Australia's Paydirt March 2016

March 2016 VOLUME 1. ISSUE 236 $11.95
paydirt
front and back cover supplied seperately
East Africa: The Pilbara of graphite
Plus:
Mining Indaba... full review
Australian Graphite Conference... new conference set to launch Site visits... Mozambique, Tanzania and South Africa
ISSN 1445-3436 02 9 771445 343007




Cover image: Metals of Africa managing director Cherie Leeden inspects core from the company’s Balama Central graphite project
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CONTENTS
NEWS
The South Australian Nuclear Fuel Cycle Royal Commission has brought down its Tentative Findings which indicate the State could generate revenue of more than $257 billion, with total costs of $145 billion over 120 years if it built an integrated storage and disposal facility. Could this be the boost Australia’s ailing uranium sector
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Editorial:
Editor: Dominic Piper
Deputy editor: Mark Andrews Journalist: Michael Washbourne Graphics: Marian Noonan Contributors:
Keith Goode (Sydney), Brendan Ryan (Johannesburg), Ross Louthean
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76 presentations STRANDLINE
Mineral sands may not be lighting the mar- ket up at the moment but that has afforded Strandline Resources the opportunity to put together a large and very prospective tenement package all along the Tanzanian coast. Mark Andrews travelled to East Africa to find out Strandline’s plans
52
20 needs? COVER
Metals of Africa managing director Che- rie Leeden admits she used to look at graphite projects – and the wider graphite market – and struggle to make sense of
it. But 18 months into exploration and development of the company’s graphite- laden ground in northern Mozambique and Leeden is preparing to release a PFS. Dominic Piper visited the company’s Mon- tepuez and Balama projects to see how
28 this had been achieved GRAPHITE PREVIEW
Graphite can be a bewildering sector at times with investors unsure of what to make of projects that cannot be judged by traditional tonnes-by-grade valuations. In an effort to bring clarity to investors, Paydirt will host the first ever Australian Graphite Conference on March 22. In the build-up to the conference, we provide an overview of the sector and some of the companies proving their worth to the
52 market
INDABA REVIEW
More than 6,000 people made the annual pilgrimage to South Africa’s Mother City for the Mining Indaba in February. Del- egate numbers may have been down and the general outlook for the African mining sector generally bleak but Dominic Piper and Mark Andrews found more than a few chinks of light during the four days of
20
28


EDITORIAL
Mining Indaba’s opportunity for the future
Ihave always argued it is difficult to be in Cape Town in February and feel down- beat but this year’s Mining Indaba was
so sombre at times that I began won- dering if anyone was enjoying them- selves.
As the sector enters a sixth year of downturn, even those eternal opti- mists who have retained their sunny outlook are suffering from
battle fatigue.
So, were there any bright spots to be gleaned from the four-
day talkfest? Certainly gold equities appear to be back in the ascendency. In Australia, this has been the case for more than 18 months as a higher Australian dollar gold price has conspired with falling diesel costs and the softening of other input costs (particularly labour) to create the best margins the industry has experienced in nearly a decade.
Coupled with this is the general growth narrative of most Aus- tralian gold producers. Apart from Newcrest Mining Ltd – which is still struggling at 10-year share price lows – Australian gold producers are on the up. Led by the likes of Northern Star Re- sources Ltd and Evolution Mining Ltd, the Aussie gold miners are lean, efficient operators, many of whom appear headed for a new mid-tier, a sector of the domestic gold industry that has been empty for more than 15 years.
On the African continent, the growth narrative is less convinc- ing. Few gold companies on the continent are on the up. Instead, the likes of Gold Fields Ltd, AngloGold Ashanti Ltd, Acacia Min- ing plc and Harmony Gold Mining Co Ltd are looking for ways to either revive underperforming assets or extricate themselves from long-held operations.
All of these companies have enjoyed improved performance in the last year but their growth profile is stunted and even where there is projected growth, it is usually associated with problem- atic mines.
Only the remarkable Randgold Resources Ltd still has mo- mentum among the African gold miners, having performed strongly through all phases of the gold cycle.
Randgold chief executive Mark Bristow always makes an im- pression on the Mining Indaba stage and this year he gave hope to companies in every commodity that good companies can be established in any market circumstances.
“The great stride the mining industry took during the early 2000s was in a low commodity price time,” he said. “Africa was open to business and Randgold was set up to capture this. In 2005 [when the upward cycle began] the company was well placed to take advantage.”
The problem was, few other companies and a great many countries – and not just in Africa – were not ready and made hasty decisions in an effort to catch the commodities wave. For industry, this resulted in wasteful acquisitions, and growth pipe- lines that concentrated on ounces or tonnes produced rather than profits made. For governments it meant super profit taxes, nationalisation debates and irresponsible budgets.
More than a decade on, both industry and government have been dumped on the beach with little to show from the ride.
“The industry and countries didn’t respond very well,” Bristow
continued. “And at the end of it, the industry was back where it started. Any value created had been lost.”
The only hope, then, is that industry and government use this lull to prepare themselves adequately to take advantage of the next upswing with policies and strategies designed to deliver long-lasting benefits to shareholders and citizens.
Royal Commission doubts mining’s impact
The South Australian Nuclear Fuel Cycle Royal Commission has handed down its Tentative Findings (see page 5) and the news is both good and indifferent for the State’s uranium indus- try.
One of the report’s key findings was that “an expansion of uranium mining has the potential to be economically beneficial” which is good news for those hardy companies still trying to make a go of uranium development despite more than five years of depressed spot prices. However, the Royal Commission went onto say “it is not the most significant opportunity”.
That was reserved for the management, storage and dispos- al of spent nuclear fuel. Financial assessments and economic modelling in the report indicated an integrated storage and dis- posal facility could generate revenue of more than $257 billion for SA, with total costs of $145 billion over 120 years.
The news, though, is not necessarily a ringing endorsement for the uranium exploration and mining industry. Indeed, the re- port also found that “there would be no opportunity for the com- mercial development of further uranium processing capabilities in South Australia in the next decade” and electricity generation from nuclear was out of the question for even longer; “it would not be commercially viable to generate electricity from a nuclear power plant in South Australia in the foreseeable future”.
So, SA could profit from taking and disposing of others’ nu- clear waste and spent fuel but cannot expect to make much out of mining, processing or production. This is bad news for the uranium mining industry.
With spot prices so low, the only way it could generate strong political support is by pointing to the added economic benefits of establishing a wider uranium industry, one that incorporated value-adding processing and refining.
The Royal Commission did find that nuclear energy could be part of a low carbon emissions future but said “it would be wise to plan now to ensure that nuclear power would be available should it be required”.
As political will on all sides of politics appears to be leaning towards support for renewable energy, such long-term planning would appear unlikely.
The Royal Commission’s Tentative Findings have doused the hopes that uranium mining could lead to a greater uranium and nuclear industry and it appears increasingly likely Australia’s uranium reserves will remain in the ground for another few gen- erations yet.
[email protected]
@DominicPiper
PAGE 4 MARCH 2016 AUSTRALIA’S PAYDIRT


Uranium mining and spent fuel storage and disposal could provide substantial economic
benefits to the South Australian community, the South Australian Nuclear Fuel Cycle Royal Com- mission has found in its Tentative Findings.
Released on February 15, the report found SA could safely in- crease its participation in nuclear activities – particularly uranium mining and storage and disposal – without compromising social, environmental, safety or eco- nomic risks. However, the Royal Commission warned this could only be achieved with bipartisan support at both state and federal political levels.
The South Australian Nuclear Fuel Cycle Royal Commission’s Tentative Findings report indicates the State could find a safe and profitable position in the global nuclear fuel cycle
of $145 billion over 120 years, in the process generating 1,500 full-time jobs and up to 5,000 jobs during the 25-year construc- tion stage.
Industry groups welcomed the report, with the South Australian Chamber of Minerals and Energy (SACOME) saying the findings supported its call for the removal of “unnecessary and onerous du- plication in regulation for uranium mining and milling”.
“There is no reason why ura- nium should be treated any differ- ently to any other mineral that is mined here and the findings con- firm the detrimental impact our dual system is having in terms of increased costs and unnec- essarily long approvals times,”
SA Premier Jay Weatherill in- stigated the Royal Commission last year as part of his Government’s push to find the State – which contains more than 30% of Australia’s uranium reserves – an active role in the nuclear fuel cycle.
The SA Labor Government has been a long-time supporter of the State’s ura- nium industry and it was former Premier, Mike Rann, who pressed the Federal ALP to drop its “three-mine” uranium policy at the 2007 National Party confer- ence.
It was hoped that decision would lead to a new era of uranium development in SA but the Fukushima incident and sub- sequent fall in uranium prices has sty- mied any such efforts.
However, the SA Government remains keen to pursue the development of a uranium industry and Weatherill set the Royal Commission the task of finding whether the State could successfully and safely insert itself into the nuclear fuel cycle.
Among the key findings of the report were:
• Exploration, extraction and mill- ing
An expansion of uranium mining has the potential to be economically benefi- cial however it is not the most significant opportunity.
• Further processing and manufac- ture
In an already oversupplied and uncer- tain market, there would be no opportu- nity for the commercial development of further uranium processing capabilities in South Australia in the next decade. However, fuel leasing, which links ura-
nium processing with its eventual return for disposal, is more likely to be com- mercially attractive, creating additional employment and technology-transfer op- portunities.
• Electricity generation
Taking account of future demand and anticipated costs of nuclear power under the existing electricity market structure, it would not be commercially viable to generate electricity from a nuclear power plant in South Australia in the foresee- able future.
However, Australia’s electricity sys- tem will require low-carbon generation sources to meet future global emissions reduction targets. Nuclear power may be necessary, along with other low car- bon generation technologies. It would be wise to plan now to ensure that nuclear power would be available should it be re- quired.
• Management, storage and dis- posal of waste
The storage and disposal of used nu- clear fuel in South Australia would meet a global need and is likely to deliver sub- stantial economic benefits to the commu- nity. An integrated storage and disposal facility would be commercially viable and the storage component could be opera- tional in the late 2020s.
Such a facility would be viable and highly profitable under a range of cost and revenue assumptions.
Financial assessments and an eco- nomic model by external consultants indicated an integrated storage and dis- posal facility could generate revenue of more than $257 billion, with total costs
SACOME chief executive Jason Kuchel said.
“The findings also confirm the value in increasing our involvement in the enrich- ment and further processing of uranium,” he added. “While the tentative findings suggest the economics for nuclear en- ergy in Australia are not favourable in the current climate, nuclear power has the scope to be viable in the future and deliver significant advances for reducing carbon emissions.
“In the not too distant future, small scale modular reactors could be used to power remote mine sites and communi- ties. For these reasons, the Commission is right in calling for Australia to remove the outdated legislative impediments that stop the potential for nuclear power.”
Chamber of Minerals and Energy WA (CME) chief executive Reg Howard- Smith said the Royal Commission’s tentative findings were also a boost for Western Australia’s 16 uranium projects.
“CME is encouraged by the Commis- sion’s tentative findings which recognise South Australia can safely increase its participation in nuclear activities and generate significant economic, environ- mental and energy security benefits for the state,” Reg Howard-Smith said.
“As acknowledged by the Commission, it is wise to plan now to ensure nuclear power would be available should it be re- quired. CME is hopeful [this] announce- ment will pave the way for further support for nuclear energy in Australia and looks forward to considering the Commission’s Tentative Findings and final report, once released in May, in further detail.”
SA’s nuclear future
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 5


NEWS
Lanstead happy with ASX investment progress
Retail investors may be unlikely to come out of hibernation in 2016 but specialist resources funds such as Lan-
stead Investors have continued to stay active throughout the bleak post-boom winter.
Speaking to Paydirt last month, Lan- stead director Andrew Sparke said the fund was seeing green shoots in the Aus- tralian resources sector.
“We believe now is the time to get back into Australian resources juniors be- cause some are doing very well off the back of good news flow,” Sparke said.
Lanstead has around $300 million to commit to ASX-listed companies and has funded $39 million in placements in 13 companies since arriving on Aus- tralian shores, including placements in companies such as KBL Mining Ltd, Austin Exploration Ltd, Promesa Ltd and Blackham Resources Ltd over the last 18 months.
A 2014 placement in Blackham Resources has proved one of Lanstead’s most successful Australian investments
“There has been a fabulous response in Australia and we have now got a fair bit under management,” Sparke said. “In the first year we had to educate the mar- ket on what we were about and that work has paid off because now we are a capi- tal partner of choice.”
He said Lanstead had recently been particularly keen on gold, lithium and graphite plays.
“Australian gold has actually been performing for more than 12 months but it has taken the mar- ket time to work that out.”
The fund will look at all commodities, Sparke saying its long-term invest- ment focus meant it was not affected by market volatility or restricted to looking at only fashionable metals.
One of Lanstead’s unique attributes is its sharing agree- ment model, which has so far seen an additional $8.5 mil- lion paid out to com- panies as part of an incentive scheme.
“It is a strong performance incen- tive,” Sparke said.
“If share price goes up, we’ll give more money but not ask for any more shares.” The sharing agreements are in keep-
ing with Lanstead’s model which identi- fies companies which need help reach- ing key development milestones.
“We look very closely at the milestones a company has in front of it and take a view based on whether we think those milestones will be value accretive. If a company needs $10 million to reach the milestone and we can see positive news flow being generated from that, we will invest,” Sparke said. “It is about dangling the carrot.”
In the current market, many companies are just happy to survive but Sparke said that sometimes became an end in itself.
“A lot of companies are very good at staying alive during the tough times but they are not progressing their business because they don’t have the capital. If they can benefit from a capital injec- tion, we will look at it. If you can deploy a strong cash injection correctly, we be- lieve we will see a lot of interest in the stock.”
Sparke pointed to the example of Blackham, in which Lanstead placed $2.2 million in October 2014 as the com- pany pursued its development of the Ma- tilda gold project in Western Australia.
“At Blackham, it was a new manage- ment team and gold was on the nose but we looked at the project and saw a big resource and access to a plant and could see the milestones the company was likely to hit.”
– Dominic Piper
PAGE 6
MARCH 2016 AUSTRALIA’S PAYDIRT


BUSH TELEGRAPH
Cast adrift Kumba prepared for journey
Kumba Iron Ore – one of the most profitable min- ing companies ever set up in
South Africa and the linchpin of arguably the country’s most successful black economic em- powerment (BEE) structure – is to be cut loose from parent An- glo American Corporation plc.
The Northern Cape iron ore
producer will either be spun out
or sold off from Anglo as part of
the group’s drastic restructur-
ing programme to reduce debt
and focus on three designated
core businesses – platinum, diamonds and copper.
That was confirmed on February 16 by Anglo chief executive Mark Cutifani when he presented the group’s results for the year to end-December. Cutifani added the unbundling of its 69% stake in Kumba was the “base case option” the group was currently studying.
There’s a reason for that. Under cur- rent grim commodity market conditions – particularly for iron ore – it seems highly unlikely that Anglo is going to get anything like the price it might want for Kumba.
It’s far more likely a successful buyer would be able to negotiate terms very much in its favour and that buyer could well end up with the mining purchase of the decade should market conditions turn and also judging by the sweeping measures Kumba management has tak- en to keep the operation profitable and which are already paying off.
Investors seem to be taking that posi- tive view judging by the share price move- ments. The Kumba share price jumped 7% on the day Cutifani confirmed Anglo was getting out, bringing total gains over the fortnight leading up to the announce- ment to 20%,
That still only brought the Kumba share price back to around R60, compared with a high of R600 in 2013 at the peak of the commodities boom.
Kumba operates two mines in the Northern Cape – the long-running Sishen operation and the much newer Kolomela mine – which between them exported 43.6mt of iron ore in 2015 and supplied another 4.3mt to the RSA do- mestic market.
Kumba will be cut from Anglo American’s portfolio
R627 million in 2015 from R14.1 billion in 2014 and no dividend was declared.
In January, Kumba an- nounced it was to lay off near- ly 4,000 workers – about half its work force – as it chopped back on operations at the age- ing Sishen mine.
Chief executive Norman Mbazima laid out the group’s survival plan in detail when he presented Kumba’s financial results on February 12.
All that ore is railed to the port of Saldanha Bay on South Africa’s west coast where it is exported, except for the domestic sales supplied to ArcelorMit- tal’s steel mill situated near the port.
The operation was set up in the mid 1970s by the former state-owned Iron and Steel Corporation (Iscor) which was subsequently privatised and split into two major listed corporations – Kumba and Exxaro Resources Ltd.
Over the past decade those two cor- porations have been among the most successful in the RSA mining sector with Kumba being one of very few RSA mining groups able to capitalise on the commodity boom as it boosted exports through Saldanha Bay.
Exxaro benefited through its direct stake in the Sishen mine – which pro- vided Kumba with the necessary BEE credentials – from which it earned an- nual dividends of typically more than R2 billion.
The largesse also extended to Kum- ba’s workforce because in December 2011 6,208 employees each received an after-tax payout of R345,627 when the group’s first broad-based employee eq- uity share scheme matured.
That’s a fortune in South African terms and came on top of each employee hav- ing already received up to R55,000 over the previous five years through payouts in terms of the scheme.
But the good times came to an end last year when Kumba’s total revenue for 2015 of R36.1 billion dropped 24% from the 2014 level of R47.6 billion mainly be- cause of the drop in FOB iron prices to $US53/t from $US91/t in 2014.
Group profit for the year plunged to
The measures taken over the past year had already succeeded in chopping net debt by 42% while con- trollable costs had been reduced by R4 billion and the group’s breakeven cost brought down to $US41/t against a prior target of $US45/t set in the first half of
2015.
Mbazima said there was more to
come, indicating that Kumba manage- ment was targeting a further drop of up to $US10/t in “controllable costs” during 2016. He said the overall target was for a reduction in “total cash break-even costs” to below $US40/t but the actual level achieved would depend on some factors outside Kumba’s control such as freight rates; the lumpy ore premium paid by customers; the oil price and currency fluctuations.
He said these “uncontrollable fac- tors” could have a significant impact on Kumba’s final cash breakeven cost num- ber and added he believed the group’s breakeven cost could drop to as low as $US32/t “if everything goes well”.
Mbazima commented: “We hope that these [uncontrollable factors] will be fa- vourable in 2016 but we cannot base our business on that being the case. That is why we have taken the tough and painful decisions required to adapt our opera- tions to this environment.”
What was that old adage about “when the going gets tough, the tough get go- ing”? Mbazima came across as some- one committed to ensuring his business would survive which is yet another plus factor for Kumba’s future outside of An- glo.
Brendan Ryan is a Johannesburg-based min- ing writer
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 7


NEWS
BHP Billiton slashes dividend, posts $US5.67 billion net loss
BHP Billiton Ltd slashed its interim dividend by 75% last month, abandoning a long-held
policy of steady or higher pay- outs, as it braces for a longer- than-expected commodities downturn.
The end to BHP Billiton’s so- called progressive dividend policy came as the world’s larg- est diversified miner slumped to a net loss of $US5.67 billion for the six months to December 31, its first loss in more than 16 years.
“We need to recognise we are in a new era, a new world and we need a different dividend policy to handle that,” BHP Bil- liton chief executive Andrew Mackenzie said on a media call, warning of a prolonged period of weaker prices and higher volatil- ity.
The dividend cut to just $US0.16c was more severe
than market expectations for a
payout as high as $US0.35c. BHP Billi- ton pledged a minimum 50% payout of underlying profit going forward.
“Given months of anguish and market debate regarding the dividend, we expect that $US0.16c, while disappointing, is cash flow positive and therefore will likely be absorbed by the market,” Shaw and Partners analyst Peter O’Connor said.
Mackenzie said the shift was part of a broader strategy to help BHP Billiton manage volatility.
“The financial flexibility we will gain as a company from this move...will allow us to invest counter cyclically,” he said. “It will allow us to look at tier one assets in distress.”
Standard & Poor’s cut BHP Billiton’s credit rating to ‘A’ from ‘A+’ last month and warned it might downgrade again if the company failed to take more steps to preserve cash and review its dividend policy.
“I can’t see [the ratings agencies] downgrading. They probably would have if the commodity outlook was still poor, but I think the outlook is starting to turn in BHP’s favour,” Fat Prophets mining ana- lyst David Lennox said.
Mackenzie also announced a revamp
BHP Billiton posted its first net loss in more than 16 years for the December half
of BHP Billiton’s corporate structure in a bid to simplify operations, creating US and Australian mineral divisions in a move that will see its iron ore chief Jimmy Wilson and petroleum head Tim Cutt de- part.
BHP Billiton shares closed 2.5% high- er at $17.62/share on February 23 – the day the company posted its half-year re- sults – in a slightly weaker overall market.
Australian Shareholders Association director Geoffrey Bowd said the dividend cut was “very prudent” in light of the com- modities outlook.
Shares in close peer Rio Tinto Ltd have lifted some 9% since it swapped its progressive dividend policy for a payout ratio on February 11.
BHP Billiton’s underlying attributable profit plunged to $US412 million, down from $US4.89 billion a year earlier, missing analysts’ forecasts for around $US585 million, as commodities prices plummeted to multi-year lows.
“While the miss looks big in percent- age terms, the numbers are quite frankly disappointingly low anyway,” Connor said, pointing to BHP Billiton’s $US100 billion asset base.
zie said BHP Billiton was still generating EBITDA margins of 40%, which is ahead of the reported figure of around 34% for Rio Tinto.
At today’s spot prices, the company would expect to generate $US10 billion in operating cash flow for the year, he said.
BHP Billiton’s results included an after- tax charge of $US858 million following a dam disaster in Brazil at its Samarco JV with Vale SA, which killed 17 people in that country’s worst environmental dis- aster.
A total of $US6.1 billion of exceptional items included an impairment charge of $US4.9 billion against the carrying value of its US onshore oil and gas assets and $US390 million for global taxation mat- ters
Mackenzie said there were no immedi- ate plans to expand shale operations in the United States, but BHP Billiton re- mained committed to the business.
– James Regan, Reuters
PAGE 8 MARCH 2016 AUSTRALIA’S PAYDIRT
Despite the tough outlook, Macken-


Boxing on despite market gloom
It is no secret mining stocks have toppled dramatically in the last few years due to falling commodity pric-
es, with many investors left feeling scorned by the downturn which has crippled the industry.
But are those investors partly to blame for the financial pain they have suffered as a result of bad in- vestments? That’s the question be- ing asked by a leading investment fund manager.
Glenn Rushton, of Rushton Fi- nancial Services Pty Ltd, believes too many investors have placed “all their eggs in one basket” and adopted investment strategies which cannot survive all economic conditions.
Rushton says investors should not be discouraged from buying shares in mining-related enter- prises, but warns against stocking up on too many investments from within the same industry.
“I look at a person’s total position
and ask how much of their assets
they have allocated to that particu-
lar sector,” Brisbane-based Rushton told Paydirt during a recent trip to Perth.
“If someone was to say they’ve allocat- ed 80-90% of their wealth to the mining sector – and they’re looking to generate a consistent income stream – I would say they’re probably being quite foolish.
“But if someone can see past these current problems and get their asset al- location right, they can survive and make good returns over the long term. And that’s the key – can you survive long enough to reap the long-term growth? Investing is a long term problem, but un- fortunately most investors take a short- term view.”
Rushton is a former property devel- oper who co-founded Rushton Financial Services with his son, Lee. The pair be- lieved the average investor could gener- ate strong financial returns through all economic conditions by adopting invest- ment models similar to the ones typically used by the world’s most sophisticated investors.
The Rushtons studied the strategies successfully implemented by some of the world’s richest families, including the Rockefellers, Rothschilds and Oppen- heimers, as well as cashed-up tertiary institutions such as Yale University and Harvard University.
From their investigations, coupled with
Glenn Rushton with boxer Joe Goodall
horizon, then it could be perceived as a good time to invest in mining,” Rushton said.
“But if you’re somebody that’s obviously close to retirement, or in retirement, and you’re looking for an income stream, then maybe it’s not such a good time to invest in mining.
“However, if you can comple- ment that with another income stream that works well through rising and falling markets, then it could be quite lucrative.”
Rushton said several mining ex- ecutives have requested meetings with him in recent times, as they look to restructure asset portfolios which are heavily weighted on the success of the resources industry.
“A lot of them are looking at what they own and saying, ‘I’m in seri- ous trouble here if things go re- ally bad. And what if I also lose my job?’,” Rushton said.
“It’s very important to stress- test your asset allocations. Have a look at everything you own and
years of experience managing invest- ments for high-net worth investors, the father and son team set up the Rushton Global Market Neutral Fund – a regis- tered, managed investment scheme that can perform equally well in both rising and falling markets, with very moderate volatility.
“In tough times, it’s important to look for alternative income sources,” Rushton said. “You need something that’s lowly correlated to growth, something that can perform when things are contracting.
“That’s what makes the Rushton Glob- al Market Neutral Fund a great addition to most investment portfolios, because our highly diversified global market neutral strategy can generate income equally well through good and bad times, but with very moderate volatility. It also provides valuable downside protection, which is desperately needed by investors heavily biased to resources.”
Inquisitive investors are pondering whether to buy shares in mining compa- nies with prices at or near decade-long lows. Others are looking to sell out in a bid to recoup some of their cash.
Rushton said any decision to stock up on mining investments was entirely de- pendent on what the individual was seek- ing from the financial venture.
“If you’ve got a long-term investment
run ‘what if’ scenarios; What if oil drops to $US10/barrel? What if China’s growth drops to 4%? What if the Federal Govern- ment continues to raise interest rates?
“One of the things we always need is cash – cash is king. A lot of investments are focused around capital growth, but you need a cash cow. You need an in- vestment that can generate revenue in bad times, not just the good times.”
Also a prolific boxing coach for more than four decades, Rushton will often use the same approach when instructing both his sporting pupils and investment clients on their next move.
“One of the things we often talk about in boxing is having someone in your cor- ner who is experienced, really capable and who cares about you,” Rushton said.
“That’s exactly who you want in your corner in the investment arena; someone who knows what they’re doing, with a lot of experience, who really cares about you as well.”
Rushton guided Jeff Horn to the quar- ter-finals of the London Olympics in 2012 and Joe Goodall to a silver medal in the super-heavyweight division at the 2014 Commonwealth Games in Glasgow.
– Michael Washbourne
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 9


NEWS
Macfarlane cuts political chain
Former Federal Minister for Industry and Science Hon Ian Macfarlane will retire
from politics later this year af- ter deciding not to contest the next election.
Macfarlane’s decision to quit parliament comes after he was dumped from his fa- voured portfolio shortly after Malcolm Turnbull was sworn in as Australia’s new Prime Minister last September.
The 60-year-old attempted to switch from the Liberal Party to the Nationals in De- cember, but his defection was blocked by the Queens- land LNP executive.
“After almost 18 years representing the constitu- ents of Groom, serving nine of those years as a Cabinet Minister and Minister under the Howard and Abbott gov- ernments, and a further six years as a shadow minister, the time is right to pass the baton,” Macfarlane said.
AMIRA International managing director Joe Cucuzza, with former Federal Minister for Industry and Trade Hon Ian Macfarlane and WA Minister for Mining and Petroleum Bill Marmion in Perth last year
“After 32 years in public
life in agripolitics, I will now
be looking for new challenges to use my wealth of knowledge and experience in the resources, industry and science sec- tors for the betterment of our great na- tion.
tion, Macfarlane served as Shadow Min- ister for Trade, Infrastructure and Water, Energy and Resources.
Macfarlane was sworn in as Minister for Industry following the election of Tony Abbott as Prime Minister in September 2013. His portfolio was expanded to in- clude Science in December 2014.
Association of Mining and Explora- tion Companies (AMEC) chief executive Simon Bennison lauded Macfarlane’s contribution to the resources industry, particularly his support of the Exploration Development Incentive (EDI).
“The Hon Ian Macfarlane was a strong advocate for the industry and worked closely with AMEC to ensure that mid- tier miners and explorers’ views were represented in the Coalition’s policies,”
Bennison said. “During his time as Min- ister for Industry, Ian was central to the implementation of key policies that the industry will continue to benefit from for many years to come, including the repeal of the Mineral Resources Rent Tax, the introduction of the EDI, and re-instate- ment and indexation of the diesel fuel credit in line with inflation.”
Turnbull also paid tribute to Macfar- lane, describing his outgoing colleague as “one of my closet friends in politics”.
“His retirement from parliament is the end of an era, but I have no doubt he will go from strength to strength in a new stage of his career and continue to make a formidable contribution to our nation,” Turnbull said.
“Ian Macfarlane always has his sleeves rolled up. This is his personal signature and also a metaphor for how he has gone about his work.
“Ian said in his maiden speech that it was his ambition to turn Australia’s future challenges into opportunities, and this is exactly what he has done.”
“I am truly grateful for the opportuni- ties to serve the nation over the years and greatly appreciate the support I have received from my family, my electorate and ministerial staff, and members of the LNP.”
Macfarlane was appointed Minister for Small Business in early 2001 and held the portfolio for almost a year before he succeeded Kim Carr and Martin Fergu- son as Minister for Industry, Tourism and Resources.
Following the defeat of the Coalition Government at the 2007 Federal Elec-
What you didn’t know about Ian Macfarlane:
• BorninKingaroy,theagriculturaltownformerQueenslandPremierSirJohBjelke- Petersen once called home
• ServedaspresidentoftheQueenslandGraingrowersAssociationforseveralyears before entering politics in 1998
• Affectionately nicknamed “Chainsaw” because of his raspy voice, although he believed it was because of his ability to “cut through red tape”
PAGE 10 MARCH 2016 AUSTRALIA’S PAYDIRT


No more shades of Gray in politics
After almost a decade in federal par- liament, popular advocate for the resources sector Hon Gary Gray AO has called time on his career in politics.
Currently serving as the Shadow Min- ister for Resources, Northern Australia and Special Minister of State, Gray in- formed his electorate of Brand he would not recontest the seat at this year’s elec- tion.
“At my regular Brand Electorate Coun- cil meeting I informed members that after nine years I felt it was time to move on, and to support renewal in the WA Fed- eral Parliamentary Party,” Gray said in a statement.
Gray said he would serve the Labor Party in whatever capacity Bill Shorten requested and threw his support behind the current opposition’s election bid.
“I wish Bill Shorten and my colleagues in the Federal Parliamentary Labor Party well. They are a terrific group of people; they will form a great government,” he said.
Gray has been a member of the Aus- tralian Labor Party since he was 16 and his 41 years of continuous membership
Gary Gray
includes seven years as national secre- tary and nine years in federal parliament. CMEWA chief executive Reg Howard- Smith said Gray was a passionate sup- porter of the sector who fully understood
the issues industry faced.
“Gary has had a long and distinguished
career in the resources sector, from his time at Woodside, being elected to Fed- eral Parliament in 2007 and then being given the honour of becoming Australia’s Resources Minister in 2013,” Howard- Smith said.
“In that role he continued and cement- ed the bipartisanship on issues impact- ing the sector.
“I would like to take this opportunity to thank Gary for his tireless work, both in government and in opposition, working to advance the causes of the resources sector.”
Howard-Smith’s sentiments were shared by Association of Mining and Ex- ploration Companies chief executive Si- mon Bennison.
Bennison was particularly keen to point out the important role Gray played in pushing the uranium cause in Australia.
“The Hon Gary Gray was a great sup- porter of the industry and recognised the value of uranium exploration and mining for the Australian economy,” Bennison said.
“Gary was extremely understanding and excellent to deal with across the range of policy issues that related to his roles as Minister for Resources and En- ergy, Shadow Minister for Resources and Shadow Minister for Northern Australia.”
Gary Gray was a regular fixture at Paydirt conferences
Gary Gray career highlights:
• OneoftheAustralianLaborParty’syoungestandlongest-servingnational secretaries
• ExecutivedirectoroftheWesternAustralianInstituteofMedicalResearch,now the Harry Perkins Institute of Medical Research
• Appointed Officer of the Order of Australia in 2003 for his contribution to electoral reform and affirmative action in the Australian Labor Party
• AmemberoftheexecutiveteamatWoodsideEnergyfrom2001to2007
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 11


NEWS
Mining Projects looks to lithium
Offering shareholders some value right now is a tough task.
Nevertheless, a vast number of ASX-listed juniors are up for the challenge and willing to explore areas and com- modities outside their main game.
One of these compa- nies is Mining Projects Group Ltd which has hopped on the lithium train in Western Australia.
The company acquired the Lynas Find assets, renamed the Pilbara lithium-gold project, from Tyranna Resources Ltd and Tribal Mining Pty Ltd in January via shares and cash worth $2 million.
“As an exploration company you are constantly looking to ensure the portfo- lio of assets you are working on is in line with the current trends of the market to ensure that you maintain ongoing viabil- ity,” Mining Projects managing director Josh Wellisch said.
“It has certainly made a lot of sense for us and the group [Tyranna] that we part- nered with in that transaction because they are excited about our nickel project and are keen to participate in that pro- ject in some form as well, so it made for a very sensible opportunity for our two
Josh Wellisch
groups to come together.” Diversifying into the lithium hotspot of the Pil- bara does not mean Min- ing Projects has gone cold on its flagship nickel project, Roe Hills, in the
Fraser Range. Atotalof10RCand
diamond drill holes were completed at Roe Hills last quarter, with results subject to assessment at the time of print.
Mining Projects’ Pilbara project borders the more advanced lithium assets owned by Pilbara Minerals (80mt @ 1.26% lithi- um) and Altura Mining Ltd (26mt @ 1.2% lithium), which could help the company attract capital when required.
“It has probably just started to take off in that [Pilbara] area. A number of com- panies have gone in there to spend capi- tal in the ground, which is very encour- aging. I think a lot of the lithium regions globally are now starting to get atten- tion from a capital perspective as well,” Wellisch said.
Mining Projects recently completed a $1.2 million capital raising and is eye- ing a drilling programme at the Pilbara project which has historically produced 125,000oz gold.
The company has started a series of exploration programmes, including map- ping, rock chip and soil sampling while it is also conducting geological, geophysi- cal and geochemical data evaluation.
An ultra detailed low level airborne magnetics/radiometrics survey (25m line spacing) covering the 29sq km Pilbara project will also be undertaken.
Data recovered from this programme will be used to define and prioritise target zones.
– Mark Andrews
Wellisch said the com- pany was preparing the next round of drill targets at Roe Hills, which is the ad- vanced project in the portfolio alongside Dingo Range, Fraser Range and Pilbara. “We have to take heed of the current situation in nickel and ensure we protect value for our shareholders. Certainly diversifying is an important part of the company, providing an opportunity for shareholders to see value in their invest- ment in what is a pretty difficult period in
the market,” Wellisch said.
Despite difficult market conditions, lith-
ium and graphite projects are attracting some interest and investment.
Lithium players, particularly in the Pil- bara, have provided some excitement in the market with the likes of Pilbara Miner- als Ltd lighting up the region.
Altura signs potential off-take customer
Altura Mining Ltd has signed a non- binding letter of intent with China- based Lionenergy Ltd for off-take of up to 150,000 tpa of spodumene concentrate from its Pilgangoora lithium project in Western Australia.
Lithium specialist Lionenergy has also agreed to subscribe to shares in Altura by way of a $3 million placement at 8.1c/ share. Altura was trading at 10c/share at the time of print.
Under the terms of the letter, Lionener- gy will purchase a minimum of 100,000t of spodumene concentrate from Pilgan- goora each production year for the life of mine, nominally 20 years.
Should Lionenergy elect not to pur- chase the full 150,000t in any one year, Altura will have the option to place ton- nages in excess of Lionenergy’s require- ments with other customers.
Spodumene concentrate pricing for the first 150,000t will be based on the prevailing market price, in US dollars. Subsequent pricing will be based on published sales prices for spodumene or negotiated between both parties.
A formal spodumene concentrate sales-and-purchase contract is condi- tional on Altura obtaining the required regulatory approvals and a decision to proceed to mine within three years of the letter of intent being signed.
Both parties have also entered into dis- cussions regarding possible investment and other project funding opportunities by Lionenergy and its associates regard- ing the construction of a mine and pro- cessing plant at Pilgangoora.
Funds raised from the private, non- brokered placement will be directed to- wards the development of Pilgangoora,
including completion of a DFS scheduled for delivery by the end of the month.
An independent mining study on the project, released in mid-February, pre- sented a base case 150,000 tpa produc- tion of spodumene concentrate via pro- cessing of 1 mtpa ore feed.
Key economics from the base case scenario included a mine life of 19 years, capex of $97.6 million, LOM revenue of $1.35 billion, LOM cash flow of $609 mil- lion, NPV of $277 million, IRR of 42.5% and payback within 2.3 years.
A 2 mtpa production case was also presented, increasing the project NPV to $392 million and IRR to 60%, offset by a shortened mine life of 10 years and an increased capex of $146.7 million. Pay- back is 1.6 years.
Orelogy Consulting Pty Ltd is oversee- ing the completion of the DFS.
PAGE 12 MARCH 2016 AUSTRALIA’S PAYDIRT


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NEWS
Perfect run by Neometals
Neometals Ltd is a few steps ahead of a number of companies looking to im- pact the lithium market.
While many of its peers try to make sense of what they actually have in the ground, Neometals is steaming towards first production of lithium concentrate from its Mt Marion project by mid-year.
“We are starting mining this quarter and start processing next quarter, with shipping in the September quarter, which is a pretty good timeline. We have done all this with no capital down for us, we have actually taken money off the ta- ble,” Neometals managing director Chris Reed told Paydirt.
Output from Mt Marion – 45% Neomet- als, 30% Mineral Resources Ltd and 25% Gangfeng Lithium Co. Ltd – is designed for 200,000 tpa of chemical grade spo- dumene concentrate.
The deposit currently contains indi- cated and inferred resources of 23.24mt @ 1.39% lithium oxide and 1.43% iron oxide.
Reed said the market can expect sig- nificant changes to the resource from a 335 RC and 30-hole diamond drilling programme currently under way.
Early results from the infill and exten- sional drilling programme prioritising near-surface mineralisation include 18m @ 1.76% lithium, 6m @ 1.39%, 11m @ 1.87%, 17m @ 1.69%, 21m @ 1.76% and 18m @ 1.24%.
Shipping of lithium from Mt Marion is scheduled for the September quarter
“We are belting them have another update this quarter and another one early next quarter and a new resource,” Reed said, referring to the drill- ing campaign.
Additionally, the com- pany is working on a DFS for its lithium hydroxide project (70% Neometals, 30% Mineral Resources).
out and we’ll
and 6% chemical grade lithium concen- trates were worth $US440/t.
Reed said current strains on the lithium market was due to a variety of reasons, including the lack of new projects in con- struction and Chinese demand for elec- tric and hybrid vehicles increasing.
“It generally takes four years to start a new greenfields operation for brine producers and there are no new ones in construction, apart from Orocobre [Ltd], but by their own admission they are a fair
way behind,” Reed said. “The Chinese have been adding the convert- ing capacity and creating this demand for lithium. There are geopolitical constraints on the brine producers, the Chinese need more hard rock and we are obviously ready, so we are well positioned for an uplift in the sector.” Off-take is of course a key component to Neo- metals’ lithium strategy and in Gangfeng – Chi- na’s leading lithium pro- ducer and most diversi- fied and most profitable – it has a reliable
partner.
Neometals and Mineral Resources
originally signed Gangfeng to take-or- pay 100% of the 6% chemical grade spo- dumene concentrate from Mt Marion.
However, metallurgical work has found
that additional spodumene product can be made through the addition of a flota- tion circuit to the beneficiation plant.
Therefore, Gangfeng has agreed to take a further 80,000 tpa spodumene concentrate of between 4-6% content.
Reed said having Gangfeng onside was a major fillip for the company.
“Prices are going up but there are 500 lithium battery producers and there are a few – probably a dozen small lithium pro- ducers and only really 2-3 big ones. Tian- qi [in JV with Rockwood Holdings Inc] have got half of Greenbushes, Gangfeng have got us and the rest are private and not really capable of financing any new operations,” he said.
“We are very lucky to have those re- lationships with Gangfeng. We have just increased our relationship, looking at a MoU to add a float circuit to recover the fines product to send that up there.”
Last month, Gangfeng requested to accelerate its option to acquire an addi- tional 18.1% in Reed Industrial Minerals, signalling the strength of support Neo- metals has from the Chinese.
Gangfeng are not the only ones backing Neometals. The market has warmed to the lithium player in the past 12 months, which is reflected in a share price rise from 3.3c/share in February 2015 to 25.5c/share at the time of print.
– Mark Andrews
The project, named the
Eli Process, has been
patented into the Reed
Advanced Materials
Pty Ltd vehicle, with the
downstream process-
ing technology designed
to be used in a 15,000-20,000 tpa LCE lithium hydroxide plant.
“The DFS will be ready about mid- year,” Reed said.
Earlier this year, battery grade lithium hydroxide was fetching $US9,000/t, while lithium carbonate was $US7,000/t
Chris Reed
PAGE 14 MARCH 2016 AUSTRALIA’S PAYDIRT


Brinsden’s backyard in the Pilbara
Ken Brinsden knows a thing or two about the Pilbara, but admits the lithi- um sector is foreign to him.
Nevertheless, Brinsden was chosen to be the main man at Pilbara Minerals Ltd late last year and will look to guide the emerging lithium player through to pro- duction at Pilgangoora in the near future.
“I don’t profess to be a lithium expert, I have a lot to learn in that area but what I do know is the Pilbara and what it takes to get mines built there and to be honest it feels a bit like the backyard there for me,” Brinsden told Paydirt.
“I know it really well and the people involved; key community groups, infra- structure providers and all that sort of thing, so I guess I can help there. Also, being able to create the link between the Pilbara [Minerals] resource in the ground and how people can take advantage of that in downstream markets.”
Brinsden remains an executive direc- tor at Atlas Iron Ltd, where he was for- merly managing director, so his contacts in key markets such as China will bring tremendous value to Pilbara Minerals.
A PFS on Pilgangoora is expected to be completed soon, while the company is continuing to conduct RC and diamond drilling to expand resources and define a mining reserve.
Last month, Pilbara Minerals an- nounced a resource update of 80.2mt @ 1.3% lithium with 1.08mt of contained lithium, including 42.3mt @ 0.02% tanta- lum for 18.3 mlb contained tantalum.
The company already has the second largest hard rock lithium resource glob- ally – behind Talison Lithium Pty Ltd’s Greenbushes – and in time it could po- tentially have the biggest.
Through infill and step-out drilling, Pil- bara Minerals has set an exploration tar- get of 100-110mt @ 1.3-1.5% lithium and
A DFS at Pilgangoora is expected to be released mid-year
200-300 ppm tantalum.
Brinsden said expanding the resource
was important, but it would mean little if there wasn’t quality in it.
“We have a quality resource and we have that in spades,” he said.
“We have a high-grade resource as far as global lithium is concerned and perhaps even more importantly we have already demonstrated some ability to hit the more sophisticated end of the lithium market regards a technical grade end product. That is a very important string to have in your bow. We have more work to do to prove up the orebody but we have made a really good start.”
Lithium is definitely flavour of the month and is fast becoming popular with junior explorers down on their luck in more traditional commodities such as base metals.
Interest in lithium stems from a market strained tense by insufficient supply.
Therefore, unlike juniors currently pondering what lithium potential they do have in the ground, Pilbara Minerals is at the advanced stage of assessing how it will impact the supply story in the next few years.
A DFS is expected to be completed mid-year, with permitting, project funding and a decision to mine to follow by the end of 2016.
By then, investors at odds with the lith- ium space should be up to speed as to why there is so much hype in the market today.
“People have started to work out that the material supply is not there and that is why everyone is now scrambling for supply,” Brinsden said.
“The institutional market hasn’t had to be exposed to lithium in a big way, but because there is a fundamental shift globally in how we use power and store power and how that affects transport and
power supply industries, the scale of the change is huge.
“We have a situation now where in- vestment markets are rapidly trying to catch up to understand that change and it just so happens that lithium is an important link in that chain. It doesn’t take long for investment mar- kets to work it out. While there is a bit to learn they are very fast learn- ers. Judging by the number of calls we have been fielding of late, they are going to get up to speed very quickly.”
– Mark Andrews
Ken Brinsden
An exploration target of 100-110mt @ 1.3-1.5% lithium and 200-300 ppm tantalum has been set at Pilgangoora
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 15


OPINION
Low prices and distressed mines: Brave decisions needed to survive
Our recent global mining report, Track- ing the Trends 2016, looks at the lat- est trends, trouble spots and travails that
should focus the minds of miners – here in Australia, as well as around the world over the next 12 months.
We also present strategies they can employ to adapt to changing industry dynamics, across the likes of China’s economic transition, the need to focus on areas such as operational excellence, innovation and safety and security.
One key trend is the need to adjust to the “new normal” when it comes to com- modity prices and demand. Demand might be down, but global production isn’t necessarily falling.
Producing at a loss is not generally a good place to be for anyone. But for companies with a strong balance sheet, it’s a simple enough strategy to continue producing at the lowest possible cost and see out the bad times. In fact, some min- ers are expanding production to lower unit costs through economies of scale to claw back margin. An added luxury for those fortunate enough to be in this posi- tion is that they may even be able to use the opportunity to add to their portfolio.
For others, however, the ongoing low price environment has forced a retreat into survival mode.
In a low price environment (and with no real sign of recovery in sight), first reac-
tions are generally to focus on cost and operational optimisation. This is an effec- tive response to price pressure and pre- serves margin. It also happens to be the option that mining executives feel most comfortable with as it generally fits their own area of expertise and is something they can control.
However, every mine has a level be- low which it simply can’t produce and, at current price levels, the number of mines producing at a loss is significant across most commodities.
Mining companies that find themselves low on cash and high on debt, however, face an altogether different picture.
A strategy of just hoping for a recovery
Mining companies need to adapt to an environment where lower commodity prices are the new normal
PAGE 16 MARCH 2016 AUSTRALIA’S PAYDIRT


can be fatal as management teams lose control and creditors and other stake- holders start to drive the agenda. This is already playing out, with increased com- pany debt restructurings and corporate collapses.
So, once cost reduction options have run out, what’s left to ensure miners pre- serve value for their stakeholders? Wak- ing up to the reality of a “lower for longer” environment, or even lower prices as a “new normal” is a very good start.
Thinking long term and being prepared to make brave decisions are the next steps, and management teams, under the oversight of smart-thinking boards, have to gain a granular understanding of key areas that drive decision-making in a distressed environment.
Areas that need the highest levels of knowledge and understanding include:
• The real value of the mineral as- sets
The current sustained low price and outlook is resulting in an increase in im- pairments to asset values. Impairments carry the risk that balance sheet cov- enant breaches may be triggered where debt exists. Understanding the potential impact of this and early engagement with debt providers is critical
ment teams need to consider a range of potential scenarios
• The skill-set within the team. Be honest about the level of expertise and get help from experts where a skills gap exists
Your people have got you this far, and done a great job operating during good times. But are they equipped to man- age during the lean times and with the competing needs of different stakehold- ers? An independent view can give confi- dence to you and your stakeholders and provide additional resource support to your team
• The implications of putting opera- tions on care-and-maintenance. Do this while management can still con- trol the process
Care-and-maintenance is certainly a consideration, but miners need to care- fully examine the pros and the cons. Put- ting an operation on hold comes with its own costs, supply chain impacts and the need to consider the risks and costs to ramping up production when operating conditions improve
• How the situation is impacting staff. Communicate openly with them The people equation remains impor- tant. Employees remain a key stakehold-
er group who can make or break chal- lenging times. Remember this is likely to be more a marathon than a sprint
• The supplier profile, risks and their expectations. Get their support early
Suppliers and contractors will become creditors should an insolvency appoint- ment become necessary and, for some, their success or failure, will be directly linked to yours. Understand their indi- vidual positions, and seek their support as valued partners, even to the extent of converting their support in the lean times into equity when better times return
• Short-term cash flow needs. Plan weekly cash flow, daily is even better
It goes without saying that taking a granular approach to managing cash when revenues are weak is critical
• How the regulatory environment can provide protection to distressed businesses in the relevant mining ju- risdiction
Regulatory and/or tax relief can cer- tainly help with some jurisdictions open to, for example, a suspension of royalties.
Once distress hits, things can go downhill fast, and management teams need to adapt quickly and be unstintingly proactive in engaging with these issues
• The rights, motiva- tions and interests of debt providers
Power can shift quickly, and knowing how to appro- priately engage and commu- nicate with this potentially di- verse group of stakeholders is important
• What operating cash flows look like at current and an appropriate range of forecast prices, not the prices we all hope for
The current volatility has challenged established norms about how future pric- es might move and manage-
in order to stay in control of the situation.
This requires clear vision on what the options are, and decisive action to pur- sue the route that preserves the most value and ensures the best outcomes for all stakeholders.
Based in Perth, Jason Tracy is a Deloitte Restructuring Services partner.
Chris de Vries is an Associate Director with technical mining ad- visory firm Venmyn Deloitte.
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AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 17
Pan Pacific Perth November 17-18


NEWS
St George stamps ground on nickel
Shortly after completing the acquisition of Mt Alexander from BHP Billiton Nickel West
Pty Ltd, St George Mining Ltd confirmed significant explo- ration upside at the project, 120km south-southwest of the nickel-rich Agnew-Wiluna belt.
“It’s already had a high- grade nickel-copper-sulphide discovery and importantly it is at a shallow depth. That is very important for economics, a lot of these mines that are closing down now are very deep, which is one of the biggest problems; the high cost because they are very deep,” St George execu- tive chairman John Prineas told Paydirt.
“[Mt Alexander] is potentially open-pittable and if we find
more of it the economics could
be extremely favourable at low
costs. Even though it is a weak
price environment we may get a
lot of interest and a lot of excite-
ment if we get more high-grade
hits at these kinds of levels. We
have lots of drilling in store and hopefully that will fire up some interest.”
At the time of print, a drilling pro- gramme was being finalised for Mt Alex- ander, 25% of which belongs to Western Areas Ltd.
Western Areas is also now a share- holder in St George, something Prineas welcomed.
“They have taken a small sharehold- ing in St George, they have a double dip interest so I think between the two of us we have an extremely good technical brain. We are definitely go- ing to find more mineralisation as we go along and get a feel for the kind of scoping or feasibility studies to do,” he said.
“It is another sort of validation that this is a good project and we are a good company. It is a great bonus they have taken a shareholding and are prepared to contribute to the process as we go along and we are happy to have a relationship with them.”
The Mt Alexander acquisition ex- pands St George’s nickel-gold inter- ests in Western Australia, which also
made at similar levels to today’s spot price, giving Prineas some heart that nickel is not all doom and gloom at $US8,350/t.
“Nickel is weak but when Siri- us discovered Nova, nickel was pretty weak too. When Cosmos was discovered back in 1997/98 prices were also pretty weak, so there is a history of discov- eries when the nickel price has been weak and they have gone on to be extremely successful and rewarding,” Prineas said.
“We are very focused on this project [Mt Alexander] and East Laverton and even though nickel prices are weak we know we are going to be here for the longer term.”
With the likes of graphite and lithium in vogue, Prineas firmly stated that St George had no interest in pursuing such oppor- tunities.
“The only other thing we will be progressing is gold because that is an organic growth pros- pect for us and we have fantas- tic prospects there. We will be
developing that and if a new project was to fall into our lap, we’d look at it but we certainly won’t be going after graphite or lithium; we are standard WA nickel and gold,” he said.
Last month, St George started a maid- en drilling programme at the Atlas gold prospect at its East Laverton project in the hub of multimillion ounce deposits
like Tropicana and Gruyere.
The campaign at Atlas will test the
bedrock geology below an extensive composite gold-in-soil anomaly, which was identified two years ago by St George.
The Atlas soil anomaly has a strike of about 5,000m and is characterised by a gold-molybdenum-arsenic geo- chemical signature.
In addition to Atlas, the Cambridge North gold target has become a pri- ority alongside Ascalon, Bristol and DD010 for drilling this year.
– Mark Andrews
Mt Alexander has been added to St George’s nickel portfolio. St George has a 75% interest in the project; Western Areas has 25%
includes a number of properties in East Laverton.
While nickel prices aren’t conducive to investment from the market, the current environment is an opportune time to pick up assets at a discount.
Previous major nickel discoveries were
PAGE 18 MARCH 2016 AUSTRALIA’S PAYDIRT
John Prineas


20 October 2016
Perth, Western Australia
Register now for Australia’s only nickel event
australiannickelconference.com
To present, exhibit or attend as a delegate please contact Melita Fogarty
on (+61) 8 9321 0355 or email [email protected]
Image courtesy of Western Areas Ltd


COVER
Metals of Africa prepares launch into graphite sphere
PAGE 20 MARCH 2016 AUSTRALIA’S PAYDIRT


COVER
Metals of Africa prepares launch into graphite sphere
PAGE 20 MARCH 2016 AUSTRALIA’S PAYDIRT


Graphite is a competitive, confusing space for investors and compa- nies alike as they battle to understand not only the confusing nature of its mineralogy but also the markets it serves. Shorn of the simplicity of
precious metals and LME-traded metals projects, an assessment of the graphite market requires analysis of another layer of complexity.
was a mineral worth investigating.
“We pegged the ground in 2012 at the same time as Syrah started putting out their positive drilling results,” Leeden said. “I always keep an eye on what peers are doing and Syrah’s results sparked my interest. I knew there must be further
mineralisation up there.”
Leeden had moved to Mozambique in
2011 and MoA was subsequently envis- aged as a project generating company. Its first major project was the Rio Mazoe base metals prospect – previously ex- plored by BHP in its hunt for another Bro- ken Hill – but as zinc prices retreated and funding for junior greenfields exploration collapsed, Leeden realised the company had to look further afield.
“The fall in the zinc price made Rio Mazoe much less attractive to inves- tors,” she said. “So, when the Montepuez graphite licence was granted in 2014 it was a good time to switch focus.”
MoA was far from the first ASX junior to jump on the graphite bandwagon and even before the company started drilling at Montepuez, local investors were ques- tioning the longevity of the graphite run. Leeden herself admits to initial concern as to whether the company was joining a bubble.
“But as I looked into the sector more I
Metals of Africa Ltd (MoA) managing director Cherie Leeden admits she used to look at graphite projects – and the wider graphite market – and struggle to make sense of it.
“There is a lot of complexity in graph- ite,” she told Paydirt. “You can’t say a project is good just because it has high grade and even flake size alone is not enough.”
Leeden is well experienced in junior exploration circles, having previously worked with LionOre International, Rio Tinto Ltd, Strike Resources Ltd and Ad- vaita Power Resources. She has always had an affinity for base metals and coal and had never previously considered industrial minerals as an attractive sec- tor. However, when MoA’s neighbour in Mozambique, Syrah Resources Ltd, be- gan enjoying rapid share price apprecia- tion on the back of encouraging drilling results at its Balama graphite project in northern Mozambique, she decided it
A sample of the graphite outcrop Metals of Africa has been finding on the Balama Central project
A deepwater port at the northern Mozambican city of Pemba caters for handimax vessels
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 21


COVER
Metals of Africa managing director Cherie Leeden (second right), operations manager Sam Sweet (far left) and country manager Bruno Carmo (second left) join the Balama Central field crew for a team photo
saw global demand didn’t correlate with supply.”
According to Benchmark Mineral In- telligence, global graphite demand is 645,000 tpa. Traditionally, this demand has come from the refractories and foundries, recarburiser, lubricant and other industrial sectors, but it is graph- ite use in lithium-ion batteries (currently accounting for 14% of annual demand)
where rapid growth is expected to come from.
Graphite demand from the battery sector is forecast to grow 40% p.a. in coming years as battery storage technol- ogy takes hold throughout the globe. As graphite is a key component of lithium- ion batteries (it is used as the anode to lithium’s cathode), this growth is expect- ed to fuel demand.
However, Leeden sees even greater demand for MoA’s product, if the com- pany can get its cost structures right.
“For me it comes down to opex and suitable quality,” she said. “Battery usage is obviously growing and I think an even greater opportunity comes in replacing synthetic graphite with natural graphite in the spherical graphite market.”
Spherical graphite is a physically and
PAGE 22 MARCH 2016 AUSTRALIA’S PAYDIRT


Despite initial reservations about jumping to graphite, Leeden has led a rapid development push of both Montepuez and Balama Central
chemically altered form of graphite used in lithium-ion batteries. Its rounded shape allows for more efficient packaging of par- ticles which increases the energy capac- ity of the anode.
China dominates the spherical graph- ite market which produces most of it from synthetic graphite; an expensive and en- vironmentally hazardous exercise.
Leeden – and others – believe if natu- ral graphite producers can deliver a low- er cost product, spherical graphite end-
Evidence of the high-grade nature of the graphite can be seen on Leeden’s hand
users will switch from synthetic to natural graphite.
“The spherical graphite market is much larger than the current natural graphite market and most observers are not highlighting that potential in the natural graphite demand projections. There are advantages, particularly for West- ern end-users, in sourcing natu- ral graphite as it is around a third cheaper than synthetic graphite.”
Metals of Africa was still awaiting some assay results from Balama Central at the time of print but early indications were it hosted a high-grade zone of 17-22% graphite within a wider zone of 5-9% graphite, almost from surface
For those companies such as
Tesla, Panasonic and LG who are mar- keting the entry into the storage battery market as a victory for green technol- ogy, the allure of a cleaner and cheaper source of spherical graphite is proving compelling.
Beginning to be convinced by the
fundamentals and opportunities in the graphite market, MoA pressed ahead with exploration.
Mitchell Drilling was engaged almost immediately and MoA then went from li- cence issue to an indicated resource in less than a year.
The new Pemba Port facility will expand Metals of Africa’s export options in the town
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 23


COVER “How we proceed all depends on
The resource at Mon-
because the major question is whether we will have a central processing facility or just focus on one of the de- posits – it makes no sense to build separate plants on both,” Leeden said.
“How we proceed all de- pends on what the PFS says and how off-take discus-
sions go. Montepuez has the superior purity and larger flake size distribution but Balama Central has the similarities to Syrah’s Balama.”
So, while Montepuez appears to have the potential to produce the higher val- ue product, the similarities between the two Balamas (they are essentially the same deposit) may make finding an off- take partner for MoA’s Balama an easier proposition.
Syrah is building the world’s largest graphite mine at Balama with the 300,000 tpa project expected to be in production later this year. The company already has an 80,000 tpa off-take agreement in place with Chinese firm Chalieco as well as a number of smaller off-take contracts with industrial end-users but negotiations with several major battery and electronic companies regarding construction of a proposed spherical graphite plant in the United States have greatest relevance to MoA.
All of these companies currently use Chinese spherical graphite produced from synthetic graphite but are consid- ering the switch to natural graphite. If one or more do come to agreement with Syrah, Leeden expects them to look to MoA’s own Balama Central project to provide diversity of supply.
“We are next door to Syrah and there are numerous end-users who have indi- cated publicly they are seeking similar product to what is coming out of Syrah because they are interested, not only in long-term supply, but diversity of supply. So, being close to Syrah is actually an advantage to us.”
Project development will therefore be largely dependent on how off-take nego- tiations unfold.
“We have got end-users conducting test-work at the moment but this is not simple work and requires months of test- ing the product under pressure, tempera- ture, etc,” Leeden said.
If agreement with an end-user was reached, it would lead to MoA building its own spherical graphite plant, a fac- tor already considered in the Montepuez concept study.
“Like all commodities, the opportunity lies in processing and value-addition and there is the opportunity to exploit
tepuez – 260km west of the
port town of Pemba in north-
ern Mozambique – stands
at 62mt @ 10.3% TGC. On
February 10, MoA released
results of a concept study,
showing Montepuez could
produce 100,000 tpa of
graphite concentrate at an
opex of $US300/t and capex of $US86 million.
what the PFS says and how off- take discussions go. Montepuez has
the superior purity and larger flake size distribution but Balama Central has the similarities to Syrah’s Balama.
Montepuez, however, is just half of the company’s Mozambican graphite story. Forty kilometres south, the company has also drilled out the Balama Central pros- pect which abuts Syrah’s 1.15bt @ 10.1% TGC Balama project.
Nineteen of the 20 holes drilled at Balama Central returned visible graphite with assays returned in January includ- ing hits of 85.55m @ 9.33% TGC from 8m including 15.85m @ 22.69% TGC from 39.2m.
A resource and related concept study for the Balama Central prospect was due
at the time of print and would lead direct- ly into a PFS for both prospects. Leeden said the PFS would judge the merits of building a central processing facility be- tween the two deposits against a stan- dalone operation at just one of them.
While in precious and base metals this assessment would be largely driven by the traditional tonnes-times-grade equa- tion, the nature of the graphite market means MoA’s decisions would be equally influenced by other aspects, chief of all what potential off-takers are willing to buy.
“Only when we have both concept studies can we start the PFS in earnest
MMetals of Africa mourns Ruli
etals of Africa Ltd lost one of its most influential and
dedicated employees late last year, Bangun Maruli Tua Napitupulu.
Napitupulu, or Ruli as he was known to his family and friends, died on site at the company’s Balama field camp from natural causes.
Metals of Africa managing director Cherie Leeden said Ruli was more than a colleague, he was her dedi- cated, affable and inquisitive sidekick who was instru- mental in every major discovery she had been involved in since 2007.
“We met in Kalimantan, Indonesia and he actually featured on the cover of a Paydirt edition back in 2009,” Leeden said.
“Since 2007 he has been my right-hand man; the col-
league that I’ve depended upon most. Over the past
eight years he worked with me across Indonesia, Australia and Africa and was loved by colleagues across the globe.”
Leeden said Ruli was an exceptional geologist and had a particular passion for mak-
ing greenfields discoveries.
“He specialised in coal until switching to graphite in Mo- zambique a few years ago,” she said.
“Ruli was instrumental in discovering our Montepuez Central graphite resource. I pegged the license; however it was Ruli who went in there and mapped it, which led to the discovery of our company’s main asset. Since map- ping it he has spent the majority of his time based on site in Mozambique defining our resource.”
Ruli leaves behind his pregnant wife, Mindoirene, and two children; Manuella, aged five and Marco, aged 3.
“Unfortunately, our company’s life insurance does not cover natural causes for non-Australian residents, so we are seeking assistance to help Ruli’s family,” Leeden said.
If you would like to donate to Ruli’s fund, please visit www.forruli.com
PAGE 24 MARCH 2016 AUSTRALIA’S PAYDIRT


Pemba is in the Cabo Delgado province of northern Mozambique and is host to one of the world’s largest natural bays
spherical graphite processing in the US or elsewhere. All end-users are currently sourcing spherical graphite from China; it doesn’t make sense that there shouldn’t be other supplies.”
The concept study showed MoA could produce coated spheri-
cal graphite for application
in lithium-ion batteries for
$US3,200/t with Indus- trial Minerals research in- dicating current prices of $US5,000-10,000 for the finished product.
Establishment of a spheri- cal graphite plant would necessarily be in conjunc- tion with an off-take part- ner and it is in MoA’s cost structure where Leeden sees great advantage for end-users.
“The biggest advantage we have is our opex,” she said. “At less than $US300/t FOB Pemba Port, we will be the cheapest graphite pro- ducer in the world. Most of the others will be consider- ably higher and that is im- portant as it translates into the spherical graphite mar- ket where opex is around
$US3,200/t.”
While the mineralisation’s friable na-
ture means mining will be conducted on a relatively cheap, free-digging basis ($US59/t unit costs in the concept study), it is Mozambique’s level of infrastructure
which offers the MoA the greatest costs savings.
Since the country began its recovery from a 20-year civil war in 1993, infra- structure across the country has im- proved dramatically.
Both Montepuez and Bal- ama Central are serviced by more than 200km of sealed highway, leaving MoA need- ing to build just 50km and 20km of road respectively. The 210km highway leads to Pemba Port on the Indian Ocean coast.
A deepwater port, Pemba has been in operation since the early 1900s and is ca- pable of handling handi- max vessels. However, with MoA expecting to ship only 100,000 tpa of graphite con- centrate, much smaller ves- sels will be sufficient.
With Syrah choosing to cart its concentrate 350km south to the port of Nacala, questions have been asked of Pemba’s suitability for MoA’s needs. Leeden is confident the company can provide robust answers to such questions.
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 25


COVER
“We have done our due diligence and
have had a consultant reaffirm the cur-
rent port’s capacity and capa“bilities. them optionality in the value chain.”
Leeden, Carmo and Sweet hunt for Metals of Africa’s recent drill holes at Balama Central
matic MoA’s shift to graphite has been over the last 18 months for a company which was previously focused on, and still has a portfolio of, base metals pro-
said. “Instead, the end-users see value in
And, construction has now started on a second, new port which is
even more spacious,” she
said.
Mining, processing and
investing at the exploration stage. It gives Such comments highlight how dra-
Leeden has held in-depth discussions with a number of major battery and elec- tronics companies and is confident of closing an off- take deal this year. It is sur- prising to hear of a junior without a PFS to its name already in discussions with major end-users, but Leeden said there was recognition among these companies that entering at the junior end of the market was a way of ensuring their price structures remained intact.
“At the kind of prices they are looking for, they are struggling to secure supply from the estab- lished producers and cer- tainly not the traders,” she
“The diversity of the com- pany’s assets has definitely been a challenge,” she said. “The original idea around Metals of Africa was for it to be a project generator but the market has been so tough it just wasn’t plausi- ble to get funding for green- fields exploration in order to spin out assets. We’ve proven that all our projects have mineralisation and in better times we would have had separate companies for each set of projects but the current market is all about getting cash flow and you can do that in graphite a lot easier than you can in base metals.
“I think we are now dem- onstrating we are focused
jects. Leeden is conscious I think we are now demonstrating of the company’s diverse
we are focused on a world-class portfolio looking like a lack of focus but she explains it
infrastructure in place, MoA graphite mine but in hindsight, if we was never her intention to
has stepped up its off-take house all of the assets un-
hadn’t been diversified, we would’ve been in trouble by now.
marketing. der one roof.
PAGE 26 MARCH 2016 AUSTRALIA’S PAYDIRT


on a world-class graphite mine but in hindsight, if we hadn’t been diversified, we would’ve been in trouble by now.”
The company is not likely to abandon its other assets, however. As well as Rio Mazoe in Mozambique, the portfolio in- cludes the Kroussou zinc project in the Central West African nation of Gabon.
“I am still bullish on zinc so we are aim- ing to keep the assets and find a partner for them. The first to find a home would probably be Gabon. There is a lot of in- terest from London funds for zinc, they are taking a long-term outlook on it.”
The company also holds a controlling
interest in the Montepuez ruby project, which abuts Gemfields plc’s namesake mine and is the largest ruby producer in the world (see below).
The company’s retreat from Rio Mazoe led to doubts about the ability to operate in what is still a nascent Mozambican mining sector but Leeden, who lived in the capital Maputo between 2011 and 2016, remains a firm believer in the coun- try’s potential.
“It has been a pleasure doing busi- ness in Mozambique,” she said. “There have been a couple of frustrations that we have voiced our concerns over to the
ministry, the main one being the increase in exploration licence rents. That resulted in us relinquishing the bulk of our base metals ground. For greenfields explora- tion it is a major disincentive but the Min- ister has pledged to revisit it this year.”
With the country’s coal and gas sec- tors stunted by low prices, it could be the graphite industry, led by Syrah, MoA and fellow ASX-listed company Triton Min- erals Ltd which finally delivers Mozam- bique the robust resources sector it has been striving for.
Ruby potential won’t distract from graphite story
– Dominic Piper
Local villagers search the riverbed gravels for highly valuable rubies at Montepuez East
The ASX ruby exploration sector is not exactly a vast one, indeed Metals of Africa Ltd (MoA) can lay claim to being about the only company with prospective ruby ground on the Australian bourse.
MoA managing director Cherie Leeden has always kept track of mineral suc- cesses around Mozambique and when London-listed Gemfields plc announced exploration success at its Montepuez ruby project in Cabo Delgado province, she quickly pegged the adjacent ground.
Gemfields started mining in 2014 and has since produced more than $US122 million worth of rubies from the region. It has defined an indicated-inferred re- source of 467 mct @ 62.3 ct/t and now has a 21-year mine life for the project.
However, not wanting this new ground to distract the exploration team or inves-
Artisanal miners have dug down at least 13m as they chase the contact between the primary amphibolites and alluvial gravels on the Montepuez East ruby licence
tors from the recent move into graphite, MoA has chosen to JV its own ruby- prospective ground out to Mozambican Ruby Lda. Under the terms of the JV, Mo- zambican Ruby will spend $US400,000
Leeden takes a look at waste rock at Montepuez East
on exploration to acquire a 75% interest in the project. MoA will be free-carried for that portion and all exploration until the first commercial ruby sale.
“The ruby potential of our Montepuez East project is very exciting, especially considering what our neighbouring li- censes are pulling out of the ground,” Leeden said when announcing the JV. “I am delighted to be partnering with Mo- zambican Ruby Lda, who will provide MoA with 25% of the upside without the requirement to contribute any of our cash. This allows us to remain focused on our zinc and graphite assets. I believe that the Montepuez region has the poten- tial to be the largest ruby gem field in the world.”
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 27


AUSTRALIAN GRAPHITE CONFERENCE PREVIEW
Graphite players lay the cards on the table
Graphite’s supply/demand dynamics may be opaque, its pricing structures may be opaque and future growth projections may be opaque, but one thing is becoming clearer by the month – lithium-ion
batteries and the battery storage market are well on their way to so- lidifying their place in the base-load energy mix of future decades.
own off-take agreements and even in this space, investors are struggling to com- prehend exactly what it is these compa- nies are proposing to supply.
Competing companies are making differing and even conflicting claims re- garding what precisely it is that off-take customers are looking for. This is not to suggest companies are being mislead- ing, just that even for those involved in the market the signs are difficult to de- cipher.
China currently dominates all facets of the graphite market from mining to processing into spherical graphite to its eventual application but there are a num- ber of international rivals who are intent on breaking this stranglehold and estab- lishing their own spherical graphite and battery-making plants.
The challenge until now for these companies has been securing reliable, affordable supplies of graphite. If the emerging crop of Australian juniors can
Graphite is a key component of such batteries. In fact, there is more graphite used in a lithium-ion battery than there is lithium. Lithium is the cathode, graphite the anode. And, as the likes of Tesla, Pa- nasonic and LG ramp up their ambitions for the sector, their demand for graphite supply is only set to increase.
However, while lithium stocks on the ASX have catapulted in the last 12 months, their graphite counterparts have flat-lined as investors continue to strug- gle to come to terms with the vagaries of the sector.
For brokers, fund managers and retail
investors more used to the traditional tonnes times grade equation, discus- sions about flake size, purity and prod- uct specifications often lead to confusion and disillusionment.
It is to counter this confusion that Pay- dirt has chosen to launch the Austral- ian Graphite Conference, to be hosted in Perth on March 22. The conference will bring together the best of the ASX’s graphite players to share their experi- ences of the sector and their strategies for development.
Without a traditional trading market, companies have been left to source their
PAGE 28 MARCH 2016 AUSTRALIA’S PAYDIRT


by supply. Expandable
reliable, affordable supplies of graphite. have followed suit and the
Graphene’s properties are staggering. It is the thinnest and strongest material ever discovered (breaking strength of 42 Nm-2, 100 times greater than steel). It shows electrical and thermal conductiv- ity greater than copper at a fraction of the weight and absorbs only 2.3% of the light
Like other graphite products, the only restriction on graphene’s application is availability. Until Talga Resources Ltd became the first company to success- fully produce graphene from raw natural graphite, samples had been restricted to just a few kilograms.
offer a solution to this problem, wide- spread adoption of natural graphite may turbo-charge graphite demand.
The same reasoning can be applied to
other applications. While the lithium-ion
battery market provides the most easily
identifiable market, other uses for graph-
ite are growing. Expandable gra“phite has passing through it. These properties are With Talga now having built a graphene
been widely adopted as a fire retardant in high-end electrical
goods and now building
materials in China. As
with batteries, the mar-
ket has been stunted
expected to see graphene revolutionise
pilot plant in Germany, it is beginning to provide samples to some
The challenge until now for these of the world’s leading elec- companies.
companies has been securing tronics and technology Other graphite hopefuls
If the emerging crop of Australian juniors ite products and while can offer a solution to this problem,
graphite makes use of sector now has another
the larger flake graph-
potential avenue to get its head around.
Such speculation and imagination are both a boon and hindrance to the graphite sector. While in- vestors warm to the idea
China is still the world’s largest producer of flake graphite, the quality of its production has been in decline for years.
widespread adoption of natural graphite may turbo-charge graphite demand.
Even Chinese end-users are eager to find new sources of supply.
Further down the development pipe- line, graphene, a derivative of graphite, is the sort of material science fiction ideas are born of.
First identified at the University of Manchester in 2003, graphene is a two- dimensional allotrope of carbon and con- sists of single atomic layers of carbon (around 0.3nm thick) while extending many hundreds of nanometres in the lat- eral dimension.
many industries and its potential applica- tions are endless.
In just a decade, its discovery has led to an exciting and elaborate array of po- tential applications, from the glamorous (tablet devices able to be folded up like a newspaper, or touch-sensitive ink), to the life-altering (bio-electronic applications in humans), to the more mundane but equally transformational (anti-corrosion additive to paints and strengthening ad- ditive to concrete or other building mate- rials).
of a junior miner being at the vanguard of a new commodity boom, they are also wary due to the lack of hard evidence to prove such a boom is on its way.
– Dominic Piper
Paydirt will host the inaugural Austral- ian Graphite Conference at the Novotel Perth Langley Hotel on Tuesday, March 22. For more information please visit:
www.australiangraphiteconference.com
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 29


AUS TR ALI AN
GRAPHITE
22 March 2016 - Novotel Perth Langley
Preliminary programme Tuesday 22 March 2016
Session One
09.00 Welcome: Bill Repard, Executive Chairman, Paydirt Media (5)
09.05 Keynote: Jason Chesters, Resource Analyst, Patersons Securities (25) 09.30 Andrews Spinks, Managing Director, Kibaran Resources Ltd (20) 09.50 Dr John Parker, Managing Director, Lincoln Minerals Ltd (20)
10.10 Cherie Leeden, Managing Director, Metals of Africa Ltd (20)
10.30 Mark Thompson, Managing Director, Talga Resources Ltd (20)
10.50 Questions (10)
11.00 Morning Tea, sponsored by CSA Global (25)
Session Two
11.25 Keynote: Andrew Scogings, Principal Geologist, CSA Global (25) 11.50 Allan Mulligan, Managing Director, Walkabout Resources Ltd (20) 12.10 David Christensen, Managing Director, Renascor Resources Ltd (20) 12.30 Steven Tambanis, Managing Director, Black Rock Mining Ltd (20) 12.50 Bruce Richardson, Managing Director, Anson Resources Ltd (20) 13.10 Questions (10)
13.20 Lunch (60)
Session Three
14.20 Phil Hoskins, Managing Director, IMX Resources Ltd (20)
14.40 Alan Armstrong, Executive Director, Mozambi Resources Ltd (20)
15.00 Peter Adamini, Senior Metallurgist, Independent Metallurgical Operations (20) 15.20 TBC
15.40 Questions (10)
15.50 Afternoon Tea (20)
Session Four
16.10 Closing Panel Debate (45)
16.55 Closing Cocktail Drinks, sponsored by Lithium Australia
Conference Sponsors to date:
* This programme is subject to change without prior notice
www.australiangraphiteconference.com


AUS TR ALI AN
GRAPHITE
22 March 2016 - Novotel Perth Langley
Register NOW!
For all enquiries please contact Dominic Piper on +61 424 934 494 or email [email protected]


AUSTRALIAN GRAPHITE CONFERENCE PREVIEW
Lincoln clears flora hurdle
The path has been cleared for Lincoln Minerals Ltd to be granted a mining lease later this month for its Kookaburra Gully project in South Australia.
Following an exhaustive review, the Commonwealth Government Depart- ment of the Environment ruled in late December the company’s proposal to build and operate an open-cut mine was “not a controlled action if undertaken in a particular manner”, meaning no further federal-level approvals are required be- fore development can proceed.
Lincoln also lodged its public response document with the SA Department of State Development in January, paving the way for a mining lease to be awarded before the end of this month.
Federal authorities raised concerns about a patch of Eyre Peninsula Blue Gum in the middle of Lincoln’s tenement and have requested a fence and signage to be erected around the threatened woodland.
The company will not be allowed to clear the woodland under any circum- stances and must also ensure a 20m buffer between construction and the ex- clusion zone, as per the conditions set out in the Environment Protection and Biodiversity Conservation (EPBC) Act.
“While it’s not an approval as such, it is a big tick because it gives us a clean slate going forward from the flora and fauna point of view,” Lincoln managing director John Parker told Paydirt.
“We now know exactly what we’ve got to do, and what we can’t do. That particu- lar decision enabled us to finish off our mining lease proposal, which we actually submitted back in February last year, but the State Government held up the pro- cess on the basis of the EPBC referral.
“In theory, that’s it. That’s the end of our input and it’s now in the hands of the State Government to make their final as- sessment and decide whether we’re go- ing to be offered a mining lease or not.
“If the State Government sticks to its decision-making process and the sched- ule they’ve given us, we should expect to be offered a mining lease by mid-to-late March.”
While Lincoln awaits confirmation of a mining lease, the company has plenty of other work to keep it busy, including final- ising samples for pilot plant testing.
Parker said his company had advanced its potential graphite product beyond ba- sic laboratory testing and now needed to assess the suitability of bulk samples in
Kookaburra Gully is set to become Australia’s second graphite mine
a larger setting.
Drilling of the Kookaburra Gully Ex-
tended targets could also begin this month. The company has been offered a SA Government PACE grant to fund part of the cost of the programme.
Lincoln is currently finalising the de- signs for its proposed mine and process- ing plant facilities, as well as making ini- tial preparations for the Programme for Environmental Protection and Rehabili- tation (PEPR) documentation.
“That’s basically our mining lease pro- posal plus a whole set of detailed man- agement plans on how we’re going to manage the environmental issues, how we’re going to manage rehabilitation and all those types of things,” Parker said.
“We’ve got to prepare a transport man- agement plan for the local council as well, so there’s quite a few things we need to do. On that note, we should be able to prepare our PEPR this year such that if everything goes smoothly we would ex- pect to have all our approvals in place by the end of this year.”
Kookaburra Gully, 35km north of Port Lincoln, boasts a resource of 2.2mt @
15.1% TGC, ranking it in the world’s top 10 graphite deposits based on grade. Established infrastructure such as water, electricity and port facilities are readily accessible.
Lincoln has flagged the potential start of mining and construction in the fourth quarter if all approvals are in place, put- ting Kookaburra Gully in the frame to become only Australia’s second graphite mine after the nearby Uley operation.
Uley has been on care-and-mainte- nance since late last year due to unreli- able equipment and groundwater issues, which attracted large debt for operator Valence Industries Ltd.
“While that’s shut down at the moment, we’re all expecting that will reopen in the not too distant future,” Parker said.
“From our point of view, we believe we’ve got a deposit which is equally as good, if not better than Uley, and in theo- ry sometime next year we’ll be develop- ing and mining.”
Parker welcomed the heightened inter- est in the graphite sector and expected his company to attract plenty of attention because Kookaburra Gully is housed in a stable jurisdiction.
“Companies like the Panasonics and the Samsungs, they are not going to put all their eggs in one basket in a country where there is a certain amount of sover- eign risk,” Parker said.
“I suppose the other advantage we have over some of the other players, cer- tainly here in Australia, is a direct link to China and certainly part of the market we’re looking at is channelling our graph- ite into parts of China. Our chairman is Chinese and we have two or three major Chinese investors, so we’re getting plen- ty of support in that area.”
– Michael Washbourne
PAGE 32 MARCH 2016 AUSTRALIA’S PAYDIRT
John Parker


IMX’s graphite opportunities infinitely expandable
IMX Resources Ltd is pressing ahead with plans to spin out its graphite assets into a separately listed company, just 18
months after it entered the sector. Speaking to Paydirt in February, IMX chief executive Phil Hoskins said the de- cision to spin out the graphite component of the company reflected both the rapid progress the company has made and the
opportunities opening up.
“When we started on the graphite
prospects we saw the other companies and thought we would have to play catch- up. Eighteen months later we have a PFS which has shown we have a high quality project and product,” Hoskins said.
The project is the Chilalo graphite pro- ject in south-east Tanzania. IMX started work there in late 2014, having been in the East African country for more than a decade through its exposure to the Ntaka Hill nickel asset. With Ntaka Hill subject
to a number of JVs, IMX had decided to test its large tenement package for other prospects.
“When MMG [Ltd] withdrew from the Ntaka Hill JV, the graphite market was strong and we knew we had it on the ground,” Hoskins told Paydirt last year. “Tanzania and Mozambique are well- endowed with coarse-grained graphite and that is why they have quickly risen to prominence.”
The company’s progress at Chilalo has since been rapid, culminating in the De- cember release of a positive PFS for the project.
Conducted by BatteryLimits Pty Ltd and based on the resource produced by CSA Global, the PFS indicated a 10- year, 69,000 tpa concentrate operation would deliver average annual EBITDA of $US47 million at an NPV of $US200 million for an initial capex of $US74 mil-
lion. Opex for the production of high- quality flake graphite was estimated at $US490/t.
The PFS in hand, IMX is now pursu- ing off-take agreements and appears close to binding contracts having struck a MoU with one of China’s largest mining houses.
In February, the company announced it had signed a MoU with China Gold Group Investment Co Ltd (a subsidiary of China Gold, the country’s largest gold miner) and CN Docking Joint Investment and Development Co Ltd (a subsidiary of China National Material Group Corpora- tion).
Hoskins said the agreement was reached following exhaustive efforts throughout 2015.
“[We have the] MoU now which is the
To page 34
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 33


AUSTRALIAN GRAPHITE CONFERENCE PREVIEW
culmination of 72 days spent in China in 2015,” he said.
“China Gold is looking at consoli- dating the entire graphite market in China but this is the first over- seas project it has aligned with. It is particularly interested in secur- ing off-take from Chilalo due to the high quality and highly expandable graphite product it can produce.”
While it has long been accepted that large flake graphite is desir- able because it demands higher prices than finer products, Hoskins believes Australian investors are still coming to terms with exactly why this is the case.
“Many companies have spoken about the value of flake graphite
for a long time but not really in rela-
tion to expandable graphite which
is curious. Spherical graphite [the processed product which is used
in lithium-ion batteries] uses finer material so there isn’t really a need
to pay higher prices for larger flake graphite when it is to be milled anyway.”
Instead, IMX is looking to place the Chilalo product into another emerging market for large flake graphite; expand- able graphite.
Phil Hoskins
standards which recommend the use of flame retardant building ma- terial in all new construction and building renovation projects.
The problem has been finding a reliable supply of expandable graphite.
“The market is 5 mtpa with ex- pandable graphite making up be- tween 5% and 50% of those ma- terials,” he said. “People are rightly talking about batteries because that market is going to be massive but they haven’t really looked at ex- pandable graphite.
“If the new standards are ap- plied, it could blow current expand- able graphite demand out of the water.
“But the market never really ex- isted previously because there wasn’t enough supply.”
With many of Tanzania’s graph- ite projects proving to have a ma- jority of larger flake sizes, Hoskins believes the country could provide
Expandable graphite is used in a range of applications which make use of its heat resistant characteristics. Graph- ite foil – thin, highly workable sheets of graphite – is widely used in high-end electronic products where it draws dam- aging heat away from electrical compo- nents. Graphite paper is used for similar purposes in manufacturing applications such as sealing gaskets, graphite tapes
the supply impetus needed to spark de- mand.
He also hopes the MoU with China Gold puts IMX at the front of that queue and expects to have a binding agreement in place by mid-2016.
“Having had plenty of experience in China from our dealings in iron ore we know it is about relationships first, deals second. But I think the fact China Gold was happy to be named in our market an-
nouncements shows
“We recognised we were amateurs
in the graphite space so we engaged
Benchmark Mineral Intelligence to look
at potential markets for our product. It
showed the expandable graphite market
was the most suitable for ou“r project and and packing. more likely to drive
higher prices.”
how serious they are A relatively new The market is 5 mtpa with expandable taking it.”
product, expandable graphite making up between 5% and By the time a bind- graphite is a com- ing agreement is in pound of graphite 50% of those materials. People are rightly place, Chilalo will like-
talking about batteries because that market foliates when treated is going to be massive but they haven’t really
which expands or ex- with acid and then
ly be housed in a new ASX-listed company.
Hoskins said the move to spin-out the graphite assets would allow shareholders to realise some of the value in Chilalo.
“The new company will be owned by IMX shareholders and we will target an ad- ditional $5 million through IPO,” he said. “China Gold will probably take exclusive off-take with the option for us to buy 10% back at any time for opportunities in graphene. They will also likely bring the project debt and equity and we will then incorporate a JV between IMX and China
heated to around
1,000oC. The result is
a product which has
unique properties of
heat resistance, cor-
rosion resistance,
softness, compres-
sion resilience and radiation resistance.
looked at expandable graphite. If the new standards are applied, it could blow current expandable graphite demand out of the water.
Almost all graphite is expandable but different flake sizes expand at different rates. Early test work has indicated to IMX that Chilalo’s expansion rates – the volume of expandable graphite produced per gram of graphite, expressed in grams per litre – far exceed those of Chinese graphite deposits.
“In China, graphite is expandable to about 250 g/l. On the test work we have done, our coarse flake expands at 1,000 g/t,” Hoskins said.
However, it is its use in the emerging applications of flame retardant polysty- rene insulation foam which is proving most alluring.
“This is one of the most interesting sectors and why China National Building Materials has come on board. They are looking to use expandable graphite as a flame retardant material in their building products.”
Hoskins said discussions with end- users had indicated the Chinese Govern- ment had introduced new building safety
Gold.”
PAGE 34 MARCH 2016 AUSTRALIA’S PAYDIRT
– Dominic Piper


Spotlight on Sri Lankan graphite
First Graphite Ltd has entered into agreements with two separate parties to provide samples from its Sri Lankan
graphite projects for graphene testing. The company, formerly known as MRL Corporation Ltd, confirmed on February 10 it had made arrangements with sepa- rate organisations in Europe and South Asia to have its graphite samples tested
for graphene capabilities.
“Although the terms of these agree-
ments are currently only in respect of the confidentiality requirements regarding the work and potential intellectual prop- erty developed, First Graphite will con- tinue to keep the market advised of any further arrangements or other material information following the results of the sample testing,” the company said in a statement.
Earlier performance testing of a 50kg sample of high-grade Sri Lankan vein graphite conducted by the University of Adelaide last year found the quality of the prepared graphene was “outstand- ing” and “comparable with the quality
of graphene pre- pared by synthetic routes”.
A further 6t of Sri Lankan graph- ite was shipped to Adelaide in Janu- ary for additional graphene testing and production.
Some graphene
has already been
passed on to Im-
agine Intelligent
Materials (IMM). First Graphite will be- come a certified supplier of graphite/gra- phene to IMM if the material meets cer- tain price and performance objectives.
IMM has provided First Graphite with material specifications required for the manufacture of its graphene-based prod- uct Imgne X-3 GT, which was subject to field trials last month.
Construction of the Pandeniya pro- ject is complete, with hoist load testing conducted and shaft-liner boxes run dur-
ing January. First Graphite was await- ing final approval for a permit from the Central Envi- ronmental Authority at the time of print, but had completed all of the necessary preparations for the start of underground mining activities.
Construction work at Aluketiya has begun, with the company targeting underground mining towards the end of this month. The headframe is under construction following the completion of
work on the first concrete pad.
Further drilling is planned for unex-
plored areas of the Aluketiya mining li- cence.
First Graphite holds almost 40,000ha of tenure in Sri Lanka, having recently secured a further two exploration licenc- es covering 12,900ha.
First Graphite is providing samples for graphene testing in Europe and South Asia
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 35


AUSTRALIAN GRAPHITE CONFERENCE PREVIEW
Black Rock to reveal resource
Black Rock Mining Ltd could poten- tially be in production at the Mahenge graphite project in Tanzania by the end of
next year.
This is, of course, assuming every-
thing proceeds without a glitch for the company between now and then.
“If we have a good year this year...all this is really good but until you get off- take it is all a bit of an academic exer- cise. If we can achieve that you could be producing within 18 or 20 months, so it is technically possible to be in produc- tion by the end of next year,” Black Rock managing director Steve Tambanis told Paydirt.
“By that time you have managed and met all of your requirements for getting a mining lease and designing a plant, which for a graphite is pretty simple.”
While Black Rock hopes to achieve its production ambitions in the not too dis- tant future, at the forefront of Tambanis’ mind are the near-term milestones to be ticked off.
At the time of print, the company was
preparing to release a maiden resource at Mahenge, with a scoping study also on the horizon.
Tambanis said the plan was to enter a feasibility study immediately after com- pleting the scoping study.
Metallurgical test work being carried out is only confirming Black Rock’s belief that it is on a winner at Mahenge, where an exploration target of 115mt @ 8.66- 10.34% TGC has been set for the Ulanzi, Cascade and Epanko North prospects.
“Everything is going swimmingly well, the [met] results are preliminary and not optimised, which is fantastic. I am not expecting any issues with capital costs and metallurgy and we are going to be announcing a very nice resource,” Tam- banis said.
Full results from the first stage met- allurgical programme are expected in mid-March, with results from the Epanko North primary mineralisation zone re- turning high proportions of coarse (great- er than 180 microns) and jumbo flake (greater than 300 microns) graphite.
Furthermore, a 54.2% distribution of coarse and jumbo flake in concentrate graded 98.27% purity from a simple three-stage flotation process.
There is scope for improvement, which might just separate Black Rock from its peers in the graphite space.
“I think what is going to differentiate one company from another is going to be based on endowment, scale, grade, and your operating costs; can you get mains electricity? Do you have to use gen set power? That is certainly a $100/t cost dif- ferential,” Tambanis said.
“We only finished drilling at the end of December and will announce a JORC resource [by the end of February]. I think everything will fall into place. I know there are a lot of graphite companies out there, butattheendofthedayitisgoingtobe the healthiest three or four that succeed.”
Mahenge is 125km by road from Dar Es Salaam and within close proximity to power, rail and port facilities, potentially making for low capex and opex require- ments.
PAGE 36 MARCH 2016 AUSTRALIA’S PAYDIRT


Therefore, it appears Black Rock is in a favourable position in the global graph- ite race.
But Tambanis knows the company has a task ahead of it, including project fund- ing.
“It depends entirely on how you struc- ture it, but a lot of companies have an- nounced resources and that is about as far as they can go, unless you get the sale and the interest and hopefully a little bit of participation from some off-takers,
Black Rock’s Mahenge project is 125km from Dar Es Salaam
otherwise I think it could be quite diffi- cult,” he said.
“At the end of the day it is about how you differentiate yourself and I am hop- ing to be able to do it on tonnes, grade and costs.”
For the few companies able to suc- ceed, Tambanis is bullish demand funda- mentals will make graphite businesses sustainable in the long-term.
“I think what you are going to see is so much growth and development in the battery sector,” he said.
“You don’t want to sell all of your hope just on batteries but unit costs are going to be going down quite dramatically and you are going to see so much more in- vestment in the battery sector. There is going to be quite a bit more demand than the existing 1 mtpa or whatever you be- lieve production to be at the moment, so I think it is not going to be a one or two- year wonder and then die in the arse, there is a lot more to it and it is sustain- able.”
– Mark Andrews
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 37


AUSTRALIAN GRAPHITE CONFERENCE PREVIEW
Walkabout anchors in Tanzania
Walkabout Resources Ltd hopes to have a mining licence approved for its Lindi Jumbo project in Tanzania in July.
The company is pre- paring an application for an initial start-up opera- tion of about 25,000 tpa graphite concentrate, while also focusing on regulatory issues around water and environmental permitting.
averse development ap- proach for a modular first stage operation.”
Since the release of the resource and start of tech- nical studies, Walkabout has had a few wins with the metallurgy at Lindi Jumbo, 60km from Lindi port.
Test work has confirmed target recoveries and im- proved flake size reten- tion, with flake size ratios of jumbo flake up 40% (+300 microns) and large flakes (+180 microns) up 60-74% in concentrate.
The company also re- ported consistent high- grade recoveries of be-
Walkabout managing
director Allan Mulligan
has spent a considerable
amount of time in Dar Es
Salaam addressing such
works and it is hoped the
positive strides taken will
attract investment in the company.
“We will be announcing the introduc- tion of a cornerstone partner that will underpin the development costs at Lindi Jumbo,” Mulligan told Paydirt.
Walkabout is no different to many other juniors grappling for cash in a tight mar- ket, and at the time of
print had a SPP open at
0.32c/share.
Cash raised will help
Walkabout through the regulatory approvals pro- cess, while studies on a modular mine set-up can also start.
“We have identified an
engineer [in Johannes-
burg] that has their own
test laboratory and they
design and construct a
plant on their workshop
floor and assemble all the
They then break it down and put it into several containers and ship it to site where it is re-assembled,” Mulligan said.
“This modular form of construction is very cost-effective and time saving. Much of the project management is based off- site, so logistics are highly reduced.”
The success of this modular mine con- cept could prove the point of difference for Walkabout against its peers in the graphite race.
Executing the modular mine plan will potentially allow Walkabout to enter pro- duction faster than many of its competi- tors.
“This is a key market risk amelioration because the forecast prices are most
Walkabout is banking on Tanzania’s mature mining fiscal and regulatory regimes to enable it to reach graphite production quickly
likely not going to be realised,” Mulligan said.
“So, the challenge then into a growing supply and demand profile is to produce as high a revenue product as possible at as low a cost as possible.”
Helping Walkabout curtail costs will be the manageable size and overall high-grade nature of the Lindi Jumbo pro-
ject.
Accustomed to operat-
ing on lean budgets and despite its low spend – $1.3 million last calendar year compared to $3-13 million by peers in its group – Walkabout re- mains a meaningful play- er in the graphite space.
An accumulation of work done in 2015 result- ed in a maiden resource at Lindi Jumbo
in January.
The Gilbert Arc inferred resource was
estimated at 15.3mt @ 10.1% TGC for 1.54mt contained graphite.
A high-grade core of 2.6mt @ 20.6% TGC is enveloped by 6.9mt @ 8.9% TGC, which provides Walkabout with an option to pursue discrete and flexible mining practices.
On release of the resource, Mulligan said: “The possible option of mining higher grade zones during periods of economic downturn as opposed to be- ing locked into a grade of around 5% are huge project enablers. We remain confi- dent that the resource size is adequate and in line with our prudent and risk-
tween 95-97%.
“Further metallurgical optimisation [will
be carried out] to produce targeted flake size distributions at market-related con- centrate grades and further limited infill drilling will take place on site to expand the high-grade resource,” Mulligan said of the company’s short-term work plans.
Results so far have confirmed that re- covery into concentrate is not an issue, with the main challenge being finding a grinding regime to liberate the graphite from the gangue without breaking the large flakes present.
“More work needs to be done on the comminution or grinding regime in order to preserve the integrity of the large and jumbo flakes. As you attrition the ore, the larger jumbo and super jumbo flakes fall victim to breakage first and while we know from petrography they are there, they must be protected while still break- ing the gangue material away from the graphite material,” Mulligan said.
Graphite in the Lindi region, south- eastern Tanzania, is known to have some of the highest ratios of jumbo (+300 mi- crons) and super jumbo (+500 microns) flake in the world.
It is forecast that jumbo and super jum- bo flake will be in short supply by 2020 and Walkabout hopes to be able to fill some of that gap.
To fast-track the process, the technical study will be run alongside the process plant design by the same Johannesburg- based engineers, effectively cancelling out the need to re-study and design.
– Mark Andrews
working parts.
Allan Mulligan
PAGE 38 MARCH 2016 AUSTRALIA’S PAYDIRT


Epanko build on the way
Kibaran Resources Ltd may be in a position to start development of its Epanko graphite project later this year af-
ter raising $2 million to complete its debt due diligence work.
The placement – at 15c/share with an attaching half option at 20c – was com- pleted on February 22. The company said proceeds will be used in part to complete the due diligence process on Epanko – in Tanzania – being undertak- en by KfW IPEX-Bank, the development funding agency of the German Govern- ment, and engineering firm SRK.
KfW is set to provide $US40 million in debt funding for the Epanko development with a further $US40 million to be provid- ed by Nedbank. With Epanko’s 40,000 tpa operation demanding a capex price tag of $US77.5 million, this will leave Kibaran needing to raise around $US15 million to cover the remaining capex and working capital requirements.
“This capital raising will essentially take us through the debt financing stage,” Kibaran managing director Andrew
Spinks said. “Once that is complete we can then look at the equity component of the project finance. We are looking at a number of op- tions, including project level equity, as we want to ensure the least amount of dilution as possible.”
stakeholders,” Spinks said. Once finance is completed, Kibaran plans to move straight
into construction.
“We still expect to be on
schedule to allow earthworks to begin by the end of 2016 with production starting in mid- 2017,” Spinks said.
Off-take agreements are vi- tal in graphite and Kibaran is comfortable its two contracts with ThyssenKrupp (20,000
Spinks said although fi-
nance was debt driven, both
equity and debt provisions
would be dependent on
each other. He couldn’t put a time frame on completion of the debt component but said the company hoped to receive the final term sheet in April or May, “but that is outside of our control”, he added.
The project itself is almost ready for construction to start.
“We are working our way through the final engineer’s report and there is a lit- tle bit of work to do on the environmental and social aspects to bring them up to Equator Principle standards which we believe will be a positive outcome for all
Andrew Spinks
a European graphite trader
tpa) and
(10,000 tpa) will prove cornerstone’s of Epanko’s 40,000 tpa output.
The company also recently struck a MoU with Sojitz Corporation which Spinks described as a “phenomenal achievement”.
“The positive aspect about the So- jitz MoU is that it is the first time we have moved specifically into the battery space. We hope to finalise the binding agreement by mid-year,” he said.
– Dominic Piper
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 39


AUSTRALIAN GRAPHITE CONFERENCE PREVIEW
Graphite on the Peninsula in South Korea
Australia, East Africa, Sri Lanka and Swe- den are where many of the ASX’s graphite hope- fuls are focused, but not Peninsula Mines Ltd.
The West Perth-based company has chosen South Korea as the pre- ferred destination to build its graphite busi- ness.
Peninsula is currently analysing all data before prioritising drill targets
products. With the lack of work that has been done in country, it is really open to us to discover orebod- ies capable of being processed in country and there is an obvi- ous off-take. The early mover advantage is to our benefit, I feel.”
unlike some of our other projects around the world,” Pyle said.
“In South Korea all those things [infra- structure] are available to us by tapping into current capital items that are already in place.”
In February, Peninsula filed tenement applications over the historic Wolmyeong mine, once the largest graphite mine in South Korea before its closure in 1987.
Some sampling results from the late 1970s included grades of 79-83% TGC. Unlike Peninsula’s other graphite pros- pects in country, Wolmyeong contains high-grade amorphous graphite.
In addition to Wolmyeong, Peninsula has applications over the Daewon, Deok- seung, Eunha, Yongwon and Yongwon West prospects in central and northern South Korea.
The Daewon project appears to be one of the most promising to date, with the
Peninsula executive director Martin Pyle said the country had both graphite prospectivity and an end-game to tap into.
“We are aware there are a lot of Ko- rean end-users of graphite and lithium and South Korea is home to a massive industry, with all their hi-tech products requiring batteries,” Pyle said.
“It is a natural demand centre for these
Early movers in oth- er parts of the world, particularly in devel- oping economies, may have to contend with a lack of infrastructure around their projects; an issue which does not con-
cern Peninsula.
“We have got the benefit that our in-
frastructure challenge is a lot lower. We have wonderful infrastructure in South Korea – roads, rail, power, water – all within a few kilometres of our projects,
PAGE 40 MARCH 2016 AUSTRALIA’S PAYDIRT


Korea Resources Corporation (KORES) identifying flake graphite grades ranging from 6.9-42.4% TGC in 1978.
Pyle said Peninsula – which West Af- rican gold-focused Aurora Minerals Ltd has a 38.5% shareholding in – needed to review all data available.
“We picked up all these projects quite recently, so a lot of the initial work is on ground truthing, getting out to these pro- jects, confirming the veracity of old re- ports, then prioritising which ones we’d like to do more work on,” he said.
“That additional work is likely to in- clude geophysics and drilling. Some of them have readymade targets in terms of outcrop and historical mining activity
which are likely to be priorities, but there are probably some that require a bit more work and could be equally better projects with more work.”
Every year KORES – the Government resources agency – invites applications from companies requiring support fund- ing for drilling activities, which Pyle in- tends to seek this year.
Peninsula is no stranger to South Korea, with the Daehwa molybdenum- tungsten and Osu porphyry copper-gold projects in its stable before the graphite and lithium prospects were brought to the table.
The Dongsugok lithium prospect, adja- cent to the Boam lithium mine, along with
the Tonggo and Ubeong prospects, re- flect Peninsula’s ambitions to explore for commodities for the 21st century – lithi- um and graphite – which are contributing to major improvements in battery power and storage capacity.
To drive its lithium and graphite strat- egy, Peninsula has appointed Danny Noonan as an executive director.
Noonan has been chief geologist and in-country manager since Peninsula first stepped into South Korea in mid-2013 and he has been instrumental in build- ing the company’s lithium and graphite interests.
– Mark Andrews
Peninsula has been in South Korea since 2013, but only recently entered the graphite and lithium space
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 41


OPINION
Global graphite market set for change
Graphite has recently been the focus of numerous exploration companies, particularly due to de-
velopments in battery technologies related to the emerging electric ve- hicle and green energy market.
Consequently, the race has been on to report large tonnage explora- tion targets and mineral resources, with certain projects being de- scribed, for example, as “world- class”, “biggest” or “highest grade”, with perhaps hundreds of millions of tonnes containing a certain per- centage of graphite.
search’s estimated 74%. China’s production has grown rapidly since 1998 and overtook the rest of the world in 2000. India, Brazil, Canada and North Korea prob- ably account for a further 20-27% of global production. Sri Lanka is a relatively small producer (about 0.5% of global production), al- though well known for its high quality vein graphite. Brazil is the world’s number two producer, con- tributing about 90,000 tpa of flake graphite. Indian production num- bers have been debated for some time; output was 170,000t of flake graphite in 2014 according to the USGS, whereas other estimates put this number closer to 25,000 tpa of flake graphite.
Global markets
Graphite exploration projects
may be ranked according to factors
such as i) deposit size, contained graphite and enterprise value/ tonne of contained graphite (EV/t);
ii) location (country risk) and logis-
tics; iii) flake size distribution; iv) product purity; v) off-take agreements; and vi) timeframe to production.
Drivers for success include having a sufficiently high-grade flake graphite de- posit with low stripping ratio and, in ad- dition, jurisdiction, logistics, timeframe to production and last but not least, off-take agreements must be taken into consid- eration.
Global production
Global graphite production has ris- en more than tenfold, from a base of 100,000 tpa in the early 1900s to an es-
Global natural graphite production (% by country) estimated for 2014. Source: Industrial Minerals Research; United States Geological Survey
timated 1.2 mtpa in 2014 at a compound annual growth rate (CAGR) of just over 2%.
While production growth remained relatively slow until the mid-20th centu- ry, production increased markedly from about 1950 to achieve an annual CAGR of close to 3% by 2014.
China is the world’s leading supplier of natural graphite (flake and amorphous) with approximately 67% of global pro- duction according to the USGS, some- what lower than Industrial Minerals Re-
Natural graphite is a very soft mineral with low density and a metallic lustre and occurs in several forms, de- scribed as amorphous, flake and vein. Graphite is flexible and has both metal- lic and non-metallic properties making it suitable for diverse industrial applica- tions. The non-metallic properties in- clude chemical inertness, high thermal resistance and lubricity, whereas metal- lic properties include thermal and elec- trical conductivity. Graphite may also be manufactured synthetically from carbon- bearing raw materials such as petroleum coke and tar pitch.
World natural graphite demand is di- rectly linked to industrial applications, including refractories, automotive, bat- teries and lubricants. Refractories for the steel industry remain the dominant mar- ket for natural graphite consumption and graphite production has tended to follow global steel production, although hi-tech applications such as battery anodes are driving demand for the mineral.
This is potentially one of graphite’s fastest growing markets due to interest in electric vehicles, portable electron- ics and large-scale domestic and com- mercial energy storage, for example in Tesla’s Powerwall batteries. Another fast growing market is predicted to be ex- pandable graphite for foil, insulation and fire retardant products.
The major primary producing and ex- porting countries are China, North Korea
World Steel (millions of tonnes)
World Graphite (tonnes)
1,400,000 1,200,000 1,000,000
800,000 600,000 400,000 200,000
0
2,000 1,800 1,600 1,400 1,200 1,000
800
600
400
200
0
World natural graphite production relative to world steel production. Source: USGS and World Steel Association
PAGE 42 MARCH 2016 AUSTRALIA’S PAYDIRT
1995 1996
1997 1998
1999 2000
2001 2002
2003 2004
2005 2006
2007 2008
2009 2010
2011 2012
2013 2014


and Brazil. Importing countries include the US, China (from Korea), Germany, Japan and India which accounted for ap- proximately 250,000 tpa of global trade in 2014. China has consistently been the leading global exporter, while the US has consistently been the leading global importer, sourcing 50,000-70,000 tpa over the past 15 years. Sri Lanka has exported about 4,000 tpa of vein graph- ite in recent years at prices in excess of $US1,600/t according to UN trade data.
Flake graphite prices remained rela- tively steady for many years until 2005, after which they climbed gradually to 2008, declined in 2009 following the GFC and then resumed an upward trend, spiking dramatically from 2011 through 2012. Prices have since returned to 2008 levels due to excess production versus market demand.
As a rule of thumb, the larger and pur- er the graphite flake size, the higher the price. Prices range from about $US500/t (cost, insurance and freight) for minus 75 micron product to approximately $US2,000/t for jumbo flakes greater than 300 micron diameter and greater than 94% carbon content. Uncoated spheri- cal graphite for use in lithium-ion bat- teries is currently around $US3,000/t,
having decreased slightly during 2015. Coated spherical graphite commands significantly higher prices of around $US7,000/t or more.
Graphite consumption per tonne of steel is projected to decrease, as refrac- tory consumption efficiencies improve in China and as global steel production slows. Graphite demand linked to growth in electric vehicles, domestic and com- mercial power storage could be impacted by alternative battery technology such as aluminium-titanium “yolk-shell” na-
noparticle anodes which are likely to use less graphite. If the manufacture of such nanoparticles becomes feasible and economic, the life time of batteries may be significantly extended which would reduce spherical graphite consumption and production.
Risks
Overproduction of flake graphite in Chi- na, in addition to proposed production by existing producers in other countries and global graphite explorers, poses a risk to supply-demand balance.
Dr Andrew Scogings is a principal con- sultant with CSA Global Pty Ltd. He has over 25 years’ experience in industrial minerals exploration, mining and process- ing, product development, market applica- tions and commercialisation processes. Andrew is a regular contributor to Indus- trial Minerals Magazine and has published several papers on the requirements of the JORC Code 2012, with specific reference to Clause 49. He has also written articles ranking global graphite exploration pro- jects and was recently senior author of the Natural Graphite Report – strategic out-
AUSTRALIAN GRAPHITE CONFERENCE PREVIEW
look to 2020 published by Industrial Minerals Research (UK). Andrew is a Registered Professional Geoscientist (RP Geo. Industrial Minerals) with the Australian Institute of Geoscientists. Andrew will be a keynote speaker at the Australian Graphite Conference
The CD-Rom of Paydirt’s 2015 Africa Down Under Conference is available
Perth,Western Australia
CD Rom includes
• Over 60 presentations • Conference media coverage
• Australia’s Paydirt preview and review reports • Conference Sponsors
CD-Rom – $160 (inc.GST)
Phone (+61) 8 9321 0355 or email [email protected]
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 43


AUSTRALIAN GRAPHITE CONFERENCE PREVIEW
Talga finds potential new anode process
Talga Resources Ltd’s willingness to test the boundaries of its graphite’s capabilities took another step last month when it announced a potential new path for battery anode production.
Independent test work at the Max Planck Institute of Polymer Research and Dresden Technical University in Germany found non-purified samples from Talga’s Vittangi project could be applied directly as an active anode ma- terial, without the need for micronising, spheroiding and coating steps used cur- rently by industry.
Currently, raw natural graphite is pro- cessed – through either thermal or acid means – into spherical graphite which is then used as the anode in lithium-ion bat- teries. Operating costs for producing raw natural graphite are around $US300/t but spherical graphite costs are around $US3,200/t.
Talga managing director Mark Thomp- son told Paydirt the recent test work could represent a step-change for the battery industry.
“It is in the very early stages but it shows a potential path towards affect- ing the industry in a positive way and we have had a strong response from battery makers,” Thompson said.
Lithium-ion batteries are currently 400-800% more expensive than tradi- tional lead batteries and some of the world’s leading electronics and technolo- gy companies are striving to find cheaper production paths.
US company Tesla Inc is trying to low- er costs through economies-of-scale by building its gigafactory in Nevada where it plans to produce 35GWh annually by 2020.
Thompson believes Talga’s findings may offer an alternative way to lowering costs.
“All batterymakers are focusing on cost. Tesla is looking at scale but what if you could change the way the anode is made?
“There are also increasing stipulations for targets of price per kWh and this may help that. There have only been incre- mental benefits in batteries in the last 20 years. Most scientists working on batter- ies would give their right arm for a 2-3% increase in power or durability. Lowering the input costs would be easier than de-
Talga managing director Mark Thompson with a sample of high-grade outcrop from the company’s Vittangi project
veloping brand new battery technology breakthroughs.”
The test work at the Max Planck In- stitute saw Talga micrographite used as active material, enabling the battery to achieve a first charge capacity of 375mAh/g, a first discharge capacity of 481mAh/g and an average charge ca- pacity over 100 cycles of 357mAh/g.
The first charge and discharge capaci- ties exceeded the theoretical maximum of graphite and the average specific ca- pacity achieved was comparable to that of highly refined spherical graphite.
Thompson admitted Talga had faced scepticism since releasing its findings.
“There has been a lot of scepticism but I don’t find that surprising, there always is with technology changes,” he said. “Even the scientists we spoke to were strug- gling to get their head around it and some still can’t believe we are putting raw rock into the process, but as you explain to them and show them, you see the light come on.
“The development path is very differ- ent but the more data we present, the more industry realises they should take advantage. These results are not Talga’s opinion; we have published indepen- dently verified data from one of Europe’s most respected scientific institutions.”
Work will continue on the process throughout 2016.
“There is a lot more test work to do, looking at variations and so forth but it is very exciting,” Thompson said.
Particularly exciting for Talga is that the test work was done on material it is currently considers low value in its eco- nomic studies. For the past two years, the company has pursued the graphene capabilities of the Vittangi ore rather than the battery market many of its graphite peers have courted.
Graphene is a potentially low volume, incredibly high-value product, while the majority of Vittangi’s proposed 40,000 tpa graphite production is planned to be sold into the industrial markets.
“It has never been part of Talga’s long-term goal to target the current bat- tery market, just the opposite in fact. We have been quite conservative about the amount of flake graphite we have,” Thompson said.
“We have been focusing on the large volume industrial sector for most of the graphite but these tests may have signifi- cant advantages for the company and al- low us to shift some of the material from industrial applications to batteries and therefore fetch a higher price.
“It is not advanced enough yet to put it straight into the economic studies, but to shift some of that 40,000 tpa into a high- er price bracket is a realistic goal.”
The anode breakthrough is another example of Talga’s attempts to find new markets for its products. The company was the first to report significant break- throughs in graphene processing flow- sheets and it continues to pursue poten- tial markets for that material.
Last year, the company began trial mining at Vittangi – in northern Sweden – and is now delivering ore to the pilot plant it has established in Germany.
“Last year was a big year with pro- posed mining and test facility and now we have actually delivered on both of them,” Thompson said. “The pilot plant team is expanding with three full-time scientists/ engineers and three technicians. We continue to produce material that is use- ful to customers. It is now about working with customers on the fastest-to-market products and applications.
“The more we explain, the more ex- cited they get.”
– Dominic Piper
PAGE 44 MARCH 2016 AUSTRALIA’S PAYDIRT


Triton revises strategic plan
New Triton Minerals Ltd man- aging director Garth Higgo is determined to adopt a back-to-
basics approach in an effort to win shareholder support and re- gain momentum for the Mozam- bican graphite developer.
Higgo joined Triton at the start of 2016 and is looking to build some consistency after the com- pany underwent a rollercoaster ride on the market in 2015. Tri- ton shares hit 39c in April 2015 after the company announced a 20-year, $US2 billion off-take agreement with Chinese graph- ite specialist Yichang Xincheng Graphite Co. Ltd.
However, as investor enthusiasm for the graphite space tailed off slightly, Tri- ton’s share price began to slide and by the end of the year the company was struggling to fill its $11.3 million entitle- ment offer.
While some of the funds raised were to be used for ongoing development work at the company’s Balama North project in northern Mozambique, construction of a graphite manufacturing plant in China was flagged.
As with most commodities, graphite’s value increases significantly as it is pro- cessed and refined but Higgo believes Triton’s move to vertical integration may have been one ambitious step too many for some investors.
“The company was looking to build graphite facilities in China and Mozam- bique,” Higgo told Paydirt. “I hesitate at that because of the challenge of manag- ing such a project. It is going out of the realms of our core business which is mining. Shareholders really voted with their feet and we could only get to 20% acceptances for the entitlement offer.”
Higgo is now keen to return Triton to mining development.
“We want to refocus as a mining com- pany and produce a high quality graphite product,” he said.
Higgo believes a refocus on mining will benefit the company and get its develop- ment plans back on track.
“It is about getting the focus back on the core business; getting the geology right and getting the mining studies start- ed.”
That refocus could include a switch in project priority. Much of Triton’s early work has been on the Nicanda Hill and Nicanda West prospects at Balama
Infrastructure throughout Triton’s Balama project area is strong enough to suggest lower opex costs
infrastructure costs you have an efficient and cheap mining method which produces a prod- uct the market is looking for and willing to pay a premium for. That could potentially make a big dif- ference.”
It is also about satisfying cus- tomer requirements.
“Graphite is a very technical product and is market related, in other commodities the market is easy to find but it is different in graphite,” he said. “You have to develop a project which suits the client’s needs.
North. The company has built one of the world’s largest graphite resources at Nicanda Hill (1.47bt @ 10.7% TGC) but Higgo is more interested in poten- tial margins than size and that is leading the company to reconsider the Ancuabe prospect as the priority.
“I find Ancuabe more interesting even though it is very early stage,” he said. “The results have been interesting – it has around 60%
jumbo and super jumbo flake distribu- tion – and the fact it is only 50km from Pemba Port with ac- cess to water, grid power and good roads makes it even more attractive.
“If I put my mining hat on, Ancuabe is the one to concen- trate initial develop- ment on. Graphite is all about the lowest infrastructure cost and mining compa- nies forget that too often.”
If Higgo is cor- rect, development of Ancuabe could lead to increased margins.
“We are look- ing at the basket price of our pro- duction. Nicanda Hill will get around $US800/t but An- cuabe could fetch up to $US2,000/t. If you can reduce
“The flake graphite market is still developing but it is certainly growing. We are not going to be a big, bulk pro- ducer. We wouldn’t take Syrah [Resourc- es Ltd] on head-to-head. But, we could be a high-quality specialist miner and do
that at the lower end of the cost curve. “It is a subtle change to our strategy
but one we think can pay off.”
– Dominic Piper
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 45


AUSTRALIAN GRAPHITE CONFERENCE PREVIEW
Mozambi makes size matter
Mozambi Resources Ltd has the larg- est graphite resource in Tanzania, but what does that really mean?
“It comes down to the quality of the product that you are producing,” Mozam- bi managing director Alan Armstrong told Paydirt.
“But, because we have got that size it means we can focus on the higher pro- portion flake size areas and the beauty of having a large size deposit is that you can then pinpoint areas of high priority. Obviously, if you have a smaller deposit then you are pigeonholed into that area. It gives us flexibility of where to target for our initial pit design.”
Earlier this year, Mozambi announced a resource of 179mt @ 5.1% TGC from the Namangale project in south-eastern Tanzania.
The resource was compiled from drill- ing at Namangale 1, 2 and 3, with all de- posits remaining open along strike and at depth, while there are also targets still to be tested.
All drilling to date has been limited to a maximum 100m depth, with metallurgi- cal test work confirming graphite can be liberated from the host rock easily.
Furthermore, met test work has re- turned a high proportion of super jumbo (+500 microns) and jumbo (+300 mi- crons) flake sizes to compliment Mozam- bi’s 179mt resource.
Size and grade at Namangale appears to have caught the attention of investors and provided shareholders with some confidence that Mozambi is the emerg- ing name in graphite.
Last month, sophisticated and profes- sional investors committed to a place- ment of 136,562,121 shares at 3.3c/ share to raise more than $4.5 million.
The placement was oversubscribed by $1.86 million (original placement was for $2.64 million) which Mozambi decided to take to ensure PFS and working capital costs were met without having to reach out to the market again.
“We’re very happy with the support we got from the latest placement. It is a re- ally tough time in the market and lots of people were wondering when companies like ourselves were going to get place- ments away,” Armstrong said.
“To get such strong support over and above what we requested from the mar- ket shows there are still people willing to contribute to a good story. For us, that shows that we still have strong support out there in the market and people will back the right story at the right time.
“Our decision to take it all was market driven. We don’t want to have to keep having to go back to the market, espe- cially in these uncertain times, so it was good to get some confidence and clarity for our shareholders.”
Armstrong said the PFS would prob- ably be ready for release in September/ October this year.
Mozambi is among a host of ASX jun- iors cutting its teeth in the Tanzanian graphite landscape and a robust PFS from Namangale could further enhance the country as the premier graphite juris- diction in the world.
While the general market may need to be convinced of this, there is no doubt in Armstrong’s mind that Tanzania is the place to be for graphite players.
“Tanzania is really shaping up as virtu- ally the Pilbara for graphite deposits,” he said.
“It is very much through the Mozam- bique mobile belt, northern Mozambique and southern Tanzania are very pro- spective, so that is why there has been a lot of demand in those parts of the world.
“The graphite that has been found there is unlike what has been found in the rest of the world, in terms of the quality of the deposit and lack of deleterious miner- als. Others in the area have been able to prove up to 99% without any chemical treatment. There are environmental as- pects of it that really make it a future hub of graphite mining.”
– Mark Andrews
Tanzania is often described as being to graphite what the Pilbara is to iron ore
PAGE 46 MARCH 2016 AUSTRALIA’S PAYDIRT




AUSTRALIAN GRAPHITE CONFERENCE PREVIEW
Renascor tastes instant
success
“This project’s a bit different be- cause the discovery has basically already been made,” Christensen said.
“It’s just a question of quantify- ing it and seeing if we can build it up into a competitive space in graphite.”
Renascor is looking to mobilise a drill rig at Munglinup during the second quarter, although the exact timing will depend on the success of the current programme at Arno.
The company has already iden- tified a series of prospective con- ductive targets at Munglinup, in WA’s Albany-Fraser Range prov- ince, some of which appear simi- lar in style to the nearby Halbert’s graphite deposit (1.9mt @ 19.2%
Positive assay results from the maiden drilling campaign at Renascor Resources Ltd’s newly
acquired Arno graphite project in South Australia look to have justi- fied the company’s move into the sector.
Broad intervals of near-surface, high-grade graphite were inter- sected in the initial 10 holes of the 24-hole programme, including best hits of 23m @ 12.9% TGC from 12m (including 19m @ 14.8% TGC from 12m), 36m @ 10.3% TGC from 17m (including 27m @ 13% TGC from 23m) and 12m @ 10.5% TGC from 29m (including 9m @ 11.8% TGC from 18m).
The company was still awaiting some assay results from the com- pleted programme at the time of print.
Renascor only picked up the project in early December after entering into a binding agreement to acquire all of the issued capital of unlisted company Eyre Peninsula Minerals Pty Ltd.
The acquisition came less than three months after the company first gained ex- posure to graphite through its purchase of the Munglinup graphite and nickel sul- phide project in Western Australia.
Renascor still retains its suite of cop- per and uranium projects in SA, includ- ing the Eastern Eyre IOCG project in the south of the renowned Olympic Domain, although Arno is now recognised as the company’s flagship asset.
Renascor managing director David Christensen said both Arno and Mung- linup had the potential to be developed quite quickly, and therefore were perfect additions to his company’s portfolio.
“They seem to fit quite well with the group’s skill-set; trying to de-risk projects and move them from exploration to de- velopment,” Christensen told Paydirt.
“I think they’re good because there is a fast-track towards potential devel- opment. And obviously the metrics be- hind graphite are quite positive.”
Arno is the most advanced of the two projects, as evidenced by Renas- cor’s ability to start drilling so soon after acquiring the asset. Christensen said earlier work on the ground indi- cated a near-flat lying body of graphite mineralisation at a shallow depth over the 600m strike length.
Christensen admitted the acquisition of Arno was “somewhat opportunistic”, but added his company had kept close
Renascor’s maiden drill campaign at Arno has delivered a series of positive assay results
tabs on the project given its previous exploration history looking for copper to the north and uranium to the south of the prospective ground package.
“We knew the parties involved and we saw the type of work they had done be- fore,” Christensen said.
“I think probably in a better market they would have gone at it for longer, but the market was tough and they needed a team that had some developmental ex- perience, which is something that our group has.
“Obviously we were keen on graphite and we had some cash, so we were able to cut a deal.”
If the remaining assays from Arno re- turn similarly positive results, Renascor expects to be quite busy for at least the next six months.
Further RC and aircore drilling is planned, with a view towards establish- ing a JORC-compliant resource for the project. More advanced metallurgical testwork is also in the pipeline.
TGC) currently being developed by Gold Terrace Pty Ltd.
“Munglinup is an earlier stage play and first of all we need to see if there are sufficient qualities of graphite there,” Christensen said. “If we’re able to get in there and push that forward, it offers real opportunities to increase shareholder value, the same as for Arno.
“Both of these graphite projects seem to be well regarded by the finance com- munity and they seem to be the type that if you can meet certain, reasonably achievable hurdles, you can push them from exploration to development and shareholders then get the benefit of the increases that come along with that.”
Christensen was confident his compa- ny had enough funds to complete most of the proposed work programmes at Arno and Munglinup despite Renascor report- ing cash reserves of just $869,000 at the end of last year.
Renascor was able to complete the maiden drilling campaign at Arno rela- tively inexpensively, according to Christensen, and future work may be eligible for co-funding grants from the
respective state governments.
“What we’d like to do is spend a bit of the money we have right now in or- der to get some return on what we’re
seeing,” Christensen said.
“If things look promising, then you
can often get some more money to do some more things. We’re sort of in a position where we’re not desperate to go to the market, but at some stage we’ll have to start thinking about it.”
– Michael Washbourne
PAGE 48 MARCH 2016 AUSTRALIA’S PAYDIRT
Arno is one of several emerging graphite projects on the Eyre Peninsula


Product focus for Oakdale
Oakdale Resources Ltd is focused on optimising its potential graphite prod- uct after a recent scoping study confirmed
the robust nature of its namesake project on South Australia’s Eyre Peninsula.
The scoping study, released late last year, found the Oakdale project could support a proposed mining operation of 2 mtpa and an output of 94,500 tpa, based on an initial three-year mine life.
Operational costs for both mining and processing were estimated at $13.25/t, while the projected cost of production is $286/t. The project carries a NPV of $170.2 million and payback within nine months.
The initial graphite resource, incor- porating both Oakdale (5.65mt @ 4.7% TGC) and Oakdale East (670,000t @ 5.1% TGC), covers a distance of about 1,500m and a width of up to 500m. The mineralisation, containing both indicated and inferred resources, is about 20m thick in the saprolite zone and has a maximum depth of 55m.
Oakdale has flagged further drilling at the Oakdale East and Oakdale North de- posits in a bid to increase the mine life beyond the initial three years, but man- aging director John Lynch could not put a time on when the proposed work pro- grammes would begin.
“Our main focus is optimising our graphite product,” Lynch told Paydirt.
“Obviously now we have demonstrated that we can mine and introduce graph- ite at a low cost we can start talking to potential end-users and look to get them involved in the project.
“My plan has always been to build enough resources to justify [building] a plant. Graphite sales are going to in- crease over the next few years and I know we won’t have a shortage of graph- ite. To actually increase graph-
ite resources at this time is not
our primary focus.”
Metallurgical testwork at both ALS Burnie and Bureau Veritas in Adelaide was ongo- ing at the time of print to deter- mine the optimal product com- position from Oakdale.
The testwork to date has indicated a 95-96% float con- centrate can be achieved with an 85% recovery of the con- tained graphite. The float con- centrate will be treated by acid washing to obtain a plus-99% graphite concentrate.
A recent scoping study confirmed the robust nature of the Oakdale graphite project
The plus-99% graphite concentrate has a high economic value because it is used in the production of spherical graphite, one of the core ingredients in the production of lithium-ion batteries.
“Purity is going to be the ultimate test for graphite deposits, so what we’re do- ing is working towards producing that plus-99% product,” Lynch said.
“The first thing I did when we realised this graphite deposit had some potential was metallurgy. I’ve never started drilling a project until I know we can recover the material.”
Oakdale is one of several graphite hopefuls based on the Eyre Peninsula and the company’s ability to complete a scoping study within 13 months of listing on the ASX suggests it is serious about developing a mine.
Lynch, an industry veteran with a ca- reer spanning more than three decades, said the scoping study and initial metal- lurgy results indicated Oakdale could be a major player on the emerging Austral- ian graphite scene.
“My knowledge of graphite is about three years old, but so is most of the rest of the world,” Lynch said.
“Graphite is not unique, there are graphite deposits throughout the world, and I think projects that can produce graphite will have the infrastructure avail- able – we’re basically 100km by sealed highway to a port – and will be in jurisdic- tions which are stable, and certainly the Eyre Peninsula is a stable jurisdiction.
“If an end-user is buying graphite, I think they would rather be buying it from a place like the Australian Eyre Peninsula than some other parts of the world. I think that’s one of the positives in our favour.”
Lynch, who founded Pan Australian Mining Ltd and Weda Bay Minerals Inc, expects to draw on his previous experi- ence in marketing of tungsten, scheelite and other industrial minerals when his company starts the search for potential customers for the Oakdale graphite prod- uct.
“Graphite is more like scheelite, or an industrial mineral, than a metal in the sense that your end-us- ers have specific grades and specific sizes and you have to cater to your end-user’s re-
The project’s initial graphite resource incorporates both Oakdale (5.65mt @ 4.7% TGC) and Oakdale East (670,000t @ 5.1% TGC)
quests,” Lynch said.
“You’re end-user will tell you
what their specs are and you have to deliver to those specs. But if you deliver outside those specs, they’ll penalise you. It is a specific market, it’s not a question of getting a graphite concentrate and selling it to whoever wants it.”
– Michael Washbourne
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 49