February Paydirt

February 2016 VOLUME 1. ISSUE 235 $11.95
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front and back cover supplied seperately
Thunderbird is go: Sheffield prepares for take off
• Mineral sands focus • New listings of 2015 • Employment and recruitment spotlight
• Southern states review
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CONTENTS
NEWS
While low prices for traditional com- modities continue to test the patience of companies and investors alike, the pasture appears greener in niche markets such as graphite, rare earths and lithium. Lithium prices are on the up and companies focused in that space are enjoying some special attention. Mark Andrews spoke to Lithium Australia managing director Adrian
Australia-Africa Minerals & Energy Group
32
18 Griffin about how the sector is shaping 5 COVER
Sheffield Resources has announced a maiden reserve estimate at the Thunder- bird mineral sands project in WA to mark
a bright start for new managing director Bruce McFadzean. While McFadzean un- veiled the reserve, it was the graft of Bruce McQuitty, Will Burbury and David Archer that has made Sheffield a must-watch company. Dominic Piper spoke to the
26 whole team to find out what’s now in store MINERAL SANDS
Among the gloom experienced in the mining industry, Paydirt found a host of mineral sands miners and explorers in a surprisingly upbeat mood, both in Australia
32 and abroad
NEW FLOATS
The IPO environment in 2015 was defi- nitely one to forget. However, the four new resources listings, including South32 and S2 Resources, definitely have interesting tales to tell
50
62 of employment in the mining industry REGIONAL ROUNDUP
Completing capital raisings has been diffi- cult, but Argentine lithium producer Oroco- bre has managed to put $85 million in the kitty. Paydirt reports on how the company plans to spend its cash
18
SKILLS
Paydirt’s annual feature on skills and recruitment is highlighted by a number
of well-known industry names that have stepped aside from prominent roles in companies which they have been instru- mental in building. We take a look at what is required for the next generation of lead- ers to be successful and the current state


EDITORIAL
Grey days ahead for most
While the demand side shocks may have created the biggest ripples and loudest headlines in the mainstream media recently, it
is the supply side of many commodities which could have longer lasting ramifications.
The last decade has seen the biggest capital expenditure splurge in mining history as the world’s largest resourc- es companies launched head-on into the China-led “commodity super-cy-
cle”.
Now that supply has met – and in
most cases – exceeded demand there is a glut of overcapacity. Normally, this would lead to production cuts and closures but there are factors in most of the major commodities which will prevent this from happening.
Under normal circumstances, production would be cut as it fell below the marginal cost of production but many of the mines built in the last decade are long life assets, designed to go through multiple cycles and not be switched on and off depend- ing on spot prices. Additionally, the environmental and social costs of closure can far outweigh the losses being made.
In iron ore, the dominance of the Big Three – Rio Tinto Ltd, BHP Billiton Ltd and Vale SA – is such that it is almost unthink- able the spot price will ever again breach the $US100/t mark.
There is no doubt the Big Three have flooded the market with their own vastly expanded supply and with their cost structures being nonpareil, it will be almost impossible for any other com- pany to compete.
Not only has their level of investment been vast but with iron ore one of their few strongly performing divisions, there is little incentive for any of the three to reduce production. Even if the iron ore spot price finally does fall low enough to force Rio Tinto or BHP Billiton into curtailing production, their recent investment in infrastructure means newcomers would be unable to ramp up as quickly as them once the price rebounded.
Fortescue Metals Group Ltd’s arrival as an iron ore miner was remarkable but only achievable because Rio Tinto and BHP Bil- liton were still in expansion mode themselves. If the majors had expanded infrastructure in place before its arrival, FMG’s op- portunity would never have presented itself.
In nickel, the situation is even direr. During the pre-GFC boom, nickel shot to $US30,000/t but the rise sowed the seeds of the stainless steel additive’s recent woes.
In response, Chinese nickel users turned to cheaper nickel pig iron. This placed a ceiling on nickel prices but it was always assumed that a fall in prices would knock most of the NPI pro- duction out. However, the effect has not been as dramatic as presumed and the NPI cost curve has continued to trend down, placing more pressure on the nickel price.
Doubling the problem for nickel producers is that so little tradi- tional production has come out of the market. Western Austral- ia’s nickel producers have wound back production and closed operations in a desperate attempt to stay afloat but their contri- bution to international supply is negligible.
The world’s major producers have not budged and new sup- ply keeps coming on stream as some of the world’s big laterite projects build to full capacity.
Further difficulties lie in the reluctance of many of those larger players to remove capacity. At last October’s Australian Nickel Conference, Western Areas Ltd managing director Dan Lougher
said it was unlikely nickel’s price drop (more than 50% in 2015) would precipitate production cuts from the world’s largest nickel miners.
“Norilsk produces nickel as a by-product credit to palladium, so their cost structure is zero. Are they going to stop nickel min- ing? No, because then they would have to stop palladium min- ing,” he said.
Elsewhere, it is the cost of closing operations which is acting as a barrier.
“Environmental rehabilitation costs are higher than the losses being made through the smelter,” Lougher said. “Experts say... of the production that is under water, only 15-20% could actually come off, because of all the structural and community [costs]. If you’ve got a refinery in the Thompson nickel belt or Kambalda... you can’t just shut them down.”
Norilsk, deputy chief executive Pavel Fedorov said global met- als prices are likely to remain low in the medium term as it could take years for producers to run out of financing for loss-making assets.
It is an impossible situation for prospective nickel producers and there is a very dark tunnel ahead of them. Only exceptional, long life projects, such as Nova-Bollinger, are going to make it to production. The faint light for domestic nickel explorers is that Australia has the world’s best track record of such discoveries and may host a few more yet.
The situation is slightly different in copper where reports sug- gest recent production cuts could put the market in deficit in 2016. However, underlying problems remain. Having sunk bil- lions of dollars of investment into major projects over the last decade, a number of producers are reluctant to run under ca- pacity for too long, particularly because efficiencies are earned through economies-of-scale given so many operations are low- grade.
So, for the base metals and bulk commodities 2016 looks grim but for gold – which shone so brightly in 2015 – good times may be set to continue.
While the US dollar gold price may be low, the Australian price remains robust thanks to the Australian dollar’s fall against the greenback. And, there is little to suggest that will change any- time soon.
Coupled with this is the cost savings gold miners are achiev- ing. Not only have diesel costs come down in line with oil’s dra- matic price fall but the lack of other mining activity means em- ployee, contractor, service and supply prices have also fallen.
Elsewhere, it appears 2016 could be the year of non-tradition- al metals with graphite, mineral sands and rare earths projects enjoying good support.
Partly this is due to growing demand for their application in new technologies but also because demand and pricing in these products are so opaque.
It takes great effort (I know from experience) to find reliable price information for many of these commodities and investors are more likely to take a punt on companies in this space be- cause the prices are not reported on the morning news bulletin which has left so many investors depressed before they’ve even got out of the car in the morning.
[email protected]
@DominicPiper
PAGE 4 FEBRUARY 2016 AUSTRALIA’S PAYDIRT


NEWS
Is it boom time for lithium?
Lithium Australia will assess lithium mica potential at Pilbara Minerals’ Pilgangoora project under a MoU signed recently
From blue chip miners to juniors on the way up, interest in lithium is building. Traditionally, the condensed lithium
sector has been controlled by just a few companies in a small market place.
“If you go back 12 months, the lithium business on a global space was a pretty small business, worth only about $1 bil- lion if you are looking at lithium chemi- cals, not large enough to attract the majors,” Lithium Australia NL managing director Adrian Griffin told Paydirt.
“As one business entity they need the cash flow out of these things to be two- three times that [$1 billion]. You only have to look at Rio’s [Tinto Ltd] reaction to the lithium space recently. They have one quite substantial lithium deposit in Serbia which has been on the backburner for a while.
“They are not going to control the mar- ket 100% themselves, but Rio has cer- tainly looked at it and the rate the lithium market is expanding and decided that they have to be a part of this and dusted off that deposit with a view on progress- ing it.”
Rio Tinto’s 125mt Jadar lithium-borate project in Serbia is at PFS stage and with demand for lithium moving beyond ceramics and glass usage to advanced technologies – including durable lithium ion batteries and electric cars – prices for the mineral may compel the company to
develop Jadar sooner rather than later. Supply constraints saw lithium car- bonate (99.5%) prices rise from below $US7,000/t to over $US10,000/t last year while a premium to the carbonate – lithium hydroxide – was fetching about
$US14,000/t.
Whether or not further price improve-
ments prompt Rio Tinto to fast-track Ja- dar remains to be seen.
“The market is pretty interesting with it being controlled literally by a handful of producers; about five producers handle 90% or thereabouts of the market,” Grif- fin said.
One of those players is Western Aus- tralian company Talison Lithium Pty Ltd which is a leading global producer of the lithium-bearing mineral spodumene.
Talison’s flagship Greenbushes lithium project in WA’s south hosts the world’s largest known reserves of lithium and has been operating for more than 25 years.
Such is the quality and importance of Greenbushes, Rockwood Lithium – a subsidiary of chemical specialists Albe- marle Corporation, which was trading at $US47.91/share on the NYSE at the time of print – took a 49% stake in Talison in 2014.
Rockwood was a noted hard rock min- er in the early 1980s before that model crashed due to cheaper lithium produc- tion from brines out of Chile.
Rockwood has become a successful lithium brine producer since, with its in- terest in Talison signalling a return to the hard rock space.
“They have turned full circle and bought back in. You would think by their actions that they have identified hard rock lithium as being one of the future preferred pro- duction alternatives and for them to take that point of view they obviously antici- pate that prices are going to go up pretty rapidly,” Griffin said.
Further improvement in prices will be timely for Lithium Australia as it under-
Adrian Griffin
AUSTRALIA’S PAYDIRT FEBRUARY 2016 PAGE 5


NEWS
takes a range of work to be- come a low-cost producer of lithium carbonate, lithium hydroxide and other by- products.
Lithium Australia’s ap- proach to production will go against the grain of tradition which Griffin believes will set it apart from its peers.
this stuff away. So, that has been achieved by develop- ing a processing flow sheet that is energy self suffi- cient,” Griffin said.
Finding a way to mon- etise lithium micas could dramatically expand the playing field for Lithium Australia.
The company has alli- ances with Pilbara Minerals Ltd, Focus Minerals Ltd and Tungsten Mining NL in WA, while offshore its has strate- gic partnerships with Alix in Mexico and a non-binding heads of agreement with European Metals Holdings Ltd in the Czech Republic.
“We have indentified the
opportunity of taking what
we often refer to as the ‘for-
gotten resource’ – lithium
micas – which have tradi-
tionally been difficult to pro-
cess. We decided to take
them as a principle target
feed source and then turn
them into lithium chemicals
without applying the large amounts of en- ergy that people have applied to do the processing,” Griffin said.
“Conventionally, you have to roast them, then leach them and the problem is that they are relatively low-grade – par- ticularly if you compare them with some- thing like spodumene – and then you can’t pay the energy bill by selling the amount of lithium you recover. That sort of processing is simply out of the ques-
While prices for many commodities have tailed, lithium has taken off
tion, so you have to remove the energy price from the equation to make it viable.” By engaging mineral processing tech- nology company Lepidico, Lithium Aus- tralia believes it has cracked the code for
producing lithium from lithium micas. The company has been running a trial plant in Perth whereby lithium micas are turned into a lithium carbonate before being converted into lithium hydroxide through “some very simple chemistry”,
Griffin said.
“One of the rea-
sons lithium hydrox- ide sells for a much higher price than lithium carbonate is because producing it in those chemical processing systems comes at a high lith- ium loss. The way we are looking at it you don’t have to accept a lithium loss and consequently hydroxides can pro- duce a much more substantial revenue than carbonate,” ac- cording to Griffin.
A real boon for the company is that lithium micas are generally consid- ered waste material by miners.
“We have cer- tainly cracked the process on the as- sumption that you have very low min- ing costs, well no mining costs bear- ing in mind that people are throwing
European Metals owns the Cinovec lithium deposit, the largest in Europe, and aims to have a PFS completed in the first half of 2016.
A scoping study completed last year on Cinovec, whereby under the HoA lithium mineralisation processing is a 50:50 JV prospect for European Met- als and Lithium Australia, revealed esti- mated production costs for battery grade lithium carbonate of $US2,000/t after a sulphate-of-potash credit.
Cinovec is primarily a tin-tungsten de- posit, meaning lithium will need to be stripped from the system.
“It [lithium] comes out of low or no min- ing costs, it is not quite the way we have structured the deal with European Metals but the principle still applies in that the lithium would otherwise be a waste prod- uct,” Griffin said.
Cinovec is an example of the endless opportunities for Lithium Australia ac- cording to Griffin.
“You can look at deposits that people haven’t looked at in the past,” Griffin said. “Deposits that never had a drill hole in them because there was no chance of a commercial outcome. You can [now] go and look at mine dumps, tailings dams and mines for other purposes [for poten-
tial lithium extraction].”
While scoping potential sources of
lithium micas for the production of lithium carbonate is on the company’s radar, im- portantly it has a service agreement in place with Strategic Metallurgy Pty Ltd, technology licences with Lepidico and technical alliance with SciAps to ensure the so called “forgotten resource” does not remain that way for much longer.
At the time of print, Lithium Australia welcomed Landstead Capital LP as its first institutional shareholder via a $4 mil- lion placement.
– Mark Andrews
PAGE 6
FEBRUARY 2016 AUSTRALIA’S PAYDIRT


BUSH TELEGRAPH
Reality bites in RSA mining
It has been another grim start to the year and particularly so for South Africa with the rand blasting its way through the
floorboards and commodity prices either weakening or showing no signs of recov- ery.
If there’s a song and an image that captures the present situation facing the South African mining industry for me it’s the gaunt, funereal, figure of the late Johnny Cash singing “Dark as a Dun- geon” at Folsom Prison.
That song is obviously a social com- mentary and not meant as investment advice but the opening lines resonate with my current bleak mood regarding the future of what’s left of the country’s mining industry which is being reduced to global irrelevance.
“Oh come all you young fellers, young and so fine,
Seek not your fortune in the dark, dreary mine.”
country in Africa.
Further, how else do you explain the
incredible regulatory contradictions with which South Africa’s mines have to deal on a daily basis?
The country’s mining legislation says the mines have to show a 26% level of BEE to meet empowerment require- ments. Yet Eskom is demanding that mining companies which want to supply it with coal have to meet a 50% plus one share BEE requirement.
I could go on and on but let me end my rant at this stage and turn to the issue of what might happen next this year.
I think the exodus from South Africa will continue. Next up is probably AngloGold Ashanti Ltd, which could well revisit plans to split its South African mines from its foreign operations.
Can you still make money in South African mining shares? Sure you can. Just don’t think
but – in my honest opin- officials alike that I am wrong on this. The Gold Mining Company
South African mining executives – with very few exceptions – are not prepared to oppose government openly because they are worried about the repercussions on their business.
As for our politicians and bureaucrats, my wake-up call came through the na- tionalisation debate of a few years back. At the time I had a number of discussions with top officials in the Department of Mineral Resources in which I asked the question: Why are we even having this debate?
I pointed to the proven disasters that nationalisation had brought about in the Zambian copper industry and Tanzania’s agricultural sector. “Ah” came the reply. “Those were the Zambians and the Tan- zanians. We are South Africans. We can do it better.”
My conclusions are that the ANC will not accept good advice nor will it rec- ognise the lessons of history. It follows a policy/strategy/ideology, call it what you will, that I can best describe as “re-
Already gone are BHP Billiton Ltd and De Beers – bar the Venetia and Voer- spoed mines – while Anglo American plc is heading for the exit with plans to sell off its domestic coal business which
I have been covering the mining beat
since 1982 and this is the worst downturn
that I have seen with the Sou“th African inventing the wheel”. should be announced soon.
miners being hit with a
double whammy. Not
only have they been
clobbered by plummet-
ing commodity prices
I have been told repeatedly by
mining executives and government long-term. Harmony
ion – they are being Ltd has nearly trebled
joint PR line is that there are “challenges” the ANC Government. and “issues” but both sides are striving to
stabbed in the back by in the last six weeks
From where I sit the ANC–atbest–has
little or no understand-
ing of this key industry,
which is still the coun-
try’s largest earner of
foreign exchange and – at worst – “has it in” for the major mining companies.
while DRDGold Ltd has nearly doubled over the same period.
The reason for that is the collapse of the rand, courtesy of Presi- dent Jacob Zuma and
his latest bout of “re-inventing the wheel” regarding choice of finance ministers.
We’ve been here before in previous periods of rand weakness. There’s a short-lived spike in the gold shares be- fore costs catch up to revenues once more and the share prices come off. So enjoy the action while it lasts but best you have a clear exit strategy.
Brendan Ryan is a Johannesburg-based mining writer
Again in my honest opinion, that’s be- cause the ANC views them as big-time beneficiaries of apartheid, sins for which they must now atone to the point of bank- ruptcy.
I have been told repeatedly by mining executives and government officials alike that I am wrong on this. The joint PR line is that there are “challenges” and “is- sues” but both sides are striving to work constructively together in the best inter- ests of the country.
I still don’t buy it. Look at the mining lekgotla, indaba and phakisa “talk shops” that have taken place, all intended to bring about sustainable and constructive change but which, so far, have delivered nothing material on the ground.
So, in due course, after destroying South Africa’s mining sector in about an- other 10 years – if things keep going the way they are – the penny will drop and key politicians will say, “Eish, maybe we should not have done that. We better fix it”.
That’s what the State Diamond Trader now seems to be attempting to do after wrecking the country’s diamond cutting and polishing industry since it was set up in 2007. It now wants to enable “South Africa to become the heartbeat of dia- mond beneficiation in Africa”.
This is after years of incompetent, ide- ologically-driven, bureaucracy coupled with government antagonism towards De Beers which has played no small part in the establishment of Botswana as the dominant diamond beneficiation
work constructively together in the best interests of the country. I still don’t buy it.
AUSTRALIA’S PAYDIRT FEBRUARY 2016 PAGE 7


OPINION
Weak commodity prices to safety and security: Focus areas for Australian miners in 2016
Each year brings with it new, and not so new, challenges for Australian indus- try. Political and policy agendas shift (and
even Prime Ministers change), global events occur and market forces act, and react, accordingly.
Despite predictions and hidden hopes that the global mining sector will recover from its current downturn the “down” cy- cle continues apace.
During the boom, everyone seemed to think prices would remain high forever. Now, everyone is asking: “When will this downturn change its course?”
What’s clear, we believe, is the cycle times between good and not so good are lengthening, and are much more severe than we have seen before. It could take years to adjust to current market forces, but things are still cyclical (just ask any- one who has been in the industry for long enough).
For the past eight years, Deloitte has looked at the latest trends, trouble spots and travails that should focus the minds of miners – here in Australia, as well as around the world over the next 12 months, accompanied by strategies they
can employ to adapt to changing industry dynamics.
The top global issues in our Tracking the Trends 2016 report include:
Going lean: Operational excellence remains front and centre
In an effort to achieve true operational excellence, sector leaders are leveraging best practices from other industries and tackling difficult issues, including labour relations.
Innovation – the next generation: Preparing for exponential change
Innovation is critical. Short-term strat-
PAGE 8 FEBRUARY 2016 AUSTRALIA’S PAYDIRT


egies should include collaborative eco- systems, digital workforce engagement and improved asset management.
China’s painful transition: Looking for the silver lining
Given China’s influence on the global economy, miners need to understand the global impact of its domestic market trends and develop plans relative to Chi- na’s offshore investment initiatives.
Adjusting to the new normal: What goes down must come up
Commodity demand might be down, but production isn’t falling. In fact, some miners have ramped up output to reduce unit costs, consolidate market share or avoid costs of shutting down older mines.
The shifting global energy mix: Pre- paring for inevitable change
Fossil fuels will remain critical to the global energy mix, but the global move towards renewables threatens the out- look for thermal coal – and is inevitable.
Engagement party: Changing the nature of stakeholder dialogues
Old tactics no longer work, and a new form of stakeholder engagement is needed. Miners should align their invest- ments with the underlying needs of their disparate stakeholders to fully maximise opportunities.
The capital crisis: Starved of fi- nance, miners struggle to survive
Attracting capital in the face of con- tinuing losses has become harder than ever. In response, companies will likely continue to seek out alternative financ- ing, even when the terms aren’t entirely in their favour.
A taxing time for miners: A global tax reset challenges yesterday’s man- agement
To keep pace with the evolving tax environment, companies need to under- stand the financial implications of new tax rules, assess their operational and corporate structures, and engage with government stakeholders.
The M&A paradox: To buy or not to buy, that is the question
Despite predictions of a pick-up in min- ing M&A, deal values and volumes con- tinue to disappoint. Miners should take advantage of opportunities, consider buying counter-cyclically and think twice before divesting.
Safe, secure and healthy: An ex- panded view of corporate and per- sonal welfare
Risks related to both safety and securi- ties continue to grow. To enhance their safety records and security postures, miners may want to strengthen their safety procedures.
As with any global report, some trends will be more relevant to some countries
and markets than others. For Australia, weak commodity prices, the ongoing productivity challenge (with high costs making the slump hurt so much more), an innovation imperative, M&A and safety and security lead the list of what should be top-of-mind issues for local miners in 2016.
The operating environment remains volatile and complex and the impera- tive remains to innovate, adapt, manage costs and drive sustainable operational excellence and productivity improve- ments while also driving and maintaining cultural change.
Encouragingly, we are seeing real evidence of companies really adapting to a longer-term, low commodity price outlook and investing in strategic areas beyond just cost-cutting to gain a com- petitive edge.
Innovation and collaboration
As solutions once considered unviable or inapplicable to the industry continue to be adapted to suit the needs of mining companies, innovation and operational excellence will remain critical. Miners need to be more open to adopting les- sons and ideas from other sectors, such as collaborative ecosystems, digital workforce engagement, enhanced asset management and 3D printing, and look closely at the likes of improved energy management to deliver significant sav- ings.
Collaboration will also be central in driving bold actions. Miners can no long- er afford to look at industry trends and address challenges in isolation. They will need to work better together, as an industry and with their suppliers, and seriously consider strategic alliances as a way to share resources and increase their operational effectiveness.
M&A
There is emerging evidence that deal activity is picking up in Australia. Gold remains the big commodity play for mid- tier miners with producing assets, but this looks likely to extend to copper and nickel if buyers can shake off their linger- ing nervousness
about commodity prices that contin- ue to drop.
Perhaps mind- ful of where future growth options will come from, the top end of town is also signalling an increased ap- petite for deal making. While the challenge will be getting investors
onside, we expect to see more deals in 2016.
To take advantage of these opportuni- ties, miners may want to consider buying counter-cyclically and thinking twice be- fore divesting.
Safety and workplace health
Creative approaches to safety and workplace health need to be at the fore- front for an industry that has invested a vast amount of money, time and effort in safety, but which is still seeing incidents occurring and even increasing.
Enhanced safety analytics, strength- ening mental health policies, improving security protocols, employing risk moni- tors and improving crisis management are just some of the strategies that can be used to detect risks, prevent incidents and change workplace cultures.
Cyber risk
Cyber security and its associated risks needs to be a strong focus area globally as well as in Australia. Cyber criminals engaged in corporate espionage, black- mail campaigns or malicious efforts to cause damage via hacking are using in- creasingly sophisticated tactics to target both organisations and individuals.
Financial performance data, technolo- gies used to streamline processes, stra- tegic planning and information around potential transactions can all be ex- posed, with the costs to business ranging from damage to a company’s reputation and profits, to serious safety and security impacts.
And as these risks expand, miners will come under greater pressure to tighten their processes and controls around safety and security to better protect all of their critical assets, from the well-being of their people to their physical facilities and data.
In the end, miners that are able to col- laborate better, innovate more effectively, develop agile organisations and capital- ise on picking up good assets at the bot- tom of the cycle will benefit and be best placed for when the longer term industry cycle finally swings in the right direction.
Reuben Saayman is a De- a Deloitte Corporate Finance loitte Assurance & Advisory Partner and the firm’s National Partner based in Brisbane and
Based in Perth, Nicki Ivory is Mining Leader – West
National Mining Leader – East
AUSTRALIA’S PAYDIRT FEBRUARY 2016 PAGE 9


NEWS
Funding tops Vimy’s wish list
Locking in project funding for the proposed Mulga Rock uranium mine tops Vimy Re-
sources Ltd managing direc- tor Mike Young’s priority list for 2016.
Vimy is set to tick off a num- ber of key milestones this year – including receipt of an envi- ronmental approval to build a uranium mine – culminating in a likely investment decision during the December quarter.
“We’d like to be in construction in early 2017, so obviously this year I’ll be spending a lot of time trying to get the project finance bedded down through some off- takers and banks,” Young said.
Vimy hopes recent infill drilling at the Ambassador and Shogun deposits will deliver at least 10 years of reserves
and collect other key informa- tion for the DFS, such as pit wall angles and rock strengths, for the final pit design.
The first stage of a pilot beneficiation circuit was due to start at the time of print as Vimy continues to prove up the project’s metallurgy.
“This was the key thing that brought RCF on board with $34 million back in August,” Young said.
“Rather than keep the sand like a sand miner would, we reject the sand and keep the slime, which is basically car- bonaceous material. There’s a relatively small loss in urani-
“We’re definitely going to have to look at [a scenario of] off-take and financing linked in, that’s mostly from Korea and China, but I’d like to get some off-take in America and Europe as well.”
A final decision on project funding will coincide with the scheduled completion of a DFS on Mulga Rock, about 240km north-east of Kalgoorlie.
In November, a positive PFS found the project could support a 2.65 mtpa operation over 17.1 years for a capex of $US254 million, plus a mine pre-strip cost of $US33.6 million.
Other key financials from the PFS in- clude a pre-tax NPV of $431 million (in- cluding royalties), an IRR of 25.1% and payback within 3.9 years from first pro- duction.
Operating costs for the first 10 years of production have been set at $US31.47/lb before by-product credits and $US27.77/ lb after by-product credits, based on a production rate of 3 mlbpa uranium ox- ide.
A base case uranium price of $US65/lb was used in the study. The uranium spot price at the time of print was $US34.50/lb.
Vimy, however, remains unde- terred and has pushed ahead with its DFS plans, including an infill drilling programme and metallurgical tests.
“Right now you wouldn’t push the button, but our view is we want to get totheendoftheDFSattheendof this year and go from there,” Young said.
“We’re funded to get to the end of the DFS, but we want to be mine- ready and have all the approvals in place. I often use the metaphor that
we want to be sitting in the water on the surfboard waiting for the swell, rather than on the beach waxing the board.”
Infill drilling at the Ambassador, Sho- gun and Emperor deposits was due to wrap at the time of print. The programme was aimed at increasing the resource classification at Ambassador and Sho- gun to indicated status, or better, and allowing for a reserve life of at least 10 years to be established.
The Mulga Rock resource currently stands at 65.6mt @ 520 ppm uranium for 75 mlb, including 33.1mt @ 580 ppm uranium for 42 mlb from the Princess and Ambassador deposits.
A maiden reserve estimate for Prin- cess and Ambassador is due this month, but will not incorporate the results from the recent infill programme. An updated resource estimate is slated for release in the June quarter.
Vimy is also digging two test pits at Ambassador to assess the overburden
um, but there’s a huge loss in the overall mass and that’s really important for the plant.”
Vimy expects the EPA to make a rec- ommendation on the company’s public environmental review (PER) in August, which all but ensures Mulga Rock will be approved for construction from early next year.
A State election is due to be held in Western Australia in March 2017, with the Liberal Government seeking a third consecutive term in office.
“The Labor policy is obviously no ura- nium mining...but the only thing that they can stop you with is the PER,” Young said.
“We see the best way to mitigate the risk [of being denied project approval] is to get the PER signed off by the Mines Minister before the State election, and we’re well on track for that.”
When in operation, Mulga Rock is ex- pected to create almost 500 new full-time jobs and deliver about $15 million in
State royalties each year.
The project is also flagged as a
key player in the predicted global uranium shortage over the next few years and will give West Australians their first taste of a nuclear future.
“The amount of uranium that we’ll produce will offset 50 mtpa of car- bon dioxide, given that most nucle- ar plants replace coal plants, and that’s about 10% of Australia’s total carbon dioxide output,” Young said.
“My view is if you’re anti-fossil and anti-nuclear, then you’re pro- blackout.”
– Michael Washbourne
PAGE 10 FEBRUARY 2016 AUSTRALIA’S PAYDIRT
Vimy is digging two test pits at Mulga Rock to collect vital information for the DFS, due later this year


OPINION
Nuclear health, wealth benefits
Australians, industry and the environ- ment benefit from the Australian Nu- clear Science and Technology Organi- sation’s (ANTSO) world-class nuclear science infrastructure. One part of that is at Lucas Heights in New South Wales.
It’s important to understand ANSTO’s work as we look for a suitable site for a national radioactive materials manage- ment facility.
ANSTO and Australian industries safe- ly transport radioactive materials every day. In December, ANSTO sent 2,377 packages of radioactive nuclear medi- cines to hospitals and clinics, sharing the roads, rail and airways with the Austral- ian public.
Australians produce radioactive mate- rial. Life-saving medical diagnoses and treatments, industry, agriculture, veteri- nary science, communications and home consumer products all generate and use radioactive material in some way.
Most nuclear waste generated in Aus- tralia is low-level nuclear material includ- ing contaminated paper, plastic, pro- tective clothing, gloves, glassware and smoke detectors.
Australians also produce much small- er amounts of intermediate-level waste from reprocessing spent fuel used in sci- entific and industrial research and pro- duction of lifesaving nuclear medicines. Very small volumes also arise from other medical, veterinary and industrial prac- tices including disused radiotherapy and industrial radiography sources.
Nuclear technology and its by-prod- ucts save lives and drive wealth creation.
ANSTO’s Open Pool Austral- ian Lightwater research reactor makes a significant contribu- tion to the Australian economy. Its main purpose is to produce nuclear medicines and provide neutrons for scientific research and industry through neutron scattering and irradiation.
Neutron scattering allows us to observe materials at the atomic scale so we can better understand how small changes in atomic or molecular structure can create dramatic improve- ments in a material’s perfor- mance. These are essential tools in many modern industrial processes. This includes pro- duction of everyday items, such as smartphones, televisions,
laptops and hybrid or electric cars.
In health, ANSTO produces more than 500,000 patient doses of life-saving nu- clear medicines each year. These are used in diagnosing and treating a wide variety of medical problems including cancers, heart and lung diseases and bone damage. During their lifetime, one in two Australians will benefit from diag- nosis or treatment using nuclear medi- cines. That’s more than 10 million peo-
ple.
We should not expect these benefits
without accepting the responsibility of managing and storing the waste radioac- tive material generated.
Australia’s current management and storage arrangements create unneces- sary complexity, causing safety and se- curity risks. They impose an undue bur- den on users and regulators and do not comply with world’s best practice or our international obligations to manage our own radioactive waste.
Australia’s radioactive waste is now stored across more than 100 sites includ- ing hospitals, universities, research insti- tutions, shipping containers and even in containment in car parks.
A national facility will provide a long- term answer to the safe storage and management of the radioactive waste that Australians will continue to produce.
It will end the inefficient and incon- gruous way Australian industries and government agencies have managed radioactive waste. Waste can be stored and managed at a single site according
to structured, technologically sound and well thought-out procedures.
Australia is party to the Joint Conven- tion on the Safety of Spent Fuel Man- agement and the Safety of Radioactive Waste Management, so we have interna- tional obligations to safely treat and store waste we produce.
A national facility will bring Australia into line with modern economies such as Britain and France, which have purpose- built facilities. These countries produce 25,000 cubic metres of joint waste a year. In comparison, about 4,500 cubic metres of waste has been produced in Australia since I was born in 1958. We produce less than 50 cubic metres of waste every year.
The site selection process is voluntary, fair, subject to community consultation and open to review under the Adminis- trative Decisions (Judicial Review) Act 1977.
Environmental, meteorological, hydro- logical and heritage evaluations must be considered before final site selection.
A regional consultative committee will ensure extensive and continuing com- munity consultation, honestly and open- ly, allowing communities to make deci- sions based on facts.
The facility will deliver economic ben- efits through job creation, infrastructure and investment in education and hous- ing.
This site-selection process takes us in the right direction. It is a necessarily long and in-depth process and must not
be rushed.
And if the current short-listed
sites do not pass muster? We start again. Because we must get it right.
Since Simon Crean began the search for a national facility over 20 years ago, there have been almost 20 years of reports, stud- ies and tests. Finally, we have a short list of suitable sites. So now it’s “make up your mind” time.
Further information at radioac- tivewaste.gov.au
This article was first published in The Weekend West.
Gary Gray is the Federal Member for Brand, Western Aus- tralia. He was re-elected in 2013. He is now the Shadow Min- ister for Resources, Shadow Special Minister of State, and Shadow Minister for Northern Australia.
AUSTRALIA’S PAYDIRT FEBRUARY 2016 PAGE 11


NEWS
IGO puts its stamp on Nova
Independence Group NL has exerted its big- gest influence yet on the
recently acquired Nova nickel-copper project, revealing an optimisa- tion study which has in- creased project NPV by 36%.
Nova was the centre- piece of Independence’s $1 billion acquisition of Sirius Resources last year and upon inheriting it, the diversified miner set about optimising the project’s DFS.
The resultant optimi-
sation study has seen
the project “firmly ce-
mented as one of the
lowest cost nickel projects in the world”, according to Independence chief execu- tive Peter Bradford.
“The study has shown that Nova is an extremely robust project that will be able to weather the commodity price cycle,” Bradford said.
As well as improving NPV by 36% on the DFS, the optimisation study delivered a 27% reduction in expected life-of-mine C1 cash costs (from $1.66/lb to $1.21/ lb nickel after by-product credits) and a 21% decrease in life-of-mine all-in cash costs ($2.32/lb nickel to $1.83/lb nickel after by-product credits).
Capex was unchanged at $443 million but Bradford told Paydirt those dollars were being stretched further.
“We are doing more and getting better bang for our buck in the pre-production period with 1.6km more development, great expenditure on dewatering, ex- penditure on a bigger filter press to de- bottleneck the processing plant and ex- penditure on ventilation to debottleneck the underground mine,” he said.
Bradford said the reductions in costs had been achieved by improving mining scheduling and sequencing and acceler- ating ramp-up of the production profile in order to fill the plant earlier as well as through lower-than-assumed contracting rates.
“Some of the cost savings reflect the passage of time since the DFS was done,” he said. “There has been pres- sure on suppliers and inputs and the conservative nature of the DFS process means there are always savings to be re- alised in that regard.”
metal on an annualised basis, compared to the optimisation study. The company will continue to assess the potential for this second stage of value creation once construction is com- plete and operations have ramped-up.”
Among the optimisa- tion exercises to affect NPV were:
• 26% increase associated with im- proved mining sched- uling and accelerated ramp-up of ore-feed to the processing plant at a sustained 1.5 mtpa rate
• 5% increase due to offtake agree- ments exceeding DFS assumptions
• 8%increaseduetoimprovedoperat- ing cost structure over the LOM;
• 3% increase in NPV resulting from a $30 million reduction in capital costs compared to the DFS (as reported on 27 January 2015)
• 6%decreaseinNPVresultingfroma change in the metallurgical recovery as- sumptions made in the DFS. This results in a decrease in the nickel recovery from 89% to 88% and a decrease in the cop- per recovery from 95% to 89%, excluding the ramp-up period.
The redesign of the mine scheduling will deliver more available ore in FY2017 and FY2018 and will also allow for ac- cess to higher grades earlier in the mine life (in FY2019 and FY2020) with lower grades deferred until the latter years of the 10-year mine life.
Bradford denied the redesign was a form of “high-grading”.
“Prioritising higher value ore into the early part of the operation is good – and standard – business practice to deliver early repayment of capex and earlier re- tirement of debt,” he told Paydirt.
Development at Nova was progressing well, according to Independence, with 42% of the project’s $443 million capex already spent and 56% of the work com- pleted at November 30.
The project remains on time and on budget with first production scheduled for December.
– Dominic Piper
Independence has optimised the Nova DFS, increasing NPV by 36% in the process
Nickel’s fall in 2015 – it had shed more than 35% for the year to $US3.92/lb by the time Independence announced the optimisation study on December 14 – has left much of the industry in a state of shock, but Independence hopes the optimisation study weatherproofs Nova against current market conditions and any other prevailing circumstances.
“Nova is a long-term business so the strategy when planning design and scheduling you have to take a long-term view which is built around consensus forecasts [for the nickel price],” Bradford said. “But, we are managing the project with short-term decisions based on the current spot price to ensure the project’s profitability and allow us to do the neces- sary tweaking.”
Bradford remains positive on nickel’s future.
“It is all up from here,” he said. “We never thought we’d see prices at these levels and it has been a unique set of circumstances which have led to them but we have got half the industry losing money; that is not sustainable and we will see a correction and then a price recov- ery. Long-term supply fundamentals look very good for nickel.”
Bradford said the new scheduling and design had set the project up for further NPV gains in the future.
“We have absorbed significant chang- es to the scope-of-work and built in op- tionality for the future. There remains an opportunity to further increase the pro- ject NPV by further improving the mining production rates and processing plant throughputs. This could deliver additional
PAGE 12 FEBRUARY 2016 AUSTRALIA’S PAYDIRT


Meet the team at Mining Indaba
Bill Repard
EXECUTIVE CHAIRMAN
M: (+61) 418 768 578
E: [email protected]
Dominic Piper
EDITOR
M: (+61) 424 934 494
E: [email protected]
Mark Andrews
DEPUTY EDITOR
M: (+61) 407 477 697 E: [email protected]
Tammy Caldwell
AFRICA DOWNUNDER
M: (+61) 413 085 536
E: [email protected]
Tony Mwarey
ADVERTISING EXECUTIVE
M: (+61) 451 280 482 E: [email protected]
www.paydirt.com.au
7 - 9 September 2016
Perth,Western Australia


NEWS
For the suite of industrial metals trad- ed on the LME, the New Year has started off where the last one left off.
Copper hit a fresh six-year low of $US4,381/t in early January. Ear- lier, zinc dropped to a low point of $US1,470/t.
The consensus is for more of the same, a relentless downward grind, with one eye on gyrating Chinese stock markets and the other on a sink- ing oil price.
China, of course, is why most of the LME metals are sliding back towards financial crisis levels.
The historical reference point is tell- ing. The demand shock caused by the loss of growth impetus in the world’s largest buyer of all things metallic is analogous to the contraction in global manufacturing that followed the financial meltdown of late 2008.
The focus on the oil price is also logi- cal, given energy is a key cost input for all base metals production.
With no sign of any demand driver to replace the loss of China, the focus is on supply and each metal’s cost curve, a moving target which, thanks to falling oil prices, is also falling right now.
Not that supply cuts, whether voluntary or involuntary, will generate a major turn- around in fortunes. But they can act as powerful brakes within the general slide.
Supply dynamics fed price differentia- tion last year. While all the LME metals ended 2015 lower than they started, the gap between lead, which fell by only 4%, and nickel, which slumped by 40%, was huge.
And supply dynamics will continue to determine relative performance this year as well.
Because China’s hard landing has caught each metal at a different point of the supply spectrum, a natural funda- mental landscape that can be reshaped by producer cutbacks or the lack of them.
At one end of the supply spectrum lies zinc.
It is ironic that after waiting years for the long-heralded mine supply crunch to arrive, zinc bulls are now starting to see it materialise at a time when demand woes are pummelling the price.
Australia’s giant Century mine, which came to epitomise ageing mines’ pro-
Iron ore was trading at $US40/t at the time of print
mine in the same state.
That said, there are signs that the
supply hits are starting to outweigh the supply additions.
As with zinc the hardest evidence comes in the form of concentrate treat- ment and refining terms.
The first major concentrates supply deal for 2016 shipments was signed between Chilean miner Antofagasta plc and Chinese smelter Jiangxi Cop- per.
The headline terms of $US97.35/t and $US0.09.735c/lb marked a signifi- cant decline from 2015’s $US107 and $US0.17c/lb, attesting to lower than expected raw materials supply avail- ability.
New year, same story for commodities
longed death throes, has finally hauled its last ore. So too has the Lisheen mine in Ireland.
Accentuating the hits to supply from these closures has been Glencore’s de- cision to mothball around 500,000 tpa of mining capacity, most of it in Australia and Peru, and Nyrstar’s suspension of its 50,000 tpa Middle Tennessee mines.
The combined effect has been to tight- en the raw materials part of the supply chain to the point that smelter treatment charges, the best indicator of the avail- ability of concentrates, have started to fall sharply.
That in turn has generated a reaction further down the supply chain, with a grouping of Chinese smelters planning to cut refined metal output this year by 500,000t in the face of weakening con- version fees and weak outright prices.
Bullish may not be the word for it, given the overall state of the metal markets, but zinc’s supply picture is possibly the least negative of the LME pack.
Copper’s supply dynamics are more complex than those of zinc, with unfore- seen production hits and producer cut- backs balanced against new mines and expansions of existing mines.
Take, for example, Canadian pro- ducer Imperial Metals, which last week announced it is mothballing its Huckle- berry mine in British Colombia due to low prices. The resulting 20,000 tpa hit on supply, however, has to be seen in the context of Imperial focusing its resources on ramping up the new, bigger Red Chris
Look no further than the supply growth downgrades coming out from re- search houses such as Wood Macken- zie. At the start of 2015 it was forecasting mine supply growth of 6.4% in 2016. By the close of last year that figure had been slashed to 1.4%.
And as with zinc, changes in the raw materials dynamic are starting to run down the supply chain: witness the plan by Chinese smelters to cut refined metal output by at least 350,000t this year.
At the other end of the supply spectrum sit metals such as nickel and aluminium. Nickel got punished last year to the
point that the current LME price of $US8,335/t is already lower than the troughs seen in 2008-2009.
It’s not hard to see why. Not only is this market sitting on huge stocks of metal, but there has been virtually no supply reaction to such historically depressed prices.
Indeed, a new generation of mines, including the likes of Ambatovy in Mada- gascar and Ramu in Papua New Guinea, are still ramping up to full production.
All eyes and all bullish hopes rest on China’s nickel pig iron (NPI) sector, which faces the dual challenge of low prices and reduced ore supply resulting from In- donesia’s ban on exports of unprocessed minerals at the start of 2014.
There have been NPI closures but the expected wholesale collapse of the sec- tor has not happened. With everyone else hanging on in there expecting that it will, the net result is a market still gener- ating surplus units.
PAGE 14 FEBRUARY 2016 AUSTRALIA’S PAYDIRT


Lacking producer cutbacks, any rebal- ancing of nickel supply is going to be a Darwinian battle for balance-sheet sur- vival, both in China and everywhere else.
The same might be said of aluminium, another metal burdened by legacy stocks and continued over production.
Alcoa Inc announced it would close another US smelter, leaving Aluminum Company of America with only one op- erating plant in America and even that, Massena West, only thanks to an 11th hour rescue package from the state of New York.
The loss of another 270,000t of alu- minium from the closure of the Warrick smelter, however, has done nothing to help the price.
That’s because global production was still growing at a robust 6.3% in Novem- ber last year thanks to 10% growth in China.
Not that Chinese smelters aren’t feel- ing the same financial pain as their West- ern peers. Just that those hurting most are being helped by local governments and by Beijing, the latter in the form of “strategic” buying of unsold stock by gov- ernment stockpile manager, the State Reserves Bureau.
The Government seems to be tying the
A new year has not brought better commodity prices for miners
stocks purchases to commitments to idle capacity but the reality is that what the global aluminium market needs is lots of Chinese capacity to close permanently. And that still looks a remote prospect.
Lead and tin sit somewhere in the middle of the supply spectrum, perhaps because in each market supply is an ac- cumulation of known unknowns.
In the case of lead this is down to the importance of scrap in the supply chain. It accounts for a much higher percentage of overall supply than in any other metal, which translates into a much higher de- gree of opacity.
Tin is a market that has been chasing dreams of supply deficit for many years.
OPINION
On paper supply has fallen short of de- mand in eight of the last 10 years, ac- cording to industry association ITRI.
The problem is that signs of that per- sistent deficit are hard to find. Most re- cently, this has been down to the emer- gence of a completely new tin supplier in the form of Myanmar.
Myanmar itself is a major puzzle. Lacking much information on the tin sec- tor in the country, the market has been scratching its head as to how long the country’s current production rates can be sustained.
Either lead or tin could yet spring sup- ply-side surprises. The supply adjust- ment brakes are too concealed to allow much inspection.
In the case of zinc and to some extent copper, the supply brakes are starting to come on. That doesn’t mean that prices can’t fall any further, it’s just to say that supply is at least showing signs of react- ing to China’s demand shock.
Nickel and aluminium, by contrast, are showing no signs of supply reaction at all. Nickel is already experiencing a slow motion price crash as a result. It’s hard to argue that aluminium isn’t going to fol- low suit.
– Andy Home, Reuters
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AUSTRALIA’S PAYDIRT FEBRUARY 2016 PAGE 15
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OPINION
2016 to be brighter in second half
If 2015 was the year in which the grow- ing oversupply of key commodities led to a rout in prices, will 2016 bring
the point of capitulation, leading to con- solidation and the start of recovery?
That would certainly be the hope of many beleaguered commodity pro- ducers, be they members of OPEC, shale gas drillers in North America or the big companies that bet their fu- tures on what they thought would be China’s endless appetite for coal, iron ore, copper and LNG.
But, the problem with hoping for a rationalisation of supply is that eve- rybody wants someone else to shut down or cut production.
Everywhere in commodity markets, producers are still following the tactics that have largely failed for the past few years.
That is to cut costs while increasing output, in order to keep, or increase, mar- ket share while lowering the unit cost of production.
This is a great strategy as long as your company is the only one able to pursue it successfully, but if everybody is able to do it, all that happens is prices continue to fall as more supply hits the market.
Coal is probably the major commodity most advanced in this process, with 2015 representing a fifth year of declining pric- es that has seen the Asian benchmark Newcastle index lose almost two-thirds of its value since January 2011.
Yet, despite this massive loss in the value of coal, output hasn’t declined significantly in major exporters such as Australia and Indonesia, with cost-cut- ting and weakening currencies allowing producers to keep mines open.
This dynamic is also playing out in iron ore, where the big three miners that dom- inate global trade, Brazil’s Vale S.A. and the Anglo-Australian pair of Rio Tinto Ltd and BHP Billiton Ltd, have managed to lower costs so much that they can still make decent profits.
Iron ore has become a race between who can last longer, the big three’s high- er-cost and smaller rivals, or the patience of shareholders angered by a collapse in the value of their investments and con- cerned about the increasingly likelihood of cuts to dividends.
The chief executives of the large min- ers will be hoping that supply will be cut as smaller companies are forced from the market, but even if this does hap- pen in 2016, it’s possible that not enough
An improvement in commodity prices is expected later in 2016
and other higher-cost producers such as Canadian oil sands, will be able to cling on for longer than the market generally expects them to.
If many commodity producers are waiting for their rivals to go out of busi- ness, LNG producers will be dreading the arrival of new competitors, as both Australia and the US ramp up output of the super-chilled fuel.
Similar to other commodities, LNG struggled in 2015 and is less than a third of what it was at the peak in Feb- ruary 2014.
It’s hard to build anything other than a bearish case for LNG, given the new plants are likely to run at close to maxi- mum rates no matter what the price, as they need cash to repay the enor-
supply will leave the market to allow for a recovery in prices.
Spot iron ore fell to the lowest since as- sessments began in 2008 recently, drop- ping to $US37/t, about one-fifth of what it fetched at its peak in early 2011.
While Vale, BHP Billiton and Rio Tinto can still make profits at this price, it’s un- likely they can make enough to keep in- creasing the dividends to shareholders.
If companies such as Rio Tinto and BHP Billiton are forced to curb payouts to shareholders, expect to see leadership changes as the current management has repeatedly said dividend policies will be maintained and the tactic of dominat- ing the market with low-cost supply will eventually work.
Another group of increasingly nerv- ous producers are those in the OPEC, as they also await the exit of higher-cost crude from the market.
While top OPEC producer Saudi Ara- bia still has sufficient financial reserves to weather another year of low prices, the budgets of other countries, such as Ven- ezuela and Angola, are starting to look increasingly vulnerable.
Fiscal and economic turmoil gener- ally leads to political upheaval, and if low prices persist, it’s likely that the popula- tions of many of the weaker commodity producing countries will become increas- ingly restless.
But like coal and iron ore, hopes for a rationalisation of crude supply may be optimistic, especially in the light of Iran’s likely boost to output as Western sanc- tions are lifted and plans for increased exports from neighbouring Iraq.
The coal and iron ore experience also make it likely that US shale oil drillers,
mous capital investment.
Oversupply also plagues beneficiated
commodities, such as steel and alumin- ium, with too much capacity remaining online in China as loss-making compa- nies are allowed to survive because poli- tics trumps economics.
Like other commodities, this isn’t a new situation and oversupply has been build- ing for some time.
While 2015 was the year that the ex- cess capacity finally hit home, it is far from certain that 2016 will be the year of capitulation.
It may take another year of producers grimly hanging on before they start to topple over, and if history is any guide, it always takes longer for the point of maxi- mum pain to be reached than the market anticipates.
Many resource companies will be hop- ing for a slightly better demand profile in 2016, especially if China’s spending on infrastructure and housing construction does pick up in tandem with a slightly brighter economy in the rest of the world.
But, demand isn’t the main issue for commodities, and even the most optimis- tic scenarios for the global economy are unlikely to spur enough consumption to overcome excess supply.
If commodities are to stage any sort of recovery in 2016, it’s likely to take the form of a fairly brutal first half followed by a brighter second, but this scenario only holds if sufficient supply is forced from the market because of ongoing low prices.
– Clyde Russell, Reuters
PAGE 16 FEBRUARY 2016 AUSTRALIA’S PAYDIRT


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COVER
Sheffield readies Thunderbird to go
Double Bruce. Outgoing managing director Bruce McQuitty (left) takes his successor, Bruce McFadzean, on a tour of Thunderbird late last year
Letting go is never easy, particularly of something you’ve built from the ground up, but Sheffield Resources Ltd managing director Bruce McQuitty has chosen to step down from the role, handing the
reins to experienced mining executive Bruce McFadzean.
realise the time to step aside.
“It was an admirable move by Bruce.
Our [Burbury, McQuitty and technical di- rector David Archer] DNA is exploration and to his credit, Bruce told the board it was time to bring in new skills,” Burbury said. “We spoke to a lot of shareholders and other people and they all agreed it was the right time. Many said it was re- freshing to see because we have seen so many times before companies who don’t bring in the appropriate skills at the appropriate time and suffer as a conse- quence.”
It was a moment of humility from the Sheffield managing director and the rest of the close-knit executive team that is rare in the junior mining industry. The ex- ploration sector is one in which compa- nies are often defined by the people who created them and only see changes in executive when things have gone awry.
However, with a BFS on its genuinely world-class Thunderbird mineral sands discovery set to begin in coming weeks, Sheffield has recognised the need to bring a new set of skills to the managing director’s role.
“It was a matter of the evolution of the company,” McQuitty told Paydirt recently. “We are moving from explorer to mine developer to eventually mining company and to do that we need to get
the appropriate skills in project building and finance.”
Sheffield chairman Will Burbury has worked closely with McQuitty for many years on a number of ventures. He rec- ognised the outgoing managing director with the foresight and self-awareness to
PAGE 18 FEBRUARY 2016 AUSTRALIA’S PAYDIRT
The bulk sample composite is taken at Sheffield’s Thunderbird mineral sands project


The appointment of the vastly experienced McFadzean is designed to counter that problem.
world-class. I was at Ar- gyle when it started and it will have a 35-year mine life by the time it finishes. In comparison, Thunderbird is a 40- year project. This is a significant project and the best I’ve ever been involved in.”
His most recent posi-
tion was as managing
director of Mawson West
Ltd during a period in
which the DRC copper
miner financed and built
its Kapulo mine. Previ-
ously, he had led Catalpa Resources Ltd through the successful redevelopment of the Edna May gold mine in Western Australia and its subsequent merger with Conquest Mining Ltd – a marriage which created the $2 billion Evolution Mining Ltd. During his earlier days with Rio Tinto Ltd, McFadzean played a key role in the development of the Kelian gold mine in Indonesia and the Argyle diamond mine in WA.
The company has enjoyed strong support since starting drilling on Thunderbird in 2012 how- ever as commodity prices continued to slide throughout 2015, Sheffield’s share price began to slip from the high of 97.8c it reached in August 2014. Sheffield
opened 2016 at 40.5c/share. McFadzean is unperturbed by the re-
cent share price fluctuations.
“If you look at where Sheffield is
against other juniors, the company has done a wonderful job with a wonderful asset,” he said. “If it hadn’t been such a difficult market it would have been more of an attractive story in 2015.”
The company released Thunderbird’s PFS in May and despite analysts giving it a welcome reception, the $367 million upfront capex did have some investors wary about funding such a project in a despondent market.
“The share price dropped following the PFS, not because of the project itself but
“There is no doubt Thunderbird is world- class. I was at Argyle when it started and it will have a 35-year mine life by the time
it finishes. In comparison, Thunderbird is a 40-year project. This is a significant project and the best I’ve ever been involved in.
Thunderbird’s unremarkable terrain will lead to low-impact mining
With such a track record, it is hard not to believe McFadzean when he says the opportunities offered by Thunderbird are almost unparalleled in the current mar- ket.
“Three things attracted me to the job; the asset, the work that had been done in the PFS and the people involved in the company,” McFadzean told Paydirt. “You don’t often get all three of those to- gether.
“There is no doubt Thunderbird is
Panning of a sample revealed heavy mineral content from the newly discovered Night Train prospect
AUSTRALIA’S PAYDIRT FEBRUARY 2016 PAGE 19


COVER
Sheffield Resources has signed an access agreement over use of Derby Wharf. The wharf will be used to export up to 500,000 tpa mineral sands from the company’s Thunderbird operation from 2019
because of the capex and people worry- ing about how we were going to do it,” McFadzean said.
A PFS update released in October re- duced the estimated capex by 26% to $271.3 million and McFadzean is confi- dent further reductions will become ap- parent during the BFS process.
aged,” he said. “There may be another increment before that to lower the upfront capex again, so we are pushing in that direction.”
have to take a long-term view,” Mc-
Fadzean said. “If you are only using cur- rent commodity prices, there won’t be any mines getting developed. But, at a 40-year mine life, Thunderbird is going to ride five or six cycles so you need to take into account long-term average prices.
the 8-12 mtpa ramp-up already envis-
in a difficult market good projects get funded. Nova [nickel project] was funded in a difficult mar- ket, Gruyere [gold project] will be funded in a difficult market. There is no reason why Thun- derbird doesn’t fit into that cat-
A $300 million price tag may be con- siderable in the current market but Shef- field believes such is Thunderbird’s scale – the PFS update estimated a 40-year mine life with life-of-mine revenues of $11.8 billion – it is justified.
“We are not being flippant about the capex but good projects always get fund- ing and Thunderbird is a very good pro- ject. If you take away the commodity and
“In the BFS there will be further modi-
fications to the plant and there is an op-
tio“n to do a lower level start up beyond “With projects like Thunderbird you look at the project fundamentals, even
We are not being flippant about the capex but
good projects always get funding and Thunderbird
is a very good project... Nova [nickel project] was funded
in a difficult market, Gruyere [gold project] will be funded egory of project.”
in a difficult market. There is no reason why Thunderbird
That such a project ended up in Sheffield’s lap is testa- doesn’t fit into that category of project. ment to the “exploration DNA”
PAGE 20 FEBRUARY 2016 AUSTRALIA’S PAYDIRT


Burbury speaks of. He, McQuitty and Archer had previously managed War- wick Resources Ltd before the iron ore junior was acquired by Atlas Iron Ltd for $64 million in 2009.
Following the merger with Atlas, Mc- Quitty and Archer – the geologists of the trio – set off looking for new opportuni- ties in WA and it was during one of their annual treks out into remote bush that they began to form an idea about Thun- derbird.
“When we started Sheffield we wanted to remain in the bulk commodity space as we had been successful with War- wick but we wanted to make sure pro- jects weren’t infrastructure restricted; we wanted Sheffield to have readily availa- ble infrastructure solutions,” Archer said.
“Bruce and I were familiar with min- eral sands opportunities from previous exposure and started putting together
“
Sheffield only started drilling in 2012 but has since built Thunderbird into a 3bt deposit
We pegged the tenements in late 2010 but the first drilling wasn’t until 2012. To go
dropped three weeks previously. We pegged it between Christmas and New Year in 2010.
“We were fortunate because we could peg the best ground in the region. Min- eral sands wasn’t flavour of the month so there wasn’t competition, but a few months later prices rocketed and the in- terest immediately came from off-takers and other companies.”
Rio Tinto had drilled only eight explo- ration holes into the prospect but had
from first hole to PFS in three years is remarkable.
projects in WA’s Mid West. During that process we were made aware of the Canning Basin discovery made by Rio Tinto. The problem was we didn’t know exactly where the discovery was made as they hadn’t made their statutory re- porting on it and we had to chase the Department [of Mines and Petroleum] for any information.
“Once that information was made pub- lic we ascertained where the discovery was and realised the ground had been
AUSTRALIA’S PAYDIRT FEBRUARY 2016 PAGE 21


COVER
New Sheffield managing director Bruce McFadzean and his predecessor Bruce McQuitty flank technical director David Archer and chairman Will Burbury
planned a major drilling programme in 2009 before a corporate decision was taken to exit mineral sands explora- tion in WA.
McQuitty admitted fortune was a factor in any discovery but he also be- lieves Sheffield’s innate willingness to pursue new ventures played a major part in securing Thunderbird.
“Luck plays a part in all discoveries but you also need nimbleness to spot and then take an opportunity when it arises,” he said.
Having taken the opportunity, it has been Sheffield’s unrelenting commit- ment which has seen the project grow so rapidly.
“There has been a clear focus on the project,” Archer explained. “We pegged the tenements in late 2010 but the first drilling wasn’t until 2012. To go from first hole to PFS in three years is remarkable.”
Sheffield’s concerted efforts have been aided by the nature of the Thun- derbird deposit itself.
“There is a level of consistency in the deposit which has allowed us to get to measured-indicated status quickly,” McFadzean said. “It has not required a huge amount of work.”
Archer said each drilling campaign had seen both the deposit grow in size and the company in confidence.
“Every time we have drilled it, we have built on it and that gave us the confidence to go at it hard,” he said. “It is a different style of mineralisation to the strandline and dune deposits you usually see. It is very thick, 12-18m, and it is very compact.”
In the PFS update, Sheffield de- scribed the deposit as having: “formed in an off-shore sub wave base envi- ronment, with the high grade zone at its core thought to have formed within higher energy shoals. This interpreta- tion is supported by the broad areal extent of the deposit, its thickness, relatively fine grainsize, high grade and strong geological continuity.”
Located on the Dampier Peninsula about 60km west of Derby, and 25km north of the sealed Great Northern Highway joining Derby and Broome, Thunderbird is the first confirmed mineral sands discovery in the Can- ning Basin but with a 5,800sq km landholding in the district, Sheffield is confident others will be found.
“There is a strategic focus within the company on Thunderbird and the region around it in the Canning Ba- sin,” Archer said.
An initial reconnaissance drilling programme completed in September
PAGE 22 FEBRUARY 2016 AUSTRALIA’S PAYDIRT


2015 identified three new discoveries at Night Train, Nomad and Seagull.
Of the three, Night Train has provided most excitement not only due to it display- ing a high value mineral assemblage with more than 90% valuable heavy minerals (HM) but because it occurs at a higher stratigraphic level than Thunderbird.
“This evidence of stacked mineralised sequences opens significant scope for further discoveries in the region,” the company reported.
Thunderbird’s location 60km west of Derby also fits in with Sheffield’s require- ments for achievable infrastructure solu- tions for development projects.
Key inputs
Location: 60km west of Derby on the Dampier Peninsula, Western Australia Resource: 3.24bt @ 6.9% HM (at 3% HM cut-off) – including a coherent high-grade
zone (at 7.5% cut-off) of 1.09bt @ 11.9% HM (measured-indicated-inferred) Mining: Conventional dozer trap mining method
Processing: Conventional heavy mineral sands processing circuit to deliver a suite of zircon, ilmenite, and HiTi88 products
Throughput: 12 mtpa (Year 1-7); 18 mtpa (Year 8-onwards)
Production: 100,000 tpa zircon, 383,000 tpa high-grade sulphate ilmenite Construction start-up: Q1 2017
Commissioning start-up: Q4 2018
First production: Q2 2019
“The exposure to zircon is a distinct feature,” Archer said. “There is no other very achievable. And we are not t“alking (at 7.5% cut-off) of 1.09bt @ 11.9% HM project which can deliver this amount of
“It has worked out perfectly in regard to having the infrastructure solutions,” Archer said. “It is 25km from the highway and is central to the Dampier Peninsula and is not near the coastline, allowing for lesser environmental impact.
3.24bt @ 6.9% HM (at 3% HM cut-off) – including a coherent high-grade zone
“Trucking is 150km to port which is
large bulk commodity; it will consist of 400-500,000 tpa of prod-
uct being moved and else-
where in WA mineral sands
is exported through urban
ports such as Bunbury and
Geraldton, so it is within the is currently a race to the bottom and The importance of that zir- realms of possibility.”
In October, the company build a project in a turning market. ment over Derby Wharf.
If infrastructure solutions
offer a welcome boost to Thunderbird’s viability, it is its mineral assemblage which provides the base of the economic credentials.
The July 2015 resource comprised
within the mineral sands
Sheffield Resources Ltd is set to launch a BFS into its Thunderbird mineral sands project in the coming weeks. The BFS will be based on the robust PFS and PFS update released last year.
zircon. Since Iluka [Resources Ltd] dis- covered Jacinth-Ambrosia more than a decade ago, it It is the perfect time to launch a has been proving harder and
(measured-indicated-inferred). The high-
BFS.Ineverycommoditythere harder to find zircon-rich de- posits.”
with first production in 2019, we get to
con component continues to
grow as zircon prices hold secured an access agree- firmer than other products
grade component contains 9.9mt zircon, 3mt high-titanium leucoxene, 2.8mt leu- coxene and 36mt ilmenite, making Thun- derbird among the highest value depos- its in the world.
basket.
Prices for zircon, rutile and ilmenite-
leucoxene (which together produce syn- thetic rutile) rose rapidly between 2010 and 2012. Rutile prices have fallen more than 70% and synthetic rutile prices as
The high zircon content makes Thunderbird particularly attractive against other mineral sands development projects
AUSTRALIA’S PAYDIRT FEBRUARY 2016 PAGE 23


COVER
“Heavy mineral content was highlighted rapidly at Thunderbird from panning
“Next year [2016] will see us produce a high quality BFS with a Tier 1 engineer- ing firm managing it,” McFadzean said. “That will allow for all the guarantees needed for it to be bankable.”
Another advantage of developing a project in the downward part of the cycle is the availability of service providers.
“Every man and his dog want to do the work,” McFadzean said. “But award- ing the contract is not about price. We don’t want a cheap BFS. Banks won’t fund something that has not been tested robustly. And, if someone wants to look up our skirt we want to be able to show something robust.”
McFadzean’s comment was reveal- ing about Sheffield’s plans for Thunder- bird. The paucity of new discoveries has meant M&A activity in mineral sands has been almost non-existent in recent years. The two most recent attempts – Base Resources Ltd’s bid for World Tita- nium Resources Ltd and Iluka Resources Ltd’s offer for Kenmare Resources plc – both faded out and Thunderbird’s quality means it is undoubtedly being watched by both miners and potential off-takers.
Having generated admirable returns to shareholders through the Warwick Re- sources sale, it seems obvious the Shef- field management team would be keen on a similar outcome this time around but McFadzean believes the company cannot become distracted by corporate possibilities.
“If you focus the business on that side, you’ll screw up eventually,” he said. “This company needs to focus on what we know. It is a good deposit and if we stay focused on what we can control as we knock off the risks, more opportunities will come.”
Chief among any risks associated with mining development is the permit- ting process but Sheffield has enjoyed a head start in this regard.
“Permitting is always a major hurdle to get through but we have already done a fair bit of work on both Native Title and
This company needs to focus on what we know. It is a good deposit and if we stay
focused on what we can control as we knock off the risks, more opportunities will come.
much as 60% since 2012, while zircon has fallen around 50%.
With impending supply shortages, zir- con prices are forecast to improve from 2017 but regardless of the state of the market, Sheffield is confident Thunder- bird will remain robust.
“Prices are down at the moment but they are not significantly lower than the long-term averages we are using, per- haps only 20%,” McFadzean said.
Rather than battling against prevailing prices, Archer sees Sheffield’s develop- ment of Thunderbird as opportune.
“It is the perfect time to launch a BFS. In every commodity there is currently a race to the bottom and with first produc- tion in 2019, we get to build a project in a turning market,” he said.
McFadzean agrees.
“This is the best time to build a project because it is robustly tested against the bottom of the market. Those projects which are built at the top of the market usually have too much debt and are over-
leveraged. Most projects are financed in the boom and come on in the down cy- cle. We will be the opposite.”
To get to the financing stage, Sheffield must produce a solid BFS for Thunder- bird. When Paydirt spoke with the man- agement team in December, it was still considering a number of tenders for the study.
PAGE 24 FEBRUARY 2016 AUSTRALIA’S PAYDIRT
October 2015 PFS update key statistics:
Pre-production capital Mine life
Life-of-mine revenue Annual operating cash flow Annual EBITDA
Capital payback Life-of-mine unit revenue Life-of-mine unit cash costs Life-of-mine revenue-to-cost
PFS update
$271.3m 40 years $11.8b $149m $135m 3.4 years $566 $280 2.02
Change from PFS
$96.6m (down 26%) eight years (up 25%) $2.3b (up 24%) $15m (up 11%) $15m (up 13%)
0.2 years (down 6%) $58 (up 11%)
$1 (up 0.4%)
0.2 (up 11%)


environmental aspects,” McFadzean said. “One of the advantages is that min- eral sands mining is very benign and there is no chemistry in the processing, just physical separation.”
Sheffield’s PFS proposed a dozer trap mining method with conventional wet and dry concentrating and processing.
The mining lease application is subject to the Mount Jowlaenga Polygon No.2 Native Title claim but Archer said the company already enjoyed a strong rela- tionship with the Traditional Owners.
“They were involved in the heritage survey and we have got a good working relationship with them. At a 40-year mine life, they see the generational opportu- nity that Thunderbird offers for employ- ment and business. They recognise it as an opportunity for their people and we will continue to work with them.”
Satisfying the Native Title and environ- mental requirements will be another step towards securing the project’s develop- ment but despite admitting the company would consider outside interest at both asset and corporate level, McFadzean said the development pathway was far from decided.
“I don’t think it will be purely the tradi- tional debt/equity model,” he said. “There is an opportunity to do something around the off-take; either at project or company level. This is a 40-year project so I’m sure there will be a willingness to invest and fund the development of this project from a number of parties.”
Before that stage is reached, Mc- Fadzean intends to build wider interest in the Sheffield story.
“This project has not even been taken overseas yet,” he said. “I’ve already had discussions with funds and industry play- ers who are urging us to take it to the Northern Hemisphere. In the recent road show we did, I received the same com- ment after all 60 presentations: ‘This is an impressive project’. The Northern Hemisphere markets will see the same.
“I’ve already discussed it with ac- quaintances in New York and they said: ‘$300 million is only $US220 million; that is doable’.”
With McFadzean in place to take Thun- derbird on the road, McQuitty and Archer will concentrate on doing what they be- lieve they do best; finding prospects which can add value to Sheffield and its shareholders.
“Our strength as an exploration com- pany has always been that we can evaluate projects quickly and cheaply and ascertain whether they are keep- ers or not. We have got a history of that. We added value to Sheffield’s iron ore assets and then sold them onto Brock-
Ilmenite and zircon will be the two main products produced from Thunderbird
man Resources [Ltd] and Atlas Iron and recently sold the Oxley potash project to Centrex Resources [Ltd]. We always have projects incubated and we will con- tinue to look at opportunities through JV or divestment for all of them.”
In December, the company restarted drilling on its Red Bull nickel-copper pro- ject in WA’s Fraser Range and while it is hopeful of repeating the discovery of Nova-Bollinger just 21km south, there is a determination that nothing will prove a distraction to Thunderbird’s develop- ment.
“There is no doubt investors want to see Thunderbird progressed and our fo- cus remains on that,” Burbury said.
“We are always on the lookout but any project has to compare to Thunderbird,” Archer said. “We are looking to develop more early-stage projects but the focus is clearly on Thunderbird.”
And, with $7 million raised at the end of 2015, even the market woes can’t dis- tract Sheffield from that focus.
– Dominic Piper
Since Rio Tinto dropped its ground in the region, Sheffield has been able to put a foot on more than 5,000sq km of land on the Dampier Peninsula
AUSTRALIA’S PAYDIRT FEBRUARY 2016 PAGE 25


MINERAL SANDS
Keysbrook winning for MZI
Conditions meant MZI Resources Ltd was swimming against the tide devel- oping the $75.8 million Keysbrook min- eral sands asset, 70km south of Perth, and after a few tough years organis- ing financing, the zircon/leucoxene rich project started on budget and ahead of schedule last year.
“We have been able to do something in the counter cycle, we have really fi-
nanced and constructed this project in the bottom part of the cycle, certainly the minerals sands cycle,” MZI managing di- rector Trevor Matthews told Paydirt.
“We were able to get good, well priced construction contracts in place and ac- tually fixed prices and fixed scheduled contracts. Going back a few years there was no way you would have been able to put in place contracts like that where the
The Keysbrook mineral sands project, 70km from Perth, was brought online ahead of schedule last year
Building a mining project is never easy and the task is made ultra dif- ficult in a bear market such as the one currently being experienced.
engineer [GR Engineering] takes the risk on costs and time. We were also able get the A Team, so the availability of people is a lot better.”
Although quality people and equipment were forthcoming, convincing financiers to lend money proved to be challenging.
RMB chimed in with $US51.5 million in debt facilities and RCF provided a $US58 million funding package to ensure Keysbrook would get up.
“It has to be a pretty special project to be able to be financed and banked and we think that is the Keysbrook project,” Matthews said.
“Securing conventional bank finance or senior debt requires some certainty around your sales volume being con- tracted. Being able to negotiate and put in place off-take agreements for the ma- jority of our annual production at prices that were still able to provide upside in terms of value for shareholders was a pretty difficult part of the process. It took quite an extended period of time to achieve that and consequently they were some of the more difficult aspects.”
With funding and construction hurdles leaped, MZI celebrated the first export of Keysbrook mineral sands products, 1,000t of zircon concentrate, to China before Christmas, marking the start of cash flow generation from the project.
The shipment was destined for Tri- coastal/Wensheng, China’s largest zir- con processor and buyer of all the zircon concentrate produced from Keysbrook.
Meanwhile, first leucoxene sales are
MZI general manager marketing Graeme O’Grady with managing director Trevor Matthews at Fremantle Port with loaded containers of zircon concentrate from Keysbrook bound for China
PAGE 26 FEBRUARY 2016 AUSTRALIA’S PAYDIRT


expected to be made this month, with former US out- fit Chemours, formerly Du- Pont, contracted to take all of Keysbrook’s L70 leucox- ene product (29,000 tpa) and two-thirds (25,000 tpa) of the premium L88 product.
MZI has done well to lock in off-take customers for over 85% of production from Keysbrook and is hoping to engage China’s Jinzhou Ti- tanium Industry Co. Ltd as a customer.
A letter of intent and coop- eration was signed late last year between the parties for a trial shipment of L88 to be sent to Jinzhou.
Securing another customer would fur- ther enhance Keysbrook’s credentials in the global minerals sands space and provide further encouragement for MZI to pursue expansion plans.
Matthews told Paydirt doubling the size of the project was still on the agenda. With a current global resource esti- mate of 155mt, including ore reserves of 26mt @ 2.6% heavy mineral sands, ca- pable of sustaining a high-value product mix lasting over 30 years, Matthews said
exploration upside remained.
It is hoped a drilling programme sched-
uled for late February/early March will expand the resource base even further.
In the meantime, Matthews said work was being done to assess the potential of increasing throughput at Keysbrook which is designed to produce 96,000 tpa of dry leucoxene products and zircon concentrate.
“As far as further activities [for 2016] we’re looking at optimising the project to expand our annual throughput by up to 30%,” Matthews said.
“That will involve some small-scale capital investment but it is a major driver in improved earnings beyond
what we are already forecasting.
That work can be undertaken in the first half of this year and ena- ble us to increase our production by about the same percentage and that is quite a big value-add for shareholders.”
The company is also conduct- ing test work aimed at improving recovery of its highest revenue product L88, an 88% grade tita- nium dioxide.
“We have been looking at some further processing options. At the moment our budget is to achieve about a 71% recovery of that product at the wet plant or
MZI has locked in customers for over 85% of mineral sands products from Keysbrook
“Prices are a bit soft, par- ticularly titanium dioxide which appears to be a lot softer in our summer and the Northern Hemisphere winter, because it is mainly used in pigments for paints. Of course, the painting sea- son in the north is more spring and summer as not too many people are keen to paint the house in an arc- tic storm. They [prices] are very affected by that sort of seasonal cycle, so you tend to see softness in the mineral sands prices at this time of the year and that will improve as we move into the middle of the year.”
concentrator at Keysbrook,” Matthews said.
“Work done to date has indicated we can increase that 71% up to close to 90%, so in percentage terms that is 30% more L88 as well. If we work on a range of 20-30% improvement or increase in production of that product, that again has quite a big impact on the bottom line and therefore we feel that the capital invest- ment modifying the plant will more than justify itself. The programme of work is under way and at this stage that project won’t be in a position to be implemented until the third quarter of this calendar year.”
Potentially increasing production later this year may coincide with improve- ments in prices for mineral sands.
Higher prices would obviously be most welcomed, however, Matthews said with unit cash costs of $355/t and an ex- change rate around the 71c to the $US1 mark, MZI would make good margins and profits at today’s low prices.
“We’ll do even better should the im- provement in pricing come through later this year,” Matthews said.
MZI is positioned for any upswing in mineral sands prices and is keen to dem- onstrate to the market its cash generat- ing capabilities.
Despite a surge to 51.5c/share on the back of operations starting at Keysbrook, MZI has hovered mostly under 40/share and at the time of print was trading at 31c.
Matthews believes the best way to gain traction in the market is to show it has money in the bank.
Assuming an exchange rate of 71c, an- nual EBITDA of $39.9 million (spot price) has been forecast, while based on index- ing to the Q2 2015 TZMI pricing outlook EBITDA of $42.8 million (base case) has been estimated.
“Investors and others outside the mar- ket still don’t know much about or under- stand mineral sands and what the prod- ucts are actually used for, it is a little bit opaque in terms of pricing,” Matthews said.
“They can’t look at a newspaper eve- ryday and see the price as is the case for gold, cooper and iron ore for exam- ple. [But] everyone understands money to really get investors interested we need
Production from Keysbrook started in October 2015
to show them that. We need to start to show cash flows generated from the project and the margins that we can earn from the mineral sands products we make and how that translates to cash to the bank. I think that is when we will really start to get attention from investors and the mar- kets more generally.”
Any share market apprecia- tion will be worthy recognition for MZI which managed to fund and construct a project in the counter cycle.
– Mark Andrews
AUSTRALIA’S PAYDIRT FEBRUARY 2016 PAGE 27


MINERAL SANDS
Strandline settles in Tanzania
Sixteen years after listing on the ASX with a suite of Australian copper and mineral sands assets, Strandline Re-
sources Ltd has found a potential path to production... in Tanzania.
Leading the charge at Strandline is Tom Eadie – the man behind one of Af- rica’s most significant discoveries in re- cent times.
Eadie was founding chairman of Syrah Resources Ltd; the $800 million ASX- listed company currently developing the highly acclaimed Balama graphite pro- ject in Mozambique.
Strandline is some way from replicat- ing any of the Syrah’s successes, how- ever, there is no shortage of enthusiasm from Eadie to deliver on the company’s mineral sands prospects straddling Tan- zania’s coastline.
The merger of Strandline and Jacana Minerals – the spin out company of Syrah which held numerous mineral sands as- sets in northern Tanzania – gives Strand- line a plethora of opportunities to develop mines of various scales.
“We [Strandline] control the whole coastline with every bit of mineral sands property we want, with different types of prospects all round from Tanga and Madimba in the north, all the way to the south. We have potential for very large deposits ranging from very good to pretty good,” Eadie told Paydirt.
“In some places ilmenite dominates a little more than I like, then in other places like North Tanga and Tanga there is a lot of rutile and zircon. At Fungoni, near Dar Es Salaam, we have got a lot of zir- con. I am very excited at having differ- ent types of projects at different stages; some which could be quite close
to production.”
Fungoni, for example, already
has an indicated resource of 11mt @ 3.1% heavy minerals and in- ferred resource of 3mt @ 1.7% heavy minerals, comprised of 22% zircon, 4% rutile and 44% ilmenite.
Being 100km south of Dar Es Salaam, Fungoni has the neces- sary infrastructure in place for Strandline to consider develop- ment in the near term if studies prove to be compelling.
“We are going to push forward with the PFS at Fungoni, which is the zircon-rich area, with results from that study possibly available in the next three months,” Eadie said.
“To get some investor interest we should at least show a short-term path to production. We think we have several deposits, and I think we are confident we have three deposits now that are in the 20mt range, all of which are able to be expanded. They are all pretty good grade and will be pretty economical at today’s prices.”
Eadie contemplated a scenario in which a mobile plant is used to service several small high-grade mines, particu- larly with high concentrations of zircon and rutile, which would be lucrative for Strandline.
“That is something we are balancing. I have seen a few too many companies get trapped, especially gold companies chasing alluvial mines to make quick cash and then that becomes the total focus. We don’t want production to be- come our total focus. I think our team is
Drilling at Madimba started in mid-January
experienced enough that we can have a mining and development team and an exploration team with totally different fo- cuses,” he said.
Therefore, Strandline won’t be rush- ing into any large investment decisions to fund a producing asset, rather modest amounts will be spent while the team en- trenches its footprint in country.
Eadie likens Strandline to mineral sands peer MZI Resources Ltd. MZI started mining its Keysbrook mineral sands project, 70km from Perth, last year and reported first shipment of its prod- ucts to China in December, signalling a start to cash flow for the company.
Producing cash flow and rewarding shareholders and investors is of course the aim for Strandline and it hopes for some investor attention on the back of upcoming results.
Aircore drilling at Tanga South (Tai- jiri and Taijiri North prospects) has been completed with results expect- ed at the time of print, while drilling at Madimba started in January.
“We’ve drilled targets at Tanga North too and Fungoni with results released on thicknesses and grades and possibly resources [estima- tions] in the next three months. We should also have some good results from Madimba, which is a large tar- get, in that time. It is good grade and in a fantastic area – close to power and port – and if we found some- thing there it has all the hallmarks of a really good deposit, with few infra- structure challenges,” Eadie said.
– Mark Andrews
PAGE 28 FEBRUARY 2016 AUSTRALIA’S PAYDIRT
Strandline is excited by the potential of a number of small, but valuable, prospects it has along Tanzania’s coast


Cyclone brewing for Diatreme
Prospective funding and de- velopment partners from China and Europe are circling
Diatreme Resources Ltd’s flag- ship Cyclone zircon project in Western Australia’s Eucla Ba- sin.
Diatreme managing director Neil McIntyre said his compa- ny, currently awaiting the final regulatory approvals for an en- vironmental permit, was being courted by “a number of major offshore parties” as the end of an intense work programme to de-risk the project draws to a close.
Diatreme has been busy on the ground at Cyclone over the past 18 months, building up resources and reserves to economic levels
tional developer is therefore the only option for the ASX- listed company in the current economic climate.
“We’ve said we’re going to develop this, but I think we’ve got to be honest to ourselves and to the market about what we’re doing and that is to make this the most attractive project possible for a major party – or parties – to come into,” McI- ntyre said.
“As a company we’ll get tre- mendous value out of that, but it will also ensure the project actually goes ahead. We don’t want to be a company that just
During the past 18 months,
the company has successfully estab- lished water supply on site, secured a mining lease, picked up additional ten- ements from Image Resources NL and signed a project compensatory agree- ment with Traditional Owners.
Receipt of an environmental permit for the construction of a haulage road from the mine to the Forrest rail siding – due this month – will open the door for Diatreme to begin advanced discussions with the interested parties.
McIntyre said he was hopeful of lock- ing in funding arrangements by the end of the first half in a bid to finalise the BFS and start construction in early 2017.
“The next 3-6 months are pretty crucial for us in terms of delivering the project,” McIntyre told Paydirt.
“Our next step after we receive this en- vironmental approval will be to get one of the larger specialised firms to come in and re-crunch the numbers and have another hard look at the capital and opex costs.
“We’ve already had one review and we got the cost down from around $220 mil- lion to about $146 million, and that was just by rethinking the composition of the mining operations.”
Part of Diatreme’s de-risking strategy for Cyclone, about 300km north of Eucla and 25km west of the WA/South Aus- tralia border, was to expand the project’s resources and reserves.
Diatreme recently increased Cyclone’s reserves by 47% to 140mt @ 2.5% heavy minerals, including 0.71% zircon, con- taining 3.5mt heavy minerals and 1mt zircon. The reserve upgrade also lifted the projected mine life from 10 years to 14 years, based on a proposed mining rate of 10 mtpa.
Cyclone, trending along the same mineral belt as Iluka Resources Ltd’s Jacinth-Ambrosia operation, boasts an overall resource of 211mt @ 2.3% heavy minerals, containing 4.8mt, based on a 1% cut-off grade.
“We’ve spent about $12 million devel- oping the project to where it is now and we firmly believe there are no other com- parable projects of this size and mineral composition,” McIntyre said.
“In the mineral sands game, you re- ally want to have a combination of things to make it worthwhile, including good grades, good deposit size, low overbur- den and, if you can, a zircon-rich mineral assemblage.
“Zircon is the highest- priced of the mineral sands products and we’re lucky enough that our project does have plenty of it. About a third of the heavy mineral sand assemblage is zircon, but that translates to at least 70% of the rev- enue and that’s really what underpins its economics.”
Diatreme is one of sever-
al junior companies looking
to develop a mineral sands
project in WA. Distinguishing itself from the likes of Image, Sheffield Resources Ltd and MZI Resources Ltd is a chal- lenge McIntyre and his team have openly acknowledged.
With a market cap of just $6.5 million at the time of print, Diatreme is rated well below its main competitors, but McIntyre does not believe his company has any less chance of developing its flagship as- set.
Partnering with a cashed-up interna-
talks about it, we actually want to make it happen.”
Diatreme is also looking to progress its Cape Bedford mineral sands project in north Queensland. It is surrounded by Cape Flattery, the world’s largest silica mine, and is currently under application for an exploration permit.
Meanwhile, Diatreme has announced a maiden resource of 630,000t @ 1.08 g/t gold for 680kg (22,0000 troy ounces) for the tailings material at its Tick Hill pro- ject, about 110km west of Mt Isa.
The company is eyeing a reprocessing operation to recover about 220,000oz from the tailings and potentially a further
Neil McIntyre
40,000oz from the old under- ground workings, while look- ing to find out why the Tick Hill orebody abruptly stopped before the mine was shut down in the 1990s.
“It was an extraordinary mine in its day, but it only operated for about five years despite producing about 500,000oz of gold at an av- erage grade of about 23 g/t,” McIntyre said.
“The blue sky opportunity is identifying where the prin- cipal orebody went. We have some ideas about where it went and we think there could be another 500,000oz or more which has been dislocated from that original orebody and possibly hidden at
depth or by lateral shifting.”
– Michael Washbourne
AUSTRALIA’S PAYDIRT FEBRUARY 2016 PAGE 29


MINERAL SANDS
Kwale takes off for Base
Base Resources Ltd is seeking clarity on a sales agreement with a customer who issued it with
a force majeure notice in mid-Jan- uary.
The party wants to suspend its obligations under an ilmenite sales agreement due to problems with commissioning of its slag fur- nace.
It is a vital issue for Base as the customer was locked in to buy about 100,000t of ilmenite by June 30 this year at an average price of $US116/t, which is substantially higher than market offerings of $US65/t.
“We are still getting details on the event to determine our posi- tion, it is not certain this is a valid force majeure, so we are trying to understand what is the case,” Base managing director Tim Carstens said during a conference call for the company’s December quarter results.
of maturity where people have a lev- el of confidence in what they do they try to start to do things slightly differ- ently. So we are constantly chang- ing up our safety system and intro- ducing new measures and I’d hope to see that addressed and reduced fairly soon,” Carstens said.
Emphasising safety as its No.1 priority will be done so alongside Base’s efforts to reduce its costs.
Cash operating costs, including royalties, for the December quarter totalled $US14.1 million, equivalent to cash operating costs per tonne of $US102/t and revenue per tonne of product sold of $US245/t.
“We do run a very tight ship, we don’t have a huge amount of scope to reduce our costs but it is some- thing that we are working on pretty hard. We have said for the last cou- ple of quarters that you would ex- pect maintenance costs to be a little higher over the next few quarters and to increase somewhat over time as the plant ages,” Carstens said.
Some relief for the company in the current commodity price envi- ronment has been the successful rescheduling of its debt facility in a
Carstens said it was understood
the customer was in the process
of reheating the furnace and it
would take a couple of weeks to
know whether it can be restarted
in March or if the resumption of con- tracted deliveries would be pushed out to November.
“The determinant being whether they have done any damage to the liner of the furnace,” Carstens said.
“We won’t know that for another couple of weeks. We are working with the cus- tomer on how we miti-
gate its impact on Base,
as they have an obliga-
tion under the contract.
There is a range of miti-
gation alternatives possi-
ble, including moving vol-
ume to other plants, cash
compensation, resched-
uling... there is a raft of
different ways of skinning
the cat. At this stage we
really can’t say what the
impact is going to be, but
it should be clearer over
the weeks and months.”
Cash generation from
Kwale is Base’s primary
objective and how it re-
sponds to the force majeure notice will be tailored to that approach.
With constrained storage facilities in
Kwale is hitting its stride now, with Base reporting record production figures in the December 2015 quarter
Kenya at the moment, stockpiling ilmen- ite may prove to be challenging for Base, however, Carstens’ immediate concern is understanding the company’s rights.
The force majeure notice failed to dampen a promising December quarter for Base, which reported record pro- duction of rutile (23,896t) and zircon
way that will see it lower repayments over the next two years.
Over the past six months, Base has paid down about $US25 million of the Kwale project debt facility, with a further $US190 million to go.
Carstens said the repayment profile now in place, which sees the company up for another $US9.5 million by June 15, was “more suited to the way we see the world at the moment”.
“We expect prices to largely track side- ways for 2016,” Carstens said.
“[We see a] strong possibility of a lift in ilmenite prices mid-year as we head into the Northern Hemisphere summer, but we are certainly not banking on that in terms of the way we plan our business.”
Ilmenite prices slid during the quarter to about $US60-65/t, rutile held fairly stable at just under $US800/t, while there was some downward price pres- sure on zircon given the large inventories and supply capacity from two of the big- ger players, Rio Tinto Ltd and Iluka Re- sources Ltd.
“There has been increased competi- tion from majors for an increase in mar- ket share that is what has put price under pressure,” Carstens said. “We expect
Tim Carstens
(7,723/t).
Carstens said Kwale was
really hitting its stride and was confident production guidance of 80,000-84,000t rutile, 430,000-450,000t il- menite and 27,000-30,000t zircon for the FY2016 finan- cial year will be met.
Despite the operation per- forming on-song, a worrying trend for Carstens was the amount of total recordable injuries (TRI) reported in the quarter.
While the company has not recorded a LTI since February 2014, the number of TRI’s requiring treatment
has risen, with three incidents occurring in the December quarter.
“[Once an operation] reaches a sense
PAGE 30 FEBRUARY 2016 AUSTRALIA’S PAYDIRT


that is probably going to continue into the March quarter. How they balance price and market share gain is yet to be seen, but they are not likely to push price too much further south.”
With Base anticipating sideways move- ment in prices for mineral sands this year, it expects improvements in 2017 when supply constraints are realised, particularly in ilmenite.
Based on a $US80/t FOB ilmenite price, Carstens expected about 60% of traditional Chinese supply to be uneco- nomic, which could trigger a supply re- sponse.
He said the closure of two Chinese operations last year and one in Russia being placed on care-and-maintenance recently, had stripped about 850,000 tpa of supply into the Chinese market.
“I’d expect to see this continue – that trend of supply dropping out – a particu- lar focus for us now is who doesn’t restart amongst the Chinese domestic suppliers post Chinese New Year. At some point above $US100/t should be seen, for us the key question is when. Our expecta- tions are that prices will track sideways this year,” Carstens said.
Base and its peers in the mineral sands sector will be paying close atten- tion to what prices do, while also tak- ing a keen interest on the latest bid for Madagascan-focused World Titanium Resources Ltd.
Carsten said he was not surprised at AMED Fund II’s unsolicited takeover of World Titanium for 5c/share, starting on February 2.
Base made an unsuccessful play for World Titanium in late 2014. Ironically, it was AMED which frustrated Base’s bid back then.
AMED currently holds a 20% stake in World Titanium.
“I think they [AMED] have reached the point where they obviously weren’t see- ing that move forward with the share- holding structure the way it was and de-
Storage may prove a problem for Base if ilmenite shipments are declined
cided rather than exit they have decided to try and get control of it and dictate the way that asset moves forward. Their view appears to be consistent with ours on the quality of that asset and we watch with interest to see how they go about mop- ping that up,” Carstens said.
The asset referred to is World Tita- nium’s Ranobe project, near Toliara, on Madagascar’s west coast.
World Titanium released a scoping study on the project, which sent its share price from 2c/share to over 5c/share, af- ter AMED’s bid was announced.
Key outcomes of the Ranobe study in- clude phase one capital costs of $US48 million for 66,000 tpa of zircon/rutile con- centrate with some 670,000 tpa ilmenite to be stockpiled.
Capital requirements for phase two, to come on stream in year three, are estimated at $US6 million, which will be used for the installation of a conveyor transport system to move ROM material to the wet processing plant and tailings disposal.
Prior to the release of the scoping
study, World Titanium whet investors’ appetite with an updated measured and indicated resource of 244.7mt @ 8% heavy mineral sands, contained in a global measured, indicated and inferred resource of 884mt @ 6.19% HM.
“We are watching on with interest and it is not entirely surprising AMED has jumped on board,” Carstens said.
With one eye on how that transaction pans out, Base will continue its search to put its foot on “a quality, undeveloped as- set to progress and have ready for devel- opment when the market calls it forward”, Carstens told Paydirt.
“We have obviously been pedalling very hard on getting the debt sorted out, but M&A is still very much on our minds,” he said.
“We have done quiet an exhaustive exercise looking at minerals sands pro- jects across the world over the last 12 months. We have a list of things we like and we’ll have a closer look at those over the course of 2016.”
– Mark Andrews
AUSTRALIA’S PAYDIRT FEBRUARY 2016 PAGE 31


NEW FLOATS
Whether floating or listing, choppy waters are everywhere
The new listings department at the ASX had little correspondence from the resources sector in 2015
As if anybody needed telling, 2015 was a terrible year for IPOs and capital raisings in the resources sector in general.
their S2 entitlement following its launch. But even the Sirius train struggled up- hill against market sentiment and after a bright start, S2 shares had fallen to around 13c at the time of print.
Not that the management team will be too concerned at this stage. With $22 mil- lion in the bank on listing, S2 has enough funds to keep the hunt for the next Nova- like discovery going for a few years yet.
With commodity prices continuing their descent and investors preferring to spend their risk dollars in sectors such as technology and health, prospective new resources floats have been forced to bide their time.
continued its downward trend in 2016, trading at around 90c/share at the time of print.
The other spin-off to list, S2 Resources Ltd, did so with a greater aura of oppor- tunity given it arose from the leftovers of
Last year saw just four resources c“om- Sirius Resources merger with Independ- Shareholders in Alt and Graphite-
panies join the Australian bourse, and of those, only New South Wales-
focused explorer Alt Re-
sources Ltd (see page 35) and Queensland graphite hope-
ence Group Ltd.
Corp will be hoping their companies can similarly weather the storm. Although both raised just
ful Graphite Corp Ltd raised money through IPO.
exploration programmes are their companies can similarly far from extravagant which
Shareholders in Alt and
GraphiteCorp will be hoping over $2 million at IPO, their
should ensure they don’t have The two biggest entrants to to head back to the market in
arrived on the boards, in the process becoming the largest mining company headquar- tered in Perth.
their exploration programmes are far from extravagant which should ensure they don’t have to head back to the market in the short term.
However, it was far from
smooth sailing for the BHP
Billiton Ltd spin-off which con-
trols assets in Australia and
South Africa. South32 opened at $2.05/ share on May 15 but by the end of the year had fallen to $1.06/share. That per- formance did little to persuade investors BHP Billiton had created South32 to con- veniently divest from troublesome assets and despite some encouraging produc- tion figures from its Australian manga- nese operations, the new company has
Far from being stacked with discards, S2 was sold as the company that would tackle the projects which were pushed down the pecking order following the prodigious rise of Sirius’ Nova-Bollinger nickel discovery.
With Sirius managing director Mark Bennett and the rest of the team back in harness, investors were happy to take
modity prices continuing to stagnate and investors beginning to worry about another global financial crisis, it may be another 12 months at least before such companies find an agreeable listing cli- mate.
– Dominic Piper
weather the storm. Although both
the ASX were both spinouts. the short term.
In May, South32 Ltd finally raised just over $2 million at IPO,
Both juniors got their listings just before Christmas, howev- er a number of others, includ- ing Soon Mining Ltd, River Rock Energy Ltd, Golden Ea- gle Mining Ltd and IronRidge Resources Ltd were unable to fulfil requirements before the end of the year. With com-
PAGE 32 FEBRUARY 2016 AUSTRALIA’S PAYDIRT


Bennett’s second coming
Arriving on the bourse flush with cash – $22 million in fact – there was an air of expectation about S2 Resources Ltd.
Come April, market observers will get a taste of what it has done with a very small portion of that cash when it releas- es a resource estimate for Baloo.
Baloo is part of the 151sq km Polar Bear project, Western Australia, which was retained by Bennett and his band mates after Independence Group NL acquired Sirius Resources for its Nova nickel project in the Fraser Range.
There are high hopes for Baloo and considering its address near WA’s pro- lific gold-bearing camps of Higginsville and Norseman, which host the likes of Norseman (10 moz), St Ives (12 moz) and Higginsville (2 moz), S2 has good reason to be bullish of finding an elephant.
But in this subdued environment, S2’s
immediate efforts will be focused on the
smaller picture. “We will be continuing to be a bit more
“The idea is to work something that expansive and doing reconnaissance might be easily doable in a modest open drilling at Polar Bear, so there will be a pit and has the potential to generate cash reasonable aircore drilling programme for us without being a big problem in at various places around there,” Bennett terms of having to find and spend capital said.
to build a big mine; that is the last thing Gold and nickel at Polar Bear are not
that anybody wants to be doing now“,” S2’s only trump cards, with Scandinavia Apart from some of the bigger institu-
tions bidding farewell to S2 in the first few weeks because the stock was way we are approaching it is to ...the fact that we have the too small for them to hold, Ben- look at it on a smaller scale, so cash allows us to try and nett is content with the support
we don’t have to go to the mar- S2 is receiving.
ket to turn it into something that ignore the outside world as best “There were a lot of shares produces cash for us. One way floated around in the first two
Bennett told Paydirt in late January. well and truly on its radar. “Given the times we are in, the
or another we’ve already got [money]. That means we have
an insulation from the stuff that is
going on in the world, which will set us up for even longer than we currently are and continue to do the important stuff; look- ing for the big one without having to wor- ry about raising the money or whatever.”
Initial resource drilling at Baloo has been completed, with S2 in the process of crunching some numbers and prepar- ing a maiden resource estimate for early April.
Some of the results released to mar- ket from Baloo from RC drilling, which confirm previous aircore and diamond drilling, included 17m @ 4.14 g/t gold and 20m @ 2.91 g/t, providing an idea of what lies within the Baloo oxide zone, starting from 3m.
Baloo is one of several targets S2 is keen on testing, along with Monsoon (32m @ 2.5 g/t gold), at Polar Bear this year.
we can for the time being.
weeks of life, but since then de- spite the share price noise from day to day the top 20 have been
remarkably stable,” he said.
“We have got six mainstream financial
institutions in there. We have a major superannuation fund and a sovereign wealth fund in there, which is pretty un- usual for a company like us. There are also half a dozen high net worths, so I think everybody who wants to be in there is in there and is staying there. That is good because the fact that we have the cash allows us to try and ignore the out- side world as best we can for the time being.”
– Mark Andrews
Through its 100% ownership of private Finnish company Sakumpu – the larg- est holders of exploration reservations in the Central Lapland Greenstone Belt and second largest holder of exploration permits in the Skellefteå Belt of Sweden – S2 has exposure to base metals in its portfolio which its keen to explore.
“We have $2 million budgeted in calen- dar year 2016, which will get us a good way down the track with that stuff. We have done a lot of the leg work there, so most of what we do in the middle of the year will be finessing targets we have identified to get them drill ready and then towards the end of the year start to drill some of those,” Bennett said.
Unlike many cash-strapped juniors, S2 can approach exploration with gusto this year as it does not have to rely on share market support for funding.
Mark Bennett
From its Sirius connection, S2 inher- ited a shareholder base many start-ups would envy.
Starting life on the ASX at 17c/share, the company has experienced lows of about 12c/share, but has mostly hovered around 13c/share so far this year.
AUSTRALIA’S PAYDIRT FEBRUARY 2016 PAGE 33


NEW FLOATS
South32 rapidly wiping off debt
BHP Billiton Ltd spinout South32 Ltd paid down almost $300 million in net
debt during the second half of 2015 despite falling com- modity prices.
South32 reported a net debt position of $115 million at the end of the December quarter, down from $402 mil- lion at the end of FY2015, having officially listed on the ASX on May 18 last year.
“Our relentless focus on safety, volume, costs and capital expenditure has al- lowed us to reduce net debt by almost $300 million in the December 2015 half year despite continuing weak- ness in commodity markets,” South32 chief executive Graham Kerr said.
South32, the new home of BHP Billiton’s former non- core assets, enjoyed a posi- tive December quarter, with record production achieved at three of the company’s op- erations
A significant increase in grade and recoveries helped underpin a 13% lift in production at the Cannington zinc opera- tion in north-west Queensland to a re- cord 41,800t.
Improvements in concentrator perfor- mance at the company’s Australian man- ganese operations in the Northern Terri- tory also contributed to a 6% increase in production to a record 1.6mt.
Strong and stable hydrate production at Worsley Alumina in Western Australia saw a 2% jump in saleable alumina pro- duction to a record 2mt.
“Following another solid quarter of op- erating performance, we remain on track to meet production guidance for the ma- jority of our upstream operations,” Kerr said.
“In order to protect our strong financial position in the currently challenging en- vironment, we have already cut or sus- pended production at our South African manganese ore mines and Alumar, Met- alloys, TEMCO and South Africa alumin- ium smelters.
“Further decisive action will be taken as we seek to maximise short-term cash flow while preserving longer-term value.”
Despite mostly positive operational performances across its portfolio of as-
South32 reported net debt of $115 million at the end of the December quarter
sets in Australia, Africa and South Amer- ica, South32 has struggled for market traction in its debut year on the bourse.
South32 listed at $2.05/share and jumped as high as $2.45/share in the weeks that followed. However, its share price has gradually declined since and
the company was trading at a just 89c/ share at the time of print.
Following the company’s first-ever AGM in November, South32 chairman David Crawford said the decision to spin out from its parent company remained justified despite its disappointing perfor- mance on the market.
“It was right at the time it was con- ceived, it was right at the time the de- merger took place and it’s right now,” Crawford said.
“In any competition for capital, those assets with a greater return [iron ore, copper, gold, petroleum] are going to get all of the exposure, so a concept of sepa- rating, or demerging, meant that South32 could be set on its own path and not be caught in that competition and really be able to operate in a number of sectors where in fact those assets are leading assets.”
A review of corporate functional sup- port during the December half also de- livered South32 an annualised saving of about $30 million. Corporate functional expenditure for FY2016 is forecast at $US100 million.
– Michael Washbourne
PAGE 34 FEBRUARY 2016 AUSTRALIA’S PAYDIRT
Graham Kerr


Alt gets control of Paupong
In an example of the kind of persistence needed to get a new resources
float away in the current market, Alt Resources Ltd eventually listed on De- cember 21 2015, follow- ing release of its eighth supplementary prospec- tus.
The eighth prospectus was released in October and saw the company fi- nally clinch the minimum $1.75 million it was seek- ing. Alt’s IPO eventually raised $2.25 million.
Alt managing director
James Anderson admit-
ted to Paydirt the IPO
had been a difficult un-
dertaking but said he was immensely proud of becoming the only new junior resources float to arrive on the ASX in 2015.
“It took a lot of effort to get the float away but all the supplementary prospec- tuses were not about readjusting our targets,” Anderson said. “We were quite unusual for an IPO in that we were do- ing work constantly through that process so the supplementary documents were designed to allow investors to see that ongoing exploration work. It was about attracting investor attention by showing that we were a genuine exploration com- pany with a new mineral system discov- ery.”
That discovery is Alt’s 70%-owned Paupong project on the southern La- chlan Fold Belt of New South Wales. The ground is 15km south-west of the town of Dalgety, not a regular hunting ground for explorers.
Paupong had seen only limited geo- chemical work in the 1970s, with Ander- son stumbling on the ground by accident.
“I was helping my son with a Year 7 school project and we came across an 1898 article about mineral discoveries in the area,” he said. “I recognised the area and had always traded in exploration shares and realised the numbers men- tioned were pretty interesting.”
The ground was pegged and a series of geochemical and geophysical pro- grammes conducted. Alt’s predecessor, GFM Exploration, identified a quartz vein system over 25sq km.
In its IPO Alt promised to focus on two deposit models at Paupong; near-
Alt Resources has found outcropping quartz veins on its Paupong project in New South Wales
a maiden 2,200m dia- mond drilling campaign planned.
“We will put four or five holes in to 500m depth to test that por- phyry model,” Ander- son said.
A second asset in Alt’s portfolio, the near- by Myalla project, will also be drilled during the year.
Anderson said Alt’s plan to launch imme- diately into drilling was in keeping with its strat- egy to present investors with a genuine explora- tion story.
surface high-grade vein-hosted, possibly intrusive related/structurally controlled gold-copper systems and deeper-lying porphyry systems.
Alt has identified a number of pros- pects at Paupong including structurally controlled quartz veins, stockwork min- eralisation and breccia mineralisation. The company received a co-funded drill- ing grant from the NSW Government in 2015 and set about drilling 2,700m be- tween June and August.
The programme was focused on the Tom’s Vein prospect and returned hits across 1,500m of strike including 11m @ 0.64 g/t gold, 4.16 g/t silver and 0.3% copper from 56m, 6m @ 1.34 g/t gold, 2.87 g/t silver and 0.2% copper from 61m, 61m @ 0.15% copper from 8m and 4.4m @ 0.98 g/t gold, 3.69 g/t silver and 0.73% copper from 100m.
“It is a genuinely new mineralised sys- tem, the first discovered in NSW in more than a decade. We have got a lot of veins at surface which we know are mineral- ised,” Anderson said. “Their grades vary but we have had up to 2% copper and 70 g/t silver. But really, the big target is the porphyry system; that’s what we will go after.”
Alt launched an airborne magnet- ics and radiometrics survey in January which Anderson said would generate ini- tial targets for drill testing.
“We’ve been doing detailed IP since October so we will have good data to analyse.”
Drilling contractor DDH1 – which con- tributed $250,000 to the IPO – was due on site before the end of January with
“The company has been constantly exploring and will con- tinue to now we are well funded,” he said. “This is a new, large system and we have
barely scratched the surface.”
He said investors had responded posi-
tively to the strategy with a number of larger shareholders coming onboard late in the IPO period.
“We picked up a few big investors in November/December, which was good.”
The company received a drilling grant from the NSW Government last year and Anderson said there were a number of parties watching Alt’s progress to see how big Paupong would become.
“We are still being watched from differ- ent areas. The Government has backed us and we have already had larger Aus- tralian companies come and talk to us about various scenarios further down the track,” he said.
Alt was a rare entry to the IPO market in 2015 but Anderson said the company believed it was the best avenue for get- ting Paupong funded.
“You either IPO or you backdoor list, which comes with a lot of disgruntled shareholders who are usually only in- terested in getting some of their money back,” he said. “This was a cleanskin IPO and I think investors liked that. We got the attention of those who liked the risk profile and we carried it through.”
– Dominic Piper
AUSTRALIA’S PAYDIRT FEBRUARY 2016 PAGE 35


NEW FLOATS
The Class of 2005: Where are they now?
Looking back a decade, 2005 was the year the great modern resources IPO boom truly picked up momentum.
The ASX welcomed 66 new minerals and oil and gas companies to its bourse in 2005, up from 62 the year previously. New listings continued to grow in the years that followed as the “commodity super-cycle” took hold.
But how did those early investors fair? A decade on – and with new listings now at their lowest ebb in a generation – Paydirt takes a look back at the metals companies in the IPO Class of 2005 to find the winners, the losers and the hangers-on.
Abra Mining Ltd: Listed at 25c on the back of its namesake zinc-lead-silver de- posit. With the project still not developed, shareholders can be satisfied with Hun- nan Copper’s 40c/share takeover of Abra in July 2011.
Accent Resources NL: Currently ac- tive and trading at 10c/share at the time of print. It is now 54% owned by Chinese group Xingang Resources. Divested its wholly-owned assets but recently made a $4 million investment in West Austral- ian mineral sands miner MZI Resources Ltd. (See page 26-27)
Alexander Resources Ltd: Listed with a suite of Victorian gold assets. Changed names to Castlemaine Gold- fields in 2006 and was acquired by Sin- gaporean company LionGold Group in 2012.
Australis Mining Corp: Listed in March but didn’t see out the year, enter- ing administration in October 2005.
Auzex Resources Ltd: Soon switched from gold in Eastern Australia and New Zealand to uranium in Namibia (as Eron- go Energy from 2006) and is now Ex- plaurum Ltd with gold assets in WA and the DRC.
Bannerman Resources Ltd: One of the first listings of the modern uranium boom and still going with its Etango urani- um project in Namibia. Interestingly, Ban- nerman listed after uranium went from $US7/lb in 2000 to $US35/lb in 2005. The price eventually reached $US100/lb but has now languished around $US35/ lb for six years.
Bass Metals Ltd: A survivor, the com- pany got into base metal production in Tasmania before running into trouble. It then avoided a predatory takeover by Singaporean company LionGold and has recently moved into graphite in Mada- gascar.
Buka Gold Ltd: Changed name to Fe Ltd in February 2010 when it acquired a suite of WA Mid West iron ore assets. In September 2015, it changed even more dramatically, acquiring an online gaming company.
Carrick Gold Ltd: Despite a name change to KalNorth Gold Mines Ltd in October 2012 and its subsequent major- ity acquisition by a Chinese group, the company is still exploring and developing in WA.
Contact Resources Ltd: Switched names to Contact Uranium in June 2007 to reflect a change in commodity focus. It has been called Ram Resources Ltd since December 2008 and is now hunt- ing nickel in WA’s Fraser Range and West Kimberley districts.
Curnamona Energy Ltd: Was spun out of Havilah Exploration NL but was brought back into the parent company just five years later as the uranium boom dissipated.
Diatreme Resources NL: Still devel- oping its mineral sands assets in the Eu- cla Basin, it is now controlled by Chinese interests. (See page 29)
Drake Resources Ltd: Still exploring but its geographic focus has switched
from New South Wales to Scandinavia.
Echelon Resources Ltd: Follow- ing uranium exploration success in the Northern Territory it adopted the name Fusion Energy Ltd in August 2007 (hav- ing floated on the back of iron ore as- sets). Fusion was acquired by Paladin Energy Ltd in 2009 for a 59% premium.
Eldore Mining Corporation: Origi- nally a gold miner in the Philippines, the company switched focus to Burkina Faso (as Stratus Resources) in June 2012 and since December 2014 has been explor- ing for graphite in Canada under the Ar- diden Ltd banner.
Elemental Minerals Ltd: Having dis- carded its WA base metals portfolio, the company has enjoyed strong interest in its Republic of Congo potash projects and was trading at around 18c/share in January. (See page 60)
Energy Metals Ltd: Still involved in uranium in the Northern Territory and WA. Since September 2009 it has been 66% owned by the China Uranium De- velopment Company, a division of China General Nuclear Power Group.
Graynic Metals Ltd: Switched from WA and NSW to Canada in March 2010 (under the new name Xanadu Resources Ltd) and continues to develop the Lynn Lake nickel project in Canada under the Corazon Mining Ltd banner.
Hindmarsh Resources Ltd: The Adelaide-based uranium explorer was acquired by Canadian company Mega Uranium Inc in July 2006 for 78c/share, a
PAGE 36 FEBRUARY 2016 AUSTRALIA’S PAYDIRT


near fourfold premium to its listing price.
Hodges Resources Ltd: Moved from base metals in WA to coal in Botswana but that country’s infrastructure issues have seen the company’s efforts stall. Hodges was suspended from the bourse in August 2015 for failure to pay listing fees.
Iron Ore Holdings Ltd: One of the un- doubted success stories of 2005 IPOs, IOH climbed from 20c to $3/share before the end of its first year. It and its Pilbara iron ore projects were eventually ac- quired by BC Iron Ltd in 2014 for $250 million.
Kalgoorlie-Boulder Resources Ltd:
The explorer had a mixed bag of gold, uranium and oil and gas assets. It changed names to Matsa Resources Ltd in January 2009 and is now exploring for copper in Thailand and nickel in WA.
Kentor Gold Ltd: Changed name to KGL Resources Ltd in August 2013 as focus switched from gold in Kyrgyzstan to copper in NT with its Jervois project.
Korab Resources Ltd: Still with An- drei Karpinski in the chairman’s role and still developing the Batchelor magnesite project in NT but also has gold interests in Ukraine.
Marathon Resources Ltd: Fell foul of the South Australian State Government following environmental problems on its exploration projects. Has since changed name to Leigh Creek Energy Ltd and is trying to develop in situ gas operations around the historic coal mining centre.
Maximus Resources Ltd: One of many South Australian-focused compa- nies to list in 2005, Maximus still retains Bird-in-Hand and its other Adelaide Hills gold plays but is spending most its time on the Spargoville gold project in WA.
Minotaur Exploration Ltd: Created following Minotaur Resources’ discov- ery of Prominent Hill and the subsequent merger with Oxiana. Minotaur recently returned to the region to find replicas. It also retains much of the same manage- ment, with founding managing director Derek Carter and Tony Belperio still on the board.
Monaro Mining NL: Undergone a number of name and commodity chang- es since listing with a focus on uranium exploration in Kyrgyzstan. It is now being used as a backdoor listing for a group of
Republic of Congo copper assets cur- rently owned by British Virgin Islands- registered Shenglong International In- vestments.
Monax Mining Ltd: The company looked to be onto a winner with its Punt Hill IOCG discovery in SA but couldn’t get it into development. Monax is still ex- ploring in SA however.
Norton Gold Fields Ltd: Switched from Gladstone, Queensland to Kalgoor- lie, WA when it acquired the Paddington operations. The company was eventually acquired by major shareholder Zijin Min- ing Group for 25c/share in July 2015.
Nova Energy Ltd: Acquired by Toro Energy Ltd in August 2007 for $276 mil- lion. The Nova assets of Centipede and Lake Way continue to form the basis of Toro’s flagship Wiluna uranium project.
Ord River Resources Ltd: After a largely uninspiring nine years on the bourse, the company changed its name to Vango Mining in December 2014 and is now looking to reinvigorate the ground around Plutonic Dome in WA.
PepinNini Minerals Ltd: Another of the SA/uranium newcomers in 2005, PepinNini is still active in both jurisdiction and commodity but has also branched out into WA with eyes on the Musgraves. It has also flirted with projects in Argentina.
Petra Diamonds Ltd: Became part of the ASX after its takeover of Crown Diamonds NL in June 2005 but delisted in March 2007. The AIM-listed company is still enjoying some success with its Southern African diamond portfolio.
Queensland Ore Metals Ltd: Despite twice changing its name – first to Planet Metals then to Cannindah Resources Ltd – it is still working on the Cannindah cop- per-gold project in Queensland, an asset in its float portfolio.
Regal Resources Ltd: The company moved out of the WA gold scene and into copper in the DRC copper four years ago where it is developing the Kalongwe pro- ject.
Scimitar Resources Ltd: Switched name to Cauldron Energy Ltd in 2009 after Tony Sage became a major share- holder. The company is still exploring for uranium in WA.
Segue Resources Ltd: Having listed with one NT project, the company has
now diversified into WA.
Southern Gold Ltd: On listing the company split itself into gold and ura- nium exploration arms. A decade on it is largely gold-focused and has recently started a toll-treatment agreement with Metals X Ltd over its Cannonball gold de- posit in the Eastern Goldfields, WA.
Stellar Resources Ltd: The compa- ny’s float was based on using innovative airborne gravity techniques to make dis- coveries in NSW, SA, Victoria and Tas- mania. However, in recent years its focus has been sharpened on its Heemskirk tin project in Tasmania. (See page 43)
Talisman Mining Ltd: Talisman has enjoyed a strong market performance over the last 18 months thanks to fantas- tic drilling results from its Monty copper project in WA. The ground Monty is on was in the company’s original IPO and has lately been joined by the Sinclair nickel mine, first developed by Jubilee Mines.
Territory Iron Ltd: A Michael Kier- nan-managed venture, Territory got the Frances Creek iron ore mine in NT up and running before hitting trouble. The company was eventually acquired by the Noble Group in June 2011 for $133 mil- lion.
Uranex NL: Listed with a portfolio of uranium tenements in Tanzania and had worked them for eight years before mak- ing an impressive graphite discovery at Nachu. The company, renamed Magnis Resources NL, is now one of the leading lights of the emerging graphite market.
Uranium Exploration Australia Ltd:
UXA shares have been suspended since September 2012 but hope is on the ho- rizon. The company exited two years of administration in May 2015 and is now looking to relist and begin exploring its portfolio of uranium assets in NT and SA.
Vital Metals Ltd: Following a de- tour through Burkina Faso gold, Vital is once again fully focused on its Water- shed tungsten project in Queensland. It is, however, on the lookout for a new JV partner, JOGMEC having recently walked away.
Washington Resources Ltd: PGMs to the north of Perth was the company’s original, ambitious, target but since a change of name to Ferrum Crescent Ltd in 2010 it has been focused on the Moon- light iron ore project in South Africa.
AUSTRALIA’S PAYDIRT FEBRUARY 2016 PAGE 37


TASMANIA
Tin still tops for Metals X in Tas
Tasmania’s mining sector and the glob- al tin industry are struggling, however, Metals X Ltd has found a sweet spot in both.
Originally making its name as a tin miner, Metals X’s attention has recently been on consolidating assets in Western Australia, but its tin plays remain far from an afterthought.
“Renison is in the best state it has probably been in its history,” Metals X executive director Warren Hallam said of the 50/50 JV with Yunnan Tin Group on Tasmania’s west coast.
“Four areas are open underground and the process plant recover-
ies are also historically
high. Costs have been
was added to the concentrator at the end of June, resulting in increased tonnes mined (11%) and processed (14%). Only a minor seismic event in August, which limited access to the South Renison area, prevented better mining and pro- cessing outcomes.
The process plant was shut down for five days following the seismic event but was quickly returned to functionality and the concentrator is operating at 700,000 tpa, above nameplate capacity, with his- torically low tails and high recoveries re- ported.
Metals X is Australia’s largest tin pro-
ducer and has been able to withstand a tin price plunge which has seen tin dip from almost $US20,000/t in January 2015 to $US13,845/t at the time of print.
Increased tin output from Myanmar has balanced the market somewhat, but indications are that supply has peaked with availability on the LME increasingly tightening.
However, Hallam isn’t expecting a surge in tin prices anytime soon, certain- ly nothing dramatic that would trigger the start of its Rentails project.
Rentails, also a JV with Yunnan, is a tailings re-treatment project which requires a tin price of
Renison, on Tasmania’s west coast, is one of the bright sparks of the island’s otherwise moribund mining sector
kept well under control, the only problem being that tin [prices] haven’t behaved. Renison is certainly going well, but tin price improve- ments would be most wel- come.”
Like many Australian producers across a host of commodities, a saving grace for Metals X has been the US dollar ex- change rate which trans- lated into EBITDA of $3.15 million from the $20,933/t it received for its tin in the September quarter.
It was a good quarter for Renison after equipment
Tin production from Renison is expected to continue for a number of years with reserves of 86,000t representing a 10-year mine life
$25,000-27,000/t.
“That is the price the
JV wants for the project to make it viable and for a proper IRR for that type of project,” Hallam said.
Therefore, Rentails and the Mt Bischoff project, 70km from Renison, will remain idle for now with maintaining production of 7,000-8,000 tpa @ AISC of $18,000/t from Renison the focus for Metals X in Tasmania.
And it appears Renison will keep Metals X con- nected in tin for some time yet, with reserves of 6.7mt @ 1.29% tin for 86,000t representing a 10-year
PAGE 38 FEBRUARY 2016 AUSTRALIA’S PAYDIRT


mine life, while current resourc- es of 12.9mt @ 1.46% tin for 188,000t equate to 18 years of production.
“If we didn’t believe in the tin market we would have dropped out a long time ago,” Hallam said.
“Globally, there is no [sig- nificant] production coming on stream and we are making $3.5 million cash flow with no man- agement or cash drain on the project. Geological understand- ing and interpretations [at Reni- son] are very good and the man- agement team we have there are also very good which makes it much better and easier to add resources and reserves. We are well and truly set up well for the future.”
Hallam said even when tin prices were good it was difficult to grow in the tin space, which was why Metals X had pursued expansion in the gold sector.
In 2015, the company made four acquisitions, the last be- ing Silver Lake Resources Ltd’s Comet project in the Murchison for $3 million, as it chases its growth target of 500,000 ozpa production by 2019/2020.
The company currently has six gold projects with over 17 moz of resource inventory plus four processing plants with 5.5 mtpa capacity on its books.
Metals X has four underground mining areas in play at Renison
though, but we are heading close to the bottom and now is the time to start consolidating,” Hallam said.
There is a small amount of copper produced from Renison and Metals X is looking to ex- pand its exposure to the red met- al via a takeover of Aditya Birla Minerals Ltd.
Aditya has knocked back an offer valuing it at about 27c/ share (Aditya was trading at 17c/ share at the time of print) which was due to expire on January 21.
The jewel for Metals X is Adi- tya’s underperforming Nifty cop- per mine in WA.
“It has been 12 weeks now and no-one else has turned up [with a superior offer],” Hallam said.
“We are looking at other pros- pects in the copper space and can take our bat and ball [and walk away from Aditya offer].”
Hallam said the company was surprised that Aditya had not sat down to talk about the offer and said it would waive the 90% mini- mum acceptance condition for its offer should it obtain a 20% or greater relevant interest in Aditya before mid-January.
At the time of print, Metals X extended its off-market takeover bid to February 24 after it waived the minimum acceptance condi- tion. Aditya shareholders have
In October, first gold pour from the Central Murchison project (CMGP) was celebrated. The mine is poised to be the company’s most significant operation.
Forecast production from CMGP in FY2017 is estimated to be
180,000 ozpa which will grow
to 230,000 ozpa in FY2020.
more, the company has not limited itself to gold and tin.
“Copper is in the same position as gold was two or three years ago and con- solidation is going to happen. We’re not going to see prices accelerate quickly
the opportunity to switch its holding in the company to Metals X shares at ratio of one Metals X share for every 4.75 Aditya shares.
– Mark Andrews
“CMGP at 200,000 ozpa doubles our production [FY2014/15 150,900oz], while Fortnum [Grosvenor project acquired from RNI NL] is scheduled for production in mid-2016. It is getting harder to find these types of acquisi- tions in gold where capital has been sunk and we have been lucky to have acquired such projects when we did,” Hallam said.
While ready-to-go, infra- structure-rich gold opportuni- ties might be drying up, Met- als X will assess the viability of potential projects as they become available. Further-
Despite tin prices falling to $US13,845/t at the time of print, Renison is cash flow positive for Metals X
AUSTRALIA’S PAYDIRT FEBRUARY 2016 PAGE 39


TASMANIA
Riley waits in the wings
Once a darling of Tasmania’s junior scene, Venture Minerals Ltd has re- emerged with a new copper-lead-silver
prospect, Thali, this time in north-eastern Thailand.
Recent surface samples grading up to 1,860 g/t silver and 27% lead has further reinforced Venture’s strategy to pursue Thali over any of its prospective projects in Tasmania’s north-west.
While its Tasmanian plays are on the backburner, the potential at the Mt Lind- say tin-tungsten, Riley and Livingstone DSO iron ore opportunities is not forgot- ten. Riley in particular is still a focus for Venture.
Last year’s Federal Court decision to dismiss an appeal against the approvals for Riley proved a boon for the project, essentially paving the way for any future development of the iron ore mine.
Venture was also awarded costs and it is actively seeking recovery of all legal costs from this case and a previous ac- tion.
Despite fighting environmental ap- peals against Riley, Venture has man- aged to complete a significant amount of pre-production work and has the project ready for mining.
The sticking point though is the iron ore price.
The Riley DSO project, 10km from Mt Lindsay, is ready to go, however, iron ore prices will dictate eventual start-up dates
At the time of print, iron ore was fetch- ing $US41.6/t, still way below anything to justify a junior brining on an iron ore mine, even one of Riley’s ilk.
Hematite resources of 2mt @ 57% (in- dicated) and 1.8mt @ 57% (probable re- serves) at Riley are accompanied by the nearby 4.4mt @ 57% Livingstone DSO
deposit.
The high-grade nature of the deposits,
plus all necessary requirements in place to start mining, means Venture can flick the production switch on at any time the iron ore price demands it.
Grange keeps the pellets coming
Despite a year in which record pellet production was achieved, Grange Resources Ltd has not ruled out job cuts
at its Savage River operation in Tasma- nia.
Iron ore price dilemmas and poor de- mand for its pellets has forced the com- pany to warn that redundancies could not be ruled out.
“An optimisation strategy, which is ex- pected to be completed early in 2016, is part of Grange’s overarching strategy to continue reducing costs, maximising margins and retaining free cashflow. Due to the continued weakness in the iron ore price and subdued pellet demand com- bined with the optimisation strategy, re- dundancies maybe made,” the company said in a statement in early January.
Like many iron ore players, cost reduc- tions and efficiency improvements were the order of 2015 for Grange and it man- aged to make some significant inroads
during the September quarter.
C1 cash operating costs were reduced
by $9/t in the September quarter to $79/t, with the company receiving an average price of $86.72/t FOB at Port Latta com- pared with $87.36/t in the June quarter.
On the back of reduced C1 costs Grange reported record pellet production of 650,000t to sustain a cash position of $139 million to the end of September.
The company was on target to achieve production of 2.5mt of high-grade mag- netite concentrate by the end of 2015.
“While the iron ore market demand is uncertain, we are still confident that our high quality, low impurity pellet product has an important place in the market,” Grange chief executive Honglin Zhao said.
PAGE 40 FEBRUARY 2016 AUSTRALIA’S PAYDIRT
Despite record pellet production during 2015, Grange has not dismissed making redundancies at Savage River


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TASMANIA
Australian Bauxite looks beyond China
Australian Bauxite Ltd chief executive Ian Levy told Paydirt China must not be re- lied on to take his company’s Bald Hill material.
Bald Hill, in Campbell Town, south of Launceston, was Australia’s first new bauxite mine in over 35 years when operations started in Decem- ber 2014.
The company was targeting two shipments during 2015, however, “low cost, oppor- tunistic bauxite exports from Malaysia flooding the Chi- nese and other markets in the months before the Malaysian wet season”, stifled Australian Bauxite’s maiden shipment in late November.
The ensuing Chinese New Year period is not likely to help Australian Bauxite achieve first sales.
To conserve cash, produc- tion and haulage of bauxite from Bald Hill was suspended on a temporary basis in mid- January with full scale produc- tion and haulage of a second cargo to begin once a sale of the first shipment is received.
Levy said while a relation- ship with the Chinese market remains a long-term focus, Australian Bauxite had to broaden its export horizons.
“This means we need to di- versify our markets,” he said.
Australian Bauxite has 37 bauxite tenements on the east coast, with Bald Hill in Tasmania its first operating mine
gering how low morale was,” Levy said.
“It appears most of their heavy industry is depressed compared with previous years. Most other economies would be delighted with what they are doing, but in develop- ing terms they are more sub- dued than in previous years. In their official statistics we think a lot of the consumer activity in China is disguis- ing their heavy industry set- backs.”
While Australian Bauxite and Rawmin work to offload the bauxite for an appropri- ate price, routine rehabilita- tion and small-scale sales of bauxite ex-mine will continue from Bald Hill.
Meanwhile, the company’s research and development project – TasTech – remains on schedule.
TasTech is a project aimed at developing a low-cost pro- cess that separates raw baux- ite into three products: met grade bauxite for alumina re- fineries, cement grade baux- ite and fertiliser grade bauxite.
Producing three products will give Australian Bauxite the opportunity to diversify into different markets.
Levy said the small-scale nature of its operations means Australian Bauxite would nev-
“We should not just rely on China. We believe the long-term relationship is with China because they have the world’s largest aluminium industry by a long way, but we need to diversify our outlets and not rely on China. Our agents flew from China to another destination and they are in discussions with other customers.”
Clientele in the Middle East, India and Australia are other logical parties for Australian Bauxite to sell to.
“There are other exotic locations that will always take our product but they are usually on a one-off basis and are unlike- ly to be a long-term customer, we want to avoid that,” Levy said.
The company does have an off-take
agreement with Rawmin Mining and In- dustries Pvt Ltd from India for all bauxite produced from Tasmania.
Terms of the deal, struck under a free- on-board stowed and trimmed (FOBST) basis, include Rawmin taking on ship- ping responsibilities based on best price tenders secured by either party.
Rawmin’s off-take is for 200,000 wet metric tonnes of bauxite to the end of March this year which will increase to 1.5 mtpa from April to 2018.
Levy said both parties were frustrated with negotiations in China where the mood has changed.
“I must admit I was a little bit shocked from [recent] trips to China, it was stag-
er be in the lowest quartile in costs but its material stacked up against competitors. “We do have the ability to focus on a good clean product, the performance of our bauxite is that it is an excellent mate- rial for blending. It will fit into any circuit without any difficulty because it doesn’t have any adverse elements in it and it doesn’t behave in any unusual way. It behaves extremely well compared to all other Australian bauxites and all other
PAGE 42 FEBRUARY 2016 AUSTRALIA’S PAYDIRT
bauxites,” he said.
– Mark Andrews


Stellar studies spur Heemskirk
Stellar Resources Ltd bucked the Tasmanian jun-
ior mining trend in 2015, steadfastly advancing its Heem- skirk tin project.
While a majority of its compatriots with- drew in the hope of better days to come, Stellar initiated a string of studies in a bid to increase Heemskirk’s appeal and ultimately woo a JV partner for the project.
In February, the company received a
WorleyParsons-prepared metallurgical
review of the Severn deposit, which, by
the way of a full PFS audit and devel-
opment of a testing programme using a
“global composite” representing typical
Severn mineralogy, composition and tin
grade, concluded improvements to St“el- particularly the 15.7% of savings made of a large ore sample to confirm process
The paper also surmised broader application of the pro- cess fix could increase Heem-
thus boosting its NPV by 34.2% to $82 million.
June brought more good news
for the junior – a Teale and Associates geological optimisation study ratified the history and composition of Heemskirk’s mineralisation.
Not only did the report confirm Stellar’s suspicions that Heemskirk’s mineralisa- tion persisted at depth, but it provided the company a focus for resource drilling and future exploration.
Teale and Associates’ report also in- cluded an assessment of 2D seismic geophysical lines to better define Heem- skirk’s subsurface structures.
That interpretation identified sev- eral more faults than those previously mapped at surface or in drill core sam- ples and demonstrated the potential for faults to tap granitic fluids, reinforcing the company’s belief that highly prospective zones existed between its deepest 500m drill holes and the top of Heemskirk’s granite.
The last report to come across man- aging director Peter Blight’s desk in 2015 was by far the best – a PFS optimisation
the project into production.
various environmental studies. Hardly satisfied with results to date, Blight reckons Heem- skirk’s DFS will unveil greater opportuni-
ties for the project.
“Testing the geological concept and fo-
cusing on areas where we think we have an opportunity to identify higher grade is important,” Blight said. “We haven’t tested everything or all of the resources yet, so there is still upside there that we would hope to see. On the cost side, while we have had an over- view at a PFS level, we still think there are op- portunities to sharpen the pencil when you get down to the DFS level. There is quite a bit to look forward to once we get the pro-
cess going.”
– Rhys Dickinson
StellarhasaddedsignificantvaluetoHeemskirkviamultiple studies over the past two years
prising cash and non-cash items, is $US15,000/t, which puts us at about the 40th percentile on the cash curve.”
Stellar has al- ready laid out a post-JV plan of attack, one cen- tred on developing Heemskirk’s DFS with haste via a pri- ority 24,250m dia- mond drilling pro- gramme targeting the project’s Sev- ern, Queen Hill and
study that bolstered Heemskirk’s NPV by 62% to $99 million, reduced its pre-pro- duction capital cost by 12.9% to $110.3 million and slashed its operating costs by 8.2% to $21,355/t tin.
Montana deposits.
Other planned works include testing
lar’s process flow sheet could increase the deposit’s recoveries by at
least 7.4%.
Blight told Paydirt he was blown away by the results of the optimisation study,
Severn’s current metallurgical circuit using representative samples from Up- per and Lower Queen Hill, Montana and blends from all deposits, pilot-scale met- allurgical variance trials and the analysis
design, equipment sizing, characterisa- tion of tailings and concentrate The focus for us now is to quality, development of a de- look for a partner out of the tailed mine plan and production schedule, drafting an engineer- ing study of the processing plant skirk’s total recoveries by 4.5%, tin industry to JV with us and take and completion of the project’s
at the processing plant and on surface
infrastructure, which accounted for 85% of the overall reduction in capital costs.
“The focus for us now is to look for a partner out of the tin industry to JV with us and take the project into production,” Blight said.
“There are certainly a number of things that have made the project more attractive for a partner. One is what we have achieved on the optimisation work and the other is the weaker Australian dol- lar and, clearly, a for- eign investor’s money goes a lot further than it did a couple of years ago in Australia. We’ve also improved our position on the cost curve now. In US dol- lar terms, our full cost of production, com-
Peter Blight
AUSTRALIA’S PAYDIRT FEBRUARY 2016 PAGE 43


TASMANIA
King Island fights for future
King Island Scheelite Ltd managing director Jo- hann Jacobs is preparing for
one of the fiercest battles of his mining career.
Armed with a top-quality, cost-effective and poten- tially long-life asset, Jacobs intends to wage war on a dubious debt market in an effort to fund the company’s promising Dolphin tungsten project.
King Island took its first
real step towards combat in
mid-2014, finding an ally in
Tasmanian Minister for Resources Paul Harris who granted Australian Tungsten Ltd, a wholly-owned subsidiary of the company, a mining lease to develop the project.
King Island sprang into action following the approval, commencing dewatering of Dolphin’s main pit which had been left flooded since historic operations ceased at the mine in 1992.
Over a period of three months the company pumped more than 450 litres per second from the pit and by mid-Oc- tober 2014 the asset was no longer wa- terlogged.
King Island drilled Dolphin for the first time in 12 years later that month, insti- gating a 1,670m diamond drilling pro- gramme to validate historical data and sure up the project’s development plan.
Jacobs told Paydirt the drilling not only confirmed King Island’s vision for Dolphin but encouraged the company to commission a pit optimisation study to explore the project’s full open-pit po- tential.
“Our original thinking was to have a four-year open-cut mine,” Jacobs said.
“Talking to potential financiers they deemed that too short, so we embarked on an exercise to increase the life of the open cut.”
Simultaneously, King Island initiated a desktop study to evaluate extensions to the mine’s historic underground opera- tions.
In April, King Island announced its op- timisation study had cracked Dolphin’s code and unlocked up to seven years open-cut mining, while its underground assessment added at least six years of sub-surface work to the project.
Optimisation soon became 2015’s theme and by the end of the year King Island could boast a 9.6mt @ 0.9% tung-
It took more than three months to dewater the Dolphin project
in discussions with two par- ties to replace Dolphin’s proposed diesel generation power station with a hybrid power plant, utilising wind and solar energy.
Jacobs said the case for incorporating renewable energy into the mine plan was still compelling.
“With total diesel we are looking at around 42c/ kWh,” Jacobs said. “By al- lowing for a combination of wind, batteries, solar and obviously diesel, which you
sten trioxide for 86,000t tungsten trioxide indicated resource, 1.9mt @ 0.55% for 22,900t tungsten trioxide reserves and a mining plan with 15 years-plus develop- ment upside.
The only apparent blemish was an in- crease to Dolphin’s strip ratio (from 3.1:1 to 9.7:1) – and even that was a misnomer.
“We are constrained by the fact that the Bass Strait is fairly close to the mine,” Jacobs said.
“As you go deeper you have to increase the footprint and size of the excavation. We are constrained by not moving into the Bass Strait, but geologically the walls were extremely competent to increase the angle of the walls and go deeper. We are moving from -80m to -140m RL. Ob- viously the size of the hole will increase proportionately as we go deeper, but the grade goes from 0.6% to close to 1% at the lower levels. The underground on average is about 1.1% tungsten, which makes it one of the richest deposits in the world...and that offsets the increased mining cost.”
At the time of print, King Island was on the cusp of releasing Dolphin’s DFS, which Jacobs said would highlight the project’s capacity to compete with the world’s most prominent tungsten mines.
“Our capex is in the order of $80-90 million, including working capital; that is much lower than any other operation,” he said.
“For example, Wolf Minerals Ltd’s Hemerdon project is costed at $240 mil- lion. Our opex is also in the lower quar- tile.”
In a mining economy where tightening purse strings has become the norm, not the exception, King Island is also think- ing outside the box to reduce costs at Dolphin.
This time last year the company was
have to have as a back-up, we think that we can reduce our costs from around 42c/kWh to about 25c/kWh, which will make for a significant cost differential.”
Jacobs’ tone changed noticeably as the topic of conversation switched to what lay ahead; enthusiasm dissipating into self-doubt.
For all the confidence Jacobs has in Dolphin, he cannot muster the same as- surance for the greater tungsten outlook.
“The tungsten spot price has been on a slippery slope for the last three years,” he said.
“The prices three years ago, when we embarked on looking at redeveloping the mine...was $US45,000/t and it’s current- ly $US16,000/t. The Australian dollar has come off and cushioned some of that, but nowhere near enough to compensate for that production price. Of late, within the last three weeks, we have seen APT prices kicking up in China – they’ve in- creased by about 16% the last three weeks – but the European price hasn’t moved. I think it will be challenging to fi- nance the project at this point in time.”
Jacobs said King Island would persist with wooing potential off-takers, which held the key to Dolphin’s funding.
“The first quarter or half of the year we will be full throttle on securing definitive off-take agreements, and we are already a long way down the track on that front,” he said.
“If we can raise the debt and equity in the first quarter, we’ll be in production the first quarter of 2017. If we are not able to raise the requisite funds, we may put a ribbon around our DFS and wait three or four months until the market is more enthusiastic about the project.”
– Rhys Dickinson
PAGE 44 FEBRUARY 2016 AUSTRALIA’S PAYDIRT


VICTORIA
Stavely sniffs new discoveries
Stavely Minerals Ltd has made a bright start to 2016, identifying a promising new porphyry drill target at one of its pro-
jects in western Victoria.
A recent geophysical survey over the
Toora West prospect, within the Yarram Park project, revealed a new mag- netic anomaly which Stavely will look to drill in May.
Yarram Park, immediately west of Stavely’s namesake copper-gold project which hosts the Thursday’s Gossan deposit, was acquired from Diatreme Resources Ltd in April last year.
Stavely managing director Chris Cairns said the closet drill hole was about 1.5km from the new target.
“Diatreme had done some ear- ly gravity work that had come up with an interesting anomaly, so we planned some IP over that feature and it has come up trumps,” Cairns told Paydirt.
“We’ll do three more lines of IP just to refine the target and pretty shortly after we’ve got that data we’ll get on the ground and drill the best target.
“The [Victorian] Government has got some co-funding initiatives in place and we’re hoping that we’ll be fortunate enough to get some fund- ing to drill this target at Yarram Park.”
The success at Yarram Park adds to the list of new drill targets Stavely has identified in the past year, in- cluding IP anomalies at the Carroll’s
VMS prospect, the Mt Ararat VMS de- posit and the Cathcart Hill gold prospect, all within the company’s Ararat project area.
Stavely was also able to lift the re- source estimate for Mt Ararat by 11% to
1.3mt @ 2% copper, 0.5 g/t gold, 0.4% zinc and 6 g/t silver, including an indicat- ed resource of 250,000t @ 2.2% copper, following last year’s drilling programme.
“We did a reasonable amount of drill- ing extending the deposit to the north... but I suppose what excited us most was the new prospects we found up
there,” Cairns said.
“The Carroll’s prospect came up
as quite a strong soil anomaly, so we’ve drilled that and now we’re waiting on the results. We also have a Stawell-style gold target we’ve drilled and we’re waiting on the re- sults from that as well.
“Right now we’re extending our soil sampling surveys. At this time of year there’s quite a fire danger so we leave our vehicles out on the roads and we go wandering through the paddocks. It’s ideal conditions to be taking soil samples because everything is dry and you can see the rocks.”
Cairns and technical director Jennifer Murphy spent more time in the field than in the company’s Nedlands office in 2015, as Stavely looked to make every dollar count in a trying market for junior explorers.
The Canadian-born geologist ex- pects that trend to continue in 2016 because “in this market we don’t add any value in the office, so the managing director has got to be log- ging core and taking samples”.
Stavely has identified several new drill targets within the Ararat project area
Chris Cairns
AUSTRALIA’S PAYDIRT FEBRUARY 2016 PAGE 45


VICTORIA
Shareholders showed they were still prepared to back Stavely – founded by former Integra Mining directors Cairns, Murphy, Peter Ironside and Bill Plyley – helping the company raise almost $3 mil- lion via a share placement and separate rights issue in the middle of last year.
“I think it was just one of those situa-
tions where there was a window open
and possibly a little bit of a sense of op-
timism that maybe the worst was behind
us in terms of funding for ex“ploration,” said. Cairns said.
A high-grade discovery at Thursday’s Gossan is high on Stavely’s wish list for 2016
and listing on the ASX in May 2014. Despite some positive exploration re- sults, Stavely has been unable to strike a major discovery on its extensive ground package in western Victoria, but Cairns remains undeterred and believes inves-
tors share his optimism.
“I think people are still interested in the
“We’ve certainly learnt a lot along the way, particularly our first round of drilling at Thursday’s Gossan,” Cairns said.
“We hit a large low-angle structure that threw in a complication that we and the previous explorer were unaware of, so it did take us about six months of fairly in- depth technical work to understand what the complications for that were.
“We’ve got some good targets that we’ve been working up that we want to drill after the heat dissipates and we can
excitement of a discovery and the value proposition it brings, I don’t think that aspect of the industry has gone,” Cairns
get back into the paddocks with machinery.”
As for his wish list for the indus- try, Cairns hoped investor focus would return to metals given the horrific price slide experienced by the bulk commodities in recent months.
had some pretty strong “I don’t think we will see the
“Since that time I think
the market has turned
well and truly for the
worse, so perhaps we
were just quite fortunate of a discovery and the value in our timing, notwith-
Ithinkpeoplearestill interested in the excitement
proposition it brings, I don’t think
standing that we felt we that aspect of the industry has gone. targets and some good
opportunities. Those
have always been the fundamental re- quirements as far as market conditions go.”
Cairns is no stranger to taking a com- pany from exploration play to profitable miner, having guided Integra through that process before offloading his then- booming gold business to Silver Lake Resources Ltd for $426 million in 2012.
The team behind Integra then founded Stavely as a private company the follow- ing year and picked up the Ararat and Stavely projects from BCD Resources NL, before raising $6.1 million for an IPO
“Perhaps the demographic of people that are still willing to put money forward has shrunk to a point where there’s very few of them, but quite frankly, exploration won’t turn around until we get greater ap- peal in terms of the investor base and get more generalist people investing back into exploration.”
Cairns has placed high-grade discov- eries at Yarram Park and Thursday’s Gossan at the top of his wish list for the year ahead, declaring he is as excited as ever about the future for his company and its three projects.
bulks come back for probably a
decade, so I’d like to see investors start to discriminate between bulks and some of the metals, particularly zinc and copper, which I think have good funda- mentals,” Cairns said.
“I’d like to see at least one or the other of those metals start to move in a way that reflects the supply-demand bal- ance.”
– Michael Washbourne
PAGE 46 FEBRUARY 2016 AUSTRALIA’S PAYDIRT


Nowa Nowa on hold indefinitely
Eastern Iron Ltd has put all develop- ment plans for the Nowa Nowa pro- ject in Victoria on hold in the wake of the
iron ore pricing slump.
Just days after the iron ore price
dropped below $US40/t for the first time in more than six years, Eastern Iron con- firmed its focus would turn to new acqui- sitions and Nowa Nowa would be parked up indefinitely.
No major work has been carried out on the project, about 250km east of Melbourne, since the company reported the results of an optimised DFS in early March.
“It’s been going about as well as the iron ore price,” Eastern Iron chief execu- tive Greg De Ross told Paydirt.
“We’ve always thought it had a lot of promise, but at the moment no one is really interested in iron ore. We’ll retain Nowa Nowa but given where the iron ore price is right now, it’s fair to say we won’t be progressing it too much.”
The optimised DFS found the project could be developed for $65.2 million and churn out 600,000 tpa of an upgraded 62% iron product for cash costs of $31.4/t FOB over a mine life of almost 10 years.
Eastern Iron has also established a re- source of 9.05mt @ 50.8% iron around the Five Mile deposit since picking up the rights to the project in early 2012.
De Ross, who has been with the com- pany since late 2009, maintained Nowa Nowa was still an attractive development opportunity in the right market despite often being shunned
by sceptical investors.
“Even when the iron ore price was
reasonable, there was a fair amount of scepticism in the market because, one, it was a big iron ore project in Victoria and, two, Victoria for a num- ber of years hasn’t been at the top of everybody’s agenda in terms of a place to go and develop a mine,” De Ross said.
“It’s still relatively close to infra- structure – roads, power, townships – so it’s not a difficult development, plus it’s also a fairly discrete, high-grade deposit and it makes quite a good product.”
Eastern Iron’s decision on Nowa Nowa came as shareholders ap- proved a $2 million placement from new cornerstone investor Fortune Fu- ture Holdings Ltd.
Fortune, a BVI-registered company, is comprised of a group of private in-
Eastern Iron has temporarily shelved development plans for Nowa Nowa due to the iron ore pricing slump
vestors who are also major shareholders in some prominent listed mining compa- nies based in China.
“Their objective is acquisitions and they’re really in the market to use us as a bit of a shell to pick up some major pro- ject acquisitions, so that’s really going to be our focus over the next 12 months,” De Ross said.
“We’ll be focusing mainly in Australia and looking at base and precious metals for project acquisitions. It’s early days in
the relationship, so we’re still discussing what the strategic approach will be...but at this stage they’re more interested in advanced or operating projects, not so much exploration.”
Both Eastern Iron and Fortune hope to finalise a new acquisition in the first half of 2016.
De Ross said his company’s partner- ship with Fortune came with many ben- efits, including potential project financing arrangements.
“It’s quite a path from the cost of actually acquiring a project and then going to look for development funds, so it’s comforting to know that if you do find something you can actually go and source the funds to develop it,” he said.
De Ross said his company would entertain other project opportunities in Victoria, but admitted it was more like- ly to acquire a new asset elsewhere in Australia.
“In terms of opportunities that are categorised as being either an op- erating mine or a project that is de- velopment-ready, there’s not a lot of them around and it’s fair to say there’s probably not a lot of those in Victoria either,” he said.
“We’ll assess each project on its merits in terms of whether it has great potential or not. Fortune are no stran- gers to this, so we’re looking forward to seeing what comes our way.”
– Michael Washbourne
No major work has been carried out on the Nowa Nowa project since March 2015
AUSTRALIA’S PAYDIRT FEBRUARY 2016 PAGE 47


VICTORIA
Dart board targets gold
Dart Mining NL enters 2016 with a new board and a fresh approach. For many years the company was
focused on the development of the Mt Unicorn molybdenum project in Victoria, however, since the appoint- ment of James Chirnside as manag- ing director and Russell Simpson and Luke Robinson as non-execu- tives in
June last year, gold has taken cen- tre stage for Dart.
“We thought it made more sense to be spending more time, money and focus on developing the compa- ny’s gold assets. We’ve got 1,500sq km of tenements in north-east Vic- toria, which are polymetallic but with plenty of gold amongst that as well,” Chirnside told Paydirt.
The Australian dollar gold price has given the company impetus to pursue gold exploration, develop- ment and production projects in Vic- toria, with Mountain View the short- term priority.
“It is very small, but for us it is not
just about the size or the economics
of it, it is actually a very good pro- cess for us to go through to being
a producing company. It is quite a challenging deposit in the sense that
a bit of it is refractory and the processing and metallurgy are quite complex. Again, that is good for us to be able to have the opportunity on a small project with a view to extracting as much as we can and get- ting the highest recoveries possible,” Chirnside said.
“There is actually a lot of dirt around on our existing tenements
which is very similar to the
Mountain View deposit, so
there is the prospect of fur- ther developing some of the very similar resource types or project types on our own land.”
A small resource exists at Mountain View and Dart is systematically evaluating the project by developing a detailed geological model based on mining of near- surface mineralisation con- ducted in the 1990s, while a mining engineer has been engaged to work on a pre- liminary mine design and economic model.
Dart has received a work
Dart head of geology Dean Turnbull prepares high- grade sections of the western wall at Mountain View for blasting and bulk sampling
anomalies identified at Mountain View have indicated potential for additional mineralisation over 2km of strike length both north and south of Mountain View, with six zones warranting first pass shallow drilling and further analysis.
The company raised $200,000 late last year to help progress Moun- tain View and also fulfil expenditure requirements with JV partner North- ern Mine Ventures Pty Ltd.
Under JV terms, Dart must spend $400,000 over two years to ac- quire 50% interest in three MLs and two ELs in ground wholly owned by Northern Mine’s in central and north-east Victoria.
Immediate expenditure will be focused on bulk sampling and an initial 1,800m drill programme at the Phoenix prospect at Rushworth, central Victoria.
“Before Christmas we announced JVs on some mining licences over at Rushworth and we are concur- rently doing work on those to bring them further along. The new JV also includes some highly prospective ground over at Beechworth which is really our focus as a company given our resources and scope for man-
plan approval to extract metallurgical samples from below the Mountain View open pit and has appointed a metallurgist to conduct an ore sampling programme and gold recovery test work in order to advise on recommended processing routes.
Meanwhile, arsenic soil geochemical
aging remote projects,” Chirnside said. “As a small company we are focus- ing on small deposits, smaller resource projects because typically they are unin- teresting for larger or mid-tier producers. Therefore they are more accessible and more exploitable from our perspective and the sort of cash flow and margins that we can make from the smaller projects, which typi- cally require a shorter lead time, means that we can drop money into the bottom line for Dart Mining and its
shareholders.”
While gold is the immedi-
ate priority, Mt Unicorn and other porphyry targets with potential long-term value have been retained by Dart.
– Mark Andrews
PAGE 48 FEBRUARY 2016 AUSTRALIA’S PAYDIRT
Dart has turned its focus to gold in Victoria


In a rare example of sen- sible M&A activity in junior resources, Mantle Mining Ltd
has secured funding for its development plans and In- ternational Base Metals Ltd (IBML) a suitable use for its considerable funds.
pany’s initial focus will be on the Norton gold mine, 100km south of Gladstone, Queens- land.
A historic producer with records going back to the 1930s, Norton was last mined in 2004/05. Mantle produced a scoping study last year which showed 62,500t could be mined over two and a half years to produce 10,340oz goldbywayofa58g/tcon- centrate. Capex was estimat-
Mantle, IBML team up
The two companies an-
nounced in January they
would merge, in the process
aligning IBML’s $16.5 million
cash balance with Mantle’s
two-mine development strat-
egy focused on Victoria and Queensland.
Under the terms of the agreement, IBML shareholders will receive 79.77 mil- lion Mantle shares which will represent just over 50% of the issued capital of the merged entity. IBML will nominate three new Mantle board members (bringing the total to six) and the Mantle management will remain in place.
Such merger-of-equals deals are rare in the junior resources space but Mantle managing director Ian Kraemer said the deal had been put together swiftly be- cause egos had been put aside as the two sets of management had been like- minded.
“It has all come together in a month,” he told Paydirt. “When you put the three ingredients of projects, cash and expe- rienced management together the op- portunity is obvious. If minds in the two companies are alike, you can do the deal pretty rapidly.”
The merger with IBML is the culmina- tion of a very active six months for Mantle which saw the company investigate myr- iad ways to fund the redevelopment of its Norton gold project in Queensland and secure an option over a second set of near-production gold assets in Victoria.
Kraemer believes Mantle’s decision to press ahead while other juniors went into hibernation was beginning to be appre- ciated in the Australian investment com- munity.
“There are a lot of investors looking for opportunities but not a lot of junior companies out there getting on with business,” Kraemer said. “We took the decision to stop exploration drilling and buy a near-production asset which could generate cash quickly.”
Investor interest may have been piqued but with equity markets still languishing, Mantle had looked for other ways to ac- cess funding.
“There is a lot of experience in man-
Mantle Mining is the latest company to take on the Morning Star gold mine in eastern Victoria
agement and we looked at every kind of funding option we could,” Kraemer said. “But, the fundamental belief was that debt should only be accessed once we had sufficient mining reserves to pay it off and we didn’t want to dilute share- holders. It is about having balance sheet leverage.”
The IBML solution has avoided either scenario with shareholders of Mantle (market cap around $6 million) set to take nearly 50% of a merged company which will have development assets and $16.5 million in the bank.
“M&A presented itself as the cheapest value equity injection we could get in this market,” Kraemer said. “This deal means we will be able to put two mines into pro- duction with zero debt and no need for a capital raising.”
IBML chairman Hugh Thomas said the company had been “seeking a home for its strong cash
position for a
ed at $800,000 with a $775/oz AISC and a payback period of six months.
Kraemer said completion of the merg- er with IBML would allow construction to start in the coming months.
“We can be in production in three to six months,” he said. “We will find a home for the concentrate in parallel with start- ing earthworks and plant construction.”
By then, the company hopes to be also considering a second construction project. In August, Mantle announced it had struck agreement with Morning Star Gold NL’s administrators and secured credit to acquire Morning Star’s ground in the Walhalla-to-Woods-Point goldfield in eastern Victoria.
The asset base comprises the Morn- ing Star underground gold mine, a new processing plant and paste backfill facil- ity and a resource of 910,000oz gold re- source dating back to 2008.
number of years”. “After an ex- haustive search Mantle became a natural choice, meeting all IBML’s criteria for invest- ment,” Thomas said. “We are ex- tremely confident that the team at Mantle can apply our strong cash position to their advanced port- folio of gold mine development opportunities to deliver profitable
outcomes.”
Once the deal
goes through, the merged com-
Mantle will operate two pits concurrently at its Norton gold mine in order to enhance selective mining
“That is $40 mil- lion of historical but recent investment we have acquired for just $4 million,” Kraemer said. “We can’t put out any capex, operating or likely production figures until we have brought it up to JORC 2012 standard and completed a scop- ing study but that will come this year.”
Kraemer said de- velopment work could begin at Morning Star within 12 months of the takeover be- ing completed which was likely to occur in March.
– Dominic Piper
AUSTRALIA’S PAYDIRT
FEBRUARY 2016 PAGE 49


SKILLS
Peter Sullivan John Welborn John Borshoff
Changing of the guard
David Moore
The time has come for the next genera- tion of mining executives to step up and lead the industry out of the doldrums, following the retirements of some of the sector’s most revered figures.
David Moore (Mincor Resources NL), Peter Sullivan (Resolute Mining Ltd), Les Davis (Silver Lake Resources Ltd) and John Borshoff (Paladin Energy Ltd) have all stepped down from the top jobs at their respective companies in the past 18 months, setting the bar high for their successors to follow.
There are certainly some big shoes to fill, but the crippling downturn currently being experienced by the sector presents a great opportunity for the new brigade to put their own stamp on those companies.
Aspiring mining executives need look no further than Independence Group NL managing director Peter Bradford for an
Les Davis
example of a successful transition at the top level.
Bradford was installed as Independ- ence chief executive in 2014, after the company was well served by Chris Bon- wick for 13 years. Independence has gone from strength to strength ever since, culminating in last year’s successful $1.8 billion takeover of Sirius Resources and its sought-after Nova nickel project.
How the emerging leaders fair against a tough backdrop for junior resources companies remains to be seen, but Sul- livan and Moore are confident their re- placements have what it takes.
Sullivan, who served as chief execu- tive of gold miner Resolute for 14 years before stepping aside for John Welborn in July, urged aspiring executives to “only make decisions based on where the in- dustry is at, at a particular time in the cy-
Peter Bradford
cle or risk playing catch-up” for the rest of their time in charge.
Moore steps down this month and be- comes deputy chairman of Mincor. His chief operating officer, Peter Muccilli, has been tasked with steering the Kambalda nickel producer back on course.
Moore encouraged all future mining leaders to “believe strongly in what you are doing, or don’t do it at all”.
“Believe in yourself and do it, be totally honest...and take your responsibilities to your investors very seriously,” Moore said.
“Get good people and set them free to work, make very heavy use of common sense and focus on the business. Get that right and the share price will take care of itself.”
Moore said his decision to transition to a non-executive role had been mooted
PAGE 50 FEBRUARY 2016 AUSTRALIA’S PAYDIRT