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A4 Paydirt Ad.indd 1 ISSN 1445-3436 343007 771445
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9
Page 1 DeCeMBeR 2019 - JaNUaRY 2020 aUSTRaLIa’S PaYDIRT
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contents
PAYDIRT (ISSN 1445-3436)
Published by
Paydirt Media Pty Ltd. 5 NEWS
A.C.N. 063 985 133 An exploration renaissance appears well
Head Office: underway in Australia. A number of juniors
Suite 9, 1297 Hay St, West Perth have carried on from where they left off in
Western Australia 6005 2019 with impressive results, while a swathe
P.O. Box 1589, West Perth of others are showing promise early in the
Western Australia 6872 new year. Paydirt looks at an exploration
Phone: (+61 8) 9321 0355 sector flourishing from northern Western
Facsimile: (+61 8) 9321 0426 Australia to western New South Wales
[email protected]
www.paydirt.com.au 22 COVER
ESG issues were once an adjunct to most
mining company presentations. But with the
Editorial: industry’s reputation in crisis in the face of
Editor: Dominic Piper the climate crisis and its social performance,
Deputy editor: Mark Andrews mining leaders are confronting ESG head-on.
Journalist: Michael Washbourne The trend was prevalent at Mining Indaba, 5
Art director: Nick Brown where the world’s biggest mining companies
Contributors: Brendan Ryan placed ESG front-and-centre of their
(Johannesburg) presentations. Dominic Piper investigates
why companies are redrawing the way
Advertising:
Advertising manager: Richa Fuller they approach and talk about their ESG
responsibilities
Subscriptions: Kate Blanchard
Phone: (+61 8) 9321 0355
Facsimile: (+61 8) 9321 0426 30 MINING INDABA
In its 26th year Mining Indaba once again
Pre-press and printing:
Vanguard Press, 26 John St, took centre stage in the mining world. The
programme covered the industry’s most-
Northbridge WA 6003 talked about issues and Paydirt had a front-
Member of:
row seat to capture all the action. We provide
full coverage of mining’s big week in Cape
Town
62 SAREIC
Paydirt Media South Australia could emerge as one of 22
Executive chairman: Bill Repard the hottest exploration destinations in the
Finance manager: Giovanny Jefferson world, according to the close-knit mining
Accounts/administration: fraternity in the State. BHP’s Oak Dam
Lana Luketic discovery has certainly set exploration
Conferences: Melita Fogarty, juices flowing and there are several other
Namukale Nakazwe, companies looking to emulate that success.
Christine Oelschlaeger, Paydirt looks at what is happening in SA
Mitchelle Matambo ahead of the South Australian Resources
& Energy Investment Conference at the
Hilton, Adelaide 1-2
76 REGIONAL ROUNDUP
Australia’s junior contingent are revving
up in Latin America again, with new
companies opening up untouched terrain
and more mature outfits achieving positive
Cover image:
Anglo American chief executive Mark Cutifani outcomes after putting in the hard yards
in Cape Town for Mining Indaba 2020 across the region 62
Member of:
Registered by Australia Post PP 643938/0071.
No pages or articles in this publication may be re-
produced in any form without the consent of the
publisher. This includes photographs either taken
by Paydirt Media staff or provided by other parties.
A different approach
to engagement
Down the years, I’ve found many will, at some point, come across a mining company and begin ask-
of the major corporate presentations ing difficult questions.
at big conferences such as Mining There is no slick marketing campaign which can hide the reali-
Indaba rather anodyne. They reveal ties. Millennials, particularly, have far greater levels of media liter-
little about their operations and speak acy than any previous generation and will quickly see through cor-
only briefly about their financial per- porate messaging and demand evidence of social performance.
formance. Such is the banality of the The only choice, as mining companies have begun to recognise,
presentations, a newcomer could be forgiven for not even knowing is to ensure they fulfil their ESG credentials, not just as a box-tick-
what industry they were part of. ing exercise but as a key metric in their overall performance.
The dullness extended to the obligatory ESG slides, where com- And, it is not only consumers who are pushing miners in this
panies would include pictures of smiling kids in the developing direction.
world, planting trees or writing in classrooms. This all may sound The rise of ethical investment and more activist shareholder
highly cynical on my part, but these presentations are utterly un- groups has placed further pressure on miners to prove they are
believable. Nobody, from shareholders to governments or commu- delivering benefits to all stakeholders.
nity stakeholders believe the corporate presentation which paints The world’s major funds all demand full transparency on ESG
the company as some sort of quasi-World Health Organisation for strategies and are willing to assert their position publicly – see
their hosts. Black Rock chief executive Larry Fink’s letter about fossil fuels or
This year’s Mining Indaba, however, was different and is why we the Church of England’s demand for a full industry audit of tailings
chose to dedicate this month’s cover story to issues surrounding facilities.
ESG. So far, this new trend has been largely focused on the environ-
The change was apparent from the moment Anglo American plc mental aspect, with the major diversified miners announcing their
chief executive Mark Cutifani began his address on the opening withdrawal from thermal coal assets and talking up their interest in
morning of the Cape Town conference. There were no token slides “future-facing metals” such as copper and nickel, as new BHP Ltd
at the end about community investment programmes and the num- chief executive Mike Henry described last month.
ber of schools and clinics built, as though ESG is something which Even the gold miners are promoting their “green” credentials by
sits almost separate to the company’s core business practices. announcing new renewable energy initiatives on their mines as
The tone had changed and ESG was now firmly flowing through they begin the long trudge towards carbon neutrality by 2050.
the heart of companies like Anglo American. But what of the other aspects of ESG? As usual, Barrick Gold
For Cutifani, it is not enough for Anglo American to make a con- Corp chief executive Mark Bristow isn’t shy to tell his peers they
tribution to solutions of global and community problems, it must be had been focusing on the wrong things.
part of the company’s mission. “Right now, I think there’s a little bit too much focus on the E part
“We are not here to help; we are here to play our part,” he said. of the ESG. The S is as important and so is the G,” Bristow said last
For the ultra-cynical among us, you can imagine the Australian month. “To Barrick, securing and maintaining its operations’ social
executive having a very different message in investor briefings. license is a strategic comparative, a core part of our business and
However, the elevation of ESG issues by Cutifani and other mining just not another box to tick.
executives is actually being driven by shareholders. “Even late Capitalism’s most unvarnished practitioners have
For those who watch the wider corporate world, the arrival of suddenly discovered the merits of a social conscience and now
the trend towards embracing ESG practices as core business is say they won’t invest in a business that doesn’t have a satisfac-
hardly surprising. Sectors which are more consumer-facing have tory ESG rating… I’ve been arguing for a long time that a good
been undergoing this change for several years. Consumers in the business also has to be a good citizen, particularly in emerging
21st Century, particularly younger generations, demand far better countries. Mining companies have a moral obligation, as well as a
ethical behaviour from brands and corporations and expect them commercial reason, to help develop economies and uplift people.”
to have a clear “purpose” outside the generation of profits. And, The problem with societal issues is performance indicators are
they are willing to withhold purchases to pressure companies into not as clean-cut as environmental factors. Carbon emission lev-
making cultural changes. els are easy to measure, whereas the upliftment and well-being of
Miners were largely immune to this trend in the first two dec- people is not.
ades of the century because consumers rarely considered them. This is certain to cause miners problems while they unpick their
However, as customers of major consumer brands demand total societal impact. We can expect to read stories of mining compa-
transparency on the provenance of every material in their products nies caught with supply chains which do not adhere to the new
– from the factories which produce Nike trainers to the source of strict standards of community engagement and upliftment but,
metals in an iPhone – miners are finding themselves coming under given the new-found focus on the space, solutions are likely to be
scrutiny. generated and mining’s standing in society elevated as a result.
The customer wants to know where the consumer brand sourced
its material so the consumer brand scrutinises its supply chain and
[email protected] @DominicPiper
Page 4 MaRCH 2020 aUSTRaLIa’S PaYDIRT
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Explorers up and away
he Australian exploration sector has 5.9% copper and 1 g/t gold at Thursdays discovery. The juniors have had good runs
Tenjoyed a lively beginning to 2020 and Gossan in October followed Alkane Re- of late and haven’t even got rigs turning yet,”
some believe the inflow of capital supporting sources Ltd’s hit at Boda, North Molong, Howard said.
success stories can be traced back to 2017. New South Wales, a month earlier. Magmatic, which started the year at 22c/
The big news three years ago was con- A hint of Cadia-style potential has now share and was trading at 39c in late Febru-
glomerate gold potential discovered in the seen a crowd gather near Boda, as porphy- ary, recently raised $5 million to effectively
Pilbara, sparking a rush from investors all ry copper-gold nearology plays and gold start a drilling programme at the Lady Ilse
over the world to divert their exploration projects, particularly high-grade ones, atop gold-copper porphyry prospect, about 6km
plans towards the intriguing geological op- investors’ wish lists at the moment. from Boda, later this month.
portunity in the vast West Australian wilder- “Thursdays Gossan appears to be a new In the meantime, Sky Metals Ltd enjoyed
ness. kind of mineralised system not typically a good run last month at Hume within the
“The whole conglomerate gold fable of seen in Australia and more akin to the Mag- Cullarin gold project, Goulbourn, NSW, af-
2017 may have been the real catalyst for ma mine in Butte, Montana, home of the ter announcing results from two diamond
all this recent hot money, with tales of vast ‘Richest Hill in the World’. Stavely contin- drill holes 200m apart had intersected
quantities of watermelon seed gold cap- ues to drill with four rigs turning at present, “a broad package of strongly altered vol-
turing minds and catapulting the market as it tries to define the extents of this high- caniclastic rocks associated with zinc and
caps of entrepreneurial juniors,” Hartleys grade system. Perhaps the ultimate goal lead sulphides, consistent with the target
resources analyst ‘McPhillamy’s style
Paul Howard told gold mineralisa-
Paydirt. tion”.
“Following the Sky was trading
Bellevue [Gold at 24c/share at the
Ltd] and Spectrum time of print after
[Metals Ltd] suc- starting the year at
cess of late, inves- 9c.
tors are looking to “Within the gold
replicate earnings space, De Grey
with a lot of hot [Mining Ltd; 5c to
money pouring into as high as 23c/
exploration stories share in February]
in recent months. also looks to be
FOMO [fear of RIU Explorers conference managing director Stewart McDonald, Hanna Oliver, onto something ex-
missing out] also Sascha Oliver and Shanelle Oliver presented Stavely Minerals’ executive chairman citing at Hemi in the
has a place; those Chris Cairns with the Craig Oliver award Pilbara with 46m
who missed out @ 6.6 g/t gold from
previously are very eager to get on the next for Stavely is to uncover a deeper porphyry 92m and 44m @ 5.1 g/t gold from 40m),”
growth story. source of this high-grade copper,” Howard Howard said.
“Every dollar invested in Spectrum in said. “Elsewhere, the Paterson province con-
January 2019 is now worth about $25. Alkane’s intersection of more than 500m tinues to command interest with Newcrest
Similarly, investors in Bellevue are 200% @ 0.48 g/t gold and 0.2% copper at Boda and Greatland’s [Gold plc] Havieron deposit
better off over the same period and we’re was followed up with a deeper intercept, set to receive 20,000-30,000m of drilling in
now seeing Bellevue attracting high calibre which returned similar grades over 689m 2020 ahead of a maiden resource. Rio’s
personnel [Luke Gleeson recently appoint- announced last month. [Tinto Ltd] Winu is also said to be shaping
ed as head of corporate development] as it “The project is only 120km north of New- up, which bodes well for juniors like Antipa
looks towards development,” he said. crest’s [Mining Ltd] Cadia and has sparked [Minerals Ltd], which is active in the re-
One of the instigators of the recent explo- a large amount of interest in Alkane over gion. In Victoria, Kirkland Lake [Gold Ltd]
ration rally – Stavely Minerals Ltd – was duly whether it has uncovered something eco- is spearheading the revival of the Victorian
recognised for its efforts at Thursdays Gos- nomic and/or the next Cadia. Alkane’s gold sector with juniors like Catalyst [Metals
san, Victoria, with the Craig Oliver award at neighbours Magmatic [Resources Ltd] Ltd, Navarre [Minerals Ltd] and Stavely set
the recent RIU Explorers conference. and Impact [Minerals Ltd] have ignited the to benefit.”
A shallow sulphide intercept of 32m @ ‘nearology’ story close to the Boda-Kaiser – Mark Andrews
rowing uncertainty over the global spread of the coronavirus with delegations from the EU, the UK and Asia confirmed to attend.
G and its affect on international travel has resulted in Paydirt Media However, as concerns over the spread of the coronavirus extended
postponing the Battery Minerals Conference, due to be held in Perth outside of China, these international delegations have been forced to
on March 4-5. The conference has steadily grown over its five-year postpone their travel plans.
history, incorporating presentations and panel debates on a range of
topics in the battery and critical minerals space from the EV revolution, The organisers felt it appropriate to postpone the Battery Minerals
to supply/demand dynamics, supply chain security and new energy Conference to allow these and other stakeholders the opportunity
generation and storage solutions. to fully participate. Paydirt Media is monitoring the coronavirus
situation closely and once there is clarity on the containment of the
The importance of the conference was highlighted by the large virus, it will consult with stakeholders on finding an appropriate date
international contingent scheduled to participate in Perth this year to host the conference.
aUSTRaLIa’S PaYDIRT MaRCH 2020 Page 5
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Australia’s next super Pitt
ueensland senator Matt Canavan’s jobs growth in the sector. Minister Pitt; he is a regional MP and you
Qrole in the National Party’s leader- “He’s been good at the exploration can see he gets the realities of regional
ship turmoil and his subsequent resigna- end too. He helped the JMEI get up and communities and understands how the
tion as Federal Minister for Resources hopefully that will be a long-term legacy. mining industry contributes to regional
and Northern Australia did little to dam- If that can continue it will be a wonderful communities. Certainly, some of the po-
age his reputation in the industry. thing to encourage and support green- sitions he has taken in the parliament are
fields exploration,” Pearce told Paydirt. really encouraging around those inquir-
“[Canavan] was really active early ies around nuclear energy which dem-
about critical/battery minerals and the onstrates he is someone who is thinking
value chain opportunities. He has really about how our industry can benefit Aus-
seen the opportunity for down-stream- tralia.”
ing, the Federal Government has been Pleasantries aside, Pearce will be de-
active on that. Canavan in particular has termined to push Pitt hard on the future
been active on the critical minerals front of the JMEI.
with the US, looking at those partner- Introduced in FY2018, exploration
ships that might come out of the defence credits under the JMEI were initially
space. He also realised the EV oppor- capped at $15 million followed by $25
tunities and I think he has really driven million (FY2018/19) and $30 million in
outcomes himself.” FY2020 and another $30 million in 2021.
Canavan’s role in promoting Australia’s “The first port of call is to meet the
importance in the critical minerals space new minister and get a feel for where
was also applauded by Queensland Re- he wants to go, but really press the im-
sources Council chief executive Ian Mac- portance and urgency of the JMEI being
farlane who urged incoming Minister for continued,” Pearce said.
Mining, Resources, Water and
Northern Australia Hon Keith Pitt
to capitalise on the momentum.
“We are also keen to see the
ongoing development of the
critical minerals strategy where
Queensland has an important
Matt Canavan role to play in the development of
renewable energy minerals such
Australia’s leading mining and resourc- as cobalt, nickel, rare earths,
es member groups were unified in their vanadium and manganese, and
praise for what Canavan had delivered advanced technology minerals
since taking on the resources portfolio such as rare earths, scandium,
in 2016. tungsten and molybdenum,” Mac-
Among the initiatives Canavan can farlane said.
take credit for are developing the coun- “QRC looks forward to the new
try’s first National Resources Statement minister building on the substan-
in over 20 years, introducing the Re- tial policy work of his predeces-
sources 2030 Taskforce, driving the criti- sor Senator Matt Canavan, espe-
cal and battery minerals strategy with an cially in the areas of maintaining
emphasis on downstream possibilities Queensland’s role as a resources
and implementing the $100 million Junior powerhouse through our coal,
Minerals Exploration Incentive (JMEI). gas and minerals sectors.”
The JMEI has enabled eligible explo- Pearce said the political land-
ration companies to generate tax credits scape around coal and nuclear in the Keith Pitt
by choosing to give up a portion of their energy mix changed daily. He was inter-
losses from greenfields mineral explora- ested to see Pitt’s approach, but was in “We are in the fourth year of the pro-
tion expenditure. no doubt the Member for Hinkler (coastal gramme, which means a decision needs
“These tax credits can then be distrib- Queensland) would continue the Nation- to be made in the Federal Budget this
uted to investors who purchase newly is- als’ consistent views and strong ideolo- year about continuing the programme.
sued shares in that eligible entity during gies on particular issues. We need him to understand why that
a certain period,” as stated by Canavan “Maybe [the Nationals] haven’t taken programme is important, how important
when the JMEI came into play in FY2018. up some issues as forcefully as people that programme is for industry in Aus-
Association of Mining and Explora- might have liked them to in some instanc- tralia and why we need his full support
tion Companies chief executive Warren es, but I think we will end up with a really to continue and extend that programme.”
Pearce said Canavan had done an ex- strong supporter of both those [nuclear – Mark Andrews
cellent job and worked hard to help com- and coal] industries,” Pearce said.
panies bring projects to fruition and see “We feel it is a portfolio which will suit
Page 6 MaRCH 2020 aUSTRaLIa’S PaYDIRT
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Checkerboard builds nicely
for Ramelius with Penny West play
n end to litigation started by Venus and Mr Adams of DJ Carmichael in July Spectrum. Announced on February 10,
AMetals Corp has opened the door and August 2018”. Ramelius’ bid offers Spectrum share-
for Spectrum Metals Ltd to strike a M&A Venus started the legal proceedings holders one Ramelius share for every 10
agreement with Ramelius Resources Ltd in October, prior to a maiden indicated/ Spectrum shares and a cash considera-
over the Penny West gold project near Mt inferred resource at Penny West of tion of 1.7c/share.
Magnet. 799,000t @ 13.8 g/t gold for 355,500oz, The offer values Spectrum at 15c/share
Venus’s claims against Spectrum over including 569,000oz @ 16.8 g/t for based on the VWAP of Ramelius shares
the Penny West ownership have been 306,800oz at Penny North, announced traded on February 7, representing a 52%
resolved, with claims against Spectrum later that month. premium to Spectrum’s last closing price
managing director Paul Adams and for- Venus’s interjection failed to stop of 9.9c/share also on February 7.
mer director David Bosio also understood the rapid ascension of Penny West, as “We were in contact with Spectrum last
to be “definitively settled”. 30,000m of drilling was completed within year and had some early conversations.
A figure of $850,000 paid by Spectrum nine months and a resource defined with The [Venus] case came along on their
to Venus essentially brought the case to a tailwind blowing hard and mounting side and we took a step back. It was for
a close. consolidation in the gold sector. those guys to settle, we did our work in
“Obviously, I wasn’t on the Spectrum With cash and gold totalling $87.7 mil- the background and we were in a position
litigation committee, but we were always lion (as at December 31) and coming off to act when that issue fell away,” Rame-
prepared to go to trial,” Adams told Pay- an “excellent” financial and operational lius chief financial officer Tim Manners
dirt. FY2019, Ramelius’ decided it was time told Paydirt.
Adams has always maintained no to back up last year’s play for Explaurum “We think there are some very good
wrongdoing in the way in which Penny and the Marda mine with another comple- benefits for both groups of sharehold-
West was acquired, after Venus alleged mentary acquisition. ers and hopefully the metrics of the bid
“breaches of fiduciary duty, breaches of Penny West is about 150km south- are appealing enough to have Spectrum
confidence and misuse of information east of Ramelius’s Mt Magnet facilities, shareholders come on board. The offer
that Venus Metals provided to Mr Bosio making the miner an obvious partner for is both cash and shares in Ramelius, so
Ramelius’ Checkers mill at Mt Magnet where ore from Penny West will be processed
Page 8 MaRCH 2020 aUSTRaLIa’S PaYDIRT
they [Spectrum shareholders] can retain their exposure to Pen-
ny West and they get the added bonus of joining a company of
our size and growth potential.”
In a research report, RBC Capital Markets said the implied
value of the offer for Spectrum was $208 million.
The day Ramelius’s off-market offer for Spectrum was made,
the latter closed 36% up to be trading at 14c/share and market
capped at $187 million.
Adams and the rest of the board of directors at Spectrum
unanimously recommended the offer and encouraged share-
holders to follow suit.
At the time of print, Ramelius held about 5% of Spectrum and
vowed to fund the cash component of the acquisition from exist-
ing working capital or the $35 million syndicated finance agree-
ment it has in place.
The bidder’s and target statements were expected to be des-
patched to Spectrum shareholders on February 28 and assum-
ing the process is straightforward, Ramelius could have ore
from Penny West into the Checkers mill at Mt Magnet in the
September 2021 quarter.
One of the conditions set out for the deal to proceed is that
the Bloomberg spot gold price does not fall below $2,000/oz
at any time during a day for three consecutive days between
announcement date and the end of the offer period (each ex-
clusive). The condition will be removed in the event the offer is
extended.
Barring any interference, the deal could be done by the end of
March and while Spectrum shareholders know they will not be
fully exposed to the entire exploration and development upside Penny West is the point of focus of Ramelius’ bid for Spectrum Metals
at Penny West, access to Ramelius’ cash flow-generating as-
sets and 90% of the Tampia Hill development could be sweet
enough.
Last year was the fifth consecutive annual profit ($21.8 mil-
lion after tax) reported by Ramelius, which returned an inaugural
dividend of 1c/share. Exploring
From the Mt Magnet, Edna May, Vivien and Marda gold mines
it owns and operates, Ramelius produced 196,679oz gold at
AISC of $1,192/oz for 2019. together for success
Guidance for FY2020 is 205,000-225,000oz gold at AISC of
$1,225-1,325/oz.
“Our guidance for 2020 remains unchanged. This process will
take a number of months to run through, but it [Penny West] is
one of the highest grade undeveloped gold assets in Australia.
Its potential is significant, not just what has already been found,
but with what could be found down the track. We hope that the
transaction can be bedded down fairly quickly,” Manners said.
“We will continue to be an explorer of that area as well, as with
our existing assets and in parallel we’ll look to bring the asset
into production as quickly as we can. I think it will add a new
dimension to Mt Magnet, it is an incredibly strong asset with a
cost profile that I think will be one of the lowest in the country.”
Penny West, 25km south of the Youanmi mining centre, was
previously mined by Eastmet/Metana (GMA) in the early 1990s Established in 1993 Bostech Drilling has successfully
and produced 91,400oz @ 18.1 g/t gold. completed exploration and mining projects across
“It is an outstanding deposit and the benefit Ramelius has is Australia and overseas.
Whether it be the Deserts of central Australia or the
all the infrastructure just up the road,” Adams said. “It would cost Forests of South Western Australia Bostech can assist
us $100 million to put all of that in plus all of the dilution to get you with your drilling requirements.
there. I think at the end of the day, it is a very good deal for us.
Penny North is a special deposit and hopefully both shareholder Industry leaders in:
groups stand to benefit from that being put into production at the RAB/Aircore - GradeControl - Reverse Circulation
right time.” Complex Remote Exploration - Zero Impact & Tight Access
– Mark Andrews 29a Clayton St, Bellevue WA 6056
e: [email protected] w: www.bostech.com.au 08 9250 4252
aUSTRaLIa’S PaYDIRT MaRCH 2020 Page 9
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Copper increasing to 2023...
ICSG’s assessment of capacity trends at operating, projected mines and plants
based on information received from its member countries
efore the impact of the coronavirus ing onstream (Cobre de Panama being 2020, the ICSG indicates that the situa-
Bon commodity prices can be fully un- the exception), while mines operated at tion is changing.
derstood, immediate forecasts have been an average 85% capacity when strikes, “The pipeline of projects is improving
bearish for copper. weather conditions and other factors im- and should result in an average annual
At the time of print, copper was trading pacted the running of projects. growth rate of about 4.5% per year from
at about $US5,732/t. The usually bustling Cobre de Panama, First Quantum Min- 2020-2023, with a higher growth of 6% in
streets in China remained scarce and its erals Ltd’s new mine in Panama achieved 2023 when major projects are starting or
manufacturing sector scaled down, but commercial production in September – ramping up,” ICSG stated.
the spread of the virus appeared to be one month earlier than anticipated – and “Concentrates will represent around
slowing by late February. was on track to record 140,000-175,000t 90% of the total growth in world mine ca-
Prior to the virus outbreak, the Lisbon- copper production in 2019. pacity over the period 2020-2023.”
based International Copper Study Group A project comprising eight mills, Cobre Chinese investment in projects and
(ICSG) released its biannual Directory de Panama is expected to hit 85 mtpa continued support for projects in African
of Copper Mines and Plants, which in- this year (72 mtpa in 2019) and when the and South American jurisdictions will
cludes details of production capabil- mine is fully ramped C1 costs in 2022 drive growth in the copper market in the
ity and capacity of the world’s largest are estimated to be $US1.20/lb (AISC next few years, while the ICSG reports
copper mines with output around the $US1.50/lb). that more mines are being evaluated to
100,000 tpa mark. Furthermore, throughput by 2023 is complement expected future demand.
Based on such projects, copper mine scheduled to tip 100 mtpa and copper In addition to production growth, cop-
capacity is expected to grow by about production hit 350,000 tpa at the mine, per refinery capacity is anticipated to
4.5% pa from 2020-2023, exceeding the which currently has a mine life of 36 grow at an average of 2.3% pa (2020-
average of 1% growth experienced dur- years. 2023) and smelter capacity 3.3% during
ing 2017-2019. While there had been a dearth of new the same timeframe.
The period 2017-2019 was low be- projects like Cobre de Panama enter-
cause of the lack of major mines com- ing the copper supply stream preceding
Page 10 MaRCH 2020 aUSTRaLIa’S PaYDIRT
...but red in near term facturing hub, accounting for around 8% of
national output, according to BMO Capital
Markets.
China’s State Grid, the single-largest buy-
opper prices slumped by 10% in Janu- ey has played out on the LME and the CME. er of copper in the world, has pushed back
Cary, marking the heaviest monthly fall Funds slashed long positions on the US its post-holiday purchase tenders, according
since 2015, in a clear warning sign that Chi- market from 81,511 contracts to 52,224 over to Citi bank.
na’s battle with the coronavirus could be very the second half of January, wiping out the The country’s giant construction sector is
bad news for metals demand. nascent net long position that had been ac- expected to return only slowly from its holi-
Activity in China, the engine room of cumulating since the start of the year and day break as curbs on movement restrict the
global manufacturing, stuttered over much leaving the money men net short to the tune flow of labour.
of 2019 but was expected to recover mo- of 20,198 contracts. Although all the early- The immediate prospect is for an accentu-
mentum this year. Investors’ belief that the year bets on a pick-up in Chinese manu- ation of normal seasonal trends with uninter-
Chinese growth story was back on track facturing growth feeding through to higher rupted metals production hitting a demand
helped LME copper hit an eight-month high metals prices have been taken off the table, vacuum leading to rapid inventory build.
of $US6,343/t on January 16. there has been no significant build in short BMO expects copper producers to re-
That early January optimism had been positions. spond with “aggressive smelter mainte-
blown away by early Feburary, with Dr Cop- So far. nance”, another way of saying output cuts.
per falling every day as the market tracks, The latest Commitments of Traders report The market has gone from talking up Chi-
with increasing trepidation, the spread of the is a rear-view mirror on the market in late na’s demand prospects to speculating about
virus and the draconian measures taken to January, when copper was still in full free- the need for production cuts in the space of a
contain it. fall. Funds may well have turned actively fortnight. Look no further to understand cop-
When copper closed at $US5,567/t (Janu- bearish since then. per’s massive reaction to the coronavirus.
ary 31) it was the lowest since September In the London market speculative money Citi has cut its short-term copper price
last year, but while funds have liquidated flipped from net long to marginal short, at forecast to $US5,300/t on the immediate
long positions they have not yet turned ag- around 2.8% of open interest January 30, hit to demand, although it remains positive
gressively short. according to an assessment by LME broker about a sharp rebound as Beijing provides
That may yet change as the market di- Marex Spectron. more stimulus.
gests the implications of the virus both on the The reaction is entirely logical. Others such as Capital Economics are not
Chinese and global manufacturing sectors. China accounts for around half of global changing their forecasts just yet although the
January’s slump echoed the two price col- copper demand, consuming around a 1mt virus “clearly poses a downside risk to our
lapses of 2015, when the market dropped per month. It is also the world’s biggest im- expectation of a pick-up in demand for in-
13% in January and more than 10% in No- porter with inbound shipments of refined dustrial commodities later this year,” as stat-
vember, both of which were occasioned by copper averaging 290,000t per month last ed in Capital’s Commodities Weekly Wrap
bear attacks in China; most infamously by year. on January 31.
the Shanghai Chaos fund at the start of the Metal markets have long got used to the There is still an underlying analyst view
year. dip in Chinese demand over the Lunar New that the Chinese authorities will do whatever
Chinese speculators were selling the met- Year holidays, knowing that it is followed by is necessary both to contain the virus and to
als demand story as the Chinese economy turbo-charged restocking along the supply offset any hit to economic growth.
transitioned through one of its low-growth chain. The harder the hit to metals demand, the
cycles. The copper price only bottomed out Chinese producers tend to continue oper- bigger the infrastructure stimulus to follow, it
at the start of 2016. ating through the holidays while metal fab- is hoped. But the problem is that the virus is
Fear about the Chinese economy is ricators normally close, meaning an annual still spreading and so is the fear around it.
once again driving the current sell-off but build in inventory before the spring demand In China the fatality count is rising and
this time Chinese speculators are having to recovery. However, this year there is growing more cities are moving toward the same sort
play catch-up as The Shanghai Futures Ex- evidence that the usual seasonal demand of lock-down paralysing Wuhan.
change (ShFE) only resumed post-holiday surge is going to be postponed as ever more And as other countries move to quaran-
trading on February 3. regional governments and companies push tine China, the supply chain implications for
It immediately went limit down before sta- back the post-holiday return to work. industrial metals multiply.
bilising on news of a central bank liquidity Wuhan itself, the city at the heart of the Even if the virus is not yet a global phe-
boost. outbreak and currently under complete nomenon, its impact on growth expectations
In the interim, the movement of fund mon- lock-down, is a significant automotive manu- is rapidly becoming global with Asian coun-
tries likely to be the first to feel the demand
chill now emanating from China.
The slide in copper prices had run out of
steam at the start of February, with the LME
three-month contract holding its ground
around the $US5,600/t level.
It may be no more than a pause for breath.
The virus hasn’t yet peaked. Nor has the
potential for disruption to metals demand.
And until that changes, market fear hasn’t
peaked either.
– Andy Home, Reuters
aUSTRaLIa’S PaYDIRT MaRCH 2020 Page 11
neWs
Building China back up
heavy infrastructure spend to stimu- China with ease or travelling from China their supply and export arrangements
A late the Chinese economy could to here with ease to progress business and their commercial relationships with
rejuvenate commodity prices once the relationships and business deals. It is China.”
coronavirus is contained. the same for suppliers in mining equip- Potential new investment opportuni-
At the time of print, it was still too early ment who need things manufactured in ties between China and WA being nur-
for experts to determine whether the vi- China. I think best information is a cou- tured before the virus outbreak have
rus had peaked or not, despite the num- ple of months before things return to been suspended for the time being.
ber of new infections dropping to below normal.” “As you can appreciate, the nature
2,000 on February 18; the first time it Handley, also a senior partner at Mint- of Chinese business relationships at
had done so since January. er Ellison, said he was working with his the early stage requires face-to-face
China’s National Health Commission mining clients on addressing workplace contact, but we look forward to getting
said the death toll on the mainland had duties to staff on the ground in China or on the ground when the time is right,”
reached 1,868, with 1,886 new infec- people returning from China. Handley said.
tions confirmed for a total of 72,436, ac- “We’re helping people deal with staff Handley said the Australian Govern-
cording to a Reuters report. that have come back from China in the ment’s dedicated health site and Smart-
Strict travel bans to and from China first 2-3 weeks before the travel ban was Traveller were the best platforms for
remained in place in late February and a implemented and how they might need people to stay abreast of the coronavi-
return to business as usual was uncer- to take steps to quarantine staff at home rus situation.
tain upon curtailment of the virus. to ensure they are protected from the vi- At the time of print, some workers had
“People here [Australia] don’t need to rus. We are receiving a lot of questions slowly started returning to their day jobs
be overly-alarmed, the virus is affecting about workplace health and safety obli- albeit in a restricted capacity as employ-
people on the ground in China and with gations,” Handley said. ers impose procedures to minimise fur-
the steps the Australian Government has “We’re also giving lots of advice ther spread of infections.
taken here the chances of significant in- around contractual issues, with some While the rate of infection had showed
fection spreading throughout Australia of our export clients who are currently signs of slowing down at the time of
is pretty minimal,” Australia China Busi- exporting products to China particularly print, Macquarie Group division direc-
ness Council (Western Australia) presi- in the bulk commodity space wanting to tor, resources Hayden Bairstow said the
dent Adam Handley told Paydirt. understand the extent to which force ma- market would be quick to react once the
“In terms of normality, it depends jeure might be claimed under particular virus was contained and expected a rise
which sector you are in. A return to nor- contracts by their Chinese counterparts. in demand for base metals.
mality for clients in the mining space We’re helping them in understanding “If it starts to slow down the market will
means people being able to travel to how they might minimise the impacts on pretty quickly start to price in its conclu-
sion and we will be back to normality,
but certainly we can see what the gov-
ernment in China is doing; they will in-
frastructure their way out of it to get the
economy back,” Bairsyow said.
“How long it takes for consumer
spending and confidence to come back
for cars and all that sort of stuff is much
harder to predict.”
ANZ (WA) head of loans and special-
ised finance Megan Joyce said China
would need to restock its commodities
chest when it started building again.
“I think the ANZ is a bit more positive
on that and see it as more of a short-term
blip, no doubt it will impact industry here
and in China. But when they do come
back and factories are back online, they
will need to restock and that is when we
will see prices back up. Once again, it
will be harder at the smaller end who are
struggling through that price period, but
over the medium-term we expect it to be
better,” Joyce said.
– Mark Andrews
Adam Handley
Page 12 MaRCH 2020 aUSTRaLIa’S PaYDIRT
Cobre sets the precedent
ew IPOs captured the attention of in-
Fvestors last year but though it’s only
early into 2020, attitudes towards fledg-
ling companies could change in the next
12 months.
Paydirt reported that just six new re-
sources floats hit the bourse in 2019, the
lowest total since 2015 when four com-
panies debuted on the ASX. At the time
of print, there were five companies pre-
paring upcoming floats to list on the ASX
sometime this year, following the lead of
Cobre Ltd.
Cobre made it to the bourse in January
with tremendous support for the Perrin-
vale base metals project, demonstrated
by a $10 million IPO at 20c/share.
The company can also earn an 80%
interest in the Sandiman base metals
project, 200km east of Carnarvon and
near to tenure held by IGO Ltd.
However, it is Perrinvale (80%), north- Cobre was set to drill at Perrinvale on the day it listed. A portable XRF reading
west of Menzies and Kalgoorlie, that has and visual observations from the first diamond hole at Schwabe confirmed VMS
drawn market attention with a VMS-style mineralisation over a 5.5m intercept from a depth of about 50m
copper, zinc and gold intercept from 50m
of 5m @ 9.8% copper, 3.2 g/t gold, 34 g/t holder with success in that commodity work and we got everything completed,
silver, 3.1% zinc, including 3m @ 12.6% gives a lot of confidence. Having institu- including securing water for the diamond
copper, 4.7 g/t gold, 43.7 g/t silver, 3.6% tional and well-known mining executives rig. So, when we listed, we could have a
zinc at Schwabe. support the company also adds to the rig on site and move forward with explo-
Such a strike from the maiden 1,000m range of things that you need to make a ration,” Holland said.
RC drilling programme in mid-2019 es- successful listing.” “We will look at the core itself and that
sentially set the wheels in motion for a Well-known AIM-listed investing com- will give us some more confidence and
listing, which occurred rather seamlessly pany Metal Tiger plc is Cobre’s corner- understanding of what we are sitting on
for Cobre. stone investor with 19.99% of the com- now. If we are seeing again what we ini-
“I think it sets a precedent for 2020; pany, while Northern Star Resources Ltd tially got, then we will be seeing a lot of
what we achieved as a company. There executive chairman Bill Beament is also interest from a lot of companies I would
was a lot of money on the sidelines, so among the top 20 shareholders. have thought.”
the overall raising was well sought after No doubt the interest in Cobre will Holland hopes that robust exploration
and we didn’t have to do a big roadshow build should it continue to hit paydirt from results will coincide with a copper price
either. I think it sets a precedent for com- drilling. rally spurred by supply/demand dynam-
panies from an exploration point of view,” At the time of listing, Western Dia- ics.
Cobre executive chairman Martin Hol- mond Drillers was mobilised on site for “The [resources] sector itself has been
land told Paydirt shortly after complet- the start of drilling at Perrinvale. looking ready for a run and a couple of
ing his third IPO. The first hole of the current pro- junior companies have done quite well in
“It wouldn’t surprise me to see more in- gramme at Perrinvale, which includes the space. The commodity itself is going
terest in the sector and more companies the Schwabe, Zinco Lago, Ponchiera through a losing streak at the moment
having success from what I have seen and Monti VMS prospects, was semi- with the coronavirus and other things
in the last period. I think there is a whole completed at the time of print. happening around the globe, but I feel
range of different things that you need An exploration budget of $3.3 million that is a bit of a storm in a tea cup and
lined up to make sure that it works, but I has been set for Perrinvale this year fol- will wash out in the next few weeks or
think pretty importantly being in the right lowed by a spend of $3.5 million sched- so,” Holland said.
commodity and having the right structure uled for 2021. “It feels to me that the overall sup-
“Privately we got all the work done be-
“ The [resources] sector itself has been reaction, which I think will happen some
and team, plus having a strategic share- fore we listed, so we did all the site prep ply and demand for copper is definitely
moving forward and a lot of people have
been waiting a long time to see a price
time in the foreseeable future and our
looking ready for a run and a couple
company will be positioned to capture
that.”
of juniors have done quite well in the space.
– Mark Andrews
aUSTRaLIa’S PaYDIRT MaRCH 2020 Page 13
neWs
Miners defy large corporate malaise
Ian Sanders
ig businesses in Australia didn’t have a topic we here at Deloitte are passion- “I wouldn’t just say it is cash-strapped
Ba “great year in 2019”, however, min- ate about, in 2019 it only improved. That juniors. I think everyone is having a good
ing companies were the exception, ac- feeling about the mining sector, relative look, be it for investment dollars, across
cording to Deloitte Australia Mining & to 5-10 years ago, has significantly im- their supply chain, getting their partner-
Metals leader Ian Sanders. proved.” ships, JVs and ecosystems right is criti-
Speaking to Paydirt upon the release While some individual companies have cally important, so that they can scale
of Deloitte’s 12th annual global edition of embarked on big budgeted marketing and bring that productivity improvement
Tracking the trends 2020: Leading from campaigns to sell their version of how the and access to the technology that they
the front, Sanders said the mining sector mining sector should been seen, Sand- need and must have to be competitive
was showing leadership ers called for a unified industry voice. going forward,” Sanders said.
“I think the mining sector made some “How we do that is really difficult and From the outset, solid foundations are
real big broad, positive statements and I don’t have an answer but enabling that required for any JV to work and selecting
certainly increased the level of investor voice and coming together as clusters/ the right partners and KPIs is integral,
and community trust in the sector,” Sand- regions or whatever that might be, might Sanders said.
ers said, be the next step,” Sanders said. “Beyond JVs, some mining companies
Community engagement efforts, sus- “There’s a lot of goodness that our sec- are considering other ways to distribute
tainability programmes, technology ad- tor is championing; other sectors like oil the risks associated with major capital
vancements and decarbonisation poli- and gas are jumping on board. I think it is projects. One emerging model is to allo-
cies are areas where the mining sector exciting and I think that is going to be a cate project assets and liabilities across
has taken the lead. real highlight to see the leap in sustain- a full ecosystem of partners – from min-
“It is not just the big players like BHP ability and decarbonisation that we see ing companies, original equipment man-
[Ltd] and South32 [Ltd] that have zero across the sector which will translate into ufacturers and service providers to local
emissions strategies in place by 2050, better social value and the image of min- communities and governments,” he said.
many of the next tier and the next tier ing across Australia.” “The sector is likely to see more JVs
down from that are actually getting on The spirit of partnership extends be- going forward, making this an important
with it, but not communicating it,” Sand- yond corporate communication. One of competency area firms will likely need to
ers said. the key trends highlighted in the Deloitte build.”
“I think when you couple all that to- report was the rise of JVs on exploration
gether, which is the image of mining and projects around the world. – Mark Andrews
Page 14 MaRCH 2020 aUSTRaLIa’S PaYDIRT
TEN
embed
processes
TaX TriBulaTions
Various global tax
measures potentially could TRENDS
create serious constraints
GeTTinG parTnerships and on mining economics. To
The social invesTor joinT venTures mitigate any unexpected
The drive towards social value is no In the next year more companies will tax obligations, mining
companies should be
longer limited to environmental activists. be looking to explore joint ventures aware of these changes,
Civil society and investors alike are and partnerships in the execution of understand how they could
demanding greater transparency their strategies. However, looking back, impact their tax affairs, and
around the environmental, sustainability many of these JVs and partnerships take steps now to mitigate
and governance principles. To regain have failed to deliver the kinds of value tax risk. This will involve
investor trust, miners must embrace originally envisaged. In this trend some new forms of agreements
a commitment to value beyond just of the common pitfalls and ways for and government
compliance with regulations and embed companies to maximise the success of partnerships, and greater
these processes in their organisations. a joint venture or partnerships through transparency regarding FOR
decision making, governance and taxes paid.
transparency is looked at. 2020
innovate seiZe opporTuniTY
aMid uncerTainTY dYnaMicallY As global volatility rises, mining
companies can no longer rely on their
ManaGinG risk registers to identify danger areas.
risK Systemic issues such as insufficient
risk sensing, a ‘tick the box’
mentality, and complex operating models
Commodity prices rise and fall in tune with economic trends, which are forcing companies to predict the
are currently foreshadowing a potential downturn or lower growth impact of emerging events and prioritise
environment. To avoid being blindsided, there are five bold plays key risks. In this trend embracing more
mining companies can make to prepare: 1. Future-proof tomorrow; strategic risk management practices is
2. Continue to innovate; 3. Redesign rather than abandon;
4. Review business relationships; and 5. Acquire resources. community looked at.
The paTh To
decarBonisaTion on The road ToWards
inTelliGenT MininG
Driven both by pressure
from stakeholders and the Digital technologies,
strengthening business case artificial intelligence, and
for decarbonisation, mining analytics solutions have the
companies are taking steps potential to transform the
to reduce their greenhouse mining industry. While many
gas emissions. While the path companies have launched
won’t be easy, the commitment digital programs, companies
is necessary if miners are to often are not deriving the value
contribute to the mitigation of they originally hoped for. A
risks associated with climate retrospective look at this
change and at the same time trend was taken, summarising leadership in an indusTrY
create value for customers, key lessons learned and 4.0 World
investors, governments, where companies need to
communities, and employees. focus going forward. There are four drivers reshaping
today’s leadership landscape:
The inTersecTion oF TalenT and coMMuniTY ModernisinG core the emergence of non-traditional
teams; the creation of exponential
To capitalise on the digital TechnoloGies roles; the proliferation of data; and
the imperative to embrace greater
revolution, mining companies Over the years, mining diversity and inclusion. Mining
need to drive radical change companies have made companies that want to strengthen
both internally and within significant investments in a their competitive advantage, and
surrounding communities. range of backend technology create an adaptive and responsive
This requires a thorough systems. Many of these culture, must commit to upskilling
understanding of the impact legacy systems will need their leaders now.
that digital transformation can to be modernised. This
have on work, the workforce, raises considerations such
and the workplace, and in turn as moving to the cloud, invest in
on the communities in which adopting sound cybersecurity leadership
they operate. strategies, managing data and
choosing the best approach
for revitalising core systems.
aUSTRaLIa’S PaYDIRT MaRCH 2020 Page 15
neWs West Musgrave JV
(Oz Minerals 70%: Cassini Resources 30%)
Power to the February 2020 PFS 10 mtpa
Processing:
Life-of-mine : 26 years
West Musgrave Copper by the numbers: 28,000 tpa average production,
78% recoveries, $US0.90/lb C1 cost payable net of
by-product credits
Nickel by the numbers: 22,000 tpa average production,
here is probably no hotter topic than en- Stage 2 at Agnew. 69% recoveries, $US1.30/lb C1 cost payable net of
Tergy at the moment with pressure mount- The Agnew hybrid re- by-product credits
ing on governments around the world to lower newable project will be an Pre-production capital: $995 million
carbon emissions to counter climate change Australian first in the min- (excluding study)
and protect the environment. ing sector, with wind gen- Project payback from 6 years
Big carbon emitting industries such as min- eration incorporated as decision to mine:
ing are expected to change the way they op- part of the hybrid micro- Post-tax average net $190 million p.a.
erate and be better custodians of the planet. grid, culminating in 54MW
Since coming online in 2016, the De- of total installed genera- cash flow:
Grussa solar farm has reportedly reduced tion capacity and renewa- Post-tax NPV: $800 million
Sandfire Resources Ltd’s carbon emissions bles providing over 50% Post-tax IRR: 20%
by 30,789t and offset 11 million litres of diesel. of Agnew’s power needs. Decision to mine: 2021 (TBC)
The DeGrussa solar project, which pro- In 2018, energy de- Project start: 2024 (TBC)
vides about 20% of the mine site’s power, mands accounted for
was acknowledged as a “blueprint for the about a fifth of operating
adoption of renewable energy at other mine costs for Gold Fields – which also has renew- asset. However, further work is required in a
sites around the world” when Sandfire was able energy solutions at Granny Smith devel- future feasibility study to maximise the pro-
awarded the Golden Gecko Award for Envi- oped by Aggreko. ject’s power position. A gas pipeline remains
ronmental Excellence by the West Australian Emulating such cost savings and emis- a secondary option to be further investigated
Department of Mines, Industry, Regulation sions reductions is the goal for West Mus- during the next phase,” Cole said.
and Safety last year. grave JV partners Oz Minerals Ltd (70%) and Significant carbon emissions and power
It is encouraging that Sandfire is not peer- Cassini Resources Ltd (30%). costs can potentially be achieved by opting for
less when it comes to charging mine sites via Headlining the West Musgrave project is vertical roller mills as the means for grinding
renewable energy means, with Saracen Min- the Nebo-Babel copper-nickel deposit, some ore and a flotation flowsheet that achieves re-
eral Holdings Ltd recently going live with its 500km west of Uluru, taking in the borders of covery at a much coarser grind size, no doubt
solar farm at Carosue Dam which is expected Northern Territory, WA and South Australia. music to the ears of potential financiers taking
to produce 1,647MWh per year and result in So isolated is the West Musgrave province, a harder stance on ESG matters.
the reduction of 988 tpa carbon dioxide. the Oz/Cassini JV project stands to be one of Furthermore, establishing a remote opera-
Fellow WA gold producer and global min- the most significant in the region should fur- tions centre for the project means a smaller
ing outfit Gold Fields Ltd celebrated the start ther studies prove its viability. environmental footprint at site and less planes
of a landmark hybrid renewable project at Ag- Last month, a PFS on the West Musgrave carrying workers to and from one of the most
new in late 2019. JV indicated pre-production capital costs (ex- remote mine sites in Australia.
Stage 1 of the project entails a 23MW pow- cluding study costs) of almost $1 billion. Having advanced the West Musgrave pro-
er station integrating PV solar with gas and Keeping costs to within margins expected ject to PFS stage, concerns around the pro-
diesel generation to fuel Agnew. The collabo- in PFS outcomes while proving 70-80% of the ject’s location appear to be nullified, however,
rative work done between Gold Fields and project’s power needs can be met by renew- some analysts are wary of the big-ticket com-
EDL, a global distributed energy producer, able sources and supplemented by battery mitments Oz has before it.
is one of Australia’s largest hybrid renewable storage and diesel or trucked gas fired gen- West Musgrave is at the early stages of
microgrid projects and Stage 2 stands to test eration is now the aim, according to Oz chief funding and regulatory approvals, while Oz’s
the boundaries yet again. executive Andrew Cole. respective pipeline of expansion studies at
An 18MW wind generation, 13MW battery “The PFS base case assumes the power Carrapateena and Prominent Hill and expan-
and advanced micro-grid control system (due solution will be outsourced to a third party, sion ambitions in Brazil are worth taking into
for completion in mid-2020) is planned for with power purchased back over the life of the account, according to RBC Capital Markets
analyst Paul Hissey.
“Project sequencing will inevitably be the
A decision to mine at the West Musgrave JV project could be made towards the end of balancing act, with Oz management previ-
next year and operations started by late 2024, according to an indicative timeline (yet to be ously stating a desire to not progress two
finalised) by Oz/Cassini. Meanwhile, a maiden ore reserve of 220mt @ 0.33% nickel and 0.36% large-scale development projects in parallel,”
copper for 720,000t nickel and 790,000t copper from Nebo-Babel was announced in February
Hissey said in a research note.
“Whilst Oz provides growth potential for
those investors seeking copper exposure,
we retain our caution on the stock given our
views on the potential ramp-up risks at Car-
rapateena over the next 12 months, when the
project is mine constrained. We remain ‘Un-
derperform’.”
– Mark Andrews
Page 16 MaRCH 2020 aUSTRaLIa’S PaYDIRT
6 October 2020 SAVE THE DATE
Perth, Western Australia
THE BEST NICKEL STORIES ALL IN ONE DAY
To present, exhibit or attend as a delegate please contact Christine Oelschlaeger
on (+61) 8 9321 0355 or email [email protected]
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aUSTRaLIa’S PaYDIRT MaRCH 2020 Page 17
neWs
Exploration the vision for 2020:
Macquarie
xploration will be the theme of the years into a positive trend. within juniors are going to have to pay for
Ecoming year, with the window open While activity doesn’t guarantee dis- it, so I suspect the style of M&A will move
for companies to potentially leverage covery success, the current hype in re- more strongly toward premium pricing
from the huge piles of cash generated gions such as the Paterson province, and hostile deals. The recent Ramel-
by the majors, according to Macquar- Northern Molong porphyry project area ius Resources Ltd/Spectrum Metals Ltd
ie Group division director, resources in central west New South Wales, where deal is a good example [$220 million, al-
Hayden Bairstow. Alkane Resources Ltd could be onto though yet to play out] and may well turn
“It is hard to define [exploration] hot- something resembling Cadia, and now out to be a great acquisition for Rame-
spots without discovery, but what you will the Mallina gold province in Western lius. We’ve seen the last of the nil pre-
find is the cash flow coming out of the Australia, could deliver on early promise. mium offers for some time I’d say.”
haves means that BHP [Ltd], Rio Tinto Past exploration rallies in places such Discovery costs continue to rise in
[Ltd] down to the mid-tier producers all as the Doolgunna region (copper-gold), gold, a situation also faced in other com-
have the same problem; they don’t have Fraser Range (nickel-copper), and the modities given much of the low-hanging
a huge portfolio of projects to develop in Pilbara (conglomerate gold) did not over- fruit has already been plucked, with PCF
the next 10 years,” Bairstow told Paydirt lap and eventually fizzled for myriad rea- Capital managing director Liam Twigger
on the sidelines of the WA Mining Club sons. backing Ramelius’ move on Spectrum.
luncheon in February. With “nearology” plays not stacking up, Analysis from Twigger’s MinesOnline,
“They are all desperately trying to fill rebuilding the confidence within the ex- based on a 355,000oz gold resource and
the front end of the development pipeline ploration sector and investment commu- total offer consideration of $US155 mil-
with exploration projects, whether it is in nity has not been easy. The emergence lion, shows Ramelius paying $US436/
their own stuff or talking with JVs. That is of battery minerals has added another oz for Spectrum, a 2,080% premium to
what I think the whole year will be about. dynamic to the market for investors to MinesOnline.com’s one and three-year
There is this huge amount of cash these consider. normalised average transaction multi-
companies are generating and trying to Nevertheless, Lion Selection Group ples of $US20/oz gold equivalent, and
find the next phase of growth because executive director Hedley Widdup feels a 1,882% premium to the five-year aver-
they certainly don’t have it in their own positive vibes returning to the exploration age of $US22/oz gold equivalent.
portfolio.” sector. Twigger said Ramelius had offered
Bairstow urged small companies to “The 2020 market is probably also far a big price for Spectrum, but with
remember that capital is precious and if more ready for some exploration plays 100,000oz gold discoveries coming at
the opportunity presents to partner with a to look at. There are profits around from an average cost of $234 million over the
deep-pocketed partner at an early stage multi-year returns generated by recover- last decade, it appears to have picked a
of exploration then it must be considered. ies of majors like BHP and Rio, growth of winner.
“You might luck onto something that mid-tier golds [Northern Star Resources “Not everyone spends $234 million,
is pretty interesting, and we have seen Ltd, Evolution Mining Ltd, Saracen Min- but there are a lot of losers for the win-
a few of these in the Paterson province,” erals Holding Ltd] and even a fair few ners. If you look at the actual number of
he said. juniors that have gone reasonably well Tier 1 discoveries it is something like 75
“Newcrest [Mining Ltd] is drilling into that can be recycled. All of this says that [worldwide] costing $2.7 billion per Tier
targets that it joint ventured into and the the risk appetite of the market has got to 1 discovery. Who is going to back those
hole starts at 800m below surface. It is the point where it will bet on exploration,” odds? You get a better return at the ca-
just not something for a small company Widdup told Paydirt. sino and something has to happen to
to do, even if it comes off it is going to be “There is a flow on from this in my change that value proposition,” Twigger
multi-billions of dollars’ worth of capital mind, too. For several years, producers said.
[to develop]. If you get lucky in discov- with an interest in growth had the oppor- “I dare say that [Spectrum] will be com-
eries, don’t wipe your balance sheet out tunity to get into juniors through either ing out with a big resource and you’ll find
trying to drill it to the ultimate peak, re- equity or JV at prices they were probably that the price per resource ounce comes
alise that you’re never going to be able very happy to take a risk at. This has pro- down. We found that the 2,000% pre-
to do that. Get someone in at an early vided a number of future growth avenues mium to the average is a big price that
enough stage and get enough competi- to many medium-to-large producers al- has been paid, but when the [resource]
tion at JV stage and get value for your beit perhaps not exclusive access. numbers come out I think the numbers
shareholders rather than looking to dilute “The reason they could place bets will fall back into line.”
by desperately trying to raise money and cheaply was because there was very While the likes of Spectrum are com-
drill out deep targets.” little or no competition from the equity manding premiums in times of high gold
Industry has lamented the lack of mod- market. The market responses to these prices, the lack of discovery success
ern-day exploration success, despite exploration stories says to me that this had Twigger urging the next potential ten
ABS statistics indicating that explora- competition has returned. Producers baggers to innovate.
tion spend and activity in Australia is 3-4 wanting to take control of growth options “In the 1990s, for every dollar you
Page 18 MaRCH 2020 aUSTRaLIa’S PaYDIRT
PCF Capital’s Liam Twigger, ANZ’s Megan Joyce, Perseus/Pilbara Minerals and Imdex director
Sally-Anne Layman, Macquarie Group’s Hayden Bairstow and Deloitte’s Nikki Ivory
spent on exploration you would normally Minerals Ltd and drilling services and “We need to show that we are better
find something, a lot of the deposits were technology company Imdex Ltd, believes users of the capital that we are given and
outcropping. Now, a lot of things have the days of the traditional exploration for me that means probably consolida-
gone below surface and until recently model may be broken and now was the tion to remove some of the overheads
we were using old techniques – doing time to push ahead with more consolida- out of the juniors,” Layman said.
the same thing and expecting a different tion at the junior end and a higher em- “Technology through data, the use of
result. If you want to get money into ex- brace of technology. data effectively and big data is going to
ploration you have to change the value Layman said tighter collaboration and be really critical in terms of having more
proposition,” Twigger said. cooperation with technology companies exploration success. There is so much
Sally-Anne Layman, non-executive was essential to improving exploration data out there and it has to be used
director at Perseus Mining Ltd, Pilbara success. wisely.”
As streaming and royalty companies nestle their way into the plus-30%, so they are getting an equity-style return plus they
Australian market, a leading banker has advised companies are sitting way in front of the shareholders and shareholders
to seek expert advice to ensure any deal delivers a favourable have to wait for a dividend,” PCF Capital managing director
outcome. Liam Twigger said.
“It is about making sure you get the structure right and “As soon as you get into production you start dribbling out
making sure you cap the royalty if you can and do some to the streamers and it is a very, very good model, but its
smart things so it is actually not as bad as giving away 30% window won’t be here forever. If you look at Saracen [Mineral
of your equity, for example. They can be structured and you Holdings Ltd], Northern Star [Resources Ltd], Evolution
probably need to get some expert advice on how to do that,” [Mining Ltd] they have bought existing mines and have
ANZ (WA) head of loans and specialised finance Megan picked up royalties, so there is a big negativity about another
Joyce said. royalty and a lot of the streamers have a royalty tapped on
Soft equity markets have been beneficial to streaming the end as well. There is a reasonable amount of negativity.”
companies in North America, but Australia’s resilience has Twigger said one or two really good streaming deals in
meant they have not penetrated that market yet. Australia would be needed to change attitudes down under.
Streaming deals are perceived as expensive by many “Then that will be part of that capital in how you fund
Australian miners, leading to a reluctance to get involved. yourself; equity, debt, mezzanine and streamers,” he said.
“The IRR the streams are getting are very high, potentially
aUSTRaLIa’S PaYDIRT MaRCH 2020 Page 19
neWs
Q A
&
RPMGlobal recently
bolstered its in-house
Environmental, Social and Luke Stephens in
Governance (ESG) capabilities Savannakhet, Laos,
with the appointment of Luke MMG’s Sepon LXML
mine. A mandarin/
Stephens as Principal Social citrus industry as a
Specialist, to the company’s long-term post-mine
Consulting & Advisory legacy project that
was established
division. remains ongoing
As a mining social
performance professional Taking mining’s
with more than 20 years’ of
international experience,
Stephens has a strong track responsibilities
record in social licence,
community relations, social
performance, multi-stakeholder beyond the gate
partnerships, grievance
management, government
and donor relations. Prior to
: How far have companies
: Having worked all over the
joining RPMGlobal, Stephens Q world, which is the trickiest Q come in addressing their ESG
was the principal closure destination and why? capabilities?
and sustainability specialist : I’ve had the privilege of : It’s an exciting time to be
for Afrique Gold and worked A working in Africa, Central Asia, A working in environment and social
with Newcrest Mining Ltd Eastern Europe, and South East Asia. management in mining. I’m seeing a
as superintendent for social Everywhere I’ve worked has posed its groundswell of support – both in words
own unique challenges and also had
and actions – building for a more robust
performance. He also spent amazing things to offer and teach me. approach to ESG. I’ve personally seen
numerous years with aid and Working in mining has provided me this among the junior mining space and
humanitarian agency, Concern an amazing opportunity to learn new with the major mining companies. I’ve
Worldwide. Since 1998, he has languages, try new foods, and learn from also seen companies unable to grapple
with core ESG issues. That’s why I’m
new cultures. The variety of cultures we
implemented best-practice work with often presents tricky situations. delighted to be with RPMGlobal. We’re
community programmes in For example, in some countries you here to work alongside companies
mining and alongside local should always be circumspect, avoiding advising them on practical ways to
communities across Africa, clearly stating any request, and never improve in a range of areas, including
actually saying ‘no’. In other countries
ESG, geology, mining, and through our
Eastern Europe, Central Asia, directness and short and to the point excellent industry software.
and South East Asia. Paydirt instructions are highly respected. : Do you believe there is a
caught up with Stephens upon Knowing which approach is required, Q general satisfactorily level of
and the ability to change your natural
his appointment with RPMGlobal approach based on the local demands, ESG standards across industry?
to find out how industry is can be the difference between officials : The existing standards, for
handling ESG responsibilities. welcoming you or being shown the door. A example the Equator Principles,
International Finance Corporation’s
Performance Standards (IFC PS),
Page 20 MaRCH 2020 aUSTRaLIa’S PaYDIRT
and ICMM’s 10 Principles, are globally one or two very small Australian juniors : Do you think mining’s image in
accepted and can guide any company which were treating ESG very seriously, Q Australia and across the world
to improve their engagement with and effectively, with limited resources. is negative?
ESG. The standards are being revised
and invigorated constantly. The more : What are your near-term : Mining has contributed to almost
important question for me is: what Q ambitions in your role with A every aspect of modern life, but it
should companies be doing beyond the RPMGlobal? has been widely reported that it faces
standards? This is where RPMGlobal’s : I’m thrilled to join a talented team a crisis of reputation. We need to find
robust and pragmatic approach to A of professionals at a company new safer, more sustainable, and cost-
ESG plays such a key role. We offer that’s a leader in the ESG field. It’s a effective methods to supply the world’s
industry-leading due diligence reviews of fantastic opportunity. My near-term raw materials. We need to do this while
compliance with the standards, and we ambitions are to integrate within the showing that we can, and do care, for
possess in-house field-tested knowledge company and begin to add value, both to the environment and partner with our
on the core fundamentals of environment the company and to our clients. local stakeholders. I see tremendous
and social management. : What are your longer-term potential for mining to be a positive
agent of change in partnership with
: Does there need to be an ESG Q ambitions? local communities, but we need to walk
Q standard implemented that : It’s great to come on board at such our talk. This is where RPMGlobal has
mining companies across the A a pivotal time within the industry a proven track record of adding value
world to adhere to? and I’m excited by RPMGlobal’s vision of with our advisory services designed to
: I am hesitant to take the approach continued growth and leadership in the improve all aspects of mining.
A of a one-size-fits all standard and ESG space. I believe that communities : What do you make of the current
context is important. For example, many and mining companies can have a Q state of the mining sector?
of the majors have in-house standards beneficial two-way relationship. My : Mining is facing multiple
that meet or exceed the IFC PS. What ambition longer term is to be able to A challenges to its core business
worked with our engagement activities share that belief – and practical steps model, including decreasing grades,
in Cote d’Ivoire was different to what to achieve it – with our clients, resulting technology and artificial intelligence,
worked in Laos. The important takeaway in better value for communities and climate change, and a growing focus
here is companies need to embrace the companies. on environmental and social impacts.
position that strong ESG performance : Would ESG capabilities in the I find this exciting. Good companies
is good business in the same way that Q mining sector be enhanced by face challenges head-on, using them
safety has been embraced across a better representation of men as springboards to provide a better
mining. and women in the industry? product and benefit to society. I believe
: How do Australian mining : Every team I’ve worked in has that mining has a fantastic opportunity
Q companies rate in ESG A made positive strides with diversity to do the same thing. We have the
performance compared to and inclusion. This is particularly chance - whether it be providing the
peers across the world? important on the ground with community raw resources necessary for renewable
: I’m of the belief that several of relations; the team should reflect local energy or building partnerships with
A the bigger Australian mining society. Effective engagement requires local communities - to be deliverers of
companies are among global ESG leaders. gender diversity that reflects all of our solutions that create value for all of our
I’ve also had the privilege of interacting with local stakeholders. stakeholders.
Stephens with the community development team at MMG’s Sepon LXML
aUSTRaLIa’S PaYDIRT MaRCH 2020 Page 21
coVeR
ESG no longer the SG no longer the
E
forgotten slide orgotten slide
f
t the beginning of the Industrial Revolution, mining was the very symbol of
A modernity. Its output – whether coal, iron ore or later copper – fuelled and
constructed the great new cities of the world and presented opportunities for
millions of people which just a century before would’ve seemed impossible.
Page 22 MaRCH 2020 aUSTRaLIa’S PaYDIRT
ver the next 200 years however, the
Osector’s reputation gradually eroded
until, by the start of the 21st century, min-
ing was perceived as a dirty, backward,
unconscionable industry which took more
from society, and the planet, than it gave.
This public image has prevailed even
as the industry turned its ethical perfor-
mance around. Over the past 20 years,
mining has made remarkable strides on
workplace safety, environmental man-
agement, social engagement and a host
of other perceived issues. However,
industry leaders, brought up with the
mantra of maintaining a small target for
detractors, have been reluctant to com-
municate this progress. Like the veteran
boxer, it has taken the critics’ punches
round after round, all the time unwilling
to fight back by asserting its own positive
skills.
At the start of a new decade, there is a
sense the mining sector is now prepared
to prove its capabilities as a participant in The dynamics of mining’s interaction with the wider society has shifted
the 21st century world of ethical, sustain-
able global development.
February’s Investing in African Mining “Companies have done a lot to en- view that it didn’t have engagement with
Indaba was the clearest demonstration hance disclosure,” he said. “The frustra- end-users and consumers. But, in this
yet that the world’s leading miners are tion is that it is not clear how investors new age of full transparency, people as-
intent on changing the narrative around are using the information now being pro- sume the worst and the only news stories
the industry’s role in the world and place duced. we see about mining are tragedies.”
it back at the forefront of global develop- “Investors often use risk methodology Major consumer brands such as Apple
ment. for companies working in challenging and Tesla are coming under increasing
“We are not here to help; we are here countries. But there are more risks in pressure to confirm the integrity of their
to play our part,” Anglo American plc these jurisdictions to take into account, entire supply chain and are subsequently
chief executive Mark Cutifani stated on so it is a different score [to Tier 1 jurisdic- demanding greater transparency from
the opening morning of the conference in tions]. I believe there should be positive raw material suppliers.
Cape Town. weightings for the social impact a com- “The sentiment from end-users is re-
The major mining companies have pany is having in a developing jurisdic- flected in the mandatory and voluntary
been producing annual sustainability re- tion.” codes which are starting to kick in,” Baker
ports for nearly two decades but Cutifani The ICMM has moved to bring clarity McKenzie London partner Richard Blunt
believes this alone has not been enough to ESG performance by establishing a explained to Paydirt. “Consumer brands
to shake the impression among stake- toolkit designed to assist miners, inves- are demanding transparency through the
holders that the change is genuine. tors and other stakeholders compare value chain; for example, Tesla’s require-
“We [Anglo American] are the lead- ESG performance across different com- ments to prove exactly where metal is
ing resource company on the FTSE100 panies and projects. coming from.”
Responsibility Index but the bad news is “The ICMM has a new programme/ini- Governments are also coming un-
we are only No.33 overall,” he said. “We tiative to assess ESG performance at a der increased pressure from civil soci-
believe the industry does a lot more than site level against 30 performance expec- ety groups to show more transparency
the number indicates. The industry has tations, enabling fund managers to as- around tax and royalty payments, forc-
to improve its messaging but also walk sess how a company and individual site ing miners to be more open about such
the talk and improve the way we connect is doing,” Butler explained. contributions. The movement, “Publish
with society.” Why has it become imperative for min- What You Pay”, is part of a wider focus
The International Council of Metals ers to change their habits? For Investec on corporate tax minimisation strategies
and Mining (ICMM) has led the push for Asset Management portfolio manager in light of the Panama Papers and other
industrywide reporting standards around George Cheveley, the dynamics of the governance scandals.
environmental, societal and governance sector’s interaction with wider society An even greater push is coming from
(ESG) performance. Speaking at Mining have shifted. investors who are adopting an increas-
Indaba, chief executive Tom Butler said “It is a major issue for mining compa- ingly holistic view of a company’s per-
reporting standards had improved in the nies today,” Cheveley said at Mining In- formance. The recent tailings disasters
industry. daba. “Historically, industry has taken a in Brazil gave the clearest indication yet
aUSTRaLIa’S PaYDIRT MaRCH 2020 Page 23
coVeR Sustainable investing is a major growth area and will escalate in the next
decade as the millennial generation expands its investing influence
that investor attitudes towards ESG per- fuels; and strengthening our commitment Millennials are already estimated to
formance are changing. Following the to sustainability and transparency in our control $US24 trillion of global private
Brumadinho tailings spill, major investors investment stewardship activities,” Fink wealth and a further $US50 trillion is
led by the Church of England pension said in his letter. expected to pass from baby boomers to
fund, demanded companies in their port- Cheveley said Investec was focusing millennials in the US alone over the next
folio produce a full audit of their tailings more on ESG performance, and not only decade. By 2030, millennials are likely to
assets. The industry’s majors reacted im- for ethical reasons. hold five times the wealth they currently
mediately, as they did in January when “We find companies which perform do.
BlackRock chief executive Larry Fink better have ESG outperformance,” he Sustainability is at the heart of mil-
said his company would avoid invest- said. “How companies are reacting to lennials’ investing strategy and they are
ments in companies which “present a ESG is a good guide about how a com- increasingly willing to dig deep into the
high sustainability-related risk”. pany is being run at the senior level.” supply chain of their preferred consumer
“BlackRock announced a number of Sustainable investing is a major products.
initiatives to place sustainability at the growth area and according to the Global “Millennials want to know the prov-
centre of our investment approach, in- Sustainable Investment Review, it was enance of products; the environmental
cluding: making sustainability integral to valued at $US30 trillion in 2018, a 60% and social issues [attached to them],”
portfolio construction and risk manage- increase in two years. The category Mpumi Zikalala, chief executive at De
ment; exiting investments that present a is expected to grow its share of overall Beers, said during Mining Indaba. “They
high sustainability-related risk, such as funds under management over the next are purpose driven, you need to tell them
thermal coal producers; launching new decade as the millennial generation ex- why [they should invest] and provide
investment products that screen fossil pands its investing influence. proof points.”
Page 24 MaRCH 2020 aUSTRaLIa’S PaYDIRT
What the industry is saying:
“Even late Capitalism’s most unvarnished “Going up that ESG curve does cost money and I
practitioners have suddenly discovered the merits think we do need to realise that; it is not a one size
of a social conscience and now say they won’t fits all basket. Juniors still don’t have the cash or
invest in a business that doesn’t have a satisfactory the head count to be able to make the same moves
ESG rating. Mining companies have a moral that the mid-tiers do… and I think you’ll find juniors
obligation, as well as a commercial reason, to will continue to move up the curve but not nearly as
help develop economies and uplift people through fast as the mid-tiers.”
investment, skills transfer, opportunity creation Sally-Anne Layman, director at Perseus Mining,
and quality of life improvement.” Pilbara Minerals and Imdex
Mark Bristow, Barrick Gold
“We believe this is a ‘make or break’ moment
facing our industry and our business. How we
adapt, operationalise and integrate sustainability
will define successful mining companies for years
ahead.”
Bold Baatar, Rio Tinto
And, given their sophisticated reading tion that miners are
of marketing and communications, mil- preparing for the
lennials require more than motherhood trend, according to
statements about what companies are Blunt.
doing to prove their ESG credentials. “It was clear that
“We are seeing CEOs talking more people are talking
openly about what their companies are about ESG in a dif-
doing and the benefits they bring,” Ch- ferent way,” he said.
eveley said. “But, in doing that, they must “Mark Cutifani lead-
make absolutely sure they are doing the ing with ESG and “The UK-listed companies know inves-
right thing.” Bold Baatar [Rio Tinto] also having it right tors won’t invest without proof of ESG
Butler agreed that millennial investors at the heart of their presentation was re- credentials and the LSE is beginning to
would demand more clarity on the pur- vealing. Even Robert Friedland spent an mandate it,” he said. “What surprised me
pose of a company. hour on stage, all focused on ESG, and in Cape Town is the focus of private eq-
“The CEO needs to articulate the pur- he knows where the money is going. uity groups on ESG. One leading private
pose and direction of the company,” he “It is all tied back to the increasing pres- equity fund said they increasingly need-
said. “Companies have done a lot to en- sure on companies to have a purpose not ed to see a clear path to compilance with
hance disclosure but what is missing is limited to the generation of profits. They its ESG requirements before investing in
vision about mining’s role in the world 20 are being pushed by investors, custom- an unlisted business. That is a big shift
years from now.” ers and NGOs to be more explicit in the because historically private equity has
ESG factors have been at the heart of way they deliver value to stakeholders. not focused on that.
a new wave of shareholder activism with “It is now very clear that you won’t get “The LME has also started asking for
investors using their shareholding to in- the big funds investing in a company voluntary carbon footprint figures attrib-
fluence companies’ ESG performance, which doesn’t have an ESG record and utable to the metal traded back through
such as the pressure placed on Rio Tinto covers the basics consistent with bench- to original extraction and I think it will be
Ltd and BHP Ltd to distance themselves marking.” mandatory in years to come.”
from industry lobby groups which dispute The pace of this evolution could catch Blunt sympathises with juniors who are
climate change. Blunt said the practice, some companies out. The shifts may be struggling to keep up with the shifting
already common in the hydrocarbon sec- manageable for majors who can afford trends. He suggests using the global vol-
tor, was likely to increase in mining. to fund entire ESG departments and pro- untary principles as a good place to start
“In the oil and gas industry, groups duce glossy sustainability reports but for building a corporate ESG identity.
such as Follow This have been making smaller companies, the world of ethical “Juniors can’t skip ESG and there
themselves known at annual general investment and corporate purpose can is no shortcut so, they have to have
meetings, often diverting attention from seem alien after years of telling investors someone looking at the ESG factors in
other key strategic messages which they are doing everything to keep costs the business. The UN Guiding Princi-
boards wish to communicate. We antici- to a minimum. ples, for example, are a good frame-
pate that the mining industry will soon fol- Blunt said although juniors find it more work, it is then a question of working
low as a target,” he said. difficult to express their ESG credentials, out how relevant they are to the busi-
The Mining Indaba was a clear indica- it is increasingly vital they do. ness; a big part of it is information
aUSTRaLIa’S PaYDIRT MaRCH 2020 Page 25
coVeR
What the
financiers
are saying:
“It is a big thing in New York and in
corporate text books and corporate finance
you would never have seen something
like community and social governance
take a step in front of shareholder return
and maximising cash flow to support
shareholders. It is new territory that isn’t
going away.”
Liam Twigger, PCF Capital
“From the debt perspective there has been
a huge increase in sustainable finance
whether that be green bonds, green
loans or sustainability loans and that is
a real opportunity for companies that are
committed to improving their sustainability
they will actually get a reward in terms of
their margins to incentivise them to do it.”
ANZ (WA) head of loans and specialised
finance Megan Joyce
“From an investors point of view, it filters
down. There is an ESG committee in every
major fund now. There are specific analysts
and researchers going through annual
reports and governance reports to work
out who is going to get strikes and who is
not ticking the boxes and that is certainly a
growth industry from my perspective.”
Hayden Bairstow, Macquarie Group
division director, resources
gathering. Equator Principles are 108 international Hill has led Native Title negotiations
“Understanding the ratings agencies banks, including Australia’s Big Four. on more than 100 projects in Australia,
which publish on ESG is also vital. Any While miners operating in the develop- helping clients meet their legal obliga-
fund will look at these ratings first, so it ing world have long been used to adher- tions. However, she sees the new Equa-
is important to identify if you have been ing to the principles, Australian-focused tor Principles as exceeding domestic law.
rated and have a conversation with the companies will also have to meet the “You could have a situation where,
ratings agencies to make sure their as- standards if they are to attract traditional even if all parties are happy and signed
sessment is consistent with how you see funding. up to an agreement, the bank will still de-
it. It gives more visibility in the eyes of the “There won’t be a project in Australia mand evidence of the process and ad-
investor.” which is not impacted by the new Equa- herence to the Equator Principles,” she
The shifting nature of codes can also tor Principles if their lender is signed up; said. “This goes beyond just Native Title;
be problematic. From July 1, a fourth it is going to be a big change for every- it will include environmental and social
version of the Equator Principles will be one,” Kellie Swanson-Hill, consultant at impact as well.
launched. Among the signatories to the Agreement Hub, told Paydirt. “There is little clarity around how the
Page 26 MaRCH 2020 aUSTRaLIa’S PaYDIRT
principles will be applied and whether Anglo American’s FutureMining and “later cycle products that support a fast-
companies and lenders will even com- Rio Tinto’s green aluminium initiative growing global population and a cleaner,
ply. Companies should be talking to are examples of miners’ efforts to cre- greener, more sustainable world”.
funders now and getting some guidance ate businesses which produced more “The addition of this Tier 1 project to
on the lender’s stance.” sustainable outcomes. Where possible, the portfolio absolutely supports our
Cheveley wants to see companies do larger miners are implementing changes transition to those metals and minerals
more than simply adopt standards and beyond the mine site, even undertaking that will meet the world’s evolving needs,
voluntary codes. portfolio change to adapt to changing including infrastructure and food for the
“On ESG, we want to see progress on perceptions. world’s fast-growing and urbanising
measured impacts, embedding targets When Anglo American announced its population and the undoubted need for
into the organisation and making an ef- acquisition of the North Yorkshire poly- cleaner energy and transport,” he said.
fort to communicate that. We want to see halite fertiliser project in January, Cutifa- BHP and Rio have also begun divest-
them doing, not just talking about it,” he ni said it was in keeping with the compa- ing thermal coal assets as they reshape
said. ny’s move towards a portfolio based on their portfolios towards new energy tech-
aUSTRaLIa’S PaYDIRT MaRCH 2020 Page 27
coVeR
Tom Butler Mark Cutifani
nology. mining companies have ESG skills.” why it matters and what employees can
Juniors don’t have the luxury of chang- The answer to this lack of ESG capa- do to help,” he said. “The industry is full
ing portfolios to fulfil ESG requirements, bility may be to look outside of mining to of engineers who love solving problems
but they will need to reposition them- find expertise. and they could tackle many ESG issues;
selves if they are to meet changing in- “Mining is very insular when it comes from using less water, to lowering a pro-
vestor demands. to leadership,” Nel said. “The industry ject’s carbon footprint. It is about making
According to Heloise Nel, Egon has cultivated a certain mindset. Leaders it clear to them why it matters.”
Zehnder’s Mining & Metals leader, com- are usually mining engineers who have For Cutifani, mining has been afforded
panies of all sizes needed a clear sense come up through the operations team. an opportunity to embrace a new, more
of purpose, driven from the top of the or- The industry needs a more global mind- positive role, thanks to the global trend
ganisation, to achieve their ESG goals. set. Companies should connect with for renewables, EVs and battery storage
“While shareholder value creation is other industries and look for leaders who which all boast high metal intensity.
a company’s raison d’être, being a re- can think outside the box.” The World Bank’s The Growing Role
sponsible steward who does this in a Blunt recognises the need for greater of Minerals and Metals for a Low-Carbon
sustainable way must be at the core of diversity but also believes there are Future report found that a low-carbon
how the company conducts business,” ESG capabilities inherent in the mining future will be significantly more mineral
Nel told Paydirt. “This needs to come industry. If companies can explain their intensive than a business-as-usual sce-
from the CEO and board. At a board level purpose to employees, they may unlock nario. The report estimated that global
you need a committee with the requisite greater potential. demand for strategic minerals such as
skills. Our recent study found that less “One of the new requirements of min- lithium, graphite and nickel will skyrocket
than 40% of board representatives in ing leadership is to explain what ESG is, by 965%, 383% and 108% respectively
Bold Baatar
Page 28 MaRCH 2020 aUSTRaLIa’S PaYDIRT
The likes of Apple and Tesla are being heavily scrutinised
Mark Bristow to confirm the integrity of their entire supply chain
by 2050. the products of mining; the essential raw working standards.
“The World Bank supports a low-car- material to modern life; whether PGMs in At Barrick Gold Corp, chief executive
bon transition where mining is climate- hydrogen fuel cells or copper in renewa- Mark Bristow is implementing the social
smart and value chains are sustainable bles and EVs. licence standards which served his pre-
and green. Developing countries can “We need to connect the future of min- vious company, Randgold Resources,
play a leading role in this transition: de- ing with emerging and next generation so well on the African continent.
veloping strategic minerals in a way that societal values, including transparency, “To Barrick, securing and maintaining
respects communities, ecosystems and sustainability, shared prosperity and its operations’ social license is a strate-
the environment. Countries with stra- technological innovation. gic imperative, a core part of our busi-
tegic minerals have a real opportunity Rio Tinto and BHP have adopted a ness and just not another box to tick.
to benefit from the global shift to clean similar approach, moving their strategies With major investors now placing ESG
energy,” the Bank’s senior director and towards commodities such as copper at the heart of their decision-making, the
head of the Energy and Extractives and lithium, and implementing carbon- rest of the industry will have to follow our
Global Practice, Riccardo Puliti, said. neutral goals for the middle of the centu- lead.”
Cutifani is positioning Anglo American ry. Miners are also ensuring their supply It is a far cry from a miner’s ESG com-
to take advantage of this new-found pur- chains are free of social and governance mitments running to half a slide in a cor-
pose for mining. issues. porate presentation but if it ultimately
“It astounds me to hear talk of a world In 2018, De Beers introduced its leads to attracting a new generation of
where mining doesn’t exist,” he said. GemFair initiative, a pilot programme investors, employees and supporters,
“The mining industry enables life as we designed to remove “conflict diamonds” the embracing of ESG issues could be
know it. We are key to powering human and connect artisanal and small-scale the smartest decision the sector has
progress. The transformation to a low- miners to global markets through digi- made in a generation.
carbon economy can’t happen without tal technology and assurance of ethical
– Dominic Piper
There was no hotter topic at Mining Indaba than holding the mining
industry accountable for their actions
aUSTRaLIa’S PaYDIRT MaRCH 2020 Page 29
InDABA ReVIeW
Rays of African light but how
long will they stay lit?
he first week of February saw the traditional gathering of miners, explorers, financiers
T and governments from around the world in Cape Town for the annual Investing in African
Mining Indaba. After 26 years, the conference has spawned an entire “festival of mining”
with seemingly every corner of the beautiful, historic Mother City filled with dealmakers
and negotiators. Mining Indaba week has become a barometer for the health of the mining
sector on the continent with participants taking the opportunity to promote their countries and
companies, ink deals and contracts and strike new partnerships and agreements. Paydirt’s
editorial team did its best to cover every aspect of the week, from the main event to the
sideline 121 Conference and the myriad related functions and meetings. In our review, we look
at the headline-making companies and themes which fuelled debate throughout the week
hile chinks of sunshine returned to Minister for Mineral Resources & En- South Africa’s sub-1% GDP growth out-
Wmany corners of the Investing in ergy, Gwede Mantashe, opened the con- look for 2020.
African Mining Indaba, the host country ference and his address and subsequent The country’s mining production fell
itself is still battling to keep the lights on. press conference were dominated by the in 2019 by 2.8%, similar to 2018 ac-
The 26th Mining Indaba took place latter part of his portfolio. cording to the Minerals Council South
amid yet another round of load-shedding Mantashe acknowledged the prob- Africa, which also pointed to logistical
in Cape Town and wider South Africa as lems energy constraints had caused to constraints (like rail capacity), disrup-
problems at state electricity company the economy, pointing to power outages tions (electricity provision) and industrial
Eskom continued to blight the country. and structural constraints as reasons for action as well as community unrest, as
Page 30 MaRCH 2020 aUSTRaLIa’S PaYDIRT
DRC Prime Minister Sylvestre Ilunga
Ilunkamba addresses the opening session South African Minister for Mineral Resources & Energy Gwede Mantashe with Orion
of Mining Indaba in Cape Town Minerals managing director Errol Smart
reasons for the retraction.
Mantashe said the issue had forced
the Government into taking “some se-
rious decisions”, chief of which was to
clear the regulatory hurdles for inde-
pendent power producers and for miners
wishing to generate their own power.
Mantashe said officials were
revising the Electricity Regulation
Act (ERA) to allow companies to
generate power for their own use
without a license. But Mantashe
said miners would still have to
register their generating facilities, The ANC Government burnished its possible and some headway has al-
which companies say is time-con- climate action credentials by enact- ready been made as a result of newer
suming. ing a carbon tax in May last year and power plants coming on stream, and the
Some analysts expect amend- several mining companies are target- impending closure of older plants asso-
ments to the ERA will have to ing self-generation via renewables pro- ciated with historically large emissions.
go through public participation, jects. Mantashe, however, is pragmatic Further, these new power stations rep-
which could delay matters further. about which energy sources the country resent an enormous investment. It would
“If there is political will, it could should be turning to. be economically crippling to simply shut
be done in months. But if you look “We are focused on low-carbon en- them down.
at the past, they’ve been talk- ergy – carbon capture, geothermal and “For the foreseeable future in South
ing about amending the flawed coal-bed methane – but must find ways Africa, coal remains a necessity as the
schedule 2 (of the ERA) since of using coal in a way that also reduces baseload source of power even with the
2017,” EE Business Intelligence emissions.” expansion of renewables. So much of
energy analyst Chris Yelland said. Price, he said, was the primary driver what South Africa produces is connect-
Mantashe said South Africa’s of power options. ed to coal. It is the largest component of
power market would be fur- “We must negotiate to pull down the mining by sales value and is a critically
ther opened to competition but price, renewables are not cheap,” he told important source of the primary energy
claimed Eskom itself wasn’t the a press briefing after his address. “Coal that drives the economy.”
problem. is still cheaper; it has been with us for With members agitating for simplified
“There is going to be a separate many years and coal is not going to go rules around self-generation, the Miner-
entity to Eskom, but the issue is away.” als Council reinforced its calls for Man-
not Eskom or no Eskom, the is- The Minerals Council is also support- tashe to deregulate the sector.
sue is security of energy supply,” ive of a transition to low-carbon power “The Government [must] fast-track leg-
he said. “We need to go back to generation but warned the move away islation that makes it possible for mining
the days of surplus energy; price from coal would have to be gradual. companies to generate their own power,
is the major problem.” “When we refer to a just transition,” including the more than 600MW of solar
In his State of the Nation address on Baxter said. “We mean that there are power projects already in the pipeline,”
February 13, President Cyril Ramapho- technical, social and economic grounds the Council said.
sa announced the implementation of the for a gradual, rather than an immediate Mantashe said moving away from li-
Integrated Resource Plan 2019 which move away from coal. censing “should accelerate the process-
will allow municipalities to purchase “The Minerals Council acknowledges ing of getting self-generation for miners”.
power outside of the national grid. that cleaner coal power generation is “Then, if new generation is cheap
enough, the mining industry will be able
to target other opportunities, beneficia-
tion for instance,” he said. “Beneficiation
will be as slow or easy as the price of
electricity allows.”
However, he remained sceptical about
miners’ desire to enter the power gen-
eration space.
“Sibanye [Stillwater Inc] was given
50MW in 2017 but never built that ca-
pacity,” he said. “Talk is cheap, action is
expensive.”
With Eskom failing, South African Air-
ways faltering and the country’s mining
sector shrinking, it appears the conse-
quences of taking no action could be
even costlier.
– Dominic Piper
Paydirt advertising manager Richa Fuller at the company’s
exhibition booth at Mining Indaba
aUSTRaLIa’S PaYDIRT MaRCH 2020 Page 31
InDABA ReVIeW
Africa integral to Barrick’s
future: Bristow
s the in-demand Mark Bristow made
Ahis way through the aisles of the
Cape Town International Convention
Centre at last year’s Mining Indaba, he
found himself being asked the same im-
posing question.
Would his African-focused Randgold
model work on Barrick Gold Corp’s glob-
al scale?
At the time, Barrick’s merger with
Randgold Resources was barely a month
old and the 2019 Mining Indaba was Bris-
tow’s first major appearance as chief ex-
ecutive of the combined entity.
Twelve months on and armed with a
set of full-year results to reflect upon,
Bristow is confident he can now accu-
rately answer that question.
“The merger has been enormously
successful by any measure,” Bristow
said.
“We established a model for a modern
mining company – lean, agile, efficient,
future-focused and socially conscious –
and it is no accident the merger has trig-
gered a series of fresh industry transac-
tions aimed at value creation.
“We delivered on every single promise
and we’re well on the way to our goal of
becoming the world’s most valued gold
company in every respect.” having a life longer than 10 years with an- Mark Bristow
In the 12 months since the merger was nual production in excess of 500,000oz
completed, Barrick’s share price has and a total cash cost per ounce in the the lingering readiness of both parties to
jumped 79% and outperformed many of bottom half of the industry curve.” sacrifice profitability for short-term gains.
its peer companies, the indices and the Prior to this year’s Mining Indaba, Bar- “I think it’s also fair to say that the in-
spot gold price. rick and the Government of Tanzania for- dustry and its investors still have some
Among the key highlights for Barrick malised a JV which is intended to give way to go in adapting itself to the ex-
during that past year were the forma- the latter “full visibility of and participa- pectations and demands of a changing
tion of the Nevada JV with Newmont tion in operational decisions made from world, not least by creating catch-up op-
Corp, the acquisition of the troubled and by the North Mara, Bulyanhulu and portunities for societies that have been
Acacia Mining vehicle in Tanzania and Buzwagi mines”. left behind in emerging countries.
the divestment of its 50% interest in the While Bristow did not discuss Tanza- “If Africa is going to take its rightful
Kalgoorlie Super Pit. nia specifically during his formal pres- place in the global economy stakes, it
Barrick is also in the process of off- entation to Mining Indaba delegates, needs genuine long-term international
loading its 90% interest in the Massawa he made it clear to all that mining com- investment and expertise to develop its
gold project – a Randgold legacy asset – panies and African host governments mining sector and realise its human and
in Senegal to Teranga Gold Corp for a to- needed to find common ground if the full natural resource endowment. The global
tal consideration of up to $US430 million. value of the continent’s mineral wealth is economy needs successful emerging
“In order to be an industry leader, you to be realised. markets and new growth engines, work-
should also be able to project a robust “Despite the fool’s gold glitter of re- ing together towards the same mutually
production profile well into the future,” source nationalism, some of the major beneficial goals.
Bristow said. mining countries in Africa are starting to “It’s absolutely imperative for Africa to
“There’s a consensus that the global see the merit in reaching out to partner play a meaningful role as an emerging
gold supply is peaking and even assum- with investors and managers to make the market destination.”
ing that all the projects currently being most of their mineral wealth,” he said. – Michael Washbourne
planned come to fruition, it’s downhill “Unfortunately, however, some ten-
from there. Hence, Barrick’s strategic fo- dencies have not yet changed, or at least
cus on Tier 1 mines, which we define as not sufficiently. Most notable of these is
Page 32 MaRCH 2020 aUSTRaLIa’S PaYDIRT
Barrick handshake opens door
for Aussie juniors
he wider Tanzanian mining indus- The dispute originally involved Acacia Tanzania.
Ttry breathed a sigh of relief following Mining, which was bought out by Barrick. “It’s encouraging for all stakeholders in
news that the Government and Barrick The Government imposed a ban on export- the mining industry that Tanzania and Bar-
Gold Corp had finalised a new invest- ing mineral concentrates in 2017 after ac- rick have formalised an agreement and
ment deal. Now, the Australian juniors in cusing Acacia of tax evasion, leading to a have started a new chapter in the country,”
the country hope the three-year develop- one-third cut in the miner’s output. an AngloGold Ashanti spokesman said.
ment freeze will be lifted. Deputy Minister for Minerals Stanslaus Clifford Chance Partner in international
Canadian gold major Barrick signed a Nyongo told Mining Indaba delegates the arbitration Sam Luttrell told Paydirt plenty
deal with Tanzania on January 24 which Government was “very much happy now of positives could be gleaned from the fi-
will see the Government take stakes in its that we will share economic benefits 50/50”. nalisation of the Barrick deal.
three gold mines, ending a long-running tax The Government said it was renegoti- “It is a positive and I’m more optimistic
dispute and setting a template for negotia- ating mining agreements with all existing about Tanzania now,” Luttrell said. “The fact
tions with other firms. companies to get a minimum 16% stake in the Government has been able to do a deal
Completion of the deal follows an an- each large-scale mine, in accordance with within the legal framework bodes well for
nouncement by the two sides in October in mining laws passed in 2017. Tanzania as a host of mining investment.
which they agreed to a payment of $US300
million to settle outstanding tax and other
disputes, the lifting of an export ban on
concentrates and the sharing of future eco-
nomic benefits from mines.
Barrick chief executive Mark Bristow –
who has been at the heart of negotiations
since arriving at the company in 2018 –
struck a conciliatory tone in a speech at the
ceremony broadcast on state TV.
“Many people said your criticism will
chase away investors ... what it’s done is
challenge the mining industry and all of us
to embark on something where we win to-
gether or lose together,” Bristow said to ap-
plause.
Bristow called it a “historical day” for Af-
rica and said the company had budgeted
$US50 million for brown and greenfield ex-
ploration in Tanzania in 2020.
“I thank God for the success of this
agreement,” Tanzanian President John
Magufuli said. While Barrick and the Tanzanian Govern- Andrew Spinks
He said confiscated containers of gold ment were congratulating each other, ques-
and copper concentrate could now be ex- tions remain about contracts with other min- “The Government has got some dif-
ported to the benefit of Twiga Minerals, a ers, developers and explorers in the East ficult issues to work through in relation to
new JV set up to manage the Bulyanhulu, African country. the changes they made to their natural re-
North Mara and Buzwagi mines. The agreement was part of a wider pol- sources laws but my impression is that they
“Twiga Minerals represents a structure icy shift in the East African country which have received and understood the signal
which allows the Government and the saw amendments to its Minerals Act. from the market and are probably to a de-
people of Tanzania to be involved in the The dispute with Barrick and some of the gree more willing to show some flexibility in
decision-making of everything that we do more radical aspects of the amendment the legislative framework than they were in
together,” Bristow said. act saw investment in the country grind to 2017.”
Foreign Affairs Minister Palamagamba a halt as investors absorbed the changes. Among the most encouraging aspects of
Kabudi, who led Tanzania’s negotiating Under the amendments, the Govern- the Barrick deal was the inclusion of sev-
team, said Tanzania now owned 16% un- ment will receive a 16% free-carried inter- eral terms deemed “unconscionable” in the
diluted shares in Twiga Minerals, as well as est in all mines while recourse to interna- 2017 legislation.
a 16% stake in each of the Barrick mines. tional arbitration was also removed. ASX-listed companies were highly active
“We almost lost hope in the discussions Mining licences will now be issued by in Tanzania prior to the 2017 changes to the
with Barrick and I was ready to tender my the newly established Mining Commis- Mining Act. Since then, their progress has
resignation to the President for failing to sion, under the guidance of the President. been stymied by uncertainty around the
complete this task, but we ultimately got the South African miner AngloGold Ashanti Acacia deal and future mining policies.
deal done,” Kabudi said. Ltd’s Geita is the largest gold mine in The finalisation of the agreement be-
aUSTRaLIa’S PaYDIRT MaRCH 2020 Page 33
InDABA ReVIeW
Bronwyn Barnes
tween the Government and Barrick should rights of our shareholders and the historical
pave the way for a reinvigoration of the sec- investment they and our JV partners – cur-
tor, according to EcoGraf Ltd managing di- rent and historical – have made in Ntaka Hill.
rector Andrew Spinks. It is a significant asset, one of the most ad-
“This is about breaking the deadlock. vanced undeveloped nickel sulphide plays
Both sides have called it an historical land- in the world. We are not walking away, and
mark agreement and I think that did reso- we are focused on reaching an amicable
nate at Mining Indaba,” Spinks told Paydirt. outcome with the Government.
Walkabout Resources Ltd executive di- “The compensation we would pursue
rector Allan Mulligan said the settlement would be a significant number which recog-
was already being acknowledged during the nises the historical investment and valuation
company’s meetings with investors. of the asset at the time of expropriation.”
“In general, an acknowledgement that the Luttrell said the cancellation of the reten-
perceived risk profile of investing in Tanza- take time for investors to warm to Tanzania. tion licences – Barrick and Glencore saw
nia is now receding,” Mulligan told Paydirt. “Regardless of the intention, what Tanza- their JV over the Kabanga nickel project
“African banks in particular, have shared an nia did in 2017 was so rare and radical that also cancelled – appeared to be an example
interest in including Tanzanian mining pro- it is now in a challenging position in terms of direct expropriation.
jects into their portfolio.” of promoting itself to mining investors. It al- “Those retention licences are invest-
Speaking at Mining Indaba, Nyongo said most doesn’t matter what the laws say, the ments as defined under almost every bilat-
the legal reforms introduced by Magafuli in fact that such radical laws were passed is eral investment treaty [BIT] in the world,” he
2017 were designed to improve the min- enough to do lasting reputational damage.” said. “All BITs make reference to business
ing sector’s contribution to the Tanzanian While the agreement brings an end to
economy and improve the investment envi- negotiations over the future of Barrick’s Allan Mulligan
ronment. three gold mines in the country, legal battles
Mulligan said the settlement was proof of could still occur elsewhere in Tanzania. As
a willingness on both sides to move forward part of the 2017 amendments, 10 retention
in partnership however he expressed con- licences were cancelled. The licences were
cerns over the meaning of the oft-quoted longstanding projects previously deemed of
“50/50 shared economic benefit” of the potential significance to the country.
agreement. Among the licences cancelled was the
“The desire by Government is that 50% Ntaka Hill nickel project licence, held by
of the gross revenues from mining as an ag- ASX-listed Indiana Resources Ltd.
gregate remain in country through expendi- Indiana and its various JV partners had
ture on local costs, salaries, wages, servic- spent more than $US60 million over more
es including taxes, duties and fees,” he said. than a decade on exploration and devel-
“This is not a difficult hurdle for locally reg- opment studies at Ntaka Hill. Chairperson
istered mining companies to achieve since Bronwyn Barnes said the company was
money must be spent where the operation pursuing its legal rights in relation to the li-
is geographically bound. The 16% free-car- cence. concessions to search for natural resourc-
ried interest has now been clearly defined In late January, Barnes said in an ASX es. If that licence is annulled or revoked by
and we accept that as a reasonable and statement that Indiana had “moved quickly legislative or executive act, that is deemed
passive recovery on behalf of the people for to protect the interests of shareholders”. direct expropriation.
depletion of the national endowment.” “This is not an approach by a government “The legal question is fairly simple: were
Luttrell said the severity of the Govern- that encourages foreign investment and is a the licence holders paid prompt, adequate
ment’s original changes meant it may still clear signal that funds invested in Tanzania and effective compensation, was the annul-
are at risk of sudden ment done in accordance with the norms of
and inappropriate sei- due process, was it non-discriminatory and
zure by the Govern- was it done for a legitimate public purpose.
ment,” Barnes said. Only if the answer to all of those questions is
Speaking to Pay- yes will the expropriation be lawful. If the ex-
dirt in February, propriation is unlawful the government has
Barnes said she was to pay damages”.
“beyond disappointed Luttrell said Indiana’s pursuit through in-
with the situation” and ternational arbitration was clear proof of the
would be pursuing its importance of BITs.
legal case through “Indiana structured its investment the right
subsidiary Ntaka Hill way,” he said. “I think it shows that structur-
Holdings Ltd which is ing your investment so you have a BIT to in-
registered in the UK. voke gives you recourse that you otherwise
“We have some wouldn’t have if you got expropriated. It is
protection under the recourse to a forum the host state does not
UK-Tanzania bilateral and cannot control.”
investment treaty,”
she said. “We are – Dominic Piper with Reuters
seeking to protect the
Stanslaus Nyongo
Page 34 MaRCH 2020 aUSTRaLIa’S PaYDIRT
SAVE THE DATE
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InDABA ReVIeW
Sierra Leone hits restart
on resources sector
ierra Leone President Julius “All we seek as a country is a cor-
SMaada Bio arrived at the Mining dial engagement in which all parties
Indaba to tell investors his country get to a meeting of minds on how
was starting its mining industry with best to reshape and develop that
a blank slate and welcomed miners, investor-host country relationship
as long as they proved trustworthy, so that we both have a win-win out-
credible and patient. come.
Bio came to power in 2018 prom- “We are not interested in players
ising he would clean up the coun- who merely speculate on mineral
try’s mining industry which had prices, we have had experience of
become largely synonymous with that, speculate on host governments
blood diamonds and other illegal on mining agreements they know
mining activity. are untenable. We have cracked
Bio acted swiftly to clear up both down on corruption.
the informal mining sector and “We seek greater benefits from
large-scale mining licences. In late our natural resources, want profit
2018, companies such as ASX- sharing return on natural resources.
listed Cape Lambert Resources Ltd We want enhanced economics ben-
and Frank Timis’ African Minerals efits.”
plc had mining licences unilaterally can- Sierra Leone President Julius Maada Bio Bio said in order to counter “com-
celled as part of Bio’s reversal of several of panies [running] on fair deals claim-
predecessor Ernest Bai Koroma’s natural “We are reviewing and harmonising all ing geological doubts” the Government had
resources deals. Then, in October, Gerald mining laws and regulations to remove du- launched an extensive geophysical survey.
Group announced its mining licence for the plications and inconsistencies and increase The survey, covering the entire country,
Marampa iron ore mine had been cancelled transparency and predictability and we comprised more than 450,000 line-km
“with immediate effect”. seek to resolve legislative issues in a fair “The results have shown extensive prov-
The tenement situation virtually wiped and transparent manner,” he said. en reserves of metals,” Bio said.
clean, Bio used his Indaba platform to urge Sierra Leone is rich in iron ore and Bio is The President also railed against “play-
investors to return, but with a new approach. seeking public-private partnerships to build ers who fiddle with numbers and argue
On October 18, the National Minerals the infrastructure needed to see develop- about fiscal regimes”, telling Mining Indaba
Agency said it had not entered negotiations ment flourish. delegates his Government had worked to
over reinstating the licences. He is also eager to ensure any mineral ensure its mining policy reforms were at-
“Government has not had any discus- boom provides Sierra Leoneans with em- tractive to international investors.
sions with any individual, mining company ployment and training opportunities. “We can guarantee security of permitting
or corporate entity on the above conces- “Sierra Leone children must have the and of tenure,” he said. “We’ve mapped out
sions, and anyone, corporate entity/mining requisite skills for future mining,” Bio said. the risk matrix on why investors would con-
company claiming to have had such discus- “We want to boost mining-related skills. sider investing in Sierra Leone. Profit ranked
sions with Government is misleading the Open to specific partnerships for mining- high. Companies, government and financi-
public,” the agency said in a statement. “In related training and mining training in line ers have often competing interests. They
particular, Government has not had discus- with educational strategic outcomes. We have to believe a new project can produce
sions with Cape Lambert nor Frank Timis.” wish to focus on science and technology an acceptable profit margin.
Speaking at the Mining Indaba, Bio said education.” “So, the tax regime we install is important.
the country was building its capabilities and In particular, he is eyeing advanced tech- The more unpredictable it is, the less likely
making itself more attractive to international nology jobs. they will invest. There is also no restriction on
investors. “The future of mining will involve big repatriation of profits or the sale of assets.”
“Sierra Leone is an open, peaceful data analytics and block chain for pre- Reforms have also taken place in the envi-
and stable democracy with a free market cious stones. The fourth industrial revolu- ronmental space.
economy,” Bio said. “We don’t believe the tion; technology, AI, drones, the internet of “Until recently the environmental laws
business of government is to govern busi- things, block chain and more will have an were interpreted by different agencies and
ness, we need to strengthen the business impact in mining.” they acted independently of each other, now
ecosystem.” However, for all the welcoming words, we have harmonious legislation and regu-
Bio said his Government recognised the there was plenty of warnings about the lation,” Bio said. “There is a new environ-
importance of mining to African economies expectations foreign miners would have to mental impact framework which will result
and with support of the returning World meet under Bio’s Government. in reduced environmental liability fees when
Bank and IMF had put in place the macro “We want trustworthy, credible and pa- companies reduce their environmental foot-
foundations for a “strong, diversified econ- tient investors who are interested in a sus- print.”
omy”. tainable, long-term relationship. – Dominic Piper
Page 36 MaRCH 2020 aUSTRaLIa’S PaYDIRT
Mahenge Graphite Project
Black Rock Mining is an Australian based company listed on the Australian Securiies
Exchange (ASX: BKT). The Company has a 100% interest in the Mahenge Graphite Project
located in Tanzania. The project has a JORC compliant Mineral Resource Esimate of 212m
tonnes at 7.8% TGC. It also has Ore Reserves of 70m tonnes at 8.5% TGC. The Ore Reserves
support a mine life of up to 350k tonnes of graphite per annum for a reserve life of 16 years.
Excepional Project Metrics
US$116M 63.1%
Phase 1 development capex AISC Margin
45% 83ktpa
Post-tax, ungeared, real IRR Phase 1 output (1Mtpa ROM)
US$1.2B 95-99%+
Post-tax, ungeared, real NPV 10 TGC Concentrate Purity
The best undeveloped graphite project globally, driven by
Geology and Geography
ASX: BKT
blackrockmining.com.au
Following release of the Enhanced Definiive Feasibility Study (DFS) on the Mahenge Graphite Project in July 2019 (see Black Rock ASX release dated 25 July 2019, Mahenge Enhanced DFS with Execuive Summary), Black Rock confirms that it is not aware of any new data or
aUSTRaLIa’S PaYDIRT MaRCH 2020 Page 37
informaion that materially affects the results of the Enhanced DFS. All material assumpions and technical parameters, including in the esimaion of Mineral Resources or Ore Reserves, underpinning the esimates in the Enhanced DFS coninue to apply and have not materially
changed. The esimated Ore Reserves and Mineral Resources underpinning the producion and financial forecasts in the Enhanced DFS were prepared by Competent Persons in accordance with the requirements in Appendix 5A (JORC Code).
chan
InDABA ReVIeW
AngloGold marvels cessfully reducing its once massive debt
levels by almost 50% over the past seven
years.
With the company also recording its
best ever cash margins for operations,
at Obuasi restart Dushnisky said shareholders can expect
to see more funds being tipped into explo-
ration and development across its global
portfolio.
ngloGold Ashanti Ltd expects the revi- Based on current gold price levels, An- “In recent years our focus was main-
Atalised Obuasi gold mine in Ghana to gloGold will achieve payback of its circa ly on repairing the balance sheet; this
achieve its planned production rate of 4,000 $US500 million investment in Ghana within meant we prioritised debt reduction en-
tpd by the end of the year. five years, about 18 months quicker than tirely funded from internally generated
First gold was poured from Obuasi in indicated in the original feasibility studies. cash over investment in brownfield drill-
December, five years after AngloGold was “Obuasi is in a class of its own when it ing,” he said.
forced to suspend operations at what was comes to capital intensity,” Dushnisky said. “With the balance sheet now in excel-
then a loss-making mine. While successfully restarting Obuasi as lent shape and improving, we can shift
Upon achieving steady-state production, a modern mechanised mining operation is some of our emphasis and focus more
Obuasi is expected to churn out 350,000- top of AngloGold’s list of recent achieve- towards ore reserve development and
400,000 ozpa for the next 10 years. ments, Dushnisky said his company was reserve conversion at our existing sites.
A ceremony to commemorate the restart
of the iconic mine was held one week be-
fore AngloGold chief executive Kelvin Du- AngloGold Ashanti Ltd has officially exited South Africa after agree-
shnisky addressed delegates at Mining In- ing to sell the Mponeng mine and other surface assets to Harmony
daba in Cape Town. Ghana President Nana Gold Mining Company Ltd in a deal valued at around $US300 million.
Akafo-Addo was among the special guests Mponeng is the world’s deepest gold mine and requires an investment
at the official reopening. of at least $US1 billion to extend its life beyond eight years. Anglo-
“Producing first gold on time and on Gold started a formal process to offload its South African assets last
budget was a significant achievement for May when chief executive Kelvin Dushnisky announced the company
the company, the community at Obuasi and
for Ghana as a whole,” Dushnisky said at planned to focus its attention on regions where it could be guaranteed
Mining Indaba. better returns for shareholders. AngloGold also divested its interest
“It’s also a testament to the focused in the Sadiola mine in Mali last year to Allied Gold Corp. It has been
execution by our team on the ground. Im- speculated by some market commentators that the sale of its South
portantly, it reflects a clear investment African assets now paves the way for AngloGold to switch its primary
framework and the supportive environment listing from Johannesburg to London.
created by the Government of Ghana. We
were pleased President Nana Akafo-Addo
attended the opening ceremony with us last particularly proud of the contribution it This will improve our overall orebody con-
week. He spent the afternoon with us on had made to its host community and fidence, improve operating predictability
site and reiterated and reinforced Ghana’s country during that process. and extend mine lives.
strong support for the project. “When you step back, Obuasi is a shin- “We believe this disciplined investment
“Obuasi is our largest current investment ing example of how partnerships with in our assets will provide a material uplift
and we’re well on our way to capitalising on Government, a supportive investment to our valuation.”
this exceptional, high-grade orebody.” framework and focused execution can Elsewhere in Africa – AngloGold is the
AngloGold estimates 8.6 moz will be pro- create real positive change,” he said. continent’s largest gold producer – con-
duced from Obuasi over the next 20 years, “About 3,500 people have been em- struction of a combination plant to treat
with an average grade of 8.8 g/t gold to be ployed directly by us and through our both hard and soft ore to improve mine
treated through the refurbished mill. contractors during the construction pe- life and margins is being finalised at the
riod. To date, 96% Siguiri open pit operation in Guinea.
of those employees A new power plant is also being devel-
have been Ghana- oped at Geita in Tanzania where opera-
ian and importantly tions are transitioning underground.
about three-quarters Dushnisky said the company remained
of that have been committed to supporting JV partner Bar-
from the Obuasi rick Gold Corp at Kibali – Africa’s largest
area. At steady-state producing gold mine – in the DRC where
next year, about AngloGold’s average share is expected
2,250 people will be to be 340,000 ozpa at $US750/oz ASIC
employed between over the next few years.
ourselves and our AngloGold’s full-year earnings and
contractors.” guidance outlook were due to be an-
AngloGold’s re- nounced at the time of print.
start of Obuasi was
achieved on the back – Michael Washbourne
of the company suc-
Kelvin Dushnisky
Page 38 MaRCH 2020 aUSTRaLIa’S PaYDIRT
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InDABA ReVIeW
Keep it consistent, for capital’s sake
enham Capital managing director who indicated her company had been Barrick chief executive Mark Bristow
DCaroline Donally has urged African “pretty successful” with its previous in- pointed the finger at the mining industry
governments to maintain consistency vestments on the continent. for confusing both government and inves-
around mining acts and other regula- Donally said because private equity tors around what to expect from develop-
tory policies or risk losing the support of funds were solely focused on returns for ment of a country’s resources.
cashed-up foreign investors. investors, firms such as Denham Capital “We’ve been doing a lot wrong, particu-
Speaking during a panel session on would only invest where the likelihood of larly the gold industry up until recently,
how Africa’s mining sector can be used a return far outweighed the risk. where we’re supposedly the experts at
as a engine for development, Donally “We continue to look for those stand- turning a large fortune into a small for-
said the biggest investment risk for a pri- out opportunities…where we can create tune,” Bristow said.
vate equity fund such as Denham Capital value for our shareholders,” she said. “This mining industry went into Tan-
was if a government suddenly changed “On a term basis, we’re not three- zania in the 1990s and invested in gold
the rules of engagement. month focused or day in/day out-focused mines, but didn’t make real returns. It
Donally said this was not just limited to because we don’t have a share price to promised a lot. But, if you look at the fea-
Africa, but was known to be more preva- watch. We’re looking at a 4-5 year term, sibilities that were published then, the
lent on the continent than elsewhere in which some might say is short term, but gold price was $US400/oz, it didn’t deliv-
the world. er. And Tanzania had
“We’re going into the best mining code
a jurisdiction with a outside North Amer-
certain set of rules ica. Eventually after
and so can we please a long time certain
stick to those rules,” companies did back
she said. off and pay taxes,
“We understand others didn’t, and so it
there will be subtle ended up in a hostile
changes along the situation.
way and we don’t ex- “So, what do inves-
pect the rules to be tors and the press
what they were 15- say globally? Oh, it’s
20 years ago when African politics. But
frankly there were it’s not really. The
10-year tax holidays person who takes
and nobody paid any the biggest risk in
import duty, there developing mines in
were no royalties, no emerging markets is
free-carry, no noth- the politician. They
ing. We don’t expect have a job to deliver
that, but we also for their community,
don’t expect there to Caroline Donally so when you come in
be a completely uneven distribution of the from a private equity perspective and as a mining company
profits between the investors and the host from a patient capital perspective, given and promise the world about what you’re
country. what we see in the markets these days, going to do, but you don’t do it…that can
“For us, a lot of it is about consistency that’s actually pretty long-term capital. happen once, twice, three times and
and so can we please agree the rules of “We see a number of reasons to come eventually the politician will change the
engagement up front so we know what it and invest in Africa. I don’t want to go rules and take away from you because
is we’re going into and we know where down the complaining route, but we do you haven’t met your commitments.
we’re spending our capital. Sure, if the see risk unfortunately, and much of that “We’ve got lots to blame ourselves for
orebody doesn’t turn out as expected, risk revolves around the uncertainty.” with the lack of delivery.”
well, that’s our risk, but we’re not taking Donally’s comments at Mining Indaba Bold Baatar, chief executive of the en-
the risk things change within the govern- followed what appears to be the end of ergy and minerals division at Rio Tinto
ments. That’s a very difficult risk to man- a nearly three-year development freeze plc, said the industry had to accept re-
age for a private equity fund. in Tanzania after the Government and sponsibility for writing the wrongs of the
“We need to return capital to our inves- major mining company Barrick Gold Corp past.
tors within a certain time period and so reached a breakthrough investment deal “It’s upon us an industry to make sure
time is money for us. If a project sits idle in January. that we generate the returns, otherwise
because we’re negotiating with govern- Once viewed as Africa’s premier mining the return destruction that we saw over
ments, that is a massive burden on an investment jurisdiction, Tanzania turned the last 20 years makes it increasingly dif-
investor like us.” the tables in mid-2017 when it suddenly ficult for today’s capital to be trusted,” he
Roughly one-third of Denham Capital’s announced changes to the mining act, said.
investment portfolio is housed in Africa, creating widespread uncertainty for min-
according to Houston-based Donally, ing companies and investors. – Michael Washbourne
Page 40 MaRCH 2020 aUSTRaLIa’S PaYDIRT
Tietto rises to in Zambia) and other finalists
EcoGraf Ltd (graphite in Tan-
zania) and RosCan Gold Corp
(gold in Mali).
Despite only listing on the
the challenge ASX less than two years ago, Ti-
etto is rapidly advancing the 2.15
moz Abujar gold project in Cote
d’Ivoire towards a PFS due for
f you can’t have fun while being serious, why completion before the end of the year.
Ibother? Drilling was ongoing at the time of print
That was the approach Tietto Minerals Ltd ahead of an anticipated resource upgrade in
executive director Mark Strizek took into the Q3 2020.
third annual Investment Battlefield for junior “It’s just a great simple story,” Strizek said. Tietto executive director Mark Strizek
mining companies – and it paid off in spades. “I guess the key takeaway for us [from Min- celebrates his company’s win in the
In a hotly contested final round decided by ing Indaba] was that people just really appre- Investment Battlefield final after receiving
a panel of expert judges, West African gold ciate good high-grade gold stories in West the trophy from Eurasian Resource
explorer Tietto emerged victorious from the Africa.” Group’s Jonathan Cordero
investment “boxing ring” which has become Tietto currently has four company-owned
of one of the conference’s signature events. diamond drill rigs turning at Abujar, with a time comes to look at project finance – that’s
“It was a lot of fun and has actually been fifth recently ordered and due to arrive on probably the biggest piece we need to put
quite useful in getting some recognition and site imminently. in place in terms of long-lead items – we’re
just generally increasing the profile of the Multiple samples have also been sent to ready to go.
company,” Strizek told Paydirt. Perth for metallurgical testing and optimi- “It’s still early days, but at this stage it’s
“There have been a number of follow-up sation work. Results will be incorporated all very, very encouraging and there doesn’t
emails and so on that have resulted out of it, into upcoming studies on the project, about appear to be any red flags en route to de-
so we’re really quite chuffed.” 30km from the regional city of Daloa. velopment.”
The final-round judging panel – Investec “We’ve started working on some of the
Asset Management’s George Cheveley, environmental and long-lead items which – Michael Washbourne
Public Investment Corp’s Heidi Sternberg, aren’t always as high profile or as interesting
Traxys Projects managing director Erez to investors, but they’re pretty important for Paydirt visited the Abujar gold project in Cote
Ichilov and Eurasian Resource Group’s Jon- us,” Strizek said. d’Ivoire with Tietto Minerals following Mining
athan Cordero – declared Tietto the winner “We want to build a mine, so we’re put- Indaba. For full coverage, see the April-June edition
over first runner-up Arc Minerals Ltd (copper ting all of these things in place so when the of our sister publication Gold Mining Journal
aUSTRaLIa’S PaYDIRT MaRCH 2020 Page 41
BUsH teLeGRAPH
Friedland flags mine
safety at Platreef
he world’s most famous mining entre- management and against all his
Tpreneur – Robert Friedland – was in training….but he still did it anyway.
superb form at Mining Indaba where he So why would Friedland make
put the boot into his competitors; slagged such a claim? Well, he clearly be-
off Chile as an investment destination lieves he does not have a rockfall
compared to the Democratic Republic of problem as he described the un-
Congo (DRC) and unashamedly hyped derground conditions on the Pla-
the prospects for his own Ivanhoe Mines treef as consisting of “very com-
Ltd. petent rock”.
So, what’s new? Well, love him or hate He was also probably looking to
him – and sections of the media gener- differentiate the Platreef from the
ally hate him which is a sentiment Fried- rest of the platinum mining sector
land seems only too happy to reciprocate in the same way that, earlier in his
– the man manages to explain the rel- presentation, he sought to differ-
evance of mining to modern society in a entiate between Ivanhoe’s copper
way that no other mining executive I have mines under development in the
listened to can. DRC with the established copper
But he made one comment in Cape giants such as Escondida in Chile
Town which I hope will not come back which is owned by BHP Ltd. Robert Friedland
to haunt him although I fear it may well “The great copper mines in
do so given the realities of underground Chile are like little old ladies lay- Pityana in 2017.
mining in South Africa. That concerns ing in bed waiting to die,” according to AngloGold and other mining compa-
mine safety which is a red-hot topic in Frieldand. nies responded by challenging the stop-
the country. He was a bit more polite about South pages in court which resulted in having
Extolling the virtues of his Platreef Africa’s existing platinum sector com- the S54 notices lifted or declared invalid.
PGM mine under development in South menting: “We think South Africa is fac- The mining industry has cleaned up
Africa, Friedland repeated a comment he ing a supply cliff from the existing mines. its act to a large extent since. Latest
has made frequently before which is that; They are deep, they have safety issues, statistics published by the Government
“no worker underground on this mine will they are tired and they need a lot of capi- in January showed the industry had its
lift anything heavier than a pencil be- tal.” best ever year in 2019 recording 51 fatali-
cause it will be fully automated”. Never a man prone to understatement, ties compared with 81 in 2018. The stats
Then he added: “There will be zero fa- Friedland said the Platreef should just be also showed that fatalities had dropped
talities in this mine – zero.” viewed as “a precious metals project”. by 92% between 1993 and 2019.
That is a dangerous statement to make “We have more than 150 moz of plati- Let’s hope Friedland does not come to
given the harsh realities of underground num, palladium, gold and rhodium. This rue those remarks and let me finish this
mining in South Africa. No mine man- is the largest precious metals orebody in column with some of his sly “investment
ager in South Africa would make such a the world,” he said. advice” to delegates, although he insist-
claim because it involves factors that are But he clearly wants to differentiate the ed at the time he was not giving out any
beyond the control of his management Platreef from the existing platinum mines investment advice at all.
teams and safety procedures irrespec- in the eyes of the Government in various He told delegates: “I don’t want to
tive of how excellent and comprehensive ways and one of those is safety. give you investment advice because if
they may be. The ANC government has “had it in” you give a friend investment advice you
From my side there’s also a supersti- on ideological grounds for the country’s might lose your friend but over the past
tious aspect to this. I have been report- mining industry since it came to power five years – which is an arbitrary figure –
ing on the mining scene for something in 1994 and one of the whipping posts it compared to say Teck [Resources Ltd],
like 35 years and time and again I have has used is mine safety. or BHP or Vale or Rio Tinto [Ltd] or Lun-
seen a mine declare proudly that it has Let’s face it they had a good point, but din [Mining Corp] or First Quantum [Min-
achieved some safety milestone such as the Government started using safety leg- erals Ltd] – we are doing OK.
1 million fatality-free shifts and extoll its islation measures such as Section 54 “I am not here to tell you to buy the
safety achievements only to have an ac- (S54) work stoppage notices to punish shares, they were up 45% last year. I
cident involving fatalities within days or mines for political reasons by shutting think they will double this year. It’s better
weeks of that announcement. down operations unnecessarily. than leaving your money in the bank. “
The two most frequent causes of mine- AngloGold Ashanti Ltd’s mines were
worker deaths have been rockfalls in hit by a string of S54 notices following Brendan Ryan is a Johannesburg-based
deep level mines and incidents where an severe criticism of the Government in mining writer
individual worker has done something in general, – and former president Jacob
breach of all the safety rules laid down by Zuma in particular – by chairman Sipho
Page 42 MaRCH 2020 aUSTRaLIa’S PaYDIRT
*138.6 Mt @ 1.13 g/t Au; 0.5 g/t Au cut-off
*138.6 Mt @ 1.13 g/t Au; 0.5 g/t Au cut-off
InDABA ReVIeW
Page 44 MaRCH 2020 aUSTRaLIa’S PaYDIRT
A longstanding tradition to start Mining
Indaba week, the Paydirt & Friends
dinner took place at the V&A Hotel,
Cape Town once again. Chairman Bill
Repard and the rest of the Paydirt team
were joined by 100 guests from the
different spheres which make up the
Australian contingent in Cape Town
including Australian heads of mission
from across the continent and Austrade
chief executive Stephanie Fahey. They
were joined by an array of mining and
service company executives. Thanks to
all our guests for joining us for another
wonderful evening
aUSTRaLIa’S PaYDIRT MaRCH 2020 Page 45
InDABA ReVIeW
Fekola expansion fuels B2Gold
for now and beyond
ith a portfolio of assets on the cusp is set to be announced
Wof collectively churning out 1 moz, next month following
B2Gold Corp is focused on growth via ex- completion of a recent
ploration rather than M&A, for the next little infill drilling campaign.
while at least. B2Gold is set to
B2Gold has forecast group production spend $US18 million of
of 1-1.05 moz in 2020, with some 47% of its $US50 million group
that output attributed to the expanding Fe- exploration budget in
kola mine in Mali. Mali during 2020.
Fekola was acquired by B2Gold in 2014 “Fekola has been an
via its takeover of Australian explorer Pap- extraordinary story of
illon Resources as an undeveloped 4 moz success,” Johnson said.
deposit. Construction of a 4 mtpa opera- “When we acquired
tion began the following year. Fekola – and it’s pretty
Last October the TSX-listed company hard to believe now – in
started expanding operations to 7.5 mtpa 2014 in a friendly takeo-
with construction works to be completed ver of Papillion…they
in Q3. Fekola will then produce 550,000 like many smaller com-
ozpa for the next five years. panies couldn’t raise the
Overwhelming exploration success at money to build it. We
Fekola – including the discovery of a new paid a premium, but it
deposit, Anaconda, 20km to the north – was a highly accretive
was a key catalyst for the expansion and, deal for B2Gold. We
according to B2Gold chief executive Clive were heavily criticised at
Johnson, organic growth is where the best the time because there
value now lies for the company and its was no competition.
shareholders. “We paid $US500
“A lot of people ask me about our strat- million in our shares to
egy and are we in the hunt for M&A,” John- takeover Papillion. Im-
son told delegates at Mining Indaba. agine if the gold was
“The short answer is ‘no, we’re not’ and there today. Even if you
there’s a reason for that – we did the heavy have the original 4 moz
lifting when very few people were doing it. of resources, I would
We acquired and built Otjikoto [in Namibia] suggest bidding would
and acquired and built Fekola when ac- start at $US1 billion.
quisitions and construction were so out of Fekola, because of our Clive Johnson
favour, unfortunately due to the poor per- rapid exploration while
formance of so many other companies. we were building it, the resources are now significant producers and pay a dividend.”
So, we’ve done the heavy lifting and had a basically 8 moz when you include Anacon- A mining study for the Wolfshag under-
great growth spurt and now we’re expand- da to the north, so we think we were right ground at Otjikoto is also due in the com-
ing those projects. to foot the bill.” ing months.
“When you look at all that, everything in Johnson expects his company to pay Johnson reiterated that exploration
our pipeline and all our exploration capa- down the remaining $US200 million of its would be critical to B2Gold’s ongoing suc-
bilities, why would you do M&A? Because debt later this year and will once again look cess for at least the next few years.
it’s not getting easier, it’s getting tougher. to distribute a dividend to shareholders. “What I find in this industry, which hap-
There’s no Fekolas that we see out there B2Gold declared its first dividend – 1c/ pens far too often, is someone discovers
today because there’s been very little ex- share on a quarterly basis – last Novem- a deposit and then it’s handed over to the
ploration done in the last 10 years to find a ber. engineers,” he said.
similar project. And there’s plenty of com- “The ultimate strategy for us, which “Being engineers, they are extremely
petition around now, so why would we try we’re achieving, is to be a company that risk averse, so they don’t tend to think or
and outbid other companies for marginal continues to use some of its profits to value exploration that much, which is kind
assets?” grow, find more gold and build more gold of funny because without exploration suc-
Johnson said his company acquired mines, and then return some of it to our cess I’m not sure what engineers would do
Fekola knowing the project’s exploration loyal shareholders,” he said. with their time.”
upside was unrivalled to anything else the “I think that’s a great gold mining com- – Michael Washbourne
B2Gold team had cast their eyes over. pany if you can get to that place. There’s
An updated reserve estimate for Fekola only 10 gold mining companies who are
Page 46 MaRCH 2020 aUSTRaLIa’S PaYDIRT
InDABA ReVIeW
Prospect’s rise
after tough year
Prospect general
manager Trevor Barnard
at the company’s
Arcadia lithium
project, Zimbabwe
t is testament to the Prospect Resources a string of high-profile problems in the on both.
ILtd management team that an out-of- nascent West Australian lithium sector. “Both of these qualities have been core
favour commodity and negatively per- In the space of six months, Pilbara Min- to our exploration and now development
ceived jurisdiction have failed to halt the erals Ltd, Mineral Resources Ltd, Alita strategies, as we sought to have a highly
company’s progress to the cusp of mine Resources Ltd and Talison Lithium all an- competitive cost of production of under
development. nounced closures, cancelled expansions the $US300/t threshold. Having now put
In November, ASX-listed Prospect an- or slowed production at their WA lithium the project through rigorous analysis, we
nounced an updated DFS for its Arcadia operations as the glut of spodumene con- have a DFS demonstrating strong project
lithium project, 38km east of Harare, centrate in the market affected prices. economics that provide a material oppor-
Zimbabwe. The DFS confirmed the po- The travails of peers is the first is- tunity for Prospect and its shareholders.
tential of a 15-year project producing an- sued raised in many of Prospect’s recent “The updated DFS last year ensured
nual EBITDA of $US168 million after a meetings but according to chief execu- we were extremely competitive, settled
$US162 million capital outlay. tive Sam Hosack the recent industry set- on the assumptions that we have the
The Prospect management team have backs have sharpened the company’s highest confidence in particularly on the
spent the subsequent three months tak- resolve as well as its investment case. recoveries and grade, and be appropri-
ing the updated project around London, “Lithium, as the world is now learning, ately conservative on the outlook to en-
Cape Town and Australia as they finalise is all about the quality of the product and sure the model was adequately stress
offtake and funding proposals. the cost of production,” Hosack told Pay- tested.”
The roadshow has been undertaken dirt. “We’ve been talking about that for a While spodumene concentrate prices
at a difficult time for lithium juniors after long time and see that Arcadia delivers have retracted, Hosack is still confident
Page 48 MaRCH 2020 aUSTRaLIa’S PaYDIRT
of the market’s depth. ramics market,” Hosack said. “In the
“The current state interim, the lithium carbonate market
of the market is a dis- is likely to change as the inevitable EV
tortion to the medium bounce takes effect.”
to long term outlook. The flowsheet reflects the initial focus
There is a large amount on low-cost petalite production. Con-
of speculation on the ventional crushing is followed by high-
current market but it’s pressure grinding rolls before the petalite
more a case of short- concentrate is separated by dense me-
age of battery grade dia separation. The remaining material is
hydroxide and an over- sent through cyclones, spirals and mag-
supply of lithium car- netic separation and milling and flotation
bonate at a time when to produce the spodumene concentrate
hydroxide is increasing product.
in demand.” Prospect general manager Trevor Bar-
The explosion of spo- nard said both the orebody and process-
dumene producers over ing had been heavily scrutinised.
the last two years has “The reserve is well-defined near sur-
meant customers face deposit. It’s a pegmatite with moder-
can be more se- Arcadia boasts high-grade spodumene material ate surface weathering but not enough to
lective about the be a problem,” Barnard told Paydirt. “We
product they take. In our research, we undertook a price have completed 26,000m of drilling and
Hosack believes this discovery exercise to understand the are very confident in the reserve declara-
should play into Pros- prices that customers would be willing tion. It is a flat orebody with a 3.2:1 strip
pect’s hands. to pay to receive technical grade lithium ratio with the pit going down 80m and we
“It probably didn’t minerals, such as our ultra-low iron pet- see grade control being highly advan-
matter four years ago alite, where the concentrates iron grade tage on the account it’s easy to differenti-
when there were very will be less than 0.05%. The information ate the ore and overburden visually.”
few sources of spo- gathered validates that this high-quality On the processing design side, Pros-
dumene concentrate specification derives a material premium pect has chosen renowned lithium and
but as the sources in price to the value it would achieve in African specialist Lycopodium
have multiplied con- the battery grade. Its indicated that it “After testing the market, we selected
vertors are recognising trades at almost double the price that a Lycopodium for the DFS because of their
the need for lower iron chemical grade product would receive. modular, EPC and lithium experience
content and are becom- This is why the glass and ceramics mar- and we’ve been very well supported with
ing more discerning in ket is our core focus and where we have this compliment of abilities,” Barnard
other quality considera- built a targeted marketing strategy to said.
tions; they are not just capture than premium.” The Prospect team are clearly con-
accepting any product. Market research has indicated an ul- fident they have answered any project
They want low impuri- tra-low iron petalite product could attract financier’s technical and market objec-
ties, particularly iron/ a 60% premium on standard 6% Li2O tions, but jurisdictional risk still looms.
mica/moisture. spodumene concentrate. Hosack said The removal of former President Robert
“Our impurities are a the company had worked hard at under- Mugabe in 2017 was thought to herald
third of those resourc- standing the nuances of the space. a reintegration of Zimbabwe into the in-
es compared against Prospect’s marketing strategy is to ternational community. However, current
our hard rock peers, with Arcadia’s iron maximise spodumene sales into the President Emmerson Mnangagwa has
grades between 0.2-0.35% iron which is chemical/battery market through long- failed to entice international investors
extremely competitive when 1% is the in- term offtake agreements while selling back to the country, his reform agen-
dustry average. the ultra-low iron petalite products direct- da largely failing to materialise on the
Arcadia’s mineralogy is offering Pros- ly into the glass and ceramics technical ground.
pect further assurances around the po- market. In contrast to international percep-
tential diversification of the product mix. In April 2018, the company signed tions, Prospect has found the Zimbabwe-
While the WA lithium miners are wedded a seven-year offtake agreement with an Government a willing supporter of its
to the EV market via conversion of their Sinomine Resources (Hong Kong) In- intentions.
spodumene product to lithium carbonate ternational Trading Co. Ltd for a corner- “It is a very present and visible project
or lithium hydroxide, Prospect is ventur- stone 42% of production. in Zimbabwe in the middle of the most
ing into alternative markets. Subsequently, the compelling nature central province and it is getting support
Since 2018, Prospect has been inves- of the glass ceramics opportunity has from Government,” Hosack explained.
tigating whether Arcadia’s lithium miner- seen Prospect adjust its mining plan and “Prospect has received all its licenc-
alogy – there are two lithium minerals in flowsheet to take advantage. es and approvals in well-defined and
the deposit; spodumene and petalite – “During the debt-sensitive part of the achieved timeframes.
would be suitable for the glass/ceramics project, the first five years, we have de- Problems remain, however. Fuel, food
sector which currently uses 500,000 tpa cided to prioritise the security provided and power shortages prevail and the
of lithium equivalent material. by the mature and stable glass and ce- recently reintroduced Zimbabwean cur-
aUSTRaLIa’S PaYDIRT MaRCH 2020 Page 49
InDABA ReVIeW
rency is not accepted outside of the country’s borders, causing
foreign exchange and repatriation headaches.
Mnangagwa has identified mining as the country’s best
chance of reversing its economic decline. Last year, the Gov-
ernment launched its 12 Billion Mining Industry Vision 2023
policy, designed to lift mining revenues from $US2.7 billion in
2017 to $US12 billion by 2023.
Zimbabwe is no mining backwater. The country has a long
history of large-scale mining and currently boasts gold, PGM,
chrome and diamond operations with Impala Platinum Ltd
subsidiary, ASX-listed Zimplats Ltd, posted a post-tax profit of
$US144.5 million for FY2019 having produced 549,320oz 4E
PGMs.
Hosack said the Government’s public support for Arcadia’s
development was backed by regulatory action.
“Arcadia was granted special economic zone status in Feb-
ruary 2019 and no further approvals are required – Arcadia is
shovel ready.”
While infrastructure and power would appear major obsta-
cles for development, Barnard said Prospect was blessed in
both regards.
“Zimbabwe has a mature mining industry and all relevant
skills are available in country to operate the mine and process-
ing plant. The mine is within 20km of the Harare-Beira corridor
which is a well-maintained toll dual carriage road system run-
ning all the way to Beira, our main export port.
“We have also signed a secured power supply contract with
the Zimbabwe Electricity Supply Authority which will ensure we
have security of supply of power,” he said.
The fiscal regime also contains benefits. Arcadia’s special
economic zone (SEZ) status grants the project a corporate in-
come tax holiday for the first five years of operation and exemp-
tion from non-resident withholding tax on dividends, services,
royalties and fees as well as import duties on raw materials and
capital equipment.
The Treasury has also approved an export tax exemption for
un-beneficiated lithium for five years.
The SEZ status also allows Prospect to hold and transact
with foreign currency.
The SEZ license simplifies Prospect’s ability to make pay-
ments to and from suppliers and customers,” Hosack said. “So-
phisticated investors are familiar with Zimbabwe. We have suc-
cessfully raised funds on the ASX for this project over the past
four years and we believe there is strong equity finance support
to fund the project,” he said.
Prospect is confident the regulatory certainty will allow it to
develop Arcadia relatively free of government interference.
Convincing investors and financiers it can do so will be crucial
to its chances of success.
Prospect has drilled 26,000m at Arcadia
Page 50 MaRCH 2020 aUSTRaLIa’S PaYDIRT
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