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Published by Paydirt Media, 2016-07-27 04:26:10

pd241 Aug16 mag-web

August 2016 VOLUME 1. ISSUE 241 $11.95

paydirt

front and back cover
supplied seperately7Sp-e9ciSael pprteevmiebweerd2it0io1n6

Pan Pacific Perth

MOD target

• Bill Turner receives Queen’s Birthday Honour

• Resolute and Base – bouncing back to form

• Lucapa begins to sparkle ISSN 1445-3436
07

9 771445 343007



CONTENTS

PAYDIRT (ISSN 1445-3436) 5 NEWS
Published by Things are hotting up in the gold M&A
Paydirt Media Pty Ltd. space with the latest deal seeing Emerald
A.C.N. 063 985 133 Resources Ltd launch a friendly takeover
of Renaissance Minerals Ltd, its JV partner
Head Office: on the Okvau gold project in Cambodia.
Suite 9, 1297 Hay St, West Perth Emerald managing director Morgan Hart
Western Australia 6005 told Paydirt why now was a good time to
P.O. Box 1589, West Perth press ahead with a merger
Western Australia 6872
Phone: (+61 8) 9321 0355 18 COVER 5
Facsimile: (+61 8) 9321 0426 It may have taken nearly 30 years for him 18
[email protected] to get there but now Julian Hanna is ex-
www.paydirt.com.au ploring in Africa, he loves it. Dominic Piper
visited Botswana and MOD Resources
Editorial: Ltd’s Kalahari copper project to discover
Editor: Dominic Piper what has the former Western Areas Ltd
Deputy editor: Mark Andrews managing director so excited
Journalist: Michael Washbourne
Graphics: Marian Noonan 24 AFRICA DOWN UNDER
Contributors: PREVIEW
Keith Goode (Sydney), Brendan Ryan
(Johannesburg), Ross Louthean Sentiment has swung and after a three-
year hiatus, investors are returning to
Advertising: African mining stories in droves. Ahead of
Advertising manager: Tony Mwarey the 14th Africa Down Under, Paydirt looks
Subscriptions: Mitchelle Matambo at a sector which has bounced back from
Phone: (+61 8) 9321 0355 the misery of 2015 and suddenly looks like
Facsimile: (+61 8) 9321 0426 fulfilling the potential it always had

Pre-press and printing: 84 BILL TURNER
Vanguard Press 26 John St, Veteran Australian-African mine developer,
Northbridge WA 6003 Bill Turner, was named as an Officer of the
Member of: Order of Australia in the Queen’s Birthday
Honours list in June. The former Anvil
Paydirt Media Mining chief has been synonymous with
Executive chairman: Bill Repard sustainable, ethical mining development
Finance manager: Giovanny Jefferson in Africa for two decades. Mark Andrews
Accounts/administration: asked him about the key ingredients to
Heather Melling success
Conferences: Tammy Caldwell,
Melita Fogarty 96 REGIONAL ROUND-UP
Leading our global coverage this month
is a rare new ASX listing; Lithium Power
International Ltd which has acquired the
Maricunga lithium brine project in Chile;
“the home of lithium”. Michael Washbourne
spoke to Lithium Power chief executive
Martin Holland about the company’s plans
for the project

Cover image: MOD Resources 24
managing director Julian Hanna at
the company’s T3 prospect, part of its
Kalahari copper belt project

Member of:
Australia-Africa Minerals & Energy Group

Registered by Australia Post PP 643938/0071.
No pages or articles in this publication may be
reproduced in any form without the consent of
the publisher. This includes photographs either
taken by Paydirt Media staff or provided by other
parties

EDITORIAL

African potential rises again

There is an undeniable feeling of optimism African governments saw such developments as the answer
throughout the resources sector and it is to all their needs. Not only did they have headline revenue fig-

growing day by day. ures similar to oil and gas projects, they had the potential to

What started as a gold trickle towards the deliver the kind of infrastructure projects needed to bridge the

end of 2015 is now a steady stream of capital increasing development gap.

raisings from junior miners, developers However, as prices for iron ore and coal began to turn that in-

and explorers across almost all com- frastructure gap became a burden and projects in Sierra Leone,

modity groups. Guinea, Cameroon and Republic of Congo which looked world-

The change highlights just how reli- class five years ago now sit stranded and unexploited.

ant the sector is on sentiment. While This time around, with iron ore and coal among the only com-

nothing has materially changed in modities unlikely to show any major improvements in the next

macroeconomic conditions or the five years, the focus will necessarily have to be elsewhere.

supply/demand dynamics of individual commodities, there is a This time around, it is likely to be gold and base metals which

general feeling that investors are beginning to look up, rather are the major focus of exploration and development on the conti-

than down when it comes to the future for commodity prices. nent. While iron ore and coal investments have the billion-dollar

How long the window stays open remains to be seen but jun- multiples that get governments excited, current market condi-

ior resources companies have been quick to jump through it in tions dictate that African projects will be unable to compete with

case it does shut quickly. The volume of capital raisings has low-cost production from Australia and Brazil. The cost of build-

“increased considerably in the last two months and while gold ing the required infrastructure is too great.
and lithium stocks are still attracting the most favour, discrimi- Gold and base metals can leap the infrastructure gap in a way

nation against other commodi- bulk commodities can’t; deliv-

ties is starting to wavier. M&A The challenge is for investors ering a world-class industry in
activity is beginning to pick up less than a generation. Africa

and even a number of IPOs and governments to resist has already witnessed this in
and spin-outs are waking the the temptation to load it with too gold with the likes of Tanzania,
ASX’s new listings department Mali and Burkina Faso all turn-

from its slumber; leading to a much expectation before it has a ing from zero production into
junior sector that is full of life chance to fulfil that potential. top 15 gold producers within a
once again. decade.

And, just as the positive sen- However, even in gold and

timent was first restricted to base metals there is a danger

domestic gold stories before spreading into other commodities, the infrastructure gap will stifle development unless govern-

it is also now moving to companies in other jurisdictions. ments accept what is and isn’t achievable.

With commodity risk lowered, investors appear willing to ac- The last decade has seen the growth of downstream process-

cept greater jurisdictional risk in their search for higher returns. ing and value-addition policies in African countries. It is under-
The majority of this edition of Paydirt is dedicated to a preview standable that governments are desperate to avoid the “resourc-

of Africa Down Under and the stories within the feature highlight es curse” by ensuring they capture maximum value for their raw

the changing attitudes towards exploration and development materials but if the investment required to establish downstream

stories on the continent in the first six months of the year. industries is too onerous, it will also kill off the associated pri-

The last three years saw a correction in the African resources mary industry.

sector after a decade of unparalleled growth. A brief glance over Botswana is currently experiencing this challenge. Having

past Africa Down Under conference agendas charts the rise of forced its diamond industry to adopt value-addition in country,

Australian investment on the continent. From a wafer-thin inau- the Botswana Government is now keen to pursue similar poli-

gural two-day programme in 2003, the conference enjoyed rap- cies in its copper sector. It is currently undertaking a feasibility

id expansion between 2005 and 2011 as Australian resources study into expanding its copper smelting and refining capabili-

companies headed to the region in droves. Even the 2008-09 ties and is considering a policy which would force copper pro-

GFC failed to stem momentum in the sector and by late 2011 ducers to value-add in-country.

Africa Down Under was hosting more than 70 company pres- Neither the sector – which has suffered a number of closure

entations across three days with a further 120 exhibition booths setbacks recently – nor the country – which is severely lacking

across two conference venues. in the power required to service expanded smelting and refining

By the end of 2014, the number of ASX-listed companies ac- – is in a position to support such policies.

tive on the continent had retracted to around 120 as investors The African resources sector, like its Australian peer, is in a

became disenchanted with the region’s challenges and compa- period of new opportunity. The challenge is for investors and

nies failed to make the leap from encouraging exploration re- governments to resist the temptation to load it with too much

sults to genuine development. expectation before it has a chance to fulfil that potential.

This failure led to frustration at the difficulty of building projects

in Africa. The boom saw a focus from majors and juniors alike

on the continent’s bulk commodity prospects. Across Africa, the

likes of BHP Billiton Ltd, Rio Tinto Ltd, Vale SA, Glencore and a

string of Chinese steelmakers made major project investments

in iron ore and coal assets.

[email protected] @DominicPiper

PAGE 4 AUGUST 2016 AUSTRALIA’S PAYDIRT

NEWS

Emerald to take 100% of Okvau

Development of the Okvau gold opment achievements of both Equig-
project in Cambodia will likely old and Regis Resources Ltd.

be fast-tracked after JV partners Hart said the Emerald team had

Emerald Resources NL and Re- already identified a number of oppor-

naissance Minerals Ltd announced tunities to improve the economics at

plans to merge last month. Okvau.

Under the agreement – which “If there has been any negative

has been endorsed by both boards attached to Okvau, it is that the re-

– Emerald will offer 1.55 shares source wasn’t big enough to drive it-

for every Renaissance share. The self. We saw an opportunity to make

deal values Renaissance at $40 the resource bigger and bring the

million or 7c/share, a 27% premi- capex in-house, utilising our exper-

um on its 30-day VWAP. tise,” Hart said.

Emerald already holds a 10% in- “When we did our due diligence on

terest in its JV partner and has re- The combined Emerald/Renaissance hopes to release a the in-country inputs they all came
ceived pre-bid acceptances from maiden reserve for the Okvau project later this year out cheaper than the PFS. So, we
a further 9.4% of Renaissance think a lower capex is very achiev-

shareholders. Two further large share- that timeframe.” able. The same could be said for opex

holders have submitted intentions to ac- Renaissance has enjoyed consider- and if you can reduce your cash costs,

cept notices which are legally binding. able success at Okvau, building a plus- you can bring more ounces into the mine

The merger is designed to streamline 1 moz resource and releasing a positive plan, thus fulfilling the size requirement

ownership of the 1.13 moz Okvau gold PFS in July 2015. However, with equity as well.”

project on Cambodia’s eastern plains. markets remaining tight, the company re- The JV is currently undertaking a

Chaired by Simon Lee and with former alised a partner was needed to continue 7,000m infill drilling programme designed

Equigold executive director Morgan Hart the project’s progression. to produce a maiden reserve for Okvau,

as managing director, Emerald entered “For the last two years, finding funds putting the merged entity in a position to

the project in February after a three-year for a company the size of Renaissance start full feasibility work.

search for an appropriate investment. has been challenging to the point of be- Project development will also be sim-

The JV earn-in allowed Emerald to ing impossible,” Tremain said. “We began pler under the unified ownership struc-

acquire 51% of the project by spending looking for a development partner which ture.

$US3 million over two years but Hart said would take the next step on the project. “Under the JV, development was

now his company was comfortable with We needed someone with the balance necessarily very structured,” Hart said.

the project, the move toward a single sheet and the team to develop it.” “Once the merger goes through we can

owner would allow for an easier develop- Renaissance may have found its ideal be more proactive on acquiring a mill,

ment. partner in Emerald. Previously an oil and putting a road in, doing some of the en-

“Our first choice was to move into gas junior, Emerald was picked up as a gineering work, etc ahead of completion

an earn-in JV to make sure everything shell company by Lee and Hart in late of the DFS.”
was aligned,” Hart told Paydirt. “We’ve 2013. The new board set about scouring
Emerald is also likely to continue its

been in six months and worked to up- the world for gold projects. hunt following completion of the merger,

date the DFS and make ourselves more “During that period we were always according to Hart.

comfortable with the resources. Having watching Renaissance and we recog- “This deal puts us in the $100 million

de-risked the project to the point of be- nised it as a good project but we were market cap bracket and that gives us the

ing comfortable, our shareholders were still a little unsure about the jurisdiction,” paper to do other deals, especially con-

more amenable to full acquisition.” Hart said. “But when I got to Cambodia sidering the news flow we expect to see

Renaissance managing director Justin it quickly won me over and we did the in coming months.”

Tremain said Renaissance’s preference deal.” While the company remains open to

had also been a merger. Okvau itself has grown in stature in line any possibility, Hart said regional expan-

“It was always logical to have one en- with the climb in gold prices. The July sion was most likely.

tity controlling the project and since we 2015 PFS (based on a $US1,250/oz gold “Acquisitions are always about hurdle

started talking with Emerald that was al- price) indicated a 91,500 ozpa project rates and while we will continue to look

ways our preference but we understood could deliver NPV of $US174 million, IRR elsewhere, the further away from South

the technical and jurisdictional risk at- of 35% and payback within 2.6 years. East Asia and Australia we go, the better

tached to their investment,” he said. While Emerald’s cash reserves (the com- the project will have to be.”

Tremain, who will become executive bined entity will have around $20 million Hart believes valuations are currently

director of the merged company, said cash on hand) were an obvious attraction at realistic levels in the gold space.

shareholders had responded positively to Renaissance, the development experi- “Pricing is commensurate with the gold

to the deal. ence within the management team made price right now. They probably got too

“We don’t really see any hurdles to it doubly attractive. low 6-18 months ago but now they are

completion,” he said. “It will take two Lee’s history in gold development tracking the value of the spot price,” he

months to go through the process but we dates back to the days of Samantha Gold said.

will hopefully reach 90% acceptances in while Hart was instrumental in the devel- – Dominic Piper

AUSTRALIA’S PAYDIRT AUGUST 2016 PAGE 5

NEWS

Upstream tailings ban in Brazil

ABrazilian state law to ban upstream The Brazilian Government could introduce a dation of mining waste rather than ex-
tailings dams, the design used at a state law to ban upstream tailings dams ternal material or solid ground. It is also
dam that collapsed at the Samarco iron the most common, holding back waste at
ore mine in November, could be ap- Geraldo Abreu, said an outright ban was mines across the world.
proved this year, an environmental official not on the cards in a Reuters report which
for the state of Minas Gerais told Reuters showed that engineers, prosecutors and Chile, where earthquakes have caused
last month. tailings dam experts were increasingly deadly spills in the past, is currently the
arguing for a ban. only major mining nation to ban upstream
Anderson Silva de Aguilar, the sub- dams.
secretary for environmental regulation, “It was a devastating disaster... it is a
also said Samarco, which is co-owned stain on the industry,” Silva de Aguilar The dam burst at the Samarco mine
by Vale SA and BHP Billiton Ltd, would said by phone. “There is now great im- killed 19 people, left hundreds home-
not be resuming operations this year and petus for us to introduce more rigorous less and polluted a major river. Brazil’s
may not in 2017 either. norms and criteria.” government called it the country’s worst-
ever environmental disaster.
In an emailed comment, Samarco said A dam design used to store mining
it was following all licensing procedures waste, known as tailings, upstream costs Vale, Brazil’s largest miner and the
and had delivered the documents neces- about half the price of other dams but is world’s biggest producer of iron ore,
sary for agencies to allow it to resume regarded as having a greater risk of fail- has already warned that stricter licens-
partial operations. ure because its walls are built on a foun- ing laws could force it to cut output by as
much as 100mt.
Support for a ban of upstream tailings
dams from Silva de Aguilar, who has Silva de Aguilar said he aims not to
been in the job for less than two months, curtail Minas Gerais’ mining industry,
represents a major policy change for his crucial to the state’s economy.
department that could increase the cost
of new projects in Brazil’s mining heart- “The state can’t afford to lose mining
land. activity now, our gross domestic product
depends on it, but the standards will be
As recently as May, his predecessor, much higher,” he said.

– Marta Nogueira, Reuters

LATIN

AMERICA

29-30 May 2013, Sydney

The CD-Rom of Paydirt’s 2016
Latin America Down Under Conference

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CD-Rom – $80 (inc. GST)
Phone (+61) 8 9321 0355 or email [email protected]

PAGE 6 AUGUST 2016 AUSTRALIA’S PAYDIRT

Prospect for good lithium
in Zimbabwe

Twelve months ago Pros- bwe indigenous company Hawk-
pect Resources Ltd was moth Mining & Exploration Pvt

doing all it could to raise a Ltd – hopes to have a scoping

small amount of money to study completed at Arcadia by

restart production from the the end of the year.

historic Prestwood mine at At its peak, Zimbabwe was the

the Gwanda East gold camp, world’s fifth largest producer of

south-east Bulawayo, Zimba- lithium, which is becoming in-

bwe. creasingly in-demand from the

Prospect achieved that ob- lithium-ion battery sector.

jective earlier this year, albeit A sample of the lithium poten-

at a slower pace than it would tial in Zimbabwe is what Pros-

have liked due to funding but pect hopes to show investors at

early indications are that it Arcadia and a second project,

will move much quicker at the the God’s Gift deposit, 165km

newly acquired Arcadia lithi- While investors around the globe have been coy on backing pro- north-east of Harare.

um project, 35km north-east jects in Zimbabwe, the Chinese haven’t and ASX-listed Prospect In July, the company signed

of Harare. Resources has been a recent beneficiary an option agreement over God’s

Since Prospect announced Gift which covers 225ha in the

in May that it had an option to acquire the the agenda. Benson pegmatite field.

project, the company’s share price has “We are drilling 24/7 at Arcadia at the Intermittent production of beryl, tan-

rocketed from 0.6c/share to more than moment with two rigs running,” Warner talite and tin was reported from 1952 to

7c/share at the time of print. said. “Basically, there is going to be a bit 1992, but with extensive pegmatite out-

Furthermore, the company has man- of catch-up in terms of data processing cropping, Prospect believes God’s Gift is

aged to get receipts of share applications and building the 3D models. We have a potential immediate lithium play.

to raise $14 million via the placement of had people out looking at the whole in- Cash from the placement will also be

280 million shares at 5c to sophisticated frastructure side and process side and used to fast-track exploration at God’s

Chinese investors. we are basically trying to run the drilling Gift as Prospect looks to capitalise on

Shareholder approval for the raising in parallel with the whole development the good fortunes being experienced in

was being sought at the time of print. side.” the lithium sector.

Hugh Warner – like many in the min- While Prospect is currently diamond “We have received really strong sup-

ing game – was taken by surprise by the drilling and carrying out detailed explo- port, Harry Greaves [executive director]

lithium rush and the executive chairman ration, the company is working towards and I have been surprised at how many

of Prospect finds himself in a position he an exploration target of 15-18mt @ 3.5% of those Chinese investors have been

didn’t expect 12 months ago. lithium oxide. very keen to participate. All these guys

“Everyone out there is trying to pick the The company arrived at such a target are involved in the lithium cycle and they

asset that the market wants to participate from historic data and information com- are certainly seeing the future demand

in and we are going to try and target piled by previous owners. and want to be involved,” Warner said.

the whole lithium battery cycle plus co- From 1954 to 1972, 15,000t of mixed Zimbabwe has been on the nose of in-

balt and graphite with an African focus,” lithium ore was reportedly produced from vestors, however, the Chinese have not
Warner told Paydirt.
Arcadia and drilling between 1969 and been afraid to invest in the country and

“We have an awesome team in Af- 1981 confirmed the pegmatite extends appear to be comfortable backing both

rica to identify assets and clearly there 1.5km along strike, with grades in the the country and Prospect’s strategy.

is huge appetite in China to do with the range of 3.5-5.5% lithium oxide. “From the Chinese side, they have

lithium battery market. It is an easy shop- At the time of print, Prospect had re- been investing in Zimbabwe for quite

ping list to go and look for.” ceived results from four drill holes with a few years now,” Warner said. “It [the
Warner said Prospect had a long list ACD001 intercepting a combined 12.35m risk of investing in Zimbabwe] certainly

of lithium, graphite and cobalt projects of visible spodumene-bearing pegmatite wasn’t an issue. It wasn’t a point even
to consider in Africa, however, there was plus a combined 9m in ACD002, while raised that they had concerns there. For
nothing it would be adding to its portfolio ACD003 revealed intercepts totalling a couple of years, Harry and I have been

imminently. 17m of visible spodumene- and petalite- trying to identify those investors who are
Instead, the funds raised will be used bearing pegmatites and ACD004 inter- comfortable with the country risk and

to fast-track drilling at Arcadia, in addi- cepted a total of 24m of mineralised peg- frankly it is easier than trying to convince

tion to ordering long lead items for the matites. everyone else.”

plant. Meanwhile, boosting production at Prospect – which through Prospect – Mark Andrews
the Gwanda East camp where Prospect Singapore has been granted the right to

had had interests for a while is also on a 70% equity interest in certified Zimba-

AUSTRALIA’S PAYDIRT AUGUST 2016 PAGE 7

NEWS

Sweet silver

Silver Mines Ltd ap- 1-Year Silver London Fix High 20.47 Low 13.58 moving in that direc-
pears to be reshap- tion at Bowdens, east

ing the Bowden’s silver 21.00 21.00 of Mudgee in central
project in New South NSW.

Wales at the right time. After raising $35 mil-

As gold prices have 19.00 19.00 lion via a placement to
soared this year, the institutional, sophisti-

other precious metal cated and professional

– silver – has also en- 17.00 17.00 investors, Silver Mines
joyed a positive 12 was able to acquire

months. 85% of Bowdens from

At the time of print, 15.00 15.00 Kingsgate and start a
silver was worth just un- feasibility study and

der $US20/oz, up from environmental impact

below $US15/oz in July 13.00 13.00 statement.
2015. To capitalise on the

Whether or not silver momentum in the silver

prices continue up the 11.00 11.00 market, Silver Mines
curve remains to be aims to have a PFS on
23Jul
seen, however, it ap- 08Sep Bowdens completed
22Oct
pears now is the apt 07Dec by the end of the year,
25Jan
10Mar
27Apr
14Jun
21Jul

time to be putting plans PM SMA(200) SMA(14) Source: Kitco while completion of an

in place to develop a sil- EIS is expected in the

ver mine. is due by September 30 or at another first half of 2017.

Having completed the acquisition of date agreed upon by the two parties. In addition to the PFS and EIS, Silver

Bowdens from Kingsgate Consolidated Bowdens, along with Challenger, were Mines will start a programme of drilling

Ltd in June, Silver Mines is focused on some of the assets Kingsgate has parted this quarter focused on resource expan-

fast-tracking development of Bowdens. with in recent times as its shifts its focus sion and upgrading of the current re-

Currently the largest undeveloped sil- to the Nueva Esperanza gold-silver play source at Bowdens, which boasts 134

ver mine in Australia, Bowdens was ac- in Chile. moz silver and 255,000t zinc.

quired from Kingsgate by Silver Mines for While Kingsgate has produced a PFS

a price of $25 million, $5 million of which at Nueva Esperanza, Silver Mines is

Tour de Paris for Investigator

An indication of the increas- base of investors.
ing appetite for silver from The immediate focus for In-

investors was Investigator Re- vestigator is to accelerate de-

sources Ltd’s $5.4 million capi- velopment of the 33 moz Paris

tal raising last month. silver project.

The company has been Drilling to upgrade the re-

ploughing at the Paris silver source to indicated status is

project in South Australia’s the first priority for Investiga-

Gawler Craton on the northern tor, which hopes to complete

Eyre and Yorke Peninsula’s a PFS by mid-2017 and head

for a while now, however, like straight into a feasibility study.

many junior explorers, pro- Adjacent to Paris is the Nan-

gress has been slowed by the kivel copper-gold target where

commodities rout. drilling is expected to start in

However, since the start September, while Investigator

of 2016, the feeling in the re- Investigator plans to accelerate development of the 33 moz silver will also look to drill a select
sources sector has improved deposit in South Australia number of satellite silver and

significantly and punters ap- copper-gold targets.

pear more willing to invest in mining able to pull off in recent times, the cash However, the priority for the company

stocks and some silver players have injection is vital for the company to take will be infill drilling at Paris and convert-

been included in the party. the next step at Paris. ing the 2015 inferred resource of 8.8mt

While Investigator’s $5.4 million raised Furthermore, the placement attracted @ 116 g/t silver (containing 33 moz @ 50

is somewhat modest compared to what new institutions, indicating that the com- g/t cut-off) to indicated status.

gold and lithium companies have been pany’s story is resonating to a broader

PAGE 8 AUGUST 2016 AUSTRALIA’S PAYDIRT

Silver runs behind gold

Silver prices have leapt nearly 50% so investment in times of turmoil, silver rare- Silver prices have put on 50% this year
far this year, reversing three years of ly plays this role due to its volatility and
losses, but history shows investors hop- erratic nature. and have got off to a slow start in July.
ing to hop aboard the bandwagon should Supply from silver mines is predicted
be wary. The rule that its price outperforms
gold, for instance, doesn’t always apply. to fall this year after successive record
A surge in gold and upbeat prices of in- As global stock markets plunged in the highs, while some improvement in indus-
dustrial metals, along with prospects for first quarter of this year in response to trial demand is expected. But the mar-
yet more monetary stimulus from lead- concerns about the Chinese economy, ket’s wild swings of recent years are not
ing central banks, have prompted some gold posted its biggest quarterly rally in doing silver any favours.
heart-stopping moves. nearly 30 years and yet silver lagged.
“There are people who love to trade
“I’ve lost hair this year,” one silver trad- The losses can be even more spectac- silver in the very short-term, who were
er said after the market shot up by almost ular than the gains. In September 2011, lured back into the market by these kind
a third in one month alone. “And [lost] silver shed a third of its value in just three of price moves,” Julius Baer analyst
about 20lb, [too],” the trader quipped. days. Earlier that year, silver slid by a Carsten Menke said. “The issue with sil-
similar magnitude in 10 days after reach- ver is that the long-term doesn’t look very
On the face of it, silver has a lot of ap- ing record highs near $US50/oz. compelling.”
peal. It tends to track gold prices, but its
low liquidity usually leads it to outperform Silver’s latest strength reflects an at- High and volatile prices have led indus-
the move in gold by around 1.5 times. tempt by traders to catch up with gold’s trial users to turn to other metals where
first-quarter rally, but the ratio of the two possible, he said.
Ultra-low global interest rates have metals has eased to less stretched lev-
helped to buoy gold this year; in the era els. An ounce of gold now buys 66oz of “Once that demand is gone, it doesn’t
of negative yields on many government silver, close to its average over the last come back. The more volatile silver is,
bonds, the fact that bullion investments 30 years, and down from 83oz in Febru- the more short-term rallies you get, the
offer no fixed returns seems to matter ary. worse it is for industrial demand.”
less.
But speculative positioning in silver has Overall, as long as silver keeps its ap-
Expectations that the Bank of England risen sharply. Net long positions – repre- peal as both a commodity and a play on
will pour more money into the British senting expectations for prices to move gold, it has a chance to build on gains.
economy following the country’s vote to higher – in Comex silver futures are at a But, those looking to capitalise on this
leave the European Union, plus the pos- record high, having risen 65% over the need to be prepared for a bumpy ride.
sibility that the Bank of Japan and Euro- last three weeks. That has raised con-
pean Central Bank might take similar ac- cerns that any pullback may be harsh. “Silver is not for children,” one trad-
tion for reasons of their own, have helped er said. “You can get in now, and see
to push up industrial metals prices. Underlying supply and demand show $US18/oz tomorrow. So, as long as
signs of improvement, but not by enough you’re aware, proceed with caution.”
On top of that, silver has appeal in its to justify such a sharp move higher.
own right as an industrial commodity – – Jan Harvey, Reuters
more than half of demand comes from In the physical market, American Ea-
industrial users, chiefly in the electron- gle silver coin sales by the US Mint have
ics sector. Central bank action to stimu- slowed. They fell 40% in June from May,
late economies, so the argument goes,
should further increase that consump-
tion.

But moves such as silver’s 32%
jump from $US15.94/oz on June 1 to
$US21.107/oz on July 4 are still difficult to
justify in economic terms, meaning buy-
ers should beware of what traders call
“the devil’s metal”.

“Silver tends to move erratically; it’s
been between $US7/oz and $US50/oz
in the last 10 years,” Macquarie analyst
Matthew Turner said. “It was quite weak
at the end of May and it’s hard to say
fundamentals have changed much since
then.

“Anything that goes up 30% in a month
looks overstretched. And insofar as it
reflects not just central bank easing,
but greater optimism about industrial
demand, there is greater possibility of a
reversal, because the global economy is
still looking shaky.”

While gold is a traditional “safe haven”

AUSTRALIA’S PAYDIRT AUGUST 2016 PAGE 9

OPINION

Zinc starts to bubble as
investors pile in (again)

Zinc is this year’s investment pick of but the underlying theme is the same. All of which reinforces the bull story
the base metals traded on the London Marex too estimates that this is the most of a fast-evolving concentrates crunch,
Metal Exchange. speculative length in the contract since albeit one massaged by Glencore’s con-
May of last year. tinued idling of 500,000t of annual mined
The price of LME zinc for three-months capacity.
delivery has risen by 42% since the start Something very similar is happening in
of January to $U2,235/t. the Shanghai zinc market. The only problem is that these con-
straints don’t yet appear to have trans-
It is by a wide margin the strongest Market open interest has risen to lated into the refined metal part of the
year-to-date performance among the 508,000 contracts from just over 300,000 supply chain.
LME pack and prices are now back at as recently as the middle of May.
levels last seen in May 2015. So for example, Swedish company
It has exceeded current levels on just Boliden, which operates both mines and
Also rising at a fast clip, though, is two occasions in the past. smelters, notes in its second-quarter
speculative interest on both the London report that “the market’s concentrate
and Shanghai markets. The first was in the July-September stocks are low and continued to decline
2014 period, when prices were also surg- during the quarter” but that “European
Market open interest on the Shang- ing. The second was in November last spot market metal premiums have re-
hai Futures Exchange (ShFE) is surg- year, when open interest and volumes mained stable”.
ing, while speculative length in the LME spiked as prices fell, attesting to a collec-
is rapidly approaching those May 2015 tive bear raid on the market. Physical metal premiums should be the
peaks. real litmus test as to when concentrates
Volumes in this particular price up- shortfall translates into metal shortfall.
Investment money is betting on zinc’s cycle have been relatively subdued, sug-
supply-side story of raw materials gesting no return of the retail crowd that Quite evidently, it isn’t happening yet
crunch, a stand-out in a sector still over- roiled Chinese commodity markets in the and that is probably down to the amount
shadowed by the overarching demand- first quarter of this year. of metal inventory, only partly visible, still
side narrative of Chinese slowdown. sitting in warehouses around the world,
Rather, the inference is that the build in particularly in New Orleans.
But timing this story has always been open interest in tandem with rising prices
tricky. is mirroring the structural build in invest- Some of it has been on the move, ac-
ment money in London without overly at- cording to LME broker Triland Metals,
Investors have been sucked into the tracting the masses of day-traders that which noted in its latest weekly physical
zinc market before, most recently in May populate both Shanghai and other do- premium report that “traders [are] ship-
last year, when the London price peaked mestic exchanges. ping material from New Orleans to Asia
at $US2,400/t only to collapse back be- to meet long term contracts demand”.
low $U1,500/t by the end of the year. That zinc’s prospects are relatively
brighter than most of the other London But equally there still appears to be
Is this time going to be any different? base metals packs is not really in doubt. sufficient metal sitting in what is the black
Speculative length has been stead- hole of the refined market’s supply chain
ily growing in the London zinc contract, There is a hardening consensus that to feed 77,000t into LME stocks at the US
both reacting to and adding to the current zinc is suffering from a hard-rock supply port over the second half of June.
strong price rally. problem as some of the world’s oldest
The LME’s own positioning reports but biggest mines reach the end of their The route of travel in the zinc market
show that money managers were net lives. seems clear. Its speed in getting there,
long of zinc to the tune of 73,928 lots, however, remains highly uncertain.
equivalent to around 18% of open inter- All the evidence is supportive of this
est, at the end of last week. thesis. That is why some players have opted
That’s the largest cumulative long po- for long-dated options as a way of play-
sition since May 2015, when it peaked at Global mine production slumped by ing the expected upside, in effect plac-
just over 100,000 lots. 8.1% in the first four months of this year, ing their bets on December 2016 and
The exchange’s commitment of traders according to the latest monthly statistical June 2017. Plenty of others, however, are
report has many detractors for the way update from the International Lead and still expressing their bullish views in the
entities, particularly some of the larger Zinc Study Group (ILZSG). form of the LME three-months price and
ones, are classified. shorter dated ShFE contracts.
However, an alternative take on specu- That has caused a drop in treatment
lative positioning from LME broker Marex charges, the amount smelters charge Possibly too many of them.
Spectron, is painting pretty much the miners for turning their raw material into Without confirmation, and soon, that
same picture. metal, as processors compete for supply. the refined metal part of the supply chain
Marex estimates the net speculative is tangibly tightening, the current levels
long position in LME zinc has surged by Spot Chinese import terms, for exam- of open interest look like an accident
13,000 lots over the last week to a cur- ple, have slid from $US170/t at the end of waiting to happen.
rent 28,000 lots, equivalent to 14.6% of last year to around $US100/t, according
open interest. to Thomson Reuters GFMS. – Andy Home, Reuters
The methodologies may be different
That in turn has fed through to signifi-
cantly lower Chinese imports so far this
year. At 910,000t (bulk weight, not metal
contained) they were down by 23% in the
January-May period.

PAGE 10 AUGUST 2016 AUSTRALIA’S PAYDIRT

NEWS

Great Southern goes to ACH

After pouring over more than
130 Australian mining as-
sets in the space of three years,

ACH Global Pty Ltd has landed

its second project.

The private company backed

by Australian and Chinese ex-

pertise has exercised its option

to buy Silver Lake Resources

Ltd’s Great Southern gold pro-

ject, Western Australia, for $5

million cash.

Since establishing itself in

2013 to make acquisitions, ACH

has made offers on up to 10

projects and managed to add

two to its portfolio.

“When you establish an effort

like we did in 2013 you always

hope that you are synchronising

with what is going to happen [in

the markets]. In 2013, we didn’t

think it would take this long but

in hindsight, looking at metals

prices and the equity market I

think it has been the appropri- Great Southern had become a non-core

ate amount of time for the mar- asset in Silver Lake’s portfolio ACH will look to resubmit mining proposals at the Great
ket to find an equilibrium,” ACH
managing director Ed Ainscough told Group Co, Ltd – also has the Southern project in Western Australia’s south-east

Paydirt. Foster/Jan nickel-gold project

Great Southern, considered a non- in Kambalda. Foster/Jan is subject to a to turn; the obvious example being gold

core asset in Silver Lake’s portfolio, has farm-in arrangement with Gold Fields in WA, I think we are turning up on the

had reserves reported by previous own- subsidiary St Ives Gold. other side of that cycle,” Ainscough said.

ers of 440,000oz gold, 8.3 moz silver Speaking at the time the deal was “We were set up in 2013 specifically

and 60,000t copper and ACH will look to done, Ainscough said ACH was optimis- with the goal of finding projects and in-

push ahead with a mining proposal. tic about the nickel price, however, with vesting in Australia. I would guess that

“We are doing the necessary ecologi- prices dropping by about 50% in recent we have probably looked at 130-150

cal and environmental surveys and stud- years, the company is focusing on the projects over the intervening three years

ies to resubmit the mining proposals with gold opportunities at the project. and during that time we have probably

a very strong focus on the gold. We will In the meantime, ACH will continue to made offers on about 6-10 projects.

“be pushing that forward, cautiously, be- assess potential acquisitions, as the re- “When we started [to look for projects]

cause gold is quite volatile,” a lot of the parties that were

he said. In 2013, we didn’t think it would looking to divest projects were
take this long but in hindsight,
“Like any gold project in still remembering the good
WA, it [Great Southern] is times. So, there was a kind of
very sensitive to the gold hangover situation where peo-

price and the gold price looking at metals prices and the ple were looking at their previ-
is moving around strongly equity market I think it has been the ous valuations, their previous
in US and Australian dol- share prices and had expecta-

lar terms. We are pushing appropriate amount of time for the tions for the value of their pro-
ahead, and because we market to find an equilibrium. jects that the market generally
are private we can push – not just us – didn’t meet.”

ahead quite strongly. Also, While gold is currently in

because we are private, we vogue, Ainscough believes

are very cautious as we are deploying sources sector starts to turn. there is still a fair way to go before buy-

people’s personal capital.” “During the last three years there has ers and sellers in other metal sectors find

In addition to Great Southern, ACH – been a settling out where there has been themselves in the same window to do

which is run by Ainscough and some of a better meeting of the expectation of the deals.

his former Gold Fields Ltd colleagues vendor and the value ascribed by the ac- – Mark Andrews
and founding shareholder, chairman Liu quirer. I think, metal dependent, we are

Yanhui who owns Dalian Bolong Holding seeing some of those dynamics starting

AUSTRALIA’S PAYDIRT AUGUST 2016 PAGE 11

OPINION

Iron ore supply discipline emerging

Iron ore’s wild price gy- that leans towards over-
rations this year may be supply, the surplus output

masking a small but sig- appears to be gradually

nificant shift in the under- easing.

lying fundamentals for the The 41mt increase in

steel-making ingredient. China’s iron ore imports

While seaborne iron ore in the first six months

remains a well supplied of 2016 probably hasn’t

market, it appears the lev- been matched by a simi-

el of oversupply has been lar spike in output by the

diminishing faster than two major exporters, Aus-

many expected, leading tralia and Brazil.

to an improvement in the While Australia’s ex-

supply/demand balance. ports have been boosted

This provides some by the start up of the 56

fundamental justification mtpa Roy Hill mine in

for the rally in spot prices, Western Australia, ship-

with the China benchmark While there is a good supply of seaborne iron ore in the market, it appears ments by other top pro-

index up almost 35% so the level of over supply has diminished faster than expected ducers have been largely
far this year. static or lower.

Let’s be clear, there is no reason to be- more a reflection of a weak first two Rio Tinto Ltd expects to ship less iron

lieve that iron ore is poised for a major, months rather than the recent strength. ore in 2017 than it does this year, with

sustained rally. Exports of steel products rose to the a target of about 340mt compared with

But there is reason to be hopeful that second highest on record in June, with 350mt for this year.

prices are more likely to pivot around the total exports for the first half rising 9% This year’s target is achievable, but

$US50/t mark, rather than revisit the De- year-on-year to 57.1mt. will require a strong second half perfor-

cember 2015 lows of $US37/t. It’s clear that China’s efforts to ration- mance from the Anglo Australian miner.

The main reasons for prices finding a alise overcapacity in its vast steel indus- Australia’s second-largest producer,

floor are improvements on both the sup- try are proving difficult to implement and BHP Billiton Ltd, trimmed its iron ore out-

ply and demand side. sustain, especially when prices have ral- put target for the 2015-16 fiscal year by

“For demand, this is largely due to lied, thus providing mills with a financial 10mt to 260mt .
China, which buys about two-thirds of incentive to keep producing. Brazil’s Vale SA, which vies with Rio

seaborne iron ore and is the Tinto Ltd for the title of the

world’s largest steel produc- If the rate of new tonnes being world’s biggest iron ore pro-
er. added to the seaborne iron ducer, has also indicated it
expects 2016 production of
China’s imports have ore market can continue to slow, around 340-350mt, roughly
jumped 9.1% to 493.7mt in in line with 2015 output of
the first half of 2016 com-

pared to the same period last if China’s domestic mine output 345.9mt.
year, representing a gain of maintains its weakening trend and if It may be stretching a long
nearly 41mt.
bow to say iron ore produc-

The strength appears set China’s steel sector maintains output ers are now exercising sup-
to continue in the current at current levels, it’s possible that ply discipline, but it does
month, with Thomson Reu- appear they have finally

ters Commodity Research iron ore’s outlook can be positive. realised that relentless ex-
and Forecasts estimating pansion was not in their in-

91.86mt will arrive at Chi- terests.

nese ports in July, which would be the This is the biggest risk for the demand If the rate of new tonnes being added

highest monthly total this year. side for iron ore, as any reduction in Chi- to the seaborne iron ore market can con-

Most of this has been on the back of nese steel output will rapidly flow through tinue to slow, if China’s domestic mine

rising steel output, which in turn has to iron ore demand. output maintains its weakening trend and

been fuelled by expectations of higher There is another positive for imports of if China’s steel sector maintains output at

domestic infrastructure and construction iron ore, with China’s domestic mine out- current levels, it’s possible that iron ore’s

spending, as well as the reality of rising put sagging 5.9% in the first five months outlook can be positive.

steel exports. of 2016 compared to the same period These are big “ifs” but at least they are

China’s average daily steel output hit last year. within the realms of possibility, which is a

a record high in June of 2.316mt, with While this only represents a cut of step-change from the relentless gloom of

the monthly total of 69.47mt being 1.7% about 29mt of largely low-grade iron ore, the iron ore sector for the past few years.

above the same month in 2015. it does lend support to rising imports. – Clyde Russell, Reuters
For the first six months of the year, The other side of the equation is sup-

steel output is down 1.1%, but that is ply and while iron ore remains a market

PAGE 12 AUGUST 2016 AUSTRALIA’S PAYDIRT

Where to from here:
Innovation in mining

We are going through one of the most Firstly, innovation is a team sport. In where we made critical breakthroughs
intense periods of change we have
ever seen and the ability to innovate – to fact, an organisation that depends on and where we missed key insights. This
evolve, adapt, and improve – is indispen-
sable. individual innovators alone is destined to should be the point of “celebrating fail-

As a nation, Australia is positioned fail. Understanding how you can wire in- ure” which, if we’re honest, is a silly thing
17th out of the 141 countries in the Global
Innovation Index, yet it is the resource- novation into your organisation, and build to celebrate for its own virtue. We make
limited countries like Switzerland, UK,
Sweden and the Netherlands that are a robust internal innovation capability, is sure we salvage all possible learning,
the most innovative. Have they found al-
ternative ways to progress which include an imperative for any company doing and see how it can improve both our cur-
creating, using and sharing information
and knowledge in the form of innovation? business in today’s dynamic world. rent business and our innovation capa-
What can we, as a nation and as a min-
ing industry, learn from them? Secondly, one of the more dangerous bilities.

One of the unfortunate consequences myths about innovation is that it is funda- We also look across the range of in-
of the mining industry’s focus on maxim-
ising volume during the boom phase of mentally a challenge of creativity. Inno- novation initiatives under way, and ask if
the cycle was that significant inefficien-
cies became deeply embedded in op- vation almost never fails due to a lack of they’re collectively addressing the right
erations, organisational structures and in
the back office functions of mining com- creativity. It’s almost always because of a issues. Do they have the right balance of
panies of all shapes and sizes. So when
the cycle turned, the industry developed lack of discipline. If we frame innovation risk and likely return, and are we dedicat-
an unrelenting and often brutal focus on
removing cost. as a challenge of discipline – of learn- ing enough resources to them?

Following a period that saw the dis- ing to use the right methods, tools and We make innovation obligatory rather
posal of poorer performing assets, the
deferral of new capital projects, reor- approaches at the right times – then we than optional. If we can see innovation as
ganisation, headcount reductions and
accelerated continuous improvement quickly focus on very different impera- a discipline, then we can start demanding
programmes, the mining industry could
be confusing operational excellence and tives; we become students of innovation; it from our organisation. We can hold our
continuous improvement with true inno-
vation. we don’t expect someone without train- team and business unit leaders account-

No surprise the industry appears to be ing to build a discounted cash flow model able for sponsoring innovation initiatives,
now asking: “Where to from here?”
or develop a marketing segmentation. and charge our bright, high potential em-
There is broad acknowledgement of
the need to be working smarter and the Nor would we expect someone new to an ployees with developing it. Some of the
next wave of productivity and growth op-
portunities will come from doing things industry to already understand its struc- most powerful innovators in history have
differently. The mining industry appears
to have embraced innovation as a god- ture and dynamics. connected involvement in innovation initi-
send in the face of an uncertain outlook
for commodity prices. But where is the So why do we expect our colleagues atives to career development, incentives
real innovation that will continue to drive
productivity and growth? and leaders to suddenly manifest an abil- and promotion.

We hear the message “we need to ity to innovate? And why don’t we expect Innovation also becomes an invest-
embrace innovation to drive productiv-
ity and growth” repeatedly from mining them to study innovation systematically ment we start funding programmati-
companies. Good examples such as au-
tomation and remote operations centres – both the methods they should apply in cally, instead of scraping budget dollars
are often cited, but haven’t these now
become the norm? Isn’t the real question different contexts as well as meaning- together each quarter, because it’s vital
for mining leaders: “What can we as an
industry learn from leading innovators?” ful innovations in the surrounding land- to the ongoing health and success of our

scape. business. We stop hoping innovation will

Like any other business function or dis- happen and start requiring it from each

cipline, innovation has tradecraft that we other and ourselves.

can learn, practice and hone. If the mining companies are going to

We measure methods and results; embrace innovation to drive productivity

when we start seeing innovation as a and growth, they will need to embed in-

discipline, then we also start focusing on novation as a discipline and think about

what does and doesn’t work. innovation in a more systemic way. Then

We set goals and measure results. we can expect to see more companies

This doesn’t mean we building breakthrough

start asking for a five- innovations – those

year financial projec- game changers that

tion two weeks into enable leading inno-

an initiative. It does vators to be top per-

mean paying attention formers that generate

to which inputs yield superior returns for

better outputs; did our their shareholders.

time spent brainstorm- Anyone can learn

ing in a room yield bet- to innovate and, with

ter ideas, or the same practice, anyone can

time spent studying become better at in-

our markets custom- novating. Simply put,

ers? there is no longer an

We start reviewing Based in Perth, David Cormack is excuse not to inno-

our efforts, spotting Deloitte Consulting Mining Leader vate.

AUSTRALIA’S PAYDIRT AUGUST 2016 PAGE 13

NEWS

Rox seeks reward for zinc sale

Rox managing director Ian Mulholland (right) with project geologist Gregor Bennett and exploration manager Will Belbin
at the Reward zinc project in the Northern Territory

Rox Resources Ltd has found a new 900,000t lead) was recently confirmed for the past five years, having forked out
home for the Reward zinc-lead pro- as the seventh largest zinc resource in almost $14 million on exploration and is
close to achieving the next expenditure
ject in the Northern Territory. Australia, behind only Broken Hill, McAr- milestone to claim a 70% stake in the
project.
IMI Zinc Exploration Pty Ltd, a wholly thur River, Hilton, Mount Isa, George
Reward also hosts Myrtle, which has
owned subsidiary of ASX-listed IM Medi- Fisher and Century. an inferred and indicated resource of
44mt @ 4.1% zinc and 1% lead for 2.2mt
cal Ltd, last month entered into an exclu- Rox has until August 18 to complete contained zinc and lead. It was the first
deposit explored under the Teck JV.
sivity agreement to acquire Rox’s 49% due diligence on IMI Zinc’s offer, com-
Rox’s share price jumped 107% to
interest in the project, including the cov- prising $2 million cash and $12.8 million 2.9c/share on June 1 when it announced
the maiden resource estimate for Teena.
eted Teena deposit, for $14.8 million. worth of shares in the parent company. The company’s stock was trading stead-
ily at 2.3c/share at the time of print.
Teena (58mt @ 11.1% zinc and 1.6% “This offer from IMI Zinc vindicates our
In an interview with Paydirt in June,
lead for 6.5mt contained zinc and view of the value of the Reward project – Mulholland flagged the potential back-
door listing of Reward into another com-
and the Teena deposit – and the fact pany.

it has gone unrecognised in our share “There’s always a risk that Teena is
going to get lost within Rox again as we
price for so long,” Rox managing di- proceed with our nickel project and vari-
ous other activities, so we really think the
rector Ian Mulholland said. best idea is to spin this project out into
another vehicle that can then be fairly
“This is a significant outcome for and transparently valued by the market
and not be clouded by any other things
the company which will not only allow that are happening in Rox,” Mulholland
said at the time.
our shareholders to retain an expo-
Rox’s flagship asset remains the Fisher
sure to Reward, but will also facilitate East nickel project in Western Australia.

a release of funds to Rox which will – Michael Washbourne

enable us to pursue other growth

opportunities. We also believe that

through this transaction Reward will

be able to be more fairly valued in the

market and, at the same time, our fu-

ture funding exposure for the project

will be reduced.”

IMI Zinc’s offer is also conditional

upon Teck Australia Pty Ltd, which

currently owns 51% of the project, not

exercising and waiving its pre-emp-

tive right to acquire Rox’s remaining

Paydirt reported on the likely spin-out of Reward interest.

in last month’s edition of the magazine Teck has been earning into Reward

PAGE 14 AUGUST 2016 AUSTRALIA’S PAYDIRT



NEWS

Lance in motion for Peninsula

Peninsula Energy Ltd’s plan to We put out really strong num-
become a diversified uranium bers that people have stood

producer is starting to come to- back said: ‘wow’ as it has been

gether. as good as they thought it was. I

The company has only been in think people are buying us on the

production at its Lance ISR pro- back of that, combined with our

ject, Wyoming, US, since March, long-term contracts we are very

and while Peninsula’s value well underpinned.”

proposition has taken a while to With a license to produce 3

be realised, investors appear to mlbpa from its plant at Lance,

be warming to the story now. the company is building towards

Peninsula’s case has been a production profile of 2.3 mlbpa,

helped by a solid quarter of pro- with exploration and potential ac-

duction from Lance, which has quisitions of satellite deposits in

the company on track to achieve the pipeline.

its targeted 200,000-300,000lb Acquisitions are not restricted

uranium for calendar year 2016. to the US, with Peninsula stick-

In the first half of the year, Gus Simpson ing to its strategy of becoming

Peninsula delivered 105,000lb a significant uranium producer

uranium to utilities, with 8.2 mlb under ating. That basically means we will have from multiple sources by 2020 through

contract at a WAP of $US55/lb, which 70 production wells producing uranium at tapping opportunities in Australia and

equates to projected revenue of $US445 that point. Our forecasts and estimates Canada.

million. are that by the second quarter of 2017 we However, the company’s foremost op-

By the second quarter of 2017, produc- will be reaching our full stage one pro- portunity lies in South Africa’s Karoo re-

tion at the designated stage one rate of duction levels.” gion, about 500km north-east of Cape

700,000 lbpa is expected to be hit, with The runs put on the board by Penin- Town.

header houses one and two performing sula so far seem to have resonated with “We have a lot going on behind the

above expectations. investors, as the company’s share price scenes at the moment at Karoo,” said

Peninsula managing director Gus rose from 49c/share at the end of June to Simpson who is working on strategic
Simpson told Paydirt he expected head- 77c/share at the time of print.
partnerships for the project.

er houses one and two to perform on- Having built a new mine – on time and “We have brought in some very sig-

song for several more months. on budget – Simpson said investors were nificant partnering there and soon it will

“They will plateau out and then we will waiting to see how the mine was per- become apparent that everything that we

have the other five header houses up forming before committing to Peninsula. have been trying to do at Karoo is still

and operating,” he said. “We hadn’t put out any solid perfor- progressing extremely well. I think we will

“We have installed two new [headers] mance numbers, but you really can’t do have a PFS by the end of the year.”

recently, so four will be in play but by the that until you have had that running for Karoo, where an exploration target

end of the year we will have seven oper- several months, which we have now. of 126-133mt for 250-350 mlbs @ 900-

1,200 ppm has been set, has been billed

as Peninsula’s second mine.

Assuming the PFS remains on track

to be completed by the end of the year,

Peninsula believes production at Karoo

can start in 2019.

A scoping study only factored in the

eastern sector projects at Karoo and the

company is confident there is significant

upside potential in the western sector

projects.

Reserve drilling is still required to be

completed at Karoo, while Simpson said

improvements to the scoping study are

being made.

“The work that has been done so far

in the PFS will significantly reduce capi-

tal and opex; that is the expectation. The

met testing, circuit design and stuff going

on behind the scenes is not readily ap-

parent, but it is highly significant for us.”

A PFS on Karoo, 500km north-east of Cape Town, is expected to be – Mark Andrews
completed by the end of the year

PAGE 16 AUGUST 2016 AUSTRALIA’S PAYDIRT

20 October 2016

Perth, Western Australia

Register now for Australia’s
only nickel event

australiannickelconference.com

To present, exhibit or attend as a delegate please contact Melita Fogarty
on (+61) 8 9321 0355 or email [email protected]

Image courtesy of Western Areas Ltd

COVER

MOD plans
copper rebound for

Botswana

PAGE 18 AUGUST 2016 AUSTRALIA’S PAYDIRT

When a junior explorer has a A $3.1 million capital raising, completed in July, will ensure MOD is funded at least
landholding of more than through to a maiden resource at its T3 copper discovery in Botswana

10,000sq km across a largely un- warm to African explorers once again, early success followed as a government
momentum is building in a copper region desperate to diversify its economy away
derexplored copper belt, there is that had apparently lost its way over the from a reliance on diamonds encouraged
last decade. exploration.
an acceptance it may take years
As the modern-day African explora- However, the last five years have seen
to define any potential. So, when tion push began at the beginning of the a change in fortunes in Botswana’s re-
21st century, Botswana was one of the sources development. The fall in interna-
MOD Resources Ltd turned up early beneficiaries thanks to its long-held tional export prices has meant appetite
reputation for democracy, peace, stabil- for Botswana’s infrastructure-intensive
a discovery with just the second ity and transparency. coal projects has dried up and in the
base metals space, a series of failures
hole of a new drill programme The country could also boast one of has led to projects along the Kalahari
the world’s most valuable mining sectors
on its Botswana copper project, thanks to the prolific contribution made
by Debswana’s diamond operations in
managing director Julian Hanna the country.

was understandably astonished. As such, a number of ASX-listed ex-
plorers set up shop in the country and
Hanna described the intersection of
chalcopyrite and high tenor bornite sul-
phides in the first drill holes as “extraordi-
nary” when the company announced the
visible logging on March 17.

It was noteworthy praise from an ex-
ecutive who is well-versed in early-stage
exploration success. Hanna’s strong
reputation in the Australian resources
sector was largely forged by his achieve-
ments as founding managing director of
Western Areas Ltd, where he oversaw
an exploration team which turned the
neglected Flying Fox mine into the nickel
sector’s highest grade producer with a
series of down-dip and nearby discover-
ies.

Hanna and MOD have been joined in
Botswana by another veteran of the West
Australian nickel scene, Terry Grammer,
who has brought AIM-listed Metal Tiger
plc (which he chairs) in as 30% JV part-
ner into the Botswana project.

With market sentiment beginning to

MOD managing director Julian Hanna discusses recent drilling with exploration Metal Tiger chairman Terry Grammer looks
geologist Larona Sethunya Teseletso over core from T3. Grammer has been in-

volved in some of the best Australian base
metal discoveries of the last 30 years

AUSTRALIA’S PAYDIRT AUGUST 2016 PAGE 19

COVER

There is a perception that the Kalahari
copper belt is under a lot of cover but

“it is simply not true, for the most part it is
shallow cover, no more than 20m.

copper belt gaining a reputation as being maintenance in 2014 amid an

difficult to develop. increasingly bearish copper

The Boseto, Mowana, Thakadu and market before Discovery was

Phoenix copper mines have been shut- eventually wound up in June

tered in the last three years, all without 2015.

ever achieving consistent production, Boseto is now in the hands

and there has been a general failure to of Cupric Canyon which is

follow-up on the early encouraging dis- looking to restart the plant with

coveries along the copper belt. feed from the wider Khoema-

The failure of Discovery Metals put cau project but it is MOD’s own

perhaps the biggest dent in Botswana’s exploration success which is

reputation. The company was consid- fuelling renewed interest in the

ered a leading light among the ASX’s Kalahari copper belt.

African set when, during commissioning It is perhaps surprising that

of its 36,000 tpa copper/1.1 mozpa silver a geologist with more than

Boseto mine, it rejected an $830 million 30 years experience should

takeover offer from Chinese firm Cathay choose now to start work in

Fortune in 2012. Botswana but for Hanna, all

However, Boseto’s subsequent ramp- the attributes which made the

up failed to meet expectations as re- country so attractive a decade

coveries came in lower than anticipated ago still stand today.

and with the Cathay Fortune relation- “It is a wonderful country

ship turning ugly Discovery was cash- and certainly the best place Jacques Janse van Rensburg (centre) explains his
strapped and unable to raise additional I’ve ever worked,” Hanna told theories on T3 mineralisation to Hanna and McGhee
funds. Boseto was placed on care-and- Paydirt on site near the town

of Ghanzi in central Botswa- Hanna admits his original appointment

na. “We have a very talented to MOD was prefixed on the company’s

team of people on the ground Sams Creek project in his native New

which has meant we have Zealand. Having left his executive role at

been able to ramp up to a Western Areas in late 2011, Hanna was

very professional set-up very “attempting” to retire back in his home

quickly. The ministry and country but the pull of the resources

government have been very game proved too strong.

supportive and it is definitely The company took Sams Creek for-

achievable for Botswana to ward but as the gold price slipped and

become a low-cost copper market interest drifted away from pre-

producer despite a few false cious metals, the company decided in

starts.” mid-2014 to revisit its Botswana project.

The company had been active in the

country since 2011, discovering the Ma-

humo copper-silver deposit late that year.

In 2015, MOD conducted a scoping study

on a 2.7mt @ 2% copper and 50 g/t sil-

ver resource supporting an underground

operation at Mahumo but struggled to

pin down an economic outcome for the

deposit.

MOD returned to regional scale explo-

ration, aided by the acquisition of an ad-

ditional 14 prospecting licences covering

6,300sq km (taking the total landholding

to more than 11,000sq km) from Discov-

ery’s liquidators in a $US500,000 deal.

Discovery had undertaken extensive ge-

MOD non-executive director (and metallurgist) ophysical and geochemical surveys but

Steve McGhee gets his hands on some of the bor- as focus on Boseto’s development grew,

nite mineralisation he hopes will produce a highly it failed to follow up on the initial work.

marketable copper concentrate That left an opportunity for MOD and

PAGE 20 AUGUST 2016 AUSTRALIA’S PAYDIRT

Metal Tiger. The AIM-listed in-

vestment vehicle provided the

initial $US100,000 down pay-

ment to secure the ground,

earning itself a 30% interest in

the project.

MOD immediately launched

a two-month soil sampling

campaign to infill and confirm

a number of existing surface

anomalies ahead of a new

drilling programme.

Hanna said MOD’s enthusi-

asm for the region was fuelled

by the misconceptions which

had tarnished the Kalahari

copper belt’s reputation.

“There is a perception that

the Kalahari copper belt is un-

der a lot of cover but it is simply

not true, for the most part it is

shallow cover, no more than

20m,” he said.

The new exploration pro-

gramme started at the previ-

ously drilled T4 target where

Discovery had reported hits Hanna and van Rensburg hosted a group of Metal Tiger’s London investors on a tour of
of 4m @ 2.6% copper and 40 the JV project in June

g/t silver from 81m and 7m

@ 1.5% copper and 23 g/t silver from further assay results including 29m @ maiden resource in September and then

69.5m. 1.8% copper and 34 g/t silver from 112m, move into scoping study work.

Those results were modest but when 17.2m @ 1.4% copper and 14 g/t silver “With each new batch of assays, our

MOD moved the RC rig to drill its first from 103.9m, 34.3m @ 1.2% copper and confidence grows for the potential to

holes into the T3 anomaly, Hanna and 11 g/t silver from 87.7m and 27.5m @ develop an open pit mine,” Hanna said.

the exploration team, led by exploration 3.2% copper and 13 g/t silver from 134m. “Only four months since discovery, T3 is

manager Jacques Janse van Rensburg, Step-out holes also returned strong re- already generating copper intersections
began to change their thinking on the sults with hole MO-G-13D, drilled 200m that compare very favourably on a global

project. east, intercepting 16.8m @ 1.4% copper scale. Given this growing momentum, we

In the RC chips, MOD observed vein- and 5/g silver from 176m. recognise the importance of having the

hosted and disseminated chalcopyrite “We are particularly excited by results right team in place to advance our objec-
and bornite copper mineralisation start- from MO-G-13D, which extended the re- tives at a time of improving sentiment to-

ing just 60m from surface. By the time source area another 200m east to a total wards new resource projects.”
first assays came back in April, MOD was 1km strike length. MO-G-13D is sup-
Royce McAuslane was appointed

already planning a larger programme and ported by other strong, widely spaced study manager in July, with responsibility

following the announcement of hits of intersections in this part of the resource for managing the open pit scoping study

“14m @ 1.97% copper from 86m, includ- area,” Hanna said. which MOD aims to complete before the

ing 7m @ 2.9% copper, end of 2016 with a PFS

and 52m @ 2% copper scheduled to start at the

from 78m, including 14m Everything about this discovery gets turn of the year.
@ 3.4% copper and 72.7 me excited. It is very predictable, Visiting the project
g/t silver, the company
with Hanna and van

returned to the market, has got good width and wonderful grades Rensburg, it is apparent
raising $2 million to fund coming out of the ground. It is the kind of their enthusiasm for T3
the first diamond drilling is driving an accelerated

on the target. stuff I haven’t seen in the last nine years exploration programme
The results continued working in this region. with four diamond rigs
now on site.
to roll in following the

start of diamond drill- “Everything about this

ing. The first diamond discovery gets me ex-

hole intercepted 28m @ 1.76% copper “This one hole has provided further cited,” van Rensburg said. “It is very pre-

and 22.9 g/t silver and by early June the confidence for the potential of more ex- dictable, has got good width and wonder-

company was announcing a $3.1 million tensions to T3 – beyond the area drilled ful grades coming out of the ground. It is

entitlement offer to fund a resource drill- to date.” the kind of stuff I haven’t seen in the last

out at T3. Such has been the rapid and consist- nine years working in this region.”

The entitlement offer closed heav- ent success of drilling at T3, the compa- Hanna agrees and both geologists are

ily oversubscribed on July 18 following ny is already preparing itself to release a particularly excited by the indication that

AUSTRALIA’S PAYDIRT AUGUST 2016 PAGE 21

COVER

T3 represents a new style of mineralisa-

tion for the Kalahari belt.

“This is not at all similar to anything I’ve

seen on the belt previously,” van Rens-

burg said. “Up to now, all the focus has

been on the redox boundary style miner-

alisation which is skinny and very steep.

What we are dealing with here is a flat-

lying orebody with thickness; the grades

hang together over multiples of metres,

in fact at least 10 times as much as the

rest of the redox style deposits.”

Hanna believes it opens up a world of

new possibilities for MOD and JV partner

Metal Tiger along the 11,000sq km hold-

ing in Botswana.

“T3 is unlike any other deposit on the

Kalahari copper belt. While Mahumo

sits on the same contact as Boseto, T3

doesn’t,” Hanna said. “And, we believe it

points to the entire area being misunder-

stood and poorly explored. T3 is a brand

new discovery and is part of a much larg-

er copper footprint. There are multiple

styles of copper mineralisation here and

the fact it is hosted by sediments gives us Grammer and Hanna have known each other for decades. It was a chance meeting in

a rare opportunity to follow this minerali- the streets of West Perth which brought them into partnership in Botswana

sation for some distance.”

Given T3 was the first new target to be to soil sampling, magnetics and IP. If you source drilling is already well advanced,

drilled, MOD and Metal Tiger have plenty get a combination of all three in an anom- our geologists have identified some very

of opportunities to prove correct this revi- aly, you should get copper. We have a compelling deeper targets outside the

sionist theory about the belt. number of targets which all require drill- current resource area.”

“It is still early days for this copper belt ing.” Positive economic studies for T3 would

and the exploration method is straight- MOD has two teams exploring for sat- likely bring Mahumo back into play also.

forward,” Hanna said. “It responds well ellite deposits in the region surrounding “T3 is only 20km from the Mahumo

T3. One team is testing IP and project so there is potential for joint de-

copper soil targets already velopment down the track. If we establish

identified along the 25km-long a plant at T3 other targets could become

T3 Dome and the other is con- satellite deposits as well,” Hanna said.

ducting soil sampling along MOD was planning to start metallurgi-

structural targets within the cal test work on T3 material in the coming

rest of the JV’s ground. months but Hanna said the dominance of

In July, MOD identified two bornite and chalcocite and results from

copper anomalies (up to 85 work on Mahumo mineralisation last year

ppm and 83 ppm) from soil suggested good concentrate grades

sampling at the T2 prospect could be achieved.

along strike of Mahumo. Ad- “In test work we are getting around

ditional copper soil anomalies 40% copper concentrate and up to 51%

were also identified at T9 and with silver also reporting well,” he said.

T10 which sit on major region- “It has potential to produce high-quality

al structures. concentrate and that is always in high de-

The challenge could come mand from smelters.”

in retention of the massive It is surprising to hear Hanna talk

landholding. The Mining Act about potential concentrate grades just

requires MOD/Metal Tiger to four months after the discovery hole

relinquish ground as licences was drilled at T3 and there is no doubt

come up for renewable but MOD and Metal Tiger both believe they

Hanna said the JV was work- are onto something special. If they are

ing hard at the regional explo- proved right, T3’s discovery may be

ration level to present a case marked as the moment when Botswana’s

for retaining ground. copper potential was reawakened.

“We are very mindful of our – Dominic Piper
exploration obligations and

Van Rensburg and Hanna discuss exploration progress have a regional team working

at T3. While Hanna is new to Botswana, van Rensburg on the wider project area,” he

has worked on the Kalahari copper belt for nine years said. “While the Phase 1 re-

PAGE 22 AUGUST 2016 AUSTRALIA’S PAYDIRT

“T3 is unlike any other deposit on the Kalahari
copper belt. While Mahumo sits on the same
contact as Boseto, T3 doesn’t. And, we believe it
points to the entire area being misunderstood and
poorly explored. T3 is a brand new discovery and is

part of a much larger copper footprint.

Exploration has accelerated following T3’s discovery. There are now four diamond
drill rigs turning on site ahead of a maiden resources statement set for September

AUSTRALIA’S PAYDIRT AUGUST 2016 PAGE 23

AFRICA DOWN UNDER PREVIEW

Down Under comes
out back on top

Africa Down Under returns to the Pan Pacific Hotel Perth on September 7-9. Now in its 14th
year, the conference has ridden the highs and lows of Australian investment in the African re-
sources sector and this year organisers are anticipating a return to growth

After three years of downward pres- on the back of improving commodity pric- since the start of 2016 and – just as in
sure on the sector, the Austral- es and a greater risk appetite. The land- the domestic Australian gold sector – the
ian miners in Africa are approaching this scape for African resources stories has developers and juniors are following. The
year’s Africa Down Under buoyed by a certainly changed from seven years ago likes of Cardinal Resources Ltd, West
sense of optimism. when there were more than 200 ASX-list- African Resources Ltd and Orecorp Ltd
ed companies exploring, developing and have enjoyed strong market cap growth
African-focused companies have suf- mining on the continent but after a long this year which has led to further capital
fered more than anyone on the ASX in winter, any sunshine is welcome. raisings and more exploration.
recent years as nervous investors took
flight from higher risk jurisdictions and “I think sentiment is a lot more positive Mark Connelly, chairman of both Cardi-
big capex projects. The market caps of and it is associated with more than just nal and West African, has felt the change
Australia’s most prominent African com- gold plays,” Taurus Fund Management in sentiment.
panies – Paladin Energy Ltd, Resolute director Michael Anderson told Paydirt.
Mining Ltd, Base Resources Ltd and “We have seen a number of our invest- “I think there is a renewed level of in-
Perseus Mining Ltd among them – took ments improve dramatically over the first terest and West Africa is certainly open
a beating but with confidence slowly re- six months of the year and the outlook is for business once again,” Connelly said.
turning to the sector, the rebuilding pro- brighter for much of the sector.” “People are getting good results – both
cess has begun. producers and explorers – and it is a
The charge has been led by the gold good time for the sector.”
The likes of Resolute, Base and Per- miners. Resolute has put on 500% since
seus have posted strong gains this year the turn of the year and Perseus 100% Connelly’s reputation in the gold sec-
tor has been burnished by recent M&A

PAGE 24 AUGUST 2016 AUSTRALIA’S PAYDIRT

successes and he thinks the West Afri- Republic of Congo – but there has to be a

can gold sector is ripe for more deals. justifiable return. Money won’t go in with-

“People are becoming more receptive out that.”

to deals,” he said. “A few years ago com- Security also remains a concern for

panies may have thought they could go investors. While events elsewhere in the

all the way to production themselves but world have seen Africa’s relative security

are realising now that if you can bring in a risk improve, issues remain; from Islam-

partner with existing production and cash ist terrorist groups in West and East Afri-

flow you can quickly de-risk the project.” ca, to border incursions in DRC, Burundi

Such is the level of enthusiasm, Con- and Rwanda to criminal gangs in South

nelly is considering taking his latest ven- Africa and Nigeria.

ture, Toro Gold – which has the Mako The kidnapping of seven employees

gold project in Senegal – to the public (and shooting of another) of Australian

later in the year. mining contractor MacMahon Holdings

“We are certainly evaluating all the op- Ltd highlighted the continuing threat se-

tions and the shareholders are keen,” he curity concerns present to investment in

said. Mark Connelly the region.

Resolute managing director John Wel- However, the continent is far from

born is adamant the market has not fully more than most from the iron ore down- hopeless and the Australian companies

appreciated his company’s performance turn, seeing its Mbalam-Nabeba go from active there continue to demonstrate the

and potential following its expansion of sector leader to unloved, stranded asset. resources sector’s unrivalled ability to of-

the Syama gold mine in Mali. Prices may not have turned dramatically fer impoverished communities opportu-

“If you look at any metric, but particu- yet but Sundance managing director Gi- nity for sustainable development and the

larly enterprise value per ounce and the ulio Casello tells Paydirt on page 92 that alleviation of poverty.

P/E multiples, we are undervalued and I even he can sniff positivity in the air. Africa Down Under is proud of its ability

think we remain at a significant discount “The market appears to have found to showcase this aspect of the industry, a

to peers,” Welborn says in these pages. the bottom and even though it may take trend which will continue this year, both

Share price movement is also appar- a few more years before the uplift, it is a with the fifth Australian African Research

ent, if not as spectacular, away from the different sentiment looking up rather than Forum – to be held on the day prior to

gold stocks. “heading down towards $US70/t.” the conference – and a number of main
Base has experienced gale-force
stage presentations on the topic.
headwinds since bringing its Kwale
mineral sands mine into produc- The expansion of Africa Down
tion at the start of last year but with
Kwale’s plant performing strongly The market appears to Under’s importance to relations be-
and commercial production rates have found the bottom tween the continents also continues
achieved, Base managing direc- to increase with this year marking
tor Tim Carstens could only have
and even though it may take the official launch of Africa Week.
a few more years before As well as the main Africa Down

Under programme and exhibition

welcomed the turnaround mineral the uplift, it is a different and the Australian African Research
sands prices have made in the last sentiment looking up rather Forum, this year will see the Aus-
four months. tralian African University Network

“This is the first time since 2013 than heading down... bring its annual conference to Perth
I have been able to talk about the for the first time while a number of

market moving in the right direction,” smaller forums will also take place

Carstens says on page 56. “I’m feel- during the week.

ing better about the indicators [for min- The problems facing Sundance are Paydirt Media executive chairman

eral sands] and what’s to come.” symptomatic of those across the conti- and Africa Down Under organiser, Bill

Junior explorers are also seeing sup- nent. Africa’s infrastructure gap, estimat- Repard, is excited by the further expan-

port on the market. MOD Resources Ltd ed at $US90 billion annually by the World sion of an event he created in 2003.

placed $2 million in April, used it to define Bank, continues to stifle developments “We are delighted that our vision for

a new copper discovery in Botswana and in many commodities throughout the re- an Africa Week is becoming a reality,” he

then had to shut the door on a follow-up gion. Whether power, road, rail or port, said.

$3.1 million entitlement offer in July. this infrastructure poverty is restricting Repard – who is also a board member

The graphite sector has also rebound- annual GDP growth by as much as 1.5%. of the Australian Government’s Advisory

ed after a tough start to the year. Syrah Casello recognises infrastructure as Group on Australian African Relations –

Resources Ltd has grown its market cap the major reason why African countries welcomed the added diversity of the re-

to more than $1.5 billion as it closes in were unable to capture maximum value lationship.

on production at its Balama project in from the last commodities boom. “We have always encouraged other

Mozambique and Tanzanian-focused “Africa has missed the boat on infra- aspects to join in the event,” Repard said.

Graphex Mining Ltd was a rare new en- structure, partly because of the unreal- “As the cornerstone of Africa Week, Af-

trant onto the ASX in June, following its istic expectations of what it was for,” he rica Down Under is keen to encourage

successful spin-out from IMX Resources said. “There is a view that infrastructure engagement between Australia and Af-

Ltd. should be there because it’s there and rica in new and interesting areas.”

Even in the much maligned bulk com- there is no method or plan for payback. – Dominic Piper
modities, hopes are rising of a fresh Public-private partnerships can work – it

start. Sundance Resources Ltd suffered has been proven in both Cameroon and

AUSTRALIA’S PAYDIRT AUGUST 2016 PAGE 25

AFRICA DOWN UNDER PREVIEW

Lesedi disappointment a mere
flesh wound for Lucara

It may have been left red-faced “The three kimberlite pipes
by the failure of its 1,109ct each have their own charac-

Lesedi La Rona diamond to teristics and as we moved into

reach its auction reserve but the southern lobe at the end of

Lucara Diamonds Inc remains 2013 we observed an increase

assured of its increasingly in- in coarseness,” Day said. “We

fluential position in the world of did a resource update and bulk

diamond mining. sampling campaign on the por-

Lucara held a live auction at tion of the south lobe outside

Sotheby’s in London on June the original resource.”

29 but after the Type IIa dia- That exploration programme

mond – the second largest ever resulted in a $US1 billion in-

discovered – failed to meet its crease to the resource value

reserve price of $US70 million, and Day believes more is to

Lucara announced it would re- come in terms of both size and

tain ownership of the stone. Lucara’s Karowe diamond mine in northern Botswana is forecast value.
Although the company did to produce 340-380,000ct in 2016 “We still didn’t realise what
truly lies beneath the resource
not divulge any further details,

it appears likely it will spend the next few monds recovered in the last 12 months and I’ve almost lost count of how many

months designing a marketing and valua- alone, including 28 plus-200ct diamonds. large carats we’ve recovered,” he said.

tion strategy around the diamond. Such is the frequency of large stones, “The highest dollar per carat is coming

Part of the problem is the Lesedi La Lucara optimised its processing plant in from the south lobe and it is also the

Rona’s uniqueness. Most large dia- 2015, adding a large diamond XRT cir- largest lobe with 70-80% of it still to be

monds are cut into several stones after cuit for $US16 million. A replacement for mined.”

sale but given it is the largest diamond the traditional DMS and x-ray process, In 2015, Lucara sold 377,136ct of dia-

found since the Cullinan was discovered the XRT circuit allows non-uniform (in- monds for gross proceeds of $US223.8

more than a century ago, Lesedi La Rona cluding larger) feed, allowing for greater million ($US593/ct) from Karowe with

could be ascribed more value than a tra- recovery of larger diamonds which would guidance for 2016 set at 340-380,000ct

ditional dollar per carat measurement. otherwise be sent to the oversized tail- for production and $US200-220 million

Speaking in Gaborone two weeks ings. for revenue.

before the auction, Lucara chief oper- “We commissioned the large diamond With rumours abound in diamond cir-

ating officer, Paul Day, said there were recovery process in June and it was just cles of an impending round of consoli-

a number of collectors interested in the in time because at the end of the year dation, Day said Lucara’s $US1.2 billion

diamond. we recovered the Lesedi La Rona and market cap and $US144 million cash bal-

“The Cullinan was given to the British Constellation stones, which otherwise ance meant it was “sitting on a good war

monarchy and placed in the Crown; that would’ve been missed,” Day said. chest to prepare for any M&A activity”.

certainly won’t happen this time,” Day Lucara is confident the large diamond The company is also preparing for or-

said at the Botswana Resources Sector discoveries will continue having moved ganic growth with a 10,000m drilling pro-

Conference. mining at Karowe onto the southern lobe. gramme started to test Karowe’s depth.

Lucara’s confidence in a higher “We expect that work to allow a

price for Lesedi La Rona comes resource update in early 2017 with

from recent experience. In May, it mine life extensions to come either

sold the 812.77ct Type IIa Constel- through a third cut back of the pit

lation diamond for $US63 million, or a move to underground opera-

the highest price ever achieved for tions,” Day said.

the sale of a rough diamond. The company has started bulk

“The Constellation sale – sampling of material from the BK02

$US77,649/ct – put a floor on the and AK12 kimberlites near Karowe

price for Lesedi La Rona and there and has picked up additional pros-

is every possibility it could sell for pecting licences around Karowe.

more than $US80 million. “This is not greenfields explora-

Both diamonds were found in No- tion; we have a strategy based on

vember 2015 at Lucara’s Karowe developing the known potential,”

mine in northern Botswana. Karowe Day said.

has proven host to a high volume of Although the second largest diamond ever found, the – Dominic Piper
large diamonds since mining began 1,109ct Lesedi La Rona failed to meet its $US70 million

in 2012 with 115 plus-100ct dia- reserve price at auction in June

PAGE 26 AUGUST 2016 AUSTRALIA’S PAYDIRT

REGISTER NOW

7 - 9 September 2016
Pan Pacific Perth

www.africadownunderconference.com

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

2016 keynote speakers: Dr Kayode Fayemi,
Minister of Solid Minerals,
HE Tolesa Shagi,
Minister for Mines, Petroleum & Nigeria
Natural Gas,
Federal Democratic Republic of Ethiopia

Hon Lebohang Thotanyana, Hon Dan Kazungu,
Minister of Mining, Cabinet Secretary for Mining,

Kingdom of Lesotho Kenya

HE Hassane Baraze Moussa, HE Osheik MohamedTahir,
Minister of Mines & Industrial State Minister of Minerals,
Development, Republic of The Sudan
Republic of Niger
Godfrey Oliphant MP,
HEYing Vah Zafilahy, Deputy Minister of Mineral
Minister of Mines, Resources,
Madagascar Republic of South Africa

HE Adoum Hassane Arsine,
Minister of Petroleum, Mines & Energy,

Republic of Chad

Other presenters to date:

Simon Taylor, Managing Director, Oklo Resources Ltd
Allan Mulligan, Managing Director, Walkabout Resources Ltd

Paul Roberts, Managing Director, Predictive Discovery Ltd
Jeff Quartermaine, Managing Director & CEO, Perseus Mining Ltd
Brandon Munro, Managing Director & CEO, Bannerman Resources Ltd
Johannes Van Heerden, CEO SE Asia Operations, Harmony Gold Mining Ltd

Bertrand Montembault, Partner, Herbert Smith Freehills
Tim Carstens, Managing Director, Base Resources Ltd

Julian Stephens, Managing Director, Sovereign Metals Ltd
John Welborn, Managing Director & CEO, Resolute Mining Ltd

Michael Blakiston, Partner, Gilbert + Tobin Lawyers
Archie Koimtsidis, Managing Director, Cardinal Resources Ltd

Andrew Spinks, Managing Director, Kibaran Resources Ltd
Stephen Wetherall, Managing Director & CEO, Lucapa Diamond Company Ltd

Antonio Carlos Sumbula, Chairman, ENDIAMA
Hugh Morgan & Louisa Lawrance, Director & Consultant, Comet Minerals

Caigen Wang, Managing Director, Tietto Minerals Pty Ltd
Brad Gordon, Chief Executive Officer, Acacia Mining PLC
Tom Eadie, Managing Director, Strandline Resources Ltd
Harry Anagnostaras – Adams, Executive Chairman, Kefi Minerals PLC

Mark Strizek, Managing Director, Vital Metals Ltd

www.africadownunderconference.com

People of ADU 2015:

2016 sponsors to date:

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

AFRICA DOWN UNDER PREVIEW

Botswana prepares for
metals industry rebirth

With its stable democracy, high level of security and low levels of corruption, Botswana is widely
claimed to be the safest investment destination on the African continent. However, the Govern-
ment continues to struggle to bring diversity to an economy reliant on the diamond industry. Pay-
dirt investigates the challenges, and opportunities, facing the development of a wider Botswana
resources and energy sector

PAGE 30 AUGUST 2016 AUSTRALIA’S PAYDIRT

Botswana will continue to industry, the country could
pursue its metals beneficia-
tion strategy despite a severe not call on similar output
lack of base metal investment
in recent years. from its base metals sector.

Speaking to Paydirt on the The global commodity
sidelines of the Botswana Re-
sources Sector Conference in downturn resulted in the clo-
Gaborone, Onkokame Kitso
Mokaila, Minister of Mines, sure of the Boseto, Mowana,
Energy and Water Resources
said it was important for the Thakadu and Phoenix cop-
country to add value to miner-
als where possible. per mines in the country

“We must make sure that while the future of state min-
what we mine can be benefici-
ated here,” Mokaila said. er BCL’s Phikwe operations

The Government, through remain under a cloud.
state miner BCL, last year
completed a PFS on a copper Siwana suggested any
smelting and refining complex
at Phikwe and remains com- beneficiation talk had to take
mitted to guiding its metals
sector down the same benefi- a back seat while produc-
ciation pathway currently being taken by
its diamond industry. tion was subdued but said

“The PFS looks very encouraging and he was confident investment
we are hoping it will energise copper and
nickel in the country,” Mokaila said. “We would return.
already have the smelter at Phikwe but
we are looking at it as a metallurgical “The problem is that not
hub and adding refining to make sure we
make the most of this opportunity.” all mines are producing at

The Government, in association with the moment,” he said. “It is
the Chamber of Mines, has established
a steering committee to investigate the beholden on the junior and
base metals beneficiation process fur-
ther. Botswana Minister of Mines, Energy and Water Resources mid-tier miners to get in-
Onkokame Kitso Mokaila volved in the smaller depos-
“There is scope to add value through its. There is still interest in
beneficiation,” Chamber chief executive
Charles Siwana said during the confer- Bostwana’s base and precious metal re-

ence. “The focus should be on competi- sources and if they get new owners we’ll

tive processing in-country. It will bring see them operate again because there is

more revenue to the country which is still copper in the ground.”

vital because eventually diamond mining Signs are emerging of a revival. ASX-

will close.” listed MOD Resources Ltd is enjoying

In regards beneficiation, Botswana is a strong exploration run on its Kalahari

far from alone. South Africa, Namibia, copper belt project (see page 18) while

Zambia have all formulated downstream Khoemecau Copper Mining Company is

processing policies as governments aiming to bring the Boseto copper opera-

across Southern Africa attempt to cap- tion – originally built by ASX-listed Dis-

ture greater returns from their mineral covery Metals Ltd – back into production

endowment. by the start of 2019.

While Botswana’s nascent diamond Mokaila admitted more work had to be

processing sector has been buttressed done to attract junior and mid-tier explo-

by the world’s largest diamond producing ration investment to Botswana.

Boseto could be back in production by the start of 2019
AUSTRALIA’S PAYDIRT AUGUST 2016 PAGE 31

AFRICA DOWN UNDER PREVIEW

The Government is making amendments to the Mines and Minerals Act in order to re-establish Botswana as the
premier African investment destination

The Government is currently undertak- as Mowana and Boseto and the lack of asked. “The information is already there,

ing amendments to the Mines and Miner- new discoveries. it is about putting it together in a format

als Act focused on re-establishing Bot- Mokaila said the lack of exploration that is accessible.”

swana’s position as the premier African was associated with the downturn in The Government has committed to

investment destination. commodity prices and was confident digitising the Institute’s database, mak-

“We hope the mining sector sees the investment would return as prices re- ing it accessible online and for download.

commitment we have to trying to create bounded. E-consult principal, Keith Jefferies,

an enabling business environment in “Investment goes hand-in-hand with said more effort needed to be placed
Botswana,” he told Paydirt. “We are try- commodity prices and once prices come on making Botswana a competitive pro-

ing to make our policies more transpar- up we will see investment again,” he said. ducer.

ent and toughen up the Mining Act. The amendments to the Mining Act “The country hasn’t been focused on

“Botswana is still a good destination for would be in place in time to benefit new the efficiency of mining projects. It is es-

mining investment. Investors considering projects, he added. sential for Botswana to be a low-cost pro-

Africa look for democracy, peace and “A new discovery now would take four ducer. It won’t have a future [as a mining

stability, security, ease of repatriation of years to develop into a mine and we are jurisdiction] without low-cost production,”

“assets; foreign exchange controls, etc; fortunate that we are planning to have the Jefferies said.MOD managing director Julian Hanna
Botswana has certainty in all of these amendments ready in that timeframe.”

areas.” is a relative newcomer

Mokaila pointed to The country hasn’t been focused on to the country but his
the country’s consist- the efficiency of mining projects. It company’s recent suc-
ent polling as the top cess has him convinced
African jurisdiction in is essential for Botswana to be a low-cost Botswana can establish
the Fraser Institute’s itself as a base metal

Annual Survey of Min- producer. It won’t have a future [as a mining miner.
ing Companies as proof jurisdiction] without low-cost production. “It is definitely achiev-
of its competitiveness.
able for Botswana to

However, he recognis- become a low-cost cop-

es the need for more per producer despite a

effort. Among the new initiatives is an in- few false starts,” Hanna said. “It is still

“It is time to improve on that reputation crease to the budget of the Botswana early days for exploration in the country

and we see work to do on security of ten- Geoscience Institute, an agency which and the Minister and the Government are

ure, certainty and predictability,” he said. has failed to produce any new publica- very supportive.”

Metals exploration investment in Bot- tions for 15 years. – Dominic Piper
swana has fallen dramatically in recent “What option do we have if we want to

years following high profile failures such become a better destination?” Mokaila

PAGE 32 AUGUST 2016 AUSTRALIA’S PAYDIRT



AFRICA DOWN UNDER PREVIEW

Mt Burgess back and firing

After a prolonged period entan- anomalies for zinc-lead and copper-
gled in red tape and the Bot- cobalt. In all, we have 12km of strike,

swana legal system, Nigel Forrester so what can we generate over that

is ready to set Mt Burgess Mining NL distance?” Forrester asked.

back on the development track. Mt Burgess is now planning a re-

Speaking in Gaborone, Forrester turn to drilling with the six new zinc-

– Mt Burgess’ longstanding manag- lead anomalies and one copper-co-

ing director – said he was excited by balt anomaly the initial targets.

the opportunity that lay in front of the “This is a sedex-style system and

company on its Kihabe base metals we know the mineralisation occurs

project. at the contact between the quartz

“The limited amount of diamond wacke and the regional dolostone,

drilling we have done is giving us a providing us with a good pathfinder

60% increase in grade so we hope, for additional resources. We know

in the near future, to lift the 3% zinc- three of the zinc anomalies and the

equivalent grade we already have,” copper-cobalt anomaly exist at that

he said. contact and will be our first targets

Mt Burgess returned to explo- in drilling.”

ration at Kihabe – within 500m of Forrester said success from drill-

the Namibian border in Western ing of these initial targets could

Ngamiland, Botswana – in February, Nigel Forrester rapidly deliver a material upgrade

almost three years after the Minis- to the size of Kihabe, crucial if the

try for Minerals, Energy and Water Re- through the Botswana legal process, company is to bring the project into de-

sources Botswana (MMEWR) stripped claiming that the lack of proposed power velopment.

the company of its prospecting licence infrastructure in the region had ham- “If this first target comes in, we could

for failure to complete a feasibility study. pered its ability to undertake feasibility double the resource base. It’s essential

Mt Burgess had appealed the decision work. we show we can develop those addition-

Its claims were re- al resources. To make a project bank-

jected and the com- able you need to show you can repay the

pany was therefore capex within 25-30% of the mine life. If

surprised when it you can double the resource here, that

was granted a new 25-30% means it is only five or six years

prospecting licence, to payback,” he said.

8 October 2015 PL 043/2016, out of While the Nxuu deposit is made up
Pan Pacific Perth the blue on January exclusively of oxide material, Kihabe is
25 this year. a 50/50 split of oxide and sulphide, re-

With zinc prices quiring two processes. Forrester said the

and the sentiment company was investigating an alterna-

towards junior ex- tive direct leach process currently being

plorers also gradu- developed by Outotec which would allow

ally improving, For- a combined zinc-lead sulphide concen-

rester believes the trate to be sent to a SX-EW circuit where

company could be it would join the oxide ores.

in a good position Forrester emphasised the SX-EW’s

to progress the pro- ability to produce zinc metal on-site, in

ject, with the first line with the Botswana Government’s

task to increase stated aim to beneficiate products in-

the 25.3mt @ 3% country. However, he warned more infra-

zinc equivalent structure was needed if such aims were

combined resource to become a reality.

The CD-Rom of the 2015 at the Kihabe and “If power remains a problem, we would
Nxuu deposits. have to look at potential sulphidation and

Australian Nickel Conference “The 25mt re- not SX-EW,” he said. “No mining project
is available is feasible without an economic power
source covers supply and we want to maximise ben-

2.3km, but since

the last resource eficiation in Botswana so we are looking

CD-Rom for conference delegates – $60 (inc.GST) update we have at temporary options including LNG and
taken 17,000 geo- solar energy.”

CD-Rom for non-conference delegates – $85 (inc.GST) chemical samples, – Dominic Piper
Phone (+61) 8 9321 0355 or email [email protected] generating a num-
ber of potential new

PAGE 34 AUGUST 2016 AUSTRALIA’S PAYDIRT



AFRICA DOWN UNDER PREVIEW

Botswana prepares to become
regional power house

Ashift in focus from physical coal ex- African Energy managing director Frazer Tabeart at the Sese coal project,
ports to power generation could be one of three assets the company has in Botswana
the key to unlocking Botswana’s latent
coal resources. port coal industry would ever be estab- he said. “And, at current international
lished in the country. seaborne coal prices, it is highly unlikely
The landlocked Southern African na- the private sector would take on the infra-
tion lays claim to more than 200bt of “Investment in coal exports is very structure funding required; the long-term
coal and the Botswana Government lumpy, you can’t build half a railway line,”
has spent the last six years investigat-
ing ways to exploit those resources via
export. However, given the country’s lack
of infrastructure and coal’s recent power
price performance, the Government is
now encouraging project owners to look
to power generation as the most feasible
pathway to development.

Speaking at the Botswana Resourc-
es Sector Conference in Gaborone,
Onkokame Kitso Mokaila, Minister of
Mines, Energy and Water Resources,
said the Government was eager to en-
courage investment in greenfields power
projects which could tap into Southern
Africa’s desperate need for more power
generation capacity. In particular, the
Botswana Government is working with
its South African counterpart over the lat-
ter’s desire to source up to 3,500MW of
power from cross-border projects.

“It is part of the strategy of our coal
monetisation plan,” Mokaila told Paydirt.
“We are engaged with the South African
Government but it is not just South Af-
rica which needs power. Namibia, An-
gola, Zambia and Mozambique are all in
need.”

Under the Government’s Coal Road-
map, the intention was to identify and
build infrastructure to service a coal ex-
port industry in Botswana but falling coal
prices and the massive investment re-
quirements of such a venture have forced
both the Government and industry into a
change of direction. However, Mokaila
said discussions with other countries
were still progressing.

“We are going ahead with a feasibil-
ity study on the Trans-Kalahari railway
[through to Namibia] because we need to
be ready for a change in circumstances.
And, we were in Mozambique last month
to refresh with them what we can do. We
are not forgetting the Roadmap,” Mokaila
said.

Managing director of Econsult Botswa-
na Pty Ltd, and former Deputy Governor
of the Bank of Botswana, Keith Jefferies,
told the conference it was doubtful an ex-

PAGE 36 AUGUST 2016 AUSTRALIA’S PAYDIRT

market is uncertain and it is increasingly the Department of Energy to start direct However, he also recognised the chal-

unlikely that finance will be available for negotiations with developers rather than lenges inherent in building large-scale

coal export projects.” relying solely on a tendering process. power projects.

Jonathan Berman, managing director Tabeart said the change gave African “The dollar value return on power pro-

“of South African energy and infrastruc- Energy and its partners a clear opportu- jects is large and a lot lower risk than in
ture investment firm Fieldstone Private nity. mining where you are a price-taker. But,

Capital Group, agreed, of course, the power pro-

saying the export coal in- [At] current international seaborne ject requires much higher
dustry was “dying”. risk upfront. These are

“Botswana should fo- coal prices, it is highly unlikely long life projects that
cus on building coal-gen- the private sector would take on the can cost $700 million to
erated power stations as build.”

part of the domestic and infrastructure funding required; the Having struck a JV with
regional energy mix be- long-term market is uncertain and it is First Quantum Miner-
cause that can be done als Ltd over its 5bt Sese

much faster than building increasingly unlikely that finance will be project near Francistown
an export industry,” he available for coal export projects. and agreeing to sell its
said. 1.2bt Mmamantswe pro-
ject to TMC Consulting
African Energy Re-

sources Ltd – which has for $US20 million, African

more than 14bt of coal resources under “It means projects which are ready Energy plans to enter the South African

its control in Botswana – was expected to can start talking to the procurement IPP procurement programme through its

to be a lead developer in the country’s group which is fantastic news for Bot- 2bt Mmamabula West project just north

export coal business but it has changed swana coal projects. Base-load projects of Gaborone.

tack over the last two years to refocus on mean 300-600MW and because of chal- In March, the company signed a joint

power generation. lenges in other countries Botswana has development agreement with a develop-

“Our strategy is not to be a coal com- to be considered in the box seat.” er to progress the power project.

pany, but to be a power company,” Afri- African Energy’s switch from coal min- African Energy completed a PFS on

can Energy managing director Frazer er to power provider makes sense at a an underground coal mine two years ago

Tabeart said. “The South African power time when export coal markets continue but the project’s environmental impact li-

“programme has identified 3,750MW of to falter in the face of slackening demand. cence is now being amended to include

cross-border power projects but a 600MW power plant with as-
other countries’ ability to partici-
pate is limited. Namibia doesn’t The reality is that the sociated grid connection.
have coal, Zambia has limited re- situation is looking better
sources, Zimbabwe is politically “Although the project is not
challenged and Mozambique is fully completed, there is no rea-
son why we can’t be in serious

for Botswana coal than ever. negotiations with South Africa

infrastructure challenged. There is potentially a whole new by the end of 2016,” Tabeart
“Botswana on the other hand said. “Then, it is a question of

has almost unlimited coal resourc- industry coming for the country. how long it takes to negotiate
es for power. The reality is that the the IPP agreement.”

situation is looking better for Bot- Given the dubious track re-

swana coal than ever. There is po- cord of IPPs in the region, such

tentially a whole new industry coming for “Exporting coal is impossible in the statements could come with a “buyer-be-

the country.” current climate and is challenging at best ware” caution but Tabeart said the South

In April, the South African Government in the longer term but there is a market African Government had become fairly

adjusted the terms for its coal base-load right now if we can generate power and adept at the process.

cross-border independent power pro- we would be crazy not to participate,” Ta- “They have executed more than 100

ducer procurement programme, allowing beart said. renewable IPPs in recent years so they

AUSTRALIA’S PAYDIRT AUGUST 2016 PAGE 37

AFRICA DOWN UNDER PREVIEW

The Morupule B power station will provide an additional 300MW of power to Botswana’s network but it is the opportunity
to export power which has the country’s Government most enthused

have the experience and they continue to “A regional energy market has huge others.

streamline that process,” he said. potential and is isolated from the eco- “If Botswana could win half of the

Tabeart said the goal was to ensure nomic impact of China or the United South African requirements you are talk-

the mine was optimised to provide the States and we should take advantage ing $6 billion of investment into Botswa-

“lowest cost fuel to the power station with of that,” Phumaphi said during the Bot- na. Then there is GDP around that. It willthe mine potentiallyemploy a lot of people

supplying a number through construction

of different power pro- Exporting coal is impossible in the and operation and
jects. current climate and is challenging at there is tax revenue –
corporate, withholding,
“There is that poten-

tial, in which case it is best in the longer term but there is a market PAYE, etc – and local
probably better to fund right now if we can generate power and we content preferential
the mine and power treatment, etc, all add-

station separate,” he would be crazy not to participate. ing to the economy,”
said. “That way you Tabeart said.

have flexibility for any “Then, if you’re in a

business situation.” position where domes-

Locally-listed Shumba Energy is pre- swana Resources Sector Conference. tically you always have available power

paring its own IPP bid incorporating two “If Botswana can get a decent portion of you can look to use it for the expansion of

150MW power stations at its Mabesekwa South Africa’s 3,750MW requirements, it other industries; with smelting the obvi-

coal project, also near Francistown. gives the country a new revenue source ous one. If you can double power capac-

Managing director Mashale Phumaphi to diversify away from diamonds.” ity in Botswana, smelting begins to make
Tabeart agreed, telling Paydirt the IPP a lot of sense. It is about building the in-
agreed the opening up of the South Afri-

can IPP sector offered Botswana’s coal programme offered Botswana not only a dustrial base of the country.”

sector a second chance. new industry but the capacity to develop – Dominic Piper

PAGE 38 AUGUST 2016 AUSTRALIA’S PAYDIRT



AFRICA DOWN UNDER PREVIEW

Minister visit a boon for Colluli

Danakali Ltd is a step closer tax NPV of $US860 million with
to being awarded a mining IRR of 29% and payback within

licence for its Colluli potash pro- 3.5 years of the plus 200-year

ject in Eritrea following a positive mine life, based on the 1.1bt @

site visit by Minster of Energy 10% K2O reserve at Colluli.

and Mines Sebhat Ephrem last Danakali has signed MoUs

month. for 800,000 tpa of its sulphate

Ephrem and a group of sen- of potash (SoP) products and

ior ministry officials, including last month announced it had en-

Mines Department director-gen- tered into a deal for 200,000 tpa

eral Alem Kibreab and Energy of sulphate of potash magnesia

Department director-general (SoP-M) off-take.

Tesfay Zekarias, are under- “One of the best things about

stood to have been pleased with engaging the market for us has

what they saw at the proposed been the ability to provide prod-

mine site and related facilities. uct samples that have been

Colluli is widely recognised as produced from Colluli salts us-

Eritrea’s next major mine and ing the pilot plant that replicates

the Minister has always retained An artist’s impression of the proposed processing facilities the processing plant design, for

a strong interest given state- at Danakali’s Colluli potash project in Eritrea both the potassium sulphate

owned Colluli Mining Share and the potassium magnesium

Company (CMSC) holds a 50% stake in also granted access to the site to evalu- sulphate,” Donaldson said.

the project. ate the social and environmental impact “The quality of our product is at the up-

Danakali managing director Paul Don- and associated management plans for per end of the spectrum and looking at

aldson said initial feedback from the Min- Colluli. This is also a critical step in the the unique aspects of the resource – fine

ister’s site visit was encouraging and he mining licence approvals process. crystal size, ideal combination of salts for

believed there was no reason why his A two-month public review period con- making SoP and a good process design

company’s application for a mining li- cluded in early July, with Danakali report- – all those things come together to give

cence would be rejected. ing no issues were raised by any of the us a superior product in the market and

An independent review of the Colluli impacted communities along the 180km that’s been recognised by the parties

DFS, completed late last year, was due transport corridor between the mine site that we’ve engaged.”

to start at the time of print and, pending and Massawa port. Danakali’s stock has more than dou-

a favourable finding, Danakali will enter “There’s been nothing but support bled since announcing the first of those

into a formal mining agreement with the for the project locally,” Donaldson said. MoUs in April, peaking at 47c/share in

Eritrean Government. “People obviously want to know what the July, and Donaldson attributed that to the

“Eritrea is one of the few countries that direct impact is, but also how it is going “superior” nature of the Colluli resource.

does its own internal due diligence and to affect them personally from an em- However, he feels his company is still

they just want to make sure, particularly ployment and skills development point of undervalued and believed negative sen-

as JV partners, that the study is robust, view. timent towards Eritrea, mostly through

the assumptions are realistic and the “We’re very focused on not just engag- “misconceptions” about the country in

project is technically sound,” Donaldson ing the local communities with the right the Horn of Africa, was the major contrib-
told Paydirt.
skill levels for the project, but also on the uting factor.

“Colluli is a very important project to development of what’s called the local “There’s a lot of accusations that get

the country because it’s the next min- supply chain, which is where we are pro- made from outside Eritrea against Eritrea

ing project in their pipeline and the Min- moting businesses that can support our and there’s a lot of negative propaganda

ister has got a high level of interest in operation and in the long term be stan- that is published, particularly in the cy-

what we’re doing, where we are and, of dalone businesses. berspace, about the country,” Donaldson

course, he wants to reconcile and do “One of the key things everybody is said.

his own due diligence to make sure that aligned on is making sure nobody over- “I don’t like to talk politics, but unfortu-

we’ve got positive social impact. steps the boundaries on what their re- nately you have to with this project be-

“The process in Eritrea is basically sponsibilities are and everything we do cause there’s a lot of misrepresentation

once you get your mining licence you can within the local communities has got to about Eritrea. They’re independent, they

break ground, there’s no further work to have the support of the local govern- want to do things themselves and they

be done. This is your licence to operate, ments because they also play a key role just want to focus on development. But

which is different to other areas [where] in the engagement process.” some of the things we’ve seen published

you get licences early and then have to Last year’s DFS found the project don’t support what we see every day in

go through all the different planning and could support an initial 425,000 tpa op- the country, so there’s still some work to

approvals processes. It’s a very big deal eration for $US298 million, with an ad- be done.”

for us to get this mining licence approval.” ditional $US175 million required to ramp – Michael Washbourne
Prior to Ephrem’s visit, a government- up production to 850,000 tpa after a few

appointed impact review committee was years. The study also established a post-

PAGE 40 AUGUST 2016 AUSTRALIA’S PAYDIRT



AFRICA DOWN UNDER PREVIEW

All eyes on the Cardinal

In what has been
a glum period for
ASX-listed explorers

in West Africa, there

have been few shin-

ing lights but Cardinal

Resources Ltd has

been one bright spark

offering investors

some value.

On the back of sus-

tained drilling suc-

cess at the Namdini

gold project, in Gha-

na’s north, Cardinal

has managed to in-

crease its share price Cardinal has delivered sustained drilling success at Namdini, Ghana

from 6c/share in July

2015 to 33c/share at the time of print. Asanko gold project, said Namdini was You put your goal posts up and you aim

The latest announcement to grab the tracking according to plan. for them and so far the drill has not disap-

market’s attention revealed Cardinal had “As we are finding through the drill and pointed. I have been in this business long

added two new cornerstone investors to as we are exploring, we’re on pace; we enough and you know where you want to

its register. are not proceeding too slow or too fast. be within a certain timeframe and it looks

Swiss group Precious Capital Global We are doing what we can do and at the like we are doing as we said we would

Mining and Metals Fund and Colonial back of our mind being as quick as we do.”
“First State Growth Equities from Australia can so we don’t burn cash through fixed
Koimtsidis was unsure of the size of

were cornerstone supporters of the impending Namdini

a strongly oversubscribed place- Whatever happens, my job is resource however Hart-
ment of up to 75 million shares to keep doing what I am doing leys Ltd has estimated
at 29c/share – a 20% discount to plus-2 moz gold is pos-
Cardinal’s 30-day VWAP. sible leading to Namdini
and making sure that the business is being touted at Asanko
A number of leading interna-

tional institutional investors also running well and is in people’s faces, Mark II.
participated in the placement, Koimtsidis is happy

which now allows Cardinal to I can’t do much more than that. with such comparisons,
continue with drilling at Namdini. but is not yet getting car-

A maiden resource estimate ried away with the interest

at Namdini is expected some- overheads, but not at the risk of overlook- surrounding Cardinal, which has been

time later this year, Cardinal managing ing important things along the way,” he building for a while.
director Archie Koimtsidis told Paydirt in said.
While Cardinal has recently benefitted

mid-July. “Twelve months ago we were hoping from a more positive vibe in the market,

Koimtsidis, previously deputy country we would be at this point [close to an- the company has been far from dormant

manager of Ghana for PMI Gold and nouncing a resource]. We were planning during the downturn in the resources

an integral player behind the 4.5 moz to be at this stage and we are on target. sector.

PAGE 42 AUGUST 2016 AUSTRALIA’S PAYDIRT

Archie Koimtsidis A maiden resource at Namdini is expected by the end of the year

“We have had a lot of one-on-one man] and the recent addition of Julian from explorer to developer at Namdini.
meetings in the last 6-12 months. We’ve Barnes [technical manager] has helped With the other ground around us not be-
been out there, pushing the story and us, but has also shown a new level of ing explored, I’d like to think investors
people have been monitoring us but now seriousness that we are moving away are looking at us and other quality junior
they are getting comfortable with the pro-
ject,” Koimtsidis said.

“The team we have got [which includes
Mark Connelly as non-executive chair-

AUSTRALIA’S PAYDIRT AUGUST 2016 PAGE 43

AFRICA DOWN UNDER PREVIEW

gold explorers favourably to define drill targets.

because gold has moved “We have completed the

a little bit, but let’s give ground IP on the 6km Kun-

credit to the team and the gongo property. Although

project and the way it is all the final results haven’t

moving forward.” come back, the early in-

While other juniors dications are that we have

have struggled to under- a lot of work ahead of us

take any meaningful work over there, so that’s also

in recent times, Cardinal one of the main drivers for

has managed to keep the the capital raising,” Koimt-

drill rigs active and could sidis said.

have a maiden resource While Kungongo is still

at Namdini by the end of Despite a lack of appetite for resources stocks, Cardinal has defied market at an early stage, suc-
the year. conditions and kept the drill rigs churning cessful exploration out-
comes at the project may
Encouragingly for the

company, mineralised gold zones of existing Namdini orebody along strike increase the attention Cardinal is receiv-

190m to 310m in width have been report- and around it looks like there is also ing.

ed at Namdini, with significant intersec- quite a bit of work to do as well, so we Koimtsidis said the interest shown in

tions of 98m @ 1.31 g/t gold, 80m @ 1.06 will definitely be exploring around there Namdini by major gold players could in-

g/t, 79m @ 1.34 g/t, 59m @ 1.42 g/t, 55m and acquiring more ground around us,” tensify once the maiden resource was

@ 1.62 g/t, 49m @ 1.39 g/t, 42m @ 3.37 Koimtsidis said. announced.

g/t, 31m @ 1.57 g/t and 9m @ 4.62 g/t hit. During the June quarter, while there “Whatever happens, my job is to keep

Furthermore, 50m spaced infill dia- were four rigs in full flight at Namdini, doing what I am doing and making sure

mond drilling has confirmed minerali- airborne geophysical surveys were com- that the business is running well and is

sation continues along strike for about pleted over Cardinal’s other interests, in people’s faces, I can’t do much more

650m north from the original mineralised including regional plays Kungongo and than that,” Koimtsidis said.

zone at Namdini. Ndongo Far East. – Mark Andrews
The total strike length at Namdini is As a result of good support from the re-

currently about 900m. cent share placement, Cardinal can push

“There is quite a bit of work to do on the ahead with work at Kungongo as it looks

PAGE 44 AUGUST 2016 AUSTRALIA’S PAYDIRT

Sun shines on Resolute
development plans

Anew underground development at “If you look at any metric, but par-
Syama in Mali and a re-imagined ticularly enterprise value per ounce
Bibiani gold project in Ghana mean and the P/E multiples, we are un-
Resolute Mining Ltd has enough value dervalued and I think we remain at
to unlock in its own portfolio, without a significant discount to peers. But,
the need to seek out corporate activ- the market is not irrational and we
ity, according to chief executive John need to demonstrate to the market
Welborn. that they can consistently produce
at positive margins from our existing
Resolute’s market cap has increased operations. If we are thinking about
500% since the start of 2016, thanks growing we have a lot in the com-
largely to gold’s bull run but Welborn pany already.”
believes the company itself can pro-
vide the next share price push. Given the recent results of a DFS
into the underground expansion of
“Obviously the last few months of Syama, it is easy to see why Wel-
global uncertainty has seen a lift in born is choosing to focus on organic
gold equities which is pleasing but development.
Resolute has also benefitted from in-
creased market confidence that we The study suggested the addition
continue to produce gold at a price that of underground operations at Syama
will reward shareholders,” Welborn would allow the mine to become a
told Paydirt from the US where the 250,000 ozpa gold producer.
company was conducting a road show. John Welborn Estimated to cost $US95 million to

AUSTRALIA’S PAYDIRT AUGUST 2016 PAGE 45

AFRICA DOWN UNDER PREVIEW

Resolute has placed a $US72 million capex on redevelopment of the Bibiani gold mine in Ghana

build, work on the Syama underground ama. It is a long mine life opportunity of the orebody to bring down our AISC.”

decline was set to begin last month. First and we have the advantage of being able The company also has plans to devel-

development ore is expected to be deliv- to build the best mine we can, using a op further low-cost ounces from a series

ered in December 2016, with stoping fol- mining method – sub-level caving meth- of near-surface oxide targets along the

lowing 12 months later. ods – which we are familiar with from our 70km of belt it controls in southern Mali

Welborn said the move to underground Queensland operations.” as it continues its efforts to reduce group

mining at Syama would allow Resolute to The underground DFS mine planning AISC.

recognise the true potential of the pro- takes development down to 600m but the “The underground and near-surface

ject. company remains confident it will add to drilling will give us a better indication of
““I said when I joined the company [in reserves as exploration goes deeper.
the improvements in the grade profile

July 2015] that we had a and we will try to beat AISC

world-class orebody in Sy- I said when I joined the company guidance again this year,”
ama and it was beholden [in July 2015] that we had a Welborn said.
on us to build a world-class world-class orebody in Syama and
mine out of it and the under- The former investment
banker joined Resolute at

ground will allow us to do a time when the entire gold

that,” he said. it was beholden on us to build a industry was preoccupied
“Syama is a unique asset. by cost-cutting but the re-

It is essentially two mines in world-class mine out of it and the cent gold price run has
one site. We have commis- underground will allow us to do that. sparked a change in senti-
sioned a very successful ment.

oxide circuit which is pro- Group AISC for FY2016

ducing 80,000 ozpa and the was $1,210/oz ($US880/

introduction of the underground means “Syama’s depth potential is still open oz), better than original guidance of

we will be able to produce 170,000 ozpa and untested,” Welborn said. “And, some $1,280/oz and lower than even the re-

from the sulphide circuit.” of the resource drilling suggests there is vised guidance of $1,220/oz given in

With estimated life-of-mine AISC of ample potential to raise the grade profile April.

$US881/oz, the Syama underground of the underground mine. Welborn said the company’s strategy

should provide Resolute with the “quality “We have boosted the group explora- for AISC reduction and steady perfor-

ounces” it is seeking. tion budget to $20 million with a signifi- mance would not be sacrificed in light of

“I think it will be a big part of the re- cant amount dedicated to boosting the gold’s recent climb.

valuation; providing clarity around Sy- mine life and increasing our knowledge “If you look at the forecasts at the end

PAGE 46 AUGUST 2016 AUSTRALIA’S PAYDIRT

Resolute has committed to converting its Syama gold mine into an underground operation after producing a positive DFS

of 2015 they were for gold to fall below change to the 30-year old company but been among the most obvious adjust-
$US1,000/oz and we were preparing for the chief executive himself is quick to ments to be made since Welborn took
that by continuing to build a development credit the base from which he is able to charge. A further three direct reporting
strategy around discipline.” work. lines have been added to the senior man-
agement group with exploration, project
Such discipline has led Resolute to “Resolute has an almost unparalleled delivery, corporate strategy and people,
bide its time on development of its third 30 years of experience in Australian and culture and information all given dedicat-
asset, the Bibiani gold project in Ghana. African gold, going back to its forerunner, ed general managers.
Samantha Gold. I have come to appreci-
Picked up as a distressed asset from ate even more the value of that experi- “They’ve all hit the ground running and
Noble Mineral Resources Ltd in 2011, ence,” he said. I have been delighted with how that has
Bibiani had looked, at prices around played out,” he said. “They’ve added to
$US1,000/oz, a margin play but a feasi- “On the flipside, I have been surprised the expert mining skills of Peter Beilby as
bility study in June suggested a 1.2 mtpa by the enthusiasm and willingness of the chief operating officer and the diligence
operation could be built for $US72 million people within the organisation to inno- and objectivity of Greg Fitzgerald as
and produce 100,000 ozpa over an initial vate, change and improve on that base chief financial officer. There is a depth of
five years at AISC of $US858/oz. and although we have been able to im- skills and experience within this business
plement a lot we are still only just started. which must be harnessed.”
Welborn said the work Resolute’s de- Resolute has been a consistent producer
velopment team – led by general man- so nothing radical is required.” – Dominic Piper
ager project delivery Paul Henharen
– meant Bibiani’s future was no longer Senior management changes have
dependent on price.
With separate sulphide and oxide circuits operating, Syama is now capable of
“The feasibility modelled some producing 250,000 ozpa gold
big improvements on last year’s
scoping study. Of the $72 million
capex, nearly $30 million is com-
mitted to an underground mining
fleet. If we thought there was only
five years of life in that mine, we
wouldn’t have included owner-
operator models. We see a 10-
year operation at Bibiani but to get
there we need to convert inferred
resources to reserves and then
find more ounces to get maximum
leverage. We see ourselves as
the right owner to do that and are
working to deliver an increased
profile on both capex guidance
and return.

“We will deliver not by price but
by delivering more ounces into the
study,” he said.

It is clear Welborn’s arrival
at Resolute has brought some

AUSTRALIA’S PAYDIRT AUGUST 2016 PAGE 47

AFRICA DOWN UNDER PREVIEW

Paladin to raise $US200 million

Troubled uranium miner Paladin The transaction, which excludes
Energy Ltd plans to sell 24% Carley Bore, will see MGT acquire
of the Langer Heinrich mine in Na- an initial 30% interest for $US10
mibia for $US175 million to a major million cash and a JV formed. For
player in the nuclear power sector. a further $US20 million, MGT can
increase its stake to 45%, which
The decision was made after is exercisable 12 months following
a strategic review process con- the JVs preparation to conduct a
cluded that a partial sale of Langer field leach trial for uranium extrac-
Heinrich for cash was the best way tion by in-situ recovery method.
forward for the company.
The outcomes of Paladin’s stra-
Upon completion of the non- tegic review process were an-
binding terms sheet under the cur- nounced shortly after it posted its
rent arrangements, Paladin will be results for the June quarter.
left the 51% owner and operator of
Langer Heinrich, plus long-term Highlights of the June quarter
off-take contracts for uranium from included sales of 1.805 mlb at an
the mine will be in place. average selling price of $US34,91/
lb – a $US7.41/lb premium to the
Paladin indicated that closure of average spot price – which contrib-
the deal would likely occur by the uted to a cash flow positive FY2016
end of this calendar year. on an all-in basis.

Meanwhile, a binding terms At the end of the June quarter,
sheet agreement with MGT Re- Paladin reported cash and cash
sources Ltd has been signed by equivalents of $US59.2 million,
Paladin for the former to acquire A partial sale of Langer Heinrich for $US175 million which was within guidance of
75% of the Manyingee project in is on the cards for Paladin $US45-65 million.
Western Australia.

PAGE 48 AUGUST 2016 AUSTRALIA’S PAYDIRT



AFRICA DOWN UNDER PREVIEW

Lucapa finds comfort
in consistency

The wider diamond industry “All the mining campaigns we
may be suffering but Lucapa have done have fed us so much

Diamonds Ltd chief executive Ste- more information than we could

phen Wetherall believes his com- ever hope to get from 50m-

pany has found a new position of spaced drilling. The shape, size

strength. and coarseness of the diamonds

The ASX-listed junior has posted from Mining Block 8 means we

solid results over the last two quar- have narrowed down the host

ters and its June quarterly per- from 300 targets to Block 8 and

formance included $4.12 million Block 6.”

worth of diamond sales, up 13% The Sedirig will be joined by the

on the June 2015 performance. larger Bauer rig once the Lucapa

That figure was achieved follow- exploration team is confident it is

ing two sales in the period which closing in on the source.

saw an average price of $1,546/ct “Drilling is a very quick way to

achieved. Half year diamond sales burn through cash and so we put

were $36.6 million at an average the interim rig in to give us more

price of $7,960/ct, indicating the detail before we introduce the

“premium quality” of the product Bauer rigs which can then just

coming out of Lucapa’s Lulo allu- be in and out. We could excite

vial mining concession in Angola. the market by saying the Bauer

Despite the cash being gener- rigs are drilling lots of holes but

ated from mining, Wetherall knows we want to know a larger body of

Lucapa’s chances of a major re- information before we send them

rating on the ASX will come from in.”

definition of the kimberlite source Once complete at L259, the drill

of the alluvials. The 404ct February Stone diamond was recovered rig will move to the E46 target from
“The kimberlite exploration is from Lucapa’s Lulo mine in February which special stones have already
been recovered in alluvial gravels.
the potentially most value accre-

tive strategy we have,” Wetherall told pects to have first results before the end “We were always getting better grades
Paydirt.
of September. but no specials from E46,” Wetherall

Drilling on the 3,000sq km concession Wetherall issued caution however to said. “We wanted to know more so in the

in Angola’s Lunde Norte province started investors used to the rapid turnaround of wet season we opened up a trial mining

in late June. The company has identi- gold or base metal exploration. area and hit an 88ct diamond as well as

fied more than 300 potential kimberlite “This is a very exciting programme; numerous 50s and 60s. The shapes also

targets on the ground but is focusing the most exciting in the diamond world suggest another hard rock source so the

initial drilling on tightly defined prospects right now but I’m not sure the market second part of the drilling programme

around the alluvial mining areas Block 8 completely understands how difficult will see work there before the end of the

and Block 6. diamond drilling is. It takes a lot longer year.”

“The drilling will initially target the kim- than metals drilling and if we find even The exploration programme should

berlite target underneath Mining Block one macro diamond in the drilling we will also benefit from improved alluvial op-

8,” Wetherall said. “We be exceedingly lucky,” erations with Lucapa hopeful Lulo will

will look to confirm how he said. become self-funding in the near-term.

close to surface it is and “What we are re- The company spent more than $5 mil-

whether we can take a ally looking for is micro lion on plant adjustments and upgrades

bulk sample or have to do diamonds and indicator in the early part of the year, including in-

deeper drilling.” minerals at depth to give stallation of a wet front-end module and

The target, L259, has us a bearing of what we improvements to the scrubber.

been defined by EM, should find in a macro The propensity for Lulo to produce

gravity and geochem as sense. This is not a pro- large diamonds also led Lucapa to intro-

being 108ha in size, larg- gramme with a one or duce an XRT sorter into the flow sheet.

er than the world-class two-week turnaround.” “You always need a bit of luck in find-

Orapa diamond mine in The company does ing the big diamonds and the 404ct dia-

Botswana. have the advantage of mond was our bit of luck,” Wetherall said.

Using a Sedi drill rig, the extensive alluvial “Because of the way the 404ct stone was

Lucapa will drill 70m un- workings to base its ex- shaped, it got stuck in the screens, which

der the surface and ex- Stephen Wetherall ploration around. were only designed for 220ct material.

PAGE 50 AUGUST 2016 AUSTRALIA’S PAYDIRT


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