February 2015 VOLUME 1. ISSUE 224 $11.95
front and back cover
Australia’s trailblazer in Latin America
• 2014 IPOs • Skills & recruitment ISSN 1445-3436
• Southern states focus 01
9 771445 343007
PAYDIRT (ISSN 1445-3436) 5 NEWS
Published by After cutting 80 jobs late last year, iron
Paydirt Media Pty Ltd. ore miner Atlas Iron shrugged off con-
A.C.N. 063 985 133 cerns it was on the brink of collapse with
Head Office: a strong performance in the December
Suite 9, 1297 Hay St, West Perth quarter. The company posted record
Western Australia 6005 shipments and costs savings to restore
P.O. Box 1589, West Perth calm at its Pilbara operations. Michael
Western Australia 6872 Washbourne reports on Atlas Iron’s good
Phone: (+61 8) 9321 0355 news
Facsimile: (+61 8) 9321 0426
[email protected] 7 OPINION 14
www.paydirt.com.au With an increase in unplanned power out- 36
ages and breakdowns plus severe delays 60
Editorial: in building two new power stations, it ap-
Editor: Dominic Piper pears supply of electricity in South Africa
Deputy editor: Mark Andrews will remain problematic for some time yet.
Journalists: Michael Washbourne, Simply put: no power, no new mining pro-
Rhys Dickinson jects for South Africa, columnist Brendan
Sub-editor: Lisa Shearon Ryan writes
Graphics: Marian Noonan
Contributors: 14 COVER
Keith Goode (Sydney), Brendan Ryan
(Johannesburg) Hot Chili has led the dance for many
Advertising: Australian juniors in Latin America and
Advertising executive: Tony Mwarey is close to unveiling a PFS on its Pro-
Subscriptions: Harriette Smith ductora copper project in Chile. While
Phone: (+61 8) 9321 0355 large tonnage, low grade copper projects
Facsimile: (+61 8) 9321 0426 might not be well understood down under,
Pre-press and printing: projects of this ilk are run of the mill in
Vanguard Press 26 John St, Latin America. To get a better feeling of
Northbridge WA 6003 what Hot Chili’s success would mean
Member of: for the ASX-listed companies looking at
similar opportunities, Mark Andrews vis-
Paydirt Media ited Productora before speaking with the
Executive chairman: Bill Repard company’s managing director Christian
Finance manager: Giovanny Jefferson Easterday
Heather Melling 36 IPO
Conferences: Tammy Caldwell,
Lauren Carey Needless to say 2014 was a dire year
for IPOs. Tight capital markets and poor
Cover image: Hot Chili managing sentiment for upstarts was reflected on
director Christian Easterday at the the ASX with only eight new listings reg-
company’s Perth office istering on the bourse. Nevertheless, the
ones that did make it appeared to do so
Member of: on quality assets. Paydirt looks at the up-
Registered by Australia Post PP 643938/0071. and-coming companies hoping to excite
No pages or articles in this publication may be the market this year
reproduced in any form without the consent of
the publisher. This includes photographs either 60 REGIONAL ROUND-UP
taken by Paydirt Media staff or provided by other Ahead of Mining Indaba, a swathe of
parties ASX-listed companies worked hard
throughout the festive season to bring
some good news to Cape Town in Febru-
ary. Paydirt captures some of the stories
that may well be talking points at this
Change the only
constant in resources’
The decimation of the Australian re-
sources landscape is laid bare in two state and federal governments will be unable to blame price movements
for budget blowouts.
features in this edition of Paydirt. The industry must retain its relevance in such circumstances and bet-
Only a few years ago our annual review ter project itself. This is not the time to hide from CSR and claim that
of the previous year’s IPOs and the skills the price of good corporate citizenship is too much to pay in these more
focus were among the largest features in the magazine but things have austere times.
changed dramatically. The general public is less likely to give tacit support to the industry
While we still retain the IPO review, it is a fraction of its former self. now it does not hold the same promise of untold riches that it once did.
In February 2011, we ran a cover story proclaiming 2010 as the “Return Unless the industry steps up its public profile, those groups who op-
of the IPO” with 70 new resources listings on the ASX for the calendar pose it will find it much easier to curry support from the general public.
year. Despite all the doom and gloom, there are positives out there. We
Four years on, however, there were only seven new listings and even may not be talking full green shoots (even though I did on a number of
they ignited only marginal interest. occasions in this column in 2014) but there have been developments in
Above all else, it is the lack of risk appetite that has stunted the arrival the last few months that suggest hope is not futile.
of new IPOs in the last 12 months. The recent upturn in the gold price, particularly the Australian gold
Back in 2011, Minelife founder Gavin Wendt told Paydirt: “IPO de- price, has been a boon for Australia’s gold producers with the All Or-
mand is driven by two things; the underlying confidence in commod- dinaries Gold Index up 13.37% in the last 12 months, including 23.5%
ity prices and secondly the greed factor. Investors with an appetite for since the turn of the year compared to a S&P/ASX 300 Resources Index
IPOs have got a particular tolerance to risk.” return of -22.29% in the last 12 months.
In 2014, that risk tolerance was completely lacking, even for estab-
lished exploration companies The continuing slide of the Aussie dollar and the relief gold producers
never mind start-ups. are feeling from lower fuel prices
is bringing cheer to the sector.
Neither was greed an issue.Neither was greed an issue. It has not yet translated through
to the explorers and developers
Retail offerings for IPOs are often but if the current round of quar-
terly reports from the producers
Retail offerings for IPOstaken up by investors desperate shows enough free cash flow,
investors may once again begin
to avoid missing out on another
are often taken up by investorsboom stock. In 2014, there were
“desperate to avoid missing out onno boom stocks to miss out on
with the entire junior resources another boom stock. In 2014, there looking at junior gold stocks for
sector performing relatively poor- were no boom stocks to miss out the next rush.
Elsewhere, there is less to
With risk appetite gone and on with the entire junior resources cheer about as the iron ore, cop-
greed not a factor, there was little sector performing relatively poorly. per and base metals prices get
to drive interest in new compa- buffeted around.
However, this month’s cover
Similarly, the stories we cover story, featuring Hot Chili Ltd, is an
in the skills feature have also changed dramatically. Where once the example of what can still be achieved in a desperate market.
feature covered skills shortages, techniques for retaining staff and the The company is now on the verge of development at its Producto-
lack of young geoscientists graduating from Australia’s universities, this ra copper project in Chile and has maintained momentum throughout
year we cover redundancies, underemployment and the loss of workers this challenging period. It may not be riding the highs of 83c/share it
to other sectors offering higher wages. achieved in 2011 but the company has steadily built its project and last
The impact of the end of the resources construction boom may have year secured $US25 million in a debt facility.
a long-term effect on the sector. That a company yet to produce can do this is encouraging for many
It is employment, more than any other factor which resonates in the smaller miners. Equity markets may be shut for the moment but debt is
wider community. The public is largely unconcerned about how much becoming easier to come by and if used judiciously, may provide the
miners are producing, what their profits are and what commodity prices catalyst many companies need to reach their development goals.
are doing unless it relates directly to their employment; the average
Australian is interested in his or her job, not the general state of the
It is a challenge the resources sector will face this year. After seven
or eight years in the national spotlight as first the boom, then the GFC,
followed by the erection and then dismantling of the MRRT captured the
media’s attention, it is likely the industry will drift away from the national
There will no longer be headline stories about the amount of people
BHP Billiton Ltd or Rio Tinto Ltd are looking to employ, the anecdotes
about electricians receiving $150,000 a year for working “on the mines”
will be gone and as commodity prices settle – as surely they must – – Dominic Piper
PAGE 4 FEBRUARY 2015 AUSTRALIA’S PAYDIRT
Atlas in for the long haul
Embattled miner Atlas Iron Ltd Atlas Iron posted record shipments from its Pilbara operations during the December quarter
has emerged from the most tu-
multuous period in the company’s supply from crude oil through to the refined sion plans could be reconsidered.
history to post record shipments product, so it would be nice to think that will Atlas has also opened discussions with the
and cost savings for the December continue to translate to lower diesel costs in
quarter. the Pilbara and therefore there’s a benefit for West Australian Government about securing
Atlas to be derived,” Brinsden said. royalty relief payments that could be worth
And defiant managing direc- up to $8 million a quarter in cash flow for the
tor Ken Brinsden declared Atlas “If there’s a marginal uptick [in Australian company.
was “here for the long haul” de- dollar price received] then Atlas has some
spite questions being asked of the fantastic leverage to that improving iron ore The interest-free scheme, announced by
company’s future after its stocks price because of the speed at which we’re the WA Government in December, opens the
crashed to nine-year lows in the stripping costs out of the business and the net door for iron ore miners such as Atlas to re-
wake of the iron ore price slump. effect of being able to meet the market by re- ceive a 50% rebate on royalties for up to 12
ducing our costs. months, as long as the iron ore price remains
Atlas shares dipped as low below $US90/t.
as 13c/share in December after “Clearly we look forward to some improve-
the company announced it had ments in the Aussie dollar price received in “Atlas is a small business, but we’ve paid
slashed 80 jobs to save $15 mil- the exchange rate or, for that matter, the iron $250 million in royalties in the period of time
lion and keep its Pilbara operations ore price, but in any case Atlas is here for the that we’ve been mining so clearly that’s not
cost competitive. long haul.” an insubstantial contribution to the WA econ-
omy,” Brinsden said.
The company also flagged up to The iron ore price squeeze has forced Atlas
$900 million in write-downs on the to put its third-party rail haulage plans for its “If that’s at risk, it makes sense for the Gov-
value of its growth projects as the remote Pilbara operations on hold, although ernment to continue to support the industry so
iron ore price continued to tumble Brinsden stressed discussions were far from we can see our way through to restructure our
late last year and threatened the off the table. businesses and get ourselves into a competi-
company’s future. tive position.”
Brinsden said 95% of the company’s focus
Despite the market struggles, Atlas man- was currently on reducing costs at its existing Atlas also reported making five shipments
aged to ship a record 3.8mt for the December operations and the iron ore price would need to India during the quarter, as well as an initial
quarter, taking first half shipments to 6.9mt, up to improve to at least $90/t before the expan- delivery to South Korea, and Brinsden sug-
35% on the corresponding period in FY2014. gested the price point at which iron ore min-
ers could sell into alternative markets other
All-in sustaining cash costs reduced to than China may have caught some people by
$66/t, but the company could only muster an surprise.
average net sales price of $63/t for the quar-
ter, meaning Atlas was operating at a loss “We’ve been able to take advantages of
over the last three months of the year. growth in India, now with multiple customers,
but we don’t quite know where that’s going
However, at the time of print, Brinsden in- to end so for the moment it’s a good piece of
sisted his company was operating cash flow business,” Brinsden said.
positive and had been since the latter part of
the quarter. “It’s an interesting dynamic and one that
talks to the flexibility of seaborne trade and
“We were operating cash flow positive dur- where it can go from the Pilbara.”
ing the December quarter and that’s a com-
bination of both costs that have been saved – Michael Washbourne
inside the business and the net effect of con-
tinuing to draw down on our stocks,” Brinsden Ken Brinsden
“We have reasonably significant stocks in
the system, whether it’s final product or ROM
stocks, and we’re going to continue to take
advantage of that position to make sure we
can continue to maintain operating cash flow.”
Atlas has increased its annualised cost
reduction target to $75-100 million by June
and said it was on track to achieve that goal,
particularly given capital works at the newly
commissioned Mt Webber mine were now
Capital costs for the quarter were $15 mil-
lion, with the company reducing its capital
cost guidance from $95 million to $69 million
Atlas forked out $55 million on capital in the
first half, but Brinsden said spending would be
curtailed to under $14 million for the remain-
der of the financial year.
A lower Australian dollar, coupled with fall-
ing oil prices and ocean freight rates, is also
giving Atlas confidence of a turn in fortunes.
“There is a lag throughout the system of
AUSTRALIA’S PAYDIRT FEBRUARY 2015 PAGE 5
Vale’s nickel unit a good target
for X2 but higher price needed
Vale SA’s nickel business analyst Alex Hacking said “This is exactly the kind of deal they should
is a good target for for- in a client note. do,” a source close to Davis told Reuters.
mer Xstrata chief executive Hacking valued the busi- Despite the recent fall in prices, nickel
could soon rebound, a Reuters poll found in
Mick Davis, but his reported ness at around $US20-25 October. A world nickel surplus is expected to
flip into deficit this year due to major producer
offer price is probably too billion, given an average Indonesia’s ban on exporting nickel ore.
low, considering the Brazil- expected EBITDA of as That makes it unlikely Vale will accept
Davis’ reported price. With the price of iron
ian miner’s stated interest in much as $US4 billion. ore, Vale’s main source of revenue and profit,
languishing at half-decade lows, Vale needs
only selling a minority stake, Vale valued its base alternative sources of cash flow. The nickel
division could account for as much as 40% of
according to analysts and metals business (nickel Vale’s total EBITDA this year.
banking sources. and copper) at $US30-35 Some also raised Vale’s close relationship
with the Brazilian Government as a possible
On January 13, Bloomb- billion in December when it hurdle.
erg reported that Davis, who said it was considering list- “I wouldn’t be surprised if cutting a deal with
Vale is exceptionally challenging... No one is
runs London-based mining ing 30-40% of the division likely to be able to do a deal without the Gov-
ernment buying in,” a market source said.
start-up X2 Resources, is Nickel was the best performing metal in Toronto as a separate
considering a $US5-7 billion last year, however, prices slumped at company. – Stephen Eisenhammer and
offer for Vale’s nickel assets. Silvia Antonioli, Reuters
the start of the new year That price, however,
A spokesperson for Vale, was based on an expected
the world’s second-largest producer of nickel, rally in nickel prices that has failed to materi-
told Reuters in January that no offer had been alise. The price of nickel fell 14% in January.
received and no talks held. Despite X2’s low reported valuation, indus-
A spokesman for X2 also declined to com- try sources say the nickel business is a good
ment. option for Davis, who has struggled to find the
“Any offer at this level... would be far too right assets to buy since raising about $US4.8
low for Vale to consider, in our view,” Citigroup billion from equity investors.
29-30 May 2013, Sydney
The CD-Rom of Paydirt’s 2014
Latin America Downunder Conference
CD-Rom for non-conference delegates – $175 (inc.GST)
CD-Rom for conference delegates – $115 (inc.GST)
Phone (+61) 8 9321 0355 or email [email protected]
PAGE 6 FEBRUARY 2015 AUSTRALIA’S PAYDIRT
Preparing for Eskom’s demise
Ihave never thought of myself as one of
those American “doomsday preppers”
you see featured on the Discovery Chan-
nel getting ready to cope with the end of
civilisation but I am starting to sympathise
I’m not preparing for Armageddon –
just for the day that South African state-
owned power utility Eskom finally has to
impose extended load-shedding – and,
judging by how 2014 ended and 2015 has
begun, that’s any day now.
In various columns dating back to June
2007 I have sounded off about South
Africa’s perilous power situation and
how government/Eskom was not doing
enough about it.
True, they managed to get through the
2010 FIFA World Cup without problems
– despite dire predictions they would not
– but it’s now becoming abundantly clear
that was done at the cost of reduced es-
sential maintenance on the country’s
ageing power station fleet.
Those chickens are coming home to
roost as that lack of maintenance has
resulted in increased “unplanned out-
ages” breakdowns, while construction of
the country’s two huge new power sta-
tions meant to provide extra capacity is
running woefully behind schedule. Four South Africa’s power situation was in good stead during the 2010 FIFA World Cup, however, problems persist
years behind schedule, in fact, in the
case of the first 800MW generating set at the In other words, if the Government does not a vicious hailstorm which pounded them with
4,800MW Medupi power station. stump up the funds Eskom’s management tennis ball sized hailstones while the replace-
Eskom – which had boasted repeatedly it has been pleading for to keep going then the ment panels cracked during a severe cold
had managed “to keep the lights on” since utility will impose load shedding rather than spell.
the week-long general power failure back in run up more debt to pay for diesel. That’s why the gas geyser. The back-up
January 2008 – was forced to resort to load- The ministers of finance and public enter- water tank was installed in November follow-
shedding for periods in March, June, Novem- prises have both heavily criticised Eskom’s ing an incident in which my suburb and many
ber and December last year and again from management for the shambolic state of affairs others went without water for nearly a week
January 9 this year. which is the height of hypocrisy given that because the water levels in the municipal
Reason is the hair-thin margin the util- government owns and controls the utility. holding dams fell too low.
ity now has in terms of available generating The situation Eskom finds itself in results The municipality/Rand Water Board blamed
capacity over electricity demand as it shuts from years of government stalling on key de- Eskom for load-shedding which had meant no
down plants over the summer months for es- cisions, such as when to build new power sta- power to run the pumps to draw water from
sential maintenance. tions and how and when to bring independent the massive Vaal Dam which supplies Johan-
According to Eskom’s system status bulle- power producers into the mix, combined with nesburg and Pretoria.
tin No 311 the capacity available to meet es- the imposition of “codes of practice” to pro- Eskom denied load-shedding and retorted
timated peak evening demand of 30,132MW mote black economic empowerment which the problem lay with poor pump maintenance
on January 14 was just 30,258MW including are adversely affecting Eskom’s coal procure- and management which meant not enough
open cycle gas turbines (OCGTs). On Janu- ment strategies. water was pumped during a heat wave which
ary 12, the generating plant down for planned So, what’s a girl to do under these circum- had created high demand for water.
maintenance amounted to 3,915MW while stances? I decided I had had enough of these clowns
“unplanned outages” stood at 7,374MW. Back in October 2008, I reported I had in- and installed the back-up tank which gives me
The latest “turn of the screw” is that Eskom stalled a solar powered geyser and in Sep- a warm, fuzzy feeling every time I look at it.
is running out of funds to pay for diesel fuel to tember 2009 that I had bought a nifty Honda Hmmm.....so now how about the assault
keep the OCGTs running which it has been portable generator. Those kept me going rifle; the two-year hoard of non-perishable
doing flat out up until now to help cover for the until last year when I installed a gas powered food; the strategic petrol supply and the “dug-
breakdowns.....sorry, “unplanned outages”. geyser and a 2,500L back-up water tank con- out” destination where I could build a nuclear
The consequences of that were spelt out in nected to my house water supply system. proof bomb shelter?
November when Eskom reported interim fig- Let me explain why. The SA mining industry faces a far simpler
ures revealing a dire financial position. The I found the solar heated geyser worked fine decision which can be summed up as follows:
utility commented, “Eskom’s board has re- in summer but not that well in terms of sup- No power? No investment in new projects.
solved that financial sustainability and status plying enough hot water in winter when I still Brendan Ryan is a Johannesburg-based min-
as a going concern cannot be compromised had to resort to the conventional geyser. It ing writer
in support of organisational sustainability or also proved a liability in that the solar panels
balancing supply and demand.” have been badly damaged – twice – once by
AUSTRALIA’S PAYDIRT FEBRUARY 2015 PAGE 7
The Chinese waiting game
is nearly up
Wait leisurely for an exhausted
I first heard this “Article of War” in
a presentation by Leonie Mckeon on
doing business in China, at the Sym-
posium Conference in Broken Hill in
May 2012 but didn’t fully appreciate
its significance until recently.
Please note that this column has
been based on observations and
some of its assumptions and conclu-
sions may be incorrect.
In October 2014, I attended the
Exploration Conference in Beijing,
which covered a number of different
aspects that I had not encountered
before, such as resolving disputes
when companies do not fulfil their
agreed obligations and how to take Albidon suffered a slow death when production at its Munali nickel mine in Zambia came unstuck
over a company (from a Chinese per-
spective). Accepting that Albidon had some issues would have thought would have been covered
The conference included a session on M&A of its own, it always puzzled me as to why its by the agreement.
in which it was stated that: “with the lower ostensibly Tier 1 (or 2) Munali nickel-cobalt- Funding arrangements of $31 million were
commodity prices, share prices had typically PGM mine south of Lusaka in Zambia, with being made with Pacific Road in early 2009
fallen by 30-40%, representing ‘prime buying good infrastructure plus an experienced Cop- that required $5 million to be raised, with
time’”. perbelt labour force and significant explora- $US6 million received by February 28 from
The session suggested that in acquiring tion upside, had failed at the first hurdle. 110 million convertible notes at 8c/share,
a company, the point was not to take it over Yes in hindsight, Albidon should have $US10 million by June 30 at 16c/share, and
straight away but rather aim for, ideally, a 30% raised money at $4/share but failed to due another $US10 million by September 30,
stake and board control. The key was to get to a tight shareholder base (that didn’t want 2009 based on a 30-day volume weighted av-
board control because then you could dictate dilution), and then gave a bank a fantastic fa- erage price to that date.
what your investment money was spent on, if vour by closing out its forwards in September However, Jinchuan was by then an 18.4%
indeed it needed to be spent at all. 2008, realising $50 million and paying $40 shareholder with $15 million also owing in
There are many examples of China’s ac-
quisitions of foreign resource
companies that have been ap-
The session suggested that inparently disastrous, depend-
ing on your viewpoint.
acquiring a company, the pointFor example, the market
perception is that Shandong
was not to take it over straight away butGold acquired poor assets in
“rather aim for, ideally, a 30% stake andits acquisition of Focus Miner-
million of the original bank debt, just as the debt (from initial off-take funding) and was
apparently not supporting/
or against the Pacific Road
offer. So on March 3, 2009,
Albidon elected to instead
take an offer from Jinchuan
of $1.8 million to be paid im-
mediately for the January
and February below spec
board control. The key was to get board
als Ltd and lost all of its invest- control because then you could dictate concentrates, and use the
ment. However, despite all the money to retrench staff and
write offs and impairments Fo- place the mine/plant on
cus still had $88 million in vari- what your investment money was spent care-and-maintenance.
ous cash forms, at September on, if indeed it needed to be spent at all. The decline was to con-
30, 2014 plus a swag of tene-
ments and two plants at Cool- tinue using additional fund-
ing with $7 million in eq-
gardie and Laverton (with the uity at 8c/share received by
Mount and the Laverton Camp sold for $1.7 nickel price was collapsing, and it was in the March 20 and an unspecified further note fa-
million in August 2014). process of commissioning the mine. cility at 10, based on a number of conditions.
It is now undertaking around $10 million The forwards provider later commented However, on March 6 Albidon was placed
on exploration and has recently made high- that it had not forced the close out of the for- into administration by its senior lenders for de-
grade intersections in the vicinity of a prime wards. faulting on its loan repayments, the immedi-
target area, Bonnie Vale. Shandong/Focus However, Albidon had negotiated an off- ately receivable March 3 $1.8 million payment
has stated it wants Focus on a sound re- take/sale agreement with Jinchuan Nickel from Jinchuan had not arrived.
source/reserve footing before re-opening the from the mine gate. When the initial prod- On April 23 it was reported that the $1.8
plants and recommencing gold production. uct was produced, no arrangements were in million had arrived to place the company
The tale of Albidon Ltd is another example place by Jinchuan to transport the product. It into care and maintenance but nothing else,
of a Chinese company “exhausting the en- then also refused to accept the concentrates Albidon was an “exhausted enemy” in admin-
emy”. because they were below spec which you istration, and almost all of its directors had
PAGE 8 FEBRUARY 2015 AUSTRALIA’S PAYDIRT
Norton Gold Fields is another Australian company to have taken on Chinese owners
resigned. $US14 million, and in August, two more Chi- was developing on surface. It was later com-
On June 9, the new terms of Jinchuan’s fi- nese directors were added with Albidon relist- mented that the sinkholes had been filled and
nancing were announced; $US7 million from ing on the ASX on October 14 that year. It had stabilised.
135.6 million shares at 8c/share for corporate even got a “speeding ticket” on December 14 In March 2013, a Jinchuan subsidiary pro-
activities and an additional $US21 million for rising from 11.5c to 15c. posed the acquisition of the remainder of
based on 323.1 million of convertible notes It looked like Munali was ramping up Albidon for US$0.0025/share cash (much
at 10c with a coupon of 3.75% and a 5-year nicely, apparently net cash of $22 million as cheaper than A$0.10), which was approved
term to 2014. Jinchuan supplied funding of at March 31, 2011 (although this clearly did on in May 2013 and Albidon was finally del-
$400,000 to the administrators. not include the debt), March production 50% isted from the ASX on June 14 2013.
Although Jinchuan had changed the na- higher due to higher grade areas with higher The “enemy” had clearly become over-ex-
ture of the actual tranches, the tranches were recoveries than previous months, revenue in hausted, and the original Albidon discoverers
deemed to have been approved by share- the month of March 2011 of $7 million. In May and shareholders had lost the Munali mine to
holders on March 20. And, three months later 2011, Jinchuan made a goodwill gesture sug- Jinchuan. Could/would a different scenario
on September 11, due to unforeseen delays, gesting allowing 161.54 million (or half) of the have occurred had the Pacific Road offer
Jinchuan issued its convertible note under a convertible notes to be repaid from cash flow been accepted – maybe.
DOCA and acquired all the debt and relevant with the balance converted to equity at a time As to what actually happened, the Mu-
securities of Barclays and the European In- involving a capital raising. nali mine had apparently mined too close to
vestment Bank. But then a “minor structural fault” resulted in surface such that stopes breached or caved
On September 9 two new Chinese direc- the partial cave-in of a stope in June 2011. On through to surface.
tors were appointed as representatives of Jin- July 4, full underground production resumed, The original intention was to decline down
chuan and board control switched to China.
On November 2, 2009, the
issue of shares and convert-
It is often remarked that Chineseible notes to Jinchuan were
approved along with a reso-
companies take a long time tolution that did not require a
mandatory takeover offer for
develop a relationship of trust withthe remaining shares, and
“another company. Perhaps it is time thatthe finances were all settled.
but within days further surface subsidence to and stope the materially higher grade ar-
eas. What happened there
and how did a highly experi-
enced mining company, with
more than 50 years of mining
knowledge from mining its
Jinchuan orebody and highly
experienced mine managers
manage to mine so close to
(As to why no mandatory 10c western world companies took a longer surface such that it lost the
takeover? Well, Jinchuan had time to assess their potential JV partner. mine?
board control and perhaps
thought it could get the rest One Chinese company
commented that investing
more cheaply). On Decem- in Australia had its issues.
ber 4 Albidon delisted from “Australia’s corporate tax law
AIM having been in suspension for over six occurred. In August, Albidon was suspended extends to 1,000 pages in four volumes. Even
months and did not expect to relist in London. from trading, with lower than expected grades Australians joke about it, compared to China’s
AIM shareholders were to receive ASX listed and recoveries being encountered. total of only six or seven pages”.
shares. At June 30, 2011, Albidon now had debt of It is often remarked that Chinese compa-
On December 23, 2009, Albidon then $125 million including $19.6 million in convert- nies take a long time to develop a relation-
entered into another $20 million loan facil- ible notes and $10.4 million in interest, and ship of trust with another company. Perhaps
ity from Jinchuan, and had recommenced was held 49.93% by Jinchuan. So, up to $30 it is time that western world companies took a
underground development with concentrate million in new equity was needed to be raised. longer time to assess their potential JV part-
shipments recommencing in April 2010, along In November 2011, Munali was on $7.5 mil- ner.
with a new Chinese chief executive and chief lion p.a. care-and-maintenance programme Keith Goode is managing director of Eagle
financial officer from February 2010. By June again, the resources had been downgraded Research Advisory Pty Ltd
2010, Albidon’s “cash” position had risen to by around 0.3% nickel and another sinkhole
AUSTRALIA’S PAYDIRT FEBRUARY 2015 PAGE 9
Platypus’ eggs in two baskets
Junior explorers in Australia were shunned
by the market last year however Platypus
Minerals Ltd has put its best foot forward for
the sector to start 2015.
The company’s Gobbos discovery in West-
ern Australia – the State’s first of the year –
triggered an encouraging response on the
Investors warmed to Platypus’ results from
an initial drilling programme at Gobbos which
included 29m @ 0.22% copper and 0.03%
tungsten and 32m @ 0.07% molybdenum.
Porphyry-related mineralisation was inter-
sected in each of the three RC holes drilled,
with mineralisation starting from surface at all
While pleased with the results, Platypus Platypus hopes to be drilling in Peru by the middle of the year
managing director Tom Dukovcic said the
hard work was ahead of the company at Gob- ment of a non-renounceable rights issue former reporting rock chip samples grading
bos, 50km north-east of Nullagine and south launched late last year. over 30 g/t and 13 g/t gold. Platypus entered
of Spinifex Ridge in WA’s East Pilbara region. A total of $402,338 was raised, with direc- Peru after Inca had tied up its ground and has
“We had a decent kick in share price – 30- tors having until March 11 to fulfil the desired watched its peer confirm porphyry-style min-
40% – which is nice but the trick is to see amount of $1.6 million. eralisation over a 1.3km vertical extent, with
whether it can be sustained over two to three “If we can place that fully we will have $1.6 hits of 284m @ 0.32% copper and 55m @
weeks,” Dukovcic told Paydirt million in the bank to apply to 2.3% copper.
in mid-January. Gobbos and the Peruvian pro- “We know the size of the Chanape deposit
“I think it will as people ana- ject,” Dukovcic said. and everything they have got is pretty much
lyse the results in more detail it Dukovcic said the majority of going to extend into our ground but we have
will become obvious that these the raising would be directed four or five times as much ground in that im-
are serious results with real po- towards Platypus’ Central cop- mediate area,” Dukovcic said.
tential for a high value porphyry per-gold project in Peru’s San “Therefore we have four or five times better
resource. Even with the results Mateo district. chance of getting a deposit of similar nature
we have generated now have The company holds rights to but we need to do the exploration to find out. It
ore grade intercepts of molyb- concessions covering 230sq has been very difficult over the last 18 months
denum and tungsten which is km of ground which includes to two years to raise a large enough chunk of
particularly pleasing for us.” the Central and San Damian money to get on the ground and do meaning-
Platypus’ next steps are to Tom Dukovcic projects ful work.”
conduct activities including The Central project hosts the About $1 million will be spent in Peru when
mapping and detailed geo- historic Shullac zinc-lead-silver Platypus is ready, with the company having
chemistry work and find out more about what mine, which Platypus is targeting for drilling Gary Anderson and Adam Szybinski – the
lies in the east. this year, in a region of Peru reinvigorated pair who had a direct hand in discovering
“We hope to increase the size of the anom- by Chinalco’s multi-billion tonne Toromocho Inca’s Chanape project – on board as country
aly then we will go and drill in May, June, July, copper-molybdenum-silver mine. managers to kick start activities.
depending on the timing of the results,” Du- Dukovcic said Toromocho had given ex- Exploration success this year will be fitting
kovcic said. plorers a renewed focus in the area, with for Platypus, which has flown under different
The company is also factoring in the time Platypus planning mapping, geochemistry guises at times including Ashburton Minerals
required to complete the shortfall of the place- and geophysics ahead of a potential drilling and Zephyr Minerals, as the listed entity will
campaign in June/July. celebrate 21 years on the ASX in 2015.
“The area hadn’t been “The current management team has not
looked at from that per- been with the company for all of that time but
spective previously but it has certainly seen quite a lot of activity in
there is a large area that various areas, including Brazil and Indonesia.
was under explored, so We are no strangers to overseas work and
you know that anything are not put off by working in Peru because we
you do is going to gen- understand what is involved,” Dukovcic said.
erate significant results,” “Over that time the company has ridden
he said. out quite a few downturns, I guess the secret
While Toromocho has [to longevity in the resources sector] is per-
spurred on explorers in sistence, determination and tenacity. Funda-
the area, Platypus has mentally you need to have the right projects
been keeping a close eye behind you and the right people behind you,
on fellow Australian ex- put the two together and then results will
plorer Inca Minerals Ltd come.”
(see page 28). – Mark Andrews
Inca’s flagship Chana-
pe project is next to Plat-
Platypus made WA’s first discovery of 2015 in January ypus’ project, with the
PAGE 10 FEBRUARY 2015 AUSTRALIA’S PAYDIRT
Keep calm and carry on
No one in the mining sector needs to be told multiple areas in an effort to embed a relent- performance
that they operate in complex environments less focus on cost management across the • Being prepared for anything. Robust sce-
and face a range of increasing challenges enterprise. nario planning capabilities that might include
when it comes to responding to competitive, the likes of econometric analysis and risk-
regulatory and compliance requirements. As And strategies that buck the trend adjusted forecasting are needed that position
a result, the imperative to adapt to changing Either way, achieving sustainable opera- an organisation to adapt to a wide range of
market conditions while adopting new innova- tional excellence requires both a long-term potential future outcomes.
tions to produce more for less cost is as impor- commitment and a willingness to embrace
tant as ever. new cultural norms. In an environment of Innovation is the new key to survival
And this remains the case regardless of zero tolerance for underperformance, com- (and it’s about more than just cost control)
whether we are in a downturn or a recovering panies must rethink not only their traditional When incremental improvements toward
market. approaches to mining operations, technol- addressing market realities are no longer
Keeping the faith is only easy when things ogy deployment, and trading and marketing, enough, the innovation imperative becomes
are going well and miners haven’t seen a lot but also their underlying cultural approach to more compelling than ever.
of positive indicators in recent years. In many costs. At its most basic, innovation presents an
ways, in fact, it still feels like the sky is falling. Ideas for achieving operational excellence optimal strategy for controlling costs. Yet it’s
Contending with the likes of price volatil- include: rapidly becoming clear that innovation can do
ity, rising costs, declining grades and weak • Getting serious about data analytics. much more than reduce capital intensity. Ap-
demand is never easy, but in a world where As data analysis becomes increasingly so- proached strategically, it also has the power
volatility has become the norm, the key for phisticated, opportunities for even greater to reduce people and energy intensity, while
future success lies in agility and determining efficiency arise across areas such as work- increasing mining intensity.
not how to ride the sector’s typical waves, but force planning and talent management, sup- The key is to think of innovation as much
how to accelerate resurgence from a down ply chains, maintenance schedules and asset more than research and development around
cycle. performance particular processes or technologies. Com-
Keeping calm and carrying on might, there- • Embracing innovation. More on this be- panies can, in fact, innovate in multiple ways,
fore, seem like a simplistic message, but it is low, but true productivity can only be achieved such as leveraging supplier knowledge around
the overriding theme of Deloitte’s latest global by finding ways to cut the largest expenses, specific operational challenges, redefining
mining report – Tracking the Trends 2015 – not by simply reducing costs around the edg- their participation in the energy value chain or
which looks at 10 big picture issue miners in es finding new ways to engage and partner with
Australia, as well as overseas, should con- • Transparency. To drive greater opera- major stakeholders and constituencies.
sider as they face a new calendar year that is tional control, operators should aim to create As operators begin to apply innovation to
likely to present plenty of challenges but, also, transparent information flows between head their full operational ecosystem, they stand to
opportunities. office and disparate mine sites by using enter- realise significant gains. Ways to accelerate
We cover 10 key issues – and outline a prise-wide operational management systems this process include:
wealth of potential responses – but two are • Revisiting culture. Operational excel- • Embed innovation into corporate DNA.
particularly important for the Australian sec- lence requires an enterprise-wide view which If companies believe innovation is the key to
tor. may need a cultural transformation their future, innovation programmes should
• Boosting balance sheets. To shore up feature as a cornerstone of their strategy
Back to basics (and the pursuit of op- capital, it may be a case of getting back to • Think big, test small, scale fast. Tradition-
erational excellence) the basics of streamlining inventory, optimis- ally testing new systems at scale can mean a
If one theme epitomises the focus of mining ing working capital, divesting non-core assets narrow focus to system upgrades to constrain
executives over the past year, and not just in and strengthening focus on portfolio man- costs, but innovators turn this on its head by
Australia, it would be a return to productivity. agement looking at the components of an entire system
Unable to rely on a commodity price ral- • Streamlining management and govern- to uncover the biggest opportunities for struc-
ly, the focus of many has already shifted to ance structures. Moving beyond basic cost tural improvement and then running small
achieving sustainable productivity improve- cutting exercises by reducing internal red tape tests to establish proof of concept
ments. Over the last year, mining companies around a broad range of systems and pro- • Leverage emerging technologies. New
have undertaken substantive cost reduction cesses, from mining methods and planning to technologies, such as 3D visualisation, social
strategies and more streamlined cost struc- quality, health and safety, and environmental media and technologies covering process-
tures. Capital discipline has also ing, production and logistics, hold the
supplanted capital projects, with op- promise of vastly altering mining sec-
erators simplifying their portfolios, tor fundamentals
divesting non-core assets, renegotiat- • Become part of an in-
ing debt and shutting down marginal novation ecosystem. Organisations
operations. can’t develop an innovation strategy
Across the board, sustainable pro- in isolation, so to drive true industry
ductivity – and profitability – hinge on change, miners should consider en-
miners’ ability to focus on operational tering alliances or JVs with technol-
excellence and realise measurable ogy providers and others already tak-
returns on all their assets. To achieve Based in Perth, Nicki Ivory Reuben Saayman is a De- ing steps to harness organisational
this goal, some are focusing on spe- is a Deloitte Corporate Fi- loitte Assurance & Advisory intelligence.
cific areas, such as supply chain or nance Partner and the firm’s Partner based in Brisbane and
asset management, while others have National Mining Leader - West National Mining Leader - East
launched programmes that focus on
AUSTRALIA’S PAYDIRT FEBRUARY 2015 PAGE 11
SA at the vanguard of
Innovation – from both industry and govern- Australia, which has lots of cover, discoveries programme designed to use open file drill
ment – will be the key to South Australia have all been made in areas where there is ei- data to contour cover throughout SA.
shrugging off the worst effects of the mining ther no cover or where the cover is very thin.” “It is about reading the geology of the cover.
sector’s downturn. “The big task of the survey is to assist com- Finding signs with indications of basement
SA’s resources fortunes were transformed panies make a start in areas which are high rocks in cover,” Hill said. “We will produce a
by the commodities super-cycle of the last risk and expensive to explore in. Some 75- meaningful, coherent under cover map.”
decade, perhaps more so than any other 80% of the State is covered by sediments; Other programmes being worked on in-
Australian state. The State went from min- some of it very deep but also some of it very cluded the world’s largest 3D dataset and a
ing backwater to second most popular ex- shallow and we shouldn’t forget that.” regional mineral systems drilling programme.
ploration destination in the country thanks The reward, Hill said, from drilling under Hill said the mineral systems drilling pro-
to proactive government policies and brave, cover could be “enormous”, particularly in gramme was also the largest of its kind in the
pioneering exploration discoveries. commodities such as copper for which there world.
However, rather than reverting to type were distinct gaps in the size of deposits dis- “It is about mapping areas using drilling
following the recent correction, the State’s covered. rather than the geo hammer,” he said.
miners, explorers and policymakers are de- “There is a great gap in the size of discov- New technology has a part to play in the
termined to use SA’s new-found status in ery in the State, from Olympic Dam to Promi- regional drilling programme with the GSSA
the resources world as a catalyst to further nent Hill and then another gap to the smaller working closely with the DET-CRC to develop
investment and development. copper deposits. If the deposits to fill that gap more effective exploration tools.
The annual South Australian Exploration occur, they are going to occur under cover so The DET-CRC is working on three pro-
and Mining Conference – held at the Adelaide the reward is enormous.” grammes; down-hole sensing, coiled tube
Convention Centre on St Barbara’s Day (De- He said the GSSA, in collaboration with drilling and lab-at-the-rig technology. All three
cember 5) – highlighted this push towards in- Geoscience Australia, other state geological are designed to reduce the cost of drilling and
novation. surveys and the Deep Exploration Technolo- analysis of data.
The conference attracted a diverse range gies CRC (DET-CRC) was working to deliver Speaking during his opening address to
of SA-focused speakers; from early-stage more information about regions of Australia the conference, SA Minister for Mineral Re-
explorers such as Renascor Resources Ltd previously thought to have too much cover to sources and Energy, Tom Koutsantonis, said
managing director David Christensen to enable effective exploration. the $2 million PACE mineral systems drilling
Kathy Ehrig, principal geometallurgist for Among the initiatives launched by the programme would allow explorers to make
BHP Billiton Ltd at Olympic Dam. GSSA is a decisions “on the spot” and better target their
However, it was Geological Survey of South efforts to drive exploration dollars further.
Australia (GSSA) director Steve Hill who best “Rather than having to wait days and
captured the mood of the day’s proceedings. weeks to see the results of sampled
Hill has led the GSSA’s quest for producing drill cores, the participating explorers
greater pre-competitive data offerings with will effectively have ‘instant’ access
success over the last five years. He point- to data from live sensors and on-site
ed to the fact the number of explorers analysis of geology,” Koutsantonis
active in SA had remained the said.
same in recent years “This will drastically
despite expenditure speed up exploration re-
declining as proof sults testing, enabling
the GSSA was on explorers to quickly
the right track but adapt their drill-
admitted the rate ing programmes,
of discovery in the improving their
State, and Aus- chance of suc-
tralia as a whole, cess.
remained a cause for “With the roll-
concern. out of this tech-
“We are not getting nology in our own
better at discovery,” backyard, South
Hill said. “We are not Australian explor-
increasing our rate of ers will be among
success.” the best-placed in the
The biggest challenge – world to rapidly assess
and one SA is most afflicted by – is the merits of mineral as-
the abundance of cover over much sets, and make a quantum
of the continent. leap in productivity gains.”
“The trend bias in exploration – Dominic Piper
history in Australia is very much to-
wards areas where there is outcrop
but they account for only 20% of The Geological Survey of South Australia is working to find solutions
the continent,” Hill said. “In South for Australia’s lack of mineral discoveries in regions with cover
PAGE 12 FEBRUARY 2015 AUSTRALIA’S PAYDIRT
Case histories of discovery
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Didipio (Philippines) OceanaGold Corp Galat Sufar South (Sudan) Orca Gold Inc.
Salares Norte (Chile) Gold Fields Ltd
Invincible (Australia) Gold Fields Ltd Aurora (Guyana) Guyana Goldfields Inc.
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Jointly organised by:
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Hot Chili leads the
PAGE 14 FEBRUARY 2015 AUSTRALIA’S PAYDIRT
Drilling at Hot Chili’s Productora project. With a large amount of drilling completed in 2013, drilling was scaled back from the start of 2014
Hot Chili Ltd’s PFS at its Productora copper companies in Chile,” Reeves said. large tonnage copper projects but Hot Chili
project could be a game changer for many The Australian investment market does can prove them beyond expectations when it
“Australian companies in Latin America.
not always fully appreciate the economics of releases the Productora PFS in the first half
“Hot Chili moving of 2015.
towards production, We are really expanding out at Productora The IOCG deposit
and also Metminco has been intensely
[Ltd] in southern with our first push into exploration in two drilled since 2010,
Peru, validates be- years. We have been very successful with this with about 100,000m
ing in Latin America on a budget of $30
in the first place. It new discovery immediately adjacent to the central million completed
validates the type in 2013 which deliv-
pit. It is very early but very exciting. The team has ered a maiden ore
of target that we are
looking for – por- been determining the style of mineralisation and it reserve in March
phyry mineralisation 2014 of 90.5mt @
– and we see the looks very different to Productora. 0.48% copper, 0.1
company’s success- g/t gold and 172 ppm
es as a fillip for us,” molybdenum for
Peruvian-focused Inca Minerals Ltd 350,000t copper, 152,000oz gold and
managing director Ross Brown told 9,000t molybdenum supporting a nine
Paydirt recently. year mine life.
Zeff Reeves, managing director of The addition of a large copper ox-
fellow copper player Metallum Ltd, ide opportunity within the central pit at
said Hot Chili’s success would help Productora – originally treated as pre-
build confidence in the Australian strip waste material – could add to the
market for Chilean projects. production mix.
“It will prove to the Australian mar- Hot Chili’s progress has proven
ket that things can be done in Chile. to be one of the first genuine ASX
Although Hot Chili has some chal- exploration success stories in Latin
lenges ahead in terms of access to America and although drilling was
infrastructure and the like and capi- paused at the start of 2014 while ore
tal is potentially going to be restrict- estimates were calculated and PFS
ed at some point, it is the same for all work ramped up, the latter half of the
of us. But if they can get that project year saw Hot Chili restart the rigs with
to work, get it permitted and prove instant success.
to the ASX that it can be done, it is Hot Chili country manager Rodrigo Díaz Bórquez with Boris Caro The Alice discovery – 400m west of
certainly going to benefit Australian near the Huasco port, about 60km from Productora the proposed central pit – has entered
AUSTRALIA’S PAYDIRT FEBRUARY 2015 PAGE 15
We have drawn attention in the finance circles and in the market but
we certainly feel very vindicated for making those decisions that were
“ probably considered brave at the time.
the fray and Hot Chili is working towards de-
A tipper/rotator system will be used to load concentrate from Productora at Huasco port termining whether Alice hosts porphyry-style
The average grade of the Productora resource is 0.6% copper mineralisation.
Since the discovery hole – 151m @ 0.4%
copper from 116m down-hole, including 54m
@ 0.5% copper and 0.1 g/t gold from 128m
down-hole – Alice’s potential has been con-
firmed with results of 26m @ 0.7% copper
from 95m down-hole and 105m @ 0.4% cop-
per from 175m down-hole.
At the time of print Hot Chili confirmed Alice
is a porphyry-style deposit, with latest drill-
ing results including 204m @ 0.6% copper
and 0.1g/t gold within a broader intersection
of 237m @ 0.5% copper and 0.1g/t gold from
“We are really expanding out at Produc-
tora with our first push into exploration in two
years. We have been very successful with
this new discovery immediately adjacent to
the central pit. It is very early but very excit-
ing. The team has been determining the style
of mineralisation and it looks very different
to Productora,” Hot Chili managing director
Christian Easterday told Paydirt.
“After the initial two years of exploration
drilling we stopped to build the central pit
and focused on getting reserves there and
aggressively charging towards a decision to
mine in a short amount of time at this very
Hot Chili only listed in May 2010 at which
time Productora was believed to be Chile’s
largest untapped uranium deposit.
The company raised $8 million at IPO and
started drilling at Productora but when the
IOCGU mineralisation began returning cop-
per hits of 116m @ 0.92% copper equivalent
including 23m @ 1.4% copper equivalent and
26m @ 1.61 copper equivalent including 5m
@ 3.52% copper equivalent it got Hot Chili
thinking there was potential for large tonnage
copper resources at Productora.
To fast-track its understanding of Produc-
tora, north of Santiago, Hot Chili raised $4.65
million for further drilling which was well sup-
ported by institutional, sophisticated and ex-
From the outset Hot Chili has demonstrated
an ability to raise money (2011: $30 million-
plus, 2012: $35.5 million, 2014: $US25 million
(debt) via traditional and innovative means,
regardless of market conditions for resources
Major shareholders Compania de Aceros
del Pacifico (CAP S.A.,11.8%), Taurus Funds
Management (11.7%), Lundin Mining Corp
(6.3%) and Exploration Capital Partners, an
affiliate of Sprott (5.4%), have strongly sup-
ported Hot Chili on its journey.
Towards the end of 2014 Hot Chili had
about $20 million cash at hand which Easter-
day wasn’t taking for granted.
“We have drawn attention in the finance cir-
cles and in the market but we certainly feel
very vindicated for making those decisions
PAGE 16 FEBRUARY 2015 AUSTRALIA’S PAYDIRT
that were probably considered brave at
the time. We feel as though we are going
to reap the rewards in what we believe is
a very tough period in the market in front
of us,” Easterday said.
“But we pride ourselves on the peo-
ple we attract to the company and there
has been a lot of out-of-the-box thinking.
Our management team is very young,
enthusiastic and energetic and is guided
by a lot of technical expertise from peo-
ple which used to run Placer [Dome], so
there is a lot of guidance around a very
young, fast-moving group. We have been
able to do a lot of things that people said
couldn’t be done.”
Pulling off a deal that provides Hot
Chili with infrastructure solutions at
Productora was perhaps one feat many
However, Hot Chili managed to court
Companía Minera del Pacífico S.A.
(CMP) in a joint infrastructure arrange-
ment which will see the Chilean firm take
a 17.5% stake in Productora.
In return CMP, an arm of parent com-
pany CAP, will grant Hot Chili certain Hot Chili exploration manager Warren Potma
surface rights over the proposed min-
ing area at Productora, easements for a wa- ditional purchase option. market wants to see progression to a share-
ter pipeline from Huasco to Prodcutora and “That has really been consuming a lot of our holder vote. We are very confident that will
the remaining 35% interest in certain mining
rights at Productora.
Additionally, a tag along option for
We pride ourselves on theCMP to increase its interest in Pro-
ductora to 50.1% for an exercise price
people we attract to theof $US80 million (after completion of
a PFS) was included in the MoU.
company and there has been aCMP is required to pay Hot Chili
“lot of out-of-the-box thinking.$US1.5 million for the grant of the ad-
corporate time and that is where, I think, the be before our shareholders very shortly. That
[deal] and funding are the two sta-
ble platforms we have put in place
as a minimum and in a soft market,
Hot Chili can remain quite buoyant
about that,” Easterday said.
Easterday hoped the CMP trans-
action, which was the culmination
of negotiations that took Easterday
Hot Chili spent $30 million on exploration in 2013, predominantly on RC drilling
AUSTRALIA’S PAYDIRT FEBRUARY 2015 PAGE 17
“I have only ever come across opportunities once in my career and that
was during the GFC; that is when we built Hot Chili. We’re very keenly
watching and participating in many data rooms in what I would classify as
advanced projects, production assets and near-term development propositions.
and his family permanently to Chile for the Meanwhile, a transmission line from the Hot Chili has committed about $100 million
best part of two years, would receive share- Maitencillo power substation and water from to its suite of assets in Chile over the past four
holder approval sometime this year. Huasco are being proposed. years.
The company also expects an update on More details are expected to emerge when “Productora has attracted the bulk of our
port access study negotiations for the Las Lo- the PFS is released this year. spend and we have pushed that into a posi-
sas port facility (owned by CAP) at Huasco, tion where we still believe we will be getting
40km west of Productora. “We have been focusing on how we can be into production towards 2017/18 – a time
a lot smarter with our PFS, instead of going where consensus points to certainly a supply
There remains work to do on infrastruc- down the path of delivering the PFS and then deficit and higher demand level. At that time it
ture plans however Productora is situated talking about a re-optimisation phase in front will be very good to deliver a large-scale pro-
in a known mining region, a boost as Hot of the DFS, the plan is to mover straight into ject for financing purposes and also for profit-
Chili looks to achieve its goal of production in the DFS,” Easterday said. ability for the beginning of mine life,” he said.
After organising a $US25 million debt fa- While the immediate focus is on bringing
CMP has two mines in close proximity cility with Sprott mid-2014, Hot Chili has the Productora into production, life exists outside
– Los Colorados and El Algorobo financial clout to kick start the DFS. Hot Chili’s flagship project.
– while the Pan American
Highway abuts Pro- The debt funding was in place prior to Hot Frontera, Banderas and the Los Mantos JV
ductora. Chili’s infrastructure deal with CMP and both (with Codelco) copper projects are situated
milestones can be seen as major endorse- in Regions III and IV on Chile’s coast, north
ments for Productora; which has attracted of Santiago, and make-up Hot Chili’s early-
$80 million in funding since 2010.
PAGE 18 FEBRUARY 2015 AUSTRALIA’S PAYDIRT
stage projects. with some encouragement in the
A maiden resource from Fron-
copper space when it moved to ac-
tera – 50.5mt @ 0.4% copper and
0.2 g/t gold for 187,000t copper and quire a controlling stake in the Can-
356,000oz gold – was revealed in
2014. delaria mine in Chile from Freeport
However, Hot Chili’s priorities McMoran Inc for $US1.8 billion.
at Productora and strained capital
markets means that limited money Such a deal is arguably out of
will be spent on these projects in
the short term, Easterday said. Hot Chili’s league however its con-
“Small discretionary funds will be nections with CMP and appetite for
budgeted for our other projects,” he
said. acquiring ground gives it the best
“For the drill-ready projects it will possible chance of landing some-
be about building them up to a value
proposition which can be put to the thing significant.
board and we can assess what we
are doing. Clearly the CMP trans- “I think there are a lot of people
action has an implied funding path
and with $US10 million-plus and in trouble and I think there are a lot
another $US15 million to draw down, we are
not without capabilities. But, I am also not ad- of boards looking for a life jacket to
vocating on going out and hitting greenfields
projects heavy in a market like this. The last get thrown in the water,” Easterday
thing we want and what we have spent a long
time avoiding is going out to raise capital.” said.
“I have only ever come across
opportunities once in my career
and that was during the GFC; that is
Rodrigo Díaz Bórquez when we built Hot Chili. We’re very
keenly watching and participating
While Easterday is happy to put the days in many data rooms in what I would classify
of 100,000m drill campaigns behind the com- as advanced projects, production assets and
pany, for now, he has not dismissed acquisi- near-term development propositions.
tions. “It is something that Hot Chili, our
Late last year Lundin Mining Corp, a major partners and our funding
shareholder in Hot Chili, provided the market
Hot Chili expects to complete a PFS for Productora in 2015
AUSTRALIA’S PAYDIRT FEBRUARY 2015 PAGE 19
Current public works programmes along the Pan American Highway will make groups that support the company like. It is
for easier access to Productora from the regional centre of La Serena certainly been the indication from all those
stakeholders for Hot Chili to expand, we are
not without capability to look at things that are
a lot larger than our diminishing market cap
[$54 million at the time of print] would sug-
gest. We will wait and see what happens,”
Hot Chili’s position, allowing it to contem-
plate expansion plans, separates it from many
of its peers from the “IPO Class of 2010”.
However, further judgement awaits the
company when the Productora PFS is made
In the lead up to Christmas, 33,000m of
drilling was under way in order to grow re-
serves to add in the PFS.
Diamond drilling at Alice has begun and is
geared towards reserve grade status.
“That drilling will probably be the penul-
timate programme before we say ‘where to
from here?’” Easterday said.
“Clearly we have a 200m core of very wide
intersections near surface and we need to
know how to expand that out efficiently. I’m
sure the market will be very happy with what
comes out this year and we will get that into
indicated and drop a pit design over it. It is
very exciting now to have a potential multi-
deposit project with Alice sitting right next to
the central pit.”
Hot Chili’s exploration success, including
the Habanero and Rocoto discoveries at Pro-
ductora in late 2013, has done little to excite
anyone outside of the inner sanctum, with the
company experiencing the same share price
pain as others in the junior resources space.
Shortly after floating, the company’s stock
soared to a high of 80c/share early in 2011
and it emerged as one of the standout juniors
on the ASX.
Hot Chili shares were worth almost 50c/
With $20 million in the bank, Hot Chili is comfortable with its expenditure requirements in Chile
PAGE 20 FEBRUARY 2015 AUSTRALIA’S PAYDIRT
“ Productora is expected to host an initial nine year mine life
share 12 months ago but despite The next six months should ity and a new generation of leaders
major achievements – including be treated cautiously by will emerge from what is a real test of
infrastructure agreements and ex- the skills of boards. But, you have to
ploration success – the company’s all stakeholders in the resources make sure that you are there for the
stock was 16c/share at the time of sector and shareholders should rebound when it comes and you can
print. get your value back what those days
“I get asked a lot about our share be careful of throwing away the come,” Easterday said.
price,” Easterday told Paydirt in baby with the bath water. – Mark Andrews
Hot Chili’s Applecross office.
“What are you doing about the
share price? Is the share price go-
ing to remain strong? Will it strengthen? Can HOT CHILI LTD ASX:HCH
you stop the share price from sliding and the
market cap destruction that is going on?” Address: First floor, 768 Canning Highway, Applecross,
Western Australia 6153
Sticking to the business plan and ensuring
funds are in place to execute Hot Chili’s strat-
egy without materially changing its activities Phone: +61 8 9315 9009
or “selling the farm” is the response Easterday Fax: +61 8 9315 5004
offers to address such queries. Email: [email protected]
Like many companies, Easterday said, Hot
Chili would tread prudently while it rides out Web: www.hotchili.net.au
the down cycle and associated pessimism 52-week share price range: 13c-50c/share
Key people: Murray Black (non-executive chairman),
However, unlike many junior resources Christian Easterday (managing director), Michael Ander-
companies, Hot Chili has many things going son (non-executive director), Allan Trench (non-executive
for it at the moment – a PFS on the horizon, director), Roberto de Andracia Adriasola (non-executive
cash in the bank and supportive sharehold- director)
ers – which has Easterday optimistic about
the future. Comment: Hot Chili has risen to prominence in Latin
America as one of ASX’s best explorers. In four years the
“The next six months should be treated company has progressed the Productora copper project
cautiously by all stakeholders in the resourc- into PFS stage after a 2013 scoping study indicated the
es sector and shareholders should be careful potential for a 55,000 tpa copper in concentrate project at
of throwing away the baby with the bath water. a capex of $US500-700 million. In 2014, Hot Chili entered
Tolerance with shareholders and not letting a MoU with Chilean majors Companía Minera del Pacífico
share prices dictate your mental health is the S.A. (CMP) regarding a joint infrastructure arrangement
order of the day. There are great opportuni- which will help Hot Chili into production around 2017/18.
ties that are around for people with capabil-
AUSTRALIA’S PAYDIRT FEBRUARY 2015 PAGE 21
CHILE SITE VISIT
Little-known copper miner “ Metallum’s El Roble project is near a multi-purpose port, in the city of Caldera
Metallum Ltd is in the By the end of March 2015 we expect raise capital for that again
throes of completing a major a big transition for the company if – a large, lower grade pro-
company revamp. ject – is very difficult plus
we can begin to hit our production targets you have to consider the
Metallum was formerly Philippine factor. We’ll sit on
Mining Group Ltd, initially and hopefully we’ll be able to talk about a that and see how things go
focused on the Comval cop- different company, one which is churning over the next 12 months in
per-gold project on the Phil- out the cash and looking to grow. Chile and work away in the
ippine island of Mindanao. background to see if we can
However, difficulties op- attract any investment.”
erating in the Philippines With Comval in the shad-
forced a shift in focus for Metallum ows, Metallum’s riches are expected to
managing director Zeff Reeves and his start with copper production out of the
team in 2013. Atacama Desert in Chile.
“The Philippines has its challenges “By the end of March 2015 we expect
at the moment, particularly with what a big transition for the company if we
they are doing with mining projects, can begin to hit our production targets
the tax system and getting things per- [in Chile] and hopefully we’ll be able
mitted. We are holding Comval at the to talk about a different company, one
moment and have had numerous dis- which is churning out the cash and
cussions with various groups interested looking to grow,” Reeves said.
in a JV, buying it or funding it, but no- Metallum arrived at the El Roble cop-
one has stepped forward and said they per project, 25km east of the port city of
are prepared to put their hand in their Caldera, in 2013 after it signed an op-
pocket,” Reeves said. tion to acquire 90% of the project.
“Comval is a fantastic project but to High grade copper is the key to spinning cash for Metallum This granted Metallum access to a
PAGE 22 FEBRUARY 2015 AUSTRALIA’S PAYDIRT
A small bobcat is all that is required to load El Roble material on to trucks
about 710t sent to a processing plant oper- begin to realise what Metallum can achieve.
ated by state-owned enterprise, ENAMI, and “The growth areas are exceptional, the vein
a further 490t stockpiled, to the end of Sep- is wide and we can see in the mine above the
In December, all ore from ac-
cessible stopes at Panga had
been depleted and while Metal-
lum’s understanding of the mine
is much greater now its focus is
shifting further afield at El Roble.
“Panga has had some challeng-
es due to access and the nature of
project boasting copper mineralisation over a the vein and some of the geology
mapped area stretching 6km, with mined ore there, so it probably hasn’t been
grades in excess of 12% consistently deliv- as good as we would have liked it
ered to local toll treatment facilities. to be,” Reeves said.
Metallum’s due diligence confirmed the “We have produced out of there
high-grade nature of the mines through rock and trucked out of there and taken
chip sampling results which returned grades what we think is the easiest mate-
of almost 30% copper. rial to mine. There are a couple of
Therefore, its strategy has always been to areas at Panga that we are doing
generate cash flow through small scale pro- work on to assess if we can mine
duction and then start expanding the com- anymore there but really our focus
pany through exploration. is going to be on San Sebastian
Metallum’s foray into mining at El Roble and Paraguay.”
started at the Panga concession with first The company is particularly
revenues collected from 270t @ 2.52% cop- excited to sink its teeth into San
per processed during the September 2014 Sebastian and hoped that by
quarter. demonstrating the mine’s produc-
“The company had mined about 1,200t, with tion capabilities the market would
It is looking like averaging over 6% There is believed to be many more repeats of high
copper, it is highly continuous, easy grade copper deposits within the 7,000ha land holding
to mine and really nice material to mine,
which is the type of stuff we are targeting. Metallum has at El Roble
AUSTRALIA’S PAYDIRT FEBRUARY 2015 PAGE 23
CHILE SITE VISIT
Metallum currently loads about one to two trucks of material to be processed at nearby ENAMI processing plants
ore shoot that we are mining lum’s El Roble project.
now goes to over 4m wide in ENAMI had informed Metallum that 460t @
some places,” Reeves said. 4.77% copper had been processed which in-
“It is looking like averaging cluded over 20t DSO material @ 22.7% cop-
over 6% copper, it is highly per, 3.05 g/t gold and 14 g/t silver.
continuous, easy to mine and ENAMI processes and markets ores and
really nice material to mine, concentrates for companies like Metallum, of-
which is the type of stuff we fering payments for oxide material based on
are targeting.” copper content less than 8% copper, while
When Paydirt spoke to anything above 8% is considered DSO and
Reeves after visiting site late companies are afforded payments for copper,
in 2014, Metallum was pre- gold and silver content.
paring the first stope for min- At a production rate of 7,000-9,000 tpm at
ing at San Sebastian and has about 3% copper, toll treating with ENAMI is
since taken full ownership of a practical and profitable means for Metallum
the mine. right now, Reeves said.
Prior to Christmas, about “At 5,000 tpm the cash flows that we do in-
700t of material had been ternally are pretty conservative using a grade
stockpiled, of which 620t of 2.8%, San Sebastian is higher than that.
had been trucked to one of Together with the 5,000 tpm at 2.8% at Para-
the two ENAMI processing guay, that produces enough cash per month
plants within 80km of Metal- for us to do everything we want to do, includ-
ing exploration. If you bump the
grade up you get more cash
but for it to be a good, lucrative,
easily managed operation two
or three small mines running
at 7,000-9,000 tpm (combined)
is going to knock out some re-
ally nice numbers for us,” Reeves
And, keeping extraction within
5,000 tpm from each mine for
now means the full permitting
process won’t be required.
Panga was the first mine Metallum “We have a very good relation-
started production from at El Roble
Metallum has copper grading 30% ship with the Mines Department
at some of its assets and continuously communicate
PAGE 24 FEBRUARY 2015 AUSTRALIA’S PAYDIRT
There is an abundance of small scale mining “Mining has stopped at Panga, with Metallum using its resources at San Sebastian and Paraguay
We do see it as prospective for IOCG
experience available in Chile [copper and gold] and we’d like to develop
our own resource of a modest size – something
with them. We’re looking at heading down the high grade out of the vein system – and utilise
full permit process and engaging consultants that resource to build our own plant and realise
and environmental consultants. That is some- full value from the material that we are mining.
thing we will do as we are making reasonable
money and getting bigger and we are looking “Vidua already has an ore shoot delineated by Metallum.
to initiate that process sometime this year,” and probably has a couple months worth of Currently, Metallum holds over 7,000ha
Reeves said. production in it. Material from there is aver-
aging over 3% copper and patches of 8-10% in an area of Chile’s Region III which hosts
Early indications are that the system be- copper. As time goes on and we get that and massive IOCG systems Candelaria (470mt @
tween San Sebastian and Paraguay has the San Sebastian into a full production scenario 0.95% copper) and Mantos Verde (350mt @
potential to deliver more than 5,000 tpm once by January/February 2015 pumping out some 0.75% copper).
stopes are opened up, and the company is regular tonnage at good grades, then we can
particularly buoyed by the way San Sebastian really start to prove to the market we can do Through geophysics and ground magnetics
is behaving. what we set out to do,” Reeves said. Metallum has detected a large strand of the
Atacama fault – which controls mineralisation
“At the moment it is actually getting better Stamping down production and generating at Candelaria and Mantos Verde – appearing
than we first envisaged,” Reeves said. cash flow is the key to the self- through El Roble.
funded growth strategy outlined
Following from the greatest ever hit at El
Roble late last year – 0.55m @ 35% copper
and 4.29 g/t gold – another high-grade vein
at San Sebastian was identified in December.
The 50m-long vein, Vidua, south of San
Sebastian, boasting grades of 10.55% cop-
per and 2.82 g/t gold, 9.92% copper and 1.53
g/t gold and 8.08% copper and 1.34 g/t gold
from sampling, has the potential to become a
second mine for Metallum at San Sebastian.
Being very close to San Sebastian, Metal-
lum can use existing infrastructure to access
Vidua if it shapes up to be a mining area.
Further detailed sampling and earthmoving
activities to investigate down dip continuity is
planned for Vidua early this year, while the
first stoping area at Paraguay is brought on
Historical issues over the concessions
meant the granting of a mining permit at Para-
guay took some time. The issue was resolved
last year and Metallum received permission to
Some 30-60t of material is sent for treating each day from El Roble Metallum managing director Zeff Reeves
AUSTRALIA’S PAYDIRT FEBRUARY 2015 PAGE 25
CHILE SITE VISIT
Reeves said a number of interesting anom- Metallum country manager Sergio Oribe Metallum entered the Atacama desert,
alies had presented for the company to follow Chile, to mine copper in 2013
up. ue our assessment work to complement our
existing operations. And in the region itself we From a base of two to three mining opera-
“Generally, when you get a high concen- see other opportunities. tions at El Roble, Metallum hopes to build a
tration in high-grade vein deposits or even solid cash position, with a pipeline of explo-
Mantos-style deposits, somewhere in the vi- “Once we get ourselves established in a ration results and potentially a resource over
cinity of that district will be an IOCG deposit continuous cash flow position then we will cer- one or two areas in addition to potentially
sitting there. Candelaria is probably the best tainly start to look outside the El Roble project making some other acquisitions.
example and within a 20km radius there are to better expand the company,” Reeves said.
hundreds of mines that are mining high-grade While there promises to be plenty to talk
copper veins. about in Chile, a Western Australian Govern-
ment EIS grant has afforded Metallum the
“We do see it as prospective for IOCG [cop- chance to conduct some drilling at its Teutonic
per and gold] and we’d like to develop our own gold and base metals project in the Eastern
resource of a modest size – something high- Goldfields.
grade out of the vein system – and utilise that
resource to build our own plant and realise full “There is a nice EM anomaly there. It is
value from the material that we are mining,” highly prospective for VMS-style copper, zinc,
Reeves said. silver, lead mineralisation, similar to Bentley
and Jaguar. Our geophysicists, who worked
When cash starts to roll in for Metallum, it on DeGrussa, are excited by that anomaly
plans to bring El Roble’s real potential to the and believe it is one of the better ones they
fore through exploration. have seen in recent years and we hope to drill
that some time in 2015,” Reeves said.
With 50% of the project covered by sand
dunes, a geophysics programme to cover the – Mark Andrews
entire area is planned which will be followed
by drilling and resource delineation. METALLUM LTD ASX:MNE
Reeves believes there is potential for re- Address: Suite 1, Ground floor, 83 Havelock Street, West Perth, Western Australia 6005
peats of the mineralisation which is already Phone: +61 8 9322 4328
known in addition to the untapped potential in Fax: +61 8 9322 5230
the exposed part of the project. Email: [email protected]
“There is huge exploration potential as well, 52-week share price range: 1c-5c
and as we get cash flow we will kick off that Key people: Winton Willesee (non-executive chairman), Zeff Reeves (managing director), Cobb
exploration. There are a lot of other areas of Johnstone (non-executive director)
interest on the project area and we will contin-
Comment: Mining Group Ltd changed its name to Metallum Ltd in June 2014 as the company
ramped up its activities in Chile. Although still having the Comval copper-gold project in the Philip-
pines, which was Mining Group’s flagship, Metallum’s focus is cash generation from small scale,
high grade copper production in Chile’s Region III. The company hopes for steady production
from two to three underground mines this year at El Roble, which will provide enough cash flow
for it to execute its self-funded growth activities. El Roble, 10km from the Pan American Highway,
is in the same region as the huge Candelaria and Mantos Verde copper deposits and close to the
regional centre of Copiapo.
“Chile provides the opportunity for us with the infrastructure it has there, with a government-
owned plant close to the project and the fact that the project is high grade and is easily identifiable
makes it a good opportunity for us,” Metallum managing director Zeff Reeves said.
PAGE 26 FEBRUARY 2015 AUSTRALIA’S PAYDIRT
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$AEa92ar9v0ly0a.MiB0la0iabrrdliecnhrcua.2ntGe0ti1lS5T 20-21 May 2015, Sydney
To present, exhibit or attend as a delegate please contact
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PERU SITE VISIT
Inca’s trek to
prosperity in Peru
Inca Minerals Ltd received “ Inca has established an exploration camp among the Andean mountains of Peru
some encouraging news in We have quite a number of majors director Ross Brown told
Peru at the end of 2014. interested in the project and we are Paydirt.
now appealing to cashed-up small caps.
The company was noti- “We have quite a number
fied that an application for of majors interested in the
a semi-detailed EIA (sdEIA) project and we are now ap-
drill permit had progressed
with the country’s Ministry There have been a number of unsolicited pealing to cashed-up small
of Energy and Mines, taking approaches and we are appealing to caps. There have been a
Inca a step closer to reacti-
vating drilling at its flagship number of unsolicited ap-
different types of companies. proaches and we are ap-
While the Ministry has not pealing to different types of
identified any deficiencies
with the permit application, companies,” Brown said.
nor any third party objections,
further information concern- “The area has had over 100
ing some maps, soil and air
quality sampling and certain years of mining historically
rehabilitation aspects have
been requested. and Toromocho nearby has
At the time of print, Inca brought a modern mining con-
was preparing all necessary
information ahead of submis- text to the area. There is scope
for large-scale mining where
The granting of an sdEIA
will afford Inca a two-year drill historically it has been small-
permit and access to all ar-
eas and targets at Chanape, er-scale vein mining. With
which could have major rami-
fications for Inca, managing Toromocho now in production
and our results appealing to
large and cashed-up small
companies, there is a hive of
activity outside of Lima.”
Essentially, the granting of
the sdEIA further de-risks the
project and could well trigger
action from a keen observer,
while Inca will generate news
flow from the resumption of
San Mateo is a convenient stopover point on the way to Chanape drilling.
PAGE 28 FEBRUARY 2015 AUSTRALIA’S PAYDIRT
“ Inca has a young exploration team in Peru, which includes geologist Trent Potts
Should we decide to go it alone, which is
still a possibility for us, we will add value
to the project by capturing the drill results for
ourselves and making announcements.
Brown said he hopes to deliver some big- silver, while results from channel sampling in
ticket announcements early in the New Year, the summit and southern areas of Chanape Despite challenging terrain there are mines
and while penning a deal is an option, Inca indicated high-grade epithermal mineralisa- successfully operating near Chanape
has not ruled out flying solo at Chanape. tion.
“Should we decide to go it alone, which is Results from 2m channel samples in un-
still a possibility for us, we will add value to the tested tourmaline breccia zones included
project by capturing the drill results for our- M183375: 12.65 g/t gold, 746 g/t silver,
selves and making announcements,” he said. 14.95% lead; M183365: 9.11g/t gold, 88.4 g/t
silver; M183356: 7.25 g/t gold, 94.1 g/t silver;
Nestled in the Andean mountains, Chana- M183419: 4.17 g/t gold, 17.3 g/t silver, 1.85%
pe is 30km from the Chinalco-owned 2.15bt lead; M183413: 3.96 g/t gold, 59.2 g/t silver
copper-molybdenum-silver Toromocho por- and 2.28% lead.
The best rock chip samples at Chanape,
Toromocho is capable of producing where Inca has tripled its prospective area
300,000 tpa copper over a 30-year life-of- and established a discrete chargeability zone
mine, while Nyrstar’s Coricancha gold-silver- (1.5km by 750m by 500m), will be followed up
zinc-lead mine further highlights the prospec- with drilling.
tivity of the region Inca is in.
With known mineralisation over 1.3km (ver-
Like Toromocho and Coricancha, Chanape tical range) plus widespread epithermal style
has multi-commodity potential, although em-
ulating such mega deposits will Despite only being a short distance from Lima, Chanape is five hours travelling time from Peru’s capital
take many years and come at
However, in recent times there
have been new opportunities for
Inca beyond chasing a large por-
Inca has bided its time wait-
ing for drilling approval by carry-
ing out mapping, talus, channel
and rock chip sampling and re-
fining drilling targets through IP
geophysics remodelling, while
re-assaying hole CH-DDH012,
which returned plus-1% tung-
Rock chip sampling near the
hole revealed the highest cop-
per values – 5.5% copper – at
The new copper-gold-silver
tourmaline breccia also contains
values of 2.2 g/t gold and 51.1 g/t
AUSTRALIA’S PAYDIRT FEBRUARY 2015 PAGE 29
PERU SITE VISIT
“ Inca’s application for a drilling permit has advanced with the Peruvian Ministry of Energy and Mines
Should the surface material prove to be of our new discoveries in a relatively short time-
economic grade we could be in production frame; certainly a lot shorter time than devel-
quite rapidly. This style of mining has historically oping a porphyry. Should a porphyry hang
been sustained at Chanape and we can even open together then the upper mineralisation comes
up some of the old adits which are there. out as payable dirt,” Brown said.
Inca will be more certain of its future when
drilling starts and results filter in.
In preparation for drilling, Inca managed
to raise over $3 million in 2014, which will be
gold-silver (copper-lead-tungsten) minerali- “We have the big porphyry system below used to begin a planned 22,500m programme
sation and copper-molybdenum-silver (gold) [surface] which is in the realms of the majors from 61 platforms once the sdEIA is granted.
mineralisation, Brown said Inca had a dual because you are talking about a 5-10 year Inca will dedicate multiple rigs to its next
project to consider at Chanape. drill out in the order of 100,000m of drilling,” campaign and despite Chanape – 90km east
Brown said. of Lima in the San Mateo district – being
“The surface gold min- about 5,000m above sea level there are no
eralisation is appealing to difficulties mobilising equipment.
majors and other types of As Chanape is at high altitude, where occa-
companies, as it would take sional earthquakes along the Andean belt are
a shorter timeframe to start
building a resource which
could easily be established
within two years. Should the
surface material prove to be
of economic grade we could
be in production quite rapidly.
“This style of mining has
historically been sustained
at Chanape and we can even
open up some of the old adits
which are there. We have
made new discoveries in
terms of vein mineralisation
and breccia pipe mineralisa-
tion at the surface.
In tough times for resources companies, for every $1 spent on “We could open the old
admin costs, Inca spends $4 on exploration mines and we could develop Inca managing director Ross Brown
PAGE 30 FEBRUARY 2015 AUSTRALIA’S PAYDIRT
Inca’s exploration team Trent Potts (geologist), Tilo Kroll (senior geologist),
Ross Brown (managing director) and Jorge Gonzales (geologist) at Chanape
experienced, the perception is that the region people’s minds that just because you are op-
is difficult in which to operate. Brown, howev- erating in the Andes it is difficult, but that is
er, is quick to debunk such suggestions. not the case.”
“There are many mines above 5,000m,” he Geographical concerns aside, Brown said
said. the common perceptions about community
“It is something to be wary of – how diesel and environment issues in Peru and other
engines run, how people survive, breathing Latin American countries were correct.
“techniques – but it is not an issue for explo- “You have to be careful with social licence.
If you don’t address community issues quickly
ration or operating mines. It is in the back of
It is in the back of people’s minds that just Chanape is shaping up as a
because you are operating in the Andes it is potential multi-commodity project
difficult, but that is not the case.
The top of Mt Chanape is about 5,000m above sea level
AUSTRALIA’S PAYDIRT FEBRUARY 2015 PAGE 31
PERU SITE VISIT
Receiving a drilling permit at Chanape could be a game changer for Inca, according to Brown
you will never be able to operate in Peru ef- “We need to start to put some more meat on
ficiently. We have done that and we think our our project before we start farming it out and
social licence is in very good condition.” we will look to do some work on the ground.
Should we prove up some drill targets, we
Taking great care of its social licence and will either drill it out ourselves or farm one
dedicating time to Chanape has been Inca’s out. There are a lot of companies looking for
focus while it has had little capacity to ad- nickel projects because of Sirius’ [Resources
vance work at its greenfields Moquega pro- NL] and Rox’s success, which have certainly
ject, comprised of the Jose Alonso, Agua elevated nickel in WA, so we may find a suitor
Blanco and Oscar Alberto prospects, 60km for that project,” Brown said.
south-east of Arequipa.
– Mark Andrews
“They are all grassroots exploration tar-
gets. We haven’t done much with those pros- Once Inca is granted a drilling permit at Chanape,
pects but we will do some work on them now it plans to start a 22,500m programme
we have our geological team more settled.
We will look to send a couple of juniors down INCA MINERALS LTD ASX:ICG
to Moquega in between programmes at Chan-
ape and steadily build a story at Moquega,” Address: 1030 Wellington Street, West Perth,
Brown said. Western Australia 6005
Meanwhile Inca, which flew under the Con- Phone: +61 8 6145 0300
dor Metals banner until mid-2012, is also keen
to learn more about its Dingo Range nickel Email: [email protected]
project in Western Australian in 2015.
Dingo Range was initially thought to be a
gold project, however Rox Resources Ltd’s 52-week share price range: 1c-4c
success at the nearby Mt Fisher project has
changed Inca’s focus to nickel. Key people: Ross Brown (managing director),
Justin Walawski (director), Gareth Lloyd (non ex-
In December Rox expanded its ground- ecutive director)
holding at Mt Fisher, extending its ultramafic
horizon towards Inca’s land. Comment: Hidden in the Andean mountains in
the San Mateo district of Peru is Inca Minerals
“Rox is starting to look at the ultramafic se- Ltd’s Chanape project. Initially billed as a potential
quence which we have on our property and large multi-commodity porphyry deposit synony-
their numbers continue to be robust. It may mous in that part of the world, recent exploration
be a case of nearology but we have had those has indicated other possible options for Inca. The
tenements for a long time – pre-nickel dis- excitement stemming from the exploration team
covery. Rox has a fairly large land package on the ground has spread, with numerous compa-
and I have been speaking with Ian Mulholland nies – majors and cashed-up small caps – show-
[Rox’s managing director] about doing some- ing strong interest in Chanape. A potential game
thing, but we need to do some more work changer for Inca is the granting of a semi-detailed
first,” Brown said. EIA (sdEIA) from the Ministry of Energy and Mines,
which will pave the way for drilling to resume and
Inca has not completed any nickel drilling possibly materialise interest from third parties into
at Dingo Range and it is planning on appor- something more meaningful. At the time of print,
tioning some of its exploration budget to the Inca was providing the department with more in-
project in 2015. formation as part of the sdEIA process and hoped
to update the market in the near future.
While drilling is a possibility this year, so is
a possible deal on the back of WA’s nickel re-
surgence in 2014.
PAGE 32 FEBRUARY 2015 AUSTRALIA’S PAYDIRT
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Australia-Peru to strengthen ties
New Australian Ambassador to Peru
Nick McCaffrey hopes to strength-
en Australia-Peru relationships during
McCaffrey replaced John Woods,
who had occupied the ambassador’s
post at the Australian Embassy in
Lima since its rebirth in 2010.
McCaffrey, a DFAT officer with
more than 20 years’ experience, re-
placed Woods late last year in his first
stint as an ambassador.
Prior to his current position, McCaf-
frey was head of political and econom-
ic public affairs at Australia’s embassy
in Manila and has spent more than 12
years abroad, in countries such as
Spain, Solomon Islands and Argen-
“It is true that when a country re-
opens an embassy it does give the bi-
lateral relationship a kick-along,” Mc-
Caffrey told Paydirt at the Australian
residence in Lima.
“The commercial, mining and in-
vestment-related parts of the relation-
ship have come a long way and there
is much more potential for us, particu- Australian Ambassador to Peru, Nick McCaffrey, at the Lima embassy. Australia reopened the
larly in the mining and energy sectors.” embassy in Peru in 2010 after a 24 year hiatus
Before arriving at his post in Lima,
McCaffrey travelled around Australia and met tralia’s leading miners. What I took away from early 2000s.
with some of the Australian mining contingent those meetings were the optimistic views that Since Fujimori’s demise there has been a
with interests in Peru. these professionals had formed about operat- positive change in leadership, and coupled
At the time of print, there were 16 ASX-list- ing in the destination and the amount of time, with mining development, the country’s pov-
ed resources companies with projects in the resources and money spent here,” McCaffrey erty rate has reduced from 40% to about 28%
country. said. since the mid-2000s.
“I was surprised by the number of compa- It has been easier for Australians, and many President Ollanta Humala’s Government
nies here but equally surprised by the length foreigners in fact, to invest in Peru since for- continues to push for social inclusion and
of time they had been here and the feedback mer President Alberto Fujimori was deposed better spread of income as the country’s eco-
I was getting from the junior miners to Aus- for corruption and human rights abuses in the nomic growth rate has averaged 5.6% over
the past five years.
Mining has contributed greatly to Peru’s
rise with 57% of the country’s exports related
to the sector.
Being the world’s second-largest producer
of silver and third-largest copper producer
has attracted miners to Peru, however only
a small percentage of the country has tene-
ments granted for mining and exploration (10-
14%), with fewer than 2% subjected to explo-
ration right now.
Peru has not been immune to the global
resources decline however the Government
remains committed to the industry, accord-
ing to Australian Trade Commissioner to Peru
“Central Government policies recognise
Peru is a mining country, always has been,
and the country requires mining for stability
and future growth,” Havas told Paydirt.
Australian miners and explorers have dem-
onstrated an understanding of the opportuni-
ties in Peru and have been followed into the
republic by the METS sector.
Australian Trade Commissioner to Peru Daniel Havas, Latin Resources chief executive and “With the slowdown in the sector in Austral-
COALAR chairman Chris Gale with Australian Ambassador to Peru Nick McCaffrey at the ia, I would say that the METS sector looked at
Mining Investment Latin America Conference 2014 in Lima Latin America more clearly and the slowdown
PAGE 34 FEBRUARY 2015 AUSTRALIA’S PAYDIRT
The global resources downturn has meant very little of Peru is currently being explored
has come here later. From a METS perspec- and the EU. ships with services agreements, double tax
tive, the companies that are doing well here “We have a good, warm relationship with agreements and other agreements that make
are those that have or are looking at estab- Peru, with some parts very strong and other that structure. If you look at the Australia/Peru
lishing some sort of headquarters or supply parts that need to be worked on very hard in relationship it has some of those but certainly
chain mechanism here on the ground. From the next four years, both on the commercial not many, so we need to work on that.”
our perspective there is still a lot of interest and investment side of things and the diplo- With the Australia-Peru relationship moving
being shown in Peru,” Havas said. matic side,” McCaffrey said. beyond mining, it is the right time for the two
More than 60 Australian companies have “If you map out formal bilateral partner- countries to enhance the connection.
an office in country and while the commercial ships, countries A and B have good relation- “The relationship with Australia is built on
presence is strong, Peru’s proxim- mining but the relationship is
ity to the Pacific Ocean and Andes ASX-listed companies in Peru starting to deepen,” Havas told
mountains makes it popular with
tourists. COMPANY ASX CODE COMMODITY Two years ago Havas’ time
An estimated 40,000 Australi- Strike Resources Ltd SRK iron ore was largely occupied by the
mining sector, however he said
ans visit Peru every year in various
capacities – a figure McCaffrey ex- Promesa Ltd PRA base and precious metals Peru was increasingly looking
pects to increase. Inca Minerals Ltd ICG multi commodities towards Australia’s ideas on
education policy and skills de-
“That number continues to grow
and will continue to. By the end Commissioners Gold Ltd CGU copper, gold, molybdenum velopment and research.
of my time here I hope we have a AusQuest Ltd AQD copper, gold “Mining is still very important
relationship with a bit of depth and Global Geoscience Ltd GSC gold, silver, base metals but the Peruvians and Australia
balance,” McCaffrey said. are looking at other sectors and
Australia and Peru enjoy bi- BHP Billiton Ltd BHP copper, zinc other ways of engagement in
lateral relations, including an In- Rio Tinto Ltd RIO copper, gold the bilateral relationship. We
vestment Promotion and Protec- see an interest in agribusiness,
tion Agreement (est 1997), while Latin Resources Ltd LRS copper, gold infrastructure, oil and gas. We
they are part of the APEC group Wild Acre Metals Ltd WAC gold, base metals do quite a lot of work in that
negotiating broader Asia-Pacific space and there is certainly a
economic integration through the Metminco Ltd MNC copper
growing interest,” Havas said.
Trans Pacific Partnership Agree- Platypus Minerals Ltd PLP copper – Mark Andrews
ment (TPP). Red Gum Resources Ltd RGX lead, zinc, silver, gold
However, Australia does not
share a free trade agreement as Minera Gold Ltd MIZ gold, copper
Peru does with Chile, US, Singa-
pore, China, Korea, Japan, Mexi- Laconia Resources Ltd LCR gold, silver
co, Panama, Costa Rica, Canada Migme Ltd MIG gold
AUSTRALIA’S PAYDIRT FEBRUARY 2015 PAGE 35
IPO set to improve
off low base
Not that any further evidence was needed Wilson said he expected that trend to con- There is little known about the company’s
but Paydirt’s annual review of new ASX tinue and even strengthen in 2015. directors and with a portfolio of exploration li-
listings in 2014 highlights the vastly changed “The barometer is definitely swinging to- cence applications in New South Wales, there
landscape for the resources sector. wards producers. You may see some spin-out was limited exploration activity to account for
This year’s review features just seven new IPOs, particularly Australian projects with im- the price spike.
listings, down from 13 in 2013 and 80 as re- mediate or short-term production opportuni- ASIC suspended trading in the company on
cently as 2011. Together the seven compa- ties and particularly in the gold sector. July 15 amid concerns about its compliance
nies raised just $89 million in their IPOs, the “Exploration plays are still fairly down in the with shareholder spread rules with the com-
majority of those funds ($54 million) going to dumps in Australia. I can see a few off-shore pany yet to return to the main board.
the undersubscribed offer from U&D Coal Ltd, exploration plays getting away but by and Wilson said availability of debt was also af-
the Queensland-focused coal hopeful which large the focus will be on near-term produc- fecting the IPO market.
has since been tied up in ownership disputes. tion domestic plays.” “It is a very strong factor for all companies,”
The paucity of new listings reflected the Elsewhere, investors were willing to back he said. “It is extremely easy to come by debt
“tough market conditions encountered by all returning heroes of yesteryear. Former BHP and it is much cheaper than equity at the mo-resources companies inment. We have seen non-
2014 as commodity prices The barometer is definitely swinging producing companies such
fell and investors continued towards producers. You may as West African Resources
to seek out safer havens. [Ltd] and Hot Chili [Ltd] raise
debt easily recently and pri-
Morgans resource ana-
lyst James Wilson told Pay- see some spin-out IPOs, particularly vate companies can also
dirt the IPO year had been Australian projects with immediate or raise debt relatively easily
defined by the uncertainty so many are staying private
in metals prices, the focus short-term production opportunities and for longer.”
elsewhere of institutional in- particularly in the gold sector. Alternative financing is
vestors and the availability
of debt. also available from the pri-
vate equity sector.
“Institutions were certain- “The rise of private equity
ly tapped out from all the big has also been a factor. We
industrial IPOs (Medibank, IPH, etc) and the Billiton Ltd senior exploration manager Stu- heard as far back as March 2013 that there
speculative nature of the metals market dur- art Fogarty was back as managing director was $50 billion of P.E. funding sitting on the
ing the year was not conducive to the current of Duketon Mining Ltd, which raised $8 mil- sidelines and some of that is now coming into
risk profile of investors; which is very anae- lion before listing in July while former Integra the resources sector. But it is hard to track
mic,” Wilson said. Mining managing director Chris Cairns re- because this is funding that is never seen or
After U&D, the amounts raised in IPOs emerged with Stavely Mining Ltd, an explorer heard about. I am hearing anecdotal evidence
betrayed the frugal nature of the market in chasing copper porphyries in Victoria. of even mining services companies being
2014 as investors steered clear of high-risk Wilson said both Duketon and Stavely had picked up by private equity.”
junior mining stocks. Valence Industries Ltd performed well, reaching 59% and 220% Other companies chose to forgo an IPO in
was perhaps the most successful new list- above their opening price respectively during favour of vending assets into existing compa-
ing, raising $10.14 million before arriving on the year. nies.
the bourse in January (see page 38). That Perhaps the most intriguing new listing was After two years of pain for junior mining
Valence’s flagship Uley graphite project is Fifth Element Resources Ltd which attracted stocks, there are myriad companies with lit-
already nearing in production highlights in- plenty of media attention in July when its tle money and few assets. For private vendors
vestors’ strong preference for production and share price rose from the 20c issue price to looking for listed vehicles in which to place as-
development stories over exploration plays. $7.96. sets, these companies can prove enticing.
PAGE 36 FEBRUARY 2015 AUSTRALIA’S PAYDIRT
“We did see some backdoor listings in 2014 “In many ways it can be more difficult than major shareholders we spoke to were keen to
and I think that will continue in 2015,” Wilson the IPO process. There are lots of shells out get some momentum into their companies but
said. “Backdoor listings can come with a lot there but they need to be right for what you often it was the incumbent management who
of baggage [disgruntled shareholders, exces- want to achieve. We looked into many and were unwilling to change.
sive shares on issue, etc] but they can also spoke to about a dozen.” “I’m surprised there haven’t been more
be very palatable. It reduces both the financial Beckwith said the first priority in looking for examples of major shareholders ruffling the
and regulatory burdens of an IPO, securing an appropriate shell company was that it had feathers of management because there is a
the shareholder spread and the like.” a good capital structure. lot of inactivity out there and the longer that
Former Westgold Re- goes on for, the more likely
a company is to turn from a
sources chief executive Andy good shell with good capital
Beckwith chose the backdoor structure into a bad shell with
a capital structure which has
It can become very frustrating.listing route last year when blown out,” he said.
Many of the major shareholdershe vended a portfolio of US Wilson expected backdoor
listings to remain popular in
exploration assets into Car-
2015 but also predicted in-
we spoke to were keen to get somenavale Resources Ltd. creasing interest in IPOs this
“momentum into their companies butHe told Paydirt his private
concern, Tojo Minerals Pty often it was the incumbent management “The weakness in the
Ltd, had chosen to backdoor who were unwilling to change.
list the assets because of the
difficulty in attracting enough
shareholders to IPOs in the Australian dollar is making
current market. resource equities more palat-
ASX rules state that companies must have “You have to look really carefully because able and with the oil price falling, producers in
a minimum 400 shareholders at the time of most of these shells need consolidation and particular are looking attractive,” he said.
listing but with retail investors having largely in that process you may reduce the amount “There is also a re-emerging focus on the
withdrawn from the market it is a figure which of marketable parcels of shares to less than retail side of the share register. Many of the
is often unachievable. 30 so you are back to the same shareholder producers have the institutions on the register
“When we looked at doing an IPO the spread problem you have in the IPO process.” but they don’t have the liquidity so they need
big challenge was getting the shareholder The amount of shell companies on the ASX the mums and dads to start buying their stock.
spread,” Beckwith said. is set to rise in 2015 as more junior resources The barometer has definitely swung towards
The company explored other options be- firms struggle to keep afloat. Backdoor listings retail.”
fore settling on vending the assets into a listed offer companies an opportunity to change di- It has been a long time in the doldrums for
shell company. However, the process can be rection and build some momentum but Beck- the IPO market but such catalysts could see
far from simple and ensuring the right shell with found some management teams unwill- the sector return to prominence in 2015.
company is selected is vital to the success of ing to make necessary changes. – Dominic Piper
such ventures, according to Beckwith. “It can become very frustrating. Many of the
Valence successfully listed on the back of the Uley graphite project in South Australia
AUSTRALIA’S PAYDIRT FEBRUARY 2015 PAGE 37
Valence leads from
start to finish
ASX newcomer Valence Industries finished 2014 with a 172.5% uplift in issue price
The restart of mining operations at the his- ber before closing the year at 54.5c/share when Chinese graphite flooded the market.
toric Uley graphite mine in South Australia (up 172.5% on issue price) as production re- A sterling first-year performance in the pub-
capped off a memorable first year for Valence
Industries Ltd as a publicly listed vehicle.
Not content with kick-
starting the 2014 IPOs with a
We decided that it was the right$10.1 million float and com-
fortably finishing the year
way to go to shift this into aas the best-performing new
“publicly listed vehicle so we could bringresources stock on the ASX,
started at Uley for the first time since the mine lic arena appears to have justified the deci-
was placed on care-and-maintenance in 1993 sion to list the one-time subsidiary of Strate-
gic Energy Resources Ltd on
the ASX when well-travelled
mining and manufacturing
executive Chris Darby joined
Valence as managing director
in September 2013.
Valence pushed the first load the operation back into production. “We decided that it was the
of stockpiled ore through the right way to go to shift this into
refurbished Uley plant on Christmas a publicly listed vehicle so we could
Day and was poised to make the bring the operation back into produc-
first product shipments at the time tion,” Darby told Paydirt.
of print. “It was certainly challenging, but
And the news just keeps getting when you have such an advanced
better for Australia’s only graphite project and a business plan that is
producer. clearly focused on value-adding to
A revised feasibility study has your base mineral it makes it a little
confirmed the company can make a bit easier to explain to investors.
relatively easy and economical tran- “We’re now producing and we’ve
sition through the various phases of got a really good expansion plan
expansion over the next few years. coming off the back of it too, so that
Valence debuted on the ASX made the [listing] process some-
on January 6 at an issue price of what less challenging for us than
21.5c/share. The company’s stocks Uley, about 23km from Port Lincoln, had been on care-and-maintenance it normally would be for a genuine
peaked at 84.5c/share in Septem- for more than 20 years until Valence decided to restart the mine explorer, but it was certainly a very
PAGE 38 FEBRUARY 2015 AUSTRALIA’S PAYDIRT
Valence has received all regulatory approvals for mining and expansion despite some community concerns about groundwater access
hard market in which to do it.” tpa increments to a capacity of 64,000 tpa by Those capital and operating costs com-
Uley, about 23km from the picturesque 2019. bined with the current Uley ore reserve of
2mt @ 12.9% TGC for 261,000t of contained
seaside town of Port Lincoln on SA’s Eyre The feasibility study also confirmed the graphite give the project an estimated NPV of
Peninsula, was discovered in the late 1800s Phase III advanced product handling strategy $65 million and an IRR of 46%.
and mined intermittently from the 1920s until would carry a capex of just $13 million and
1993. could be brought online sooner than originally “The rationale behind those phases is to
planned. increasingly value-add to your baseline pro-
Production rates peaked at 14,000 tpa dur- duction and what the feasibility study identi-
ing that time and Valence will have 174,000t of Operating costs from the current Phase I fied for us was show that bringing Phase III
stockpiled ore to process as part of the Phase operations are expected to fall in the range of production online much earlier was a viable
I development before attention turns to the $400-500/t at the mine gate and $750-950/t and highly profitable thing for us to pursue,”
new pit later in the year. FOB in Port Adelaide. The weighted average Darby said.
sales price for the company’s flake graphite
Phase II will see a new processing plant products is flagged at $1,669/t for general “The profit margin this leads to presents
built on site for an estimated $37 million and products and $4,774/t for advanced products. some pretty compelling mathematics and it’s
production rates ramped up in staged 25,000
Pre-1993 graphite stockpiles will be processed through the refurbished Valence managing director Chris Darby
plant during Phase I operations at Uley
AUSTRALIA’S PAYDIRT FEBRUARY 2015 PAGE 39
“ Strong relationships with global graphite customers will be crucial to Valence’s continued success
certainly a goal we’re pursu- It’s very hard to explain our have on the region’s potable
ing. Plus it also moves you business model to the investor water supply.
further and further away from
any fluctuations in the com- community because it’s not immediately “We were an unusual case
modity cycle.” for the Government to un-
derstand because we were a
Valence received the final obvious in terms of a mining operation. brownfields site and we were
government approvals to re- moving very rapidly towards
start graphite production at production rather than step-
Uley in late December and Darby was heart- Regulatory approvals had proved to be a ping through a lengthy building process,”
ened by the enthusiasm shown by workers major sticking point in the months leading up Darby said.
to take the first shift at the reopened site on to the restart of operations due to concerns “It was a definite learning curve for both the
Christmas Day. surrounding the potential impact mining would company and the regulators and was proba-
bly the key challenge for us last year, but that
challenge was met by the SA Government
and they responded quite rapidly in the end.
“We’ve now got 100% approvals for our
current operation and to do our expanded
mining and production operations as outlined
in the feasibility study. We don’t need any fur-
ther permissions to do what we need to do for
the next five or more years in terms of our op-
erations on site.”
Valence is the only recognised Australian-
based graphite producer on the ASX and
the company has signed multiple MoUs with
global customers for the supply of 80,000t of
graphite from Uley for at least the next two
The company will also contribute $800,000
to the University of Adelaide’s graphene re-
There is no doubt Valence is striving to dis-
Darby with chairman Graham Spurling at the official reopening of the Uley tinguish itself from other mining companies
graphite mine last November looking to make a statement in the current
PAGE 40 FEBRUARY 2015 AUSTRALIA’S PAYDIRT
“Construction of the new Uley pit will begin later this year as part of the Phase II expansion
It’s all well and good to be exploring for
graphite or thinking you might be mining it
at some point in the future, but you actually have
to be able to sell that stuff and that’s where the
window of opportunity is for Valence.
market and perhaps this is best illustrated a call for the initial 25 jobs on site, he received “It’s a really important thing to have some
through its marketing strategy as an advanced more than 500 applications from people in the diversity of employment here and diversity of
manufacturing business. region desperate to be part of the action. economic opportunities, so as we move for-
ward we’ll be able to offer some employment
“It’s very hard to explain our business mod- Environmental superintendent Evelyn opportunities for our youth which aren’t here
el to the investor community because it’s not Poole’s family has a rich history with the pro- right now.”
immediately obvious in terms of a mining op- ject. Her grandfather Albert Easton worked on
eration,” Darby said. the mine in the early 1920s and her geologist Valence has narrowed the list of potential
husband Jeff has overseen exploration pro- financiers for the Phase II expansion down to
“You’re required under the JORC code to grammes for some of the companies which four and Darby was confident of closing a deal
issue an NPV that’s related to your ore re- have operated the project in years gone by. with one of the likely bidders before the end of
serve, but that’s not really how you would the month.
ever measure a manufacturing company, so The number of positions at Uley is expected
the people who do the proper analysis based to swell beyond 90 when Phase II becomes The company has not been short of inter-
on other metrics for how a company performs fully operational later this year and Poole said est for the project, having successfully raised
are now recognising what that value is.” the proposed expansions were a major boost $12.6 million via a placement and share pur-
for employment in the region. chase plan in September before tasting ex-
Darby’s comments are echoed by Va- ploration success the following month with
lence chairman Graham Spurling, the “Most families, and ours is exactly the the discovery of a near-surface “arterial flake”
former managing director of Mitsubishi same, children grow up and they go off and with grades of more than 60% graphite.
Motors Australia Ltd and one of the most become themselves and train in all sorts of
respected manufacturing executives in different areas, but often there’s not a lot of Potential customers from the electronic,
the country. opportunities for them to come back to,” she plastic polymer and biomedical industries are
said. also lining up to strike product agreements
“We’re not just a miner,” Spurling said.
“In our future we will be a very complex with Valence and Darby said those rela-
company, exporting products of ad- tionships would be vital to the continued
vanced manufacturing quality to all parts success of his company now that it was a
of the world. recognised graphite producer.
“This is probably one of the most excit- “The more we specialise and provide
ing things that is happening, in a strategic unique products to those customers and
sense, in this State and we want to make the stronger those customer relationships
the most of it and not screw it up in any are, the harder it will be for others to fol-
way.” low us into the market,” Darby said.
The impact the restart of operations “It’s all well and good to be exploring for
at Uley has had on the local community, graphite or thinking you might be mining it
particularly in Port Lincoln, cannot be un- at some point in the future, but you actu-
derestimated either. When Darby put out ally have to be able to sell that stuff and
that’s where the window of opportunity is
– Michael Washbourne
Environmental superintendent Evelyn Poole
with her mother Lorna Harding
AUSTRALIA’S PAYDIRT FEBRUARY 2015 PAGE 41
Fifth Element puzzles market
Fifth Element Resources Ltd re- been effectively evaluated by his-
mains an ASX enigma follow- toric explorers.”
ing its listing on May 20, 2014. Despite reportedly having four
The company’s prospectus aces up its sleeve, Fifth Element’s
pitched the development of four June and September quarterly
copper-gold projects in Central revealed “no significant activities
New South Wales’ Lachlan Fold related to exploration”.
Belt, but to date little seems to Fifth Element announced on
have happened on the company’s October 21 that it had entered a
ground. “technical services agreement”
In spite of no notable progress, with SRK Consulting to provide
Fifth Element’s stocks soared in an airborne magnetic survey of
2014, rising to $7.96/share from its four project sites, with work ex-
its listing price of 22c/share in pected to commence on October
less than two months. 27.
Fifth Element acquired its four At the time of print the compa-
projects – Fairholme, Pine Hill, ny was yet to confirm whether or
Trangie and Mendooran – through not that survey had commenced.
the purchase of four licences held Exploration aside, the com-
by EJ Resources Ltd. pany found itself in hot water
In its prospectus, Fifth Ele- with the ASX on July 15 when
ment described Fairholme as an its shares were suspended from
underexplored licence within the trading pending a review of its list-
Macquarie Arc volcanic belt, with ing process.
the potential for a large copper- An enquiry from the ASX’s list-
gold porphyry system. ings compliance department on
“Geophysical interpretation June 5 questioned the reason
by Fifth Element has identified for a change in the company’s
a zone of enhanced magnetics share price from $0.60 to $0.68 in
coincident with a gravity low, with the absence of any reported an-
prominent cross-cutting north- nouncements.
west structures,” the prospectus This was the first of six such
stated. enquiries prior to the company’s
“These features are interpreted suspension.
to represent a previously unrec- The peculiar case of Fifth Ele-
ognised and untested, concealed ment continued on November 19,
volcanic centre.” when its chairman, chief execu-
Pine Hill is located on the fur- tive and foundation investor, Chi
thest northern extent of the Cow- Ho William Lo, resigned from the
al Igneous Complex, which forms board to pursue other business
part of the Junee-Narromine Vol- Fifth Element has four prime prospects awaiting work opportunities.
canic Belt and is also conducive Lo was, however, retained as a
to a large-scale porphyry copper-gold depos- ture, some 170km to the south,” the company consultant to the board.
it, according to Fifth Element. said. On January 9 company secretary Nick
Trangie is located along the north-west- “The Lachlan transverse feature is inter- Geddes said the ASX advised the board it had
Igneous Complex, which“trending axis of the 10km-wide Narromine preted to have a controlling influence on the an insufficient spread in the company’s secu-rities to ensure there was an
the company believes has orderly and liquid market in
potential for volcanic and In spite of no notable progress, Fifth its securities.
structural settings favour- Element’s stocks soared in 2014, In the same announce-
able for copper-gold and
ment Geddes said the
gold mineralisation. rising to $7.96/share from its listing price company would “use its
It believes the structure of 22c/share in less than two months. best endeavours to obtain
could be an extension of additional spread within
the Parks Shear, which three months from January
hosts the hydrothermal re- 7, 2015 in order to achieve
placement gold deposits of a level of spread to satisfy
Alkane Resources Ltd’s Tomingley and Peak location of a major ordovician porphyry in- ASX’s requirement and have the company’s
Hill gold mines. trusive centres and association copper-gold total issued shares relisted as soon as prac-
Mendooran is centred on a 15km-wide mineralisation, including Cadia and North- ticable”.
northern section of the Molong Volcanic Belt, parkes. Mendooran covers and inferred Fifth Element did not return calls from Pay-
which is also prospective for porphyry copper- northern transverse cross structure at the dirt.
gold deposits, according to the prospectus. point where the intersected Molong Volcanic – Rhys Dickinson
“Interpretation of regional magnetic and Belt appears to thicken and be offset by a ma-
gravity data sets indicate a large-scale fea- jor, deep-seated intrusive. The combination of
ture parallel to and analogous with the geo- these features is considered prospective for
logically significant Lachlan transverse fea- porphyry-related mineralisation and has not
PAGE 42 FEBRUARY 2015 AUSTRALIA’S PAYDIRT
Stavely Minerals Ltd managing making the discovery, if in fact the
director Chris Cairns was al-
ways hopeful the loyal shareholder deposit has been offset to the east
base which backed him during his
successful tenure at Integra Mining where there has been very little
Ltd would return to support his lat-
est venture. drilling. That’s where the opportu-
Cairns helped build Integra nity lies for us.”
from unheralded gold explorer to
100,000 ozpa producer before Cairns deemed the maiden drill-
selling the company to Silver Lake
Resources Ltd in 2012 and making ing programme at the Ararat pro-
shareholders plenty of money in
the process. ject a success given every hole
So when the former Integra boss drilled at the Mt Ararat VMS de-
reunited with directors Bill Plyley,
Peter Ironside and Jennifer Mur- posit had intercepted copper-gold
phy and launched a prospectus
to list copper hopeful Stavely on mineralisation.
the ASX last year, the old firm was
back ready for action. Results included a hit of 5m @
Stavely made a conscious deci- 2.1% copper, 0.56 g/t gold, 0.48%
sion to offer potential investors the
opportunity to buy shares in the new company zinc and 9 g/t silver (including 2m
either through the ASX BookBuild facility or
via renowned stockbroking firm Morgans Cor- @ 3.37% copper, 0.73 g/t gold,
0.47% zinc and 14 g/t silver) and
The strategy proved a masterstroke and
Stavely listed on the ASX on May 7 after rais- all holes confirmed the company’s
ing $6.1 million for an IPO at a time when new
floats were being looked upon unfavourably. theory that the deposit (inferred re-
“The reason we did that was really because source of 1.2mt @ 2% copper, 0.5
the generalist fund managers weren’t in the
market so we weren’t going to be able to mar- g/t gold, 0.4% zinc and 6 g/t silver
ket to them – and even some of the specialist
resources funds were more focused on exist- Stavely managing director Chris Cairns with some of the core for 30,000t contained copper) ex-
ing producers as opposed to greenfields ex- from his company’s flagship project in western Victoria tends to the north.
ploration plays,” Cairns told Paydirt. “Our thesis was that it continued
“The focus of the IPO had to be retail in- someone had pinned their ears back and for 15km through our tenure and that there
vestors and, in particular, we had hoped that
a reasonable proportion of the ex-Integra started buying. It looked institutional, so were some obvious targets along strike that
shareholder block would come into the IPO.
By going with Morgans in conjunction with the hopefully they are as excited – and as patient had the potential to increase the tonnage
ASX BookBuild, we gave all of the ex-Integra
shareholders the opportunity to participate on – about the projects as we are.” available, potentially for a feasibility study,”
the basis that it didn’t really matter what bro-
ker they dealt with individually.” Stavely listed on the back of two projects it Cairns said.
Stavely’s market performance following its purchased from BCD Resources NL in May “We’ve done downhole EM now and we’re
listing at 20c/share was unprecedented given
the depressed state of the market and the 2013 and the company was active on the waiting for a review of those results towards
perceived negative sentiment towards Victo-
ria where the company has its two projects. ground in western Victoria within weeks of be- looking at doing some deeper diamond holes,
The company’s stocks peaked at 70c/share coming just the third new resources entry to but given that we have demonstrated that
in July before tailing off to 25c/share at the
time of print. But, as Cairns noted, to be sitting the ASX in 2014. horizon is quite extensive, we’ll look at doing
25% ahead of the issue price in the current
economic climate is “very pleasing”. The company’s namesake project has an some more geochemistry work, followed up
“It was a little bit interesting in that it inferred resource of 28mt @ 0.4% copper for by ground EM, to pick up a number of addi-
seemed much of that buying was coming from
two nominee companies,” Cairns said. 110,000t contained copper and the copper- tional targets.”
“We still don’t know who they are or who gold porphyry potential has already drawn Cairns said his company was well funded
they might be representing, but certainly
comparisons with Newcrest Mining Ltd’s Ca- to carry out the next phase of exploration
dia Valley deposit and Rio Tinto Ltd’s former after signing a $2 million share subscription
Northparkes operation in New South Wales. agreement with Titeline Drilling Pty Ltd late
Deep diamond drilling at the main Thurs- last year.
day’s Gossan prospect returned promising The managing director was also upbeat
early results until the company struck a major about the future of copper, referring to ana-
low-angle fault at depth during the September lyst reports from InfoMine and Kitco which
quarter. suggest copper is trending upwards from an
“It looked as if we were heading towards the Australian dollar perspective.
best mineralised zone and then having gone “I think when you scratch the surface of
through the structure, we ended up in the the pessimism, there’s probably not a lot of
outer periphery of the system, so it was a bit foundation for base and precious metals, but
frustrating in that regard,” Cairns said. things are actually a lot better than the market
“I suppose the silver lining to that is our is indicating at the moment and eventually the
current interpretation is the fault offset has market will come around, particularly if the
been to the east, which would bring the target Aussie dollar goes down to 75c,” he said.
mineralisation closer to surface. We’re do- “There’s no question we’ve got some short-
ing some 3D modelling to predict where that ages. Zinc has been the most talked about,
might be and we’ll look at extending some of but the same should be said for copper and
our IP geophysical lines to extend over where other base metals. Eventually the elastic is
we think the deposit should be. stretched to a point and it has to come back.”
“The fault is a mixed blessing in that it’s – Michael Washbourne
becoming apparent where previous explor-
ers had been drilling is only in the upper plate
above the fault and they had no chance of
AUSTRALIA’S PAYDIRT FEBRUARY 2015 PAGE 43
U&D not lamenting listing woes
It’s no secret juniors have had a tough time Drill core from U&D’s MDS project require a wash plant, so these characteristics
of it lately, but few companies have faced as enable getting the mine up and running quick-
much adversity as 2014 IPO U&D Coal Ltd. Should U&D settle its mine lease compen- ly. And certainly the economics today are fine
sation agreement with Glencore soon, Ed- for that particular mine, because it is a very
Chief financial officer Peter Edwards told wards believes MDS could be in production low production-cost and capital-cost mine.”
Paydirt things went awry when U&D’s major either later this year or early 2016.
shareholder, Australian Kunqian International The Broughton project, 30km north-west of
Energy Co Ltd (AKIE), opposed the board’s “It’s a small coal mine with an estimated an- Nebo in the Northern Bowen Basin, was sub-
decision to list on the ASX in Q1, 2014. nual production of 1-1.4mt with a 9-11 year life ject to an 11-hole drilling programme testing
of mine,” he said. the quality and consistency of the project’s
“The company completed its listing on the Girrah and Hinds Lower seams, which led to a
ASX on February 19, 2014, but at the time “It’s not a company-maker, but it’s certainly 192% increase in its resource to 121mt.
of completing that listing the company’s ma- going to be good for our cash flow and it’ll
jor shareholder [AKIE] advised the company be good for the company to get an operating “We are doing more drilling in the south-
and shareholders that the IPO was contrary coal mine up and running. The construction west corner of Broughton which has con-
to their wishes and direction,” Edwards said. timeframe to get to first coal is expected to be firmed the presence of coal seams; it’s just a
less than six months and the site itself won’t question of how mineable that coal will be,”
“The directors at the time decided to pro- Edwards said.
ceed with the listing and then throughout the
2014 year, AKIE, who held more than 50% “There’s quite a bit of potential to do further
of the company’s shares, took matters into exploration on the tenement. The PFS is pro-
their own hands and went through a process gressing and we are encouraged by what we
of attempting to remove the board through a see. We have selected a ‘Go Forward Case’
shareholder meeting. and the results of the economic analysis are
encouraging so we have decided to proceed
“This shareholder meeting didn’t actually with the remaining work for the PFS. At the
happen, because the relevant board mem- same time we are progressing the EIS but
bers resigned around July 31, 2014, and new we’ll wait until we’ve got something that we
directors were appointed on August 1, 2014, can read and digest and then we will an-
so that AKIE effectively achieved control of nounce to the market accordingly.”
the company on that date. With the new board
in place the majority shareholder requested Edwards said U&D was looking to the fu-
the $50 million invested under the IPO be re- ture rather than dwelling on its troublesome
turned.” listing and the company was excited by what
the year might bring.
Edwards said a special U&D sub-commit-
tee resolved to return the $50 million in ex- “We are looking forward to 2015 greatly be-
change for a $20 million loan to keep the com- cause we are a junior explorer and potentially
pany solvent – a deal AKIE agreed to. we could see construction commence this
year and could see first coal in 2015,” he said.
As part of the agreement, U&D also offered
to buy back shares from all other participants “It’s nice to see projects go through their
in the IPO. EIS process, mining lease applications and
then getting to the end of it and pulling some
Having essentially lost at least $30 mil- black coal out of the ground. It would be a nice
lion dollars from its IPO, Edwards said U&D moment. We are looking forward to that.”
hoped to raise money early this year to fund
work at its Queensland coal plays, Meteor – Rhys Dickinson
Downs South (MDS) and Broughton.
Drill rigs at the company’s budding Broughton project
“We have set a tentative timeframe which
would have us being back in the market
around May 2015 for raising equity and we
think that time is really built around what
needs to go into a document to make an offer-
ing to the market,” he said.
“We understand there is a fair bit of work to
do but on the back of good-quality informa-
tion we would like to be in a position that when
we’re going to the market we have a mining
In spite of its listing challenges, U&D
pressed on with work at MDS and Broughton.
December 17 brought a rare snippet of
positive news for the company, with The Land
Court of Queensland granting, subject to a
special condition with the landowner Glen-
core, a mining lease for the MDS project.
The Court also gave MDS the environmen-
tal tick of approval, subject to some minor
MDS, 45km south-east of the Central
Queensland town of Springsure, is the com-
pany’s most advanced project, boasting a
small but workable 13mt resource.
PAGE 44 FEBRUARY 2015 AUSTRALIA’S PAYDIRT
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Leading from the front
From the 1960s to the late 1980s, Liverpool opportunity to those companies willing to de-
Football Club enjoyed an unprecedented velop strategies.
level of success in the world of soccer, becom- “With our larger clients the advice has
ing the most successful football team in the been ‘just do something’ because if you do
world, winning numerous English and Europe- even one thing then you will be exponential
an titles. Its success was attributed largely to percentage points ahead of your competitors
its management succession plans, with each because they are doing nothing. Just one ini-
new manager having been mentored by his tiative will put you ahead of the game.”
predecessor. And, Coetzer said, complete overhaul was
It was only once Liverpool appointed some- not necessarily needed.
one from outside the fabled coaching “Boot “It is not about huge organisational change,
Room” in 1991 that the glory days ended. Liv- just formalising the structures that are per-
erpool has failed to win the English champion- haps already in place.”
ship since. Coetzer said the report highlighted the de-
According to a report from recruitment firm sire from younger mining professionals for
Stratum International, many mining compa- clear leadership and development pathways
nies could find themselves in a similar posi- within organisations with respondents in their
tion. Will Coetzer 20s far more likely than any other group to de-
The report, The demographic time bomb scribe coaching unequivocally as “extremely
in mining, highlighted the severe lack of suc- Even for those companies with strategies important” (55% compared with 34% for the
cession plans, coaching and mentoring strat- in place, there was a scepticism among re- overall sample) with a similar response in their
egies in companies throughout the industry. spondents about how such plans were en- opinion of clear pathways to leadership roles
And, with most of the industry’s senior ex- acted upon. (45% to 24%).
ecutives heading towards retirement over the “Periodic attempts have been made to cre- “This clear hunger for coaching and a path-
next 15 years, there may be a leadership cri- ate all these programmes, but they tend to get way to leadership near the start of their ca-
sis just around the corner. flushed every time the CEO calls for a [man- reers cannot be ignored,” Coetzer said.
“We anticipated the results somewhat but “They are more open to and actively seek-
even we were surprised by the sever- ing clear pathways. The respondents
ity of the problem, perhaps not in the to the report were desperately keen
junior space but certainly in the mid- for it and respond positively to men-
toring they have received.”
A lot of the qualitativetier and majors,” Stratum managing Surprisingly, given the lack of ac-
feedback we receiveddirector Will Coetzer told Paydirt. tion on the issue, only 1% of respond-
ents said they thought the industry
“All industries are suffering from this
“suggested the short-termissue but mining appears to be par-
agement consultancy] reorganisation,” one
ticularly hard hit by it.” pressures of financial was “well prepared” and four out of
Coetzer said many companies performance were taking priority five people (79%) said they thought
were confused about what suc- mining companies were “completely”
cession plans and mentoring pro- over leadership development. or “somewhat” unprepared.
grammes actually were and there Coetzer hoped the report would
were few which had official strategies push companies into action.
in place. “Industry has responded well to
Less than a quarter of companies had for- respondent said, while another identified a the report and some of the conversations we
mal succession and leadership development career development programme but said it did have had following the report’s release have
schemes and less than a third had even a not function: “It is just a box-ticking exercise.” highlighted that the needs the industry are be-
strategy in existence. While troubling, the situation also offered ing recognised, particularly among company
leaders,” he said.
“It has raised awareness of the problem
Stratum International’s Lessons for leaders: and everyone has an opinion on it. I would
hope we see a 5% increase in take up of strat-
1. The demographic time bomb is real and most companies are not well prepared for it egies as a result of the report’s publication.”
2. Get just one succession or leadership strategy into place However, with companies continuing to
struggle in the face of a hostile market, can
3. Succession strategies and leadership development programmes have an important symbolic they afford to make the necessary changes?
role for your staff “A lot of the qualitative feedback we re-
4. People in their 20s crave development, in particular coaching and clear pathways into leadership ceived suggested the short-term pressures
of financial performance were taking priority
over leadership development,” Coetzer said.
5. People at the mid-point of their careers are also looking for support, coaching and direction to “This is understandable, but the urgency of
the matter should not be underestimated.”
take them to the next level
6. Establish a broad succession strategy that identifies and nurtures talent within and outside of – Dominic Piper
7. Consider running a Leader as Coach, or How to be a Mentor programme
8. Although HR is not seen as the solution to the problem, when everyone is seen as responsible
no one takes responsibility
PAGE 46 FEBRUARY 2015 AUSTRALIA’S PAYDIRT
Contractors nail down costs
The future of contract mining in Aus- Contract miners are working closer than ever with their clients to reduce costs
tralia remains bright despite further
uncertainty in the resources sector and throat nature for jobs in the industry at pre- Both companies have multiple clients with
the growing threat of more mine clo- sent. iron ore interests and Fair said also having ex-
sures, according to two of the industry’s posure to coal was helping his business stay
leading contracting executives. Heylen believed newcomers to the indus- afloat in the current economic climate.
try were more likely to be squeezed out by
The financial and operational per- the market conditions. However, he said the “I think we probably need to diversify and
formances of Perth-based firms BGC wealth of experience on hand presented an have a look at the gold front as well and we
Contracting and Action Drill & Blast in opportunity for contractors to become more have had an ambition at one point in time to
2014 provided some much-needed op- productive. spread our wings and see what else is out
timism for the local contracting space there internationally,” Fair said.
as the industry was hit hard by down- “Experience helps you become more pro-
turns in the gold, iron ore and coal sec- ductive and in today’s market it’s all about “We haven’t reached the conclusion of
tors. helping the client lower their cost base so where we want to be and what we want to do
they can survive at these prices as opposed just yet, but there’s certainly scope to have a
BGC Contracting posted record to scaling back operations,” Heylen said. look around and I think that’s healthy for the
revenue and profit in FY2014 and industry.”
chief executive Greg Heylen said his “Commodity prices will go up again, but we
company was on track to match that want to be working with those clients through- Heylen, who has worked for BGC Contract-
achievement this financial year. out any pricing cycle so we’ll just keep look- ing for 15 years, believed people were still
ing to get our strategies right and deliver a excited about the mining industry despite the
Heylen said his company’s perfor- reduced cost base for the client.” purported lack of jobs.
mance had been highlighted by an al-
most zero turnover rate despite every- “Very few industries go
thing that had happened in the industry through a 50% drop in com-
over the last few years. modity price without seeing
some sort of strain and un-
“We’ve seen our turnover figures ba- fortunately we’ve seen some
sically halve in the last 12 months and I organisations and mine sites
think that’s because people are apply- drop away,” Heylen said.
ing a bit of reality and realising that if
things are going OK, you’re better off staying “The mining industry has
with the organisation,” Heylen said. proved to be very resilient
over the last 50 years and I
“Most people have worked out that you think the sort of people who
need to get yourself into a satisfied position work in the mining and con-
within the team you’re already in and that’s tracting industry are people
going to be a better result than perhaps going who like a challenge – per-
somewhere else and not liking it there either.” haps that’s why the industry is
able to survive all these highs
Heylen confirmed there had been a small and lows.”
number of redundancies at BGC Contracting
last year, but he said the company was always – Michael Washbourne
looking to retain jobs and employees where
possible. Greg Heylen Warren Fair
Action also let go a handful of employees,
but general manager Warren Fair said the lay-
offs were not related to market conditions.
“Our numbers have reduced on a project by
project basis, but that’s just the nature of the
industry and even in the good times that hap-
pens,” Fair said.
“I think we’ve been pretty
good at moving people from
a project that is finished to a
new project, but we certainly
haven’t had to look into head
office and think about whether
we need to significantly reduce
staff numbers at this stage.”
Fair said he had received a
few more unsolicited job ap-
plications in the second half
of 2014 than usual, but he did
not believe there was a higher
proportion of skilled workers
sitting on the sidelines.
The fact both BGC Contract-
ing and Action had low staff
turnovers last year reflects
both the esteem the two firms
are held as well as the cut-
AUSTRALIA’S PAYDIRT FEBRUARY 2015 PAGE 47
Time to turn the tide
Instead of shedding staff and
shelving projects, there are other
ways for companies battling the
tough times in the mining sector,
according to management con-
sultant and training services com-
Staff members are often re-
ferred to as a company’s most
valuable asset however during
the boom times getting the job
done and delivering a healthy
bottom line was the main aim of
A lack of attention to employee
training and development there-
fore impacted staff retention
which has caused some prob-
lems in how efficiently business-
There has been a shift from
companies to rectify this situa-
tion, with reinvestment in employ-
ees now being the key to not only
surviving but thriving in the cur-
rent mining cycle.
“Invest in the right individual
skills for the right people in your
business which will help you to
achieve your strategy. Lasting
efficiency will be achieved as
a result of individual and small
group efforts. One overarching
group strategy is important but it
is the individual and small team
effort that will help deliver that
and help bolster the skills in the
right areas which is the key to Training and development opportunities are key to retaining staff and helping businesses operate more efficiently
lasting efficiency,” Kepner-Tregoe
regional managing consultant Vince Connelly About 60% of Kepner-Tregoe’s business in programme of change,” Connelly said.
told Paydirt. Western Australia is dedicated to mining cli- “They don’t need to set up a massive pro-
However, convincing some companies to ents. gramme and do all the up-skilling which is
outlay the initial capital required to assess Connelly said he was seeing great improve- huge. We can actually come in, have a look
their business strategies and identify areas of ments in the way Australian companies were at a business and identify a few critical areas
improvement can be a challenge. operating, in terms of achieving better long- where you can get the best bang for your buck
“The most difficult part is the beginning term efficiencies, which was essential in pro- by helping you to apply the tools to achieve
where there are some people who don’t want tecting jobs. that.”
to embark on change or anything that takes One of the company’s most recent suc- Connelly said there were many companies
them away from day-to-day operations,” Con- cesses has been saving a business $11 mil- which had adapted to the new environment in
nelly said. lion in one year. the resources sector and were benefitting in a
“Once people make that leap and we draw “They brought their mid-level management down market right now.
them a clear picture, identify- up to speed with project And while some companies may be ahead
ing actual physical savings and management. In the first of the curve, companies facing operating
targets for efficiency and put year they achieved a 60% losses operating need to act urgently before
dollar terms against them to be improvement on time and it’s too late.
tracked over time, it is easier. delivery which saved that “The key message to reiterate is really the
Once the company sees this operating mine site $11 mil- investment, particularly in mid-level manage-
working and that it is saving lion in that first year,” Con- ment, and in the right skills sets that will en-
money, being more efficient nelly said. able them to solve everyday problems, make
and more productive everyone While some companies decisions and manage projects. They are
is sold on the programme. But, are in desperate need of a the skills sets that are going to help deliver
the early stage is where peo- major company overhaul to a strategy and help improve efficiency in the
ple have to draw themselves boost their performance, long run,” Connelly said.
out of day-to-day operations not all need drastic change. – Mark Andrews
and identify the benefits. Be- “What is really important
ing convinced of the benefits of Kepner-Tregoe regional managing is that companies don’t try
change, that is the difficult part.” consultant Vince Connelly and embark on a wholesale
PAGE 48 FEBRUARY 2015 AUSTRALIA’S PAYDIRT
Job security top priority
When it comes to wages versus job se- There is hot competition for jobs in the resources sector at the moment
curity, people employed in the mining
sector are working in a vastly different climate “That having been said, it is easy for the other end of the scale, iron ore is earlier into
compared with three years ago, according to
Mining People International managing director market to drift sidewards or retreat margin- their contractions and is probably 18 months
ally with some of the news coming out about to two years behind the other commodity cy-
“In regional Western Australia people are
not jumping around for an extra 50c/hour any commodity prices. The gold industry tended cles.”
longer, they are definitely looking for job se-
curity as opposed to money. This has been to respond first to the cost pressures and con- Many within the resources industry believe
a significant change in the past three years,”
Heather told Paydirt. sequently they are further down the path to the current downturn is the worst on record
The situation is similar for Perth-based recovery. Similarly, the Australian dollar gold and are at a loss to predict when the market
FIFO workers, where wages have settled
down as mining companies have trended to- price has improved will start to recover.
wards pay freezes in recent times.
markedly over the last That could lead to more job
“Attitudes have changed and more people squeeze, with Mining People Inter-
are grateful for actually having secure em- two years, so the em- Jobs in demand
ployment rather than an extra $1/hour. There
is still a bit of uncertainty in the market across ployment we are see- R egional Western Australia national advising candidates look-
all commodities and the feedback we get from ing across the indus- • HD fitters ing for employment in the industry
a number of supervisors on site is that they try is tending to be in • electricians to keep up-to-date CVs.
have noticed an increase in their worker’s per- the gold sector. At the • auto electricians
formance to ensure that they stay employed “Your CV is always your first sell-
due to uncertainty in the market at present,” ing point. Have it looking profes-
Perth sional, don’t tell lies as you will get
Professionals and expert technicians have found out and that will set you back
not been immune to the mining doom, with an
average 10-20% reduction in salaries across • skilled tradespeople further, and no more than three to
the board, while contractors have been im-
pacted more severely with day rates down • HD fitters five pages. When interviewing, do
30-40%. • auto electricians your research on the company you
are applying to and always dress
“Previously certain people who could have
asked for $1,000 per day will now only get – Professional/technical appropriately for the role you have
and be happy with – $600 per day,” Heather • junior open pit mining applied to,” Heather said.
engineers (limited two to – Mark Andrews
Needless to say the job market in the min- three years experience)
ing sector is extremely tight and competition
for jobs is hot, particularly with mining compa- • high level technical skills
nies being more specific about who they can
hire. Steve Heather like mine planning engineers
Heather said some senior personnel and
professionals were willing to do jobs they
were more than qualified to do just to remain
employed in the industry.
“There has definitely been a number of
[FIFO] people who have left the industry and
are back in Perth-based roles. We hear regu-
lar stories from people who have never had
to put together a resume in the past as they
have always gained employment through
word of mouth, who are now exploring other
avenues to find employment. We also find
very senior people applying for junior posi-
tions but they find it frustrating if they are
not accepted due to employers’ wariness
that the person will move on if they find a
better job,” he said.
More and more professionals are also
without work with further redundancies
and a lack of new projects coming on
stream exacerbating the problem.
However, there is a silver lining in the
professional space, Heather said.
“The market in general is in a better
place than it was one to two years previ-
ously,” he said.
AUSTRALIA’S PAYDIRT FEBRUARY 2015 PAGE 49
Geoscientists’ prospects of finding a job achieving less than one-tenth of their desired employment rates from June to November
have not improved in the last year, accord- workload. gave him hope things were about to turn
ing to the latest Australian Institute of Geosci- around.
entists (AIG) survey. A further 16% were achieving between one-
tenth and one-quarter of their desired work. “We remain, however, in an environment
The November questionnaire revealed where Australian-listed, junior exploration and
geoscientist unemployment had remained at In the latest survey, these figures were 30% mining companies are critically undercapital-
13.5% for the past 12 months, the same lowly and 20% respectively – representing a small ised and finding it difficult to attract new in-
figure experienced during the GFC. sign of improvement in the sector despite the vestment – the fundamental driver of geosci-
increase in the number of geoscientists who entist employment rates,” he said.
Scarily, the unemployment number was reported being underemployed overall.
an improvement on the June quarter, when it “The Federal Government’s promised Ex-
climbed to 15.4%. “If we reclassify self-employed geoscien- ploration Development Incentive is yet to be
tists achieving less than 10% of their desired introduced and state governments have yet to
The only bright spot in the survey was a workload as essentially unemployed, the act to reduce compliance requirements that
minor decline in geoscientists’ underemploy- unemployment rate increases from 13.5% to are choking a range of industries, all at a time
ment rate, which had fallen from 16.9% to 18% – almost one in five professional geosci- when commodity prices are depressed, creat-
15.4%. entists,” Spilsbury said. ing a less than ideal investment climate. It is
something akin to a perfect storm for explo-
AIG president Wayne Spilsbury said Aus- In the latest survey, one third of unem- ration and mining, but one that governments
tralian geoscientists continued to experience ployed and underemployed respondents had can help to clear.”
difficulty obtaining and retaining work in 2014. been without work for three months, a further
17% for between three and six months, 16% – Rhys Dickinson
“In contrast to the sharp increase in employ- for between six and 12 months, and the re-
ment following the global economic downturn maining third for more than 12 months.
in 2009, any recovery in employment within
the geoscience profession has been much Also, three quarters of unemployed and
slower this time,” he said. underemployed geoscientists were not con-
fident of returning to full-time work in their
The AIG’s June survey further probed its chosen field within 12 months and one in 12
members by assessing the degree of under- were seeking long-term employment outside
employment experienced by self-employed the profession.
consultants and contractors.
Though the situation was mostly grim,
Results revealed 41% of respondents iden- Spilsbury said the slight improvement in un-
tifying themselves as underemployed were
Mining no longer money pinnacle
The mining and resources industry is losing them away from reliability engineering roles. The report said Australia-wide skilled can-
employees to other sectors offering bigger A lack of training and apprenticeships has didates with specific equipment knowledge
pay packets, according to recruitment agency and experience were in high demand as many
Hays. left SA short of rubber liners and project man- projects are in maintenance phase meaning
agers, while shutdown planners are highly short-term contracts were in the offing as op-
Its quarterly report revealed professionals sought after in WA. posed to permanent positions.
in at least four occupations – high voltage
and underground auto electricians, diesel Meanwhile, in Queensland, underground “Candidates need to be fully inducted and
mechanics, underground electricians and re- electricians were opting for employment in up-to-date with their training to be considered
liability engineers – were being lost to other the metalliferous mines industry over any for a position. This was not previously the
industries which could offer prospective em- other opportunity in the State’s wide ranging case as companies used to put candidates
ployees significantly more money. resources sector. through all training that was required. In South
Australia, we have recently seen an increase
The West Australian and South Australian Fitters and boilermakers are also in short in demand for both technical and trade posi-
mining industries were hardest hit by the sec- supply in Queensland. tions. Despite the number of available trades-
tors fading employment allure, where three of people increasing, most quality or specialist
the four aforementioned skilled workers were In the Hays report, mechanical fitters, die- candidates remain employed. Many technical
in short supply, according to the report. sel fitters and maintenance supervisors were candidates have gained employment inter-
identified as being in short supply in New state during the mining downturn. However,
On the shortage of available high voltage South Wales, while maintenance planners we do expect to see good candidates return-
and underground auto electricians in WA, were also hard to come by. ing to [SA] in the next three to four months.”
Hays said: “A high number of candidates have
left the resources and mining sector in order “Many maintenance crews are now servic-
to pursue higher salaries and better rosters in ing the same amount of equipment but with
the construction industry.” significantly fewer members on their team,”
the report stated.
According to the report, most SA-based
diesel mechanics were attracted to better “As a result, they have strict maintenance
paid work interstate and most engineers in plans in place to ensure all maintenance ac-
WA pursued higher paying careers, steering tivities are executed as efficiently as possible.
Therefore good planners are highly sought af-
ter to maximise a crew’s performance.”
PAGE 50 FEBRUARY 2015 AUSTRALIA’S PAYDIRT