIEW
St George boosts discovery odds
St George Mining Ltd’s belief it is on the John Prineas Laverton boasted strong potential for nickel
cusp of making a major discovery at one sulphides because of its favourable structural
of its three nickel projects is resonating with covery in this programme,” Prineas said. setting.
investors. “We’re getting a lot of market attention at
“Studies at Forrestania and the Leinster
St George was trading at 11.5c/share at the the moment and that’s because we could be nickel fields show that most of the nickel sul-
time of print, having slipped as low as 5.8c/ making a major discovery soon.” phides are associated with the intersection
share in late August despite further encourag- of major faults and transform faults, and the
ing results from its East Laverton project. St George kicked off a 7,000m drilling cam- nickel sulphide deposits are within a 5km ra-
paign at East Laverton on the eve of the con- dius of those intersections,” he said.
But the junior explorer is back in the market ference and modelled the programme on the
spotlight thanks in part to its acquisition of two one which helped Sirius Resources NL find “We have the same architecture at East
nearby nickel sulphide assets once held but Nova. Laverton and we’re very encouraged because
hardly touched by BHP Billiton Nickel West. most of our nickel sulphide hits are within that
The programme, scheduled for comple- 5km radius, and our exploration so far has
St George forked out just $40,000 for the tion before the end of this month, will include been successful in proving up the potential for
Hawaii and Mt Alexander projects along the testing the EM conductors at Desert Dragon nickel sulphides.”
Ida Fault/Mt Goode Rift, which is also home and drilling the basal contact at Windsor with
to the plus-500,000t Cosmos nickel complex, downhole EM surveys. Prineas tipped his company would be re-
recently acquired by Western Areas Ltd for rated very favourably should it make a new
$24.5 million. Prineas said his company’s ground at East discovery in the Yilgarn Craton, which has
been somewhat deprived of major nickel ex-
A deep drilling campaign was scheduled ploration success since the 1970s.
to begin at Hawaii at the time of print and a
similar campaign is planned for Mt Alexander “In our view we’re pretty much at the bot-
in early 2016. Only shallow drilling has been tom of the cycle so it’s a great time to invest in
carried out at both projects to date. nickel exploration companies,” Prineas said.
St George executive chairman John “We think the nickel price will have a strong
Prineas said both projects were housed in recovery and it’s a good time to look at com-
a proven nickel sulphide area and that had panies like St George which can leverage off
increased his company’s chances of finding that increase in the cycle.”
something economic.
– Michael Washbourne
“We’ve got multiple opportunities for dis-
PAGE 44 NOVEMBER 2015 AUSTRALIA’S PAYDIRT
Upswing on Poseidon’s mind
Poseidon Nickel Ltd is in the best position David Singleton ore extraction rates.
of any non-producing nickel hopeful to take “After that we would see the opening of
advantage of a commodity price rebound, ac- about 12%.”
cording to managing director David Singleton. A restart at Lake Johnston would likely fol- Black Swan,” Singleton said.
“We’ve externally said that we think Black
Singleton said Poseidon was ready to make low, with Silver Swan’s ore to be processed at
good on its nickel masterplan, which has seen its concentrator. Swan is about a nine-month programme to
the company strategically acquire four de- get it to production and so we see that com-
funct West Australian mines; Lake Johnston, A Simulus Engineers produced BFS in ing in after Lake Johnston. Mt Windarra would
Mt Windarra, Black Swan and Silver Swan. May advocated the restart of Lake Johnston, then feed ore into the Black Swan project.”
which was in full scale operation less than two
Singleton outlined Poseidon’s likely plan of years ago. Singleton said aside from BHP Billiton’s
attack at this year’s Australian Nickel Confer- Nickel West operation, Poseidon had the sec-
ence, telling delegates the company would The study confirmed it would take less than ond biggest nickel resource and concentrator
probably prioritise a restart of its highest four months to get the mine back into produc- in Australia.
grade asset, Silver Swan, in the event of a tion and also presented Poseidon with a plan
spot price upswing. to improve the project’s operating costs and Although somewhat unconventional, Po-
seidon’s approach was advantageous in the
“Silver Swan is, I believe, the highest grade current nickel environment, according to Sin-
nickel mine in the world, ever,” Singleton said. gleton.
“Not only is it the highest grade nickel mine “We have very low capital costs when we
in the world ever, but it’s about twice the grade go through both the acquisition of the project
of the second highest grade mine that exists and also fundamentally the restart of the pro-
in the world today. We’ve been doing some ject,” he said.
work on Silver Swan recently and we see that
as a mine that can get into production very “We also have no construction risk, be-
quickly. It looks about a 4-5 month process to cause broadly these projects are already
get Silver Swan into production. The decline constructed, and we have very little commis-
is open and ready to go. We have a resource sioning risk. The geological risk is lower be-
statement to come out on Silver Swan soon. cause there is a great deal of knowledge, a
I can’t talk…in detail about where we see the great deal of drilling knowledge and structural
grades going there, but typically you can think knowledge associated with these projects.”
– Rhys Dickinson
AUSTRALIA’S PAYDIRT NOVEMBER 2015 PAGE 45
NICKEL REVIEW
Windward reviews project offers
Windward Resources shareholders are rewarded Barnes insisted her company’s decision to
Ltd will remain ac- consider other opportunities did not reflect
tive in the Fraser Range for their investment. a lack of belief in the prospectivity of both
while entertaining other Windward’s tenements and the entire Fraser
project opportunities out- “What the review high- Range.
side the region.
lighted to us was there re- “We do believe there will be another discov-
A strategic review of ery at some point, it’s just the clarity around
the company’s corporate mains a significant amount when that might be made,” Barnes said.
and exploration activities
highlighted “significant of work to be done in the “For every dollar we spend in the Fraser
time and cost challenges” Range, it’s unlikely we’re going to replace that
for the nickel hopefuls Fraser Range to progress in the next two years unless there is a discov-
that followed Sirius Re- ery by us or somebody else. The board is very
sources NL into the Fras- to the next discovery and cognisant of its responsibility of shareholders’
er Range and suggested funds so we do have to consider other oppor-
their funds might be best not only will this take a large tunities.”
directed elsewhere.
amount of time, but it’s also At the time of print, Windward was look-
Windward listed on the ASX in 2012 on the ing to complete about 4,000m of drilling on
back of acquiring an extensive portfolio of ten- going to be expensive,” its Fraser Range North prospects before the
ements from prospecting king Mark Creasy, end of the year, while awaiting assays from a
who currently owns 27% of the company. Barnes said. recent campaign at Uraryie.
Some of those tenements border the large
Nova deposit which Sirius discovered that “The feedback I’m get- Previous drilling at Uraryie intersected 1m
same year. @ 0.55% nickel within a broader interval of
ting from the market is many 12m @ 3,975 ppm nickel from 28m.
Windward has spent $8.4 million on explo-
ration in the Fraser Range over the last three Bronwyn Barnes people are quite content to The company also hopes to identify a se-
years, but discovery success has eluded sit back and see where the ries of follow-up drill targets at Fraser Range
the company and executive chair Bronwyn South for a programme to kick off in early
Barnes conceded it could be sometime before next discovery comes from 2016.
in the Fraser Range before those purses are – Michael Washbourne
reopened for additional funding.
“The board has made a decision to contin-
ue with our existing exploration programmes
in the Fraser Range, but we have expanded
our focus to consider other opportunities that
might lie outside the region.”
Windward’s strong cash position ($7.8 mil-
lion at the end of June) has made the com-
pany a regular target for project offers, many
of which are near-term production assets and
readily available.
PAGE 46 NOVEMBER 2015 AUSTRALIA’S PAYDIRT
Almost halfway to Nova
Independence Group NL’s Nova nickel project He said the feasibil- beaten guidance on all pro-
is almost half built, according to managing di- ity study foreshadowed
rector Peter Bradford. a slow ramp-up at Nova, duction and cash cost met-
with the mine unable to
Nova was 45% complete “on a spend ba- deliver enough ore to feed rics in 2015, which justified
sis”, with the highly anticipated project on the plant for the first year of
track to produce first concentrates by the end operations. Independence’s near $20
of 2016, Bradford told Australian Nickel Con-
ference delegates. For that reason, Inde- million investment in more
pendence initiated a project
“The underground development is pro- optimisation study to inves- exploration at the asset this
gressing very well,” Bradford said. tigate opportunities to try
and bring the mine online financial year.
“Barminco is doing an excellent job. We’ve earlier than anticipated, he
got very little requirement for ground support said. Exploration at Long will
and that’s allowing it to proceed at a rate far
in excess of what was envisaged in the DFS. “We are working on an continue to test for exten-
The DFS envisaged a rate of about 50m/ optimisation study to pursue opportunities to
week and Barminco is consistently achiev- try and bring that ramp up period forward and sions to existing orebodies
ing somewhere between 70-90m/week. The fully feed the processing plant earlier rather
initial stretch of the decline is 1.5km down to than later and therefore deliver extra value to at McLeay South, Moran
the orebody and two weeks ago we passed the project,” he said.
the 1km mark. All up we have competed about South and Long North, and
1.4km of underground development.” “In the process we are also working through
a number of other value drivers, which will be Peter Bradford for new deposits in the tene-
On the surface, Independence has com- captured in the optimisation study. That study ment area.
pleted all the required earthworks in prepara- is expected to be completed in December of
tion for the construction of Nova’s processing this year.” “Our main focus is in the
plant.
Independence’s gung-ho attitude at Nova lower lava channel; that has been the more
Bradford said GR Engineering Services had not affected the company’s work at its
Ltd was on top of its game at Nova, installing Long nickel mine, according to Bradford. prolific source of nickel in the past and we are
footings and foundations for the plant’s equip-
ment two weeks ahead of schedule. He said Long had met or consistently currently exploring for extensions south of
Moran,” Bradford said.
“We’ve identified a mineralised envelope
south of Moran and we are busy infill drill-
ing that. The best intersection in that area is
5m @ 12% nickel. Parallel to that infill drilling
work, which will result in an inferred resource,
we are marching our drill drive south so we
can continue to test the search space towards
the southern end of the property.”
– Rhys Dickinson
AUSTRALIA’S PAYDIRT NOVEMBER 2015 PAGE 47
NICKEL REVIEW
Time to get the
party started: Smith
By mid-2017, this year may be remem- “I suspect all of the Indonesian ore has
bered as nickel’s annus horribilis if
nickel analyst Carey Smith’s predictions now gone or nearly gone and the ban is go-
hold true.
ing to stay in place,” he said. “That means
A regular at the Australian Nickel Con-
ference, Smith admitted his 2014 predic- nickel pig iron in China continuing its de-
tions for the sector had been blown away
by an “absolute disaster” of a year which cline. There is increasing nickel pig iron
saw the nickel spot price fall 38% in the first
nine months of the year. production coming out of Indonesia but it is
“Nickel is the only base metal which is a long way until it reaches Chinese levels.”
trading at its GFC lows,” Smith said.
It is supply out of western producers
He pointed to consistently high LME
warehouse stocks, increased production which is in danger of being interrupted with
and flat demand as reasons for nickel’s
travails. 11 of the world’s 15 major nickel mines be-
However, he remained optimistic about ginning to slow production.
the stainless steel additive’s medium-term
future, predicting prices could more than “And, all the new projects have now
double over the next 18 months.
come on stream, with the exception of
“They all added up to a dismal market
but luckily that is history now. It might be time Nova, so the cupboard is almost bare,”
to take out the party frock and shoes,” Smith
told a surprised audience. “I think we will look Smith said.
back at this moment in a few years and say
that was a massive opportunity because right The longevity of the price downturn is
also hurting production.
“Historically, the 90% quartile is a good
indicator for where the nickel price should
Carey Smith be and currently the spot price is below
that. It is estimated that 60% of nickel pro-
now is as bad as it gets for nickel.” ducers are losing money at the current spot
It was the kind of statement company rep- price,” he said.
resentatives and shareholders in the room – Dominic Piper
wanted to hear and Smith made sure he
backed up his bold statements with evidence.
Nickel to stand out from the base
Thomson Reuters is forecasting a strong “Demand has been knocked by a prolonged “While this is unlikely to set nickel alight giv-
rebound in nickel prices as further supply destocking cycle that began in late 2014 and en that it will make only a small dent in the
constraint coalesces with increased demand continued into the early months of this year to continued vast inventory overhang, industry
from the stainless steel sector. more than counter lower supply, leaving the watchers will be heartened by the fact that its
In its latest GFMS Base Metals Review & market in a forecast 40,000t surplus in 2015,” fundamentals will be moving in the right direc-
Thomson Reuters said in the report. tion, with further deficits foreseen in subse-
Outlook, Thomson Reuters predicted nickel
to be the strongest performer among the The overhang from LME stocks has driven quent years.”
base metals in the next year with prices set nickel prices down 30% in 2015, but as a All eyes will be seemingly on China’s nickel
to increase 9% in 2016, followed by copper number of presenters discussed at the confer- pig iron (NPI) industry which can use cheap
“(up 4%). Aluminium and lead are forecast to ence, this leaves more than half of the world’s nickel laterite ore to produce stainless steel
report lower prices while zinc feed without the need for
is expected to increase only Demand has been knocked by a more expensive refined nick-
1.5% despite losing 7.7% this prolonged destocking cycle that el.
year. began in late 2014 and continued into the
early months of this year to more than Indonesia’s ban on unre-
The nickel forecast would fined nickel laterite exports
only have heightened the was expected to reduce the
sense of optimism that had NPI industry’s impact in 2015
spilled out of the Austral- but with some NPI producers
ian Nickel Conference earlier counter lower supply, leaving the market having been forced to close
that day. Delegates were sur- in a forecast 40,000t surplus in 2015 due to environmental issues,
prised by the level of enthu- remaining producers have
siasm for nickel, despite the been able to survive on exist-
stainless steel material shed- ing stockpiles and blending of
ding more than 30% of its spot price this year. nickel producers to be operating at a loss. Ad- lower grade ore from the Philippines.
According to Thomson Reuters, nickel pric- dressing this should lead to supply coming out Those stockpiles have been largely run
es should reach $US13,200/t in 2016, predi- of the market. down and Norton predicted NPI output is ex-
cated on further supply constraint that will “Further curtailments look set to come pected to decline in 2016, leading to pressure
coincide this time with stronger consumption through that will tip the market into a 30,000t on supply to the stainless steel sector.
from the key stainless steel sector. deficit,” Thomson Reuters’ Karen Norton said.
PAGE 48 NOVEMBER 2015 AUSTRALIA’S PAYDIRT
Duketon senses another Nariz
Exploration success has failed to deliver further joy potential on offer south-east of Nariz.
evaded Duketon Min- “The extent of the drilling through that
ing Ltd in recent months, for the company.
but managing director Stu- whole corridor is virtually zero and where we
art Fogarty believes it’s only However, Fogarty tipped do see a little bit of drilling we also get a bit
a matter of time before his of background anomalism in nickel,” Fogarty
company makes another his company to make sev- said.
Nariz-style discovery.
eral more discoveries, sug- “We think this whole system is really alive
Duketon drilled Nariz last and kicking and very productive…we’ll con-
November and returned a gesting that Nariz was just tinue to drill and I think we’ll continue to find
mouth-watering hit of 9.22m things in the Duketon greenstone belt.”
@ 4.96% nickel and 0.4% one of the many “outstand-
copper, including 5.65m @ Duketon has been prudent with its spend-
7.09% nickel and 0.5% cop- ing” nickel prospects along ing in the 14 months since its listing and has
per, which garnered plenty retained $6.5 million for future exploration.
of market attention and lifted the company’s the Duketon greenstone The company also recently entered into a JV
stocks above 40c/share for a brief period. with Regis Resources Ltd over the gold rights
belt. to some of its ground.
The Nariz discovery came less than four
months after the company was spun out of “We haven’t yet been able Regis can earn up to 75% interest in four
South Boulder Mines (now Danakali Ltd) and tenements by spending $1 million over the
raised $7 million for an IPO. It was also the to replicate that same inter- next two years and ultimately confirming a de-
first time exploration had stepped outside cision to mine. The gold producer has three
of the known C2 and Rosie deposits within Stuart Fogarty section, but we still think this operating mines in the district and has already
Duketon’s tenements, north of Laverton. [mineralisation] is open to committed $100,000 upfront as part of the ini-
tial transaction.
Earlier this year, Duketon increased its pro- the east, down-dip and also
ject resource base to 71,000t nickel, 26,000t Fogarty said the JV had “greatly de-risked”
copper and 144,000oz platinum and palladi- back to the west towards Rosie,” Fogarty said. his company’s portfolio.
um – more than double what existed before
the IPO – but subsequent exploration has “It’s not easy and it’s challenging from a – Michael Washbourne
geophysics and geochemistry perspective,
but we have a strong belief the endowment
is there and it’s just a matter of unlocking it
over time.”
C2 (5.7mt @ 0.7% nickel for 38,000t) was
discovered by previous explorers in 2006 and
followed three years later by Rosie (1.9mt @
1.7% nickel for 32,700t). Both deposits remain
open at depth and along strike.
Only 15% of Duketon’s tenements have
been subjected to modern exploration and the
company remains eager to test the untapped
AUSTRALIA’S PAYDIRT NOVEMBER 2015 PAGE 49
NICKEL REVIEW
Rox ready to roll on Sabre
Increasing resource tonnes concentrate standalone lease in the next few months] and Sabre and
will be the best way to im- we are still keen to follow up on the Horatio
prove the economics of Rox operation with a capex prospect.
Resources Ltd’s Fisher East
nickel project, according to of $73 million and cash “We have also got a number of conductors
managing director Ian Mul- off the bottom of the orebodies and we are ex-
holland. costs of $4.11/lb nickel-in- cited about the potential of those. If you look
at the likes of Cosmos and Flying Fox, they
It may be a simple strat- concentrate and an 8,000 go down 1.5km but we’ve only drilled Fisher
egy but such is Mulhol- East to 500m.”
land’s liking for the project tpa toll-treatment project
– 150km north-east of Lein- The Sabre prospect is the immediate fo-
ster in Western Australia – with capex of $20.8 million cus with drilling to target a 250m deep zone
that he is convinced a larg- underneath recent intercepts of 13m @ 1.3%
er resource will alone be and cash costs of $4.31/lb nickel, 2m @ 2.2% nickel and 8m @ 1.3%
enough to make it robust. nickel.
nickel-in-concentrate.
“We could reduce the “It is a great target zone at Sabre and we
cash costs at Fisher East, The scoping study was think we will grow the resource at about the
if we increase the resource same grade we currently have,” Mulholland
base,” Mulholland said. based on the Camelwood said.
“That would equal an in-
creased inventory and al- and Musket orebodies at Having made the initial discoveries at
low us to selectively mine Fisher East for a cost of just 4.8c/lb, Mulhol-
the high-grade zone. We are working on that Fisher East which have a land believes further tonnes can be added but
sort of optimisation.” knows with depth comes more expense.
combined resource base
The need for a larger inventory was high- “We are looking at ways to fund the deeper
lighted by the results of a scoping study Rox of 72,100t @ 2% contained drilling,” he said.
completed at Fisher East earlier this year.
nickel at a 1% cut-off – Dominic Piper
The study, produced by CSA Global, iden-
tified two scenarios; an 8,000 tpa nickel-in- grade. However, increas-
ing the cut-off grade to
3.5% still delivers 33,600t
Ian Mulholland to inventory, offering Rox
a pathway to early-stage
higher grade production.
And, given the project still has three depos-
its to be defined and at least three down-hole
EM conductors to test, it is far from complete.
“Our aim is to ultimately double or triple the
size of the resource,” Mulholland said. “We
have made further discoveries at Cannonball
[for which a maiden resource is due for re-
PAGE 50 NOVEMBER 2015 AUSTRALIA’S PAYDIRT
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