2015 July Paydirt

Gold Road raises the bar

Gold Road Resources Ltd has undertaken With $49 million locked away, funds and they continue to be
the biggest capital raising in its history, in Murray can avoid the usual man-
the process ensuring it does not have to worry aging director twitch of checking supportive and continue to follow
about share price movement or the spot gold the company’s share price and
price through until it reaches a decision to the gold spot price on his smart- us,” Murray said.
mine. phone.
“We are different from other
Early June saw Gold Road announce the “We now have money for the
finalisation of a $39 million institutional place- PFS, DFS and for regional explo- ASX companies in that we have
ment and details of a share purchase plan ration, without the need to worry
designed to generate a further $10 million in about the market,” he said. “We scale; a 5.5 moz gold resource
funds. don’t know where the share price
and the gold price is going to be in and a plus-10 year mine life which
It was an audacious move by Gold Road the next six months but we know
to attempt to raise so much money at a time we can deliver now regardless of is unique and that is why North
when harsh market conditions means juniors where they are.”
are all but locked out of equity markets. American resource specific funds
Murray said both the placement and share
However, chairman Ian Murray told Pay- purchase plan had been strongly supported. are really interested in us.”
dirt, the appetite for the Gold Road story was He was particularly pleased to have attracted
such that it made sense to secure the com- new institutions to the register. Attention now turns to com-
pany’s future immediately.
“Within 24 hours of opening it, we had filled pleting the PFS, which Murray
“We’d completed the resource upgrade and the capital raising. That is a good sign as is
were busy with the PFS so we need to raise the support which came from new institutions, Ian Murray said would hopefully be out in the
money,” Murray said. “The traditional route particularly in Sydney and Melbourne.” March 2016 quarter.
is to do a capital raising after completing the
PFS but that means you are stop-start-stop- And it is not just the domestic institutions The current focus of work is on
start. We didn’t want to slow the momentum which are beginning to pay attention to what
so decided that given the rearranging we had is easily the most exciting Australian gold pro- the scale of production.
after the resource announcement, we had the ject currently heading towards production.
opportunity to secure funding right through to “We’ve already drawn a line through the 5
the DFS.” “Since we discovered Gruyere we’ve had a
lot of attention from North American resource mtpa option and are concentrating on the 7.5

and 10 mtpa options,” he said. “That gives us

the best value and raises NPV.”

Murray said the preferred size would be fi-

nalised around September.

“It is important that we narrow it down so

that when we get to the DFS, we are not look-

ing at anything else. It will then be all about

implementation rather than scenarios in the

DFS and so will be quicker and lower cost.”

– Dominic Piper

AUSTRALIA’S PAYDIRT JULY 2015 PAGE 51

DIGGERS & DEALERS PREVIEW

Tech triumph for MRG

Sasak is being backed as the likely secret Drilling at Xanadu was expected to start at the time of print
behind MRG Metals Ltd’s next discovery.
MRG is hoping that the data-driven Sasak of BHP Billiton Ltd’s Cannington silver-lead head start,” Gregory told Paydirt.
technology – useful for identifying prospects mine (now under South32 Ltd’s stewardship), “Internally we have verified it and we are
under cover – will enhance its ability to un- adds further potential for mineral diversity in
earth a major mineral find. MRG’s portfolio. very driven to achieve external validation by
making a discovery for MRG.”
The groundbreaking technology has deliv- If the variety of could-be deposits aren’t
ered MRG a host of flagship IOCG prospects enough to excite investors perhaps MRG’s Sasak not only helps to steer MRG into
in Queensland, while Sasak-aided drilling access to the Sasak technology will. prospective territory, it can also rank other
programmes are under way at priority targets explorers’ prospects, potentially opening the
Xanadu and Loongana in Western Australia. MRG has a strategic partnership with Sa- door for acquisitions and corporate activity.
sak Minerals Pty Ltd whose core business
MRG director Chris Gregory said Fortes- has been developing Sasak which is largely Similarly, particularly in a tight funding envi-
cue Metals Group Ltd had pegged ground based around applying data mining tech- ronment, the company is welcoming of oppor-
around Loongana on the Nullabor Plain and niques including predictive analytics using tunities to explore JV partnerships and other
he expected the iron ore player to take an in- hundreds of layers of information to generate ventures at its IOCG projects in Queensland.
terest in MRG’s progress. exploration targets.
“MRG is not wasting money on moose pas-
A co-funded drilling grant of $108,000 from Sasak Minerals has access to a hard-to- ture,” Gregory said.
the WA Government will be used by MRG at match geo-scientific database comprised of
Loongana which is believed to be prospective 10 terabytes of geochemical, geological and “We have a good development model and
for PGEs, gold, copper and nickel. geophysical data. have internal validation of what we are doing
but what happens next is the exciting thing.
At Xanadu, near Northern Star Resources “We are from big company backgrounds There are opportunities in all parts of the cy-
Ltd’s 1.5 moz Mt Olympus gold project, a se- and Alf Eggo [Sasak CTO] has had a lot of cle and we are open to a lot of things; JVs at
ries of small open pit gold deposits hosting time to define the database and models. If an- our IOCG opportunities, not just fund raising
more than 100,000oz is the target for MRG. other company decided to do it, it would take [to finance exploration].”
years of pre-development to get started. It is
At the time of print MRG was mobilising a huge advantage for us to have such a big – Mark Andrews
equipment at Xanadu, in WA’s Pilbara, in
preparation for drilling multiple holes at Perti-
nax and up to four holes at Cleopatra.

About $500,000 will be spent on drilling in
WA in 2015, as ground geophysics and geo-
chemical surveys are planned ahead of drill-
ing in Queensland later this year.

MRG has applied Sasak technology – for
which a Federal Government R&D rebate of
$613,000 was received by the company in
April – to 1.5 billion cubic data cells across the
Mt Isa block and come up with 135 top rank-
ing targets.

More than 42 targets have indistinguisha-
ble geo-scientific characteristics from known
Australian IOCG deposits, including Ernest
Henry, while the probabilities are high that the
remaining targets also boast IOCG potential.

Currently, MRG has two IOCG drill-ready
targets with another four applications expect-
ed to be granted to the company in the next
six months.

Additionally, EPM19470, 12km north-west

PAGE 52 JULY 2015 AUSTRALIA’S PAYDIRT

A Sperling choice for Diggers

Diggers & Dealers is re- from the Federal Government
nowned for bringing some and it is widely believed that

of the world’s best minds to the mining magnate has no

Kalgoorlie for the annual min- case to push for an inquiry.

ing forum. “There is absolute no need

Gene Sperling – former for it,” Giorgetta said.

Director of the National Eco- “When there was demand

nomic Council for the Barack a lot of people came into pro-

Obama and Bill Clinton admin- duction, but that is typical of

istrations – will be the keynote every industry, not just the

speaker at the 23rd Diggers & iron ore sector.”

Dealers Mining Forum. Whether or not Diggers

Australian miners and ex- is the stage Forrest uses to

plorers are enduring a torrid push his claims for an inquiry

time and a confidence boost of will be known in due course.

any kind in Sperling’s address In recent years, both indus-

would be welcomed. try and politicians have aired/

Diggers chairman Nick Gior- affirmed stances for and

getta hoped Sperling could in- against various issues affect-

spire this year’s delegates with ing the mining industry.

some good news stemming Last year, the Gold Royalty

from the US economy. Response Group (GRRG)

“I think he will. There has Former Diggers & Dealers chairman Barry Eldridge, with owner Kate Stokes campaigned hard against

to be some positivity because and current chairman Nick Giorgetta at the forum last year the West Australian Govern-

America has experienced ment’s proposed change to

some bad times in the last four or five years players – Rio Tinto, BHP Billiton Ltd and gold royalties, while Diggers 2010 may be

and it is coming out of those times, so I’m sure Fortescue Metals Group Ltd – were embroiled best remembered for the camaraderie within

there will be some positivity,” Giorgetta told in a stoush over third party rail access in the the industry as angry miners banded strongly
Paydirt. Pilbara. together to criticise Kevin Rudd’s

Sperling was the first man to serve two As the miners continue to lock proposed Resources Super Profits

US presidents as Director of the National horns over rail access, Fortescue Tax and Julia Gillard’s alternative to

Economic Council, a role he combined with has waged another war on its big- that – the Mineral Resources Rent

assisting Obama with economic policy from ger rivals, calling for a government Tax (MRRT).

2011-2014. inquiry into the Australian iron ore No doubt the 50-strong media

Sperling’s credentials include a variety of export market. contingent expected at Diggers will

policy advisory roles to the US Treasury, while Fortescue chairman Andrew For- swoop on all the issues and stories

this year he was appointed economic advi- rest believes an inquiry is essential (even the good news stories) that

sor to trillion dollar investment powerhouse to determine whether the iron ore arise during this year’s forum.

Pacific Investment Management Company market is “operating as a truly free – Mark Andrews
(PIMCO). market”.

Hence, Sperling’s insights and outlook on Forrest has received no support Gene Sperling

global economic conditions are sure to in-

trigue the 1,800 delegates expected at Dig-

gers this year. Must see presentations

Despite difficulties in the mining sector, del-

egates and companies have warmed to the Independence Group NL and Sirius Re- Energia Minerals Ltd: The company is

forum once again, with Giorgetta reporting sources NL: Independence’s proposed $1.8 hotly pursuing development of its Gorno zinc

booths had sold out quickly and presenters billion takeover of Sirius and its Nova-Bol- project in Italy. To help its cause, Energia has

locked in for some time. linger deposit will be a definite highlight recently sold its Carley Bore uranium project

“We had to select 45 companies to present in WA to Paladin Energy Ltd for $15 million

and as usual you have to reject some compa- Evolution Mining Ltd: Its latest acquisi- Vimy Resources Ltd: Led by Mike Young,
nies. We had plenty of companies to choose tion of Barrick Gold Corp’s Cowal gold mine

from, there is absolutely no difference this in New South Wales for $550 million makes it the uranium hopeful hopes to lock away $30

year than in the last couple of years,” he said. a favourite for the Dealer of the Year million to take its Mulga Rock project in WA

Of the 45 presentations on this year’s card, through to the financing stage

there is sure to be great interest in Rio Tinto Northern Star Resources Ltd: The mar- Gold Road Resources Ltd: Australia’s
Ltd’s address (to be delivered by its Australa- ket darling has not been as active in the ac-

sian exploration director Ian Ledlie) consider- quisition space compared with the previous most successful junior gold explorer in recent

ing the plight of iron ore miners. 12 months however, its exploration success in times has taken its Gruyere gold resource to

Australia’s biggest iron ore producer re- Kalgoorlie has kept it in the headlines 5.5 moz and raised $39.3 million in June

turns to Diggers in 2015 after a hiatus of sev-

en years. Kingsgate Consolidated Ltd and Reso- Ramelius Resources Ltd: The unveil-

Circumstances have changed dramatically lute Mining Ltd: Both gold producers have ing of new gold mines in Australia has been

in the iron ore space since Rio Tinto chief ex- announced new chief executives – Greg sparse, but Ramelius is committed to devel-

ecutive Sam Walsh delivered the keynote ad- Foulis at Kingsgate and John Welborn at oping its Vivien project in WA

dress to delegates in 2008. Resolute – to lead their respective companies

Back then, Australia’s dominant iron ore into new eras

AUSTRALIA’S PAYDIRT JULY 2015 PAGE 53

DIGGERS & DEALERS PREVIEW

* Subject to change

PAGE 54 JULY 2015 AUSTRALIA’S PAYDIRT

10 ABM Resources NL 86 MacPhersons Resources Limited

105 Aggreko Australia Pacific 36 Matsa Resources Limited

60 ALS Minerals 102 Metals X Limited
95 Altona Mining Limited
116 Mincor Resources NL

23 Amec Foster Wheeler 70 Minerals Development Victoria

39 Andes Resources Limited 130 MinesOnline.com
82 AngloGold Ashanti Ltd
33 Mining People International

30 ASX 67 Minotaur Exploration Ltd

80 Aurelia Metals Ltd 85 Montezuma Mining Company Limited

7 Ausdrill 25 Mungana Goldmines Limited

27 Ausgold Limited 58 Neometals Ltd

46 Australia’s Mining Monthly & MiningNews.net (MNN) 29 Newmont Asia Pacific

9 Australia’s Paydirt 127 Nextgen Group
50 Barminco
43 NICOLAS

88 Beadell Resources Ltd 57 Northern Star Resources Limited

83 BGC Contracting Pty Ltd 22 Norton Gold Fields Limited

45 Bis Industries 113 OceanaGold Corporation

97 Blackham Resources Limited 100 Olympus Australia

3 Bureau Veritas Minerals Pty Ltd 87 Optiro
134 Cassini Resources Limited
112 Orinoco Gold Limited

54,55 CIBC 71 Pacifico Minerals Limited

106 Clarke Energy 76 Panoramic Resources Limited

2 Cobre Montana 110 Patersons Securities Limited

89 Como Engineers Pty Ltd 44 Peak Resources Ltd

129 Convergent Minerals 12 Peel Mining Limited

56 CRU Group 41 Peninsula Energy Limited

52 Dacian Gold Limited 69 Phoenix Gold Limited

17 Dassault Systemes GEOVIA Australia Pty Ltd 49 Pioneer Resources Limited

8 Deloitte 104 Primary Gold Limited

11 DGR Global Limited 121 PYBAR Mining Services

99 Doray Minerals Ltd 132 Ramelius Resources Ltd

66 Downhole Surveys 1 Rapid Crushing & Screening Contractors Pty Ltd
42 Encounter Resources Limited
111 Red 5 Limited

61 Energia Minerals Limited 131 Regis Resources Limited

28 Energy Power Systems Australia (EPSA) 126 Resolute Mining Limited
108 Evolution Mining
77 Rio Tinto Exploration

64 Far East Capital 114 Rowe Scientific P/L

103 Fortescue Metals Group Ltd 32 Rox Resources Limited
65 Gascoyne Resources Limited
79 Sandfire Resources NL

35 Gekko Systems 15 Sandvik Mining and Construction Pty Ltd

68 Geoscience Australia 125 Saracen Mineral Holdings Limited

84 Gold Fields Australia Pty Limited 59 Sedgman Limited
37 Gold Road Resources Ltd
91 SGS Australia Pty Ltd

74 Golder Associates 34 Sheffield Resources Limited

38 Government of South Australia 24 Sirius Resources NL
93 Gryphon Minerals Limited
19 SNL Metals & Mining

21 Gyro Australia Pty Ltd 123 Southern Gold Limited

26 Haines Surveys 133 SRK Consulting
101 Hampton Mining & Civil Services
119 St George Mining Limited

5 Hays Resources & Mining 13 State Government of Goiás

4 Heron Resources Limited 14 Stellar Resources Limited
94 HiSeis Pty Ltd
118 Straits Resources Limited

47 Hot Chili Limited 124 Swick Mining Services Ltd

117 HotCopper 73 Talisman Mining Ltd

122 Image Resources NL 120 Teck Australia Pty Ltd
51 Independence
109 TNG Limited

72 International Geoscience 96 Troy Resources Limited

98 Intertek Genalysis 20 Venture Minerals Limited

6 Ironbark Zinc Ltd 75 Vimy Resources Limited

135 Jindalee Resources Limited 81 VM Drilling
78 Kal Tire Mining Tire Group
115 West African Resources Ltd

90 KBL Mining Limited 62 Western Areas Ltd

92 Kin Mining NL 31 Western Australian Department of Mines and Petroleum

63 Kingsgate Consolidated Limited - Geological Survey of Western Australia

40 Klohn Crippen Berger Limited 16 Western Australian School of Mines

18 Kula Gold Limited 107 WesTrac Pty Ltd
128 Macmahon
48 Wolf Minerals Limited

* Subject to change

AUSTRALIA’S PAYDIRT JULY 2015 PAGE 55

MEET THE TEAM

Mark Andrews Dominic Piper Bill Repard Tammy Caldwell

DEPUTY EDITOR EDITOR EXECUTIVE CHAIRMAN AFRICA DOWNUNDER

M: (+61) 407 477 697 M: (+61) 424 934 494 M: (+61) 418 768 578 M: (+61) 413 085 536
E: [email protected] E: [email protected] E: [email protected] E: [email protected]

Michael Washbourne Rhys Dickinson Tony Mwarey Melita Fogarty

JOURNALIST JOURNALIST ADVERTISING EXECUTIVE NEWGENGOLD

M: (+61) 400 956 703 M: (+61) 421 336 909 M: (+61) 451 280 482 M: (+61) 420 495 163
E: [email protected] E: [email protected] E: [email protected] E: [email protected]

Come see us at booth #009

at Diggers & Dealers

DIGGERS & DEALERS PREVIEW

Sandfire sets Doolgunna alight

Something is brewing at Sandfire Resourc- Karl Simich project, which commands an annual explora-
es NL – again. tion budget of $20 million.
Six years on from the hysteria created by timely boost for explorers in the region, how-
the DeGrussa copper-gold discovery, 900km ever, many are hard-pressed financially to ex- “There will be good solid exploration [in this
north-east of Perth, Sandfire has another ecute the type of programmes Sandfire can. region], but I don’t know if there is going to be
beauty baking in the Bryah Basin, according that many that have the capacity to do it right
to chief executive Karl Simich. The company has a 1,700sq km land hold- at the moment,” Simich said.
ing in the Greater Doolgunna region, com-
“We’re as excited about drill hole four as prised of the Talisman and Thaduna (with “You don’t see 17%, 20% copper grades
when we made the first discovery at DeGrus- Ventnor Resources Ltd) JVs and Ned’s Creek like we have seen here and if you look at any-
sa,” Simich told Paydirt. thing in the world in the last two to three dec-
ades, there are very few that compare with
Of course Simich is referring to the com- this region. Our technical guys have said this
pany’s success at the Springfield JV with Tal- discovery [TLDD0004A] means this area will
isman Mining Ltd, where diamond drill hole be explored quite intensely for the next 20-30
TLDD0004A at the Monty prospect intersect- years because it warrants it.”
ed a massive sulphide hit of 16.5m @ 18.9%
copper and 2.1 g/t gold from 409.5m to 426m Meanwhile, Sandfire’s Alford JV with Argo-
down-hole. naut Resources NL may also be demanding
the company’s attention in the near-term.
Both Sandfire and Talisman were rewarded
for their exploration feats, particularly Talis- Hot on the heels of success at Springfield,
man, which doubled its share price to 56c/ Sandfire reported 10.4m @ 66.6 g/t silver and
share in late June. 0.28% copper from 217m and 3.9m @ 1.19%
copper from 287m at the Alford project on
At the time of print drilling was at a depth South Australia’s Yorke Peninsula from a two-
of 745m down-hole, beyond mineralisation, hole 750m diamond drilling programme.
and was still in progress.
Under a farm-in JV agreement signed in
Once TLDD0004A is completed, Sandfire 2012, Sandfire has the right to earn a 49%
planned to move 80m south-west and start interest in Alford by funding $4 million in ex-
drilling hole TLDD0005. ploration within three years.

Sandfire, which is earning a 70% interest in – Mark Andrews
Talisman’s Doolgunna project, has provided a

AUSTRALIA’S PAYDIRT JULY 2015 PAGE 57

DIGGERS & DEALERS PREVIEW

Contract wins buoy Barminco

Underground mining specialist Barminco Ltd Barminco has been one of the standout Australian contractors of the past 12 months
is waiting up to six months for access to
major equipment – a situation chief executive though total revenue would be similar. the last year. The lost time injury frequency
Peter Stokes compares to the “boom times”. Barminco has committed all of its capex for rate (LTIFR) has been zero for the past six
months.
Barminco has been one of the standout FY2016 and is buoyed by the performance of
contractors of the past 12 months, winning a its US high yield bonds. Over the last Christ- “We’ve just implemented the ‘Seeing Eye’
number of key new contracts and penning ex- mas holiday period, the company repur- technology for fatigue management in some
tensions with a host of long-term clients. chased $US56.9 million of its bonds, deliver- of our underground trucking fleet,” Stokes
ing an annual saving in cash interest costs of said.
It is an encouraging sign for the mining in- $3.7 million.
dustry as a whole to see contractors such as “We’re the first in the underground mining
Barminco being kept busy and enjoying both Like many of its peers, Barminco has also space to put that in and we’re seeing really
operational and financial success. adopted new and innovative good results from that, so we’re planning to
practices to improve efficien- roll that out much more broadly across our
Stokes told Paydirt one of the “positive cies and drive down operating trucking fleet over the next few months.”
challenges” his company was experiencing costs. This included imple-
was long lead-times for premier mining gear. menting new Sandvik trucks Hard times has seen some mining compa-
into the business and investing nies make the transition to owner-operator
“All the manufacturers, as always happens in industry-benchmarked SAP status, particularly among surface miners, in
in a slowdown, scale their production right software technology. a bid to save cash but Stokes said that was
back and they almost always get caught short Stokes confirmed some job yet to impact the underground space.
when things pick up,” Stokes said. cuts did take place at Barmin-
co last year, but some of those “There’s a couple that are doing it – Rand-
“This time last year, you could pretty much were related to the shutdown gold [Resources Ltd] is going to do one in Mali
buy things off the shelf that parked up in the at the Mount Lyell mine in Tas- – and we’ll help them through that transition,
yard, but lead times for major equipment now mania. but in Australia we haven’t seen that,” Stokes
is about six months. It’s back to the sort of “Historically Barminco has said.
‘boom times’ in a way.” probably always carried a full
“I think people recognise that underground
The past financial year saw Barminco win Peter Stokes crew for a new contract, but we mining is a deep expertise and a lot of the sur-
coveted box cut, portal and underground min- decided that didn’t make sense face ones were driven less by cost and more
ing contracts at Sirius Resources NL’s Nova given what was happening in by poor safety outcomes, so where BHP [Bil-
nickel project and return to MMG Ltd’s Rose- liton Ltd] and others felt they weren’t control-
bery mine in Tasmania after a two-year ab- the market so we released about 100 people ling the safety, they were happy to outsource.”
sence. at the start of last year,” Stokes said.
Stokes hoped the next 12 months would
Both contracts are for three years, with one “But we haven’t done anything like that deliver a welcome boost in revenue and pave
and two-year extension options, and valued since. We have contracts go up and down, the way for growth opportunities in overseas
at $129 million and $110 million respectively. which happens in any cycle. We had a num- markets.
About 220 people will be employed across ber of redundancies when Mount Lyell shut,
both mines. but that was really on the back of that project “The Australian market probably doesn’t
shutting. We’re hopeful that might start again have as many opportunities as we’d like and I
Barminco also celebrated at the end of this year.” think it’s very symptomatic when you go to big
its 10-year anniversary work- [overseas] tenders and you see all the Aus-
ing with Western Areas Ltd Barminco’s number one priority remains tralian underground miners are there, when it
at the company’s nickel op- the safety and wellbeing of its workforce and used to be just us and one or two others,” he
erations by penning contract Stokes was pleased to see the company’s to- said.
extensions valued at $190 tal recordable injury frequency rate (TRIFR)
million. drop more than 40% to near single digits over – Michael Washbourne

A similar contract extension
was recently signed for Sun-
rise Dam where it has also
been present for a decade.

Barminco’s diamond drill-
ing fleet is also operating at
its highest levels since Stokes
joined the company in early
2013.

“I think it’s positive that us
and some of our peers are
starting to look at the future again,” Stokes
said.

“Everyone has looked back and gone, ‘that
was really nasty’ but now we’re looking at how
we go forward as a company. We’ve run our
idle equipment down to almost nothing. Typi-
cally we start a new contract with a mix of new
and old and we’re at the point now where we
are still blending fleet, but we need to plan
well ahead for the gear that we’re ordering.”

The downturn in the resources sector did
not come without its challenges and Stokes
expects his company’s margins for FY2015
to be slightly down on the previous year, al-

PAGE 58 JULY 2015 AUSTRALIA’S PAYDIRT

Hera grows Aurelia’s confidence

Aurelia Metals Ltd – winner of the Emerging A 32% resource upgrade is set to add another two years of mine life to the
Company Award at last year’s Diggers and Hera gold-zinc-lead operation
Dealers – celebrated a whirlwind 12 months
with a likely two-year mine life extension at Aurelia has forward sold 10,500oz of gold year, returning a number of promising inter-
its burgeoning Hera operation in New South at an average price of $1,591/oz and has de- sections, including 3.65m @ 39.7 g/t gold,
Wales. liveries scheduled through to September. The 243 g/t silver, 972 ppm copper, 7.91% lead
company also has a total hedged position of and 11.3% zinc (including 1m @ 141.5 g/t
Australia’s only gold-zinc-lead producer re- 35,445oz gold at an average minimum price gold, 463 g/t silver, 17% lead and 14.6% zinc).
ported a 32% increase in total tonnes at Hera, of $1,523/oz through to the following Septem-
lifting the project’s resources to 3.2mt @ 3.75 ber. Other encouraging hits of 7.7m @ 0.1 g/t
g/t gold, 3.5% lead, 4.6% zinc and 33 g/t silver gold, 30 g/t silver, 2.5% lead and 3.8% zinc
and effectively adding another 24 months to Kairaitis said the current trading market from 507.3m and 9.5m @ 3.1 g/t gold, 179 g/t
the initial seven years of operation. performance of all minerals found at Hera silver, 17.5% lead and 12.7% zinc from 571.4m
was providing plenty of upside. were also included in the Hera resource up-
Aurelia managing director Rimas Kairaitis grade.
said the resource upgrade had justified his “We don’t really preferentially mine high-
company’s regional exploration efforts over grade gold or high-grade zinc in the project, Aurelia was not drilling at the time of print,
the last 18 months. we tend to try and blend it all through, but pending results from previous campaigns, but
we’re particularly interested in the zinc mar- Kairaitis said his company would always have
“We’ve got 32% more tonnes, we increased ket and what it might do over the next 12-18 an exploration focus because it was “part of
our lead grade by 27% and our zinc grade months,” he said. our DNA”.
by 20% and achieved an overall increase in
grade of about 5%,” Kairaitis told Paydirt. “If it does respond to some of the supply “We’ve got a lot of confidence in our patch
constraints as a lot of the commentators are and excess cash generation and we think its
“Part of the reason for applying exploration talking about – and I don’t know if they’re right best use is exploration and resource develop-
expenditure is obviously being able to return or wrong – but if they do get a jump through ment work, so we’ll be turning it back for or-
new discoveries and new mine life additions, to $US3,000/t, then there probably is that op- ganic growth,” he said.
so being able to do that was a really important portunity to access some high-grade lead-
step for us.” zinc, particularly out to the northern end of “You can never guarantee anything, but it’s
the project.” such prospective terrain and the precedence
News of the resource upgrade came just for Cobar systems becoming big deposits is
weeks after Aurelia declared the start of com- Exploration success at the Hera North pod so strong that we’ve got a lot of confidence
mercial production at Hera on April 1 following was a highlight of the first six months of the around that part of the business.”
an extended commissioning period.
Rimas Kairaitis Aurelia has drawn $105 million from its debt
Despite some setbacks due to mechanical finance facility with Glencore, but retains a
and chemical issues in the process plant, pro- $50 million undrawn facility for development
duction was ramping up at Hera after through- of the nearby Nymagee copper-lead-zinc de-
put hit the design rate of 350,000 tpa in early posit.
May.
“We probably haven’t given Nymagee the
Aurelia has forecast production of 39,000 focus it deserves over the last 12 months with
ozpa gold, 7,800 tpa lead, 10,800 tpa zinc and all the focus on Hera and we’ve just diverted
154,800 ozpa silver. some internal technical resources towards
getting it back up to publishing a feasibility
The Orange-based company is also deter- study,” Kairaitis said.
mined to improve lagging recoveries for gold
and zinc. Gold recoveries were 84% in May “We don’t have a set timeline on when that
(compared to the forecast 94% at full capac- would be, but I’m hopeful it will be this year.
ity) while zinc and lead recoveries were above Nymagee is an important value uplift for our
the expected 90%, although zinc recoveries company because we think there’s so much
had been somewhat impacted by silica reduc- capital that is going to be common between
tion work. Hera and Nymagee that it represents a low
capital, high return project.”
“Our lead recoveries are on budget and our
throughput is now 100%, but we’ve still got a – Michael Washbourne
little bit of a way to go on the gold and zinc
recoveries, so we’re hoping over the next few
weeks we can work those up and hit our full
run rate and full metal recoveries,” Kairaitis
said.

“We know what the remaining impediments
to meeting our feasibility parameters on the
mill are, so we know exactly what we have to
do to get there and we’re confident of doing
that.”

Aurelia boasted a strong cash position of
$12.4 million at the end of March after rak-
ing in revenue of $9.7 million in the first three
months of 2015.

Gold contributed $6.5 million of the total
revenue from the sale of 4,156oz at an aver-
age price of $1,565/oz, while net concentrate
revenue accounted for $3.2 million from the
provisional sale of 845t of lead and 937t of
zinc.

AUSTRALIA’S PAYDIRT JULY 2015 PAGE 59

DIGGERS & DEALERS PREVIEW

Aurora in the buyer’s market

While investors remain coy on explorers, Aurora managing director Martin Pyle says more “We have three projects in South Korea and
the likes of Aurora Minerals Ltd are look- education is required to alert investors to the we have been very fortunate to have the Ko-
ing to capitalise on projects needing cash. mining opportunities in South Korea rean Government funding a fair bit of explora-
tion at Daehwa. It’s about getting a tangible
Last year the company took cornerstone in- “That is an early stage project, but we are resource there and a study so we can then
terests in West African explorers Golden Rim trying to develop a pipeline of opportunities show that to Korean investors who may be in-
Resources Ltd (13%) and Predictive Discov- and in terms of business development we terested in helping co-develop that. Since we
ery Ltd (44%). are actively looking at range of projects right have been in country we feel as though [our]
now,” Pyle said. model has been vindicated.”
“I think in talking to our shareholders/bro-
kers, we have received considerable recogni- Having advanced projects to resource sta-
tion that it is a good time to be taking this tack tus, Pyle said he was confident of attracting
and providing bridging funding when there are interest from Korean parties in potential part-
so few other sources of funding available. It is nerships and co-development opportunities.
proving to be a good time to do it and hope-
fully rewards will be seen down the track,” Au- South Korea’s mining industry has been
rora managing director Martin Pyle said. shut for decades, however, the country has
a thriving manufacturing industry, which is a
Market capped at $4.7 million and with a sector to potentially tap into.
cash balance of $5 million, Aurora is prudent
with its spending. “We were initially attracted to the fact that
the country had a very well established down-
However, it will not sit back and let a good stream processing industry for a range of min-
opportunity slip. erals including iron ore into steel, molybde-
num, tungsten, copper, zinc, yet their mining
“We are very mindful of the opportunity in industry has remained dormant for 40 or 50
the market to be investing now,” Pyle said. years. We saw an opportunity to get involved
at a relatively small scale and add value at the
“The appetite and competition is very low exploration stage,” Pyle said.
and we are hopefully using it judiciously to
pick up projects either directly or through in- There is major scope for medium-sized
vesting in companies with advanced projects. mines hosting commodities such as molybde-
This will hopefully position us very well for num, tungsten, copper, lead, zinc, silver and
the upside in the resources sector, which is gold in South Korea.
hopefully not too far away. We’ve managed to
participate in projects at an attractive cost to “South Korea doesn’t have the land
our company. We see it as a buyer’s mass of Western Australia, but it is
market. To replicate the discoveries bigger than Tasmania and we think
already achieved by the companies the mineral endowment is equally
we have invested in would have cost comparable,” Pyle said.
us tens of millions of dollars and we
have been able to buy in at a fraction Admittedly, Aurora’s knowledge of
of that cost,” he said. South Korea was fairly limited prior to
its engagement a few years ago and
While the time is ripe for buying, Pyle knows more education is need-
Pyle knows that true value in any in- ed to sway investors’ minds.
vestments made now would only be
seen once markets recover. The WA Government is doing its
part to help foster relationships with
A recovery in the resources sec- South Korea, with Aurora recently
tor is proving to be a slow burn, with participating in the third Western Aus-
juniors finding it hard to generate any tralia-Korea Energy and Resources
excitement through exploration. Forum (WAKER) in March.

Aurora, however, could well spark Enhancing bilateral business and
some interest with its Daehwa mo- investment opportunities between
lybdenum-tungsten project in South WA and Korea, particularly in the
Korea. energy, mineral, construction and
finance sectors, is the aim of the fo-
Through its 38% stake in ASX-list- rum.
ed Peninsula Mines Ltd, Aurora has
had access to Daehwa for a few years “We went up and met with Korean
now and is tracking towards a maiden Government officials and Korean in-
resource. dustry to continue to promote what
we are doing in country. We fully
South Korea may be devoid of a recognise we have to do a lot of leg
mining culture, however, outlets such work to make the general community
as KORES – a state-owned resourc- aware of the potential in South Ko-
es and energy enterprise – have sup- rea,” Pyle said.
ported the Daehwa project with fund-
ing over the years. – Mark Andrews

KORES awarded Peninsula an- Pyle believes there is potential for several medium-sized base
other 2,650m core drilling grant in and precious metals mines in South Korea
May, with 1,000m to be conducted at
Daehwa. Meanwhile, the remaining
1,650m has been allocated to a maid-
en drilling programme at Peninsula’s
Jinan gold and base metals project.

PAGE 60 JULY 2015 AUSTRALIA’S PAYDIRT

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DIGGERS & DEALERS PREVIEW

Panoramic eyes gold spinout

An IPO is shaping as the best of four op- Exploration success continues to be achieved at Lanfranchi
tions being considered by nickel producer
Panoramic Resources Ltd for the future of its The company intersected 89.3m @ 1.6% we did some years ago. Other people may
Mt Henry gold project. nickel at Savannah North in early 2014 and have missed that and not followed that up, but
followed it up with another promising hit of we were lucky enough to do so. I really put it
Mt Henry, about 20km from Norseman, has 33.7m @ 1.56% nickel. down to the geology teams at both sites for
played third fiddle to nickel operations at Sa- their insight, knowledge and tenacity in being
vannah and Lanfranchi since Panoramic ac- Further discovery joy, this time at Lan- prepared to back themselves.”
quired a 70% interest in the project in 2012. franchi’s Lower Schmitz prospect, arrived
earlier this year in the form of a mouthwa- Maiden resource drilling programmes are
But the release of a robust feasibility study tering hit of 6.5m @ 5.82% nickel, including under way at Savannah North and Lower
in May has put Mt Henry firmly in the spotlight, 6.06m @ 6.11% nickel. Schmitz and the company was hoping to re-
especially after two Australian banks indicat- lease estimates for both discoveries in early
ed debt financing terms for the project. Harold sang the praises of his geology 2016.
team, led by John Hicks, for having the cour-
Panoramic has stated it could proceed with age to drill at both prospective locations de- Initial results from the first three drill holes
financing and development of Mt Henry, but spite having limited information in front of at Savannah North, including hits of 37.2m @
managing director Peter Harold said his com- them. 1.58% nickel and 0.67% copper and 10.7m @
pany was looking into divestment options in 2.12% nickel and 0.46% copper, are encour-
a bid to realise maximum shareholder value. “When we discovered Savannah North, aging.
it was certainly a very ballsy call to go out
“My preference would be to do an IPO, but there given that it was uncharted territory and A third underground drill rig was mobilised
it may be that when we’re ready to press the there were no EM targets. It was very much to Lanfranchi based on a range of recent
button the market is not quite right, so it’s al- old-style geology and thinking about structure high-grade results, including 6.94m @ 7.31%
ways a good idea to have a plan B,” Harold and where the mineralisation potentially could nickel, 11.23m @ 6.47% nickel (including
told Paydirt. have come from,” Harold said. 3.6m @ 11.28% nickel and 4.57m @ 6.84%
nickel) and 9.8m @ 5.49% nickel (including
“Like all those things, from an IPO perspec- “The Lanfranchi drilling was similarly based 5.6m @ 8.68% nickel).
tive the market has got to be right and hence on some old results where there was a bit of
the reason for running a dual-track trade sale/ a sniff of a potential channel and some min- Production is ticking along nicely for Pano-
IPO process. We haven’t quite started that eralisation which we followed up from work ramic despite having to lower its FY2015 pro-
yet, but we’re looking to commence that pro-
cess sooner rather than later.” duction guidance to 19,500t after
seismic activity at Lanfranchi in
The long-running feasibility study found the April slowed both development
project could support a 120,000 ozpa gold and mining.
operation for an initial life of 7.3 years from a
maiden reserve of 20.2mt @ 1.42 g/t gold for “That was disappointing be-
922,900oz. cause they were running very
well up there at Lanfranchi until
Pre-production capital came in at $161 mil- they had those problems, hence
lion, average C1 cash costs are estimated at the reason we dropped the guid-
$1,024/oz and cumulative pre-tax cash flow is ance by about 1,000t,” Harold
$179 million for a $1,500/oz gold price. said.

Forecast project NPVs were $39.6 million “But that’s mining, unfortu-
at a $1,500/oz gold price, $80.2 million at nately. So one operation is going
$1,600/oz and $120.7 million at $1,700/oz. well and the other has had a few
hiccups, but they’re back on track
“If you’re bullish on the gold price in Aus- now.”
tralian dollars, it’s a very robust project which
is well located, easy to develop and there are Panoramic is looking to spin out its gold assets to focus on its – Michael Washbourne
opportunities to improve on the capital and nickel business, including operations at Savannah
operating cost side of the ledger and make
the project even more attractive,” Harold said.

“I think the opportunities are more around
the competitive nature of the construction and
mining side in that you might be
able to get the plant built cheaper
and you might be able to get the
mining costs down as well, given
the state of the market at the mo-
ment.”

Spinouts of non-core assets
are somewhat the flavour of the
month following recent moves by
BHP Billiton Ltd (South 32 Ltd)
and Sirius Resources Ltd (S2 Re-
sources Ltd). However, neither of
those spinouts was IPO-based.

Panoramic’s dedication to its
nickel business has been justified
in the last 18 months on the back
of two promising regional discov-
eries that have the potential to ex-
tend the lives of both operations.

PAGE 62 JULY 2015 AUSTRALIA’S PAYDIRT



DIGGERS & DEALERS PREVIEW

BC Iron almost debt-free

BC Iron is almost debt-free after making the last repayment of a bank loan to fund a partial acquisition of the Nullagine JV

BC Iron Ltd is just one $US5 million payment Ball, like so many others in the industry, did “We had some issues with the clay and the
away from being debt-free after clearing an not foresee the speed of the current slump, handling of our product earlier in the year,
outstanding bank loan 18 months ahead of which almost claimed the scalp of fellow WA which was quite challenging for us, but I think
schedule. producer Atlas Iron Ltd. we handled it really well and what I’m really
pleased about is the way the guys on site now
The Perth-based producer repaid the The low pricing environment took the gloss handle any potential issues.”
$US30.8 million outstanding on its $US130 off a strong March quarter in which BC Iron
million secured term loan facility on June shipped 1.4 wmt at an average run-rate of 5.8 With debt now all but paid off, BC Iron will
29 and now only has a $US5 million interest mtpa, while product stockpiles rose to more look to take advantage of any major uptick in
and security-free facility with primary off-take than 0.5 wmt. the iron ore price ($US62/t at the time of print)
partner Henghou Industries Ltd to wipe before and possibly lock in some hedging in case of
December 31. BC Iron also successfully reduced its C1 another sudden downturn.
cash costs from $54/t in the December quar-
BC Iron entered into the $US130 million ter to $49/t over the first three months of 2015, “Iron ore producers, given the volatility of
facility with ANZ and Commonwealth Bank in including average C1 cash costs of $43/t and price, are probably starting to look at hedg-
December 2012 to partially fund the acquisi- all-in sustaining costs of $52/t in March alone. ing and lock-in profits a bit more seriously
tion of an extra 25% interest in the Nullagine than we were in the past and [being almost
JV with Fortescue Metals Group Ltd in the Pil- Ball described the last 12 months as the debt-free] gives us a little bit more flexibility
bara. The company had until December 2016 toughest period he had experienced since in making sure we’re getting the best hedging
to repay the loan. joining the company initially as chief financial opportunities available to us,” Ball said.
officer in 2009, but he was pleased BC Iron
The iron ore price was sitting nicely at rallied against the tide. “If you have strong financial risk policies
$US129/t when the loan was dished out, hav- and apply good rigour to your hedging deci-
ing climbed from just below $US100/t only a “If you put the macroeconomics to one side sions then it’s a prudent decision to consider
few months earlier, but BC Iron knew it would – and that will be what it will be, even for the in this environment if you can lock in one, two,
be prudent to start making repayments ahead largest producers – I think we’ve done excep- three months out sales of your iron ore at a
of schedule while the price was elevated. tionally well despite that backdrop and the op- price that is about your cash costs.”
eration challenges we had can happen at any
It proved to be a wise move given the pric- time in the mining game,” Ball said. A debt-free position also creates a cleaner
ing slump over the last year, culminating in the launching pad for the company to consider its
iron ore price falling below $US50/t in early Morgan Ball growth options, including the Buckland devel-
April for the first time in almost a decade. opment project in the West Pilbara.

BC Iron managing director Morgan Ball “Notwithstanding the iron ore price, we still
lauded his company’s decision to pay back think that it’s a project which deserves to be
as much debt as possible during the “good developed at the right time and, most impor-
times”. tantly, it has this associated port approval at
Cape Preston East for 20 mtpa, so we think
“Now that we’re in the more challenging it’s a pretty attractive asset to have in our
times, it’s absolutely been the right thing to company for the future,” Ball said.
do,” Ball told Paydirt.
“Then we may even start to cast our eyes
“We always ringfenced enough to pay it a bit further afield, even potentially into other
back anyway, so our approach was that if commodities on a very small basis, just to
you’re treating it as ringfenced money and not give our shareholders an opportunity to ac-
dipping into it, why not pay it back now and cess some diversification…but we need to
reduce the interest cost going forward? make some decisions around commodities
and jurisdictions, etc before we go too far.”
“Had we just stayed on the schedule we
would still be net cash, but we would have a – Michael Washbourne
bigger debt pile and we would be having to
think about it. Hindsight is a wonderful thing
and it was absolutely the right thing for us to
do.”

PAGE 64 JULY 2015 AUSTRALIA’S PAYDIRT

McAleese rides with the times

McAleese is the Pilbara’s largest haulage operator however its scope of business activities is much more far reaching

McAleese Ltd was very much in the spot- cyclical one with peaks and troughs, however cost. But, there has certainly been nothing
light earlier this year when it launched a major in terms of [staff] reduction.”
rescue mission to save Atlas Iron Ltd from the in recent times these swings have appeared
scrap heap. Simpson said he understood the difficulties
more extreme and have had obvious impli- of recruiting and training skilled labour and re-
A revised haulage agreement for the Aby- mained committed to increasing productivity
dos and Wodgina mines and $14 million com- cations for some of our customers and of within the group to reduce costs in order to
mitment to an Atlas share issue essentially keep McAleese and its customers cost-com-
provided the miner with a lifeline amid poor course our operations. We have had to apply petitive.
iron ore prices.
even greater flexibility to meet expectations Furthermore, the resources division has
McAleese’s innovative solution to Atlas’ added another string to its bow recently with
woes, which included involvement from other and ramp up and down where required. This the addition of a diesel distribution service in
contractors, is an example of the lengths the the Pilbara.
diversified services provider is prepared to go hasn’t always been easy but I think we’re cau-
while times are tough in the resources sector. “We have been able to leverage off the ex-
tiously optimistic that we’re now through the pertise and some of the equipment in the oil
“There have been other examples over the and gas division. We are distributing diesel
last 12-18 months where we have worked with most difficult period,” Simpson said. on the mining side, which is work we weren’t
customers to find different ways and some performing six months ago. We have that ca-
better solutions that didn’t make the papers,” Coming to grips with the unpredictable na- pability in place now in the Pilbara and we are
McAleese Resources divisional general man- looking to do that through the Goldfields and
ager Andrew Simpson told Paydirt. “[They ture of the mining industry, particularly dur- any of the other resources regions where we
may] not be exactly the same as the Atlas situ- think we can bring some benefit,” Simpson
ation but still along the same ing this year’s iron ore crash, has impacted said.
theme. In the Eastern Gold-
fields, we have been working McAleese staff with a number asked to take Having this capacity enables McAleese to
with customers who were a bit put “more on the table” for existing and pro-
more used to being in a diffi- leave and others being paid the minimum posed new clients, but also provides adapt-
cult environment than the iron ability in an unpredictable resources climate.
ore sector. requirement under the enterprise agreement
“The more we have the flexibility to move
“It seems to go under the when Atlas’s operations were on hold. up and down in times of volatility [the better].
radar that we renewed the It has enabled us to establish more relation-
contract with Metals X [Ltd Simpson said he was confident the Pilbara ships within the Atlas contractor groups and,
recently] and we have good more broadly, other customers in the Pilbara.
relationships and contracts mines would reopen and McAleese was keen We have been able to open up more con-
with Gold Fields [Ltd] at their versations with them and get closer to their
St Ives site and also Norton to retain as many staff as possible. business and show what we can do for them,”
[Gold Fields Ltd] at Padding- Simpson said.
ton, which has been a suc- Across its four divisions – heavy haulage
cess story for us, but they Simpson said geographical and commod-
tend to get pushed to the and lifting, resources, spe- ity diversity was key to retaining current cus-
background because they are a lot smaller in tomers and attracting new customers, while
size than our iron ore agreements are.” cialised transport and oil and McAleese’s range of services was an advan-
tage its peers could not match and held the
Just as with miners and explorers, services gas – McAleese employs company in good stead for expansion.
companies such as McAleese have had to
adapt to challenging times in the resources about 2,000 people in Aus- In a tough year for service providers,
sector. McAleese estimates financial year 2015
tralia, with regional hubs es- EBITDA to be $70 million, while net debt at
Simpson said one of the major difficulties in June 30 was expected to be $174-179 million,
the current environment was managing vola- tablished in mining hotspots up $14 million on previous guidance due to
tility in the sector. the Atlas share issue commitment.
Port Hedland, Kalgoorlie and
“The resources sector has always been a – Mark Andrews
Cloncurry.

Some administration and

middle management posi-

tions have since been viewed

as surplus, however, the re-

sources division still compris-

es a workforce of about 450

people.

Andrew Simpson “We needed to have a
credible offer to get the mines

open again and without the

people we wouldn’t have had that credible of-

fer, so it was critical that we held onto them

[staff],” Simpson said.

“About half a dozen roles [administra-

tion and middle management] were seen as

surplus with Atlas being on care-and-main-

tenance but it was also part of the evolution

of the business. We centralised some of that

function, we automated some of that function

and that enabled us to bring some benefit to

AUSTRALIA’S PAYDIRT JULY 2015 PAGE 65

DIGGERS & DEALERS PREVIEW

Big things beckon for
Australian Bauxite

Australian Bauxite Ltd is about Australian Bauxite had the Bald Hill deposit ready for mining in less than five weeks
to reap the rewards of a plan
hatched almost a decade ago.

Managing director Ian Levy told
Paydirt it became apparent in
2006 that China was developing an
appetite for seaborne-traded baux-
ite – an industry that failed to exist
until 2002.

At the same time, India was tran-
sitioning from being a net exporter
of bauxite to a net importer of the
aluminium ore.

With two of the world’s largest
and fastest developing economies
in need, Australian Bauxite trav-
elled the country to find not just the
biggest, but best available bauxite
mining project site.

“We started exploring for a par-
ticular type of bauxite which was in
strongest demand and in shortest
supply,” Levy said.

“That was gibbsite bauxite,
which dissolves at a low tempera-
ture and can be used in low tem-
perature alumina refineries that op-
erate at about 140 degrees, rather
than the other type of bauxite which
is high temperature and has to be
processed at 250 degrees. The
low temperature plants are world
famous, particularly south of Perth
in the Darling Ranges. Alcoa Inc
and BHP [Billiton Ltd] produce the
world’s lowest cost alumina from
the world’s lowest grade bauxite,
mainly because they do it at a large
scale and it is all gibbsite.”

Levy said the company identi-
fied a number of significant gibbsite
deposits along Australia’s eastern
seaboard, but it still wanted more.
The site needed to have estab-
lished infrastructure and no envi-
ronmental impediments.

For those three reasons, the
company settled on establishing a
base in Tasmania’s north-east.

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PAGE 66 JULY 2015 AUSTRALIA’S PAYDIRT

Australian Bauxite started operating at Bald Hill on December 9
and constructed the mine in less than five weeks.

First ore excavations started on January 8 and the company began
trial screening to produce bauxite on January 28.

Levy said capital works at Bald Hill were completed at more than
40% under budget.

“The slowdown in the mining industry in Tasmania meant that our
contracting rates were very low – much lower than budget,” Levy
said.

“The greater availability of equipment helped too. We assumed we
would have to manufacture new equipment in China, but it all be-
came available to us.”

At the time of print, Australian Bauxite had already mined 22,000t,
screened 8,500t and stockpiled 5,000t bauxite from Bald Hill, which
was merely a deposit of the company’s greater Campbell Town pro-
duction centre.

Australian Bauxite’s grand plan is to progressively mine three Tas-
manian production centres: Campbell Town, DL-130 and Portside.

“Right now what we can see is three production centres that will be
developed over the next 18 months,” Levy said.

“Each one will produce approximately 500,000t bauxite. We see
a 10-year project at least, but that means each year we will have to
replace the tonnages of bauxite that we mine, and we are doing that
quite comfortably. If the bauxite price were to stay strong and trade
was to weaken or if our net Australian bauxite price was to rise, we
would probably explore further afield and bring in a fourth production
centre. But at the moment we have no plans for that; we just know
that there is potential for multiple production centres.”

Levy said a staggering 75% of Australian Bauxite’s costs were as-
sociated with transport, handling and shipping of its product because
bauxite’s mining method – a simple quarrying and mobile screening
process – was relatively cheap.

And it is for that reason established infrastructure was such a criti-
cal prerequisite for the company’s project site.

“Everyone thinks we are following some geological trend line with
our pegging of tenements, but if they look more closely we are really
following the railway line,” Levy said.

“There is an existing rail site only 11km away from Campbell Town
and we will load the bauxite into containers at the mine, they are
covered and then trucked 11km to the rail site and those containers
are placed onto flatbed rail wagons and then hauled down to Bell Bay
Port. At port the containers are taken off the flat bed rail wagons and
tipped upside down and the material will be immediately poured into
a stockpile next to where the ships come in.”

At the time of print, Australian Bauxite was in off-take negotiations
with two interested buyers.

Levy said the company was interested in partnering with long-term
buyers, with a minimum contract of 18 months to three years.

“We do not want to be putting each ship load out to bidders,” he
said.

“We want to be mechanised, automated and streamlined to reduce
the transport costs to a minimum, and that’s where we can shave an
extra $5/t. Simplicity is crucial for the next 18 months.”

Simultaneously, the company was putting together its maiden
shipload, which was likely to be between 30,000-55,000t.

With all that said, it’s almost laughable to reveal Australian Baux-
ite’s Tasmania project pipeline is merely the forerunner for its flagship
30mt-plus Binjour bauxite project in Queensland.

Levy said Binjour was potentially the best undeveloped silica-free,
gibbsite bauxite play in the Pacific Basin.

“We believe it will come on stream in 2018, but it is a $100 million
project and right now you could easily waste a lot of money by doing
it inappropriately,” he said.

“At the moment the most important thing at Binjour is to do a scop-
ing study to focus on the most likely 2-3 transport solutions and line
all the ducks up in a row before we commit to developing the project.”

– Rhys Dickinson

AUSTRALIA’S PAYDIRT JULY 2015 PAGE 67

DIGGERS & DEALERS PREVIEW

PFS a priority for Renaissance

Renaissance Minerals Ltd managing direc-
tor Justin Tremain says the company’s
2015 Cambodian game plan is simple: finalise

Okvau’s PFS and keep exploring.

Tremain told Paydirt he expected the

Okvau PFS to be completed by the end of

July upon the establishment of a “more robust

resource” for the project.

The PFS would seek to improve the eco-

nomics of a scoping study, which Renais-

sance published late last year.

Tremain said a significant chunk of Renais-

sance’s March quarter was dedicated to re-

modelling the resource to include all drilling

completed at Okvau for the PFS, as well as

some fine-tuning to the metallurgy.

Previous test work on representative sam-

ples from Okvau resulted in total gold extrac-

tions of between 85-90% by the way of coarse

grinding and flotation, fine grinding of a low

mass concentrate and conventional cyanide

leaching of flotation concentrate and tails Trenching continues at Renaissance’s Okvau and O’Chhung licences
products.

Further metallurgical work was conducted du Camboge (EDC) during the quarter, which The programme, which consisted of ex-

last quarter to test variability composites and confirmed the availability of sufficient grid tension and infill sampling, also tested new

to optimise grind sizes and reagent consump- power for the project at the tariff provided for ground at O’Chhung’s O’Svay prospect and

tion. the company’s scoping study. identified and refined multiple target areas

“The previous test work we did was looking “The Government is really supportive and suitable for follow-up investigations.

at maximising gold extraction and we didn’t they are very keen to supply power to us,” Soil sampling and trenching at Zeus net-

have much focus on the economics of rea- Tremain said. ted 19m @ 4.1 g/t gold, 12m @ 5 g/t gold and

gents and grind sizes,” Tremain said. “We are still in discussions with them. We 5m @ 7.5 g/t gold, while rock chip samples

“The review of our reagent consumption envision working up a heads of agreement grading up to 11 g/t gold were collected from

is also looking really positive. We have defi- with the ECD. They have confirmed they’ve Rhyolite Ridge.

nitely reduced reagent use, particularly cya- got the power to allocate to it and have con- At the time of print Renaissance was await-

nide consumption, which is what we assumed firmed the tariff of that and largely confirmed ing the results of a 30-hole RC campaign at

in the scoping study numbers. Also, we will the capital cost required to put in a line from Rhyolite Ridge.

most likely reduce the mass pool of concen- the Okvau deposit to the national grid, which At O’Svay, infill soil sampling returned a

trate, meaning we will have to re-grind a lot is about 75-80km.” plus-20 ppb gold in soil anomaly of 1km by

less material, which should reduce our pro- With its PFS work on track, Renaissance 500m trending in a north-east and north-west

cessing costs.” continued geochemical soil sampling at its orientation.

Renaissance appointed MineGeoTech to Okvau and O’Chhung licences. Renaissance planned to follow up the hits

complete a geotechnical survey study for in- The company targeted anomalous gold de- with a trenching programme to help define

put into the mine design last quarter. fined by an ultra-fine BLEG stream sampling drill targets at the site.

A number of diamond holes were complet- programme at Area 6 – located in the west of “Obviously with the market the way it is and

ed to provide data for Okvau’s single pit de- the Okvau licence – specifically the Zeus and the financial constraints it’s been tough to ex-

sign, which Tremain said is still progressing. Rhyolite Ridge prospects. plore,” Tremain said.

The company also contracted “We would like to do more,

Groundwater Resource Man- but we’ve been testing some

agement (GRM) to undertake targets with limited resources

hydrogeological and hydrology and not as many drill holes

studies. as we would like on many

Tremain said early findings of those targets. One of the

suggest Okvau will require a things that we are keen on is

water storage facility to ensure finding new opportunities to

enough water is available for expand our land holding. As

ore processing during Cambo- there’s been no real explora-

dia’s dry season, but that would tion in Cambodia there is a

be determined once a final plant lot of opportunity. Hopefully

size and design was agreed by the end of the year we will

upon. have secured some additional

GRM’s hydrogeological study ground, which would be in

concluded it was unlikely there close proximity to Okvau. We

would be any major water in- would like to secure any newly

flows to Okvau’s open pit from acquired ground and then roll

surrounding rock formations. into a BFS for Okvau.”

Renaissance continued power – Rhys Dickinson
discussions with the Elecricite Renaissance was awaiting results from drilling at Rhyolite Ridge at the time of print

PAGE 68 JULY 2015 AUSTRALIA’S PAYDIRT

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DIGGERS & DEALERS PREVIEW

Basics breed success for Zenith

In lean times for explorers, low-cost activities Zenith may consider applying for a Queensland Government co-funded drilling grant this year
are the order of the day and with cash of less
than $1 million at the end of March, Zenith for more definitive test work however the If results and cash allow Zenith to con-
Minerals Ltd is making the most of what it has early signs are positive for Zenith. Recover- template drilling, accessing Develin Creek in
available. ies greater than 90% copper and zinc have central Queensland does not appear to be an
been reported from RC samples of Sulphide issue.
Soil geochemistry and geophysical pro- City massive sulphides and open cycle flota-
grammes have been fruitful for the company tion has produced copper concentrate grades The project is 70km from Rockhampton
at its flagship Develin Creek copper-zinc- of more than 22%. which hosts Gladstone port, with the area
gold-silver project, north-west of Australia’s suitably supported by infrastructure.
cattle capital – Rockhampton, Queensland. In an effort to further prove up priority tar-
gets, down-hole EM surveying of recent drill Furthermore, should Zenith move towards
Never before have simple exploration tech- holes is planned while a VTEM SuperMax development scenarios at Develin Creek it
niques been applied to the Develin Creek airborne geophysical survey has been flown can take into account existing infrastructure
package but Zenith is using them to good ef- over Sulphide City, Scorpion, Redback and nearby.
fect now, managing director Mick Clifford told Huntsman.
Paydirt. “I don’t think it is a well understood or well
“We’d like to get some more done drilling at known project. It certainly has had a bit of his-
“We see really great opportunity in screen- Develin Creek this year. We want to define a tory. Groups have come in and spent a little bit
ing a large package of ground there, which we series of the best prospects and to get a sub- of time on it, but have not taken it through to
believe is highly prospective, using a very ba- stantial drill campaign together rather than its logical destination which I think is potential
sic tool in soil geochemistry. That allows us to doing it a little bit piecemeal. Drilling one pros- production in the medium term,” Clifford said.
collect the samples rapidly and screen them pect then having to get the rig back and do
quite easily using a portable XRF machine. something else is not what we want to do, so Resources at Develin Creek currently do
From what we have seen, that work has been we’d rather add some value with the soil geo- not warrant a standalone project proceeding,
providing us with immediate success and defi- chemistry and geophysics first and then come however, Carbine Resources Ltd is looking at
nition of the Huntsman and Golden Orb pros- in with a more comprehensive programme,” re-starting gold and copper production from
pects which we plan on following up,” Clifford Clifford said. the nearby Mt Morgan project.
said.
Drilling costs have come down in recent Clifford said there could be potential syner-
Reconnaissance mapping identified the times, making it a viable activity for Zenith to gies for the companies by way of a potential
new gossans at Huntsman and Golden Orb, consider. Applying for a Queensland Govern- toll treating agreement.
with the work done to date revealing the two ment co-funded drilling grant is also an option
prospects bear semblance to surface geo- for Zenith. “If they [Carbine] get up and operating that
chemical signatures to known targets at De- is maybe something for the future as a fall
velin Creek. back,” Clifford said.

Encouraged by its grassroots approach to “If we can’t find something that would sup-
exploration previously ignored by partner Fitz- port a standalone operation there may be
roy Resources Ltd (49%), Zenith has collected potential for us with Carbine. We really think
a further 1,500 soil samples to determine how we need to double what we have now with the
far it can expand the Develin Creek project. existing resources or find something that is
slightly higher grade at surface to ensure we
An inferred resource of 2.57mt @ 1.76% can have a standalone mill.”
copper, 2% zinc, 0.24 g/t gold and 9.6 g/t sil-
ver has been estimated at Develin Creek from As the company moves ahead at Develin
the Sulphide City, Window and Scorpion mas- Creek, it has hit a snag in Turkey at its Kavak-
sive sulphide deposits. litepe gold JV with Teck Resources Ltd.

Since acquiring 51% (with the option of tak- “It is a bit of a sleeper at the moment. We
ing full ownership) of Develin Creek in July have been waiting on permits for about 12
2014, Zenith has almost doubled resources at months, but we think we are getting close.
minimal costs and started initial metallurgical We now have a new partner – Teck – and we
test work at Sulphide City. are hopeful that we will be able to get on the
ground and get some trenching and drilling
Further diamond core drilling is required under way in the near term,” Clifford said.

– Mark Andrews

Basic exploration, such as soil geochemistry, has not been applied to Develin Creek in the past

PAGE 70 JULY 2015 AUSTRALIA’S PAYDIRT

Horseshoe throws
stockpile haymaker

If the global minerals market was a boxing Horseshoe is assessing low-grade stockpiles for early cash flow potential
match, Horseshoe Metals Ltd would be look-
ing to fight its way out of the corner. Horseshoe’s most recent infill drilling pro- higher level, but that will take time as some
gramme at the NWS returned intersections of that drilling will have to be deep diamond
But fortunately for Horseshoe’s backers, of 10m @ 2.1% copper, including 3m @ 4.5% drilling under the base of the pit. That’s still a
Neil Marston says he has a plan to help the copper and 6m @ 1.5% copper while inter- little way away.”
company land a few early punches. sects outside the project’s existing mineral re-
source block model north of the historical pit While Horseshoe is focused on verifying its
Should the economics fall in its favour, included 33m @ 0.8% copper, including 3m current resource, Marston said the company
monetising historical stockpiles at its flag- @ 2.3% copper, 10m @ 0.7% copper, includ- was also excited about the future of two new
ship Horseshoe Lights copper-gold project, in ing 1m @ 2% copper and 5m @ 1% copper, prospects it discovered in December last year.
Western Australia’s Gascoyne region, with a including 1m @ 2.6% copper.
low capex start-up is an option for the com- A rock chip sampling programme conduct-
pany. “Also, we’ve just drilled a bunch of holes ed 2.5km south-east of Horseshoe Lights’
in the Motters zone to the east of the Main Main zone returned a promising grab of 0.11%
“Our approach is to push ahead with devel- zone,” Marston said. copper and 0.16% nickel, while 3km south-
oping the surface stockpiles within the next west of the main pit Horseshoe defined an
phase,” Marston said. “We’ve got more holes planned around the area containing several gossanous ironstone
eastern footwall zone and the NWS zone. The outcrops with box work texture and visible
“We’ll be working through that plan in the entire Main zone is inferred as we haven’t sulphide mineralisation, including pyrite and
next couple of weeks. In this market people done any drilling that far south, but the more chalcopyrite.
see companies like us who have got resourc- drilling we do and the further south we go the
es close to development and if there is a way more confidence we will have in the resource. Tethys and Titan, the names of the respec-
to box your way out of the corner by generat- We are trying to get the Main zone up to a tive prospects, could be “game changing”
ing some cash flow it makes sense.” plays for Horseshoe, according to Marston.

Horseshoe acquired its IPO project from But for now the managing direc-
Grange Resources Ltd in 2010 with an es- tor is focused on landing those
tablished resource of 4.9mt @ 1% copper for first few jabs and intends to put
48,000t copper. together studies on the viability of
mining the project’s stockpiles and
The project previously produced more than tailings, as well as persisting with
300,000oz gold and 54,000t copper from its infill drilling.
main pit and now boasts a total measured, in-
dicated and inferred resource of 12.85mt @ “Once we have finished this
1% copper for 128,000t copper and 36,000oz round of drilling we will revisit the
gold thanks to systematic exploration by resource estimate and re-run the
Horseshoe. scoping study figures and see how
things are going,” he said.
A scoping study released late last year put
forward a three-case scenario for the project, “Those activities will run concur-
tabling Horseshoe Lights’ economic potential rently in the back half of this year.
at a $7,750/t, $8,825/t and $9,925/t copper Hopefully towards the end of this
price. year we will have some favourable
numbers on the tailings and stock-
“At Case 3 it starts to make some decent piles.”
money, so we are reviewing how we can make
the project more economically viable when Horseshoe Lights Main zone pit has already produced – Rhys Dickinson
there’s lots of gaps in the drilling and a lot of 300,000oz gold and 54,000t copper
historical drill holes,” Marston told
Paydirt.

“At the North West Stringer zone
(NWS) we’re trying to convert a lot
of our holes to plus-1.5% copper,
because that will bring the eco-
nomics of that pit design up quite
substantially purely because all
the costs of processing that mate-
rial have been taken into account
in the scoping study model. If you
are producing 20% more metal out
of those same costs then that goes
straight to your bottom line. That’s
the basis of what we are trying to
do. We are trying to tighten up the
numbers on the scoping study so
the next time around when we run
it we will have a better grade and
better tonnage within the scoping
study shells.”

AUSTRALIA’S PAYDIRT JULY 2015 PAGE 71

DIGGERS & DEALERS PREVIEW

New era for Consolidated
Zinc in Mexico

Anew name, a fresh focus and money in the Plomosas, in Mexico, is 350km from the Texan border
bank is the platform one ASX-listed outfit is
set to launch from in Mexico. “All of our sampling has backed that up and The company hopes to have a scoping
in some places we’ve seen mid-30% zinc. We study completed early next year, with a devel-
After a period of time assessing the Ulaan haven’t seen any evidence of big structures opment decision targeted for the second half
Tolgoi coal opportunity in Mongolia, Perth- that are going to offset the mineralisation or of 2016.
based Newera Resources Ltd dropped the any reason it won’t continue. We are bullish
project in 2014 and started its pursuit of Plo- that we’re in for an exciting drilling campaign,” Current parameters the company is work-
mosas, northern Mexico. he said. ing within are an initial mine life of 5-7 years
producing 250,000-300,000 tpa.
Late last year a binding heads of agree- A timeline provided by Consolidated indi-
ment was executed with private Australian cates it is aiming to define a resource within Small scale production of 90-110 tpd of
company – Arena Exploration Pty Ltd – pro- six to nine months of drilling, with the best remnant mineralisation is being delivered to
viding Newera with the rights to acquire a case scenario being a resource estimate by a concentrator about 90km away from Plomo-
90% interest in Plomosas. the end of 2015. sas.

Upon completing due diligence in March, An exploration target below current mine However, there is a small concentrator com-
Newera opted for an initial 51% interest in Plo- workings of 2.9-3.2mt @ 15-25% zinc and prised of a dual-stage crushing and screening
mosas and has recently raised $2.75 million lead plus 60-80 g/t silver based on 3D model- circuit, two small ball mills, two banks of float
via a placement, while a $1.25 million convert- ling of mineralisation, mapping and historical cells and two thickeners on site.
ible loan facility entered earlier in the year has information at Plomosas, in Mexico’s Chihua-
the company poised for drilling activities. hua region, has been published by Consoli- The concentrator is not currently operation-
dated. al but Consolidated believes it can be recom-
The company will start its new era under missioned for a small capital outlay.
the banner Consolidated Zinc Ltd led by Will
Dix who joined Newera as managing director Dix is aware that capital is scarce – there-
in February. fore limited activity will be undertaken at
its base metals prospects in Sweden –
“It is a complete re-birth and we will be very but retains the belief that good projects
much focused on Mexico,” Dix told Paydirt. will warrant cash injections.
“This asset hasn’t been shopped
“We’ve had a great reception in Mexico, the around before, it has been owned by the
family [owners of Plomosas] has been terrific family that we are dealing with for over 30
to deal with and the Government has been years. It hasn’t sat in TSX-listed compa-
supportive. There is a strong legal framework nies through the booms. It has got grade
and there is obvious pressure on the supply which is what you need, scale-ability and
side for zinc but what that means for the price a clear pathway ahead of it. If the market
I’m not sure. Regardless, we have a good can see what you are going to do and the
platform from which to launch Consolidated timeframe you think you can do it in then
Zinc.” I always believe that good projects will al-
ways be able to attract funding,” Dix said.
Dix expected drilling to start late June/early
July, with the emphasis being to test the down An example of the high-grade zinc being mined – Mark Andrews
dip and down plunge extension of the miner- on a small scale at Plomosas
alisation below areas previously mined.

“We will target the first 150m in the initial
drilling campaign and drill from underground.
We will drill relatively short holes, with a quick
turnaround and we expect to drill a lot cheap-
er than drilling from surface. In the next two
to three months we hope to have a fairly good
idea whether we have something devel-
opable in the short to medium term,” Dix
said.

The top levels of the project have been
sporadically mined by the family owners
based on encouraging zinc prices, how-
ever, there has been no major activity
conducted since ASARCO Grupo Mexi-
co’s involvement in 1974.

A total of 2.2mt @ 16% zinc, 8% lead
and 60 g/t silver at a rate of 20,000t of ore
per vertical metre at 24% zinc and lead,
was previously mined.

Historically, the mining grade at Plomo-
sas has been in the order of 22-25% zinc-
plus-lead and there has been nothing in
the underground to date to suggest that
won’t continue, Dix said.

PAGE 72 JULY 2015 AUSTRALIA’S PAYDIRT

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LATIN AMERICA DOWN UNDER REVIEW

Ecuador debuts
at Latin dance

This year’s Latin America Down Under attracted more than 200 delegates to the Sheraton-on-the-Park, Sydney

Along with its sister event Africa Down cated – Minister for Mines, Javier Cordova could establish a mining sector,” Cordova
Under, Latin America Down Under has Unda, travelled to Sydney for Latin America said. “The geology is here but we began to

proven a debutante ball for countries and their Down Under. understand that the tax burden was too high.”

mining industries down the years. He told Paydirt, the Ecuadorian Govern- Correa approved Wood MacKenzie’s find-

Keen to attract foreign investment, coun- ment had built a new focus on exploration ings and the new incentives were approved

tries such as Nigeria, South Sudan, Nicara- and the development of large-scale metals late last year.

gua and Guyana have come to Australia, not projects. “As a result, the taxes have gone down from

just to promote their mineral potential but also “The aim is to attract $US8 billion of invest- 36.1% to around 26%.”

listen to what explorers, miners and investors ment into the sector over the next 10 years,” He said the Government continued to as-

find attractive in a mineral code and tax re- Cordova said. sess how it could improve its attractiveness.

gime. He said Correa’s Government had iden- “The Government understands companies

At this year’s Latin America Down Under, it tified foreign investment as vital to growth need a return and we are comfortable with

was Ecuador’s turn. Long known for its min- in the mining sector sometime ago but had that. Our tax regime needs to be more flexible

eral prospectivity, the country in the north- made some “good faith mistakes” in establish- and we are still reviewing the legal framework
west of the South American continent has

been largely shut to foreign

mining investors as the Gov-

ernment concentrated on oil

The Government understandsproduction and state-owned
companies need a return andoperations.

The country’s reputation

we are comfortable with that. Our taxtook a hit in 2013, when Kin-

“regime needs to be more flexible and weross Gold Corp pulled out
ing the regulatory and tax regime. to make it more investment-friendly.”
The lifting of the tax burden

has allowed Cordova to high-
light areas in which Ecuador
has always been competitive.

“We have invested $US6
billion in hydropower and our
power prices are about a third
of those in neighbours such as

of the largest gold project, are still reviewing the legal framework to Chile and Colombia.”
Fruta del Norte, saying the make it more investment-friendly. Water is also widely avail-
Government refused to com-
promise on a 70% tax. able, in contrast to Latin Ameri-
can mining powerhouses such

However, in the last 18 as Chile and Peru, while labour

months, President Rafael Correa’s Govern- “The Government set some conditions and costs in Ecuador are also lower than in more

ment has passed a series of laws designed to rules that in a way made it hard for investors established mining economies.

attract foreign miners to Ecuador’s gold and so they didn’t achieve what was expected.” With the above-ground incentives in place,

copper prospects. The new initiatives include Those mistakes included a tax burden of the Ecuadorian Government has set out on an

30-year investment contracts that promise tax more than 70%. The Government brought international road show to display the coun-

stability, accelerated depreciation and other Wood Mackenzie in to advise on how it could try’s below-ground potential.

tax credit schemes. invigorate the sector. “We were a country sponsor at PDAC [held

Ecuador’s newly appointed – and first dedi- “The main question was whether Ecuador in Toronto each March] and went to London

PAGE 74 JULY 2015 AUSTRALIA’S PAYDIRT

in April. We are getting closer to the investors Ecuador’s first Minister for Mines, Javier Cordova Unda, speaks to Paydirt editor
and closer to the banks.” Dominic Piper in Sydney

Cordova’s trip to Sydney for Latin America understanding of what mining was. However, restricted,” he said.
Down Under was part of the international through communication the process has be- Instead, the Government is keen for foreign
promotional tour, but he said the road show come more transparent and communities are
was about more than showcasing Ecuador’s seeing benefits and they are much better in- investment in Ecuador’s mining industry to
potential. formed about the mining process.” drive development in other sectors.

“It has been not only about encouraging in- AIM-listed SolGold plc is the only Australi- “The Government believes one of the main
vestors but also listening to them and under- an-based company currently active in Ecua- contributions mining can make to the country
standing their needs and concerns,” he said. dor, but Cordova said opportunities were ex- is a capacity builder, creating new opportuni-
tensive for more Australian investment. ties in all parts of the production chain.
Ecuador has 18 major projects under evalu-
ation and development, but Cordova is con- “The country remains underexplored. Only “Local labour can be employed and local
scious of the need for more grassroots work in 5-10% of the country has been explored and companies can thrive by giving support to
a country which saw just $US26 million spent there is much more opportunity,” he said. projects.”
on exploration in 2014.
State-owned miner Enami has done much It is too early to assess whether the Cor-
“The logical thing to do is begin with explo- of the exploration but Cordova was quick to rea Government’s new approach will pay off,
ration,” he said. “We have reopened the min- dispel any notion that foreign companies but with markets thawing and Australian junior
ing cadastre and are now granting conces- would struggle to gain a foothold in the coun- explorers preparing to restart the global hunt
sions again.” try. for new projects, it is likely the Ecuadorian
flag will begin making regular appearances
Thirteen concession blocks are set to be “Although Enami is looking for partners on ASX-listed company presentations.
auctioned off in 2015 and Cordova hoped for its projects, there are no local ownership
Australian companies would be involved in requirements and foreign companies are not – Dominic Piper
the process.

“We know the importance of Australia’s
mining sector to the international scene. Its
companies operate to best practices in envi-
ronment, community, etc and we are hoping
to encourage them to come to Ecuador.”

Community issues have proven a major
stumbling block for mining developments in
other Andean countries however Ecuador ap-
pears to have overcome such problems, ac-
cording to Cordova.

“Six or seven years ago it was very differ-
ent. In most communities there was opposi-
tion to mining because there was a lack of

AUSTRALIA’S PAYDIRT JULY 2015 PAGE 75

LATIN AMERICA DOWN UNDER REVIEW

Capital strike set to end: Twigger

PCF Capital managing director Liam Twig-
ger believes the junior sector may be over
the hump, but has warned companies are still

far from rosy.

Twigger, who is also founder of Mineson-

line.com, said although there were plenty of

signals to suggest market antipathy towards

the junior resources sector was thawing, noth-

ing should be taken for granted.

“The market can remain irrational longer

than companies can remain solvent,” he said.

Twigger travelled to Toronto in March for

the annual PDAC forum in search of “bright

lights, green shoots and optimism” instead he

found the four-year “capital strike” was still go-

ing strong.

That “capital strike” is most keenly ob-

served in the junior sector where exploration

expenditure is at nine-year lows and IPOs on

the ASX are at their lowest ever level: “We

haven’t had one IPO in the last six months”.

However, Twigger said there were signs

beginning to emerge that investors were once

again warming to mining stocks.

“Our broking desk had its best ever month Liam Twigger

in April and there is a definite reallocation of

funds. We are seeing people coming out of He said these closed-end funds – such as “This could result in money moving into bet-

the financial sector and the banks and coming Denham Capital, RCF and Pacific Road – ter quality mining stocks.”

into the better quality mining stocks. That is were much more patient. A move out of gold exchange traded funds

likely to continue because the value proposi- “You need to make yourself known to these (ETFs) could also bring capital back into min-

tion for mining is very good.” groups who have long-term, patient capital ing stocks, he said.

Despite these signals, the challenges for which is better matched to mining and explo- “ETFs have taken $US60 billion from gold

the junior sector are still present. Twigger ration funding.” mining companies. It is a pretty poor perfor-

Another source of capital is the Chinese mance indicator [for the industry] that so much
market. money has gone into ETFs and not into min-
said the traditional exploration funding model
of capital raising, drilling, capital raising, re- ing. It is a wakeup call for the
source statement, capital industry; well-run mining com-
raising, scoping study, etc panies should prove a better
value proposition than ETFs
Our broking desk had its bestis “broken”. which have no dividend yield
“You’ve got no increase and no exploration upside.”

ever month in April and there isin your market cap as you If the equity is difficult to
come by, project finance is
“a definite reallocation of funds. We arego along that trajectory
and in fact as you release seeing people coming out of the financial
your feasibility study you

actually see your share sector and the banks and coming into the even tighter, according to Twig-
price drop. better quality mining stocks. That is likely ger.

“Some private equity “A lot of the major banks

firms are now viewing to continue because the value proposition have left the sector and for the
exploration as value de- for mining is very good. first time ever we are hearing
stroying and in the last 12 from banks that they are not
months, post-feasibility prepared to back single asset

study share prices have companies,” he said.

gone down 15% on average because the “Despite the poor performance to date of This has forced some smaller players to

market assumes there will be a need to raise Chinese investments in Australia – they’ve in- source alternatives with royalty and streaming

money.” vested $25 billion and had to write off about companies becoming popular choices.

Instead, Twigger said, juniors should look 90% of that – the interest in our stocks re- “These companies are aggressively com-

for sources of equity which were “better mains very high. As much as accessing Chi- ing into the market but it is a double-edged

aligned” with the value proposition of a min- nese market comes with challenges, it has to sword. While it can avoid dilution, the royalty

ing project. be part of long-term funding solution, espe- funds get money off the top, as soon as you

“Why are companies going back to the cially if you are an Australian company oper- start production and the streamer gets its cut

market every 12 months if it takes 10 years to ating overseas.” of production before you make any money.

build a project? Domestically, mining companies could look That is before you are paying any operating

“It has been the short-term funds which to the slowing of other sectors for encourage- costs or even taxes. So you can be actually

have traditionally supported the mining indus- ment. pushing shareholders back. You need to be

try but we are seeing a big pick up in inter- Twigger said the Australian financial index careful.”

est from the closed-end funds. These are big had come under pressure in recent months – Dominic Piper
funds which have pension money from the US with banks being sold down and APRA in-

and have 10-year durations.” creasing its focus on banks’ balance sheets.

PAGE 76 JULY 2015 AUSTRALIA’S PAYDIRT

Azure ready for double drilling

Azure Minerals Ltd is preparing for a busy @ 2.5% copper equivalent for the epithermal Azure can acquire 100% of Alacran by
second half of 2015, as drilling starts on its and breccia mineralisation at Promontorio in spending $US5 million over four years. How-
100%-owned Alacran project and Rio Tinto Ltd early May, Rio’s eye is on a much larger prize. ever, Teck has a one-off right to clawback
ups the spend on the Promontorio JV. 65% for $US15 million.
“Having Rio Tinto as JV partner is a sig-
After eight years testing a variety of pro- nificant tick of approval for the project,” Ro- Azure’s early work has been focused on the
jects in Mexico, Azure finds itself in the envi- vira said. “Although we announced a new La Morita and San Simon epithermal targets
able position of having two projects attracting resource last month, it was the discovery with mapping, soil sampling and geophysics
the interest of large copper producers. of porphyry rocks under that mineralisation being undertaken.
which attracted Rio Tinto.”
The first, Promontorio, has been Azure’s At La Morita, soil sampling conducted in
flagship asset for five years, but is now sub- The JV is now targeting “giant” copper por- May on historical adits returned samples of
ject to a JV with Rio Tinto which is keen to test phyries with $2 million to be spent this year, 17m @ 4.3% copper (including 2.5m @ 20.5%
the porphyry potential of the northern Mexico mainly on geophysics and initial drilling. copper) and 117m @ 0.33% copper.
project. Further north, Azure is itself earning
into the potentially high-grade Alacran copper Azure – which is free-carried for the first At San Simon, an adit sample returned 45m
project, previously worked by Teck Resources $US245 million of expenditure – manages @ 1.1g/t gold equivalent and 19m @ 1.3 g/t
Ltd, in Sonora state. the project and consequently receives a 10% gold equivalent with up to 272 g/t silver.
management fee.
Managing director Tony Rovira told Latin Subsequent regional work also highlighted
America Down Under that with the company While Promontorio sees Azure farming out the potential of the Mesa de Plata prospect
responsible for management on both pro- interest in a project, at Alacran – on the Lara- where samples returned silver grade of up to
jects, Azure was planning plenty of activity in mide copper belt – it is earning its own initial 213 g/t.
coming months. interest from Teck.
Rovira said La Morita, San Simon, Mesa de
“At Promontorio activity is mostly geo- A 54sq km concession, Alacran is 15km Plata and the Palo Seco prospects were all
physics with drilling to come later in 2015. At from the 26mt copper Cananea mine owned “exciting targets” and would be drilled as soon
Alacran we expect to start drilling in June- by Grupo Mexico. as the necessary approvals were received,
July,” Rovira said. which was expected to be in July.
Rovira described Alacran as “the best
The Promontorio JV marks Rio Tinto’s under-explored copper project in Mexico” Elsewhere on the Alacran property, Az-
re-entry into Mexico having previously with- with the ground prospective for high-grade ure has the potentially much larger 106mt
drawn in 2007. Rovira said despite Azure sulphide, medium-grade porphyries and low- @ 0.21% of leachable copper Cerro Alacran
announcing an updated resource of 2.9mt grade supergene, leachable chalcocite cop- prospect.
per deposits.
– Dominic Piper

AUSTRALIA’S PAYDIRT JULY 2015 PAGE 77

LATIN AMERICA DOWN UNDER REVIEW

Alice has Hot Chili in new land

Hot Chili Ltd managing di- “The large-scale copper Easterday said the company had spent
rector Christian Easter- months “sharpening its pencils” in an effort
day makes no apologies for projects in the world are to drive down input costs with the results of
the direction the company those efforts to be laid bare when the PFS is
has chosen. For him, it gives facing significant challeng- released in coming weeks.
shareholders the rare oppor-
tunity to participate in a com- es in regards capital, but While the PFS will consider the develop-
pany with a clear pathway to ment of Productora’s Main Zone deposit,
early production. Productora already had im- Easterday is equally excited by the project’s
future potential.
Eyebrows were raised mediate advantages in this
among investors earlier Found as part of the first concerted explo-
this year when Hot Chili regard. It is at only 800m ration effort at Productora in more than two
penned a deal to sell 17.5% years, the Alice porphyry discovery repre-
of its Productora project to altitude, is right on the Pan sents a “new phase of discovery” on the pro-
Chilean iron ore producer ject, according to Easterday.
CMP, but for Easterday, the American Highway and was
deal – which was unanimously approved by “This is a new style of mineralisation for
shareholders in May – has handed Hot Chili right next to existing port fa- the project and it looks like the major source
compelling advantages. engine of porphyry mineralisation on the pro-
cilities [controlled by CMP]. ject,” he said, adding that it could potentially
“The deal with CMP represents a very large “transform” the size potential of the project.
de-risking of the project,” Easterday said. “It is “CMP is giving us water
a partnership with a very large local miner and He said the company was working on pre-
offers us clear funding all the way through to a pipeline and transmission liminary mineralisation modelling and pit opti-
decision to mine.” misation studies to identify the impact it could
Christian Easterday easements and all of the have on the PFS.
The deal will see CMP take a 17.5% stake surface rights. It will allow
in Productora in exchange for Hot Chili secur- “A bulk-scale deposit such as this repre-
ing access to critical infrastructure and CMP’s us to leverage ourselves sents the opportunity to drive down our cash
interest in certain mining rights at the project. costs because of very low strip ratios.”
CMP also has an option to increase its stake into an infrastructure position. That is what
to 50.1% for $US80-110 million. Easterday said it was a lesson in not aban-
our master plan has always been about,” doning the drill bit despite being in project de-
“It values Productora at more than $US300 velopment.
million, much more than our current market Easterday said.
cap [around $40 million at time of print],” East- “Sometimes it pays to continue exploration
erday said. The value of the deal in comparison to even when you already have the economic
deposit.”
Inking of the deal secures the infrastructure Hot Chili’s current market cap highlighted
advantages Hot Chili has always professed at Hot Chili restarted drilling at Alice in May
Productora. the need for companies and shareholders to with a view to better defining the 6km-long
porphyry footprint.
remain focused on their strategy rather than
– Dominic Piper
being distracted by short-term market fluctua-

tions, according to Easterday.

“It is about persistence, doing what we say

and having strong backing behind you. If you

know your assets are good, that your funding

is strong and that you have partners who are

strong it is simply about forging ahead,” he

said.

That is precisely what Hot Chili is doing with

the company preparing to complete a PFS for

Productora. The PFS is testing the potential

for Productora to host a 55,000 tpa copper

concentrate, 10,000 tpa copper cathode op-

eration.

Las Bambas ready for 2016

MMG Ltd’s chances of success at its newly have been spent on infra- It will also account for
acquired Las Bambas project in Peru structure before the first mon-
have been enhanced by the company’s com- ey will be earned.” 1-1.5% of national GDP.
mitment to community engagement, according
to executive general manager Troy Hey. Roads, schools, hospitals, Hey said building such a
training and employment
Speaking at Latin America Down Under, services and environmental project was only possible
Hey said construction at Las Bambas was on services plus the relocation
track because of the work MMG had under- of the town of Fuerambamba thanks to the “absolute sup-
taken with community. have been completed from in-
vestments made to date. port” MMG had received at all
“One of the secrets to Las Bambas’ suc-
cess both before MMG took it over and since The result of MMG’s – and levels of government in Peru.
has been the engagement with the commu- previous owner Xstrata Cop-
nity,” Hey said. per’s – community engage- “The Humala Government
ment has the massive copper
Las Bambas is located within the Cotabam- project poised to start in 2016. is growth focused,” he said. “It
bas region, an area which has never previ-
ously hosted mining and with the host com- Hey said construction was 90% complete at is no mistake that MMG is in
munities living traditional Andean lifestyles, the $US6 billion project, with first concentrate
Hey said positive community engagement expected to be produced in the first quarter. DRC, Laos and Peru. These
was paramount.
With reserves of 6.9mt copper and resourc- countries encourage and wel-
“It has been a very innovative approach es of 10.5mt, Las Bambas will be the third
which has seen us bring forward those ben- largest copper mine in the world and is set to Troy Hey come investment in a way
efits of mining with pre-investment into the vault Peru into second place in world copper Canada and Australia don’t.
community. More than $US240 million will production.
“The ability to have a tax re-

gime and attractiveness to foreign capital has

made this project possible. We continue to

work with the people and the Government to

deal with the expectations of local communi-

ties and understand them. It is never easy but

neither should it be,” Hey said.

– Dominic Piper

PAGE 78 JULY 2015 AUSTRALIA’S PAYDIRT

Gale appeals for Ilo hat-trick

Latin Resources Ltd managing director Chris “Certainly now those ject to fund upcoming test-
Gale is searching for a third JV partner for opportunities are with us work, feasibility and design
his company’s suite of Ilo copper projects in and the other great thing studies.
Peru. is you can probably pick
those projects quite rea- A conceptual explora-
Following successful starts to partnerships sonably. There are some tion target of 3.9-5.1bt @
with local entity Zahena at Ilo Este and First very exciting times coming 3.2-8.4% heavy minerals
Quantum Minerals Ltd at Ilo Sur, Latin Re- up and we’re really looking has been set for Guadalu-
sources has put out the call to do a deal over forward to working through pito, which already has an
the Ilo Norte. the next 12 months and de- inferred resource of 1.3bt
veloping these projects to @ 5.7% heavy minerals.
The company has completed more than the next level.”
10,000m of drilling at Ilo Norte and has re- Andalusite is shap-
corded a number of high-grade copper inter- A drilling programme ing as the main product
sections, including 30m @ 0.93% copper and started at Ilo Este last which can be extracted
0.12 g/t gold from 282m including 6m @ 3.1% month. Latin Resources from Guadalupito and has
copper and 0.45 g/t gold from 300m. entered into an earn-in a number of potential mar-
agreement with Zahena kets, including new indus-
Ilo Norte follows the trend of the company’s last year to transfer 70% Chris Gale tries such as proppants in
other copper prospects in the district and is ownership of the project CSG fracking.
just 5km from a sealed highway, 10km from for a total consideration of $US1 million cash
Peru’s major copper smelter and 25km from plus exploration commitments of $US3 mil- “The bottom line is if we
the main port at Ilo. lion. can get that project through bankable feasibil-
ity and into production, we see a very strong
Gale said his company had opened dis- Latin Resources and First Quantum signed market for proppants,” Gale said.
cussions with a number of Australian copper a MoU over Ilo Sur in February and will col-
producers about a potential partnership at Ilo laborate for the next 12 months to explore “It’s the only mineral I’ve seen go up in price
Norte. prospective areas on the 65,000ha property. in the last two years. Supply-demand has re-
ally run that price up to $US400/t, but if we
“The great thing about a market like this The company, which is planning a listing turned that product into a proppant all of a
is being able to secure some opportunities on the AIM market, is also considering JV op- sudden we get $800-900/t.”
where perhaps three or four years ago you tions for its Guadalupito minerals sands pro-
might not have seen a near-term copper pro- – Michael Washbourne
ject looking for a partner,” Gale said.

LATIN

AMERICA

29-30 May 2013, Sydney

The CD-Rom of Paydirt’s 2015
Latin America Downunder Conference

ORDER NOW!

CD-Rom for non-conference delegates – $175 (inc.GST)
CD-Rom for conference delegates – $115 (inc.GST)

Phone (+61) 8 9321 0355 or email [email protected]

AUSTRALIA’S PAYDIRT JULY 2015 PAGE 79

LATIN AMERICA DOWN UNDER REVIEW

Argentina looks to mining

Argentina’s mining players are However, with the Govern- have done, you see the geological frontiers of
looking to the country’s upcom- ment still embroiled in a debt Argentina gives lots of encouragement for the
industry.”
ing presidential elections to give the holdout with US creditors, Ar-
Mining has played a supporting role to ag-
ailing industry the boost it desper- gentina’s re-entry to interna- riculture for more than a century in Argentina
but several exploration booms in the last 20
ately needs. tional markets continues to be years point to the country’s geological pro-
spectivity.
Widely considered one of Latin stalled. Temperley believes a
Celorrio said there were a number of “good”
America’s most geologically pro- solution will be achieved for development projects awaiting a change in
both domestic and international economic
spective countries, Argentina’s min- $US15-25 billion. conditions.

eral development has been stunted “Positively, vultures have said “Prospective pro-investment policies from
a new administration should bring important
by years of opposition at the provin- they would be prepared to swap returns to first players,” he said.

cial level and lamentable economic Igancio Celorrio holdout papers for term sheets. Provinces such as Salta, San Juan, Jujuy
performance at the national level. The trade seems clear; swap and Catamarca all ranked highly for geologi-
cal prospectivity in the Fraser Institute’s most
However, with the country set to holdout paper for term debt and recent Annual Survey of Mining Companies
and Celorrio said the industry could double its
embark on a new era when President Cris- gain considerable capital in-flows, some of share of GDP to 2% in coming years.

tina Kirchner completes a third and final term which will go to ‘shovel-ready’ investments.” The survey also showed explorers were
more comfortable investing in Argentina
in October, business leaders are hoping the Temperley expected the Government to where anti-mining policies in some provinces
had tempered the appetite for investment in
mineral sector will play a key role in leading treat the rest of 2015 as a transition period, the country.

Argentina out of economic turmoil. “muddling through” accepting a lower level of Celorrio said mining investors could enjoy
30-year fiscal stability agreements which in-
Argentine investment banker Diego Tem- economic activity in order to preserve interna- cluded double deduction of exploration ex-
penses, accelerated depreciation systems
perley said all three presidential candidates tional reserves. In 2016, he expected the new and exemptions on import duties, stamp duty
and exchange controls in certain provinces.
– Mauricio Macri, Serio Massa and Daniel Government to look to mining to help solve
The sector has always played second fiddle
Scioli – had promised to change the country’s the economic crisis. to agriculture in the Argentine economy, but
Celorrio said it represented the best gateway
“economic model” with mining identified as a “All three candidates expressed that they for foreign investment.

major driver. want development of the mining sector,” he “There is a lot of activity; money is waiting
to come back in when the cycle changes,” he
“The challenge for all of them is to attract said. said.

foreign investment back into the country,” Quevedo Law Firm partner, natural re- – Dominic Piper

Temperley said. “There is an acceptance that sources group, Ignacio Celorrio, agreed with

they shall all be similar on a directional basis Temperley’s assessment.

but they will yield differences in style, degree “A key factor is that mining is important for

and timing of adjustments.” the promotion of foreign exchange,” Celorrio

Attracting foreign investment is at the heart said.

of Argentina’s economic challenge. The coun- Investment has fallen in the last four years

try has been isolated from international mar- as the domestic economic crisis coalesced

kets for more than a decade following its debt with falling commodity prices. Celorrio, how-

default in 2001 and with controls on foreign ever, believes Argentina’s mineral potential

exchange and inflation rampant, the country remains.

has struggled to attract investment, “Mining is still not a significant factor in Ar-

“There is a need to attract foreign invest- gentina’s total output and its contribution is

ment and repatriate some of the $US300 bil- currently small in comparison to its potential.

lion Argentine nationals hold abroad,” Tem- If you look at how our neighbours such as Bo-

perley said. livia, Chile [and though not a neighbour] Peru

Tax upside for Latin America

Tax relations between Australia and Latin open to potential treaty abuse by others. ploration and mining projects would not be
America are rapidly improving but several “I can assure you that in Latin America the affected as part of the focus on multi-national
aspects still need reviewing, according to DLA tax avoidance.
Piper head of tax partner Jock McCormack. audit activity is escalating,” McCormack told
delegates at Latin America Down Under. “It doesn’t directly target Australian-based
A lack of transparency around tax rules of foreign-based multi-nationals in the mining
in certain Latin American jurisdictions has “Their audit techniques are becoming more sector, it’s more pursuing the Googles, the Mi-
proved a sticking point for many forms of for- sophisticated and the combination and coor- crosofts and the like who work across multiple
eign investment in years gone by, but that ap- dination with other revenue authorities is ex- jurisdictions,” McCormack said.
pears to be changing as many countries grap- panding quite significantly.”
ple with the issue that is international profit “In the eyes of the revenue authorities
shifting. In a sign tax relations are improving, coun- they’re looking at business which may be con-
tries such as Mexico, Argentina, Colombia ducted through a taxable presence in Aus-
McCormack said a number of Latin Ameri- and Brazil have brought in tax amnesties in tralia and how it’s dealt with through a local
can states were now implementing tax audit recent years in a bid to provide more disclo- subsidiary to a foreign parent.”
techniques similar to the ones in place in sure around offshore revenues and activities.
countries such as Mexico, Chile and Argen- McCormack urged all current and poten-
tina. McCormack said he expected several re- tial investors to stay abreast of any tax policy
forms to arise from the recent Federal Budget amendments which may occur in this “fast-
However, Chile and Argentina are the only and he hinted some had the potential to im- changing environment” and to seek out a
two countries in Latin America with recog- pact relations between Australia and some qualified professional for further advice.
nised treaties with Australia, leaving the door Latin American jurisdictions.
– Michael Washbourne
However, he was confident that most ex-

PAGE 80 JULY 2015 AUSTRALIA’S PAYDIRT

SolGold strikes big in Ecuador

SolGold plc will soon begin a new drilling Nick Mather where it has a true thickness approaching
programme at its Cascabel copper-gold 300m. This is going to yield us a very big and
project in Ecuador to follow up on a number about half of the prospective T1 area within very rich orebody and set Ecuador on fire
of exciting discovery hits which rank among Alpala, but all signs were pointing to a very from a mining industry point of view.”
some of the best porphyry intersections in his- large copper-mineralised system over at least
tory. 1km. SolGold has spent about $US30 million
on Cascabel to date and is expected to keep
The AIM-listed company recorded hits of The presence of bornite in the “heart of the pouring money into the prospective ground as
1,050m @ 0.68% copper g/t and 0.92 g/t gold, system” also has SolGold’s geologists confi- it looks to scope out some economic param-
772m @ 0.8% copper and 1.19 g/t gold, 888m dent Alpala could be the “tip of the iceberg” for eters for the project.
@ 0.77% copper and 0.72 g/t gold and 552m the project’s development, he said.
@ 1.03% copper and 1.03 g/t gold during first- The company is targeting an 8 mtpa op-
pass drilling of the Alpala system within the “Now that we’re getting down into the top eration from a potential 80mt @ 2.5% copper
50sq km project area. of this magnetic anomaly we’re starting to get equivalent resource at Cascabel with a likely
into the high grade, just as the conductivity $600 million capex and operating costs of
Those hits rank alongside major intersec- and magnetic information predicted we would $50/t.
tions from Anglo American plc in Chile, Ivan- see,” Mather said.
hoe Mines Ltd in Southern Mongolia and Mather said the project had the ability to
Newcrest Mining Ltd at Cadia-Ridgeway in “It’s open along strike, it’s open at depth carry a $1.2 billion NPV, an IRR of 100%
New South Wales. and underneath 1,800m. We don’t really know and payback within 1.4 years. The proposed
yet how thick it is, but there are some places underground mine would run for at least 10
“There are some big names here and we years.
sit happily in their company,” SolGold execu-
tive director Nick Mather said. “This is one of SolGold also plans to explore other de-
the things we think will ultimately underwrite a velopment opportunities in Ecuador over the
very big value re-rating in our company.” next 12 months.

SolGold will deploy a second rig at Casca- “We believe it’s important to demonstrate to
bel – a JV with 15% owner Cornerstone Capi- the Ecuadorian authorities that we are not just
tal Resources Inc – very soon to drill diverted a land grabber and warehouser of exploration
holes off existing discovery holes in a bid to licences, as frequently is the case in emerg-
strike further high-grade intersections. ing exploration and mining nations,” Mather
said.
Mather said the company had only drilled
– Michael Washbourne

AUSTRALIA’S PAYDIRT JULY 2015 PAGE 81

LATIN AMERICA DOWN UNDER REVIEW

Equity boost for Mexico

Astrong rebound in Mexico-focused The Fraser Institute’s Annual As well as introducing a new royalty, the
capital raisings on the TSX was Survey of Mining Companies new fiscal regime aimed to address commu-
evidence the sector was comfortable nity concerns about the distribution of wealth
with the North American country’s highlighted the unease over the from mining.
new minerals tax regime, according to
Dr Mario Cantu, general coordinator tax changes among investors Cantu said a new fund for regional sustain-
of the Mexican Mining Ministry. able development would ensure a more even
with 95% of respondents saying distribution of mining tax revenue.
Some 187 of the 276 companies
active in Mexico are listed on the TSX the country’s fiscal regime did The new fund will see local municipalities
and with Mexican-focused equity receive 50% of mining tax revenues, with the
raisings increasing from $US100 mil- not encourage investment. State receiving 30% and the Federal Treasury
lion in 2013 to $US1.1 billion in 2014, 20%.
Cantu said the industry had digested However, with the tax regime
the potential effects of the new fiscal regime. He said the fund was part of a wider Gov-
now bedded down and capital ernment policy initiative to ensure local com-
Investors had been nervous when the new munities were more engaged with mining ac-
framework was first mooted in 2013, particu- raisings on the increase again, tivity.
larly as Mexico had not previously had a min-
erals royalty scheme. Mario Cantu Cantu expected Mexico’s stand- “The Mexican Government works first as
ing among investors to improve. an authority and then with communities,” he
The revised tax regime for miners sees a said. “We have to work with private sector to
7.5% royalty applied to EBITDA and an ad- Certainly, the country’s pro- improve the image of mining because it is not
ditional 0.5% precious metals environmental as good as in other sectors.
royalty and a new productive payment on con- duction statistics are on the increase. Already
cessions. “Having a good relationship with communi-
the world’s largest silver producer, the country ties is as important as any other part of doing
Other changes include a requirement for business in minerals.”
miners to amortise pre-operational deduc- is forecasting major increases in copper and
tions over a 10-year period, and holding taxes Cantu said the new fund had already result-
at 30% rather than lowering to 28% as the gold production over the next few years. ed in a change of perception of the benefits of
Government had previously announced. mining among local communities.
“We expect to see our global production
The uncertainty had led, in part, to explora- The new minerals policy also pledged to
tion budgets shrinking from more than $US1.2 ranking improve, especially in copper produc- improve pre-competitive geological data and
billion in 2012 to just $US708.8 million last in this regard the Mexican Geological Survey
year with junior explorer budgets most se- tion with Grupo Mexico planning to double has continued to expand its data capabilities
verely hit ($US404 million in 2012 to $US161 with some 52% of the most prospective re-
million in 2014). capacity and in gold where Goldcorp is sig- gions now covered by 1:50,000 scale geologi-
cal mapping.
nificantly increasing investment,” Cantu said.
– Dominic Piper
In April, Goldcorp and JV partner Silver

Wheaton Corporation announced a $US800

million mine life expansion project for its Pe-

nasquito gold operation.

Cantu also pointed to the positive appraisal

Mexico had received in the Fraser Institute

survey as evidence the international mining

sector continued to view Mexico as a good

investment destination.

“In the Fraser Institute index, Mexico is third

in Latin America for investment attractiveness

and mineral potential,” he said.

Mexico seeks more foreign trade

Bilateral trade between Australia and Mexico and openness to the world.” be used in Mexico and can also be
totalled more than $US1.5 billion last year Garza said Mexico had a num-
and could grow considerably over the coming exported from Mexico,” Garza said.
years if economic forecasts hold true. ber of market advantages, includ-
ing strong human capital, a healthy “Mexico’s economy as a market
ProMexico, the government body which microeconomic environment and a
promotes Mexican trade and investment, sophisticated economy. is growing and developing in a way
has flagged increased trade between the two
countries on the back of three straight years Inflation in Mexico – the second that it’s demanding more sophisti-
of positive trade balance, coupled with the largest gold producer and third larg-
geographical appeal of the world’s largest sil- est copper producer in Latin Amer- cated goods, so this is also an ad-
ver producer. ica – has held firm at almost 4% for
the best part of two decades, while vantage for the Australian compa-
Mexico is a member of the Trans-Pacific exports are growing at a rapid rate
Partnership (TPP) and ProMexico senior and hit a record $US1.76 billion last year. nies as an additional market.”
trade and strategic investment advisor Esau
Garza expects the country’s relationship with According to figures from NAFTA, mining Garza said Mexico’s relatively
Australia to continue to develop. in Mexico contributes about $US19 million
to intra-regional trade every 24 hours. Car Esau Garza youthful population – median age
“Companies in the mining industry can manufacturing ($US709 million per day) is the of 27 years – was also attractive to
take advantage of the logistics in Mexico, so country’s leading industry ahead of the oil and
instead of exporting from other parts of the gas sector ($US540 million per day). mining enthusiasts.
world you can export directly from Mexico,
for example, to the North American markets,” Mining activities have contributed more Mexico boasts some of the lowest labour
Garza said. than $US18 billion in foreign investment to
Mexico over the past 15 years and Garza also costs in the world and better than the likes of
“We would like to have very diversified in- sees potential for further growth in the sector.
vestment from abroad and I think this is an China, Korea, Canada, Brazil and Australia.
area of opportunity in this region where Aus- “I think we can move on not only to mining
tralia can take advantage of Mexico’s location itself, but to the production of the heavy ma- “Every time, for example, there is a change
chinery used in the mining industry, which can
in China in the labour costs, more and more

companies start looking towards Mexico,”

Garza said.

“The advantage of Mexico is not only is it

labour competitive, there are advantages in

logistics and FTAs which enable Mexican

products to enter markets at much more com-

petitive costs.”

– Michael Washbourne

PAGE 82 JULY 2015 AUSTRALIA’S PAYDIRT

AusQuest builds on JV strategy

For AusQuest Ltd managing director Grae- little exploration because of will build its 100%-owned
me Drew, the decision between issuing the proliferation of cover.
project and company level equity is a simple Cerro de Fierro project into
one to evaluate in these tough times for junior “There is no outcrop on the
explorers. property and that is why no a worthy JV prospect later in
drilling has been done previ-
The Peruvian-focused junior has farmed ously,” he said. 2015.
out three projects in the Andean nation to
two major explorers; Southern Copper Corp To counter the cover, Aus- “It has had no previous
and Zahena SAC. Drew said giving up project Quest has employed tech-
level equity was preferable to the continual niques and strategies well drilling but our work showed
dilution encountered when raising funds on known domestically.
equity markets which are currently hostile to it was a large discrete mag-
early-stage exploration stories. “We are using Australian
expertise in exploring under- netic anomaly and that has
“We elected to farm out equity to guaran- cover to test these projects.”
tee proper drill testing of these projects rather now been further defined by
than having to rely on going to market after AusQuest used aeromag
every drilling programme.” for area selection and has ground magnetics, mapping
since had several mapping and sampling
The two JVs are worth up to $34 million – teams doing work to prioritise targets for drill- and geology with a number of
including cash payments to AusQuest of up ing.
to $13 million – and will see 20,000m drilled anomalous gold and copper
over four copper-gold targets in the next 12- Around the port town of Ilo in southern
18 months. Peru, 13 drill sites have been approved at Pu- Graeme Drew samples in the area.”
ite and 10 at Cardonal with the target large- AusQuest continues to use
Peru is the world’s second largest copper scale porphyry and IOCG mineralisation.
producer and over the last 20 years has at- airborne magnetics to further
tracted major exploration investment from Zahena can drill 50,000m and spend $US7
the world’s largest mining houses. However, million to earn 70% in each project. define porphyry targets. Drew said the com-
Drew said AusQuest’s projects – the Lana JV
with Southern Copper and the Cardonal and Further north at Lana, Southern Copper pany had completed a desktop study of mag-
Puite-Colorada JVs with Zahena – had seen can earn 70% by drilling 20,000m and spend-
ing $US3 million over four years. netic signatures and had identified at least

To the north of Lana, AusQuest is hoping its three areas in Peru which showed similar
use of geophysics and mapping techniques
magnetic signatures to the massive Escon-

dida copper mine in neighbouring Chile.

“We’ve identified a signature that we think

may be telling us we have mineralised por-

phyries and we’ve plugged that into our pro-

priety data we have in Peru and have identi-

fied and pegged three locations we will look to

drill,” he said.

– Dominic Piper

AUSTRALIA’S PAYDIRT JULY 2015 PAGE 83

LATIN AMERICA DOWN UNDER REVIEW

Colombia reacts to
permit concerns

Colombia is working swiftly to implement a ground to make up, the regu- Rojas said the introduction of
series of new processes for approving per- latory process was in much a new register for mineral trad-
mitting applications in a bid to boost the appeal better shape than in 2011. ers, RUCOM, had been well re-
of the country’s stuttering mining sector. ceived and 14.8t of gold, 2.7t of
“There is still a lot of con- silver and 211g of platinum had
The world’s fifth largest coal exporter has cern from investors with re- been traded since its opening in
often been criticised for the length of time it spect to the timing of deci- January to the end of April.
takes to approve mining and environmental sions, but the message is
permits, prompting many to turn their backs we are working as fast as we But she believed it was the
on the country at a time when it is crying out can,” Rojas said. proposed public bidding system
for some much-needed foreign investment. for new tenders that will have
“Sometimes we can’t be as the biggest impact of Colombia’s
It is understood only a handful of junior pro- fast as we would like because mining sector.
jects are being seriously explored at the mo- of these changing rules, but
ment despite being a hot destination for new our spirit is that we want to be No date has been set for im-
discoveries, particularly gold, just a few years an ally for all mining projects plementation of the four-step
ago. and we are happy to meet process, which is still in the pre-
with investors and under- Carolina Rojas liminary stages of development,
The interest in Colombia was so high that stand what your concerns are but she hinted it would initially
the country was forced to put a ban on new and – to the extent that is pos- target greenfields projects.
requests for mining concessions in 2011 as it sible – to help you address those concerns.” “We are looking for firms that are experi-
struggled to cope with a backlog of applica- enced in exploitation and can present quality
tions. Mining represents more than 2.1% of Co- in their exploration plans,” Rojas said.
lombia’s GDP and generated $1.2 billion in “Our first tender process will be a very
About 97% of the pre-2011 applications royalties last year. And of the one million peo- small pilot process because we are still test-
have been processed and 588 concessions ple who benefitted from the industry, about ing how this tendering process will work and
are currently under review. However, more 35% were directly employed by the sector. we expect the first tender will be processed in
than 4,000 new applications have been sub- the Andean region.”
mitted since the ban was lifted. Yet only 5% of Colombia is dedicated to
mining activities, comprising 2.3% for explo- – Michael Washbourne
National Mining Agency of Colombia pro- ration, 1.6% for construction and 1.1% for ex-
motion and development vice-president ploitation of minerals.
Carolina Rojas said while there was still some

Minera eyes dual restart in Peru

Minera Gold Ltd is looking to bring per, 8.83 g/t gold and 9.6 mon practice in South America where there
two mothballed mines near the g/t silver. is a large presence of artisanal miners who
company’s San Santiago processing are very good at mining the ore, whether it be
plant in southern Peru back into pro- Minera managing direc- copper or gold,” Pattison said.
duction over the coming months. tor Ashley Pattison said
his company has a long- “Our processing plant is therefore a key bit
Limited mining has been carried term ambition to process of infrastructure in that processing chain in
out at the Brasil and XV copper-gold its own ore at San San- southern Peru.”
mines – aside from selective mining tiago, one of the largest
at depth on a trial basis – but Min- operating mills in Peru. Minera will also soon begin a drilling pro-
era has plans to restore both sites to gramme at the Tumi gold-copper target where
operational status in the near-term. “While toll treatment is trench samples have previously returned av-
nice, processing our own erage grades of 2.16 g/t gold, 0.6 g/t silver and
Minera’s acquisition of the San ore is where the real profit 0.1% copper.
Santiago processing plant and sur- is,” Pattison said.
rounding tenements last September Pattison believes the real potential of gold
has paved the way for three poten- “We’re hoping within prospect Torrecillas – one of Minera’s original
tial revenue streams, including pro- Ashley Pattison the next 3-4 months to ba- purchases in 2007 – is still to be unlocked and
cessing of 40-100 tpd of ore from this has been supported by the recent Tessie
Brasil and XV at the San Santiago complex. sically have our own pro- vein discovery.
duction flowing through,
Recent exploration success at Brasil, in- which basically accounts for about 60% of the “The focus of Torrecillas over the last few
cluding samples of 0.32m @ 25.11% copper, feed of the flotation circuit.” years has been to really understand the geo-
4.16 g/t gold and 16.4 g/t silver and 0.4m @ San Santiago offers three processing op- logical setting and there’s around 12-13 tar-
22.84% copper, 4.04 g/t gold and 45 g/t silver, tions – a 100 tpd gold CIL circuit, a 250 tpd gets we have as a company to follow up for
has provided Minera with plenty of reason to copper flotation circuit and an 80 tpd copper high-grade vein structures,” Pattison said.
pursue a return to production at both mines. oxide vat leaching circuit.
In recent times, Minera has focused on pur- “Through that process we have started to
Other encouraging hits include 0.67m @ chasing and processing ore from third parties focus our attention on the potential for heap-
19.39% copper, 4.68 g/t gold and 9.6 g/t sil- in the district under toll treatment contracts. leachable targets that are lower grade but
ver, 0.57m @ 18.09% copper, 4.36 g/t gold “Toll treatment is not something unfamil- good tonnage.”
and 35.1 g/t silver and 1.6m @ 16.26% cop- iar to Australia, but it certainly is very com-
– Michael Washbourne

PAGE 84 JULY 2015 AUSTRALIA’S PAYDIRT

Latin engagement needs
to continue: Blanco

Growth in Latin America open market and many of its “Activity has slowed less than in Australia.
may be slowing, but Aus- A focus on copper and gold has meant it has
tralia’s private and public sec- countries are in a strong fiscal fared better than Australia where the focus
tors must continue to increase has been on the bulk commodities of iron ore
engagement with the region, position. If we don’t give Latin and coal.”
according to a leading expert
on relations. America attention we are doing According to Blanco, as investors contin-
ued their flight to quality, Latin America’s large
Australia Latin American ourselves a disservice. orebodies and progressive legislation would
Business Council chairman see it retain its position as the most popular
Jose Blanco used his open- “Any Australian company, destination for exploration expenditure.
ing remarks at Latin America
Down Under to express his when forging an international “Government in most countries is support-
concern that Australia has ive of the sector and there is a clear push to
not committed fully to en- strategy, must look at Latin develop safer, more environmentally-friendly
gagement with a region that is home to 600 mines,” he said.
million people. America. It has 600 million
However, he warned Australian companies
“Latin America’s credentials are second to people and has significant in- considering investment in the region to not be
none and Australia can’t lessen its engage- foolhardy.
ment,” Blanco said. “We need to look beyond fluence in the US market.”
the short term and get a foothold for the long “Australian companies going to Latin Amer-
term sustainable benefit of our private sector.” Jose Blanco He described the journey to ica vary in their approach and their success
full engagement with the region but one thing that is certain is that you can’t
The mining sector has led Australia’s en- go for a few weeks and establish a business
gagement with the region and Blanco said the only 5% completed and urged partner; that would be like playing Russian
growing importance of the mining economies roulette.
of Chile, Peru and Brazil should not be lost on Australian politicians to pay it more attention.
Australian politicians and business leaders. “Even speaking Spanish is not enough. You
“No Australian prime minster has ever been have to have a cultural understanding and
“Latin America’s appeal is compelling. that takes a long time. You need quality rela-
On top of its vast mineral reserves, there is to Latin America for bilateral discussions. tionships, built up over a long period.”
a sea-change to democratic rule. It has an
When other countries send their leaders an – Dominic Piper

entire entourage of ministers travels with

them.”

He said while growth was slowing in Latin

America, the situation was not as grim as

many expected.

“The IMF sees 0.9% growth but many of the

individual countries are set for plus 4% growth

in the coming year,” Blanco said.

Indeed, Latin America’s mining industry

had outperformed Australia’s in the last two

years.

Sharing is caring at MEC

MEC Mining managing director Simon ia are very common with the to share the technology we
Cohn has openly encouraged other con- Latin American market – and
sulting firms to consider Latin America as a of course there is a rich mining have here and apply new meth-
business destination. history in the four countries we
are targeting.” odologies into those projects.”
Cohn could not speak highly enough of the
region after an “overwhelmingly positive” four The mutual exchange of MEC is currently working
years providing consulting services to mining technical expertise between
projects in Chile, Peru, Colombia and Mexico. countries has saved MEC from closely with ASX-listed com-
having to send large numbers
MEC recently opened an office in Santiago, of its Australian workforce panies Metallum Ltd and RMG
Chile, to build on its burgeoning portfolio of over to Latin America to assist
work in Latin American jurisdictions. The with projects. Ltd in Chile as well as Hong
company remains headquartered in Brisbane
and has completed more than 250,000 hours MEC has, however, intro- Kong-based privately held de-
of consultancy work over the past decade. duced exchange programmes
with the various countries to velopment firm HKND Group
Sharing skills and knowledge around mine bring specialist workers to Australia so they
development plans was central to MEC’s en- can build on their already proficient skills and on the Nicaraguan Grand Ca-
try into Latin America in 2011 and the com- knowledge bases in a foreign setting.
pany’s focus has not wavered in the ensuing nal project.
four years. “We’ve brought engineers and other pro-
fessionals across from Latin America to work Cohn said his company has
“There is a very large Latin American pres- with us and to share some of the skills and
ence in the Australian mining industry and knowledge that we have,” Cohn said. Simon Cohn learned plenty in the past four
one of the key things for us choosing Latin years and hoped MEC’s Latin
America as a destination was the shared val- “What this allows us to do is work on the
ues and cultures we’ve learned to love from cross-training opportunities on projects so American experience would
the people who we have worked with,” Cohn when we’re working on a big project over in
said. South America, we use our team in Australia continue to be a positive one.
to share those skills, to share the innovation,
“All the things we hold dear here in Austral- “I can’t speak highly enough of the opportu-

nities Latin America has presented to us and

as an Australian company I couldn’t encour-

age people more to enter the Latin American

market if they haven’t done so already,” Cohn

said.

“It really is about gaining access to the right

expertise in the region and for us it has been

an immensely positive experience thus far.”

– Michael Washbourne

AUSTRALIA’S PAYDIRT JULY 2015 PAGE 85

LATIN AMERICA DOWN UNDER REVIEW

Stability drives Latin’s
mining future

Latin American countries must possess po- Department of Foreign Affairs and Trade, Americas Division, first assistant secretary Brendon
litical, regulatory and fiscal stability if they Hammer, Quevedo Law Firm natural resources group partner Igancio Celorrio, Minera Gold
want to attract foreign investment and maintain
a prosperous and reputable mining industry. managing director Ashley Pattison and SolGold executive director Nick Mather all cited stability
as the key to a flourishing resources sector in Latin America
According to members of the closing panel
at this year’s Latin America Down Under con- costs. Labour is cheap over there and so is “The locations of the main deposits are in
ference in Sydney, stability in key areas such power and these things make a very big dif- traditionally poor provinces so mining has be-
as taxation and governance was the most im- ference when you’re looking at a large-scale come a key factor in the development of those
portant factor for mining companies looking to mining operation.” provinces because they are traditionally dif-
establish a base in foreign jurisdictions. ficult to develop without mining,” Celorrio said.
Brendon Hammer, first assistant secretary,
Convened by Paydirt editor Dominic Piper, Americas Division, at the Department of For- “Companies that go to a particular coun-
the panel boasted more than 100 years of eign Affairs and Trade, agreed sensible taxa- try or sector in Latin America must know the
combined operational and consulting experi- tion arrangements were necessary for coun- conditions and traditions of the place where
ence in countries such as Ecuador, Argentina, tries with foreign investment ambitions. they are, how they work and especially how
Chile, Peru and Brazil. business is done in those places because it
However, he sounded a warning to mining gives an industry the key elements to develop
Strong government support has seen Ec- and exploration companies on managing their an area which would be very difficult to predict
uador emerge as Latin America’s newest political expectations. otherwise.”
hotspot for foreign investment in mining and
exploration, following a commitment from “Countries can’t actually promise political Minera Gold Ltd managing director Ashley
President Rafael Correa to develop a re- stability very easily, but what they can do is Pattison has seen the unfortunate side of how
sources sector with a renewed focus on gold set up a regulatory legal environment where a working environment can quickly become
and copper. there’s an unwritten contract between one unstable.
government and the next which essentially
SolGold plc executive director Nick Mather, says there are certain things that you don’t Recent mass protests over the proposed
whose company is looking to develop the unwind or interfere with if you get elected,” Tia Maria project, 300km from Minera’s San
Cascabel copper-gold project in Ecuador, Hammer said. Santiago operations in southern Peru, have
said countries with stable governments often negatively impacted Pattison’s company and
presented compelling investment cases. “You definitely need stability in these areas, required him to spend a lot more time on com-
but the settings need to be pretty sensible as munity engagement initiatives than ever be-
“The other important thing from an explora- well. We know very, very well that businesses fore.
tion point of view is you want to make sure they can plan ahead if they’ve got a sense of how
have a cadastral framework that has ease of the future environment is going to look, even if “The town that surrounds our operations
application from a process point of view, but you’re in a really high cost environment.” [consists of] about 300 families who are all
still requires demonstration of proper intense pretty much illegal miners and their objec-
work programmes and decent amounts of in- While Ecuador has come on in leaps and tive for social change can be quite different
the-ground expenditure,” Mather said. bounds as a stable jurisdiction in a number to most indigenous communities you might
of key areas, Argentina is only just beginning come across,” Pattison said.
“The last thing you want to do is be tied that process.
up in a country where there is a lot of land “They have to be engaged, they have to be
banking going on. It might be great for people The country’s ailing minerals sector has managed because at the end of the day their
who want to try and monopolise exploration been identified as potential driver for future livelihoods depend upon mining and process-
activities in some countries, but a much better economic growth by the presidential candi- ing of their material [through our operations]
idea is to have a diverse and open approach dates vying to succeed Cristina Kirchner later so it is something that we obviously have to
to investment from both a geotechnical and this year. manage and devote a lot of time and resourc-
expenditure point of view.” es to.”
Quevedo Law Firm natural resources group
Tax stability and other enticing fiscal prom- partner Igancio Celorrio said a vibrant mining – Michael Washbourne
ises, spearheaded by new Minister for Mines sector would benefit Argentina’s lower socio-
Javier Cordova Unda, have also boosted Ec- economic provinces.
uador’s appeal as a global investment oppor-
tunity.

But Mather claimed the county’s current tax
regime did in fact demand higher rates than
some rival Latin American jurisdictions such
as Chile due to the presence of “spectacular”
existing infrastructure.

“We don’t have a problem with the often
criticised tax regime that exists in Ecuador
because they allow sensible return of your
capital at the front end and the much-feared
windfall profits tax doesn’t kick in until you
get some spectacularly high gold and copper
rates,” Mather said.

“You’ve got to look carefully at the tax re-
gimes in the context of the infrastructure that’s
provided and in the context of the operating

PAGE 86 JULY 2015 AUSTRALIA’S PAYDIRT

Oro Verde senses discovery

Oro Verde Ltd managing director Trevor on, but the country has really A sample of 3.35 g/t gold
Woolfe believes the underexplored nature turned itself around significantly
of Nicaragua has his company well placed to in the past 25 years. in the new Buena Vista
make the country’s next major gold discovery.
“Nicaragua hasn’t been ex- vein, about 6km north-east
Nicaragua fell behind Central American posed to a lot of modern explo-
neighbours El Salvador, Honduras and Cos- ration technologies and we see of the resource area, has
ta Rica during the mining and exploration that as a real benefit and a real
boom of the 1980s and 1990s, but has since opportunity for us because there also provided some discov-
emerged as one of the world’s lowest-cost are a lot of opportunities to find
gold producing jurisdictions thanks largely to new deposits within the country.” ery excitement.
the likes of TSX-listed giant B2Gold Corp.
Oro Verde’s main focus is “The exciting part about
Oro Verde made the strategic decision last advancing the 340,000oz Topa-
year to shift its focus from Chile to Nicaragua cio gold project, which is in this project for us is the
and has since acquired the prospective Topa- the same district as B2Gold’s
cio and San Isidro gold projects. 150,000 ozpa La Libertad op- fact that most of the ground
eration.
Woolfe, who joined the company last Au- hasn’t been explored in any
gust, sees the country as having huge poten- The company signed an op-
tial for further discoveries. tion agreement to purchase the project last great detail,” Woolfe said.
October and must spend $US2 million on
“I first went there in 2012 as a consultant exploration, plus a series of vendor pay- “This is a low sulphida-
and I must say I went with a bit of trepidation ments, over the next three years before it can
at first because of the history of the country, 100% of the project with a further payment of tion, epithermal-style de-
but after doing some research and going to $US1.5 million.
the country I was really impressed by the po- posit and these deposits
tential it had,” Woolfe said. Oro Verde expects to start a drilling cam-
paign later this year to follow up a number of Trevor Woolfe are generally quite large,
“Most people don’t know too much about promising gold samples, including 38.5 g/t so we are hoping that we
the country and what they do remember about and 33.6 g/t in the Dos Amigos vein, 12.3
it is from the 1970s and 1980s when it was g/t in the Topacio vein and 14.1 g/t in the Su can turn this resource from
basically a basket case. No one wanted to go Majestad vein.
there because there was a revolution going 340,000oz into something much more signifi-

cant over the next few years.”

Reconnaissance work, including mapping

and sampling, will soon begin at San Isidro,

adjacent to Condor Gold plc’s 2.3 moz La In-

dia project, pending the receipt of an environ-

mental approval.

Oro Verde also raised $650,000 via a share

purchase plan and placement last month for

the upcoming exploration programmes.

– Michael Washbourne

AUSTRALIA’S PAYDIRT JULY 2015 PAGE 87

LATIN AMERICA DOWN UNDER REVIEW

Latin alternative to China

Australia needs to focus less
on the Asian markets and
invest more in Latin America,

according to Council of Australia

Latin America Relations (COA-

LAR) chairman Chris Gale.

It is no secret the Tony Abbott-

led Liberal Government views

China as the perfect trade and

investment partner given the

Asian country’s proximity to Aus-

tralia and its lucrative resources

industry.

However, there are growing

concerns from some analysts

and trade experts that Australia

is relying too heavily on invest-

ment from the cashed-up Asian

markets and neglecting other

potential development opportuni-

ties in jurisdictions such as Latin

America.

Gale planted the idea of Latin

America as an alternative invest-

ment destination in the minds

of delegates at this year’s Latin Australia’s heads of mission to Latin America convened for a special panel session at Latin America Down Under.
America Down Under confer- Pictured from left is Nick McCaffrey, Ambassador to Peru; Noel Campbell, Ambassador to Argentina; Patrick Law-
ence in Sydney with some com-
pelling research figures. less, Ambassador to Brazil; Tim Kane, Ambassador to Chile, Colombia, Ecuador and Venezuela; Tim George,
Ambassador to Mexico; Ross Tysoe; High Commissioner to Trinidad and Tobago; and Kym Fullgrabe,
“The consumer growth in Latin Consul-General and Senior Trade Commissioner for Sao Paulo, Brazil
America is outstanding,” Gale

said. “In the past decade the middle-class in Government’s focus on Asia was too strong Argentina, said most Latin American coun-

Latin America grew 50% and now represents was posed to the country’s ambassadors and tries were welcoming of a Chinese presence

30% of the population. high commissioners to Latin American coun- in the region.

“The growth area for the next 20-30 years tries during a special panel session at the “Argentina is a country that is clearly keen

is going to be Latin America and we, as COA- conference. on developing relationships with countries

LAR, have got to make sure the Government Patrick Lawless, Australia’s Ambassador that are rich in resources, but often there is a

stands up and has a look at these numbers – to Brazil, said he did not believe other juris- perception issue – which Australia and Aus-

and they are. I think we’ve had more ministe- dictions were being left in the cold as a result tralian companies don’t face – which is the

rial visits in Latin America in the last year than of the Government’s pursuit of stronger trade Chinese are out to get something, but I don’t

we’ve had in the last 20 years and I’m sure relations with China. believe that to be true,” Campbell said.

there will be even more before this year ends.” “When you consider they’re still in their “Any relationship has a number of layers

Gale cited other research figures which first term, the number of visits they’ve already and we’ve been talking in particular about op-

suggested burgeoning Latin American coun- made to Latin America is pretty impressive portunities in the mining sector, but clearly oil

tries Brazil and Mexico would be ranked and each time they visit my impression is they and gas and renewable energy has important

among the world’s top six economies by 2050. want to come back,” Lawless said. links that not only Australians but others are

Gale, the Latin Resources Ltd managing “We’ve had a visit from the Trade Minister keen to capitalise on.”

director, also highlighted the fact about 25% and I know he’s keen to come back and [For- Tim George, Australia’s Ambassador to

of all global exploration dollars spent in 2013 eign Affairs Minister] Julie Bishop is keen to Mexico, said the relationship between both

was focused on Latin America and more than come to Brazil, but it’s just a matter of timing.” countries was developing at a rapid rate, but

$269 billion would be invested in mining in the Kym Fullgrabe, Consul-General and Sen- there was still plenty of ground to be made up

region over the next five years, including $100 ior Trade Commissioner for Sao Paulo, said on leading rival Canada.

billion in Chile alone. a trade relationship between Australia and “Australian mining companies have not

“Every day we’re seeing jobs being lost be- China could benefit Brazil and other Latin been very engaged with Mexico up until now

cause of the reliance we have on China and American countries in the long run. and I think that’s sort of symptomatic of a

the reliance we have on Asia to create those “China for some time has obviously been wider challenge that’s been around for a long

jobs and no longer is the case if China gets a a recipient of produce from many of the Latin time, which is lack of engagement or lack of

cold, do we get a cough; we get the flu,” Gale American countries and, certainly in the case focus by the business community in many

said. of Brazil and its iron ore and soy beans, China respects on Latin America, but I think we’re

“We’ve got to start to develop another re- is the major trading partner,” Fullgrabe said. starting to see change,” George said.

gion to drive our economy so we can really “There’s a lot of Chinese investment about “Clearly Mexico’s interest and engagement

iron out those peaks and troughs in the cycle. to flow through to Brazil, covering everything with Australia has grown strongly in recent

We certainly see Latin America as being ca- from purchase of planes from Embraer, to a times and we’re seeing that in all sorts of

pable of doing that so what we’ve got to do feasibility study for a railroad from Brazil to ways, particularly the Mexican presence on

now is make sure the Government sees the Peru, so I think you’ll start to see a more ac- the ground in Australia.”

opportunities that lie in Latin America.” tive role for China in the market.” – Michael Washbourne
The question of whether the Australian Noel Campbell, Australia’s Ambassador to

PAGE 88 JULY 2015 AUSTRALIA’S PAYDIRT

Students given social experiment

As education links to the region increase, Communities were asked ests, fears and concerns of com-
it could be the Latin American mining
experience which provides Australian mining about their perceptions of the munities,” Baillee said.
graduates with a head start in understanding
community needs and concerns around min- State and of mining compa- A role-playing simulation
ing operations.
nies while company repre- game has been created to help
Established at The University of Western
Australia’s School of Civil, Environmental and sentatives were asked how students develop such skills.
Mining Engineering in 2012, the Engineer-
ing, Communities and Environment team has communities and NGOs were Based on a mining project in
spent the last three years researching this
space in a mining context. perceived. the fictional state of Minadoro,

The aim of the research was to provide Community representatives the game sees participants take
mining engineering students with the key is-
sues different stakeholders hold in the min- perceived the State as having on roles as family members
ing experience, issues which can often derail
the development of mining projects if not ad- an absence of regulation, at- within two different communi-
dressed appropriately.
taching no value to land, being ties located near the mine. Par-
“We all know of many horror stories of the
potential cost of community conflict,” Profes- in collusion with companies ticipants make decisions about
sor Caroline Baillee, chair of Engineering
Education for the Faculty of Engineering, and developing environmental events and issues which are
Computing and Mathematics at UWA and
Winthrop Professor in the School of Civil, En- impact statements that were based on real life events with the
vironmental and Mining Engineering said.
hard to understand. Professor Caroline Baillee story spanning a decade from
“The key message we are passing onto Their impression of mining when the mine is being con-
engineering students understand is how com-
plex interest-based negotiations are and how, companies was that they were structed to five years after min-
in trying to understand what stakeholder inter-
ests are, one has to understand their percep- arrogant with bad histories and a sense of dis- eral processing has begun.
tions, needs and fears.”
trust with communities. Baillee said the game helped students un-
The course programme was built on the
back of two case studies involving interviews Baillee said most revealing was that com- derstand the “complex impact of mining from
with community members and groups, NGOs,
lawyers, human rights groups, company and munities, governments, NGOs and com- community perspectives”.
government representatives involved in the
Tintaya and Yanacocha mines in Peru. panies agreed about what was needed to The effort to broaden the engineering ex-

“change the conversation”. perience at UWA has also been extended into

“Companies and communities say the the environmental space. UWA Professor of

same things in detail about how to get it right,” Mining Engineering and Head of the School

she said. of Civil, Environmental & Mining Engineering,

“Getting it right” includes the need for re- Andy Fourie, told delegates students were

spect, the upholding of fundamental human being encouraged to share their knowledge

rights, transparency and trust and the imple- about mining processes – including the po-

mentation of effective and transparent en- tential impacts of mining and mine closures

gagement, communication and reporting. – with communities.

The research is now being used to educate The environmental stewardship course

future mining engineers on the need to “see deals with mine waste management, water

through other lenses”. and energy minimisation and mine closure.

“We use this to teach students to shift from – Dominic Piper
blame to cause and develop an appreciation

of the multiple and often contradictory inter-

Chilean miners put on notice

Operators of new and existing mining pro- ter and the solution is just one – water from comes from the resources sector.
jects in Chile have been urged to exercise the sea,” COCHILCO vice-president Sergio The Chilean Government has endeavoured
more caution around the country’s social and Hernandez told delegates at Latin America
environmental regulation, particularly those re- Down Under. to introduce stricter controls on mining opera-
lating to water. tions and smelter emissions in recent years,
“At the moment there are a lot of desalina- but challenges continue to arise from a public
Chile is the world’s largest producer of tion plants under investment. CODELCO is perspective.
copper and it is estimated more than $US75 building a very big desalination plant for all of
billion worth of new mining projects will be its operations, which is around the production “The Government, the private sector and
developed in the country over the next eight of 1.2bt of copper.” the agenda of the Energy Minister all support
years. the development of these projects, but at the
COCHILCO has forecast sea water con- moment they have been delayed in part due to
However, there are growing concerns the sumption to initially reach 2.6cu m/second external factors,” Hernandez said.
high level of water consumption by existing (82 million cu m/year) by 2017 before rising
projects in Chile, particularly in the northern sharply to 5.4cu m/second (170 million cu m/ More than 100 mining operations are
regions of the country, will impact the pro- year) by 2021. scheduled for closure in Chile over the next
posed development of new mines. year, but Hernandez said he still expected
Chile is already behind in its estimates for copper production to remain the country’s
Based on 2013 figures from the Chilean new mining projects with about $US8.3 mil- main industry for many more years to come.
Copper Commission (COCHILCO), 79% of lion worth of proposed resources develop-
the country’s copper production for that year ments sitting on the sidelines due to socio- COCHILCO has estimated mining will ac-
came from the north, but the average water environmental problems. count for about 27,000 jobs, including more
flow for the region is only 800cu m/year, com- than 15,000 new positions, in Chile by 2023
pared to the national average of 53,000cu m/ Mining is huge business in Chile, account- but only if production costs continue to be
year. ing for 11% of the country’s GDP and generat- driven down.
ing more than $US240 billion in revenue last
“In this region there is high demand for wa- year. About 45% of foreign investment also – Michael Washbourne

AUSTRALIA’S PAYDIRT JULY 2015 PAGE 89

LATIN AMERICA DOWN UNDER REVIEW

Now in its fourth year, Latin America Down Under returned to the Sheraton-on-the-Park, Sydney once again in May.
The event attracted more than 200 delegates and is now firmly established on the Australian resources calendar. Latin
America was represented by eight delegations with particular interest generated by the presence of Ecuador’s first ever
dedicated Minister of Mines, Javier Cordova Unda.
The presence of more than a dozen junior miners with projects in the region also highlighted the fact that, despite tough
market conditions, Australian explorers and miners are a hardy lot and are prepared to bide their time to secure the rich
rewards they perceive to be on offer in Latin America.
In expanding its coverage of the region, Latin America Down Under introduced new water and energy and education
sessions which proved highly popular. The Latin American delegations were particularly interested to hear from Austral-
ian water experts given water resources is a major issue in countries such as Brazil, Chile and Peru.

PAGE 90 JULY 2015 AUSTRALIA’S PAYDIRT

AUSTRALIA’S PAYDIRT JULY 2015 PAGE 91

REGIONAL ROUNDUP

Zambia plans unfinished mineral
products export: Minister

Zambia, Africa’s No. 2 charge as much as 20%. Pascal said although it was “disconcerting”
copper producer, plans However, the State said on that there had been many changes to Zam-
bia’s mining taxes over the last five years, he
to introduce a law banning June 5 that it would cut min- hoped a common ground between the two
parties could be reached.
the export of unfinished eral royalties for underground
Pascal said Zambia faced falling ore grades
mineral products, Minister mines to 6% because under- compared with the Democratic Republic of
Congo – Africa’s top copper producer – and
of Mines, Christopher Yalu- ground mining was more ex- needed to come up with a stable tax regime
that would encourage mining exploration and
ma, said in June. pensive than open pit mining. discovery of new orebodies.

“We want to curb the Zambia would be the only “Zambia needs a lot of exploration. We
don’t have the ore grades in Zambia that we
unnecessary export of un- country in the world to en- have in Congo, so it does make it that much
more difficult,” he told Reuters on the side-
finished mineral products. force different royalty rates lines of a mining and energy conference.

We need to get all exports based on mining method, the “We are heartened by the fact that the cur-
rent government has expressed the willing-
to be beneficiated within chamber, which represents ness to talk to the industry and come up with
a rational tax going forward that will be con-
the country and this will mining companies operating ducive to further investments and the sustain-
ability of the mines.”
come into effect very soon,” in Zambia, said.
First Quantum last year postponed $US1
Yaluma told a mining and Christopher Yaluma “A two-tiered rate, differ- billion worth of investment in Zambia due to a
energy conference. entiated by mining method, tax dispute with the Government.

Yaluma said a lot of cop- is not conducive to the long- “As it stands at the moment the projects are
still on hold. We will review that as things de-
per was being exported without being fully term health of the industry and government velop,” Pascal said.

processed and that was denying Zambians revenues,” the chamber said in a statement. The fall in copper prices was a major chal-
lenge to First Quantum’s operations but that
jobs that would have been created if mining “It does not address the need for continued had been mitigated by lower costs of inputs
such as fuel, Pascal said.
firms invested in processing plants. investment in the country’s mines, nor does

He said the Government had been talking it address the fact that there are some open

about local processing for a long time, hence cast mines with higher operating costs than

the decision to compel mining companies to underground mines and vice versa.”

do so. He said local processing would also The chamber said it maintained its recom-

ensure proper accountability of mineral ex- mendation that the 2014 fiscal regime, when

ports. the mineral royalty was at 6% for both under-

Meanwhile, foreign miners in the country ground and open cast mines, should be re-

have urged the Government to introduce just stored.

one royalty rate for the sector. First Quantum Minerals Ltd director of

Zambia’s Government set the royalty tax operations, Matt Pascal, said the company

rate for open pit and underground mining at hoped the Government’s finalised tax regime

9% in April, rowing back from earlier plans to would encourage investment in the country.

Syrah expands suite of graphite products

Shares in Syrah Resources Ltd broke back mediate focus, the economic assessment of ter it can be applied to battery anode applica-
through the $4 barrier in June after it an- the spherical graphite process represented tions.
nounced new value accretive opportunities at an “exciting, value-accretive future option for
Balama. the company”. Syrah said based on discussions with po-
tential customers, coated spherical graphite
A BFS into Balama – which also received “The decision to incorporate spherical currently sold for $US7,000-10,000/t.
its final key approval from the Mozambican graphite production into the overall busi-
Government in June – showed the project ness strategy is driven by global customer Following the positive outcomes of the
could provide an IRR of 71% and post-tax demand,” Kumova said. “The appointment study, Syrah has started detailed work on
NPV of $US1.1 billion for a $US138 million of a chief technology advisor will strengthen the technical aspects of the coated spherical
capital outlay. Syrah’s technical capability in this area. The graphite gacility as well as due diligence on
company looks forward to participating in the the necessary regulatory approvals in the US:
However, a recent study has shown Balama expected significant increase in the spherical “so as to position the company to enter this
could also produce coated spherical graphite, graphite industry from lithium ion battery ap- market following the successful delivery and
a premium product used in the rapidly evolv- plications.” ramp up of the Balama graphite project”.
ing and growing lithium ion battery market.
Battery grade spherical graphite is a physi- That project is set for development start up
The study identified that for $US80 million cally and chemically altered form of natural in the December quarter after the company
in additional capex, Syrah could build the graphite or synthetic graphite and is the op- received its final regulatory approval in June.
world’s largest coated spherical graphite facil- timum product for use in anodes for battery
ity in the US, capable of generating $US104 technologies, particularly lithium ion batter- The issuing of the land access licence by
million in pre-tax free cash flow. ies, which is a key component of electric vehi- the Mozambican Government allows Syrah to
cle and energy storage applications. start the second and third phases of its farm-
Syrah managing director Tolga Kumova land relocation plan, including the clearing of
said that while development of the main The more spherical the graphite, the bet- land for initial mine, processing plant and as-
graphite project remained the primary and im- sociated infrastructure development.

PAGE 92 JULY 2015 AUSTRALIA’S PAYDIRT

AFRICA

Tanzania ready for new dawn

With a rejuvenated major miner and a slew Acacia Mining’s new-found confidence as a Tanzanian company is expressed by its presence
of promising junior developers, the future as a cornerstone occupant of one of Dar es Salaam’s newest high-rise buildings
of Tanzania’s mining sector is looking brighter
than at any time in the last decade.

Thanks to the transformative influence of
Australian chief executive Brad Gordon and
his management team, Acacia Mining plc
(formerly African Barrick Gold) has gone from
basket case to innovator and is now reaping
the rewards with a 10th successive quarter of
production and cash cost improvements set to
be reported for June.

It is a dramatic turnaround for a company
that was struggling with high operating costs
and poor government and community rela-
tions just two years ago.

Speaking to Paydirt in the Tanzanian capi-
tal of Dar es Salaam recently, Gordon said
even the company itself had been surprised
by the level of improvement.

“Our relationships with government and
community have improved a lot in the last
two years and they are now the best they
have ever been,” Gordon said. “And on the
operational front, we have seen significant
progress. Two of the three operations are per-
forming well and while Bulyanhulu is still not
quite there, it is starting to turn the corner and
by the end of 2015 we expect the journey to
be complete.”

Meanwhile, at the junior end of the Tanzani-
an mining sector, it is ASX-listed juniors which
are reinvigorating the scene.

The push is being led by graphite explor-
ers such as Kibaran Resources Ltd, IMX
Resources Ltd, Magnis Resources Ltd and
Walkabout Resources Ltd and rare earths
developers Peak Resources Ltd and Cradle
Resources Ltd.

Having seen mining development stall over
the last decade, the Tanzanian Government
is keen to foster progress in the junior sector.

“Junior exploration companies are vital in
carrying out initial exploration and developing
medium-sized projects that are later picked
up by the majors,” Deputy Minister of Miner-
als, Charles Kitwanga told Paydirt. “Tanzania
has welcomed investors to come to invest, not
only in mining, but also exploration, value ad-
dition and in the provision of mining services.”

Presidential elections loom in October but
the country’s mining sector is confident the
path towards further development will not be
hindered.

“The outcome of the election should make
little difference,” Gordon said. “We have re-
ceived positive comments from both govern-
ment and members of the opposition and nei-
ther of them is against investment.”

– Dominic Piper

For more on Tanzania and the re-emer-
gence of the country’s junior exploration sec-
tor, be sure to secure your copy of the August
edition of Australia’s Paydirt

AUSTRALIA’S PAYDIRT JULY 2015 PAGE 93

REGISTER NOW

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

2015 keynote speakers:

Hon Julie Bishop MP, Hon Ngouille Ndiaye, HE Tolesa Shagi, Hon Bright Msaka,
Minister for Foreign Affairs, Minister for Industry & Mines, Minister of Mines, Minister of Natural Resources,
Federal Democratic
Australia Republic of Senegal Republic of Ethiopia Energy & Mining,
Republic of Malawi

Hon Nii Osah Mills, Hon Lebohang Thotanyana, HE Omar Hamidou Tchiana,
Minister of Lands & Natural Minister of Mining Minister of Mines &

Resources, Kingdom of Lesotho Industrial Development,
Republic of Ghana Republic of Niger

Other presenters to date:

Steve Stone, Managing Director, Azumah Resources Ltd Brad Marwood, Managing Director, Tiger Resources Ltd

Andrew Spinks, Managing Director, Kibaran Resources Ltd Tim Carstens, Managing Director, Base Resources Ltd

Allan Mulligan, Managing Director, Walkabout Resources Ltd Stephane Brabant, Partner, Herbert Smith Freehills

Lynda Daley, Managing Director, Sipa Resources Ltd Rick Yeates, Managing Director, Middle Island Resources Ltd

Paul Donaldson, Managing Director & CEO, Danakali Ltd John Welborn, CEO, Resolute Mining Ltd

Otsile Matlou, Director, ENSafrica Michael Blakiston, Partner, Gilbert + Tobin

Trish O’Reilly, CEO, AAMIG TBC, First Quantum Minerals Ltd

2015 sponsors to date

www.africadownunderconference.com

REGIONAL ROUNDUP

Zuma defends police before
‘Marikana massacre’

South Africa’s President Jacob Zuma has Ngoako Ramatlhodi started issuing notices to “licence holders”
defended the actions of police who shot who have not complied with a government-
dead 34 striking workers in 2012 at Lonmin most of the industry’s platinum production to mandated “mining charter”.
plc’s Marikana platinum mine. a halt – a factor that probably contributed to
the record as it meant tens of thousands of He did not specify what he meant by “no-
Speaking days before publication of a re- miners were not underground and exposed to tices”, but companies that fail to comply with
port on the most deadly security incident danger during that time. the charter can face a number of sanctions
since the end of apartheid, Zuma said: “Those including the loss of their mining licences.
people in Marikana had killed people and the But Ramatlhodi said “the figures till the end
police were stopping them from killing peo- of March 2015 show that we are well on track Ramatlhodi has said 79% of mining compa-
ple.” to improving further” on the 2014 numbers. nies had complied with a government target
of achieving at least 26% black ownership of
He was responding to a question during a Since the end of white minority rule in 1994, operations, a key component of the charter,
visit to a university in Pretoria. the Government has been pushing a safety which is aimed at redressing racial imbal-
drive with the goal of “zero harm” in the shafts. ances.
Zuma received the results in March of a
nearly three-year inquiry by retired judge Ian In recent years, the industry has, at times, The industry disputes this, while the Gov-
Farlam into the “Marikana massacre”. complained that the drive was overzealous, ernment and the Chamber of Mines have
with unnecessary safety stoppages imposed taken the issue to the courts.
Ten other people were killed in violence re- by inspectors, resulting in output and revenue
lating to the strike, including two police offic- losses. Power tariffs in the energy-starved country
ers who were hacked to death. are also an issue for the industry and one of
Ramatlhodi, who was addressing one of the the country’s largest gold miners, Sibanye
The shootings sparked intense public and houses of parliament before a vote on his de- Gold Ltd, has warned state power provider
media criticism towards the police, mining partment’s budget, also said his ministry had Eskom’s proposed electricity price increase
companies, unions, the ruling African Nation- could lead to mine closures and job losses.
al Congress and Zuma.
“The unsustainable electricity price in-
As well as investigating the shootings, the creases will lead to diminished operating per-
Farlam commission had a broader remit to formance, early closure of mines, job losses
look into labour relations, pay and accommo- and reduced capital investment,” Sibanye’s
dation in South Africa’s mines – issues seen senior vice president, said at a public hear-
as behind the strike that preceded the police ing to consider Eskom’s latest application to
shootings. hike tariffs.

Meanwhile, Minister for Mineral Resources, Monique Mathys, head of Economics at
Ngoako Ramatlhodi, hailed 2014 as the “saf- the Chamber of Mines said closures were “in-
est year” in the history. evitable if the planned electricity increases of
more than 20% were implemented.
“There has been a reduction of about
86% in fatalities from 615 in 1993 to 84 in “The mining industry is at a tipping point.
2014, which is the safest year on record for We have absorbed as much as we could.
the South African mining industry,” Ngoako Mine closures are a reality,” Mathys said.
Ramatlhodi said in prepared remarks.

Last year was exceptional for South African
mining, with a five-month strike that brought

AngloGold ponders next sale

Talks on IAMGold Corp’s to dispose of its stakes in relative to the US dollars the company gets
possible purchase of Sadiola and Yatela. for its gold, have helped AngloGold cut costs.

AngloGold Ashanti Ltd’s “We have made good “As far as we are concerned the balance
sheet fix is done,” Venkat said.
stakes in two gold mines in progress but ... we are not
He said AngloGold was talking exclusively
Mali are moving along well, bound by any particular to IAMGold on selling its Mali mine stakes.
AngloGold operates both mines, and the Ma-
but there is no urgency to time line. There is no real lian Government owns the remaining stakes
in them.
do a deal, AngloGold’s chief urgency,” Srinivasan Venka-
A deal with IAMGold would involve three
executive said in June. takrishnan, who is known as considerations, namely, the capital that An-
gloGold will not spend on an expansion that
Canadian-based Iam- Venkat, said. is required at the Sadiola mine; closure costs
for Yatela, which is near the end of its life; and
gold and South African- In early June, AngloGold cash for the assets, Venkat said.

based AngloGold each announced the sale of a – Nicole Mordant, Reuters

own 41% of the Sadiola Colorado-based gold mine

mine in south-western Mali for $US820 million, helping

and 40% of the nearby Srinivasan Venkatakrishnan it get most of the way to its
Yatela mine. goal of reducing its debt load

Under pressure to re- by at least $US1 billion.

duce debt, AngloGold, the world’s third-big- Weaker oil prices coupled with a softer

gest gold producer, in April announced plans South African rand, which reduces local costs

PAGE 96 JULY 2015 AUSTRALIA’S PAYDIRT

AFRICA

Discovery takes final curtain
in Botswana

Less than a decade after being hailed as one Formerly known as Hana Ghanzi Cop- jected the initial offer and when rival bidders
of the ASX’s African success stories, Dis- per, Khoemacau is developing the Ghantisi- conducted due diligence on the project they
covery Metals Ltd is set for liquidation. Chobe copper/silver prospect in the Kalahari found Boseto’s reserves had been incorrectly
copper belt, within the Ghantsi and Ngamiland calculated.
The company, which rose to prominence districts.
with its development of the Boseto copper In the meantime, Discovery was in court
project in northern Botswana, called in the It brings the curtain down on a company with EPC contractor Sedgman over missed
liquidators in June, after it failed to improve once considered an Australian trailblazer in payments.
performance at Boseto. Africa.
By March 2013, the company was in a vol-
Following the liquidation announcement, Discovery had originally entered Botswana untary trading halt in an effort to shore up its
Cupric Canyon Capital – whose subsidiary in 2005 and under the guise of Discovery finances and only rectified the situation in Sep-
Khoemacau Copper Mining has been in dia- Nickel had delineated a nickel resource at tember that year when it arranged a recapitali-
logue with its stricken neighbour as a potential the Dikoloti nickel project in the north-east of sation programme with Blumont Group Ltd.
acquirer for the last two years – announced its the country. However, it was the discovery of
own offer for the company had been accepted the Boseto project (then called Maun) on the Blumont took 15% of the company for 12c/
by creditors. edge of the Okavango Delta, which catapult- share and a $US100 million convertible bond
ed Discovery to prominence. at 15c/share.
In June, Creamer’s Mining Weekly reported
that when put to a vote as part of a provisional The Brisbane-based company took the Several operational restructures followed,
liquidation process being conducted by De- project from exploration through to PFS, BFS but with copper prices continuing to stagnate,
loitte Botswana, Cupric’s offer of compromise and construction before eventually producing Discovery eventually placed Boseto on care-
won the support of all of the secured credi- first copper concentrate from the 36,000 tpa and-maintenance in December 2014.
tors, who are claiming more than $US103 copper and 1 mozpa silver operation in 2012.
million, all of the preferential creditors, who On February 9 this year, Discovery an-
are claiming more than P40 million, and 83% In 2012, it received a takeover offer from nounced it had secured a MoU with Castle-
of the unsecured creditors, who are claiming Hong Kong-based Cathay Fortune worth pines Global Equities Ltd worth $US110
nearly $US23 million. $1.70/share, a 56% premium to Discovery’s million. However, just two weeks later it an-
30-day VWAP. The Discovery board re- nounced its voluntary suspension from the
ASX, never to return.

AUSTRALIA’S PAYDIRT JULY 2015 PAGE 97

REGIONAL ROUNDUP

Xanadu pushes on in Mongolia

Despite scepticism about operat- Xanadu is halfway through a 10,000m diamond drilling programme at Kharmagtai
ing in Mongolia arising from Rio
Tinto Ltd’s dispute with the Govern- the project was before we engineered those “We are also looking at new centres. There
ment over Oyu Tolgoi, Xanadu Mines sorts of works,” Stewart said. is a lot of upside and there is plenty of poten-
Ltd has pushed ahead at its flagship tial to extend the resource.”
Kharmagtai copper-gold project. The holes drilled at the end of last year indi-
cated a major increase at depth and geometry A mid-scale project in the ilk of PanAust
“We have been working away with of the high-grade zone is leading Xanadu to Ltd’s Phu Kham project in Laos is within reach
our head down in the background believe a big deposit at Kharmagtai is pos- for Xanadu, according to Stewart.
advancing our copper-gold project sible.
and I wouldn’t say it has affected Perhaps proving such potential at Kharma-
us,” Xanadu managing director An- The company is focused on picking out gtai, near Oyu Tolgoi, might perk the interest
drew Stewart told Paydirt. the high-grade pods of the deposit, however, of majors in the area, including Anglo Ameri-
Stewart said holes would be drilled so the big can plc, Teck Resource Ltd and Rio Tinto.
“I have worked extensively deposit won’t be missed.
through South East Asia, Central Regardless of who may or may not be fol-
Asia and Eastern Europe and this Therefore, Xanadu started another lowing Xanadu’s progress, the company is
[Mongolia] is a fairly easy place to 10,000m diamond drilling programme at the internally driven to build a nice portfolio of
work. It is one of the most sparsely end of April and was about 50% complete at projects and discoveries.
populated countries in the world. It is the time of print.
a very well-endowed in copper de- With Stewart taking over as managing di-
posits and mineral resources. There Drilling is aimed at extending resources in rector and Mark Wheatley as executive chair-
are no land rights issues as there is the higher-grade shallower pits, while Stewart man earlier this year, Xanadu added another
a small population. It is relatively flat is confident that new discoveries will be un- change to the board with Marcus Engelbrecht
and easy to get around, we are drill- earthed along the way. joining as a non-executive director.
ing for about $US150/m, which is
because we don’t need helicopters “The size of the price is certainly worth the Stewart said the company had a well-
to access high mountains. There is no high effort we are putting into it, but we need to rounded board positioned to steer Xanadu in
rainfall, so it is quite an easy place to work.” demonstrate whether the big deposit is there the right direction.
or not,” Stewart said.
Stewart’s sentiments could start to be ech- “While a lot of people are saying that given
oed once again, with Rio Tinto and the Gov- the current constrained capital market
ernment settling its dispute over taxes and you should be slowing down and conserv-
building costs at the $US5 billion Oyu Tolgoi ing cash, we look at it very differently,”
project in May. Stewart said.
“We are drilling for $US100/m at all-in
Furthermore, the Government has started costs about $US150/m, so we are push-
issuing exploration licences after a 12-month ing the project ahead as fast as possi-
hiatus, which Stewart believes will trigger a ble. We don’t want to stop drilling now,
positive response from miners and explorers. we really want to push it through to that
potential scoping phase. We are not con-
He expected activity to start to ramp-up in strained by seasons as we have a winter-
The Gobi and northern Mongolia, as the junior ised camp so we can push through while
end of town regained confidence in the juris- we have those cheap numbers and are
diction. keen to keep going.”

“I think you will see it pick up again, it is just – Mark Andrews
a matter of a restart and the opening of the
licensing system has been a real reset button Diamond drilling at Kharmagtai produced best ever
for Mongolia,” Stewart said. results for Xanadu in Mongolia last year

“There hasn’t really been one signature that
has changed things in Mongolia. The Govern-
ment has worked really hard in the last 8-9
months, there have been a lot of policy chang-
es in the background that really don’t get
reported on but are really significant.”

From Xanadu’s perspective, there are
no major hurdles in the way of the com-
pany advancing Kharmagtai.

Stewart said the mineral law was trans-
parent and Mongolia was “a good place to
develop mines considering you are on the
doorstep of China”.

Xanadu has entrenched itself in the
country and completed over 60,000m of
diamond drilling at Kharmagtai, South
Gobi, for a resource of 203mt containing
1.5 blb copper and 2.2 moz gold.

Xanadu hopes to start a scoping study
at Kharmagtai sometime in 2016.

“The last holes that we drilled last year
we’re the best to date, so we felt that we
needed to keep that going to see how big

PAGE 98 JULY 2015 AUSTRALIA’S PAYDIRT

ASIA

Asian Mineral looking for the
perfect storm

Asian Mineral’s Ban Phuc camp site in Vietnam’s north

In Vietnam’s northern mountains, Asian Miner- and at some point you have to put some real Drilling costs all-in are about $100/m which
al Resources Ltd has made a promising start holes in. The next three to four month phase gives the company real bang for its buck.
to nickel production. will be the initial round of real exploration and
in the short term determine the success of “We always had a business improvement
Commercial production of nickel sulphide Ban Phuc,” Spencer said. plan to go through but we came in being more
started mid-2013, with targeted annual pro- aggressive and said ‘we have to continue to
duction of 6,900t nickel and 3,500t copper in “We have opportunities in the disseminat- drive enough cash to drive exploration even
concentrate, plus some cobalt credits from ed [area] and we have a large low-grade re- through these periods’,” Spencer said.
the 2.2% massive sulphide Ban Phuc nickel source that we are working on. We have done
project. our initial pass of met recovery which has “It’s not necessarily the size of the spend;
been very positive and we are looking at that it’s the size of the project we’re trying to
To date 122,000 dmt nickel concentrate of and evaluating some options there. achieve. You can achieve a lot by drilling 60-
ore has been produced and the company is 70m holes from surface,” he said.
on track to deliver 98-100,000t this year. “There could be three years in that at this
stage. But, the main focus remains the mas- Following detailed structural interpretation
By mid-2014 the TSX-V listed company had sive sulphide veins and targeting the intrusive and a review of the geological history at Ban
come to grips with operations at Ban Phuc, related MSV systems to supplement and then Phuc, Asia Mineral has identified potential
Asian Mineral’s chief executive Evan Spencer replace in full at some stage and obviously the new high-grade mine extensions at Ban Phuc
told Paydirt on site last month. depth extents at Ban Phuc we strongly believe Deep, where drilling was expected to start at
are there.” the time of print.
“I say it took two quarters and by late June/
July we were at full scale production, our con- At the time of Paydirt’s visit to Ban Phuc, “We will be drilling underground and we
centrate flows were steady and on spec. Bed- 160km west of Hanoi in the Son La province, should have another three campaigns to be-
ding down things like road cartage to port and drilling rigs were being mobilised to site as the gin on surface in the next two months with
handling processes were good and the mine company looked to capitalise on recent drill- hopefully some success,” Spencer said.
was delivering steady tonnes and meeting
decline development to en- ing success. “We know we are in a world-class terrain
sure the production profile Continuation of massive – there are numerous other base metals pros-
was maintained,” Spencer pects in the region with historical mines all the
said. sulphide mineralisation way through to China. There are substantial
down dip at the Suoi Phang current operating environments on the same
Fundamentally the foun- prospect – 1.79m @ 1.73% system, the Son Da Rift.
dations were set at Ban nickel – was confirmed in
Phuc in the latter half of June, while Asian Mineral “The work we have done – inversion, EM,
2014 as Asian Mineral doubled its number of re- ultra-magnetic-surveys – has highlighted sig-
proved its ability to operate gional high priority nickel nificant intrusive events just below where we
and generate cash. and copper targets to 28. are currently [at Ban Phuc] and it is a matter
of having cash to drive the asset to deliver the
However, with current Nickel prices have not cash to self fund our exploration campaign.”
mine life in the realms of helped Asian Mineral and it
2.5 years, Asian Mineral’s will be savvy with its drilling For the full story on Asian Mineral Resourc-
destiny at Ban Phuc exists spend, with the next pro- es’ Ban Phuc project, look out for the August
within the drill bit. gramme likely to be 6-10 edition of Australia’s Paydirt.
Evan Spencer holes.
“Drilling is the truth tester – Mark Andrews

AUSTRALIA’S PAYDIRT JULY 2015 PAGE 99

REGIONAL ROUNDUP

Variscan on the rise in France

Variscan Mines Ltd is starting to that we have planned for the next
make some noise in France. couple of months.”
In May the company’s share
price rocketed from a low base of The company has started a
1c to 5c/share on the back of as- VTEM survey over the Merleac
say results – 31m @ 10.4% zinc, licence and in the next 6-12
2.1% lead, 1.2% copper, 105.5 g/t months will be targeting resource
silver, 1 g/t gold from 236m (19.6% calculations, more diamond drill-
zinc equivalent) – from its Porte- ing and possibly testing new
Aux-Moines deposit, within the targets generated outside of the
Merleac licence. VTEM survey.

However, the real score for the “We have got 410sq km around
company has come from high it [Porte-Aux-Moines] which cov-
grade zinc equivalent intercepts ers about 70km strike of the fertile
within a broader mineralised zone stratigraphy along strike and oth-
including, 8m @ 25% zinc, 5.4% er parts of that basin, so we have
lead, 1.6% copper, 208.5 g/t silver, more than enough ground. We
1.39 g/t gold from 236m (41.5% can cover both the strike exten-
zinc equivalent). sions on the Porte-Aux-Moines
deposit and we can also look for
Early indications are the deposit new VMS centres elsewhere in
looks to be part of a typical VMS the licence,” Jones said.
cluster conducive to large tonnes
at high grades. At the time of print holes PAM8
and PAM16 were being assayed
In the next 6-12 months by ALS, however, in the meantime
Variscan will start to piece togeth- Variscan has kept the market’s at-
er the significance of Porte-Aux- tention with a series of other an-
Moines in the zinc space, but for nouncements.
now it hopes to whet the appetite
of investors with another set of The company reported highly
outstanding assay results. anomalous gold assays from soil
sampling within its St Pierre ex-
“Suffice to say that the hole we ploration in Brittany.
released is pretty good, the other
ones are not bad either and cer- Soils up to 0.8 g/t gold were
tainly ore grade, which is the main Variscan’s share price skyrocketed 500% in May on the back of assays recorded at the Begrolle and Bel-
thing,” managing director Greg
Jones told Paydirt. returning 8m @ 25% zinc from Merleac leville prospects, south of the his-
toric 335,000oz @ 12 g/t La Bel-
“The overall deposit is not as good
grade as that 8m @ 25% [zinc], that’s liere gold mine.
for sure. But it is a good high grade VMS Further compilation and assessment
deposit, there is no question about that.
The BRGM [French Geological Survey] of BRGM drilling will continue ahead.
calculated a resource on the deposit in RAB drilling across higher grade zones
the 1980s, but it can’t release it because to test shear systems is also planned
it is not JORC compliant. They did do by Variscan.
quite a bit of 3D work on it, so it is pretty
robust.” Meanwhile, the company boosted
its pipeline of projects in France with
The BRGM has spent about $10 mil- a fourth exploration licence granted in
lion on Porte-Aux-Moines since the the country.
mid-1970s, giving Variscan plenty of
data to verify, including underground Its latest addition is the 278sq km
development around zones of zinc- Beaulieu licence in a highly regarded
lead-copper-silver-gold mineralisation tin district, which includes the Abbaretz
up to 20, thick near surface to about mine.
300m deep.
The district is believed to share
“They did more than 9,000m of sur- similar geological characteristics to the
face and underground diamond drilling Cornwall region in England.
and 2km of underground development,
so the deposit itself is very well defined BRGM data has identified numer-
but hasn’t been closed off,” Jones said. ous prospects, including Abbaretz,
Beaulieu, Chenaie, plus others, which
“Our challenge now is to take the old Variscan will look to verify through dig-
information, which is in hard copy for- itising and interpretation of data and
mat, digitise it and produce a 3D model drilling high priority prospects.
of the mineralisation. Then we can
calculate a resource, which is our next Variscan has indicated drilling could
step. From that we can then define our lead to possible resource estimates in
next drilling targets using that informa- the next 12 months.
tion and do a large airborne EM survey
– Mark Andrews

At the time of print two more holes were being assayed

PAGE 100 JULY 2015 AUSTRALIA’S PAYDIRT