Leake, Danakali chairman Seamus Cornelius and Donaldson discuss plans
for the Colluli project
Danakali drilled 110 holes in defining The other piece of the funding jigsaw is “Outside of China, there has actually
the 1.2bt Colluli resource likely to come through marketing. been supply contraction in that period,”
Donaldson said. “Some 50% of SOP is
“Getting the mining licence is one of “Signing an off-take agreement will from secondary production but because
the key milestones in front of us and we also be a critical milestone for us,” Don- that process also produces hydrochloric
hope to have it in the next few months,” aldson said. “We are heavily engaged acid, there are more challenges in place.”
Donaldson said. “The licence gives us with potential off-takers already.”
exclusivity over the resources for 20 Weather volatility has also impacted
years and so provides another level of He said the company’s preference SOP brine producers in the US, giving a
certainty for investors.” was to bring in a cornerstone investor at hard rock source like Colluli further ad-
the company level with off-take groups vantages.
While traditional lenders will likely be in among the most likely.
the mix of debt providers, the company is “There is no clear line of sight for new
also looking to development institutions The SOP market has proven remark- supply. Most new development projects
and export credit agencies. Danakali has ably robust during the recent commodity don’t have strong returns or can’t be
built recognition of the latter avenue into downturn as the growing global popu- funded at all. That leaves Colluli as the
its EPC process which was initiated in lation heightens food security issues. most attractive out there.”
September. Dietary preferences in emerging mar-
kets are also changing, a good sign for At a time when investors are looking
“Getting a good procurement process SOP which is ideally suited to high-value for simple projects with easy develop-
in place as part of the front-end engi- crops such as fruit and vegetables, cof- ments in Africa, Danakali may prove to
neering design will allow us to tap into the fee and nuts. have a most fertile mix.
export credit agencies,” Donaldson said.
The supply side of the curve is also – Dominic Piper
under pressure with little new production
coming on-stream in the last five years.
AUSTRALIA’S PAYDIRT DECEMBER 2016 - JANUARY 2017 PAGE 51
INDABA PREVIEW
Mining key to unlocking wider
Eritrean development
Like many countries in Sub-Saharan Af- fleeing the country each month while heightened mobilisation and border se-
rica, Eritrea is looking to the resources the Eritrean Government puts the figure curity remains priority.
sector to kick-start economic develop- closer to 1,000.
ment. “The stalemate is considered as a
The sanctions stem from the coun- major impediment to the Government’s
The challenge remains Eritrea’s posi- try’s border dispute with Ethiopia. Eri- development efforts as a number of pos-
tion on the international stage. The coun- trea gained independence from its larger sible national socio-economic initiatives
try of 6 million people is currently subject neighbour in 1993 following a 30-year and resources remain tied up.”
to a number of sanctions imposed by conflict but according to the World Bank,
the UN Security Council for its role in tensions remain. Eritrean Minister of Finance and di-
the political instability in the Horn of Af- rector of Colluli Mining Share Company
rica. The sanctions are likely to remain in “The Ethiopia-Eritrea Boundary Com- (CMSC), Berhane Habtemariam, told
place while the Government of President mission made a final ‘virtual’ demarca- Paydirt the international sanctions had
Isaias Afworki – a hero of the independ- tion of the boundary at the end of 2007,” made it difficult for the country to fund
ence movement and Eritrea’s only ever the World Bank says in its overview of projects.
president – retains its policy of mandato- Eritrea.
ry, and in some cases, indefinite military “We previously had several projects
conscription. “This has been accepted by Eritrea but funded by the World Bank, the EU and
was rejected by Ethiopia. Tensions be- Middle Eastern countries but when it
Eritreans now comprise the fifth larg- tween the two countries remain high and came to funding [state mining company]
est group of Mediterranean Sea arrivals both have troops positioned alongside ENAMCO’s share of the Bisha gold mine
into Europe, according to the UNHCR, the border. In a situation that has been project, the Government took loans from
with estimates of many as 5,000 people described as ‘no war, no peace’, Eritrea’s the Bank of China because at the time,
Government has remained in a state of 2011, sanctions were placed and interna-
PAGE 52 DECEMBER 2016 - JANUARY 2017 AUSTRALIA’S PAYDIRT
tional banks had to pull out,” Habtemari- these other industries. national government support. Even dur-
am said. “There is an expectation of mining but ing the global downturn the Government
encourage foreign investment.”
Negotiations are ongoing with the UN if we have mining just by itself, the sec-
over the lifting of sanctions and the World tor will not be sustainable,” Kibreab told Eritrea’s 1995 Mining Law is based on
Bank about new programmes. Paydirt. “But, we can use it as a kick off the West Australian Mining Act and Ki-
for other industries and there is a particu- breab said the country’s tenure system
“We are trying to resume the relation- lar push in agriculture and fisheries.” was clear with no overlaps. Royalty rates
ship with the World Bank,’ Habtemariam stand at 5% for precious metals and
said. “There is slow but steady progress.” Eritrea’s mining sector is certainly on 3.5% for other commodities, including
the up. Nevsun Resources Ltd’s Bisha base metals and potash.
However, the country is not devoid of gold-copper-zinc mine is now into its
investment, with the EU currently sup- third expansion and the Zara gold mine On the future of Colluli, for which Dan-
porting a €200 million renewable energy started operations earlier this year. akali was awaiting a mining licence when
project and new developments in food Paydirt visited Eritrea in October, Kibre-
processing, cold storage and an expan- Danakali Ltd’s Colluli potash project ab said the Government was keen to see
sion of the Port of Massawa on the Red would represent further expansion of development start.
Sea. the industry and Kibreab said the Gov-
ernment was keen to encourage further “The Government is ready to move and
Habtemariam said fisheries and agri- foreign investment. the department will try to expedite the
culture had been identified as key sec- project,” he said.
tors for growth but both he and Alem “There is still a lot of unexplored terrain
Kibreab, director general at the Ministry in the country,” he said. “Exploration is – Dominic Piper
of Energy and Mines, emphasised the very cheap in the country because there
role mining could play in helping develop is community, regional, provincial and
AUSTRALIA’S PAYDIRT DECEMBER 2016 - JANUARY 2017 PAGE 53
INDABA PREVIEW
Minbos confident of
cutting capex
Anew trade-off study is likely to show
Minbos Resources Ltd can pursue a
low capex option for development of its
Cacata rock phosphate project in Angola.
Minbos started work on a BFS for Ca-
cata – part of the wider Cabinda phos-
phate project – in April with Ausenco Ltd
charged with delivering the study. Min-
bos managing director Lindsay Reed told
Paydirt the study would weigh up the
relative merits of dry and wet processing
options for the 800,000 tpa project.
“We will have the results by February
and without knowing the exact results, I
think it will lend itself to dry processing,”
Reed said.
Moving towards a dry processing flow
sheet will essentially allow Minbos to pro-
duce a DSO product, leading to a dras-
tic reduction in capex estimates. A 2012
scoping study based on an 800,000 tpa
operation estimated capex at $US157 Lindsay Reed
million for the 15-year project.
“That’s where the major change will some resilience during the global com- “From a mining perspective, this de-
come,” Reed said. “If we can go with the modities rout but there is an increasing posit is long, shallow, flat and high grade;
dry processing option, we will only need supply-side problem in the sector. in other words ideal,” Reed said. “The
a roll sizer, dryer and air classifier in the “There are few deposits with low bulk sampling campaign went down
plant.” capex,” Reed said. “There is a lot of ma- 6-7m and there was no trouble. There will
The scoping study also assumed Min- terial at around 15% P2O5 but grade is be no drill-and-blast, no ripping, it will be
bos and JV partner Petril Projects would still king and there are not many develop- all free dig.”
build a new port for the project but with a ment projects with grades of around 30% Angola’s economy has stalled in recent
LoI signed with the managers of the un- like ours.” years due to the collapse in the oil price
der-construction Porto de Caio Cabinda, The grade and discounted flow sheet but Reed said the Government remained
Minbos has the opportunity to further re- would make Cacata an attractive invest- onside with Cacata’s development.
duce capex. ment for companies trying to fill that sup- “The oil price collapse stretched the
ply gap, Reed said. Government’s ability to complete some
“Reed said contract mining and trans-
of its social infrastructure projects
portation were also being consid-
ered. There are not too many but it appears to be managing the
African countries
The changes will flow throughout economy well and things are sta-
the project, according to Reed. ble. And, it is pretty keen to get this
project up and running.”
“To recover that kind of capital in-
vestment we had to originally bring which inspire that amount of Reed pointed to the Porto de
more low-grade ore into the mining confidence from the majors. Caio Cabinda project – due for
plan but a lower capex means we completion before the end of 2017
can mine the high-grade separate- – as evidence of the effort the An-
ly and don’t have to look at a larger golan Government was putting on
scale of project.” “The project had good IRR previously further industrial development.
Cacata’s amenability to DSO produc- and now capex is coming down it won’t Chevron is also building its own $US15
tion comes from its high P2O5 content be risky at all for financiers,” he said. billion LNG development in the country,
and lack of deleterious material such as The company has already begun pre- further proof that a country once consid-
cadmium. Reed said early test work on liminary discussions with potential cus- ered a basket-case was still attracting
two bulk samples had shown drying and tomers and Reed said there were at least investment.
sizing of Cacata material could produce three parties already looking at samples. “There are not too many African coun-
a 30-32% DSO product. The bulk sample campaign – in which tries which inspire that amount of confi-
“Most people struggle to beneficiate to Minbos took 5t and 10t samples, also dence from the majors,” Reed said.
32-33%,” Reed said. proved the potentially low opex nature of – Dominic Piper
Rock phosphate prices have shown the deposit.
PAGE 54 DECEMBER 2016 - JANUARY 2017 AUSTRALIA’S PAYDIRT
OPINION
Africa’s potash awakening
The dawn of Africa as a major potash Arable land estimates
source and, in the process, taking
destiny into its own hand seems to be- Global arable land per capita
coming reality.
0.25 0.23 Arable hectares per capita -21%
Global potash production was tradi-
tionally highly concentrated among a 0.21 0.2
couple of producers from three countries:
Canada, Belarus and Russia and while 0.20 0.19
high industry concentration ensured dis-
cipline, the tightness in the market before 0.18
and immediately after the global financial
crisis and the split in the trade partner- 0.15
ship between Belaruskali and Uralkali in
late 2013 disrupted the market and led to 0.10
its fragmentation, offering new African
potash projects opportunity for develop- 0.05
ment.
0.00 2010 2020E 2030E 2040E 2050E
Potash occurrences in Africa were
long known but it has taken time to un- Source: OECD
derstand the deposits and significant
efforts from, mainly junior, companies parts of Northern Africa and potash con- the only project in the region that can
to alert the existing producers about the centrated in two regions; Congo-Brazza- be mined completely via open pit. In
untapped potential. ville in West Africa and the Danakil Salt comparison, the Ethiopian projects will
Basin in the Rift Valley shared by Eritrea all have to revert to some sort of under-
Today, continental Africa has still no and Ethiopia. The exploration efforts of ground operations.
potash production to speak of but two multiple companies in both regions have
drivers have helped crystallise interest; increased Africa’s share of global know OCP’s entry has thrown the Ethiopian
the emergence of some African coun- potash reserves to 40%, which com- race wide open. It has clear advantag-
tries as agricultural hotspots amid the pares to hardly any known production. es, having spent significant amounts of
predicted fall in global arable land per money to understand the soil types of the
capita over coming decades and the ge- Both regions have seen considerable country and seeing Ethopia as a manu-
ological potential of the continent. interest in recent years. Elemental Min- facturing hub and end-market. OCP’s in-
erals (now Kore Potash Ltd) in West Af- vestment will include building the plant in
Northern Africa is already a dominant rica was the target of an Asian takeover Dire Dawa, 250km east of Addis Ababa,
and profitable producer of phosphate offer and more recently saw three major and developing infrastructure at Djibouti
rock and fertiliser with OCP Group the investors join its share register to ad- harbour for handling the phosphoric acid,
global leader in this nutrient segment. vance its project. which will be shipped from Morocco. The
plant will produce advanced NPK fertilis-
The Moroccan group is using its mar- In Ethiopia, Yara International, ICL ers, and the required nitrogen and pot-
ket position and standing as a truly Afri- and, from late November, OCP entered ash, will be supplied by Ethiopia.
can producer to market its products on the race to first production on the Ethi-
the continent and get its hands on high opian side of the Danakil Salt Basin. A The plant is expected to start produc-
quality sources of potash and gas (for further contender is Circum Minerals Ltd, tion in mid-2022, after Danakali.
nitrogen). a private company that is looking for a
development partner for its Danakil pot- Africa is currently punching far below
OCP is only the latest of several major ash project. its weight considering the low mining
fertiliser producers to target the Danakil risks associated with the East African
Depression of East Africa as its potash However, it is Eritrea, through the Col- deposits in particular and there is little
platform by announcing a $US3.7 billion luli asset, which hosts the most advanced doubt these world-class potash depos-
deal to build a fertiliser plant in central project in the region (see page 46). CRU its will finds their way into the seaborne
Ethiopia. The Moroccan company is 95% considers the project “probable” (the market.
state-owned and cleverly understands highest level of all projects in Africa) and
the opportunity for dealing with other Af- has only a few hurdles to overcome be- Ingo Hofmaier is partner head of mining
rican nations, arguing for a collaborative fore it can begin construction.
approach in using the continent’s natural at Hannam and Partners merchant bank
resources. Colluli is in the race for the first pro-
ject to go on-stream because it has low in London. Ingo has 17 years’ experience
Africa not only has untapped arable capital requirements and is only 180km
land, it is also a big soft-commodity mar- via an existing road from the Port of in corporate finance, corporate M&A and
ket with 1.3 billion people and will there- Massawa, which is Eritrea’s key import/
fore be both a large exporter and major export facility. general management in Europe, Africa and
consumer in coming decades.
Colluli provides confidence as it is Asia, including with Rio Tinto Ltd where
The second driver facilitating foreign
investment is the regional geological he focused on JVs and multi-jurisdictional
potential, with world-class sedimentary
phosphates deposits strewn over large transactions.
AUSTRALIA’S PAYDIRT DECEMBER 2016 - JANUARY 2017 PAGE 55
INDABA PREVIEW
Steenkamp in harmonious start
Peter Steenkamp has made an ing to average reserve grade and only Peter Steenkamp
encouraging start as chief ex- mining quality grade.
ecutive of Harmony Gold Mining Co eted for exploration in PNG and South
Ltd. Growth projects such as declines at Africa for FY2017.
Phakisa and Tshepong are on track,
Steenkamp took the reins from while accessing of higher grade areas “Our exploration strategy targets sig-
Graham Briggs at the beginning of through Doornkop and Kusasalethu and nificant prospective geological regions
2016, as the company’s restructur- mining the higher grade pillar at Bam- to discover large, long-life gold and cop-
ing and optimisation initiatives were banani are delivering good results. The per orebodies that will allow us to create
in full swing amid a higher rand completion of the Joel decline will deliver value for years to come. We aim to create
gold price. additional higher grade ore this financial a balanced brownfields and greenfields
year. exploration portfolio,” Steenkamp said.
The financial rewards in FY2016
for Harmony included a net profit of The success of such growth projects “Brownfields exploration allows us to
$US64 million, compared with a net will be critical to the company’s ambitions maximise value from existing infrastruc-
loss of $US374 million the previous of bolstering its production profile to 1.5 ture by developing mineral resources
financial year. mozpa and increasing profitability in the that sustain our operations. Greenfields
next three years. exploration, on the other hand, allows us
FY2017 has also started brightly to create new opportunities in highly pro-
with Harmony recording increased In addition to exploring organic growth spective under-explored mineral provinc-
production, strong cash flows and opportunities, Harmony will look to ex- es and emerging gold districts.”
returning a dividend totalling $US16 pand its footprint in South Africa and
million to shareholders in the Sep- Papua New Guinea where it acquired As Harmony looks to expand, it will do
tember quarter. Newcrest Mining Ltd’s 50% share in Hid- so with safety at the forefront of every-
den Valley in 2016. thing it does.
Furthermore, revenue of $US374
million was the highest quarterly “Papua New Guinea is in line with our The company was recognised with a
outcome ever recorded by the com- overall aspiration to increase our annual number of awards at the MineSAFE cer-
pany which managed to generate free production profile to 1.5 moz within three emony in 2016, with Harmony improving
cash flow of $US60 million and reduce years. We believe that Hidden Valley has its overall LTI rate from 9.24 to 6.23 per
debt by 51% to $US38 million. the potential to contribute approximately million hours worked in FY2016.
180,000 ozpa to Harmony’s production
“Harmony is driven by excellence, with profile at an all-in sustaining cost of less “Harmony intensified its focus on safe-
strong management teams and mining than $US950/oz within the next three ty through the appointment of a chief op-
capabilities. With the quality orebod- years,” Steenkamp said. erations officer who will refine the safety
ies that we own, we are positioned for a strategy to institutionalise risk manage-
promising future. Harmony’s share price Developing Hidden Valley in the near ment, promote a culture of continuous
performed exceptionally well over the term won’t mean exploration in PNG be- improvement and a genuine care for
past year, outperforming our peers and ing neglected, with Harmony spending safety whilst providing safety leadership,”
the gold price,” Steenkamp told Paydirt. about $US13 million on exploration at Kili Steenkamp said.
Teke and PFS work at Golpu.
“We are very pleased by the gold – Mark Andrews
price’s performance in both dollar and A total of R292 million has been budg-
rand terms. We remain confident of the
metal’s long-term fundamentals as a
desirable and scarce source store of
wealth.
“Periods of price volatility in our busi-
ness can have a significant impact on our
margin, but can also present short-term
opportunities to secure an attractive mar-
gin. This is reflected by the steps we took
to conclude a currency hedge for about
35% of our annual dollar flows in Feb-
ruary 2016, and then concluding a gold
production hedge just after the end of the
current financial year for about 20% of
two years’ gold production.”
The company had about 424,000oz
hedged at September 30 2016, with
1,680kg gold locked in for the remaining
three quarters of FY2017.
Having exceeded underground gold
grade expectations in FY2016 (5.02 g/t),
Harmony is on track to meet guidance of
5.13 g/t this financial year by adhering to
its model of no mining below cut-off, min-
PAGE 56 DECEMBER 2016 - JANUARY 2017 AUSTRALIA’S PAYDIRT
Momentum keeps building
for busy West African
West African Resources Ltd gold from 209m (including 2m @
expects to release the find-
ings of its highly anticipated DFS 315.3 g/t) 13m @ 0.65 g/t from
on the Tanlouka gold project,
Burkina Faso, in late January. 81m (including 1m @ 1,107.5
The market kept a close eye on g/t), 5m @ 30.28 g/t from 216m
West African through 2016 fol-
lowing a high-grade gold discov- (including 1m @ 104.95 g/t) and
ery at M1 South last February,
shortly after the company’s stock 14m @ 11.82 g/t from 224m (in-
fell to a record low of 4.5c/share.
cluding 1m @ 131.8 g/t).
In August, West African un-
veiled a maiden resource “The grades are outstanding
of 290,000t @ 10.3 g/t gold
for 96,000oz (indicated) and and that gives you a lot of flexibili-
410,000t @ 6.4 g/t for 83,000oz
(inferred) for M1 South, lifting the ty on developing a mine schedule
total project resource to 9.8mt @
2.1 g/t for 670,000oz (indicated) and also designing a plant,” Hyde
and 10.7mt @ 2 g/t for 695,000oz
(inferred). said. “It also gives you scope for
An updated resource for M1 as scale because we’ve got lower-
well as the M3 and M5 deposits
is due in early December. grade, soft material at M5 that we
West African managing direc- can blend through with the very
tor Richard Hyde said the DFS was fo-
cused on a CIL operation rather than the high-grade material from M1.
heap leach scenario his company had
been working on for the past two years. “Our geologists believe the
“Because we’ve done so much work mineralisation should persist at
previously on the heap leach, we were
able to transition directly into feasibility depth and we’ve demonstrated
on our CIL project,” Hyde told Paydirt.
that in our most recent drilling.
“One of the benefits is we’ve got a
lot of oxide material, so 10-12mt of ox- There’s no reason why this min-
ide material we were planning on heap
leaching we’re now going to put straight eralisation wouldn’t be economic
through our CIL project. Obviously it has
better recoveries and it’s more bankable West African recorded a number of spectacular down to 800m or 1,000m vertical,
because banks are much more willing to drilling results at M1 South in 2016 given the grade.”
fund a conventional CIL project. West African will continue drill-
“Right now we’re only focusing on dent his company would receive a min- ing at Tanlouka to confirm mineralisation
open-pittable material, but there’s going
to be potential to optimise and improve ing licence and an environmental permit continues at depth and may soon open
the economics once we’ve got the fea-
sibility study finished and we’ll look at in the coming months. studies on potential underground mining
including underground material as well
because portions of M1 and M5 have It has been a whirlwind year for West options.
definitely got underground potential giv-
en their very high-grade mineralisation.” African and certainly one Hyde did not Hyde also met with new Burkina Faso
At the time of print, West African was think was possible after desperately rat- President Roch Marc Christian Kaboré
finalising the plant design and complet-
ing the last remaining metallurgical test tling the tin for a modest raise of $2.04 earlier this year and praised the coun-
work from M1 and M5.
million last December. try’s new leader for the
Hyde recently met with Burkina Faso’s
new Minister of Energy, Mines and Quar- “It was the most difficult stability he had brought
ries, Alfa Oumar Dissa, and was confi-
capital raising I’ve done since being elected to
since I started the com- power in late 2015.
pany [in 2010],” he said. “He’s got a mandate
“It’s been a very busy to put his policies for-
year. We haven’t taken ward and one of those
our foot off the pedal is to have a vibrant and
once.” strong gold mining sec-
The rigs have hardly tor in Burkina Faso,”
stopped turning at Tan- Hyde said.
louka since the M1 South “All investors in all
discovery and West Afri- companies in Burkina
can raised $12.5 million require stability so we
and a further $21 million can move forward and
on the back of impressive Richard Hyde remain invested in the
drilling results. country. What we’ve
“The old saying goes seen generally this year
‘grade is king’ and when you have high- is resource stability and our view is that it
grade mineralisation, the funds looking to should persist.”
invest in gold companies certainly sit up – Michael Washbourne
and take notice,” Hyde said. “It really is a
point of difference.”
Among the best intersections record-
ed at M1 South were 16m @ 69.11 g/t
AUSTRALIA’S PAYDIRT DECEMBER 2016 - JANUARY 2017 PAGE 57
INDABA PREVIEW
Birimian delivering
on lithium front
So strong are the fundamentals driving
the lithium market, Kevin Joyce was
not at all surprised by how Birimian Ltd
fared in the market during 2016.
The company has been a long-time
tenement holder in Mali and has re-
mained stoic throughout the downturn in
the commodities sector.
“We persisted fairly hard on our gold
assets in Mali in what had been a difficult
time, but we kept our ear to the ground
and our project generation activities kept
ticking along,” Birimian managing direc-
tor Joyce told Paydirt.
“As a result we acquired the lithium
asset at Bougouni which we are pretty
excited about. We are keen to continue Birimian was busy on the ground in Mali in 2016
project generation in West Africa as that
has borne fruit for the company.” agreement with Randgold Resources the project so far,” Joyce said.
While Birimian has made a number of Ltd, the operator of Morila, over a defined Having completed 50 holes for 5,179m
gold discoveries at Massigui, which sur- area of interest at Massigiui which could of drilling at the Main and West zones,
rounds three sides of the 7 moz Morila lead to the commercialisation of pros- a total of 10,000m was set for the next
gold mine, it was the acquisition of the pects close to Morila. phase of drilling.
Boungouni lithium project which really Morila, managed by Societe de Mines “The spirit of the next round of drilling is
captured market attention in 2016. De Morila, a JV comprising Randgold, to extend the resource, but also upgrade
Shortly after announcing the deal in AngloGold Ashanti Ltd and the Republic resource classifications. The next round
March, Birmian stocks tripled to 30c/ of Mali, has a six-month option to acquire of drilling is to upgrade the resource to
share before reaching 50c/share in Sep- an interest within the project where Birim- facilitate these [detailed] studies,” Joyce
tember. At the time of print, the company ian has made three discoveries – Ntiola, said.
was trading at 34c. Viper and Koting (not included in the op- “We are mapping out a pretty aggres-
“Lithium is a popular commodity and it tion) – amenable to open pit mining. sive timetable for advancing the asset.
should be,” Joyce said. Joyce said there was every reason to Green lights all the way, we think by the
“The fundamentals for lithium look very believe a processing solution at Massi- end of 2017 we’d be in a position to have
strong and I guess it is not surprising that gui would be reached, allowing for cash a feasibility study in front of government
we are getting some value in terms of generation, giving Birimian freedom to and have this permitted. It is a high qual-
share price for the lithium asset. We also return to exploration on the property with ity resource with a lot going for it.
have quality gold assets in Mali which vigour. “We know Mali well and have good
we think we can add substantial value In the meantime, Birimian can concen- government relationships and that is part
to over time as well, so I think that is an trate hopes on maintaining the momen- of the reason we think we can move the
added string to our bow.” tum established at the Goulamina lithium feasibility and permitting in an expedi-
In November, Birimian entered an project at Boungouni, southern Mali. tious way; we are comfortable operating
A maiden resource of 15.5mt @ in Mali.”
1.48% lithium, containing 229,000t Mali is the focus for Birimian, with no-
lithium, was the base from which a tification that an extension to its Basawa
scoping study was launched. gold licence would not be granted by the
Joyce hoped to have the scop- Liberian Mines Ministry.
ing study completed by the end Birimian confirmed the decision would
of 2016, and subject to positive not be contested and instead the focus
results, head straight into detailed would be on near-term development ac-
feasibility work. tivities in Mali and project generation in
Providing further encourage- West Africa.
ment for the company was the lat- With $7.8 million cash at the end of the
est round of drilling results, which September quarter, Birimian was well
showed mineralisation to be wide funded to carry out its pipeline of work.
open along strike at Boungouni. – Mark Andrews
Completing two fund raisings in 2016, Birimian “They were probably some of
was cashed up with $7.8 million the best holes we have drilled at
PAGE 58 DECEMBER 2016 - JANUARY 2017 AUSTRALIA’S PAYDIRT
Newcrest and Randgold tie up
in Cote d’Ivoire
Newcrest Mining Ltd added another Michael Nossal Mark Bristow
layer to its turnaround story by enter-
ing a heads of agreement with Randgold sources of 3.6 moz gold at Tongon.
Resources Ltd concerning exploration Speaking at the Denver Gold Forum
ground in south-east Cote d’Ivoire.
in September, Randgold chief executive
Newcrest has managed to reel in AISC Mark Bristow said Côte d’Ivoire was the
from $1,300/oz in 2014 to $762/oz in company’s top exploration priority.
FY2016 across its portfolio of projects in
the Asia-Pacific and Africa. “It is our only A-
grade risk country
With a strong focus on curtailing costs in Africa. And, it
and reducing debt, Newcrest can look has [most of] the
to sustain its performance and grow the Birimian sequence
business it has turned from a $13/share and has never re-
stock at the start of 2016 to $20.82/share ally been explored.
at the time of print. There is not even a
published geologi-
The heads of agreement signed in late cal map of the coun-
November will see the two gold heavy- try,” he said.
weights establish an exploration JV and
potentially develop mines in areas of in- Bristow said the
terest included in the agreement. JV ground had
lacked any serious
A band of senior geologists from New- exploration at depth
crest and Randgold will work together and he backed the
under the direction of a JV board which technical explora-
will oversee the exploration programme tion committee of
and any consequent development pro- both companies to
jects. realise the potential
existing in the area.
Randgold will manage the exploration
programmes and operate any mines that “The bigger the
may be developed on ground which in- footprint, the great-
cludes the extension of some of the more er the opportunity,
prolific Ghanaian gold belts and associ- and both Newcrest
ated structures. and Randgold be-
lieve in Côte d’Ivoire
Newcrest chief development officer and the potential for
Michael Nossal said two of the world’s the discovery of tru-
leading gold explorers and miners looked ly world-class gold
forward to unlocking the mineral poten- deposits,” Bristow
tial of an under-explored area of Côte said.
d’Ivoire together.
“Newcrest is pleased to team up with
Randgold on this exciting project. Rand-
gold have proven their ability to success-
fully explore and operate in Africa over
many years. Combining this with our
own experienced West African explora-
tion team to apply the best thinking from
each group will provide a strong com-
petitive edge in what we consider to be a
prospective part of the country,” Nossal
said.
Newcrest and Randgold are already
the two largest gold miners in Côte
d’Ivoire; the former at the Bonikro mine
(FY2017 targeted production of 120,000-
145,000oz gold), the latter at Tongon
where it produced 242,948oz gold at total
cash costs of $US836/oz in 2015. Rand-
gold has total reserves of 2 moz and re-
AUSTRALIA’S PAYDIRT DECEMBER 2016 - JANUARY 2017 PAGE 59
OPINION
Industry must win back
eroded trust
At the Africa Down Under confer- ASX-listed Evolution Mining Ltd
ence in September, I participat- and Northern Star Resources
ed in the final panel session, titled: Ltd, two mid-tier Australian gold
“Sourcing the sentiment: finding companies, have bought assets
capital for African projects”. I was through this dip in the cycle and
quoted as saying that one of the key seen spectacular success as a
reasons finding capital in the mining result of getting it right.
industry was challenging was the is- Perhaps it is the very success
sue of trust. of these early movers that has
The industry has quite simply lost created challenges for the rest
the trust of its investor pool. PwC’s to follow – sellers, seeing what
2016 Mine: Slower, lower, weaker… has been made from these well-
but not defeated publication re- timed transactions, adjust their
ported that over the past five years expectations up and buyers are
alone almost $200 billion had been Northern Star swooped on gold assets not willing to do anything but
written off the balance sheets of when the commodity cycle dipped the very best deals so that they
the world’s Top 40 mining compa- aren’t seen to be repeating the
nies in an unprecedented destruction of ideal point for buyers to be looking to mistakes of the past.
value. Ill-timed and over-priced acquisi- take advantage of lower asset prices. Trust is ever-elusive, time consuming
“tions and a strategy of volume growth at However, we have seen this play out in and challenging to win, but easy to lose
any cost has taken its toll. The industry a limited number of cases. For example, with just one false move. Therefore, for
literally wrote-off the trust in- those who have this trust and
vestors had placed in it. With If an exploration company are able to move while others
that trust went share prices was struggling to fund a gold rebuild, now is the time to act
– Mine found that in 2015 and take a contrarian view to
alone the share prices of the project near Kalgoorlie in Western the market.
Top 40 mining companies We saw this play out in No-
Australia, funding an equivalent
decreased by 37%. project in West Africa, where security vember with the move by Pal-
Mining companies with adin Energy Ltd founder, John
Borshoff, and Sprott Asset
exploration or development
projects in Africa have faced issues added heightened concerns, Management into Namibian-
the brunt of the fallout of this became near-on impossible for all focused uranium junior Deep
value destruction by their Yellow Ltd at a time when the
industry peers. Countries but the very best assets. uranium price was trading
across the African continent at less than $US19/lb. How
are still perceived to be high- many other investors are will-
er risk jurisdictions for investment and as ing to take such a position?
such the flight of capital was felt more It is undisputed that there have been
keenly than elsewhere. a number of companies who have
If an exploration company was strug- achieved significant success and creat-
gling to fund a gold project near Kalgoor- ed value through the exploration for and
lie in Western Australia, funding an development of mines in Africa. Howev-
equivalent project in West Africa, where er, for every success there have been a
security issues heighten concerns, be- much higher number of failures – as is
came near-on impossible for all but the ever the case.
very best assets. Lost trust, combined The mining sector in Africa needs these
with lower commodity prices, crippled industry champions to continue to stand
the ability for the industry to develop its up and be successful. For it is ultimately
Ben Gargett is Partner at PwC. He is re- the successes achieved by companies
projects.
Such an issue has naturally made sponsible for connecting the PwC mining who create value for the shareholders,
boards and management teams trigger- network to best support our clients and host governments and wider stakeholder
shy in this next phase of the mining cy- working with the Mining Leader to develop groups, that will lead to the rebuilding of
cle. We have experienced several tough PwC’s strategy for the mining sector. Ben lost trust.
years with commodity prices down, capi- has worked with global and small to mid-
Finding, developing and operating
tal hard to source and share prices at cap mining clients across a range of com- mines in a sustainable manner will drive
munity groups, including clients who are success. What better way to rebuild
long-term lows.
These difficult times are arguably the dual listed on the ASX and TSX
trust?
PAGE 60 DECEMBER 2016 - JANUARY 2017 AUSTRALIA’S PAYDIRT
INDABA PREVIEW
Processing tick for Ngualla
Peak Resources Ltd’s Ngual- mine plan.
la rare earths project in Tan- Peak is finalising docu-
zania has taken a huge step mentation for an environ-
towards development following mental permit for Ngualla,
the successful completion of with an application for a min-
the third and final pilot plant. ing licence to follow in early
Testing at ANSTO’s dedi- 2017. Both are critical to the
cated piloting facility at Lucas company’s chances of secur-
Heights, New South Wales, ing project finance.
demonstrated the leach recov- Another key plank in the
ery flowsheet was robust and funding discussions is off-
would deliver recoveries above take. Demand for neodym-
90% for the target magnet met- ium and praseodymium is
als. growing, with recent research
It follows the earlier valida- by Peak’s marketing team,
tion of the beneficiation and headed by Michael Prassas,
separation processes, also indicating that 90% of electric
via piloting. All information will and hybrid vehicles require
now be fed into the BFS, which both magnet metals.
is due for completion in March/ Peak has completed three successful pilot plant trials at ANSTO “If you want to get the en-
April 2017. ergy from your car’s lithium
Peak managing director Darren “One of the beauties about Europe is battery to the road, 90% of the time you’ll
Townsend said the latest milestone there is excess chloralkali production go- be going through a rare earth magnet
marked the end of technical de-risking ing on at the moment and for the fore- motor,” Townsend said.
for Ngualla, about 150km north of Mbeya seeable future, so that keeps the cost of “Prior to the electrification story really
in Tanzania’s south-east. hydrochloric acid – one of the key inputs cranking up over this last year, we were
“We’ve spent $4-5 million so far on pi- into the refining process – at a good seeing 9% compound annual growth for
loting, which is a pretty substantive sum price,” Townsend said. these magnet metals. So the demand
to spend on making sure we completed “With rare earth refineries, you actu- side is really good, but unfortunately rare
all the technical de-risking,” Townsend ally use more process chemicals than earth prices are still at seven-year lows
told Paydirt. you put ore feed or mineral feed into the and 90% of the world’s producers are
“These processes are not the sim- actual project, so it’s absolutely critical to losing money.”
plest and it is absolutely critical you do be close to available, cheap chemicals. As a result, Townsend said, his com-
pilot them – and pilot them properly. We Availability of experienced petro-chemi- pany was not in a rush to lock down off-
were able to get recov- cal workforces is also take at current prices, describing it as “a
eries in excess of 90% important and Europe bit of a cat-and-mouse game as to what
through the leach pro- certainly has those you do and when”.
cess, which is an excel- benefits.” Rare earth prices have failed to recov-
lent set of results.” Townsend said his er from the lofty heights of 2011 and even
Along with high re- company had also took a further hit in May 2015 following
coveries of neodymium benefited from the in- China’s removal of export quotas.
and praseodymium, put of experienced pair However, Townsend is priming his
which make up almost Gavin Beer and Rocky company to be perfectly placed for an
80% of the current rare Smith (ex-managing “inevitable pricing recovery” in the ma-
earths market, Peak director of Molycorp ligned rare earths space.
also achieved low dis- Inc’s Mountain Pass “Ninety percent of the world can’t keep
solution of cerium – a operation) during the losing money, so prices have to recover
loss-making rare earth recent piloting cam- or we will see operations shut down and
– and gangue elements Darren Townsend paign. this year, then you’ll see the pricing behaviour
during the leach recov- Earlier potentially overshoot like it has always
ery process. Peak slashed 10% done,” he said.
BFS work was more than 70% com- and 18% off the capex ($US330 million) “What I can say with absolute certainty
plete at the time of print. Amec Foster and opex ($US97 million per annum) es- is it doesn’t matter whose numbers you
Wheeler plc is the lead engineer for the timates respectively from the 2014 PFS. look at, the future demand for neodym-
study and is busily finalising plans for the Further reductions are expected in the ium and praseodymium is very strong.
acid leach and solvent extraction refin- BFS. And, from our analysis, we see a dou-
ery. Ngualla boasts the world’s largest bling of the demand for those two metals
Peak has flagged a European location undeveloped neodymium-praseodym- over the next 10 years.”
for the refinery due to availability and ium resource (214mt @ 2.15% REO for – Michael Washbourne
ease of access to the required treatment 4.62mt), yet Peak plans to extract just
chemicals. 22% of it, based on the initial 31-year
PAGE 62 DECEMBER 2016 - JANUARY 2017 AUSTRALIA’S PAYDIRT
INDABA PREVIEW
Vital year in gold
Asoul searching strategic review in Gold mineralisation remains open
early 2016 proved the tonic for a at depth and along strike, suggest-
positive year for Vital Metals Ltd. ing Kollo could become a significant
JOGMEC’s inability to find a project.
partner to help develop the shovel- It is perhaps too early for Vital to
ready Watershed tungsten project in appear on the radar of potential suit-
Queensland, meant Vital had to take ors, but the perfect storm of higher
stock of the situation and figure out gold prices and continued exploration
which direction it was heading. success could draw some attention.
Choosing to pursue its gold assets “Cardinal and West African have
in Queensland and Burkina Faso really kicked some goals and I think
proved a good decision for Vital. that is the way is works; juniors get
Hits of 8m @ 13.4 g/t gold, includ- out there and de-risk [projects] and
ing 4m @ 26.4 g/t from 17m from the majors come in and make it a
its latest RC drilling campaign at El- mine,” Strizek said.
ephant Creek in Queensland sent Vi- “I think there is definitely a lot of op-
tal’s share price up 10% and further portunity there and as we have seen
validated its gold strategy. in Africa it has had a tough couple of
“We have been able to raise money years with Ebola and so on and there
from our existing shareholders, but has been a flight of capital coming
also we have been able to bring in out. But, the fundamentals are still
new shareholders which has allowed there and it is a great place for explo-
us to put exploration programmes in ration and making discoveries. Those
place,” Vital managing director Mark majors that have a pedigree and his-
Strizek told Paydirt. Mark Strizek tory of working in the area are com-
“For myself, it has been fantastic fortable working in that region, so I
to see us out there creating value for our through $US1,300/oz, Strizek sensed think definitely it [consolidation] is going
shareholders. Our share price is signifi- the window of opportunity for Austral- to be on.”
cantly above where it was at the start of ian players in West Africa was starting to Kollo sits within the Markoye structural
the year and I see some great opportuni- open. corridor which hosts Cardinal’s Namdini
ties going ahead.” He said the success of both Cardinal and West African’s Tanlouka project.
At the time of print, Vital was trading Resources Ltd in Ghana and West Afri- Vital also has the Bongou gold project
at 2.2c/share and with gold breaking can Resources Ltd in Burkina Faso, was in the same address, which Strizek con-
spurring the likes of Vital on. siders to be prime real estate for gold in
“We are not quite at the West Africa.
same level, but it is still trans- West African has already defined a
formative. Looking at some of resource of 9.8mt @ 2.1 g/t gold for
the other Australian compa- 670,000oz from the M5 deposit at Tan-
nies that are on the ground ex- louka and is working towards the com-
ploring, in terms of the season pletion of a feasibility study and resource
we have got until about June/ update, while Cardinal announced a
July 2017 to show our stuff, maiden resource of 110mt @ 1.2 g/t for
it is all ahead of us,” Strizek 4.1 moz gold at Namdini in early Novem-
said. ber.
“I really feel that it is not a “We are just up the road from where
flash-in-the-pan and it is part Cardinal is, we have done relatively little
of something bigger and the work but plan to do more,” Strizek said.
cycle is starting again. What “We have got the kind of ground that I
is exciting for myself and Vital believe with the right amount of explora-
shareholders is that we are tion we will hopefully deliver a multimil-
not quite first mover [in Burki- lion ounce resource which is our target.”
na Faso], but we are up the – Mark Andrews
front and we have the project
on the ground. We have got
a lot of work to do and some-
thing will definitely come of it.”
Final results from phase one
drilling at Kollo in Burkina Faso
returned intercepts of 3.5m @
9.11 g/t gold from 88m and 2m
Ausdrill has been a good supporter of Vital @ 7.05 g/t from 48m.
PAGE 64 DECEMBER 2016 - JANUARY 2017 AUSTRALIA’S PAYDIRT
INDABA PREVIEW
Flanagan joins MTA’s
battery charge
Metals of Africa Ltd closed out a next 12 months, according to
$9 million placement in Novem- Leeden.
ber, emphasising the growing mo- “We weren’t planning on un-
mentum within the company. dertaking another raising before
The money was raised through the DFS was completed but [new
the issue of 100 million shares at non-executive chairman] David
9c/share to institutional and sophis- Flanagan said to take it when it’s
ticated investors. there. You are always in a more
Metals of Africa managing direc- powerful position when there is
tor Cherie Leeden said the raising money in the bank and now we’ve
highlighted the support the compa- got more than we need and a
ny was gaining for its Mozambican buffer to get the job down,” she
graphite development story. said.
“The high level of demand for “It should also encourage some
the placement was a big tick for on-market buying and it will be in-
the work we’ve done at our graph- teresting to see how much money
ite assets in Mozambique,” Leeden finds its way back in through the
said. “The potential of the battery market.”
minerals industry is enormous and Leeden admitted Flanagan – a
graphite is a key ingredient in all man widely respected in Aus-
lithium-ion batteries, arguably the tralian investment circles for his
most important battery of our time.” founding role with Atlas Iron Ltd –
Speaking to Paydirt prior to the had brought a change of mindset
raising, Leeden said the decision to with his appointment.
go to market had been taken due to “I think it is about developing
the surge in interest the company a new mentality,” she said. “Cer-
had witnessed in recent months. tainly, prior to David’s appoint-
“In the last two years battery min- ment, the company was very con-
erals have been somewhat exempt cerned with diluting shareholders
from the commodities downturn,” Cherie Leeden through capital raisings but he
Leeden said. “When the company asked a simple question: ‘Will a
was zinc-focused, we couldn’t raise Leeden said the funds from the recent further $9 million be able to create more
$500,000 but for the battery minerals placement would carry Metals of Africa than $9 million in value’ and the answer
there is still a perception that they are through the DFS and up to a decision to was definitely ‘yes’.
“half resources, half tech plays and so are mine.
“David thinks like a developer, not like
a little different. an explorer and I think
“This is the first capi- I wanted to be involved in the space that is to our benefit.”
tal raising we have done Flanagan told Paydirt
since listing in 2011 and this is the opportunity which his involvement with
where there was no had the best combination of leadership Metals of Africa had
stress. We have had to come after a period of
scale back the allowanc- – Cherie is a wonderful executive, great assessing the entire bat-
es because it was over- technically and has enormous integrity – tery minerals sector.
subscribed so it is a nice
“I really believe in this
position to be in.” and value in the project. space,” he said. “I’ve
Metals of Africa re- seen enough to know
cently began work on a the momentum in this
DFS for its Balama Cen- space is real, it is grow-
tral and Montepuez graphite projects “We are now fully funded to develop- ing and it is big.
in northern Mozambique. In February, ment and aim for that decision during the “I wanted to be involved in the space
the company released a concept study second half of 2017,” she said. and this is the opportunity which had the
pointing to the potential for Montepuez The placement was the company’s best combination of leadership – Cherie
(indicated-inferred resource of 61.6mt @ second capital raising in 2016 and while is a wonderful executive, great techni-
10.3% TGC for 6.3mt contained graph- there was no imperative to secure further cally and has enormous integrity – and
ite) to host a 100,000 tpa graphite op- cash – the company had $3.8 million in value in the project. It looked like there
eration boasting operating costs of just the bank at the end of the September were things we could do together where I
$US300/t. quarter – it has set the junior up for the could make a contribution and achieve a
PAGE 66 DECEMBER 2016 - JANUARY 2017 AUSTRALIA’S PAYDIRT
Metals of Africa plans to be developing its Mozambican graphite projects before the end of 2017
bit of a rerate as we converted the com- Leeden said the results from the plant good hydropower available in the coun-
pany from explorer to producer. would be available in the second half of try. It has also established a tax-free
2017 but no decision had been made on zone which will have zero tax for the first
“This project has got the capacity to where any spherical graphite plant would 10 years.”
be huge. It is going to be low-cost, low be built.
capex and is going to run for a long time. Such is Metals of Africa’s focus on the
It could be the nucleus of something we “The pilot plant is in the US but the full graphite and battery space, it has divest-
can build a really significant company plant will not necessarily be built there,” ed the base metal assets which were at
around.” Leeden said. “The economics in Mozam- the heart of its 2011 IPO.
bique will be really compelling because
The funds will be put to use both in Mo- the Government is offering big incentives In November, the company announced
zambique – where the company expects for downstream processing and there is Zambezi Resources Ltd had taken an op-
to complete early mining earthworks, tion over the Kroussou zinc-led project in
build a mining camp and undertake
infill and extensional drilling – and the Gabon. Under the terms of the deal,
United States where it is participating Zambezi can earn up to 70% in Krous-
in a spherical graphite facility feasibil- sou by funding an initial $US250,000
ity study. drilling programme. It will then earn
30% by paying $US240,000 in cash
The production of spherical graph- or shares and spending $US1 million
ite is a critical step in the production on the project. It can take its holding
of material for use in the anodes of up to 70% by spending a further $US3
lithium-ion batteries. Metals of Africa million over a two-year period.
is partnering with three TSX-listed
graphite developers as well as a num- To emphasise the renewed graphite
ber of other industry players to build focus, Metals of Africa is proposing to
the spherical graphite plant. change its name to Battery Minerals
Ltd.
The company will provide the mill
with concentrate from Montepuez and “The proposed name… will more
Balama Central graphite which will closely align the company’s corporate
then be processed into battery-ready image and brand with the focus of its
anode material for end users. Material operations and strategy to become
will then be provided to battery manu- a key supplier of high grade natu-
facturers for technical verification and ral flake and spherical graphite,” the
testing of other key supply chain met- company said.
rics such as environmental best-prac-
tice, which is currently being legislated – Dominic Piper
in the US and Europe.
David Flanagan
AUSTRALIA’S PAYDIRT DECEMBER 2016 - JANUARY 2017 PAGE 67
INDABA PREVIEW
Promoting the sustainable
development message
Mining companies need to get better Former mining engineer Robin Bud-
at showcasing their sustainable de-
velopment practices, according to Aus- den, now principal of Social Aspects
tralia-Africa Minerals & Energy Group
(AAMEG) chief executive Trish O’Reilly. Solutions, spoke at an AAMEG sun-
“The juniors and mid-caps are not downer event in November and urged
very good at blowing their own trum-
pet,” O’Reilly told Paydirt. mining companies to use the SDGs to
“These small companies don’t have their advantage.
whole units or departments like Rio Tin-
to [Ltd] and BHP Billiton [Ltd] dedicated “Whether that be with regards to se-
to promoting the message; they’re do-
ing the work but they don’t really tell curing finance, attracting investors or
anyone.”
buyers, keeping regulators and com-
AAMEG is looking to facilitate that
promotion of the mining industry’s munities on-side, attracting talent or
contribution to sustainable development
in Africa on the back of the United Na- retaining a reputation as a progressive,
tions launching its official Sustainable
Development Goals (SDGs) on January innovative and responsible company,”
1, 2016.
Budden said.
The SDGs are a set of 17 individual
Trish O’Reilly “I’ve had the idea for some months
now that there has to be a way, or ways,
goals and 169 specific targets that seek for small and medium-sized explor-
to address a range of development is- ers and operators – the typical AAMEG
sues. member – to contribute to the goals and
Some African countries have been just as importantly be recognised for
quick to act on the SDGs, particularly what you do.”
Liberia and Sierra Leone post the Ebola During a follow-up discussion to Bud-
crisis of West Africa in 2014. den’s presentation, Sipa Resources Ltd
PAGE 68 DECEMBER 2016 - JANUARY 2017 AUSTRALIA’S PAYDIRT
managing director Lynda Burnett with the community leaders.
explained how her company’s man-
tra was to add to the lives of those “If you don’t do that, then you start
impacted while exploring in Ugan-
da. to encounter problems and it’s very
Burnett also recalled her time hard to come back with any sort of
working in the Solomon Islands for
Newmont Mining Corp in the 1980s positive impact,” Dinning said.
and the lasting impression the gold
producer had left on the local com- “You must remember you are
munities.
guest in a local community, even if
“We left this wonderful legacy, so
we were welcomed back with open you’ve got the mineral rights. Adopt
arms some 20 years later and con-
sidered a positive force, not a nega- an operating philosophy which is
tive force as the mining sector is so
often portrayed,” Burnett said. good for the locals, good for the
“That has always been in the back of company and good for everyone
my head.”
involved.”
Burnett added most people failed to
acknowledge that companies such as One suggestion put forward by
Sipa were only junior explorers with am-
bitions of becoming producers, leaving AAMEG members discuss ways to promote AAMEG members was for min-
many to “expect the world” from a small their sustainable development activities ing companies to include SDG ac-
business. tivities in annual reports to shine a
Electrical engineering consultant Jim tor, such as being “rapers and pillagers” light on how they are already employing
Laing, formerly of MMG Ltd and Paladin
Energy Ltd, said demonstrating the min- to local communities. the principles as good business practice.
ing industry’s contribution to sustainable
development would go a long way to “There are a lot of people out there O’Reilly said promoting sustainable
quashing misconceptions about the sec-
who believe mining companies only say development activities was often a diffi-
all these things because of some hidden cult task for African-focused mining com-
agenda,” Laing said. panies.
“Mining is a force for good. It is a genu- “It’s much easier to promote it here in
ine relationship like any other in a com- Australia than it is in Africa, but that’s not
munity. It’s no different to a local busi- to say they’re not trying to do the best
ness supporting a local tee-ball team.” they can,” she said.
Sarama Resources Ltd chief executive “Australian mining companies are do-
Andrew Dinning said mining companies ing some great work in Africa and we
were trusted to set out expectations of need to tell their stories.”
their contribution towards sustainable – Michael Washbourne
development at the very first meeting
AUSTRALIA’S PAYDIRT DECEMBER 2016 - JANUARY 2017 PAGE 69
INDABA PREVIEW
OreCorp/Acacia JV
on track for PFS
Diversified Australian producer Inde- Infill and exploration drilling will continue in conjunction with a PFS at Nyanzaga, Tanzania
pendence Group NL is the type of
company OreCorp Ltd wants to emulate “It is nice to have a bit of diversifica- ozpa coming in the first full five years of
in Africa. tion both in terms of location and also operations.
commodity. It gives you good exposure
OreCorp has a fair way to go be- across the board there.” AISC over life-of-mine is estimated at
fore matching the feats of the $2 billion $US798/oz, with pre-production capital
gold-base metal miner, but the stepping Like many in the gold sector, Yates is costs being $248 million (including con-
stones are in place. confident there is further upside in the tingency).
price which was $US1,303.50/oz at the
The company plans to release a PFS time of print. It is expected capital and operating
on its 3.3 moz @ 3.5 g/t Nyanzaga gold costs at Nyanzaga will be improved,
project in Tanzania in the first quarter of “I think the overall consensus is that however, with Acacia Mining plc as JV
2017. gold has a long way to run...I think it is partner, OreCorp is confident capital re-
just the beginning,” he said. quirements can be fulfilled.
“If everything goes well, we should fin-
ish the DFS at the end of 2017 and then If this is the case, OreCorp’s timing in Last year, OreCorp entered a farm-
certainly if everything continues to go tightening up the scoping study produced in and JV agreement with Acacia over
well and the gold price goes to where on Nyanzaga in August may just be spot Nyanzaga, with one of the conditions be-
we believe it is going to go, then 2018 is on. ing the latter’s right to retain a 75% inter-
when we can start to build the project,” est in the project.
OreCorp chief executive Matthew Yates The scoping study – run by Lycopodi-
told Paydirt. um Minerals Pty Ltd – highlighted the po- Depending on the NPV generated in
tential for 182,000 ozpa gold production the DFS, Acacia can trigger its right by
While its gold strategy starts to take over a 13-year mine life, with 220,000 paying OreCorp a NPV-based multiple of
shape, OreCorp will also continue to pay
some attention to its nickel play in Mau-
ritania.
The Akjoujt South nickel project is cur-
rently way behind Nyanzaga from a de-
velopment viewpoint however Yates is
confident the company will have some
ground-breaking results in the near fu-
ture.
Geological interpretations from a
massive soil sampling, mapping and
ground magnetics survey over the en-
tire 460sq km Akjoujt South project area
had OreCorp primed to complete an EM
survey before Christmas, with drilling to
follow.
“We believe we are not far away from
pay dirt,” Yates said.
“We did very well in the first round of
drilling and identified massive sulphides
[peak nickel and copper values of 1.34%
and 1.29%, respectively]. We are quite
happy to run them [Nyanzaga and Akjou-
jt South] in two streams and I think eve-
rybody will get a nice pleasant surprise
with Anomaly 5 [at Akjoujt South].”
While OreCorp is bullish on the pros-
pects of both projects, Yates said there
was no plan to split the assets into sepa-
rate vehicles at this stage.
“I think you have companies like Inde-
pendence Group that manage to be both
gold and nickel producer. They have a
$2 billion market cap and I think you can
look upon us as being potentially similar
to that in Africa,” Yates said.
PAGE 70 DECEMBER 2016 - JANUARY 2017 AUSTRALIA’S PAYDIRT
expenditure, while OreCorp can take its A DFS on Nyanzaga is expected to be completed by the end of 2017
stake to 51% by making cash and royalty
payments up to a total of $US15 million, some warmth come back into the African more recently and the appetite was defi-
based on milestones achieved, if Acacia mining scene. nitely more bullish. I think you can con-
decides against exercising its right. vert that into the same sentiment in Lon-
“Twelve months ago when we did this don and Europe now as well. The market
The future of the JV could be known deal, I was in London and I think it was has shifted, people have money and I
in the next 12 months, with the DFS on fair to say that London and Europe were think that augurs well for the future.”
track for completion by the end of 2017. well in to a nuclear winter,” he said.
– Mark Andrews
In conjunction with PFS work, Orecorp “People we saw at Beaver Creek and
will conduct further infill, sterilisation and Denver described it as a diabolical situa-
exploration drilling. tion. We attended the same places again
“We also have a big met programme
going on looking at variability of the sam-
ples which should be done to a definitive
standard by the end of the PFS,” Yates
said.
“That will give us an idea of what the
plant is going to look like, what the ab-
solute throughput is, grind size, etc. It is
a pretty detailed programme with around
$750,000 worth of met work going on.”
The company will also have a better
gauge on where the open pit will finish
and how best to access the underground
ore.
With the likes of former Equinox Miner-
als stalwarts Craig Williams and Robert
Rigo on board, Yates is certain the com-
pany has the right technical people in
place to turn Nyanzaga into a mine.
Furthermore, he is starting to feel
AUSTRALIA’S PAYDIRT DECEMBER 2016 - JANUARY 2017 PAGE 71
INDABA PREVIEW
White Rivers to float in 2017
Mark Creasy-backed White Rivers Ex- Neil Warburton as we de-bundle a lot of the assets we
ploration Pty Ltd appears headed for have,” Warburton said.
the London Stock Exchange in the first “We probably won’t get best value if we
half of 2017. went public in Australia, they [investors] Judgement is being reserved on how
seem more risk averse,” he said. long the rebound in coal prices can be
Creasy has been the company’s sole sustained, but if it is anything like the
funder since 2007 and while going public “A lot of the London and European in- upwards trajectory of gold, White Rivers
will see his stake in the South African- vestment houses are invested in South will be well placed to capture any positive
focused vehicle diluted, he will remain a African assets and generally have been sentiment returning to the sector.
significant shareholder. for a long time. They are more at bay
with it, they understand it; they are in the In the meantime, the company will look
What Creasy, along with the six other same time zone and have made quite a to capitalise on good times in the gold
shareholders in White Rivers, will want to lot of money over a long time. So, as long sector and advancing the EJV project,
retain is exposure to the 11.5 moz @ 8.89 as we price it right, I think we will get very which will become 51% Harmony and
g/t gold EJV project with Harmony Gold good take up.” 49% White Rivers upon a decision to
Mining Company Ltd. mine.
The float being prepared will include
White Rivers owns 65% and Harmony White Rivers’ precious metals and ura- Reaching a decision to mine may not
35% of EJV, which has the potential to nium assets, while Warburton indicated be a far off, considering the EJV abuts
produce 6.7 moz gold over more than 30 there was potential to spin the remaining Harmony’s Target mine in South Africa’s
years, according to scoping study esti- base metals and coal projects into an- Witwatersrand Basin.
mates. other vehicle.
Therefore, currently under-utilised in-
At the time of print, a PFS was half While the company boasts potentially frastructure is in place to leverage from,
complete. White Rivers executive chair- the largest gold bore hole database in with Harmony to take charge of mining
man Neil Warburton told Paydirt it could the country, Warburton believes the coal activities at the EJV, freeing up White
be ready for release in April. bore hole database compiled is just as Rivers to assess the wide-ranging data
it has collected.
“That is what we are aiming for and if impressive.
we decide to go public and if we press And now that coal prices Warburton said a lot of the areas White
the button on that we will have the PFS Rivers had access to had been drilled,
result to put in the IPO prospectus and have rebounded remarkably, however, there was not one repository
people can value our company on that,” White Rivers is envisioning a in South Africa containing historical re-
he said. future for its projects. cords.
“We are probably going to raise some- “We have about 250mt of Therefore, White Rivers has spent
where around £25-30 million [up to $50 thermal coal in White Rivers a great deal of time and money track-
million]. The valuation of the business will which won’t be part of the ing down ex-exploration managers of
be dependent on the market at the time, IPO. Coal has turned around the tenements and consultants to have
but we are working through different val- so surprisingly that the coal scoured the ground to piece together
uations. The company is worth a consid- assets are starting to be worth geological data related to the area.
erable amount of money, going public will something again. There could
obviously dilute Mark [Creasy] and other Mark Creasy be another IPO in the future It has a comprehensive database to
shareholders, but not significantly.” work with now and some of the money
raised in the IPO will be budgeted for re-
An investor tour through London in source development.
September confirmed that market and
European investors would be the right “The gold assets are the major value-
fit for White Rivers, which could also be add with the JV with Harmony, but we
housed on the Johannesburg Stock Ex- have another 13 projects of which there
change. are two needing some money thrown at
them to bring them up to JORC compli-
Despite the strong Australian influence ant resources,” Warburton said.
behind White Rivers, Warburton said the
ASX was not ideal for South African as- “We’ll be looking to spend some of that
sets right now. money raised next year to advance some
of those other projects. A lot of the gold
veins or reefs contained in our tenement
also contain uranium. We have uranium
completely off the radar at the moment,
but we have got a number of resources
and we haven’t done any valuations on
the uranium at this point in time.”
– Mark Andrews
PAGE 72 DECEMBER 2016 - JANUARY 2017 AUSTRALIA’S PAYDIRT
West Wits gets down to cash
flow in Soweto
With its selective slot min- one was more coincidence
ing business up and run- between the zama-zamas
ning, West Wits Mining Ltd is being active and the landlord
considering how it can expand who wanted the area cleared
the size and scope of its South for land development.
African operations. “We could get a more prof-
West Wits announced in itable project going at narrow
November that it had begun slots and higher grades but we
receiving cash from the mining want to make sure operations
contractor on its Sol Plaatjies are humming before we start
project – within the Soweto committing to other areas.”
Cluster prospecting right – on West Wits aims to generate
the Witwatersrand Basin, but enough cash to self-fund ex-
chairman Michael Quinert said ploration which would lead to
the company was now con- an increase in its exploration
templating how it could widen ambitions on the West Rand.
its options. “The more we look into the
“We have steadily upgraded project, the more it keeps
the resource to 1.8 moz in the giving us,” Quinert said. “We
last 12 months and we think have always kept the JORC-
plus-2 moz is achievable,” compliant resources above
Quinert told Paydirt. “We will 400m because of the water
have a stronger balance sheet table but there was 12 moz
as a result of the cash flow reported in total by DRD and
from Sol Plaatjies and perhaps we are now looking at a feasi-
some other rehabilitation/slot bility study of what is possible.
mining projects. From there, Remember, Harmony [Gold
we are looking at a full conver- Mining Co. Ltd] is doing some-
sion of the licence to a full min- thing very similar just 9-10km
ing right.” away.
West Wits’ strategy is to One of the stopes which had been subject to illegal mining incursions “We could deliver more
return to remnant resources on West Wits Mining’s Soweto Cluster project in South Africa ounces very quickly. We are
on the West Rand and at- well advanced in increasing
tack them via open pit methods. At Sol illegal miners, locally known as zama- the resource above 400m and we are
Plaatjies, the plan is to remove and zamas. then looking at deeper compartmental-
process a 1,500m section of Kimberley “The community has been good and ised mining below the 400m level.”
Reef outcrop. The local mining contrac- there have been no real issues,” Quin- The company has enjoyed a good per-
tor had extracted 11,000t of ore between ert said. “We are using local employees formance on the ASX this year, with the
late August and mid-October as it ramps where we can and we haven’t had to use share price hitting 4.7c in August (2.9c at
up to 14-15,000 tpm. West Wits is set to any blasting. The illegal miners have the time of print), having last raised mon-
receive $US25/t for the ore mined once moved away from the Main Reef follow- ey at 1.4c/share.
development costs – including pre-strip- ing a concerted effort by authorities to However, Quinert admitted the compa-
ping – are recouped. deal with them. The local authorities are ny needed to ramp up its promotional ef-
Quinert said the company had started now pushing us to open new areas be- forts as it moved into steady production.
receiving payments in early November, cause the zama-zamas have moved off. “We need to do more marketing as a
giving the company the impetus to push The police are very happy.” company,” he said. “We have a lot of pa-
its horizons. Quinert said Sol Plaatjies had been tient investors because we haven’t been
“We are aiming to get $150,000- chosen for such a reason and was far promoting the company due to being to-
250,000 a month,” he said. from the best mining target West Wits tally focused on getting the project going.
The Soweto area is home to a mix of had on the property. “Until you actually have the cash com-
historical mining and expanding urban “If this works, the police will want us to ing in you can’t say it is working. You are
areas which has led to environmental close all these stopes. The Main Reef, better off waiting until you have the infor-
and social problems. West Wits’ reha- Southern Reef and Main Reef Leader mation. Now it is flowing in steadily, we
bilitation-cum-mining strategy has been have a lot of crown pillars which are high have to get out there.”
welcomed by local authorities who see it grade and are where the zama-zamas – Dominic Piper
as an opportunity to solve some of the have been getting in and the police are
local issues; particularly surrounding keen for us to start looking at those. This
AUSTRALIA’S PAYDIRT DECEMBER 2016 - JANUARY 2017 PAGE 73
INDABA PREVIEW
Borshoff’s back
He’s back. So far, the support for Borshoff
John Borshoff has returned
to the mining scene and the set- has come from Exploration Capi-
ting couldn’t be any more familiar
than the one he left. tal Partners 2014 Ltd Partner-
Borshoff was, of course, the ship (ECP), an affiliate of Sprott
founder of Paladin Energy Ltd,
the once favoured uranium stock Group, which has subscribed
on the ASX with operations in Na-
mibia and Malawi. for more than 320,000 shares at
After some time off for “garden- 0.44c/share worth $1.42 million
ing leave”, Borshoff has taken over
as chief executive of Deep Yellow and 15% of Deep Yellow.
Ltd – the uranium hopeful in Na-
mibia. Exactly what Borshoff has
“It was an opportunity to take planned for Deep Yellow will
a sabbatical, it was an appropri-
ate time, mutually agreed situa- be known late December/early
tion with Paladin that we part our
ways,” Borshoff said in regards January, as his first port of call is
the departure from the company
he founded in 1993. conducting a strategic review of
“Over the 6-8 months of gardening the company.
leave I forgot about it all. I thought about
the markets a bit and a lot of people ap- Tumas is the most advanced
proached me to see if I was interested in
project in Deep Yellow’s portfo-
lio, with former chief executive
Greg Cochran on the cusp of
starting a PFS prior to Borshoff’s
arrival.
John Borshoff An updated resource of 16.6mt
@ 366 ppm for 13.4 mlb uranium,
[opportunities] in various forms. I came at a 200 ppm cut-off, was announced in
up with this idea [Deep Yellow] and October.
passed it through a few groups who said The resource update was expected to
if you are involved we will support you.” be followed by a geometallurgical drilling
PAGE 74 DECEMBER 2016 - JANUARY 2017 AUSTRALIA’S PAYDIRT
programme, with designs on Tumas be- exit. I think the capability and the team opportunistic acquisitions and projects
ing Namibia’s next uranium mine. that come with it will be a huge asset amenable to modern mining techniques
and once the uranium price goes up, you are in the offing, according to Borshoff.
Borshoff is familiar with Tumas, having can’t replicate it. That is the strategy, it
initiated Paladin’s strategic holding in the seems to enthuse the shareholding; it While a number of ISR uranium pro-
junior explorer several years ago. actually surprised me how much. It sort jects have come on stream, there has
of vindicates my feeling for what I think I been a lack of conventional mines
Upon Borshoff’s appointment, the sub- can do and it is all there available.” brought to the table and with former
sequent placement to Sprott and an on- Paladin people still in Borshoff’s camp,
market sale of Deep Yellow shares, Pala- While there were opportunities to test he believes the right expertise is on hand
din has reduced its interest to 10.65%. the waters with companies in other com- for Deep Yellow to follow a similar growth
modities, the lure of returning to the ura- trajectory to his former company.
“I know the assets they [Deep Yellow] nium sector was strong for Borshoff.
have got. They are good assets which “I think that should give confidence to
I believe can be developed with maybe Despite the uranium cycle lingering at both the countries I will be working in and
a different focus and sympathy to the a low point, Borshoff told Paydirt he was the supporters I have to take me through
uranium price at the moment,” Borshoff “recharged and enthused about every- this process,” he said.
said. thing”.
“When I went to Langer Heinrich it only
“I believe we can develop a standalone Deep Yellow shareholders will there- had 30 mlb, it ended up with 175 mlb.
operation; a standalone operation of a fore benefit from a reinvigorated Bor- There are opportunities there which I
real sort.” shoff who said the current environment believe are under-explored, under evalu-
reminded him of the early days at Pala- ated and bringing that to the fore will
The uranium sector is bare on bulls at din. bring forward a lot of opportunities for
the moment, with Borshoff one excep- the company.
tion. “There was negative sentiment all over
the place, it was a great time if you paced “The big thing is now that the company
He said it would take a period of 6-24 yourself accordingly and used that to has differentiated itself completely; dif-
months to establish a project pipeline your advantage; that is what I am doing. ferent from the single project company
and global footprint at Deep Yellow. Bor- I am a bull in terms of the outlook for ura- that went to the altar praying every night
shoff was also clear that turning Deep nium – no question of that. I think there for uranium price increases, but I have
Yellow into a uranium producer was the is a consensus on that, it is just that it will to work it for a bit of a marathon, not a
goal. take a little while to settle out and that is sprint.”
the window I am looking at,” he said.
“I am not a promoter, I build mines. – Mark Andrews
What I take on has an outcome to pro- Being an out-of-favour commodity,
duction. It is not something I am dress-
ing the bride looking for some sort of
AUSTRALIA’S PAYDIRT DECEMBER 2016 - JANUARY 2017 PAGE 75
INDABA PREVIEW
Tanzania’s mining companies
won’t build extra
The Tanzanian president’s recent calls Frustrations are building between the Tanzanian administration and big
to build more smelters to process gold mining companies in the country
show a lack of understanding of how the
industry works, the head of the industry’s build a smelter for the concentrate, gauge interest and liquidity in the mar-
trade body said. Mpungwe said. Tanzania’s annual pro- ket,” Mpungwe said.
duction of mixed concentrate – 60,000t –
Frustrations are building between the falls well short of the minimum 150,000t Mining contributes about 4% to Tan-
administration of President John Magu- needed to make a smelter commercially zania’s GDP, but the Government wants
fuli, who has been on an anti-corruption viable, he added. that to rise, according Ali Samaje, an act-
drive since his election last year, and big ing commissioner at the Minerals and
mining companies, which feel they are Mining companies are also required Energy Ministry. Any firm whose share
being unfairly targeted. to list 30% of their shares on Tanzania’s offering was not fully subscribed could
stock exchange by September 2018, a be exempted from the rule by the minis-
Major gold mining companies in Tan- rule originally laid down in 2010 but on ter, he said.
zania include Acacia Mining plc and An- hold until Magufuli approved a regulation
gloGold Ashanti Ltd. to enforce the requirement. Samaje also said the Government was
inviting investors to consider building a
Magufuli said he was tightening min- Executives say there may not be smelter, but would not force mining com-
ing rules to curb what he called “funny enough investors in Tanzania to take up panies to do so.
deals”. He has also urged miners to build the shares offered. At worst, say execu-
smelters to refine ore in Tanzania and tives, uncertainty over such rules could – Katharine Houreld, Reuters
speculated they might be smuggling gold deter potential investment.
sands out of the country from private air-
strips. “The best way is a phased listing to
Tanzania is Africa’s fourth biggest gold
producer and boasts reserves of copper
and other minerals. Like other African
nations, Magufuli’s government has been
on a drive to add value to its exports rath-
er than send raw materials abroad.
But more than 99% of gold mined in
Tanzania is already processed there.
The concentrate that is exported – mixed
silver, copper and gold – is challenging
to separate and needs complex technol-
ogy, Ami Mpungwe, chairman of industry
body Tanzania Chamber of Energy and
Minerals, said on the sidelines of a con-
ference.
“There’s a lack of understanding [in
government] about how the industry
works,” Mpungwe told Reuters.
“It didn’t make economic sense” to
PAGE 76 DECEMBER 2016 - JANUARY 2017 AUSTRALIA’S PAYDIRT
M&A in Africa: Structuring
deals to bridge value gaps
For mining companies in Africa, China Molybdenum Co. Ltd’s
the past two years have pre-
sented an extremely challenging acquisition of Freeport Mc-
set of conditions – and it doesn’t
appear any relief is in sight. MoRan Inc’s 56% stake in the
A lack of accessible equity Tenke Fungurume copper mine
funding, low cash balances and
commodity pricing pressures – in DRC, Chinalco’s acquisition
perhaps with the exception of
gold, certain rare earth elements of Rio Tinto Ltd’s 46.6% stake
and the recent rally in iron ore
– have combined to restrict ex- in the Simandou iron ore project
ploration and have a dampening
effect on M&A activity. And, all in Guinea and Tembo Capital’s
signs indicate we can expect this
to continue. provision of equity finance to
The good news, however, is opportuni- Strandline Resources Ltd for its
ties still exist in the African mining indus-
try for well-credentialed, persistent and mineral sands project in Tanza-
creative investors to generate value by
acquiring stalled, forgotten or uncertain nia.
projects.
The difficult economic condi-
Africa has not been a favourable destination for tions facing the African mining
mining companies in the past few years industry mean there are assets
ripe for the picking which pro-
Our experience in the market has vide significant long-term upside for the
shown that increasingly, the best way to shrewd investor willing to take advan-
do this is with innovative deal structures tage of countercyclical openings.
which often involve minimum up-front Key to getting any deal away in this
cash spend. market will be the ability to bridge value
Examples of this approach include gaps – and this means the onus is on
AUSTRALIA’S PAYDIRT DECEMBER 2016 - JANUARY 2017 PAGE 77
INDABA PREVIEW
prospective buyers and targets to con- Investors and targets are using a va- impacting the company, and increasingly
sider creative ways of structuring consid- riety of different structures, and in some they are being tailored to fit the individual
eration and allocating risk. cases combinations of structures, to situation.
bridge that value gap and get deals
In looking at recent distressed M&A across the line. For miners operating in Africa, the
transaction structures, one of the most challenges they will continue to face in
striking observations is that there is no Deal structures can be directed to- the year head mean the importance of
clear trend, and no one deal structure wards the buyer’s strategic interests, getting good advice in structuring a deal
that is more prevalent or proving more towards the seller’s strategic interests – and getting it right – will be crucial to
popular in this market. and/or designed to address the distress delivering a positive outcome.
Mechanism/ structure Considerations and tip
Acquisition of senior Acquisition of senior debt may strengthen a buyer’s bargaining position and provide defensive benefits in
debt the context of a competing transaction. Such acquisitions often form part of and precede a “loan to own”
transaction. Where possible, the buyer should also obtain or seek underlying security of the acquired
debt
Assumption of Distressed and stressed targets are often burdened by numerous liabilities and obligations that preclude
liabilities a return to solvency and/or profitability. By offering to assume the target’s liabilities (e.g. financial, envi-
ronmental, etc), a buyer may be able to reduce the upfront consideration
Bridging finance – Similar to the acquisition of senior debt, the provision of bridging finance is a means of ensuring short-
equity, debt or hybrid term business continuity while securing valuable strategic rights for the financier. Sometimes the provi-
sion of bridging finance is wholly necessary to facilitate a broader control transaction, particularly where
existing debt covenants may be breached as a consequence of that broader transaction
Clawback mechanism A clawback right is a right conferred on the seller to buy back into the business at some future point in
time. It may be subject to meeting certain conditions and involve the payment of money
Contingent Buyers should consider the risks of contingent events and whether any reduction in upfront costs could
consideration be achieved by offering contingent consideration (i.e. CVRs or milestone payments). Where possible,
the buyer should seek to bring triggers for contingent consideration within its control. Conversely, sell-
ers should link contingent consideration to objectively determinable events outside the control of the
acquirer, such as a commodity trading price or the results of a feasibility study
Recapitalisation/ A recapitalisation or debt restructure, often combined with a debt for equity swap, is a comprehensive
restructure means of ensuring the long-term continuity of a business. To achieve this outcome, buyers, sellers and
targets should identify the commonalities between their interests in agreeing the transaction structure.
While short-term gains may be limited, if done correctly, everyone will stand to benefit in the long term
Royalty and other Royalty, off-take and streaming financing can provide flexible alternatives to conventional debt or equity
alternative financing financing. For example, a royalty has limited EPS-impact and no direct balance sheet impact, and is only
payable when the project is generating revenue. Royalties can also be used to enhance returns to equity
or subordinated debt providers. Issuers may seek a buy-back right to limit the project upside they pass
on and restrict assignment to competitors. Royalty holders should secure their royalty interest over the
project assets, subject to resolving any potential intercreditor issues with other secured financiers
Meredith Campion James Nicholls is a Emerson Walker
is Partner at Allen & senior M&A and cor- is a graduate in Al-
Overy Perth, prac- porate law special- len & Overy’s Cor-
tising in the areas ist. He has particular porate team. He
of corporate, com- experience in com- has experience in
mercial and energy plex cross-border a number of com-
and resources law. and contested M&A mercial transac-
She has advised on transactions and in tions and has been
a wide range of com- successfully assist- actively involved in
mercial transactions, including takeo- ing boards of directors on transactions comprehensive compliance and due
vers, mergers, acquisitions, disposals, subject to significant regulatory over- diligence programs.
capital raisings and joint ventures. sight.
PAGE 78 DECEMBER 2016 - JANUARY 2017 AUSTRALIA’S PAYDIRT
Cardinal reveals 4 moz
resource at Namdini
Cardinal Resources Ltd managing di-
rector Archie Koimtsidis has asked
shareholders and market observers to
consider the full technical report on the
Namdini resource before casting judge-
ment.
A maiden resource of 4 moz from the
Namdini deposit at the Bolgatanga pro-
ject, north-east Ghana, failed to impress
investors who voiced concerns about the
metallurgical results.
Koimtsidis defended the company’s
decision to release preliminary results
from met test work completed on one
hole over the 1km strike at Namdini.
Based on met test work from hole
NMDD005, Cardinal stated there was
good potential to achieve gold recoveries Archie Koimtsidis (centre) with the Ghanaian delegation at Africa Down Under 2016
of 75-76% via a mill-flotation-concentrate
re-grind process. sector, Cardinal has been one of the could deliver from Namdini, with further
Roasting of sulphides (86-87% recov- most active explorers on the ASX in the studies to start in the near future.
ery from concentrates) or BIOX, which past few years and the resource an- “The resource is coming in at ap-
can produce higher recoveries than nouncement from Namdini was highly proximately 4 moz straight off the bat.
roasting or producing high sulphur, gold- anticipated. Significant scope remains to expand
rich concentrate for transport and sale to Therefore, the company was marked the resource with further drilling and the
smelters are other options on the table. hard by the investment community when resource remains open at depth and
Addressing shareholders and inves- it revealed the maiden indicated and in- along strike. We have four rigs operat-
tors at the company’s AGM on the day ferred resource of 110mt @ 1.2 g/t gold ing on site, operating 24/7 with a focus
“the resource was announced, Koimtsi- for 4.1 moz. on increasing drill density, which gives
dis said he was pleasantly us more confidence in
surprised by the size of the orebody and also ex-
the maiden resource. We haven’t seen a resource so tensional drilling to actu-
“We haven’t seen a re- close to surface for quite a few ally see how best we can
grow it from this base
source so close to surface
for quite a few years. This years. This is what I can say the world has line of 4 moz,” Koimtsidis
is what I can say the world been waiting for; a decent size, base line said.
has been waiting for; a
“Preliminary metallur-
decent size, baseline re- resource that now needs to be optimised gical test work has been
source that now needs in many ways, shapes and forms as time completed with further
to be optimised in many test work continuing to
ways, shapes and forms goes by over the next 3-6 months. determine optimal pro-
as time goes by over the cess routes. The Nam-
next 3-6 months,” he said. dini resource and the ini-
“As we have done with tial metallurgical results
the resource, we have also done first- The resource statement was made represent a major milestone for Cardinal.
pass baseline metallurgical test analy- just days before the US election and with The whole idea is extending potential
sis, one single hole through the whole much uncertainty on the outcome, Cardi- which is open at depth and along strike
kilometre of the orebody. If you would nal’s share price copped a whack, plung- with the first 4 moz now behind. Our ag-
like further information, I strongly recom- ing 43% to 35.5c/share on November 7. gressive drilling efforts will continue with
mend you go to our website, pull out the The company’s stock continued to slide exploration around the existing resource
full report in its entirety, read it carefully for most of November, however, once the under way. Furthermore, we have four
and in particular take note of the recom- intricacies of the resource were digested rigs to increase the size and the confi-
mendations for us to be able to optimise there were some signs of appreciation, dence, while Namdini is well located [to
the results, so we can go down the pro- with Cardinal rebounding somewhat to infrastructure] and we have got great
cess route.” 25c/share at the time of print. government and local land holder sup-
Despite depressed gold prices and Nevertheless, Koimtsidis remained up- port.”
generally poor sentiment in the resource beat that there was much more Cardinal – Mark Andrews
AUSTRALIA’S PAYDIRT DECEMBER 2016 - JANUARY 2017 PAGE 79
INDABA PREVIEW
Cote d’Ivoire moving
up the curve
Cote d’Ivoire has some with Castleden confident if
ground to make up on gold stays above $US1,200/
its peers in the West Afri- oz the company’s momen-
can gold space, but it is be- tum will continue and Cote
ginning to do so. d’Ivoire will rise even higher
Mired in civil war be- on the radar of investors.
tween the north and south “Burkina Faso, Ghana
of the country, Cote d’Ivoire and Mali are probably about
was hardly a place attract- four or five years ahead of
ing foreign investment dur- Cote d’Ivoire on the explora-
ing the 1990s and 2000s. tion maturity curve, mainly
Therefore, when the because of the back poli-
commodities boom ar- tics in the country through
rived, Cote d’Ivoire missed a messy patch in the 1990s
out, while neighbouring and early 2000s which
countries like Ghana, Mali made it hard to do any work
and Burkina Faso became there,” Castleden said.
favoured destinations for “Equigold, Newcrest [Min-
investors, particularly gold Exploration in Cote d’Ivoire is five years behind the likes of Ghana, Mali ing Ltd] and Randgold [Re-
bulls. and Burkina Faso, according to Apollo Consolidated’s Nick Castleden sources Ltd] were in there,
but pretty much everyone
However, the rise of ter-
rorist activity in Mali’s north and uncer- coincided with the return of investor else was making stop-start progress.
tainty in taxation policy in Ghana has sentiment which has been led by the re- Conditions have changed since the Gov-
seen the investment pendulum swing evaluation of assets over here. That has ernment changed in 2010 and the Min-
back in West Africa. been the flow-on effect of full valuation ing Act was rewritten. Administration is
According to the official Mining in Af- [of projects] in other parts of the world friendly in country and the situation in
rica Country Investment Guide (MACIG) and eventual flow-on to gold domains in the country has really calmed down, with
2016, issues in Mali and Ghana, com- Africa.” people applying for and receiving per-
bined with the peaceful election of Presi- Apollo has not been missed in the cur- mits.”
dent Alassane Ouattara in Cote d’Ivoire rent upswing for gold players, with the After selling the Seguela gold project
in 2015, has brought investment back to company able to raise money internally in the central west of the country to a
the latter. and the market providing it with a near subsidiary of Newcrest for $US3.5 mil-
In November, the country’s two larg- tenfold re-rating in the past 18 months. lion, Apollo has turned its attention to the
est miners, Randgold Resources Ltd and At the start of 2016, Apollo was trading Boundiali and Korhogo projects.
Newcrest Mining Ltd announced a new at about 5c/share and reached a high of The option fees from the sale to New-
exploration JV (see page 59). Mean- 17.5c/share in the latter part of the year. crest will be reinvested in drilling at
while, on the small cap front, Apollo Con- At the time of print, as the price came Boundiali, west of Randgold’s 4.3 moz
solidated Ltd and Predictive Discovery off a little, Apollo was worth 15c/share, Tongon operations, where Apollo is ex-
Ltd are leading the charge on the cited by the Trench Zone discovery.
ground from an ASX perspective, A phase two RC programme con-
enjoying some early stage success ducted by Geodrill at Trench Zone
and starting to capture the imagina- comprised of 20 holes for 2,322m
tion of investors. to a depth of 160m was completed
“Interest in the company has in October. Results were pending
been really strong [in 2016], after it at the time of print, as Apollo start-
was very hard to get any attention ed an aircore drilling programme
at all during the period 2012-2015,” aimed at untested portions of the
Apollo director Nick Castleden told larger Antoinette soil anomaly
Paydirt shortly after hosting inves- where previous RC drilling has in-
tors and analysts in Cote d’Ivoire. tersected 14m @ 11.24 g/t gold.
“We worked our way through Meanwhile, Apollo is looking to
the permitting process all the way put some more time into the 20km-
through that time, so we couldn’t long Korhogo permit where just one
really do much work on the ground phase of shallow aircore drilling has
anyway, but I am glad we stuck to been completed to date.
our knitting and persevered, As it Gold exploration is on the rise in Cote d’Ivoire – Mark Andrews
turned out, the granting of permits
PAGE 80 DECEMBER 2016 - JANUARY 2017 AUSTRALIA’S PAYDIRT
Predictive’s resource goal
Predictive Discovery is gearing up for a busy start to 2017 in Cote d’Ivoire
Predictive Discovery Ltd could unveil son arrives in July. Predictive and JV partner Toro Gold
a maiden resource estimate for its “I would like to be able to calculate Ltd recently wrapped a 92-hole RC pro-
Boundiali gold project in Cote d’Ivoire by gramme totalling 5,500m of drilling, at
mid-2017. a resource during the rainy season at the Nyangboue prospect on the Boundi-
Boundiali,” Predictive managing director ali permit, with mineralisation success-
At the time of print, the company was Paul Roberts told Paydirt. fully extended beyond 1.2km of strike in
finalising a series of drilling programmes multiple mineralised zones.
which – all going to plan – will allow for a “The reason we’ll do the diamond drill-
resource to be calculated. ing first is because we have questions Best hits from the campaign included
about the orientation of some high-grade 20m @ 10.5 g/t gold from 38m (including
Diamond drilling is likely to kick off the shoots and we need to do some work 1m @ 144.5 g/t), 9m @ 7.9 g/t from 99m
upcoming campaign, followed by some before we get to large-scale RC drilling (including 1m @ 44.7 g/t), 10m @ 3.3 g/t
RC and infill drilling. Geophysics, includ- to make sure we drill the holes in the from 1m (including 1m @ 27.4 g/t), 7m @
ing IP, will also be factored into the pro- right direction. We certainly don’t want to 3.8 g/t from 33m (including 1m @ 11.3
gramme which will run until the wet sea- waste any drilling dollars.”
AUSTRALIA’S PAYDIRT DECEMBER 2016 - JANUARY 2017 PAGE 81
INDABA PREVIEW
g/t) and 4m @ 5.4 g/t from 4m (including cess, while also ensuring it could fund its “We’re also working hard on project
1m @ 15.2 g/t). share of the upcoming exploration. generation and identifying targets, princi-
pally in Cote d’Ivoire, but also elsewhere
“The later results weren’t as good as “To do it at five times the price we did in West Africa,” he said.
the first results we put out, however, our last raising on is a good result,” Rob-
there’s visible gold in the chips all the erts said. Roberts said his company was coming
way through,” Roberts said. “What’s im- off one of the best periods in its nine-year
portant to recognise here is that the lines “I think there were moments where history – Predictive’s stock was up 650%
are 320m apart. You can fit an awful lot of potentially if we had jumped right in very from the start of 2016 at one point – and
orebody on that kind of spacing. quickly we could have raised a bit more, he insisted the greenfields explorer had
but all of these things take time obviously never been better placed to make a ma-
“The fact a lot of the intercepts have and we’re always very focused on mak- jor gold discovery.
high grades in them over narrow inter- ing sure our existing shareholders are
nals and the fact we’re seeing visible looked after. But I’m very satisfied with “We’ve been on an evolutionary path
gold gives us a lot of hope we are able to where we ended up. from being basically a single-project
maintain good grade in a resource when company to a multi-project company and
we come to that. Quite often what hap- “Certainly I don’t think it was as easy as we embarked on that without a lot of sup-
pens with these lower grade systems – of it has been for some Australian-focused port, in terms of share price support and
which there are many in West Africa – is juniors, but the sentiment is way better investor interest,” he said.
you just don’t get those spikes of really than it was at the beginning of the year
high grades.” on West African gold stocks. We’re get- “I would say we’ve got five shots at
ting interest from fund managers over- the title now with the projects we’ve got
Toro holds 51% equity of the six grant- seas now and the Sprott investment is a under the Toro JV, the Bobosso JV and
ed permits and two permit applications great example of that.” what we have in Burkina around Bongou,
which comprise the JV and is close to but I’d like to expand that to more like 10
meeting the expenditure requirements to Predictive is also planning exploration shots at the title, so that’s something we’ll
lift its stake to 65%. Predictive will start programmes for Ferkessedougou North be working on in 2017.”
contributing financially towards future ex- – also part of the Toro JV, and Bobosso.
ploration once that milestone is reached. Soil geochemistry was ongoing at Beri- – Michael Washbourne
aboukro at the time of print.
Predictive raised $3 million via a place-
ment and SPP in September and Octo- Roberts said the search for potential
ber, welcoming renowned asset man- JV partners for his company’s gold pro-
agement firm Sprott Global Resource jects in Burkina Faso, including Bongou,
Investments Ltd to its register in the pro- were “quite advanced” and he hoped a
deal could be finalised in early 2017.
PAGE 82 DECEMBER 2016 - JANUARY 2017 AUSTRALIA’S PAYDIRT
INDABA PREVIEW
Mining: The great contributor
Anew report by the International ings around how countries and compa-
Council on Metals & Mining (ICMM) nies have adapted to an environment
has reaffirmed the importance of mining of lower commodity prices.
to national economies. Davy said there was always a lag be-
The Role of Mining in National Econ- tween where government expectation
omies Report, the third of its kind pro- might be and where the companies
duced by ICMM, highlighted the signifi- were in their ability to satisfy expecta-
cant contribution the mining and metals tions when commodity prices falter.
sector made to low and middle income “What we see is from the peak in
countries, particularly in Africa. 2011 in terms of metals prices, we
Included in the report was a Mining didn’t see an immediate decline in ex-
Contribution Index (MCI), which ranks ploration spend. Exploration spend still
and scores the relative importance of went up in 2012, there was still a little
mining in the economic life of 183 coun- Aidan Davy bit of a lag around and I guess resourc-
tries. es were already committed to explora-
The MCI is updated every two years to attract investment and build sustaina- tion, but then it falls quite significantly to
and the 2016 version included a new in- bly to help alleviate some issues, namely 2015,” Davy said.
dicator – mineral rents as a percentage poverty, it faces. “I think you see that same lag, but over
of GDP. The CIA World Fact Book estimates an even longer period with host govern-
The 2016 MCI ranked the DRC, Mau- about 40% of the country’s 13 million ments and I think the realisation of de-
ritania, Burkina Faso, Madagascar, Bot- people live below the poverty line, with clining metals prices and the impact that
swana as the top five countries most the mining, construction, agriculture and has on companies takes a little while
economically dependent on their metals industrial sectors expected to play key longer to bleed through in terms of the
and mining sectors. roles in economic development in Rwan- expectations of host countries.”
To place such findings in context, Aus- da. Mining companies have grown in stat-
tralia – the second largest mineral pro- ICMM’s latest report has provided ure when it comes to engaging with host
ducing country in the world – ranked 11th great insight into the role of mining in countries and it is fair to say the opportu-
“in the index, while China, Russia and the Rwanda and other developing nations nities mining presents for both stakehold-
US did not feature in the top 25. and now the organisation is focused on ers is better understood today than ever
In 2014, when the last before.
MCI was compiled, min- I think sometimes there is a sense Davy said this was a
eral rents as a percentage that there are question marks huge transformational
of GDP was not factored change and hoped the
in the rankings system, over the extent any of this translates in potential to capitalise on
however, under the new broader based develop-
to broader social benefit. Our sense is
arrangement Rwanda was that the benefit is there, but we are keen ment opportunities, partic-
a surprise-mover in the in- ularly in the middle income
dex; shifting from 77th to countries, was captured.
19th in the MCI courtesy to look a little more systematically in “In the last 15 years, our
of the export value of its quite an objective way to test that. conversation has not just
minerals. been with the bigger play-
Since 2012, special ef- ers in the mining sector,
forts have been made by but many of the medium
Rwanda to increase investment in its understanding how that can translate sized companies in the mining sector
mining sector, with the country’s cassit- into a broader socio-economic contribu- around the role of mining in the develop-
erite resources (tin ore) rising as a major tion of a country. ment of those countries in which you op-
export commodity. “We’re looking to build on this theme erate,” Davy said.
When Hon Evode Imena, Minister of of looking at the role of mining in national “It is very much on the agenda. I think
State for Mining, Republic of Rwanda, economies and we want to take a closer the real sensitivity is the fact that is there
attended Africa Down Under four years look at the economic contribution,” ICMM enough resources developed well and
ago, the country was starting its rise as chief operating officer Aidan Davy told developed responsibly that there is a
one of the fastest growing countries in Paydirt. great opportunity there for them to con-
East Africa, with minerals accounting for “I think sometimes there is a sense that tribute to the development of the host
47.5% of exports. there are question marks over the extent countries. I am really gratified that this is
Falling mining output in recent times any of this translates into broader social very much on the agenda and front and
has been one factor for slowed econom- benefit. Our sense is that the benefit is centre of their thinking.”
ic growth in Rwanda, however, its vision there, but we are keen to look a little – Mark Andrews
for increased exports ($US240 million a more systematically in quite an objective
year) and increased tax revenue ($US30 way to test that.”
million a year) is being targeted by 2020. An interesting part of ICMM’s analysis
Mining is one industry Rwanda hopes into broader social benefit, will be find-
PAGE 84 DECEMBER 2016 - JANUARY 2017 AUSTRALIA’S PAYDIRT
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INDABA PREVIEW
Walkabout consolidates
for market traction
Walkabout Resources Ltd is in the have that realised,” he said.
process of consolidating its shares “This whole raising [$2
in an effort to lift its share price and gain million] is about providing
traction in the market. our shareholders an oppor-
Walkabout managing director Al- tunity to get in at a cheap
lan Mulligan said it was part of a larger value with an option, in
strategy to put the company on a strong preparation for the company
structural basis to facilitate growth. to be revalued and to be re-
Walkabout was worth about 0.4c/share established.”
at the time of print, but upon consolida- As for the shortfall of
tion of its share structure the company 227 million shares, Mul-
expected to be trading at 0.138c/share. ligan hoped these would
Through the security consolidation, be placed before the com-
Walkabout aims to reduce the number pany’s AGM, which was
of shares on issue – 1.37 billion shares scheduled for the end of No-
before the reorganisation – to 96.6 mil- vember.
lion shares. “We will also be buying
The company’s share consolidation of- back all the unmarketable
fer came with one free option exercisable parcels, which are invest-
at 0.6c/share. ments below $500,” he said.
Mulligan said shareholders have re- “Through doing that you
sponded well to the company’s strategy consolidate your register
and he was pleased with the result. and you reduce the number
“We can see we have a large base of of shareholders you have, to
loyal shareholders who can see the val- a more manageable num-
ue in the company and can see the value ber.”
in the project, and want to stick with us to When asked if Walkabout
was trying to cull the
crowd of “day traders” it Allan Mulligan
had attracted, Mulligan believe within the next few weeks that will
all be coming up,” Mulligan said.
said: “If they have faith in the compa-
“Following that we also have to submit
ny and its story then they will see the the relocation assistance plan, which we
are busy with.
advantage of hanging in there and
“Currently we are engaging with the lo-
see large capital growth out of it.” cal population, and stakeholders on site.
Then the mining license application goes
Walkabout is aiming to retain in- in.”
vestors who are serious about the Mulligan described the Lindi Jumbo
project as “robust” enough to make Walk-
future of the company and its excit- about stand out in the crowded graphite
space in East Africa.
ing Lindi Jumbo graphite project in
“It has been bullet-proofed by the three
Tanzania. areas of risk management we have tak-
en. First is to find a high-grade resource
While some warn of the risks of and therefore be able to mine a high
grade deposit,” he said.
consolidation, Mulligan said Walka-
“The second is to produce a premium
bout’s strategy was to “consolidate product, one of the best in the industry,
which will therefore command a premium
into momentum”. price. The third is to fast track the opera-
tion so that you get ahead of the market
“We believe we have solid project and mitigate downside risk.”
momentum now. We are moving for- – Jonathon Daly
ward with project development,” he
said.
“We are expecting our updated
resource with additional inferred,
indicated and measured resources
which will allow us to then move to
the next stage of development.”
Walkabout is currently in the pro-
cess of completing a DFS on the
Lindi Jumbo project.
A DFS on the Lindi Jumbo project, Tanzania, is “The environmental impact as-
being completed by Walkabout sessment must all be approved. We
PAGE 86 DECEMBER 2016 - JANUARY 2017 AUSTRALIA’S PAYDIRT
Kibaran’s downstream delight
Downstream processing could is opening up more opportunities for
soon become a reality for graphite,” Spinks said.
Kibaran Resources Ltd at its “Graphite is the main industrial
Epanko graphite project in Tanza- mineral for anything that requires
nia. conductivity, so anything to do with
Natural flake graphite from eMobility and all of these low emis-
Epanko was recently used to pro- sion requirements we keep hearing
duce battery-grade graphite under is only going to see us relying more
commercial production conditions. on the use of graphite.
Tests showed the final product’s “We’ve just seen the German
analytical specifications exceeded Government become the fourth
those required by leading anode government to subsidise electric
manufacturers and all existing Chi- vehicles. They’ve allocated €1.2 bil-
nese producers. lion for rebates and some R&D and
Samples of the battery-grade they’ve also provided a resolution to
graphite product have been distrib- the European Union to ban the sale
uted to major anode manufactur- of internal combustion engines in
ers in East Asia via Kibaran’s new the EU by 2030, with only zero emis-
trading partner Sojitz Corp. Fur- sions vehicles on the road after that
ther samples will be sent to other time I don’t think many people have
key markets in the electric vehicle recognised that initiative.”
space, including the US and Ger- Spinks also senses an opportunity
many. for his company to play a role in the
Kibaran managing director An- solar energy space, both in Australia
drew Spinks could hardly contain Kibaran hopes to expand proposed graphite production and Africa.
his excitement at the opportunity from Epanko to 60,000 tpa “Solar energy has enormous im-
presented to his company. plications for not only Australia, but
“We haven’t said a lot about it [battery- than 100% of the initial production from Africa and I think there’s a great relation-
grade graphite] in the past because we Epanko in the form of binding agree- ship that can be generated because both
very much founded the company on ments with Japan’s Sojitz (14,000 tpa), continents are drenched in sun,” he said.
commencing production for the tradition- German industrial giants ThyssenKrupp “I think it could be one of the greatest
al markets, however, there’s a lot of value (20,000 tpa) and an unnamed European changes in Africa from a power perspec-
that can be added to the project and the graphite trader (10,000 tpa). tive, but also here in Australia where
company if we look at downstream pro- “Battery-grade graphite, expandable we’ve got a lot of undeveloped mineral
cessing,” Spinks told Paydirt. graphite for thermally efficient building deposits because of infrastructure is-
“What the results demonstrate is that products and the micronised product sues. Both countries have a lot of re-
our quality of graphite is now at battery- which can go into friction sources that are strand-
grade specifications better than Chinese products are all growth ed, so having access to
supply. That’s important because China markets for graphite,” remote power through
supplies all of the world’s battery-grade Spinks said. solar panels has enor-
graphite from natural flake graphite. “We have three of the mous potential as well.”
“By trying to get a slice of this new largest traders in two of Kibaran recently wel-
growth market, we’ve been able to dem- the largest markets out- comed a number of in-
onstrate we’ve got better quality battery- side of China and that stitutional investors to
grade graphite and that will make our gives us a really strong its register, including
product more appealing to the anode case to consider that Colonial First State As-
manufacturers and battery makers.” we’re going to get a large set Management and
Production of battery-grade graph- portion of the growth. Westoz Funds Manage-
ite from Epanko is part of an expansion “We’re not going to ment Pty Ltd, following
study the Perth-based company is un- get an exclusive portion Andrew Spinks an oversubscribed $10.9
dertaking to lift the planned production of that growth – I don’t million placement.
from 40,000 tpa to 60,000 tpa. think anybody can – but it’s about getting Germany’s KfW IPEX Bank has com-
A scoping study on battery-grade a percentage of the growth, given that pleted its technical project due diligence
production at Epanko indicated a NPV China has such a strong history of pro- and is all but committed to providing up
of $US115 million from $US30 million duction into these markets.” to $US40 million of debt funding. Negoti-
capex. It follows on from a BFS for the Current demand for battery-grade ations with Nedbank for a further $US30
mine and flotation project which esti- graphite stands at 48,000 tpa, but is fore- million remain ongoing.
mated a $US77.5 million capex for a cast to increase more than threefold over – Michael Washbourne
NPV of $US197.4 million and EBITDA of the next decade.
$US33.6 million. “Awareness of the lithium ion battery
Kibaran has already locked away more market is continuing and that awareness
AUSTRALIA’S PAYDIRT DECEMBER 2016 - JANUARY 2017 PAGE 87
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Bannerman raises optimism
It might pale in comparison to some of Bannerman has completed the technical de-risking of its heap leach processing
the cash collected for other commodities at the Etango uranium project in Namibia
in recent times, but Bannerman Resourc-
es Ltd’s $4 million capital raising has pro- modity, is up and down – and you might impact on the agglomeration, metallurgi-
vided a welcome boost for the uranium think that’s a bit of a trite statement to cal extraction and acid consumption.
sector. make because eventually it will go up –
we’re trying to deliver a depth of analy- “We pushed the envelope on the
Bannerman initially went to the market sis that shows the uranium market itself coarseness of the crush and didn’t reach
in late October looking to raise $3 million is behaving in a way where the recovery a point where the recovery was tailing
via a placement to institutional and so- will respond abruptly to a number of cata- off, so we’ve gone significantly coarser
phisticated investors and was pleasantly lysts. than the DFS specifications and are still
surprised when it came back heavily achieving consistent 93% recovery [com-
oversubscribed. “We’ve had a very good response to pared to 87% in the DFS],” Munro said.
that, particularly amongst, for example,
“I think what this says about the sec- institutions who were taken by surprise “Acid consumption is about 25% less
tor is we are seeing interest return to with metallurgical coal, found themselves than what the DFS assumes and we’re
uranium,” Bannerman managing director underweight in gold and then realised working on reductions in reagents and
Brandon Munro told Paydirt. they can’t afford to sit on the sidelines potential changes to the crushing cir-
after seeing thermal coal’s performance cuit. The other thing to bear in mind is
“If I compare the investor meetings I over the last couple of months. when the company optimised the DFS in
was doing for this capital raising versus 2015, we were very cash-constrained at
only a couple of months ago, there’s “These institutions and investors re- that point and we weren’t in a position to
clearly an awareness amongst the ana- alise they can’t afford to not be looking make any changes to the flowsheet. This
lysts and advisors that uranium could carefully at a commodity like uranium is something we can now revisit, particu-
well be one of the next cabs off the rank where the dynamics point to similar larly in light of technology changes such
in terms of commodities to fire. strength recoveries to what we’re seeing as the membrane technology which is
in those commodities.” now playing a big role in other uranium
“What’s interesting is, in the course of operations around the world.”
that period of time, we’ve had the urani- At Etango, where the company com-
um price slip further and what was initial- pleted the technical de-risking of its heap At the time of print, Bannerman was
ly a case of concern is now being more leach processing in June, Bannerman is completing additional test work, in con-
and more recognised as a deepening currently undertaking optimisation work junction with engineering firm Amec Fos-
of the opportunity, particularly for those in a bid to lower the project’s capital and ter Wheeler plc, to assess the use of a
uranium companies that aren’t exposed operating costs. conventional tertiary crushing circuit in-
to production at the moment. stead of the high-pressure grinding rolls
An optimised DFS was completed in put forward in the DFS.
“The well-informed investors now un- November 2015 and found the project
derstand that a lower spot price is bring- – in the same district as the Rossing, “What we’ve also done is go back to
ing forward one of the key catalysts for Langer Heinrich and Husab uranium the metallurgical core and crushed from
a uranium price recovery, which is the mines – could support production of 7.2 a broad spectrum of metallurgical holes
economic disruption of mines as they roll mlbpa over an initial 15.7 years of open- across the orebody,” Munro said.
out of term contracts and become more pit mine life for an opex of $US38/lb.
and more exposed to a decade-low spot “Whilst we have been very confident
price.” Pre-production capex is estimated at about the homogenous nature of the
$US793 million. Other key financials from orebody, and we proved that some time
Bannerman elected to take the extra the study included a NPV of $US419 mil- ago in our early metallurgical testing, we
$1 million to ensure it would remain fund- lion, IRR of 15% and peak annual cash wanted to remove any potential questions
ed to complete the next round of engi- flow of $US392 million. around the success of the demonstration
neering study work at its Etango uranium programme somehow being related to a
project in Namibia. Recently completed engineering work localised trial mining area.”
at Etango assessed different particle
It also allows Munro, who was appoint- sizes and crushing methods as well as – Michael Washbourne
ed chief executive in March, the opportu- varying binder addition rates and their
nity to present his company’s investment
case with increasing confidence the ura-
nium price is on the way back up.
Munro and study manager Leon
Fouche conducted information sessions
for brokers and analysts across Australia
during November in a bid to enhance the
investment community’s understanding
of the yellowcake market and the cata-
lysts for a pricing recovery.
“The main message is the uranium
sector is poised for an abrupt and sus-
tained recovery from where it is at the
moment,” Munro said.
“Whilst uranium, like any other com-
AUSTRALIA’S PAYDIRT DECEMBER 2016 - JANUARY 2017 PAGE 89
INDABA PREVIEW
Volt’s sparky graphite arrival
An impending PFS on the company’s Stephen Hunt Further confirmation of Namangale
Namangale South graphite project South’s quality came in November when
will be the culmination of 12 months of to market darling Magnis Resources Ltd. the company released tests by an inde-
high-energy activity at junior graphite “What we are seeing – in the drilling pendent German lab which confirmed
company Volt Resources Ltd. Namangale South graphite flake concen-
and in the metallurgical test work – is that trate produced battery-grade graphite of
“From a standing start 12 months ago, we have something very similar to what 99.9% purity.
to be where we are now is a remarkable Magnis has and I think the market has
achievement,” Volt executive chairman realised that which has helped us gain Such is Hunt’s confidence in the re-
Stephen Hunt told Paydirt recently. “Our acceptance,” Hunt said. source, he is certain the PFS will recom-
market cap has gone from around $15 mend advancing the project.
million to $70 million and we are now re- Volt raised $4.5 million in March and
ally poised to start going to the next level $8.6 million in total during the year, in the “A lot of what we’ve done is setting up
with finalisation of the PFS into a 180,000 process bringing on institutional inves- to advance into a BFS and it won’t cost
tpa operation, which we are confident will tors. much more and it makes sense to do the
support a move into full BFS.” work to a higher standard anyway.”
Hunt said shareholders were encour-
The fact Volt was a late arrival on the aged by the quality of the Namangale He said more infill drilling on the de-
East African graphite scene makes its South resources. posit would be needed and the company
progress even more remarkable. The would also use the release of the PFS to
company started 2016 as Mozambi Re- “The quality of the product sets us ramp up its marketing initiatives.
sources, a name with its origins in Mo- apart,” he said. “We have done a lot of
zambican coal assets the company had metallurgical work where we’ve achieved Volt has already signed MoUs with
previously held. outstanding results on flake size distribu- three potential Chinese off-takers but
tion and concentrate grade. There is a Hunt recognises the need to diversify the
The shift to Tanzanian graphite pro- lot of graphite out there and we believe company’s potential customer base.
jects triggered the name change as the those companies with quality resources
company looked to tie-in with the mar- will be the ones who get into production “It is an area we have seen others stall
ket’s growing interest in battery minerals and thrive. Without quality product it is in; securing off-take agreements with
such as graphite and lithium. going to be difficult.” non-Chinese end-users,” he said.
However, by the start of 2016, the In Tanzania, the company has started
graphite bubble appeared to have burst. its mining licence application process, in-
Unperturbed by the market slowdown, cluding EIS work.
the company announced a maiden re-
source of 179mt @ 5.1% TGC for its The East African country is emerging
Namangale South project, the largest as a graphite hotspot but some investors
JORC-compliant resource in Tanza- have been spooked by new president
nia. In May, it increased the resource to John Magufuli’s insistence that mining
214.4mt @ 5.1% TGC. companies list on the local Dar Es Sa-
laam stock exchange.
The company was trading at under 4c/
share at the time but has since reached “I think there has been some confu-
more than 11c/share as investors warm sion over the new policy,” Hunt said. “The
to a story which shares some similarities Government is not demanding a 30%
share of projects, it wants 30% of a com-
Volt has been impressed with the pro-development attitude of government in Tanzania pany’s market cap to be on the Dar Es
Salaam stock exchange but it is only an
ambition.”
Hunt has been impressed with the pro-
active nature of the Tanzanian Govern-
ment and ministry, saying it had been
very supportive of the sector.
“The Government is pro-development
and it is trying to find ways it can get
involved in helping mining support the
development of other industries such as
financial services and downstream pro-
cessing.”
Magufuli holds ambitions to develop
mineral processing in the country and
Hunt, like other Australian executives
with graphite projects in East Africa, be-
lieves it is achievable.
“I think the logical step would be to
build a spherical graphite plant in the
country and it is possible,” he said.
– Dominic Piper
PAGE 90 DECEMBER 2016 - JANUARY 2017 AUSTRALIA’S PAYDIRT
Sovereign’s soft approach
Sovereign Metals Ltd has marked 2016 returning to more traditional commodi- Julian Stephens
as a watershed year. ties such as gold and copper in Central
“To be competitive in the graphite and West Africa. This is very positive for mentally friendly technologies such as
space, potential developers must be able African investment in general,” Stephens electric vehicles.
to compete with the Chinese producers said.
on production costs. In order to achieve “That bodes very well for the sector
this, the company moved its focus to the Stephens believes there are better in general and particularly for graphite,”
soft saprolite (clay-hosted) graphite de- days ahead for players in the mining sec- Stephens said.
posit at Malingunde,” Sovereign manag- tor, particularly with continued growth in
ing director Julian Stephens told Paydirt. China and that country’s shift to environ- “The mining sector remained volatile
in 2016, however, it is pleasing to see
Stephens defines Malingunde, 15km investment returning to the junior ex-
south-west of Malawi’s capital Lilongwe, ploration space as the commodity cycle
as a potential high quality, low capex, low
opex project, affording Sovereign the op- begins to turn. Importantly, we
portunity to compete on the global stage. have seen substantial interest
in lithium, largely driven by the
“That is a key advantageous point of forecast growth of Li-ion batter-
difference when compared to our East ies in electric vehicles and for
African hard-rock peers,” Stephens said. energy storage.
Sovereign will aim to prove its competi- “It should be noted that natu-
tiveness in the sector during 2017, with ral flake graphite is a key com-
delivery of an initial resource from Ma- ponent in Li-ion batteries and
lingunde expected in Q1, followed by the we expect this to result in con-
completion of a scoping study. tinued growth and investment
in the graphite supply chain,
The company has $4.3 million in the including high quality, low cost
bank to achieve its planned milestones. mining operations such as at
Malingunde,” he said.
“We will be aiming to commence a
PFS on Malingunde immediately after A number of African graphite
the completion of the scoping study. Ad- projects are restricted by lack
ditionally, we will be progressing the met- of infrastructure but this is not
allurgy and downstream test work on our a concern for Sovereign at Ma-
concentrates with the aim of progressing lingunde. The project is close to
to off-take agreements with our part- the country’s main city, with rail
ners,” Stephens said. facilities 25km from the project,
power 15km away and a plenti-
Diamond drilling towards the ful supply of water in range.
back end of 2016 delivered bet-
ter than expected results for – Mark Andrews
Sovereign at Malingunde, with a
thick high-grade zone of sparo- A scoping study on Malingunde is expected to be
lite-hosted graphite mineralisa- completed in early 2017
tion intersected, which confirms
the continuous and coherent
nature of Malingunde, accord-
ing to Stephens.
Results included: 15m @
19.7% TGC within 25m @ 15.1%
TGC, 12m @ 17.1% within 20m
@ 13.7% and 13m @ 10.7%
within 25m @ 8.5%.
At the time of print, an aircore
programme was being con-
ducted, as Sovereign worked
towards capitalising on the mo-
mentum garnered in 2016 and
take advantage of the positive
sentiment returning to miners
and explorers in Africa.
“We have seen strong inves-
tor support in East Africa over
recent times, largely in graphite
exploration, but it is very encour-
aging to see the investor dollar
AUSTRALIA’S PAYDIRT DECEMBER 2016 - JANUARY 2017 PAGE 91
INDABA PREVIEW
Coal bounces back at last
Surprisingly good coal
prices at the back end of
2016 could spur a round of
M&A in the space, according
to IchorCoal N.V. chief ex-
ecutive Nonkululeko Nyem-
bezi-Heita.
Thermal coal was trading
at $US106/t at the time of
print, while coking coal was
worth $US312/t.
The upward trajectory in
coal prices started in Sep-
tember, upon China’s in-
creased push to stem over-
capacity of coal supply and
its continued programme to
reduce pollution.
China has reduced the
number of days coal can be
produced in the country from
330 to 276, which has had a
hand in coal prices almost
doubling in 2016.
Nyembezi-Heita said the
turnaround in coal prices IchorCoal has a minority interest in a number of Universal Coal’s projects, including Kangala
could change in a “heart-
beat”, depending on decisions made in However, one roadblock in the way of IchorCoal announcing the restart to pro-
China, however, with South African state- IchorCoal and other companies looking duction at the mine in November.
owned power provider Eskom reliant on to consolidate their position in the South The company is targeting 500,000 tpa
coal-based electricity, she expected a African coal sector is access to funding. production from three units at Penumbra.
sustained period of higher coal prices to “Securing funding for mine develop- Funding arrangements to see Penum-
drive consolidation on the domestic front. ment is difficult, let alone securing acqui- bra hit its straps are progressing while
“I would expect that with higher prices sition finance,” Nyembezi-Heita said. phase one work on the re-establishment
we should be back in some level of ac- “I think as the sector starts to gain of the nearby Usutu underground project
tivity on the M&A front, the issue will be more confidence in this up-cycle, then has been completed.
securing funding,” Nyembezi-Heita told financing might come back into play, but Penumbra and Usutu, in Mpumalanga,
Paydirt. some of the financiers have put the pen- are expected to produce a combined 2.1
With aspirations to become a pure play cil down on funding activity in our sector. mtpa thermal coal, with Usutu scheduled
mid-tier coal producer in South Africa, I am hopeful that come the first quarter of to hit a run rate of 1.6 mtpa coal by the
IchorCoal’s strategy of acquisitive growth 2017, if the prices stay as they are, then last quarter of 2018.
saw it make a run at ASX-listed Universal maybe some funding might come back Nyembezi-Heita hopes the blue skies
Coal plc in 2015, which was followed by into the sector.” hovering over the coal sector will still be
a competing offer from Coal of Africa Ltd. Nyembezi-Heita said there were a there in 2018, as IchorCoal starts to re-
IchorCoal was unsuccessful in its bid number of junior coal miners in South Af- model its business around thermal coal
and Coal of Africa’s offer lapsed in July. rica without the scale and sustainability prices above $US60/t.
Soon after Coal of Africa’s deal fell to survive, which will be a major driver “Hopefully it stays above that for the
through, Universal went on to start com- for M&A in the domestic market, while next two years, maybe even three if we’re
missioning of its second mine – the New majors looking to offload assets, such as lucky,” she said.
Clydesdale colliery – in South Africa. Anglo American plc, would be another “Really all of this could change in a
Now with two operating mines and re- area of activity. heartbeat, depending on what China
sources of over 2bt coal, it is easy to see “We still have some of the majors that decides to do. At the moment, believe it
why Universal is an attractive proposi- want to sell their assets and those are or not, there is a shortage of coal in the
tion. still in the pipeline but by no means are domestic [South African] market and we
IchorCoal has minority interests in they complete,” Nyembezi-Heita said. are all trying to start up sections and in-
some of Universal’s projects in South Despite missing out on the Universal crease production to take advantage of
Africa, and it still has stated ambition of transaction, IchorCoal managed to se- higher prices.”
“being a meaningful player in the con- cure the Penumbra coal mine from Con- – Mark Andrews
solidation of the fragmented emerging tinental Coal Ltd in December 2015.
or ‘junior’ coal mining sector to achieve Penumbra was placed on care-and-
scale and resilience”. maintenance in February 2015, with
PAGE 92 DECEMBER 2016 - JANUARY 2017 AUSTRALIA’S PAYDIRT
More to be done for
women in mining
Nonkululeko Nyembezi-Heita can see Nonkululeko Nyembezi-Heita mining sector,” Nyembezi-Heita said.
green shoots appearing for women “For women coming up the ranks [and
seeking prominent roles in mining. How- “It can be unpleasant work sometimes;
ever, the sector is far from breaking the going underground can be quite hazard- making it at executive level] it would mean
shackles of being dominated by 50-some- ous and it is difficult not only because the that they would have had to have been
thing white males. people we want to draw in are not neces- a section head, mine boss or supervi-
sarily interested in that kind of career.” sor where 100% of that section probably
“There is movement, but not actually would have been males. It then comes
that much. Is the sector focusing on this Nevertheless, Nyembezi-Heita said, down to authority in the workplace and if
[the role of women in the mining sector]? women shouldn’t require “scarily good you add at the personal level the difficulty
I don’t know,” Nyembezi-Heita said. skills and expertise” compared to men in getting ahead, which is naturally there,
to make it in the industry, one which in there is no question that African women
Diversified resources house Exxaro, South Africa is highly steeped in custom have it harder than anybody else.”
which has business interests in South and tradition and dominated by men.
Africa, Europe and the US, is a leading While the challenge remains for Afri-
example in the sector with about 17% of “I think it is tougher for African women can women to play more influential roles
its 7,500-strong workforce being women, to break into anything, particularly the in mining, the sector itself faces the pros-
compared to the South African industry pect of missing out on top quality talent to
average of 11%. other industries.
Furthermore, Dr Nombasa Tsengwa In a South African context, there is a
was appointed the executive head of small minority of women graduating with
coal operations at Exxaro in 2015 and university degrees and those that are
is joined on the executive committee by highly sought after in other sectors like
Vanisha Balgobind (executive head of business, health and education.
human resources) and Carina Wessels
(company secretary). “Why would you come to mining?” Ny-
embezi-Heita said.
Having committed funding and im-
plemented programmes designed to “The problem is both with the push and
diversify their workforces, companies the pull [of the mining sector]. It tells you
such as Exxaro, South32 Ltd and Anglo that it is fairly intractable and there are
American plc are further along the inclu- not going to be any easy answers. Look
sion path than their junior mining coun- around the world and tell me what per-
terparts. centage of management teams women
constitute; there are very few. I don’t
Despite efforts to make the mining in- suppose the sector will ever look like a
dustry more attractive and inclusive of services sector or other professional
women, there remain, and quite possibly sectors, but nevertheless we should see
will always be, barriers preventing wom- more diversity in time but I think mining
en from entry into the sector. will always remain fairly marginal [in fe-
male participation].”
“People who make the top echelons of
mining companies typically start off in the – Mark Andrews
ranks, but women don’t necessarily like
working on mines,” Nyembezi-Heita said.
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AUSTRALIA’S PAYDIRT DECEMBER 2016 - JANUARY 2017 PAGE 93
INDABA PREVIEW
Graphex licenced to negotiate
Graphex Mining Ltd’s award of enterprises in China as well as
a mining licence for its Chilalo the group’s exposure to the ex-
graphite asset has a far greater pandable graphite market.
meaning than the ability to turn Hoskins has spent about 130
dirt at the project. days in China over the past two
Tanzania’s Ministry of Energy years and is under no illusion
and Minerals officially presented about the size of the country’s ex-
Graphex with the 10-year permit pandable graphite market, which
in mid-November, marking the fi- accounts for 80% of global pro-
nal regulatory approval required duction.
before development can proceed. “I’ve been able to hear from the
It also satisfied a key due dili- coal face what they’re seeing in
gence condition for Graphex to the market and I’m absolutely cer-
enter the next round of negotia- tain the expandable graphite mar-
tions for binding off-take and pro- ket is bigger than what any inves-
ject finance with China National tor or analyst is aware,” Hoskins
Building Materials (CNBM) and said.
China Gold Group Investment Co “A lot of it comes down to flame-
Ltd, having signed initial MoUs retardant building materials and
with both groups in June 2015. Graphex’s project partners have instigated independent the amendments to Chinese reg-
“It’s a great milestone for the testing of the Chilalo graphite ulations requiring use of flame-re-
tardant building materials. We’re
company to achieve and it paves
the way for the rapid development of the which we expect to be able to conclude now hearing that there is no substitute for
project,” Graphex managing director Phil off-take and finance arrangements in the expandable graphite in China for these
Hoskins told Paydirt. coming months.” flame retardants. That’s why groups like
“In terms of what this means for our dis- For Hoskins, company secretary Stu- CNBM, who control the building materi-
cussions with the Chinese, they definitely art McKenzie and other former members als market in China, are interested in our
wouldn’t be signing any binding off-take of IMX Resources, the impending devel- product.”
or finance agreements if we weren’t in opment of Chilalo, part of the Naching- Graphex recently wrapped up a drilling
possession of a mining licence, so clear- wea property in south-east Tanzania, is programme targeting resource expan-
ing that hurdle as well paves the way for a milestone worth cherishing. sion at Chilalo, including the discovery
us to advance those discussions.” IMX was initially focused on devel- of a new zone of mineralisation, about
CNBM and China Gold revised the oping the Ntaka Hill nickel project be- 200m north of the flagship Shimba de-
terms of their respective MoUs with fore turning its focus to Chilalo in 2014 posit.
Graphex in August following a site visit when graphite started to capture more Some of the better drilling hits were
to Chilalo in late June and the start of in- attention from the investment commu- 68m @ 6.6% TGC from 50m, including
dependent testing by the Suzhou Design nity. Chilalo was spun off to new listing 18m @ 13.8% TGC from 80m and 5m @
and Research Institute for Graphex via a $7 million 20.3% TGC from 91m, and 45m @ 8.2%
the Non-Metallic Minerals IPO in June 2016. TGC from 10m, including 22m @ 119%
Industry. “There’s been a lot of TGC from 10m.
Successful test work on money spent on this prop- Results are expected to be fed into an
a 500kg sample of Chilalo erty and in this region by updated resource at Shimba (currently
ore to confirm its coarse IMX before us and now 25.1mt @ 6% TGC for 1.5mt contained
flake size distribution and Graphex, so to see some- graphite, including a high-grade resource
achievable expansion thing come out of that will of 9.2mt @ 10.7% TGC for 984,000t) due
rates marked the end of be very exciting and fan- in late December.
product due diligence. tastic for the people in the Hoskins said some lower-cost items for
Both CNBM and China local community,” Hoskins the feasibility study had been completed
Gold are continuing tech- said. to ensure a rapid transition to production
nical due diligence on Phil Hoskins “We’ve still got a lot of at Chilalo when the time comes.
other project parameters. work to do to convert cur- “We’ve worked very hard, but the big
“The positive conclu- rent off-take and finance milestone is still there to be achieved and
sion of product test work has satisfied discussions into a binding deal, but we all of our efforts are going into that right
our project partners for the off-take are confident of doing that. Even though now,” he said.
side,” Hoskins said. “This technical due it has taken a little longer than we had ini- “We’ve never taken a backward step
diligence is required by them to become tially anticipated, both parties have con- with our partners and they’re still ex-
satisfied with the investment proposition tinued to make positive progress every tremely confident in the market opportu-
presented by our proposed financing step of the way.” nity for expandable graphite.”
terms. CNBM has assumed the role as lead – Michael Washbourne
“Our partners are in the final stages counterparty following some recent reg-
of this technical due diligence, following ulatory changes affecting state-owned
PAGE 94 DECEMBER 2016 - JANUARY 2017 AUSTRALIA’S PAYDIRT
Meet the
team
at Mining Indaba
Bill Repard Dominic Piper
EXECUTIVE CHAIRMAN EDITOR
M: (+61) 418 768 578 M: (+61) 424 934 494
E: [email protected] E: [email protected]
Mark Andrews Michael Washbourne Christine Oelschlaeger
DEPUTY EDITOR JOURNALIST AFRICA DOWN UNDER
M: (+61) 407 477 697 M: (+61) 400 956 703 M: (+61) 420 225 058
E: [email protected] E: [email protected] E: [email protected]
www.paydirt.com.au
6 - 8 September 2017
Perth,Western Australia
REGIONAL ROUNDUP LATIN AMERICA
Metminco raises more
cash for Miraflores
Metminco Ltd had continued to defy “This successful capital raising rep- Howe said it was pleasing to attract
a faltering share price after raising resents a strong vote of confidence in long-term investors to the company.
a further $4.85 million to fund a feasibil- the forecast economics of the Miraflores
ity study on its Miraflores gold project in project and the work completed by the “[These are] investors with the capac-
Colombia. company following the acquisition of the ity and commitment to follow their invest-
Colombian gold assets,” Howe said. ment through to gold production,” he
Metminco’s shares have languished said.
below 1c for more than two years having Under the terms of the placement, Met-
been as high as 41c in early 2011. How- minco issued 2.058 billion new shares The company plans to have the Mira-
ever, a recent switch in focus from Chile at 2.37c/share. Some 212.63 million of flores feasibility study complete in Janu-
to Colombia appears to have reinvigor- these shares were placed with sophis- ary, paving the way to start gold produc-
ated interest in the company and the ticated and professional investors with tion in late 2018/early 2019.
$4.85 million raising is the second it has the remainder taken up by Redfield As-
completed in 2016. set Management, Howe and UK-based Miraflores is part of the wider Quinchia
investor Lanstead Capital LP. gold project which sits on the Mid Cauca
The money will be used to fund a fea- gold belt, also host to AngloGold Ashanti
sibility study on the Miraflores project, Lanstead has also entered into a shar- Ltd’s 33 moz La Coloda gold project and
picked up in June as part of the compa- ing agreement with Metminco which will Gran Colombia Gold Corp’s 14 moz Mar-
ny’s acquisition of the Quinchia gold port- enable the junior “to secure much of the mato gold mine.
folio. In September, Metminco released potential upside arising from anticipated
results of a scoping study into Miraflores near-term news flow”. If the Metminco Miraflores is the most advanced of the
which pointed to a $US81 million capex share price exceeds a benchmark price project’s prospects with a measured-indi-
being sufficient to build a nine-year, of 32c/share, the company will receive cated resource of 9.19mt @ 2.81 g/t gold
50,000 ozpa underground operation pro- more than 100% of the monthly settle- and 2.76 g/t silver for 832,000oz gold.
ducing gold at AISC of $US648/oz. ment but Lanstead will not receive any Elsewhere on the project, the Dosque-
further shares. bradas prospect has a 920,000oz @ 0.5
Metminco managing director William g/t gold inferred resource and at Teso-
Howe said the raising was an indication Lanstead will eventually become Met- rito drilling has uncovered a gold-copper
investors were taken with the Miraflores minco’s 19.9% major shareholder with porphyry prospect with a best hit of 384m
acquisition. Redfield holding 8.6%. @ 1.01 g/t gold.
Sherritt to profit from Cuban nickel JV
Sherritt International Corp’s nickel JV age price of nickel would hover around isting business, but as you look ahead,
in Cuba will return to profit in 2017 if current levels of around $US11,000/t in there is the opportunity to do more,” he
prices for the metal sustain themselves 2017. Nickel is essential in the production said.
at the current level, the Canadian mining of stainless steel and other corrosion-re-
company’s head said in an interview. sistant alloys. Beyond its Cuba venture, Sherritt was talking with Cuba about
Sherritt also has a stake in a large Mada- different investment options in power
Speaking at Sherritt’s office in Ha- gascar nickel mine. generation, he said. The company al-
vana in November, chief executive Da- ready has a one-third interest in a JV with
vid Pathe said the price, which has risen The Canadian company has been production capacity of 506MW, equiva-
around 20% in 2016 from multi-year lows, operating in Communist-ruled Cuba for lent to 15% of the Cuban grid.
could improve further given global nickel more than two decades and says it is
supplies were expected to swing into a the most-vested foreign investor on the Asked about the impact of the US-
deficit. island. Cuban detente, Pathe said the key issue
for businesses like his remained the em-
“If prices can sustain where we are While Pathe expected little if any profit bargo, which was still firmly in place.
now, we will be EBITDA positive at these from its Cuban nickel business in 2016,
prices with some upside in 2017,” Pathe he forecast $US50 million to $US70 mil- “As and when [it is lifted], it will be good
said. lion in EBITDA from its Cuban oil and for us, in that it will give us access to US
power ventures. suppliers and to US markets,” Pathe said.
“It looks like the nickel market... is mov- “It would also help demystify our assets.
ing into deficit, with forecasts of deficit Sherritt has been focused in recent
for a few years, and we are optimistic it years on improving efficiency in existing “There are people who see the political
will be positive for pricing going forward,” businesses rather than undertaking new risks of our assets being higher than it is
Pathe said. projects in Cuba, he said. because of the noise around the Cuban-
American relationship.”
A Reuters poll released in November “We’ve had, in particular in this market
showed that analysts expected the aver- environment, enough on our plate in ex- – Sarah Marsh, Reuters
PAGE 96 DECEMBER 2016 - JANUARY 2017 AUSTRALIA’S PAYDIRT
LATINSAVE THE DATE
AMERICA
17-18 May 2017
Perth,Western Australia
www.latinamericadownunder.com
To present, exhibit or attend as a delegate please contact
Melita Fogarty on (+61) 8 9321 0355 or email [email protected]
REGIONAL ROUNDUP
Beijing cools on free and
open trading
Unprecedented steps by Beijing to China has been pushing to boost its influence series of fee and margin hikes in a coor-
snuff out a months-long rally in coal on pricing of everything from iron ore to oil dinated effort to make it more expensive
prices are casting fresh doubts on Chi- to trade everything from thermal coal to
na’s drive to become a global price-set- ramped up its meetings with coal min- rubber to ferro-silicon to tame wild price
ting hub for commodities worth trillions of ers to as many as three a week from the swings.
dollars. usual monthly gatherings.
With all these steps, the BSPI weekly
The world’s top consumer of many raw Adding to its scrutiny over the market, index (published November 10) fell by 1
materials has been pushing to boost its the NDRC also said in mid-November it yuan per ton to 606 yuan per ton, its first
influence on pricing of everything from was vetting the sector for hoarding, as drop in 4.5 months. Even so, the price re-
iron ore to oil, mainly through steps such well as investigating a coal pricing data mained close to historic highs supported
as promoting Chinese futures contracts firm in the province of Shanxi for “prob- by robust demand as the first cold spells
as regional or global benchmarks. lems” in its data. of winter start to grip the country.
But analysts and traders said a wave of While the NDRC did not give any de- The Government has form when it
moves to cool coal prices, which surged tails, FenWei Energy, a Shanxi-based comes to exerting pressure on financial
as a side-effect of radical government coal data company, suspended its spot markets. Past tactics have included halt-
measures to fight pollution by curbing physical thermal coal price index (mid- ing margin trading in equities last year
mining, show that Beijing could be re- November) – used as the domestic in- and changing trading limits and margin
luctant to let markets trade freely and dustry benchmark – saying its prices did requirements for some commodity fu-
openly. not reflect the majority of business trans- tures contracts earlier this year.
acted in the country.
“(Moves like those taken in coal mar- And the latest moves come just as
kets) dampen hopes from investors that The NDRC did not respond to requests the Shanghai International Energy Ex-
the Government will be transparent,” for comment. change, known as INE, prepares to
Wang Fei, a coal analyst in eastern Chi- launch a crude oil futures contract that
na, said. Meanwhile, China’s three main com- will compete with established bench-
modity exchanges this week launched a marks in the United States and Europe.
Soaring coal markets have sparked a INE did not immediately respond to re-
weeks-long effort by China’s state eco- quests for comment.
nomic planner, the National Develop-
ment and Reform Commission (NDRC), “If NDRC can do this to the coal indus-
to rein in prices, culminating in the an- try, it can deploy the same strategy with
nouncement that two of the nation’s top other commodities,” Lin Boqiang, direc-
coal miners had signed long-term supply tor at the energy institute at Xiamen Uni-
contracts with a utility at a quarter below versity, said.
current spot rates.
– Meng Meng and Josephine
Market sources said the body had Mason, Reuters
China stimulates coal production
China adopted new rules to stimulate this triggered a surge in the price of coal. said in a statement.
coal production in late November to Li told a meeting of the National En- China faces uncertainty over the
counter surging prices and Premier Li Ke-
qiang said the country had to balance de- ergy Commission that reports directly to weather outlook in northern regions, it
mand for heating over winter with efforts the cabinet that China must increase the said, which is contributing to coal supply
to tackle pollution. clean and efficient use of coal, according difficulties.
to state radio.
Li’s comments came after state plan- Adding to supply concerns, some
ner the National Development and Re- Higher coal prices have been hurting producers have not ramped up produc-
form Commission (NDRC) ruled all coal consumers in China and concerns about tion as fast as expected with winter ap-
mines that abide by production safety supply were growing ahead of expected proached, the state planner said, without
rules can operate 330 days a year rather strong demand during winter. naming any companies.
than 276 days previously.
“This is the biggest policy adjustment It also said it expected major regional
Analysts and traders said the new limit to lift coal production so far,” Huaan Fu- producers Datong Coal Mining Group
marked a major step from Beijing to help tures coal analyst Wang Fei said. “We are and Inner Mongolia Yitai Coal Co. Ltd to
boost coal supplies. The NDRC capped expecting coal mines to quickly increase agree medium- to long-term contracts
domestic mining earlier this year in a production as soon as early 2017.” with utilities in the near term.
campaign to reduce excess capacity but
The new limit will be effective until the – Meng Meng, Reuters
end of the winter heating season, NDRC
PAGE 98 DECEMBER 2016 - JANUARY 2017 AUSTRALIA’S PAYDIRT
ASIA
Taliban expands in Afghan north
Afghan Taliban militants have strength- tionally been weaker.
ened their grip on lucrative illegal
mining operations in the north of the “We always thought that since much
country, as security forces focus most of
their efforts on battling the insurgency in of the north, especially Badakhshan,
the volatile south, officials said.
Takhar and even parts of Kunduz, were
Abuses by local commanders with
private militias and beyond the purview anti-Taliban, we would be fine and the
of central government have also driven
people into the hands of Islamist fighters, militants would never be able to gain
the officials added, making it easier for
them to profit from small-scale mines in ground, but we were wrong,” one Afghan
the region.
security official, speaking on condition of
“The Taliban provide protection for
the villagers to mine and the people are anonymity, said.
happy to do it despite the fact that there’s
a presidential decree banning any un- The October attack on Kunduz, the
controlled mining,” Badakhshan province
deputy governor Gul Mohammad Bedar city the Taliban briefly seized last year,
said.
underlined the movement’s growing
He estimated the militant group, fight-
ing to overthrow the Western-backed The total value of opiates in Afghanistan far strength in the north and the problems
government in Kabul, raised about a third outweighs that of mining’s worth the government has had in enforcing its
of its funding needs in Badakhshan from authority even in a traditional stronghold.
deposits of minerals, including semi-pre-
cious lapis lazuli, found in its mountains. Afghanistan, is by far the biggest source The grip the Taliban still holds on sur-
Opium, grown mainly in the south of of revenue for the Taliban nationwide, rounding area was underlined last week
with the total value of opiates reaching as by a raid by Afghan and US forces on a
much as around $US2-3 billion annually, nearby village in which two Americans
according to the UN. died.
Mining, by comparison, is worth sev- More than 30 civilians, half of them
eral tens of millions of dollars a year, al- children, were killed in an air strike called
though that proportion rises in the north. in to protect the troops, and the com-
Insurgents have taken authorities by mander of US forces in Afghanistan has
surprise in the last year or so by seizing promised an investigation.
large swathes of territory in a part of the – Jawad Kakar, Reuters
country where their presence has tradi-
‘Mines there for us’
Alack of security and infrastructure nese company that bid to develop it has lice for the northern zone, said abuses by
has meant mine reserves in Afghani- yet to start production nine years after local strongmen had encouraged some
stan remain largely untapped, and up to winning the contract. local villages to work with the Taliban in-
10,000 deposits are estimated to be out- stead.
side government control. Afghanistan is estimated to contain
mineral deposits worth $US1-3 trillion, “Now that the Taliban are there, they
Most mines being exploited are small, including gemstones and precious met- have been looking into funding their fight-
artisanal operations. als, copper, marble and iron ore. ing and digging mines.”
“I have been digging mines, espe- Much of it is in remote northern regions For much of the past two years, as
cially lapis, for years,” Mohammad Zahir, like Badakhshan, where Taliban revenue Afghan forces fought largely alone fol-
a farmer in the Mahdan area of Keran collectors have moved in, working with lowing the withdrawal of foreign combat
Munjan district in Badakhshan, said. smugglers to ship stones out of Afghani- troops at the end of 2014, the strategic
stan for processing. focus has been on southern provinces
“These mines are created by our Allah like Helmand, a Taliban heartland and
for us to dig and feed our families and it Allowing the Taliban to boost its rev- source of much of the country’s opium.
is not the property of the Government or enues has given them a financial base
others.” to expand operations in the north, where But in the north as well, local officials
government control outside the main dis- said it would be difficult to restore trust in
As well as lapis lazuli, a semi-precious trict and provincial centres is minimal. Kabul’s authority.
blue stone mined for thousands of years
in the region, gold mines and emeralds Maheullah Noori, a spokesman for the Abdullah Naji, a member of Badakh-
in Raghestan and Keran Munjan districts ministry of mines, said the Government shan’s local provincial council, said there
have grown in importance over recent had no official estimate of the amount had been two recent operations by Af-
years, according to Bedar. raised by insurgents from mining, but lo- ghan forces to push the Taliban back, but
cal MP Safiullah Muslim said the figure security forces struggled to hold areas
The country also boasts major depos- ran into millions of dollars a month. they captured, and insurgents soon re-
its of industrial metals, including the huge turned.
Mes Aynak copper deposit in Logar prov- “Gold, emeralds, rubies, and amethyst
ince near Kabul that is valued at $US3 are all illegally mined by local militiamen “The local people invited them back
billion. and the Taliban who profit by hundreds because it is good business.”
of millions of afghanis monthly,” he said.
But security concerns and the short- – Jawad Kakar, Reuters
age of roads and railways mean the Chi- Shir Aziz Kamawal, commander of po-
AUSTRALIA’S PAYDIRT DECEMBER 2016 - JANUARY 2017 PAGE 99
REGIONAL ROUNDUP
Rinehart heads to Yorkshire
The Australian influence at AIM-list- all package would provide the financing Yorkshire and Teesside, and represents
ed potash developer Sirius Miner- needed to start construction of the North a significant business investment in the
als plc is set to grow after the company Yorkshire project, near Whitby on the UK. It’s been a long journey to this point,
announced a funding deal with iron ore North Yorkshire coast. and we still have some way to go, but I
magnate Gina Rinehart’s Hancock Pros- want to thank everyone who has support-
pecting Pty Ltd. “Considering Mrs Rinehart’s and Han- ed the company in its efforts to reach this
cock’s expertise in each of mining and major milestone. Once we have received
The deal will see Hancock pay $US250 agriculture, this investment is a signifi- shareholder approval, we want to get on
million in a royalty financing agreement cant vote of confidence in not only our with the job of delivering this compelling
which will guarantee it a 5% royalty on project, but also our product,” Fraser value proposition, not only for our share-
Sirius’s North Yorkshire polyhalite pro- said. holders but also for the North Yorkshire
ject in Britain. Hancock has also com- community.”
mitted to making a $US50 million invest- Sirius’ plan is to build an operation pro-
ment in Sirius itself. ducing 20 mtpa of polyhalite, in the form A DFS released in March this year,
of the company’s Poly4 product which forecast NPV of $US15 billion and IRR of
The deal is part of a wider financing comprises four of the six macro-nutrients 26% for the project.
exercise announced by Sirius in October that are essential to plant growth – po-
which also saw £330-400 million under- tassium, sulphur, magnesium and cal- Sirius enjoyed a stellar run on AIM dur-
written placement and $US400-450 mil- cium. The mined polyhalite ore will be ing 2016, rising from a low of 11p/share
lion underwritten convertible offered. transported 23 miles via an underground in January to as high as 45.5p/share in
slurry pipeline to the materials handling August. It was trading at 21p/share at the
Sirius hopes to raise $US1.2 billion facility Wilton Terminal at Teesside. time of print.
from the process as it looks to fund de-
velopment of the $US3.6 billion capex The development will represent the The company said details of how the
project. largest ever mining investment in Britain remainder of project finance would be
which had been off the resources radar sourced would be made public “at an ap-
Sirius is headed by Australians Russell for more than a generation. propriate time”.
Scrimshaw (chairman) and Chris Fraser
(chief executive). Fraser said the over- “This project will create jobs in North
EDF buys Areva’s reactors
France has moved to shore up its nu- capital in both firms, rather than minority va chief executive Philippe Knoche said.
clear industry with utility EDF agreeing shareholders The contracts covering the Finnish
to buy the reactor construction business
of state-run peer Areva $US2.7 billion. “For Areva, it’s a sensible deal, as it project will, however, remain with Areva
will help to reduce Areva’s debt. For EDF, after the sale of its reactor construction
Loss-making Areva is years behind it’s less positive, but it’s a deal that has division to EDF, the companies said.
schedule on projects in France, Finland essentially been pushed through by the
and China, and the delays have raised French Government,” he said. Finnish utility TVO said it remained
concerns at EDF as it lines up Areva to concerned as to how the restructuring
build two new nuclear plants at Hinkley Laverne does not own shares in either would affect future resources at the Olki-
Point in Britain. company but said he would consider luoto project, but repeated that the plant
looking at the restructured Areva as a was still set to start operations at the end
The contract signed with EDF clears possible recovery story once its capital of 2018.
the way for Areva to raise €5 billion in increase was out of the way.
new capital, largely from the State, as it “TVO ... considers that the separation
restructures to focus on uranium mining Areva has run into trouble with its latest of project ownership from the resources
and nuclear fuel. European Pressurized Reactor (EPR) needed for the completion and commis-
design and is being sued over Finland’s sioning (of the plant) is not appropriate
“Today [November 16] marked a new Olkiluoto 3 project which is nine years behavior from a nuclear technology ven-
step in the restructuring of France’s nu- behind schedule. dor,” it said in an emailed statement.
clear industry which the Government is
pursuing with determination,” Economy In France, work on an EPR at Flaman- TVO and Areva are claiming billions of
Minister Michel Sapin said. ville is five years behind schedule and euros from each other at an arbitration
the estimated budget has ballooned to court due to the project’s delays and cost
France has Europe’s largest network more than $US11 billion from $US3 bil- overruns.
of nuclear plants and together EDF and lion initially.
Areva spearhead the country’s export Flamanville director Laurent Thieffry
efforts in competition with Russia’s Ro- EDF now wants Areva to build two told reporters that EDF was sticking to its
satom and Japan’s Hitachi Ltd. EPRs at Hinkley Point, with the deal seen timetable for the reactor to start operat-
as helping it to safeguard the skills and ing by the end of 2018, while EDF added
Gregoire Laverne, a fund manager at technology needed to deliver the $US22 that it was looking to cut the costs of fu-
Roche Brune Asset Management, said billion project. ture EPR projects.
the deal was better for Areva than EDF
but had been done mainly in the inter- “This signature marks an important – Benjamin Mallet, Reuters
ests of the State, which owns most of the stage in the refocusing of Areva on fuel
cycle activities, our core business,” Are-
PAGE 100 DECEMBER 2016 - JANUARY 2017 AUSTRALIA’S PAYDIRT
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