Australia's Paydirt March 2016

AUSTRALIAN GRAPHITE CONFERENCE PREVIEW
Metalicity moves on rare minerals
Metalicity Ltd has picked up the rights to explore more than 2,500sq km of ground pro-
spective for graphite and lithium. The emerging explorer now holds dominant tenement posi- tions in the renowned lithium dis- tricts of Pilgangoora and Green- bushes in Western Australia, as well as access to the Munglinup graphite region in the Albany- Fraser Range, following a recent
acquisition spree.
Metalicity’s flagship remains
the undeveloped Admiral Bay zinc project, but the company decided to act on the heightened interest surrounding lithium and graphite in a bid to realise more immediate value for sharehold- ers.
A scoping study and resource upgrade for Admiral Bay is set to be unveiled later this month, but the company has already recognised that a JV partner will be required to help fund the next phase of exploration and beyond.
Metalicity exploration manag- er Michael Hannington said the company had sensed an oppor- tunity to board the graphite and lithium train.
“I think it’s now been three years since the general press first started talking about lithium and graphite, but it’s literally only in the last few months people with lots of money have said, ‘hey, we can actually make some money out of this’,” Hannington told Paydirt.
“There is real demand out there. In the past people have just thought it was all being made up. Now people can cali- brate that there is going to be demand, but what they can’t calibrate is the quan- tum of that demand.
“Chasing lithium and graphite in Aus- tralia was our best option. All we really did was go and have a look at lithium occurrences and graphite occurrences in publicly available databases and start picking ground up.”
Metalicity entered into a tenement sale letter agreement to acquire 146sq km of ground in the Munglinup graphite district. The company’s land package is about 20km north of Gold Terrace Pty Ltd’s Munglinup deposit, regarded as one of the world’s highest-grade graphite sources.
Metalicity has picked up a suite of lithium and graphite tenements in Western Australia
ject area on the Wodgina green- stone belt, is the company’s highest priority lithium target. Outcropping pegmatites have been identified over a 5km strike length as well as a rock chip sample of 1.62% lithium oxide.
The project is adjacent to Global Advanced Metals Pty Ltd’s (GAM) lithium-tantalum operations and Pilbara Minerals Ltd’s Pilgangoora lithium project.
Hannington said very little of the prospective ground in the Pilbara region had been properly tested for lithium.
“GAM had no appreciation of the fact lithium was there or how much lithium was there, but we now know this is a district which has lithium, tantalum and nio- bium in the pegmatites,” he said.
Talison Lithium Pty Ltd’s Greenbushes deposit is con- sidered the largest spodumene (hard rock lithium) deposit in the world and Metalicity has now picked up a tenement about 25km to the east.
Hannington said the company was hoping to find a repeat of the main Greenbushes deposit.
Fellow ASX-listed explorer Renascor Resources Ltd also recently picked up some prospective ground around Mung- linup.
Previous assaying for graphite on Met- alicity’s tenement intersected 12m @ 7.4% carbon, including 4m @ 10.33% carbon, from 20m beneath the surface.
“Munglinup graphite is very high- grade, jumbo flake, but it’s very small,” Hannington said.
“There’s a lot of other known graph- ite deposits around the place, but what we’re trying to do is find a much bigger graphite deposit. We think being around Munglinup is the right kind of place to be.”
Exploring in the Fraser Range is noth- ing new for Metalicity, with the company first venturing into the region in 2014 when it acquired the rights to the Rocky Gully nickel project.
Metalicity has appointed former Lithex Resources Ltd and Magnis Resources Ltd exploration manager Brendan Borg to assist with the exploration and devel- opment plans for Munglinup.
Stannum, within the Pilgangoora pro-
“Pegmatites get ex-solved off a certain type of granite, but they haven’t found where the granite is at Greenbushes,” he said. “It’s either to one side or straight down. Most people think it’s straight down, but it’s at least 10km
PAGE 50 MARCH 2016 AUSTRALIA’S PAYDIRT
down.
“What we’re trying to do is go to other
places in WA where we think those simi- lar conditions occur, where you’ve got a deep buried granite and you’ve got a major structure that’s tapped into the granite.”
Work on Admiral Bay will continue while the company searches for a JV partner for the world’s largest undevel- oped zinc project.
Hannington expected that search would step up from next month once some formal project economics are an- nounced in the upcoming scoping study.
“What this project needs is a company that can take a leap of faith and say we believe this system is going to be ginor- mous and it’s going to be worth the ef- fort to drill out what we already know and then get down there and start exploring from underground,” Hannington said.
– Michael Washbourne


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INDABA REVIEW
Low key Indaba but seeds of future growth ready to be sowed
Even in quieter times the Australia Lounge continues to attract a strong crowd to its corner of the Mining Indaba exhibition space
In a year when subdued was the buzzword of the conference, new South African Minister for Mineral Resources, Mosebenzi Zwane, delivered the kind of opening address that did anything but set the
had squandered an opportunity during the last commodities boom.
“I am convinced that during our sum- mer season, as an industry, we have failed ourselves in not preparing better for this winter,” he said. “What lessons can be learnt to ensure that as we move into the next season, our workers don’t remain the ones worst affected by the winter?”
For the industry, regulatory certainty would be at the top of the list of lessons. Even a decade after the new mining legislation was introduced, the industry continues to operate within regulatory uncertainty with the MPRD Amendment Bill still yet to be ratified.
Zwane said he appreciated the impor- tance of regulatory and political certainty
pulses racing.
While previous years had seen the spiky Susan Shabangu and the forthright Ngoako Ramatlhodi take the stage for the Indaba welcome, Zwane’s appearance as the new incumbent in one of the South African Government’s most troubled portfolios betrayed the confusion and indecision which seems to have gripped the Jacob Zuma-led Government.
Not only is Zwane new to mining, he is a relative novice on the national stage and while he personally could not be crit-
icised for delivering an anodyne keynote address, his presence only highlighted the lack of clear mining policy initiative in the country.
Mining has always had an uneasy rela- tionship in South Africa’s democratic era but the present era is symbolised not by confrontation but listlessness. No one, it appears, has a clear vision for where the industry is headed.
Zwane admitted as much in his ad- dress, acknowledging that South Africa
PAGE 52 MARCH 2016 AUSTRALIA’S PAYDIRT


but it was only when pressed by media in a news conference following the event that he gave a firm commitment to pass- ing the Bill this year.
Further work is also needed on South Africa’s Mining Charter.
“It is an important transformation tool and its targets remain applicable beyond 2014. The social and labour plan com- mitments constitute a critical component of restoring and sustaining the dignity of mineworkers and communities,” Zwane said.
Clashes between mineworkers and their employers has been a recurring theme throughout the last decade, culmi- nating in the Marikana tragedy in 2012. Zwane said all stakeholders should con- tinue to find ways to avoid a recurrence.
“We should take lessons from the pro- tracted platinum strike in which there were no winners and ensure that such events are not repeated,” he said.
On support for industry itself, Zwane said the Government was “investing in research and development throughout the mining, minerals and upstream petro- leum value chain” as well as investing in pre-competitive exploration data through the Council for Geosciences.
“Our goal is to substantially increase the share of the global exploration ex- penditure.”
of the post-boom commodities market.
ingintheminingsector,atGrantT“horn- While five years ago, the majority of realisation that mining investment is so
ton Johannesburg said Zwane’s raising discussions were about Africa’s iron ore of R&D funding was laudable.
New South African Minister for Mineral Resources, Mosebenzi Zwane opens the 2016 Mining Indaba
pable reassurance for investors.”
While the initial spotlight was on South Africa’s new mines minister, the tone of the conference soon turned to the wider Sub-Sahara African region as miners, governments and investors could be seen trying to adapt to the new realities
Ashanti Ltd counterpart Venkat in ebul- lient mood.
mobile that excessive demands will only result in a flight of capital.
Jacques Barradas, partner specialis-
Outside of South Africa, there is a general acceptance that investors and governments cannot afford to be greedy. Miners are still adapting to the changing nature of the social licence to operate but now governments are also faced with the
“Unfortunately, this is a I am convinced that during our Linkages to other indus-
process which should have summer season, as an industry, tries appear to be the hope
started many years ago be- for many nations. While
cause the benefits in sup- we have failed ourselves in not beneficiation of minerals
porting research and devel- remains the ideal, govern-
to fruition. This really will
be part of the Department of
Mineral Resources’ long term strategy,” he said.
Barradas also commended the Min- ister for ensuring the MPRDA Act re- mained a priority.
“The updated Act will hopefully bring South Africa on par with other emerging economies while ensuring that as a na- tion, we continue to lead on the African continent in terms of governance and reporting standards and requirements,” he said.
Deloitte Africa Mining Leader, Andrew Lane, said industry would have hoped for Zwane to deliver a “more tangible action plan” for the sector.
“What actually creates certainty is co- hesiveness in government’s statements,” Lane said.” How is he going to ensure business stability in the current climate? We would have liked to see a more pal-
and coal potential, the future for bulk commodities on the continent is bleak. Without the requisite multibillion dollar in- frastructure, African nations cannot hope to compete with the iron ore behemoths of Australia and Brazil and as thermal coal prices continue to slide, even China and India, once sources of considerable investment, are beginning to turn away from the sector.
There was discussion about Africa’s infrastructure gap, but it appeared at times to be futile. Even when the spot iron ore price was $US190/t, companies struggled to raise the necessary funds for related infrastructure. Now it is less than $US50/t, their job is impossible.
Of the traditional minerals, only gold appears to be in the ascendency with both Randgold Resources Ltd chief ex- ecutive Mark Bristow and his AngloGold
are investigating ways other
industries such as agricul- ture, fisheries and manufacturing could
benefit from mining development. Former Zimbabwean Finance Minister Tendai Biti said this was the great chal- lenge of coming decades in African min- ing; “to change from a high value, low im- pact industry to a high value, high impact
industry”.
“The mining industry operates in an
enclave which hardly touches the do- mestic economies of many African coun- tries,” he said.
At a time when there is little hope for near-term development, raising such top- ics now may ensure action is ready to be taken when opportunities do return.
– Dominic Piper
preparing better for this winter.
opment take years to come ments across the continent
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 53


INDABA REVIEW
404ct gem is largest ever recovered by Australians
Shares in Lucapa Diamonds Ltd jumped nearly 30% on February 15 after it reported the largest ever
diamond recovered by an ASX-listed company.
The 404ct, Type IIa D-colour gem was recovered from alluvial mining at Mining Block 8 on the company’s 40%-owned Lulo project in Angola.
The diamond is the biggest re- corded diamond ever found in An- gola, the 27th largest diamond on record and the largest diamond ever discovered by an Australian com- pany.
Lucapa chief executive Stephen Wetherall said he was very happy with the discovery because it was further proof of the quality of dia- monds Lulo was capable of produc- ing.
“We are very pleased,” Wetherall
told Paydirt. “We have been telling
the market Lulo is a special piece
of ground and we have frequently recovered large special diamonds since mining started in August 2015. This 404.2ct diamond is the icing on the cake. Our long-term shareholders share our belief but I think this will go a long way to attracting new investors.”
The diamond is the largest of more than 60 large special diamonds recov- ered from alluvial operations at Lulo. The previous largest was 120.4ct. In the par- cels sold to date, the value of Lulo’s dia- monds has averaged $US1,473/ct.
Alluvial operations at Lulo are set to continue but Wetherall knows the greater prize lies in finding the kimberlite source of the diamonds.
“We had two primary objectives in set- ting up the alluvials operation; generate free cash-flow to fund the kimberlite ex- ploration and start generating a return on our in-country investment and that is what we plan to do this year.”
The large diamonds have been re- covered from an area of Mining Block 8 which has also been found to contain kimberlitic material. Lucapa has recently completed gravity and EM surveys and is confident the hard rock source of the alluvial diamonds is in or near Mining Block 8.
Wetherall said a drill rig was now being mobilised to site.
The 404ct diamond recovered from Lucapa’s Lulo project is the largest diamond ever reported by an Australian company
“It should be there by the end of quar- ter one and from there we can begin drill- ing the gravity lows we have identified,” he said.
Finding the kimberlite source could catapult Lulo into the upper echelons of the diamond industry. Far East Capital managing director (and Lucapa share- holder) Warwick Grigor stated recently that Lucapa had “upped the ante” with the 404ct discovery.
“For those of you who weren’t con- vinced that there was something special about this project, notwithstanding the multitude of special stones that have been produced, you have no more rea- sons to doubt the quality,” Grigor said in his weekly commentary. “Never before have I seen a diamond project with so much promise, and now, with such spec- tacular delivery. It would not be contrite to start calling this ‘world-class’. If the alluvials are generating such amazing stones, how good will the pipe be?”
Wetherall steered clear of such super- latives but agreed that Lulo was among the best projects he’d seen in a 20-year diamond career.
“It is as exciting as that and I have been in the space for a good few years. There
are very few projects that can produce the quality and size of diamonds as fre- quently as Lulo does and the source of these diamonds will be a very special mine.
“We are very gung-ho on finding that source. It is an exciting project and I don’t know of any other project in the world that can match its potential.”
Lucapa is in partnership with Angolan state diamond miner Endiama (32%) and local company Rosas & Petalas (28%). Wetherall said Lucapa’s partners were equally excited about the project.
“With the results being achieved En- diama sees how special this operation is and they are showing a lot of interest. Our relationship goes from strength to strength.”
– Dominic Piper
PAGE 54 MARCH 2016 AUSTRALIA’S PAYDIRT


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INDABA REVIEW
The screaming opportunity for Anglo American
Amid an intense asset review during Mining Indaba, Anglo American Coal South Africa chief ex- ecutive Themba Mkhwana- zi threw his support behind the coal industry.
Speaking just days before thec ompany an- nounced plans to divest its coal and iron ore divisions, Mkhwanazi said coal would remain an important com- modity, particularly with the world population set to ex- pand by a further 2 billion people by 2050.
“From a coal perspec- tive we believe that coal is a positive story because coal will continue to be one of the key drivers in terms of economic development,” he said.
“The fact that 50% of the
current global population
already has access to elec-
tricity, what you are finding
is that countries in the emerging markets are driving quite hard in terms of putting on electric power capacity. Coal will be- come a feature of that because of its [low] cost and also because of its abundance. We see that coal is a positive story going forward given its costs, reliability and its abundance.”
Despite Mkhwanazi’s bullishness on the commodity, Anglo American has pri- oritised its diamonds, PGMs and copper businesses, leaving the bulk commodi- ties and other minerals in the portfolio to be disposed of or managed for cash generation.
Therefore, the company’s thermal and met coal operations in South Africa and Australia remain up for grabs, as Anglo American chief executive Mark Cutifani attempts to revive the faltering company.
Coming up to three years in the posi- tion as chief executive, Cutifani has over- seen monthly revenue losses and an- nounced 85,000 job cuts worldwide, as commodity prices have deteriorated and global economies have stumbled.
“In talking about the new Anglo Ameri- can, we talk about the opportunity we see in probably the toughest time we
Mark Cutifani
The medium-term goal for Anglo American is to reduce net debt from over $US12 billion (at the end of 2015) to $US6 billion through sales and positive free cash flow, which will hopefully go some way to redeeming its credit rating.
One avenue through which Cutifani hopes Anglo American can be returned to a solid investment grade rating is its copper busi- ness.
At Mining Indaba, he said it was too early to disclose the precise plans for a cop- per rejuvenation, but hinted the plan was a master- stroke in the making.
“I expect to be able to talk this year about the significant changes we are making in our copper busi- ness. It is too early to go through any details but the works we are doing with our
have seen in most of our lives in terms of this industry and to me that screams new opportunity,” Cutifani said at Mining Indaba.
“That is what we are working on, that is what we are working with and in fact many people in this room we are collabo- rating with in terms of developing new models and approaches to the way we do our work. Given the world around us, the need to establish a more robust out- look as a platform for the future and the long-term future we see requires us to do things differently. We are a self-help group, we understand that our share- holders demand we do the best with the resources we have and we’ll deliver on those expectations and the future poten- tial we see within the business.”
Anglo American has targeted net debt to be less than $US10 billion (pro forma) by the end of 2016, with $US3-4 billion expected to be recouped from disposals.
While coal and platinum operations in South Africa and Australia are to be sold off, the company’s nickel, niobium, phos- phates and Moranbah and Grosvenor met coal disposal processes are already under way.
teams are certainly going to make a dif- ference and will change the face of our company and our competitive position in the industry. We are going through a step change and it takes time and it is impor- tant,” Cutifani said.
Anglo American’s overhaul, which in- cludes exiting coal and iron ore, is being done at one of the lowest ebbs ever in the mining industry, with Cutifani antici- pating an even tougher year ahead.
But, with adversity comes opportunity and this remake to suit the demands of the market will position Anglo American as a much stronger group, Cutifani said.
“The world is changing at a faster rate than any of us have probably been able to digest – certainly in the last five years – and it will get faster. The key question is can we position ourselves as a country, continent and a company as partners at each level within our community in devel- oping the future? Can we work together or get ahead of the curve and help lift Af- rica up and beyond other competitors?” he asked.
– Mark Andrews
PAGE 56 MARCH 2016 AUSTRALIA’S PAYDIRT


With its gold and bulk commodity sec- tors continuing to whither on the vine, South Africa’s embattled govern- ment is looking to the platinum sector to provide a boost to both the economy and mood in the mining sector.
Speaking on the opening day of this year’s Mining Indaba, newly installed South African Minister of Mineral Re- sources, Mosebenzi Zwane said plati- num could take on the role of economic leader, a title once held by gold.
“With more work we should be able to turn platinum into what gold previously was to South Africa,” he said.
In the current environment, such no- tions appear ambitious. Although the country boasts 77% of global reported platinum reserves, the precious metal’s price slide of recent years has left the South African platinum mining sector in disarray.
Lonmin plc has shed 90% of its value in the last 12 months and was earlier this year forced into a further 93% discount- ed rights issue of $US407 million to stay afloat. Aquarius Platinum Ltd’s value had also tumbled 95% before Sibanye Gold
Ltd launched a $US294 million takeover offer in October last year and even An- glo Platinum plc has been forced to re- structure, closing shafts and selling its Rustenburg operations to Sibanye for a discounted initial upfront payment of R1.5 billion.
However, the ANC Government re- mains unperturbed and is looking to plat- inum to not only increase its own contri- bution to the national economy but also foster new industries.
A special economic zone will be es- tablished in the country’s North West province before the end of 2016 as the Government continues its efforts to drive value-adding beneficiation sectors in the country.
Minister for Trade and Industry Dr Rob Davies said he was confident the special economic zone would be in place this year, allowing South Africa to develop expertise in emerging technologies.
“A special economic zone is being es- tablished in North West Province with the aim of bringing fuel cell technology and other technologies which use platinum to South Africa,” Davies said.
Dr Davies recognised the impact of falling commodity prices but said South Africa needed to find new ways to extract value from its reserves.
“There are structural changes to com- modity prices occurring as China’s econ- omy adjusts to the ‘new normal’. But, if your existing customers are not prepared to pay the same prices for your product, the smart thing to do is find new uses for your product.”
Fuel cell technology is one such use and has been touted as a potentially im- portant driver of platinum demand. Dr Davies said the special economic zone was designed to encourage the develop- ment of such technology in South Africa.
“We need to establish a set of indus- tries that make use of platinum,” he said. “There have been a lot of reasons why beneficiation hasn’t happened before but we are determined and need to create the conditions to make those industries viable.”
– Dominic Piper
South Africa turns to platinum for growth
An investment seminar panel which included South African Minister of Mineral Resources, Mosebenzi Zwane (second from right) and Minister for Trade and Industry Dr Rob Davies (third from right) debates the future of South Africa’s mining sector
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 57






INDABA REVIEW
South Africa needs to tighten up its investment case: Tete
South Africa needs to stop scoring own goals and provide more political and regulatory stability if it is to attract more
investment into its mining industry. Speaking at a South African invest- ment seminar, the Chamber of Mines of South Africa president, Mike Tete told delegates international investors were looking for certainty when making invest-
ments.
“In mining, South Africa competes
with Australia, Canada and other African countries for investment and investors only want to put money into jurisdictions where investment conditions are stable,” he said.
Once the strongest in the world, South Africa’s mining industry largely missed last decade’s commodity boom as it struggled to find its place in the post- apartheid national landscape.
A series of debilitating crises have struck the sector since, including wide- spread labour unrest, political interfer- ence, increasing power costs and a lack of infrastructure development.
Tete pointed to the current delays over the MPRDA Bill – legislation designed to clarify the many uncertainties created by the original Mineral and Petroleum De- velopment Act – as an example of how uncertainty left investors wary.
“As South Africans, we need to ensure we create stability and in that regard we need to expedite the MPRDA Bill. When I travel the world investors always ask me why it is taking so long. We need to strengthen our regulatory environment and ensure that whatever we agree to must be implemented.”
Solidarity’s Gideon du Plessis agreed, saying South Africa’s mining sector was like a football team which mixed spectac- ular “goals” with lamentable “own goals”. He pointed to the failure of AMCU to join wage negotiation agreements and the Government’s inability to get the MPRDA Bill through parliament.
New Minister for Mineral Resources, Mosebenzi Zwane, said his government recognised the need to push the Bill through.
“We understand the policy settings are vital to encouraging investment and we are treating the matter of the MPRDA Bill as urgent,” he said. “We are also review- ing the Mining Charter and that will be completed by April.”
Zwane admitted South Africa was ex- periencing tough times in mining but said the country had done better than many others “under the conditions”.
Some of the country’s major miners – including AngloGold Ashanti Ltd, Gold Fields Ltd, Anglo Platinum plc and Lon- min plc – have either closed, suspended, divested or attempted to sell their domes- tic operations in recent years but Zwane said companies had yet to completely divest their assets.
Instead, he is optimistic the resources sector would rebound in the near future.
“The long commodities winter is com- ing to an end. We should be able to re- vive the mining industry and we will work to attract investors,” he said.
– Dominic Piper
Rio Tinto Ltd chief execu- tive of diamonds and minerals, Alan Davies, has
called on African govern- ments to help miners through the current downturn.
Davies said adjusting the cost base through produc- tivity and other direct cost reductions needed to be ad- dressed right now.
Alan Davies
Infrastructure development must continue for governments to real- ise maximum potential from mining and other industries such as agri- culture.
Some of Africa’s most promis- ing assets are in remote locations, meaning the capital required to build such heavy infrastructure can cost billions of dollars.
trepreneurs and retail development.
“We have seen across the continent large infrastructure projects are catalysts
for transformative growth and change.” African Development Bank (AfDB) es- timates that more than $US360 billion was needed by 2040, with 51 priority pro-
jects demanding $US68 billion by 2020. Attracting such investment is a chal- lenge in any cycle, but with Africa’s minerals sector a cornerstone for devel- opment and economic growth, Davies encouraged the private sector, govern- ments and financiers to look at the long-
term benefits of their investment. “Infrastructure is a catalyst for invest-
ment to follow,” Davies said.
“It is a challenging climate at the mo-
ment, there is no doubt about that, but the focus must be on the long term and the conditions that create and underpin development regardless of what point of the cycle we are at. I am confident that we can rise to the challenge.”
– Mark Andrews
Build now for tomorrow’s mines
“This can come in the form of labour productivity, electricity and power costs and reduced bureaucracy,” Davies said.
“By focusing more on these types of improvements, governments will improve their operating environments, simplify their systems and attract new investment to help new business and improve their competitiveness.”
Commodity prices are not demand- ing investment in the mining sector any- where in the world, however, now is not the time to lose sight of what is needed for growth in Africa, Davies said.
The infrastructure deficit Africa is facing is large and building roads, rail, ports and associated items needs to be the combined focus of private sector, governments and financiers alike.
Furthermore, the process of construct- ing infrastructure solutions would be made easier through regional integration and cooperation, Davies said.
“Borders should not be in the way when contemplating projects,” he said. “Platform for growth is investment in infrastructure. Infrastructure is the life- blood of countries, the backbone of in- dustries, and the trade path of global en-
PAGE 60 MARCH 2016 AUSTRALIA’S PAYDIRT




INDABA REVIEW
Africa must invest in Africa
Black Rhino Group chairman and Emir of Kano Lamido Sanusi believes Africa itself must provide
some of the investment needed to increase GDP and productivity on the continent.
Speaking during his keynote address to Mining Indaba, Sanusi said China’s domestic economic woes meant it could no longer be relied upon to be the major investor in Africa.
“So, we need new sources of investment,” Sanusi said, point- ing to the fact only $US1 billion of the current $US18 billion being spent on minerals projects in Af- rica was raised on the continent (through the Johannesburg Stock Exchange).
“African capital markets are lack- ing efficiency and to deepen them we must look to trade reform. Re- silience depends on strong and robust financial systems and we need platforms to encourage in-
Black Rhino chairman Emir Lamido Sanusi on the Mining Indaba stage
frastructure. Enhancing domestic mechanisms to attract investment, including sovereign guarantees, etc will assist in this.”
Africa’s infrastructure deficit and the restrictions this places on growth was highlighted throughout the Mining Indaba with the IMF’s estimation that Sub-Saharan Af- rica would need $US93 billion of infrastructure investment each year to bridge the gap by 2040 oft- quoted.
Sanusi said public financial sup- port for infrastructure, including multilateral lending, could not pro- vide all of that funding.
“It is clear that relying on public finance for infrastructure invest- ment is unsuitable,” he said. “But governments need to provide transparency, good governance and political stability [to encourage private investment].”
– Dominic Piper
PAGE 62 MARCH 2016 AUSTRALIA’S PAYDIRT




INDABA REVIEW
South32’s new manganese plan
Prior to Mining Indaba, South32 Ltd re- leased a detailed plan of how it would tackle the current slump in the manga-
nese market.
South32, 60% owner of the world’s
largest manganese company, Samancor Manganese JV, announced sweeping changes to its manganese business in order to capture the upside when prices rebound, chief executive Graham Kerr said.
“For our part, South32 are taking ac- tion now so we are appropriately struc- tured for the current environment, yet flexible enough to benefit from an even- tual recovery in prices,” he said.
“These actions include accelerating the second phase of the Central Block development at Wessels, reducing sale- able production at the Wessels mine, optimising the mining and processing footprint at Mamatwan’s and continuing operation of only one of four furnaces at the Metalloys smelter.”
Mining activity at a reduced rate re-
Graham Kerr
started in South Africa in February, with the Hotazel mines expected to ramp-up to a saleable production rate of 2.9 mtpa, subject to market conditions.
At that nominated rate, it is estimated 900,000 tpa will be taken out of the mar-
ket for the foreseeable future, as sustain- ing capital expenditure is expected to be slashed by 80% to $US7 million.
South32’s restructuring plans has re- sulted in a staff reduction of 620 employ- ees across the Samancor JV.
While South32 has made the hard de- cisions on its business, Kerr called on peers in the space to do the same thing for the sake of the manganese industry.
“All manganese participants have a role to play in supporting a healthy, sus- tainable manganese industry,” he said.
“The industry cannot depend on a quick demand and price recovery as market fundamentals have changed.
“Looking ahead, the industry needs to make rational decisions and take a dis- ciplined supply approach. The industry’s future depends on it.”
South32 has flagged that it expects to book pre-tax, non-cash charges of about $US1.7 billion (post-tax) in its December 2015 half year financials.
In the scheme of power supply in Africa, ECG En- gineering is a new player.
However, it has already found a good footing in the region.
The Perth-based com- pany specialises in a num- ber of areas, including pro- ject management, power generation, plant integrity, power and control systems, automation and operations support, which are highly sought-after in Africa.
Unlike some of its peers in the services sector, ECG remains busy in the mining industry, despite the lull in activity at the moment.
Mark Huddy, general manager at ECG, has only been in the position for six months, and quite can’t pinpoint exactly why the company is thriving in the mining sector right now.
“We are probably lucky that we are still young and new,” Huddy said.
“We are built around tighter times, in terms of overhead build-up and salary
graphite project in Tanzania. Mining contracts have been core to ECG’s busi- ness and while it does have capabilities to service other industries, Huddy said pros- pects in other areas were just as tight as the resources
sector.
“In these times you are
probably best-served keep- ing your head down and working hard and we cer- tainly don’t want to get car- ried away with what we have got and we certainly don’t want to take anything for granted either,” Huddy said.
“It may well take a while for things to materially change in this industry and we are still learning to become a business. We are only 18 months old and probably not even that. Therefore we are sticking with our knitting; working hard and respecting what we are doing and who we are doing
ECG finds fruits in Africa
– Mark Andrews
ECG has found a hotspot for its business in Africa
rates and all that. It is hard to put a finger on what has been our main selling point and I am not sure whether it is luck or just good timing.”
Huddy isn’t complaining about the flur- ry of activity for the company and was re- cently selected to deliver power genera- tion and transmission systems solutions for Kibaran Resources Ltd’s Epanko
it for.”
PAGE 64 MARCH 2016 AUSTRALIA’S PAYDIRT
– Mark Andrews




INDABA REVIEW
Exploration unlikely to fire up soon
Companies must conduct their social and political due diligence as carefully as they do their technical
due diligence when acquiring pro- jects in Africa.
Speaking during a panel discus- sion on global exploration trends, Veracity Worldwide chief executive Stephen Fox said the changing face of politics in Africa meant companies had to ensure projects they were picking up didn’t come with social and community problems.
“Today’s environment places greater emphasis on appropri-
ate probity and companies need to make sure they steer clear of pro- jects with baggage,” Fox said. “A key issue for companies to think about
is that [they’re] a political actor. The days of the ‘Big Man’ in African poli-
tics are largely gone and being able to go straight to the top is not enough today. It is important to understand the social history of the licence. More disclosure is required, particularly in the EU.”
Despite this changing landscape, and the stricter legislation introduced by western governments on companies op- erating in foreign jurisdictions, Fox found companies were still unwilling to make a proper commitment to getting their politi- cal and social approach right.
“Companies are still reluctant to pay upfront to make sure they get the politics and probity issues right,” he said.
Aureus Mining plc chief executive Da- vid Reading agreed, saying even at the exploration stage a failure to secure a social licence would lead to trouble.
“If you haven’t got that social licence your project will fall down very quickly,” Reading said. “You have to do these things to get social licence and have chance of being successful.”
Ken Tainton, exploration director for Africa-Eurasia at Rio Tinto Ltd agreed social licence had become increasingly important but warned African govern- ments there were certain agreements they had to continue to adhere to.
“Countries have to understand what is going to incentivise us to enter a particu- lar jurisdiction; 1) Can we safely put peo- ple in place? 2) Rule of law; 3) Security of tenure,” he said.
Reading also pointed to greater techni-
The new global exploration trends panel discussed the future of the sector on the first day of Mining Indaba
cal infrastructure as an attraction when assessing exploration destinations.
“If you have good infrastructure of geo- physics, geochemical data, mapping, etc that can save a company two or three years and can allow for more specific early stage work on the actual mineral occurrences and target generation,” he said.
Tainton pointed to Botswana as the best example among a number of coun- tries which had opened up their explora- tion sector by providing extensive pre- competitive data. However, he said, the integration of such information was now needed.
“The challenge is to bring together all the cross-border data together into one platform,” Tainton said. “It is still frag- mented and that is a drawback for inves- tors. A lot of information has been sub- mitted by companies but how to make that available to the next generation of explorers is the challenge.”
When that next generation of explor- ers will materialise is open for debate. The current downturn has decimated the junior mining sector with panel modera- tor Chris Hinde of SNL Metals & Mining pointing out more than half of the world’s 3,000 listed mining companies had mar- ket caps of less than $10 million.
The panellists expected the major com- panies to return to exploration in coming years but Reading warned all sectors of the industry against slashing exploration
budgets now for short-term gains.
“In the longer term, the focus on brownfields not greenfields exploration will tell,” he said. “Companies have to try to avoid destroying their R&D teams because it takes five or six years to put them back in place. There is a lot you can do with a core team in the downturn es- pecially when taking that back-to-basics
approach.”
Tainton said the current climate for
commodities meant exploration teams had to conduct “more efficient explora- tion”.
“The internal prioritisation process is becoming more ruthless,” he said. “We will have to eventually go back to green- fields exploration in more remote places, or invest in new technology.”
He pointed to the work on copper por- phyry targeting as an example of new technology being integrated with tradi- tional methods.
Dr David Twist, founding partner of private equity fund African Minerals Ex- ploration and Development, said he ex- pected large companies to return to ex- ploration eventually.
“But in the short term balance sheets are far too stretched and obviously jun- iors won’t be increasing exploration ei- ther,” Twist said. “We have seen private equity emerge and that is where a lot of investment will come from.”
– Dominic Piper
PAGE 66 MARCH 2016 AUSTRALIA’S PAYDIRT




INDABA REVIEW
Infrastructure to be built for all
Apanel addressing financing options to drive infrastructure in Africa unani- mously agreed a co-operative approach must be taken.
This means financing groups, govern- ment and companies – mining and non- mining – need to devise a strategy which will attract maximum investment to ben- efit all stakeholders.
“It is much better – we think – for a company, the anchor, to build infrastruc- ture that is multiuse and hence where the costs can be shared not among different companies but different sectors,” IFC co- head director of infrastructure and natu- ral resources Sujoy Bose said.
“In my mind we are going to have to look at these holistic approaches to de- veloping the associated infrastructure to actually make sure that the cost of infra- structure is shared among as many us- ers as we can.”
In theory, the model of shared costs makes sense, particularly in an African context where many countries across the vast continent are landlocked making ac- cess to ports, for instance, unattainable without some sort of regional integration.
Bose said while shared costs and agreements can be discussed, essen- tially there will have to be an anchor – a mine for example – to underpin initial de- velopment.
“The ultimate goal has to be multiuse but it is going to take an anchor other- wise there is just not the capital. I think there are models we are still trying to pursue whereby the division of the risk
A panel discussion on driving investment in infrastructure was hosted by Africa Finance Corporation executive director Oliver Andrews
Randgold Resources Ltd chief executive Mark Bristow said miners needed
to be savvy with their busi- nesses to ensure Africa’s gold mining sector has a sustainable future.
“One needs to be disci-
plined and also we are not
being truthful to our host
countries if we are design-
ing businesses to be mar-
ginal. It is better to leave
the gold in the ground then wait for a gold price scenario which will deliver the as- set where the host country will be able to benefit,” Bristow said.
Mark Bristow
Bristow estimated about 25% of the gold industry was currently unprofitable, mean- ing miners weren’t making a return and essentially wast- ing national assets.
“We must be more diligent in delivering profitable busi- nesses,” Bristow said.
“We should be more trans- parent in the way we deal with our host country gov- ernments in explaining the
nership needs some work.”
AngloGold Ashanti Ltd chief executive
Srinivasan Venkatakrishnan (Venkat) said if proper due diligence was carried out by companies there should be no major issues in meeting the expectations of governments and communities.
“You should still be able to generate cash in different gold cycles, the quan- tity of cash may vary, but the overarching [key] is doing due diligence correctly. If the deposit doesn’t make sense at global prices you probably shouldn’t have de- veloped it in the first place,” Venkat said.
– Mark Andrews
between the countries, the anchors and developers of finance could actually cre- ate opportunities for long-term investors to come in to some of these projects. The role of government, the regulatory frame- works and other policies is important to attract such investment.”
Resolute Mining Ltd managing John Welborn said the mining sector was not great at supporting multiuse infrastruc- ture, as miners were more interested in owning their roads, rail and ports.
Welborn used Rio Tinto Ltd and BHP Billiton Ltd’s presence in the Pilbara re- gion of Western Australia as an example of “a complete absence of multiuser in- frastructure” and “terrible example of ef- ficiency in infrastructure use”.
The Pilbara is the world’s largest iron ore producing hub and both Rio Tinto
and BHP Billiton have rail running side- by-side in WA, while Fortescue Metals Group Ltd also has facilities in the region.
“If you look here in South Africa, there are much better examples of multiuser infrastructure, Richards Bay for example, which has formed the ability for smaller operators to actually get into production and drive economic benefit,” Welborn said.
“That is a real challenge for the mining industry; to see and drive the solutions all the way through to financiers. The South African example needs a really strong role of government in the financing be- cause they are the main driver and vi- sionary behind multiuser infrastructure.”
Be honest or walk away
– Mark Andrews
assumptions and conditions on which we are going to develop assets so they un- derstand the risks that we are posing on their own assets. I think that whole part-
PAGE 68 MARCH 2016 AUSTRALIA’S PAYDIRT


Another bleak year ahead: Nedbank
One of the most active investment banks on the continent sees little im-
provement for the African mining sector in 2016.
Nedbank Capital has par- ticipated in deals across the commodity spectrum over the last decade but accord- ing to Haaris Zafer – princi- pal for Mining M&A Africa at the bank – there are few sectors providing cheer at the moment.
“Commodity prices are not proving an incentive now and will continue to be that way,” Zafer said. “We’ve been in a holding pattern since 2013. 2015 was already quite slow but because of the price col- lapses at the end of the year there was a sting in the tail.”
Africa is also home to some of 2015’s standout commodities and Zafer said the bank continued to take an interest in a num- ber of graphite, potash and phosphate projects on the continent.
He said the question of price outlook had largely overtaken political risk con- siderations when it came to judging African mining projects.
“Traditionally, ranking projects in Africa was first about political risk, then the underlying commodity, then the question of infra- structure. However, the po- litical risk in Africa is largely accepted now, even in the likes of DRC, Zambia and Mali where we have seen political upheaval.
“Itisnowaquestionofdo you want to invest in cop- per? And, if the economics make sense then the infra-
The outlook is bleakest
in the bulk commodities of
iron ore and coal which, just
a few years ago, were be-
ing held up as the likely catalysts for an unequalled generation of investment and growth on the continent.
Nedbank predicts little activity in Africa’s mining sector this year
for supply discipline before moving back into the sector.
structure will happen.”
He pointed to the increasing stability of
“Supply discipline is needed in zinc, copper and even PGMs. If supply disci- pline doesn’t take place recovery will be
West and East Africa as cause for con- fidence in Africa’s future, however like many visitors to Cape Town for the 2016
“In iron ore there is really nothing. There
are few producers we are aligned to but
nothing in development, the econ“omics tough. I was at LME Week late last year Mining Indaba, he remained cautious
just don’t make sense at cur- rent prices,” Zafer said.
the South African space and
you will continue to see that.
India and Pakistan continue
to build new coal-fired power
plants but the seaborne thermal coal is under pressure. In this environment it will remain tough and there will be no spectacular recovery. There is not a lot of capital around but if it is a regional or local proposition, projects may work.”
They also need to work through ate future.
the massive inventories but the and East Africa there has
The South African domes-
tic coal sector did offer some
chinks of light but growth in only way majors can remain profitable been steady progress but the seaborne market was it has probably been South likely to remain flat, he said. Africa that international in-
is by lifting volumes. That will lead vestors have not been very
needs to instil a lot more confidence,” Zafer said.
“There has been a bit of to more concentration and I think the
consolidation and activity in happy with. The Government
over South Africa’s immedi- “In various spots of West
Base metals prices have also taken a beating in recent years and Zafer said the investment community was looking
and Wood Mackenzie stated that 200- 250,000 tpa of zinc has to come out in 2016 if the price is to recover.
“They also need to work through the massive inventories but the only way majors can remain profitable is by lifting volumes. That will lead to more concen- tration and I think the bloodletting will continue in 2016.”
“There have been enough positive signs and hope- fully it will get through the trouble and the economy will come good. It still has enormous potential but the World Bank is predicting South Africa will be in re- cession by the end of this year and that could prove a watershed moment for the
country.”
– Dominic Piper
bloodletting will continue in 2016.
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 69


INDABA REVIEW
Black Mountain banks on vermiculite
One-time silver hopeful Black Mountain Resources Ltd is seeking a fresh start in the agricul-
tural sector after taking control of the world’s largest vermiculite deposit and a promising phosphate project.
Black Mountain has entered into a binding heads of agreement with private company African Phosphate Pty Ltd to acquire Namakera Mining Company Ltd, operator of the Nam- akera vermiculite mine and owner of the Busumbu phosphate project in Uganda.
The acquisition includes the exist- ing mining and exploration licences, all mining equipment, the process- ing plant, power generator, mine of- fice and associated site infrastruc- ture.
Black Mountain will fork out 400 million shares to the vendors, finan- ciers and advisors at the completion
of the transaction, as well as a 1%
per annum royalty on revenue received from mineral production at Namakera. The company has also committed to rais- ing $2.5 million in new capital investment into the operation, including exploration and mine development.
Sanlam Private Wealth Australia and Verdant Capital have been appointed ad- visors to the company to assist with the acquisition and ensure all capital require- ments are met.
Namakera, a former Rio Tinto plc as- set, is considered the world’s largest vermiculite deposit, boasting an inferred resource of 57.4mt @ 26.7% vermiculite (JORC 2004) with a flake size greater than 18mm.
Black Mountain’s planned move into Africa’s booming agricultural sector – the African Development Bank is forecasting growth of $US500 billion over the next five years – will also result in an overhaul of the company’s board and manage- ment team.
Executive director Peter Landau and company secretary Jane Flegg depart, while non-executive director Jason Brewer transitions to an executive role. John Ryan will continue to manage the company’s US silver projects.
Simon Grant-Rennick will become Black Mountain’s new chairman, Julian Ford takes over as company secretary
Black Mountain has acquired the Namakera vermiculite mine in Uganda and all associated site infrastructure
and Luca Bechis also joins the board as a non-executive director.
Brewer, who founded African Phos- phate late last year, welcomed the op- portunity to move into production almost immediately.
“To have an opportunity to secure an asset which is in production, which has existing infrastructure and existing sales and marketing agreements, allows us to hit the ground running,” Brewer told Pay- dirt.
“This is not a greenfield exploration play...more than 80% of Uganda’s popu- lation is involved in the agricultural sector and 90% of the country’s foreign earn- ings come out of the sector, so clearly there is a lot of potential for the country in terms of the export markets to Europe and Asia, but also regionally in Africa.”
Production from Namakera, about 190km north-east of Uganda’s capital Kampala, began in 2002 and sales for the first 11 months of 2015 totalled 1,118t vermiculite, of which 70% was classed as either premium large or medium flake, selling for more than $US400/t.
Black Mountain will soon start a BFS with the intention of increasing produc- tion from 30,000 tpa to at least 80,000 tpa, representing about 10% of current global demand for vermiculite products.
“We’ve got to go in there and look at different ways of optimising the opera- tion,” Brewer said.
“Over the first 3-6 months we’ll look to make a number of modifications and develop partnerships with our mineral processing group, then we’ll look to
PAGE 70 MARCH 2016 AUSTRALIA’S PAYDIRT
Black Mountain executive director Jason Brewer on site at Namakera


boost our sales throughput to around the 100,000 tpa level.
“It’s a fantastic opportunity and with Namakera being a world-class deposit, we have to sit back, take stock and work out how best to maximise its potential because the opportunities are immense.”
Vermiculite is a naturally occurring, inert laminar mineral used extensively in agriculture and horticulture as well as in some aspects of construction, heavy industry and manufacturing. More than 50% of global vermiculite sources are used in fertilisers because of its non- combustible, compressible, highly absor- bent and non-reactive properties.
Brewer, whose last formal role in the resources industry was with Continental Coal Ltd, admitted he was still learning about vermiculite.
“It has been eye-opening to see how strategic and critical a mineral it is,” Brewer said.
“Southern Africa is really the only re- gion which produces large and medium flake vermiculite – and that’s the pre- mium product. Europe, North and South America are all producing a fine and su- perfine product, but that’s at the lower end of the pricing matrix. We’re targeting a high, premium product.
An impending BFS will target an increase in vermiculite production at Namakera from 30,000 tpa to 80,000 tpa
“The expansion [in production] will ob- viously take us to being one of the ma- jor players in the world, so we’ve got the potential to really dominate world pro- duction of that medium and large flake, which is a fantastic position to be in, no question about it.”
Black Mountain is also upbeat about the exploration and development upside at Busumbu, also on the Namakera min- ing lease.
Diamond drilling results reported by a previous owner to the ASX in 2012 sug- gested high-grade and extensive phos- phate mineralisation at Busumbu, with grades of up to 30.5% P2O5 and best intercepts of 35.4m @ 25.8% P2O5 from 4.7m and 29.2m @ 25.1% P2O5 from 7m.
– Michael Washbourne
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 71


INDABA REVIEW
Governments head for rehab
It is time for African countries to enter rehab, drop their dependency on com- modities and diversify their economies,
according to a former Zimbabwean fi- nance minister.
Delivering the keynote address on the second day of Mining Indaba, Tendai Biti said diversification of their economies would reduce the dependency many Af- rican countries have on extractive indus- tries.
“Commodities have been a drug for at least 24 African countries and like all drugs, you get addicted,” the former Fi- nance Minister in the Zimbabwean Unity Government said. “It is time to get rehab and move away from a dependency on the mining sector and into other sectors such as agriculture and fisheries.”
Biti said African countries had failed to make the most of the commodities boom of the last decade and needed to re-adjust policies to ensure development goals were met.
“If you take a balance sheet of whether Africa was able to utilise the boom the
answer is, regrettably, no. Some pro- gress has been made but much more could’ve been achieved,” he said.
Africa did react to the commodities boom. Across the continent, govern- ments reached for a greater share of mineral wealth by increasing royalty rates and taxes and installing – to vary- ing extents – nationalisation policies.
Biti recognised this move but said it was not restricted to Africa.
“During the boom, governments ques- tioned the distribution of revenue,” he said. “Every major commodity-based economy moved towards nationalisation in some way.”
He said the tension between guaran- teeing the state a fair return on these finite reserves and ensuring parity for investors would be ever present but declared the traditional “accumulation” model of resource development needed to be overhauled. Instead, he argued value addition of raw commodities was the only way to ensure the “resource curse” was lifted. Finding ways of build-
ing on the raw mineral wealth would also reduce the temptation to look toward na- tionalisation.
“Without beneficiation, minerals hardly touch African countries and the situa- tion actually increases dependency [on income from extractive industries],” Biti said. “What is needed is a major para- digm shift by all stakeholders. There is a need to create mutually transformative policy which will change the minerals sector from high value, low impact to high value, high impact.”
Biti said mining often operated in “an enclave” within African countries, “hardly touching the domestic economy”. He pointed to the development of the Ma- range diamond fields in his own country as an example of a region where rich mineral wealth had failed to bring wider development.
In contrast, he said, Zimplats plc’s op- erations in Zimbabwe were a good exam- ple of high impact development.
– Dominic Piper
The Australia-Africa Minerals & Energy Group (AAMEG) is the peak body supporting Australian companies to be partners of choice in the development of Africa’s resources sector.
Across 38 African Countries
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Our Primary Roles
• To create a forum for AAMEG members to network and share operational experience in responsible business practices;
The peak body supporting
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partners of choice in the development of Africa’s resources sector
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• To represent at an industry level on behalf of our members; and
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To enquire about membership, please visit www.aameg.org
PAGE 72 MARCH 2016 AUSTRALIA’S PAYDIRT
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100+ Member Companies


Time for new mining policies
Asenior industry advisor has called for a rethink on African mining policies. Speaking at a special information ses- sion hosted by World Bank Group, Afri- can Union Commission senior industry advisor Frank Mugyeni said it was im- perative that African countries position themselves now to capture the fruits of the next mining boom.
“We need to revisit our policies to see what worked and what didn’t, so we can have it right this time around. When you look at mining boom cycles [and busts] it is not the first time we have seen this situation,” Mugyeni said.
“We have to have informed policies in place because most other times we have rushed to put in policies to facilitate beneficiation and we forget that some of those policies might not work for us.”
World Bank Group practice manager, energy and extractives global practice Paulo de Sa said African countries were right to expect economic development to be driven by the resources sector, how- ever, many countries are a long way from
fulfilling such aspirations. De Sa said despite cur- rent low commodity prices, African countries needed to remain committed to devel- oping their mining sectors, with regional integration to be an important pillar in bringing wealth and oppor-
tunities to the continent. “We have to move away from the model of enclave mining towards a model where mining and resource
abundance can be used as an instrument to leverage economic development,” de Sa said.
“Countries need to develop a common vision and policies and then allocate re- sources for the development of natural resources because what is missing in many countries is the long-term vision. Downstream processing and beneficia- tion is seen as the only way to develop the economy but this is not necessarily the case. Most countries that have achieved
Paulo de Sa
big economic development through manufacturing in recent years were in coun- tries that were not resource rich, but resource poor.”
How beneficiation and downstream processing will be managed by coun- tries will be critical and key to that will be adopting pro- active policies now.
OECD economist and trade policy analyst Jane Korinek said it was wrong to
assume that placing export bans on raw materials would help downstream indus- tries to flourish.
“We [have] found that the downstream industries benefit from the removal of export taxes across the board,” Korinek said.
“We found that if all countries removed their export taxes the downstream indus- tries were actually far better off.”
– Mark Andrews
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 73


INDABA REVIEW
Bleak present to fuel copper’s bright future
An expert panel – including Ivanhoe Mines Inc chief executive, Lars-Erik Johansson (far right), and ZCCM Investment Holdings plc chief executive Dr Plus Chiulfya Kasolo (second right) – discusses copper’s fortunes for 2016
It seems no one in the mining or finance sectors is prepared to predict exactly where the copper price or the copper
mining industry is headed in 2016. Commonly seen as a bellwether among the base metals, copper endured a bumpy ride in 2015, hitting a high of $US2.92/lb in April before ending the year in a sharp decline towards $US2/lb. That decline culminated in the lowest copper spot price in six years in January ($US1.98/lb) but the red metal rebound- ed immediately following the end of the Chinese new year holiday, closing at
$US2.06/lb on February 15.
Meanwhile, on the supply side, major
producers are still considering produc- tion cuts as lower prices eat into margins. Prior to the reopening of Chinese mar- kets, a specially convened panel told Mining Indaba delegates volatility in the copper market was likely to remain as the world’s economy lurched between crisis
and growth.
“Copper mining is not just sensitive to
economic growth but is sensitive to the acceleration and deceleration of growth,” Bernstein senior research analyst at Paul Gait said.
Ivanhoe Mines Inc chief executive, Lars-Erik Johansson, shared a similar sentiment, saying there was little unique about the current state of the market.
“This cycle is not any different to any
other cycle and we will see ups and downs in the near future,” he said.
However, Johansson, Gait and their fellow panellists – ZCCM Investment Holdings plc chief executive Dr Plus Chiulfya Kasolo and Wood Mackenzie, senior research manager, copper mines costs, Nick Pickins – agreed the endur- ing instability would sow the seeds of the copper industry’s next rebound.
“Volatility in the markets makes financ- ing new projects more difficult,” Johans- son said.
Gait said significant supply challenges remained in the copper space.
“Above all there is the geological scar- city of copper; it is the scarcest of all the major industrial minerals,” he said.
Kasolo said lower prices left existing copper operations facing unenviable fu- tures, particularly in Africa.
“The biggest problem is the cost of production as grades fall and input costs go up. Most copper mining countries [in Africa] are not mechanised and to do so is a challenge on a political and social front,” he said.
For Pickins, the extensive cost-cutting sparked by the prolonged downturn in copper prices cannot last much longer.
“Margins are still tight despite having had three or four years of cost deflation and I’m unsure how far that trend has to run,” he said. “There may be further de-
flation to come; prices could go lower but costs will also come down.”
Gait said further cost-cutting would not necessarily create a stronger copper sector.
“It is about the short-term response and the long-term response,” he said. “There is a difference between deflation [through cost-cutting] and productivity improvements. In the short-term, the in- dustry is trying to defer costs but even- tually it will have to put in investment. It is about how sustainable high-grading is compared with the productivity gains from the introduction of new technol- ogy, such as the arrival of SX-EW in the 1990s.”
Achieving productivity gains has be- come more problematic for copper min- ers as mining depths have increased and head grades have fallen.
“Also, the average time between dis- covery and first production is now 30 years versus 10-15 years two decades ago,” Gait said.
However, for those willing to bet on copper’s revival, the current environment could be ideal.
“Now is the time to buy assets and I think China is thinking the same,” Gait said.
– Dominic Piper
PAGE 74 MARCH 2016 AUSTRALIA’S PAYDIRT


Cheaper, cleaner nuclear power
Peninsula Energy Ltd managing direc- tor Gus Simpson lamented the lack of knowledge about the nuclear power sec-
tor in today’s society.
Currently, uranium consumption is
growing at about 3-4% a year, with 430 nuclear reactors demanding 200 mlbpa.
“That is a pretty healthy business,” Simpson said.
“Outside of that, there are more nu- clear power stations in construction than at any time in history. While that is widely available information, I am always sur- prised by how few people are aware of that [fact].”
Simpson said there were about 70- odd nuclear power stations currently in construction outside of the industrialised world, the majority being in China, India, Russia and the Middle East. A further 160 were in the planning stages.
“I believe this number is on the low side,” Simpson said.
Reducing carbon from the power gen- eration source by adding nuclear power to the energy mix will be one of the driv-
ers of the nuclear sector this century; cost will be another.
“We are at about the
same upfront capital ex-
penditure as a coal-fired
power station. The overall
cost today of generating
electricity through nuclear
within the Chinese envi-
ronment, with a second-
ary Chinese company as a
supplier is a very low cost
option for the consumer of
this technology which I don’t believe is a well known fact,” Simpson said.
There is no doubt the nuclear power sector has taken a step back since the devastating Fukushima incident five years ago.
Post Fukushima, nuclear reactors in Japan were shut down, causing a pro- longed oversupply situation in uranium.
Simpson believes uranium demand will pick up and a return to better pricing is on the way.
Gus Simpson
“I believe that period [of oversupply] is pretty much behind us and we are moving towards a time where supply and security is very much going to be more of a concern for the exist- ing utilities out there and the new ones. This will ultimately result in a normalisation of pric- ing. I am not a believer in $US100/lb uranium,
more $US65/lb uranium and if that is achieved over life-of-mine for us that will make us an extremely successful com- pany,” Simpson said.
Peninsula started uranium production at the Lance ISR project in Wyoming, US, last year, while it also owns 74% of the earlier stage Karoo project in South Africa.
– Mark Andrews
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 75


INDABA REVIEW
Mineral sands
flavour to return:
Strandline
Strandline Resources released a scoping study for its Fungoni project in Tanzania last month
Asmall taste of the mineral sands quality Strandline Resources Ltd has on Tanzania’s coast was revealed last month.
Capital costs have been estimated at $12.3 million which would be paid back in two years considering average annual revenue of $15.3 million, operating costs of $8.1 million a year and annual free cash flow of $7.2 million.
Strandline managing director Tom Eadie said the company would enter the
A scoping study on Fungoni – a small high-grade, zircon-rich deposit, near Dar Es Salaam – was released to market a week after a site visit from Paydirt.
The overall indicated resource at Fungoni, with a cut-off grade of 1%, is 11.3mt @ 3.1% heavy minerals (HM).
However, mineral sands expert TZMI bumped the cut-off grade to 2.8% and based the study on an indicated resource of 2.4mt con- taining 8.3% (HM), with the endowment of zircon being 22%, rutile (4%) and ilmenite (44%).
TZMI ran the study in conjunction with Sedg- man Ltd, setting param- eters for a fully trans- portable processing plant initially capable of
producing 20,000 tpa of non-magnetic concentrate @ 60% zircon and 10% ru- tile plus 25,000 tpa of chloride ilmenite @ 55-60% titanium dioxide.
DFS phase immediately. “The fact it is zircon-rich and low capital cost plus it will give us operating expe- rience in Tanzania and mar- keting experience [in min- eral sands] is great for the
company,” Eadie said. “Another key to it is that we can potentially use a to- tally transportable process- ing plant designed by Sedg- man. They actually have built one and are building one for the US, so using that same design they can build one for us quite quickly and
cheaply.”
Unlike some African
mining assets stranded by a lack of infrastructure,
PAGE 76 MARCH 2016 AUSTRALIA’S PAYDIRT
Strandline receives strong local community support in Tanzania


“Our main focus is finding big world-class mineral sands deposits somewhere between north and central
Tanzania, around Taijiri and Madimba too.
Fungoni, and many of Strandline’s as- sets covering 3,500sq km of Tanzania’s coastline, are close to existing infrastruc- ture such as roads and ports.
For example, Fungoni can be easily accessed within an hour from Dar Es Sa- laam, with bitumen roads running most the way and with a port nearby.
Such factors will assist Strandline’s endeavours to become a mineral sands powerhouse in the next few years.
Fungoni is the starter project for the market to mull over, however, it is not the end game, as clearly stated by Eadie.
“Our main focus is finding big world- class mineral sands deposits some- where between north and central Tanza- nia, around Taijiri and Madimba too,” he said.
“We can make money from these small high-grade deposits; Fungoni is the first we have found and along the way we may find deposits where we can shift the plant to, such as if we found something at Mafia Island but our focus remains big, high-grade world-class deposits.”
Fungoni is likely to be a three or four year mining proposition which offers Strandline entry into production and cash
With a good climate and plenty of arable land, Tanzania is looking to boost its agriculture sector
Geologist Fanuel Festo says Fungoni is the pick of the projects for Strandline at the moment
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INDABA REVIEW
“However, mineral sands isn’t a basket case commodity like iron ore or nickel where people don’t see much of a future. It is more like copper
which is fundamentally oversupplied right now.
flow at a low risk.
“We have already moved into a DFS
which we think will cost less than $1 million,” Eadie said.
Eadie and his team, which includes a number of noticeable faces at board level – former Iluka Resources Ltd managing director Mike Folwell as non-
executive chairman and non-executive directors Didier Murcia and Mark Hanlon with Mark Alvin as consultant geologist – are convinced Strandline can rise to the mid-tier of mineral sands producers at some point, however, like many juniors right now, the company is suffering from a stunted share price.
“Our share price might not look that great until mineral sands becomes popu- lar again,” Eadie said.
“That is a concern for us because in the meantime we are going to have to raise money and things like that. How- ever, mineral sands isn’t a basket case commodity like iron ore or nickel where people don’t see much of a future. It is more like copper which is fundamentally oversupplied right now.”
Iluka’s decision to suspend mining and concentrate production activities at Jacinth-Ambrosia for a period of 18-24
The wet season can cause some access problems in Tanzania
PAGE 78 MARCH 2016 AUSTRALIA’S PAYDIRT
Fungoni is composed of zircon, rutile and ilmenite


A milk and yoghurt production centre near Fungoni means there is supporting infrastructure for Strandline to leverage off
months, starting in April, will allow global inventory to be drawn down and hope- fully breathe some life into zircon prices.
At peak production Jacinth-Ambrosia can produce up to 30% of global zircon demand.
Eadie sees Iluka’s position on zircon as a short-term issue and remains confi- dent there are no problems with the long- term fundamentals for the mineral sands industry.
“Right now the industry is not expand- ing like we thought it would; there is just too much supply. It might take half a year or two years, but when things turnover all of a sudden we’ll be a market darling,” he said.
“When mineral sands becomes flavour of the month again we will be seen as one of the good companies. Certainly in
five years we could be pretty major with some big resources and production. You have to be patient sometimes and there are other ways of handling this short- term lull. We have good geologists and a technical team who could start looking for other commodities that are flavour of the month and our in-country expertise would give us an advantage over other companies.”
Strandline has started low-level project generation and exploration work in Tan- zania on commodities such as lithium, cobalt and tantalum.
However, before Strandline generates any excitement from those prospects, it hopes to get a near-term kick from the market with some resource announce- ments from Taijiri, within the Tanga pro- ject area, (12m @ 8.26% THM, 9m @
10.38% THM, 7.5m @ 13.16%, 7.5m @ 16.1%, 18m @ 11.45% and 22.5m @ 8.66% all from surface) and Madimba, near Mtwara.
Resources from these projects are ex- pected to be much larger than Fungoni and therefore command higher capex re- quirements, however, in terms of devel- opment Tanga and Mtwara appear most likely second in line to become mines.
“That is only because they are the
Port infrastructure will become more accessible once a new highway is completed
Auger drilling was completed at Fungoni in December
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INDABA REVIEW
places we have drilled and right now we can only focus on where we have a resource,” Eadie said.
and dilution which is the struggle currently.
Subject to funding, Cummins said a lot of auger drilling was planned for this year across numerous targets.
With 3,500sq km
of exploration tenure,
Strandline is not strapped for mineral sands opportunities.
and are getting those resource estima- tions completed in the next few months,” Cummins said.
Cummins said the company was fortu- nate to have probably the only systematic database in the country which gave it a massive head start in ranking and prior- itising its projects.
“The benefit of mineral sands projects is you can go very quickly from an auger drilling programme straight into a resource drill out, which we have shown at Madimba and Tanga as well. We have done our first pass air-core programmes and we are resource esti- mating now. As an exploration team we are probably trying to ignore the noise in the market at the moment and are just trying to get on exploring with the funds that we have and do it ef- ficiently at the lowest cost, like what most juniors are going through,”
Cummins said.
While Cummins and his team
take care of business on the ground, Eadie has the task of keep- ing the company funded in this dif- ficult period.
Investors are hardly warming to any commodities and while the downturn has helped Strandline acquire the suite of assets at a discount, generating interest in a mineral sands stock has been a challenge.
“We’re a well regarded company with well regarded people, so we won’t have trouble raising money it is just at what price
A cement operation is in close proximity to Fungoni
Starting from Tanzania’s north, the company owns Tanga North and Tan- ga South, (near Base Resources Ltd’s Kwale project in Kenya), Bagamoyo, Fungoni, Mafia Island, Kiswere, Sudi Bay and Madimba.
Strandline consultant geologist Brendan Cummins said the com- pany was lucky to have a spread of projects at different stages.
Cummins said it was also a plus to have really good geologists and field technicians with big company training in the goldfields of Mwan- za.
“We have a full range of grass- roots type exploration projects that need first-class work completed. We have done reconnaissance work over all of them so we know what we are dealing with in terms of access and infrastructure. Then we have the more advanced projects that we are starting to develop now
PAGE 80 MARCH 2016 AUSTRALIA’S PAYDIRT
A resource at Taijiri was being compiled at the time of print


The company was trading at less than 1c/share on the ASX at the time of print and Eadie is aware of the need to boost Strandline’s standing.
“I think we are solid in the long term as long as we survive, but in the short term we have to think of how we can get a bit more interest. Brokers are say- ing how are they going to get people to buy mineral sands stocks now, no doubt there will be some private equity come in, but mums and dads and Joe Punter won’t have a bar of us until mineral sands becomes popular,” Eadie said.
ence in Africa, says Tanzania is his fa- vourite work destination in Africa, while Cummins, who also has great experi- ence across the continent, speaks warm- ly about the Government and mining leg- islation in place.
Tanzania’s mining legislation is loosely based around the Western Australian system and the industry is backed by the Government.
An election held last year was won by the ruling Chama Cha Mapinduzi party, with John Magufuli chosen as president.
So far Magufuli has had a profound
impact on the country, taking a hard stance against corruption, while boosting his popularity by dedicating time and re- sources to social causes.
A big winner last year was cancelling Tanzania’s national day prior to Christ- mas and instead encouraging people to clean their towns. The money usually set aside for national day festivities was do- nated to hospitals.
“The Government in place is very good. The same party was voted in but is now headed by Magufuli. He is focusing a lot on agriculture, mining is important
A bitumen road from Dar Es Salaam takes you most of the way to Fungoni
“We’re a well regarded company with well regarded people, so we won’t have trouble raising money it is just at what price and dilu- tion which is the struggle currently. We have lots of news flow coming out and we will be raising money at some point in the future.”
Mineral sands prices may be concerning to investors, however, those prepared to back Strandline can do so knowing that the company is in a mining friendly juris- diction.
Eadie, a mining industry stalwart with vast experi-
to Tanzania, but I think they see bigger value for the country in agriculture. They have so much arable land and good climate they just need investment in agricul- ture,” Cummins said.
“I would say agriculture is higher on the list than min- ing, but mining would be a close second. The footprint of mining is so small that there won’t be any clash between mining and agri- culture.”
– Mark Andrews
Strandline will look to do more auger drilling across its portfolio this year
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INDABA REVIEW
Growth the option for IchorCoal
The Usutu Colliery was placed on care-and-maintenance in 1991
Coal prices have flunked for sometime but that has done little to stop South African thermal coal producer IchorCoal N.V. from seeking expansion in the sector.
would also have complimented a deal IchorCoal completed with another ASX- listed entity, Continental Coal plc.
In June 2015, IchorCoal bought Con- tinental Coal’s Penumbra and Vlakvark- fontein mines for R128 million, which came with a rail siding and export alloca- tion of 18,000 tpa at Richards Bay Coal Terminal (RBCT).
IchorCoal’s willingness to participate in M&A is driven by a supply gap of 60 mtpa in the South African coal sector.
Last year, the company made an $80 million bid for ASX-listed Universal Coal plc which was trumped by Coal of Africa Ltd.
IchorCoal, a 29.99% shareholder in Universal, aspires to increase production
to 10 mtpa by 2017 and eventually 15-20 mtpa in the longer-term and the addition of Universal’s assets would have deliv- ered 2bt of coal resources to IchorCoal, including the operating Kangala mine and the New Clydesdale Colliery.
Signing off the Universal acquisition
Vunene mine overseer Ben Maslela showed Paydirt through the underground mine
Production from the underground will ramp up to 1.6 mtpa
PAGE 82 MARCH 2016 AUSTRALIA’S PAYDIRT


South African power provider Eskom is completing two new power stations and with the possibility of a third being built, IchorCoal’s strategy to grow its business appears justified.
“The whole business case for Ichor- Coal was predicated on Eskom continu- ing to prioritise coal electricity generation which seems to still be the case,” Ichor- Coal chief executive Nonkululeko Nyem- bezi-Heita told Paydirt.
“From my perspective, the demand scenario here continues to be good for thermal coal producers and I don’t see that we will be stranded with coal only suitable for Eskom.
“On the supply side, the majors are still reluctant to invest heavily in South Africa’s mining space, including coal, so I don’t see SA thermal coal being in the net over-supply position that you see globally. Supply here seems to be good,
The first underground blast in 25 years at Usutu occurred in February
Open pit reserves are expected to last at least two years
Eskom will initially be targeted as Vunene’s main customer
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INDABA REVIEW
so generally SA producers seem to be able to navigate the downturn in reason- able fashion.”
Themarketispromisingonthedomes- tic front, and while Eskom is a key cus-
tomer, the quality of coal in IchorCoal’s portfolio is also fit for export.
Delivering more coal into the export market will be important in the future, particularly if Eskom goes ahead with
plans to manipulate shorter-term con- tracts above traditionally longer ones, which have provided the industry with somestability.
Pending the outcome of Eskom’s plans, IchorCoal is comfortable with adapting to any change in environment and will con- tinue with its M&A policy.
And Nyembezi-Heita is confident there will be opportunities for IchorCoal.
Nyembezi-Heita said many junior coal mining companies in RSA started opera- tions just before or after the GFC on the back of more positive outlook for coal than currently being experienced.
“There were a lot of mines developed for the export market when export prices were $US90-100/t and even when prices were coming down, we thought the mini- mum was going to be $US70/t, but with the price at $US50/t we do expect a lot more distress on the junior mining front,” Nyembezi-Heita said.
“We are also seeing the majors want- ing to retire their operations on the back of commodity prices, so I think there are going to be a lot more assets coming to the market that we can price for today. I don’t think we will be short of potential acquisitions to target and we can rework the numbers to reflect the reality today.”
A weak rand to the US and Austral- ian dollar, means RSA coal companies reporting in rand earnings are on Ichor- Coal’s radar.
While the net is being cast over local players, rejuvenation of the historic Usu- tu Colliery, 200km south-east of Johan- nesburg in the Ermelo region, was near- ing completion at the time of print.
Eskom’s Camden power station is 6km from Usutu
IchorCoal N.V. chief executive Nonku- luleko Nyembezi-Heita says the mining industry is no longer dominated by men
as it once was.
“There is still a belief that mining is a
very male dominated industry, but it’s not,” Nyembezi-Heita said at a Women In Mining panel discussion at Mining In- daba.
Prior to being appointed IchorCoal chief executive, Nyembezi-Heita was chief executive at ArcelorMittal South Af- rica and chief corporate strategy officer at Vodacom Group in SA.
Nyembezi-Heita is also independent non-executive chairman of the Johan- nesburg Stock Exchange, where women occupy half of the 14 board positions.
“At the JSE at the top level, there is a high number of women running the or- ganisation,” she said.
“To confront new challenges you need greater diversity to meet those chal- lenges. You are doing a disservice by limiting the pool from which you pull a workforce,” Nyembezi-Heita said about looking at diversity of race, gender and skills across all areas of a business.
While an advocate for more women to become involved in the mining sector, Nyembezi-Heita said companies need- ed to constantly adapt to different envi- ronments in the sector and companies shouldn’t have to compromise their busi- nesses based on efforts to fill quotas.
Nonkululeko Nyembezi-Heita
“If you are looking at the other risks prevalent in the mining industry at the moment you are talking about regulatory, reputational risks, decisions that man- agement make, dealing with corruption, dealing with communities, social licence to operate; those are all things that actu- ally lent themselves to affecting change,” she said.
“These are all areas that can make it quite easy to bring in people that might not enjoy going down 1km from the sur- face of the earth to work, because let’s be honest there is an element of the min- ing industry that women don’t enjoy, will never enjoy and should not be forced to be selected just because we want to fill quotas.”
PAGE 84 MARCH 2016 AUSTRALIA’S PAYDIRT
Usutu, run by Vunene Mining of which


IchorCoal is a 74% owner, was last in operation 25 years ago. At its peak in the 1970s and 80s, Usutu produced 450,000 tpm coal; RSA’s largest single producing coal mine.
The first underground mine blast since the nearby Camden power station was mothballed by Eskom in 1991 was achieved in February. The colliery was placed on care-and-maintenance for some time, with Vunene managing the programme for a number of years.
With Camden recommissioned, Vunene will seek Eskom as a customer for its Usutu coal. Open cast production starts this month and will be followed with underground production once open pit reserves are depleted in about two years.
Vunene will look to hit an underground production rate of 1.6 mtpa, with reserves of 36mt at Usutu likely to last 20 years.
While negotiations remain ongoing, Eskom has first right of refusal for off- take of underground production.
“In the first instance we will be looking for Eskom to take the bulk of it. That said, we just bought Penumbra across the road, plus Vunene has coal qualities that are good to export. We exported 40% of our output in 2014 and we will be looking quite anxiously at the export market in the hope that we see a recovery,” Nyem- bezi-Heita said.
Nyembezi-Heita isn’t hedging any bets on an immediate coal price recovery, but is hopeful light will return to the sector in the latter part of 2017 and into 2018.
“I don’t think there is any one driver that can identify the environment that is going to drive the seaborne coal market up. I suspect as well as a cyclical downturn that we are seeing we are also seeing a structural shift. Even when the cycle turns, structurally coal will be in a differ- ent place in the future than it is today. I will be very cautious calling a recovery any time soon, so it could push out to 2018 quite easily,” she said.
How China responds from this down- turn with its industrial output and how India handles its internal supply/demand dynamic are two of the factors expected to impact coal prices.
Furthermore, Nyembezi-Heita believes the world is finally taking climate change and radiation issues seriously which will force structural changes in the sector.
“Until such time that the coal sector does come up with technology that ad- dresses those concerns, you are not go- ing to see very much build in our sector. I think what you will see before a recovery in the coal price is a technological break- through on cleaner coal,” she said.
The quality of coal from Usutu is good enough for the export market
Usutu was once South Africa’s largest single-mine coal producer
– Mark Andrews
Usutu is 200km south-east of Johannesburg
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 85


REGIONAL ROUNDUP
Chile’s small copper miners battling to stay afloat
Like his father before him, Alberto Carr- izo has worked in Chile’s copper mines since he was a teenager, supporting his
family as prices for the metal boomed in recent decades.
But as copper prices have slid to a more than six-year low, Carrizo and his colleagues labouring away at the count- less smaller mines that pock mark the Atacama desert are finding the buckets of ore they spend all day digging from the ground are fetching less and less money.
Some are responding by turning to gold mining, others are finding work in growing industries like renewable ener- gy, while a dwindling few are hanging on, hoping prices will yet recover.
They are at the sharp end of a com- modities downturn that was triggered by slowing growth in China and which has led half of all the small mining operations in top copper exporter Chile to shut in the last eight years.
Although 93% of the country’s out- put comes from larger mines, a sharper drop in copper prices could send more small and medium-sized mines over the edge. Small mines generally employ up to 80 workers but are often much smaller, while medium-sized ones have a maxi- mum of 400.
The mass closing of mines represents a potential social and political disaster for Michelle Bachelet, who has staked her centre-left presidency on improving social equality while keeping the coun- try’s famously successful economy tick- ing along. Copper makes up half of all of Chile’s exports.
Mines of all sizes shed some 23,000 jobs last year alone, around 10% of posi- tions in the sector, making it by far the biggest loser in Chile’s economy, accord- ing to data from the Government’s INE statistics agency.
Carrizo, 59, was one of 100 workers laid off from a medium-sized operation last year.
Like many other miners who were let go by larger operations, Carrizo has since turned to small-scale mining and now spends his days 305m underground, chipping away at the copper-rich bowels of a mountain he first visited while his fa- ther worked there in 1969.
But his stint at the Rodesia mine, which overlooks the dusty streets of the tiny
mining outpost of Inca de Oro, may be short-lived.
“I’ve still got the strength to keep work- ing another 10 or 15 years [but] things are complicated ... I’m going to look for a gold mine because prices are better,” Carrizo said.
Like their larger peers, small- and medium-sized mining companies are coping with the copper price drop by cut- ting jobs, reducing salaries and heaping more work onto fewer labourers.
With leathery hands, miners at small- scale operations across the Atacama are painstakingly picking out rocks that contain higher grade ore. When China’s economy was still growing in double digits, or near there, it could hardly buy copper fast enough to manufacture wir- ing, cables and plumbing materials for its construction boom. The metal sold for a giddy $US4/lb or more – around double today’s price – and miners would load trucks with as much material as possible.
But now some are turning to gold, whose safe-haven status has driven up prices for the precious metal nearly 15% so far in 2016.
“A lot of miners are moving to gold from copper because with the current level of the dollar it’s very profitable,” Reinaldo Leiva, the top government mining author- ity in the Atacama region, said.
“For the miner who has been working in mining for generations, it’s very diffi- cult to switch to another activity because it’s all he knows how to do,” Leiva said.
Reuters spoke to a dozen miners who had recently made the switch to gold, or were looking to do so.
Grey-haired Nolberto Barrera has been working in Chile’s mines for half a century, after getting his start while still in school at the age of 12.
“I was working at a copper mine but since prices have dropped I’m going to dedicate myself to gold. It’s the only way to make a little bit of money,” Barrera said. He even tried his hand at working at a local vineyard before returning to what he knows best.
However, Chilean gold production is tiny compared with its copper industry, accounting for just 1.3% of global output in 2015. It employed around 6,000 peo- ple in 2013, the last year for which reli- able data is available. That makes it an
unlikely panacea in terms of absorbing the lost jobs from copper.
Although the sector has shrunk signifi- cantly since the height of the boom, as many as 27,000 people still work in small or medium scale copper mining compa- nies in Chile.
Between them, they are producing some 390,000 tpa of copper, about 7% of Chile’s total.
“There are five or six (medium scale) mines that if we don’t do something in terms of supporting production, their op- erational continuity is in danger ... that’s about 50,000t of copper,” Alberto Salas, head of mining industry association Son- ami, said.
Right now, only government aid stands between many small and medium mines and failure. State-backed loans, subsi- dies for essential ingredients such as sulphuric acid, and courses to help min- ers improve technical skills are among key measures.
“Small-scale mining is a constant con- cern, which is why we’ve run relevant initiatives that increase productivity and strengthen the sector,” Mining Minister Aurora Williams told Reuters.
Under the most important of those initi- atives, state-run mining company Enami purchases copper from such miners at a subsidised rate. Last year Chile spent some $US22 million, and once prices re- cover the loans must be paid back with interest.
But if copper prices fall further, industry insiders say such measures will not be enough. The Government has set aside some $US20 million through June for the loans and is currently paying miners up to $US2.43/lb for their copper, some 40c more than average spot prices, and has said that will not increase at least until midyear. But costs for small-scale pro- ducers average around $US2.50/lb.
For Bernardo Carrizo, Alberto Carr- izo’s younger brother and a union head for small-scale miners, the Government aid is crucial.
“We still haven’t stopped but we’re swimming upstream,” he said. “And what’s coming doesn’t look good be- cause the trend (for copper prices) is lower.”
– Anthony Esposito, Reuters
PAGE 86 MARCH 2016 AUSTRALIA’S PAYDIRT


Crusader Resources Ltd re- mains focused on developing the Juruena gold project in Brazil
despite signing a MoU to explore opportunities in the booming lithium sector elsewhere in the country.
Increased investor interest in lithium tempted the company to re- assess the potential of its Magna prospect in Goiás State, Central Brazil. Previous exploration work in 2007 only tested for tin, indium and gold, and returned modest results.
However, a recent review of the previous rock-chip programme confirmed grades of up to 1.3% lithium oxide within a zinnwaldite- rich greisen zone, proximal to the anomalous tin and indium-bearing greisen.
Crusader signed a MoU early last month to establish a strategic JV with exploration and mineral processing tech- nology company Lepidico Ltd to pursue a range of lithium opportunities in Brazil, starting with Magna.
The agreement gives the JV exclusive rights to use of Lepidico’s patented L- Max technology in Brazil for the recovery of the alkali metal from lithium-bearing micas, including lepidolite, zinnwaldite and polilithionite.
Crusader executive director Paul Ste- phen said Magna was shaping as a de- posit his company could exploit, but he acknowledged another party was re- quired to help make that happen.
“Our expertise is in gold and iron ore so rather than try and reinvent the wheel, we’ve looked to put the project in with a team that is able to operate in that space,” Stephen told Paydirt.
“Our driver has always been to gen- erate value for shareholders and we think we’ve got a project in Magna that is worth commercialising, so we’ll look to do something with it.”
Brazil is the world’s eighth largest lithi- um producer despite no company specif- ically searching for lithium in the country. Most lithium is produced as a by-product of tin, tungsten or tantalum mining opera- tions.
Australia (13,000 tpa) and Chile (12,900t) head the list of top lithium pro- ducers, while China (5,000 tpa) and Ar- gentina (2,900 tpa) are other key players.
Crusader has signed a MoU to explore development opportunities for its Magna lithium prospect in Brazil
piece of work on Juruena will be to drill out the first year of production to indicated or better status, allow- ing us to publish some forecasts on what we think the project will return,” Stephen said.
“Juruena displays two under- ground opportunities, both of which have good mineable widths and good continuity, meaning we should be able to minimise the mining dilution and hold on to a reasonable head grade. We’ve stated from day one that are our target was to have a deposit great- er than 10 g/t.”
Applications for trial mining li- cences for Juruena were lodged late last year. Crusader has flagged a similar development
LATIN AMERICA
Crusader explores lithium potential
Brazil’s 2014 output of 4,000t accounted for 1% of global production.
Brazil’s Government recently passed legislation that zeroed importation taxes for electric cars and some hybrid vehi- cles, of which lithium-ion batteries are a key component.
Stephen expects Brazil’s lithium pro- duction levels to rise rapidly over coming years as more explorers specifically test for the metal and a series of lithium-relat- ed developments come online.
“We’re not experts in the lithium space, but we know if there’s one thing you need to make a lithium-ion battery, it’s lithium,” Stephen said.
“The economics of lithium are chang- ing on a daily basis and there’s some re- ally interesting things happening in that space in Brazil, not least of which is what Warren Buffett is doing in conjunction with a Chinese automaker, Build Your Dreams, which is looking to build a lith- ium mega-factory in Sao Paolo.”
Crusader’s venture into lithium has not distracted the company from advancing Juruena as planned and a scoping study on the promising gold project is due in the coming months.
Drilling at the Dona Maria/Crentes (196,300t @ 11.8 g/t gold for 74,700oz) and Querosene (263,500t @ 12.3 g/t gold for 104,100oz) deposits is under way in a bid to increase the resource confidence level.
“We’ve based the current scoping study on inferred resources and our next
pathway for the project to the one which helped it put the Posse iron ore mine into production in March 2013.
“I can’t over-emphasise the benefit of the experience we’ve gained by putting Posse into production,” Stephen said.
“Brazil is a fantastic environment for mining, but it is a bureaucratic system and there’s a long history of newcom- ers having trouble dealing with the pro- cesses required to maintain and apply for licences.
“We’re not in a situation of having to go to external consultants and rely upon someone else to guide us through the process because we can do all that in- ternally. Our experience is our biggest asset.”
Crusader has also opened discussions with potential funding partners for a debt facility to develop Juruena, with a final firm agreement likely to come after the release of the scoping study and a new resource statement during the second quarter.
“It’s got good economics and if the numbers stack up, the funding will be there,” Stephen said.
“At the end of the day, good projects always manage to find funding and this is an exceptionally good project, so our confidence in being able to fund it is driven by the fact we think it’s a great project.”
– Michael Washbourne
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 87


REGIONAL ROUNDUP LATIN AMERICA
Antas ahead of schedule
Avanco Resources Ltd is rapidly approaching the commissioning phase at its Antas copper mine in Brazil.
As Paydirt went to print, first ore was flowing through the ball mill and the com- pany was preparing to test each individual phase of the new processing facility, including the cyclone and flotation circuits.
Construction works also wrapped up early last month and the major contractor was demobilising from site at the time of print.
Avanco managing direc-
tor Tony Polglase said the mine devel- opment at Antas was progressing “well ahead of schedule”.
“Obviously things can still go wrong, but it all looks very encouraging at the moment,” Polglase said.
“We’ve established the first stage of the open pit and we’ve also established the second phase of the open pit. We’re in very good shape.
“We’re well established on the mine site, we’re operating well...there’s a sig- nificant stock of ore on the ROM pad, so the mine is advancing a lot quicker than what we expected.
“We told the market we would start commissioning at the end of the quar- ter, but I would say we’re well ahead of schedule.”
More than 11,000t of ore grading 2.55% copper has been extracted and delivered to the ROM pad since first earthworks began last October.
The processing facility was also ener- gised via a 10km grid power line during the last quarter.
Antas is expected to produce about 12,000 tpa of copper in concentrate, plus about 7,000 ozpa of gold
credits, later this year
Commissioning of the new processing plant will start this month
contracts through to the end of 2018.
Antas is tipped to be- come one of the lowest- cost copper producers in Brazil, with minegate and C1 cash costs of $US0.48/lb and $US0.99/ lb respectively to fall with- in the first quartile.
“We are a very low-cost producer because of the high-grade nature of the orebody, which means we’re in a good position to weather out the bottom of this market and we should be well-placed to rise with
with an enviable cash position of $43.5 million, plus a $US4 million drawdown facility from key shareholder BlackRock World Mining Trust.
“We’ve always been very conservative in the way we’ve approached our busi- ness as far as the market goes,” Polglase said.
“From the engineering side of things, we’ve over-engineered and I think it would be fair to say we’ve built a healthy contingency into our capital estimates.
“We’ve been really lucky the Brazilian real has weakened considerably since we did our initial costings.
“Above and beyond that, we’ve raised all our finance through equity, which means we don’t have the banks lean- ing on us at the moment and we’re not scared about interest rates going up because we’re debt-free and covenant- free.”
Avanco is also on the verge of award- ing concentrate off-take contracts fol- lowing a competitive bidding process. Three groups were shortlisted in late December for closing negotiations and the company plans to award two off-take
it, as and when that comes,” Polglase said.
“The interesting thing is the orebody actually improves in grade as it goes deeper, so we have a great opportu- nity to establish ourselves in the copper space and that puts us in an extremely good position for the coming years.
“We’re looking at a potential head grade going into the plant in excess of 2% copper and about 0.5 g/t gold. We’ve got grade control over the deposit and where we’ve drilled it’s basically demonstrated that the resource and reserve numbers are holding together really well.”
Avanco is upbeat about the near-mine opportunities around Antas, including Pedra Branca. The company is looking to complete a scoping study for the un- derground project in the coming months.
Recent diamond drilling results con- firmed the high-grade nature of the Pedra Branca orebody, including hits of 24.6m @ 1.15% copper and 0.35 g/t gold from 138.4m (including 7m @ 2.07% copper and 0.66 g/t gold from 152m) and 24.7m @ 1.93% copper and 0.41 g/t gold from 275.3m (including 9.7m @ 3.1% copper
before ramping up pro- duction to 15,000 tpa by 2018.
Development of the Pedra Branca under- ground project could lift production at Antas to 50,000 tpa within five years, pending study re- sults.
Avanco has the luxury of being fully funded into the start of production,
and 0.66 g/t gold from 275.3m).
Further drilling is planned for Pedra Branca East in the next quarter to increase the confidence level of the resource to indicated status and facili- tate the design of the pro- posed box-cut.
– Michael Washbourne
PAGE 88 MARCH 2016 AUSTRALIA’S PAYDIRT
More than 11,000t has been extracted from the Antas open pit since October


LATIN AMERICA
17-18 May 2016, Perth
Keynote Presenters to date:
HE Mr. Javier Córdova Unda, Minister of Mines, Republic of Ecuador
HE Mr. Richard Lozada, Vice Minister for Mining, Republic of Venezuela Santiago Angel Urdinola, President, Colombian Mining Association
Ms. Silvana Habib-Daza, President, National Mining Agency of Colombia Hon. Bill Marmion, Minister for Finance; Mines and Petroleum, Western Australia
Hon. Josh Frydenberg, Minister for Resources, Energy and Northern Australia, Government of Australia (via video message)
Conference sponsors & supporters to date:
www.latinamericadownunder.com
To present, exhibit or attend as a delegate please contact Melita Fogarty on (+61) 8 9321 0355 or email [email protected]
EARLY BIRD RATE $A990.00 INC. GST AVAILABLE UNTIL 18 MARCH 2016


REGIONAL ROUNDUP
Highfield hatches Muga masterplan
Highfield Resources Ltd managing director Anthony Hall expects to have finalised
the development plans for his company’s Muga potash pro- ject in Spain by the end of the first half.
Early construction works have begun at Muga – recently confirmed as the world’s high- est-margin potash project – as the company awaits receipt of an environmental permit and mining licence over the coming months.
Highfield has received credit approval from three of the four banks in the proposed project finance syndicate. The fourth lender was set to confirm its participation at the time of print.
“What that means is we now
have €166.5 million available to
us and we expect to receive the
final bank’s approval before the end of February,” Hall told Paydirt.
“It means we will have been able to se- cure basically €222 million in what is a super-difficult market to finance projects.
“The positive thing for us is there hasn’t been a lot of financing that the European banks have done in recent times, given where commodity prices are. It definitely helped to have a project that is so robust, because obviously they have been look- ing for work.”
A recent optimisation study on Muga flagged a revised pre-production capex of €267 million, up from the €249.5 mil- lion estimated in the earlier DFS. How- ever, the project NPV increased from $US1.42 billion to $US1.46 billion at an 8% discount rate and from $US1.8 billion to $US2.04 billion at a 10% discount rate.
Muga’s mine life also lifted from 24 years to 47 years, based on a production rate of 108 mtpa of K60 granular muriate of potash (MoP).
An independent report by Argus FMB recently found Muga was set to become the world’s highest-margin and lowest- cost potash operation in the target mar- kets of Europe, Brazil and the US.
The report, commissioned by High- field’s project finance banking syndicate, was based on average potash prices for the 2015 calendar year and assumed a
Highfield’s Muga project in Spain will have easy access to all of the key potash markets
“We are really fortunate from that perspective and I also think we’re very fortunate in that there probably isn’t another pro- ject as strategically valuable as our project, in any commodity either, given the nature of the potash industry and how that plays into the global fertiliser industry.”
Hall credited his company’s success to a genuine belief in- vestors still want to tip money into resources projects because they typically generate the best returns when the economy im- proves.
“We’re able to finance a mine at 55% debt-to-equity levels in what is a very complicated market because we’ve got enor- mously strategically valuable assets and we’ve got multiple projects at our disposal,” Hall
sales ratio of 75:25 into Europe and the US respectively.
“We’ve been arguing for a long time that potash is very different to commodi- ties like iron ore and people have always been very focused on the cost curve as opposed to the margin curve, so it was great to have Argus come out and basi- cally confirm our Muga mine will have the highest margins of any global producer, and that’s really exciting,” Hall said.
“When you’ve got roughly 75% of the market that’s either producing in the mid- dle of Canada or the middle of Russia or Belarus, you would expect us to have that sort of an advantage, given how im- portant the logistics are into the markets that we’re targeting.”
Not only is Highfield setting a bench- mark for the rest of the world’s potash hopefuls, but also other junior resources companies, at a time when sentiment towards the mining sector is at depress- ingly low levels.
The company has been one of the strongest performers on the ASX in re- cent times, reaching a 12-month high of $2.08/share last May and trading consist- ently above $1.75/share since January.
“We challenge people to find a better undeveloped project, in any commodity, and I just don’t think there is one,” Hall said.
said.
“I think people are genuinely looking
for the next ‘star’, if you like, when the markets return and I guess we’re sort of fortunate that people out there are con- sidering us in that light.”
With financing arrangements to play out in the background, Highfield’s prima- ry focus over the next six months will be to take Muga into the construction phase. Late last year the company entered into a collaboration agreement with experi- enced Spanish construction firm Acciona Infraestructuras.
Fifty people have been employed to work exclusively on construction, while another five people are working sepa- rately on a strategy to produce sulphate of potash (SoP) once Muga is up and running.
“Producing MoP basically enables you to move into that SoP market,” Hall said. “Based on some of the high-level work
we’ve done so far, we actually think we’re going to have an unbelievably compelling SoP proposition once we’ve got our MoP project into production.
“SoP is an interesting market that would be fantastic for us to diversify into once we are a MoP producer, but it’s very difficult to move into SoP unless you con- trol the MoP stream.”
– Michael Washbourne
PAGE 90 MARCH 2016 AUSTRALIA’S PAYDIRT


EUROPE
History is Variscan’s future
Zinc explorer Variscan Mines Ltd could announce a maiden resource for the Porte-aux-Moines deposit in France be- fore the end of the month.
Variscan has spent the past six months digitising historical drill results from Por- te-aux-Moines after gaining access to a historical two-gigabyte dataset from the French geological survey, BRGM.
Assays from the historical drill core have confirmed the potential of the high- grade, zinc-rich VMS deposit, strength- ening the company’s belief an economic discovery could be made within its Mer- léac project licence.
Variscan has received assays for 56 of the 58 holes, reporting a number of inter- sections greater than 15% zinc equiva- lent and some individual intervals up to 50.3% zinc equivalent.
Some of the best intersections were 27m @ 14% zinc, 3.3% lead, 0.8% cop- per, 161.4 g/t silver and 0.8 g/t gold from 143.5m (26% zinc equivalent), 12.5m @ 11.3% zinc, 2.7% lead, 2.5% copper, 157 g/t silver from 49m (24.2% zinc equiva- lent) and 8.5m @ 14.5% zinc, 3.4% lead, 1.6% copper, 144.2 g/t silver from 99.5m (27.2% zinc equivalent).
Variscan managing director Greg Jones said the assaying was continu- ing but the results so far had confirmed the high-quality work completed by the BRGM more than 35 years ago.
“Our aim is to complete that work and to have an independent JORC resource completed towards the end of this quar- ter,” Jones told Paydirt.
“To confirm a JORC-compliant re- source is a huge step for the company. It allows us to confirm the asset we’re dealing with and then we can start talking about the next steps such as drilling, in- creasing tonnages and taking it through to a possible scoping study over the next 12-18 months.
“It’s very high grade, so the likelihood of it being of economic quality is high, but it requires tonnes so the next step for us is to define that, and that’s certainly part of our exploration programme.”
Variscan expects to be just as busy over the next six months converting the remaining historical data as well as gen- erating a 3D model of the mineralisation at Porte-aux-Moines.
Following up a number of high-priority VMS targets identified during last year’s VTEM survey – the first-ever undertaken in France – is also high on the company’s agenda for 2016.
Variscan flew the very first VTEM survey over France last year
There are currently no active
mines in France, but Variscan
is widely acknowledged as the leading resources explorer in the country and Jones believes his company is capable of taking the project through the development stages.
“It’s not dissimilar to what we see al- most everywhere else in the world, in terms of the environmental studies, the community relationships, and the ap- proval process will probably be very similar to what we see in parts of Austral- ia, like New South Wales for instance,” Jones said.
“The mining industry has basically been on hold since the mid-1980s. The last mineral mine closed in France in the early 2000s, but the French Govern- ment’s been very clear in its desire to reactivate the mineral industry and has been very supportive.
“We think from a government point of view it’s very positive and
from a prospectivity point of
view it’s very good as well.
It’s something we will get to test over the next few years if we can manage to find enough tonnes at Porte-aux- Moines, but we don’t see any major hurdles.”
Variscan confirmed its
faith in France’s mining fu-
ture late last year when it
picked up three further ex-
ploration licences, mostly prospective for specialty metals tin and tungsten.
The Sydney-based junior also raised $1.6 million via a placement and sepa- rate share purchase plan in November and finished last year with $1.39 million
A maiden resource for the Porte-aux-Moines deposit is imminent
cash, plus about $2 million of liquid in- vestments.
“We are relatively well positioned, al- beit if we do move into large drilling pro- grammes we will need further assistance because drilling is an expensive exer- cise,” Jones said.
Jones was upbeat about the prospects for zinc over the next few years, citing the recent closures of Lisheen, Century and some of Glencore’s mines as a catalyst for a likely supply-demand imbalance.
Zinc has enjoyed a positive start to 2016, trending up from about $US1,450/t in mid-January to just below $US1,700/t at the time of print.
“We follow a number of the metals and some are obviously worse than others, such as the supply glut for iron, but in some of the met- als – and zinc is one of them – there’s been a complete lack of exploration focus and success over the last decade and at some point that will
start to bite,” Jones said. “Supply-demand funda- mentals must take over at Greg Jones some point. Zinc is one of those metals that you can’t replace, there’s no other re- placement product. We feel this may be the start of a return to a little bit of nor- mality to the zinc market, so we’re very
positive about the future of zinc.”
– Michael Washbourne
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 91


REGIONAL ROUNDUP
Iran offers mining riches
Iran’s rich deposits of zinc, copper, gold and other minerals are tempting international investors after the lifting
of Western sanctions, but develop- ment of the sector will take time and problems will have to be overcome.
A slump in metals prices and un- certainty about working with the Teh- ran Government, which controls vir- tually all the country’s mines, means that many foreign mining firms are not scrambling to sign deals.
Nevertheless, some agreements have already been struck and other foreign firms have been looking at Iran’s mining and metals sector in the weeks following the scrapping of sanctions as part of a nuclear deal, which came into force in January.
Iran, which boasts one of the world’s largest undeveloped zinc pro- jects and myriad other mines, has been trying to lure investors since it became clear that sanctions would be lifted under last year’s deal signed by Tehran and six world powers.
Iran’s state-owned mines and met- al holding company IMIDRO told an Australian mining conference in No- vember that its mining sector needed $20 billion of investment by 2025.
“Iran absolutely has world class mining assets, which have hitherto been shroud- ed from investors, but we’re in the depths of one of the darkest, worst downturns in mining for some time,” Hannam & Part- ners chief executive Neil Passmore said.
The slump in commodity prices has hit international mining firms, forcing them to sell assets, cut dividends and slash capital spending to preserve cash, but some deals with Iran are still being done.
“During the six to 12 months that it’s looked likely sanctions would be lifted, people have been starting to do some work and now that things have opened up, they’re increasing the pace,” Pass- more added.
In India, national aluminium company NALCO said in January it planned to send a team to Iran to explore setting up a smelter worth about $US2 billion and state-run KIOCL is considering building an iron ore pellet complex.
Other companies from Italy and China to South Korea have either signed deals or are looking into possibilities. But high- lighting the uncertainty among potential investors, NALCO said it was also look- ing at Oman and Qatar as possible sites for its aluminium smelter.
Mark Bristow
and time consuming. Foreign energy executives hoping to invest in oil and gas fields there complain Tehran has still not revealed contract terms, abruptly cancelling a conference due to be held last month when they had expected it to do so.
Although minerals development may take years, Iran’s bounty and low energy costs will eventually build it into a substantial player in the global metals industry, analysts say.
Iran’s Mehdiabad project is one of the world’s largest zinc deposits, which was previously due to be devel- oped by Australia’s Union Resources, with output of 300,000 tpa.
Iran says it has 68 types of miner- als, including iron ore, coal, gold and copper with total reserves of 43bt.
Besides growing as a producer, the country of 80 million people is also set to help boost global demand for met- als since it is the biggest economy to rejoin the global trading system since Russia, following the breakup of the Soviet Union over two decades ago.
“As they get more oil revenue, there’s no reason why they shouldn’t look to diversify the economy and drive metals exports,” Robin Bhar,
A spokesman for global miner Rio Tin- to Ltd, which was previously involved in the Sara Gunay gold project in Iran, said there was no work being done by their exploration team regarding the country.
Chief executive Mark Bristow of Rand- gold Resources Ltd, which has experi- ence of mining in risky areas of Africa, told Reuters the firm was not interested in Iran.
Dealing with Iran, which is beset by political infighting between pragmatic and hardline factions, can be complex
head of metals research at Societe Gen- erale, said.
“It plays both ways, as they’re wel- comed back into the international fold, hopefully they’ll also contribute to the de- mand side of the ledger, as they’ve got a young and rising population.”
– Eric Onstad, Reuters
Iran’s mineral wealth
Iron ore: 34mt iron ore produced in 2014 and has 2.7bt of reserves. The Gol Gohar and the Chadormalu mines account for the bulk of output
Steel: 14.9mt crude steel produced in 2014 with aims to increase to 52mt by 2025 Gold: 8.04 moz reserves. In 2014, Iran launched the Zarshuran plant, which it billed as
the biggest gold processing operation in the Middle East
Copper: 194,000t cathode copper produced in 2014 with aims to boost that to 800,000t by 2025. It has 2.6bt of reserves. One of the major mines is the Sarcheshmeh complex in the south-east Kerman province.
Zinc: 11mt of reserves. The Mehdiabad project, with one of the world’s biggest zinc deposits, has been under consideration since the 1990s.
– Based on data from IMIDRO
PAGE 92 MARCH 2016 AUSTRALIA’S PAYDIRT


ASIA
Focused Finders ramps up
Finders Resources Ltd is on the verge of ramping up to full pro- duction at its Wetar copper project
in Indonesia.
Commissioning of the new
25,000 tpa SXEW plant is expect- ed to start before the end of the month, with full copper cathode production to follow sometime dur- ing the next quarter.
The new facility will operate alongside the existing 3,000 tpa SXEW demonstration plant the company has been running for the past 18 months, lifting Wetar’s pro- duction to 28,000 tpa.
HSBC and Societe Generale – for a $US162 million project finance facility. Daewoo also in- vested $US45 million to acquire 24.1% interest in the project.
The senior lenders fund- ing package is comprised of a $US127 million term loan facil- ity, a $US20 million cost overrun facility and a $US15 million VAT working capital facility. Find- ers also has a hedge book for copper and diesel fuel valued at $44.1 million.
Once in full production, the company expects its operating costs to drop as low as $US1.05/ lb, making Wetar one of the low-
Finders is the only pure copper cathode producer in Indonesia
and its Wetar product is sold at a pre- mium to the LME copper price without any specification issues. The new SXEW plant will allow the company to produce a 99.999%, or “five nines”, copper cathode product.
During the December quarter, Finders produced 494t and sold 280t at an av- erage price of $US2.08/lb and grade of 1.99% copper. Products were exported to countries such as Thailand, China, In- dia and Pakistan.
Finders managing director Barry Cahill said the last few months on Wetar Island had been “quite frenetic” as the project entered the final stages of commission- ing.
“We’re right at the pointy end of com- missioning, so there’s just lots and lots of things happening,” Cahill told Paydirt.
“Everything has to come into Wetar by landing craft. It’s not like in Western Aus- tralia where you can make a phone call and there’s an overnight truck for you to get a part you need. We really have to be fairly well self-sufficient.
“We’re basically due to commission the 25,000 tpa SXEW plant at the end of this quarter and then start
full production early in the next
quarter. We’re very close to be-
ing a 28,000 tpa copper cathode producer, which makes us quite
a robust little mining company.
“I don’t think we’ll blow a sigh of relief until the end of Q2 when we’re producing properly and turning over some really good revenue.”
A new crushing circuit was commissioned late last year and the company has been stack- ing the heap since mid-January.
Finders is the only pure copper cathode producer in Indonesia
The new power station is also live and now energising the existing plant.
The Wetar expansion project has tracked on budget, although a delay in the delivery of some fabricated steel saw it fall slightly behind schedule. However, the Finders team were not fazed by the setback.
“The fabricated steel [delays] was unexpected, but by the same token we expected to have some weather delays around this time which really haven’t arisen,” Cahill said.
“We’re basically trying to construct the guts of this plant during the wet period [November to March] so we had expec- tations we would have delays due to the weather, but they really haven’t eventu- ated so there has sort of been a bit of an offset.”
Cahill is expecting no surprises once the 25,000 tpa plant goes live, insisting it is “standard, proven, well-known tech- nology” used in many other SXEW plants around the world.
Finders was able to build the new plant after striking a deal with four banks – BNP Paribas, Commonwealth Bank,
est cost cathode copper operations in the Asia-Pacific region. Finders is also exempt of any export tariffs because it produces a refined copper product.
Cash generated from the new produc- tion set-up will be tipped back into the ground to advance several other aspects of the project, including regional explora- tion.
Based on current reserves of 8.9mt @ 2.4% copper, Wetar has a forecast 10- year mine life, including about 6.5 years of steady-state production, and the pro- ject boasts a number of near-mine tar- gets, including the Meron prospect, 1km from the leach pads.
“In this market, as we all know, cash is king,” Cahill said. “You need cash flow to keep advancing your projects because you’re not going to be able to get it out of the market.
“Our focus has been to build the plant, generate cash flow, pay off our debt as quick as possible and then start advanc- ing the project and build a resource and reserve base much bigger than what we’ve already got. We’re pretty confident we can do that, based on the way these
orebodies occur.”
Finders is anticipating a re-
rating of the company once in full production and Cahill hopes to see his company’s share price lift well above the 12c/share it was trading at the time of print.
Corporate research and stockbroking firm Argonaut as- signed a 23c/share target price for the company in a recent mar- ket report.
– Michael Washbourne
The new 25,000 tpa SXEW plant at Wetar is expected to go live this quarter
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 93


SIGNED, SEALED AND DELIVERED
Mitchell Services will conduct surface and underground drilling at Cannington for the next three years. Picture: Courtesy of South32
Kidman had used the services of for- mer JV partner Blue Tiger Mining Pty Ltd for underground works following its acquisition of Burbanks in May 2015, but that arrangement was terminated in De- cember.
Late last month, Kidman acquired the remaining 20% of Burbanks it did not al- ready own from Blue Tiger.
BGC extends stay at Koolyanobbing
BGC Contracting Pty Ltd has been ex- tended its working relationship with Cliffs Natural Resources Inc at the Koolyanob- bing iron ore project in Western Australia.
The current mining contract was due to be completed next year, but has been extended through to 2022. The five-year contract extension is valued at more than $520 million.
Under the terms of the contract, BGC Contracting will continue to provide the full range of mining services, including drilling, blasting, loading, hauling, dump- ing, crushing, screening and train load- out.
BGC Contracting has worked at the project, about 400km north-east of Perth, since April 2004, initially delivering off- road haulage services before expanding its involvement to include contract mining operations in 2007.
“This has been a tough period as the iron ore price has fallen and I believe that by maintaining strong relationships with Cliffs at all levels of our organisation, we have helped them succeed at Koolyanob- bing in what has been a difficult market for all iron ore miners,” BGC Contracting chief executive Greg Heylen said.
New mining contractor for Cannington
Mitchell Services Ltd has secured a three-year contract at South32 Ltd’s Cannington silver-lead-zinc mine in Queensland.
The contract is for the provision of surface and underground drilling and is expected to deliver $US14 million in rev- enue.
Mitchell Services will purchase a new underground rig to meet the require- ments of the contract, with the required capital expenditure to be financed using traditional long-term equipment finance from a commercial lender.
Basil Read to dig up diamonds at Lerala
Lerala Diamond Mines Ltd, the Bot- swana subsidiary of Kimberley Dia- monds Ltd, has awarded a contract for open-pit mining operations to Basil Read Botswana Pty Ltd.
Following a two-stage competitive tender process, in which eight compa- nies bid for the contract, Basil Read was selected to begin open-pit mining at the Lerala diamond mine later this month.
The key terms of the contract include an initial five years of mining, which may be extended further, and drilling, blast- ing, loading and hauling of ore and waste.
The contract is valued at $47 million, based on current exchange rates.
Basil Read was set to mobilise staff and equipment on site late last month.
PYBAR takes over mining at Burbanks
PYBAR Mining Services has been ap- pointed mining contractor at Kidman Re- sources Ltd’s Burbanks gold mine, near Coolgardie in Western Australia.
PYBAR will initially focus on develop- ing the unmined Dahmu lode on multiple levels, with stoping set to begin during the June quarter.
Development will also begin for the first time along the high-grade Hadfield and Jesson lodes on the historic 4 level, which is the limit of all previous produc- tion where the average grade was 27.4 g/t gold.
PAGE 94 MARCH 2016 AUSTRALIA’S PAYDIRT
BGC Contracting has signed a five-year extension with Cliffs Natural Resources at the Koolyanobbing iron ore project


DRA acquires marine engineering business
South African engineering and project management firm DRA Group has ac- quired Cape Town-based ports and har- bour engineering business RLH Consult- ing Engineers.
RLH will be integrated into DRA’s new Cape Town office, servicing projects in South Africa as well as others jurisdic- tions, including West Africa.
Additional services DRA will now be able to offer current and future clients following the acquisition include marine project concept planning and evaluation, ports, harbours and coastal engineering, marine terminals and pipelines, environ- mental data collection and analysis, and port logistics and materials handling.
“Diversification into marine engineer- ing, as offered by RLH, has been part of DRA’s strategy for the past year and we are very excited about RLH forming part of our team, DRA Africa managing direc- tor Johann de Bruin said.
Meanwhile, DRA has been awarded the optimisation study and front-end en- gineering and design (FEED) contracting package for Coal of Africa Ltd’s Makhado project in the Limpopo Province, South Africa.
DRA previously oversaw preparation for a DFS on the project’s coal processing and handling facilities. This latest award will include the infrastructure components and the integration of a number of spe- cialist consultants.
Both hard coking and thermal coal are expected to be produced from Makhado for export and domestic consumption. The operation will initially be an open- cast mine, with potential for underground expansion in future years.
Coal of Africa expects work to start in the second half of 2016, followed by a 26-month build programme. First coal production is slated for 2019.
GR knuckles down at Mt Morgans
Dacian Gold Ltd has selected GR En- gineering Services Ltd to oversee the feasibility study for the Mt Morgans gold project, about 20km south-west of Laver- ton, Western Australia.
GR started feasibility work in late Jan- uary. The scope of the contract includes estimating the cost of establishing and operating a 2.5 mtpa processing facility and site service infrastructure.
Other key contract terms are develop- ing, managing and supervising metal-
GR Engineering has been contracted to complete the feasibility study on Dacian Gold’s Mt Morgans project
lurgical testwork programmes, engaging and managing specialist consultants relating to the tailings storage facility design and civil geotechnical work, and development of the project implementa- tion plan.
Dacian is targeting completion of the feasibility study during the fourth quarter, allowing the company’s board to con- sider an investment decision for project development and potential financing ar- rangements within that timeframe.
A detailed scoping study completed last September showed Mt Morgans had the potential to be developed into an ini- tial seven-year operation, producing 1.2 moz of gold at an AISC of $929/oz.
Clough hooks up dual Ichthys contracts
Engineering and project services com- pany Clough Ltd secured two contracts in as many days for hook-up services at the INPEX-led Ichthys LNG project in late January.
One contract is with Daewoo Ship- building and Marine Engineering Co Ltd and the other is with Samsung Heavy Industries Co Ltd. The scope of work in- cludes the preparation and execution of offshore hook-up and assistance to com- missioning.
Work officially started last month with the mobilisation of engineering and tech- nical teams to the respective fabrication yards in Geoje, Korea, before moving on- shore to the Browse Basin, about 200km off the northern coastline of Western Australia.
Project management will be executed from Clough’s Perth office, with the tech- nical support from the company’s Korean JV arm CloughCoens.
AUMS set to take Geita underground
African Underground Mining Services (AUMS) has been appointed the pre- ferred contractor for the underground mine establishment and operation at An- gloGold Ashanti Ltd’s Geita gold mine in Tanzania.
The contract value is estimated at $US70 million over a term of 31 months. Work will primarily focus on Geita’s Star and Comet pit.
AUMS is a 50/50 JV between Ausdrill Ltd and Barminco Holdings Ltd.
Alcoa pens another deal with Boeing
Lightweight metals leader Alcoa Inc has signed another long-term supply agreement with Boeing for multi-material aerospace parts.
Under this agreement, Alcoa will sup- ply components for the 777X, Boeing’s newest commercial airplane, as well as the 737 MAX and the 787 Dreamliner.
The deal draws on capabilities gained through the Firth Rixson acquisition and the company’s new aluminium-lithium fa- cility in Lafayette, Indiana.
It is the fourth multi-year agreement Alcoa has signed with Boeing in recent times. Late last year, Alcoa announced a series of long-term supply contracts with Boeing for fastening systems and titanium seat track assemblies.
Alcoa has secured about $US10 billion of aerospace contracts since the start of 2015, including the Boeing transactions.
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 95


COMINGS AND GOINGS
Felicity Gooding
Minderoo Group chief operating officer and chief financial officer Felic-
ity Gooding has joined the board of Impact Minerals Ltd as a non-executive director. Gooding has held senior posi- tions at PwC, Diageo plc and Fortescue Metals Group Ltd. She replaces Aaron Hood, who has resigned to take up a new corporate position in Melbourne.
Lincoln Minerals Ltd has appointed James Tenghui Zhang as a non-executive
director. Zhang is expected to provide crucial support to Lincoln as the company looks to secure funding for its proposed Kookaburra Gully graphite mine.
Susan Hunter has resigned as joint company secre- tary of Pioneer Resources Ltd
after more than three years in the role. Julie Wolseley will continue as the sole company secretary.
Founding directors Robert Richardson and Malcolm Smartt have resigned from
the board of Crossland Stra- tegic Metals Ltd. Dato Sia Hok Kiang has been appoint- ed the new chairman, while Grahame Clegg has stepped in as interim company secre- tary.
Sheffield Resources Ltd has appointed Mark Di Silvio to the roles of chief fi-
nancial officer and company secretary. Di Silvio has over 25 years of resources industry experience, including almost 10 years in senior executive roles with Woodside Petrole-
amelius Resources Ltd
has appointed Duncan
Tom Palmer
om Palmer will succeed
Chris Robison as execu-
tive vice-president and chief operating officer of New- mont Mining Corp on May 1. Palmer joined the company in March 2014 after 20 years at Rio Tinto Ltd. Robison has decided to retire after a distin- guished 36-year career in the mining industry.
P
graphite and magnesia devel- oper Archer Exploration Ltd as a non-executive director. Rix has more than 30 years of experience in the market- ing of industrial minerals and products, having previously worked for Queensland Mag- nesia Pty Ltd as general man- ager marketing.
B
Carstens is the new chair- man of the Australia-Africa Minerals & Energy Group (AAMEG). Carstens takes over the role from long-serv- ing chairman and one of the organisation’s founding direc- tors, Bill Turner.
N
Baxter have resigned from the board of Triton Minerals Ltd.
P
rector and chief executive of
um Ltd in Australia and Africa, Centamin plc, Mawson West Ltd, Ausgold Ltd and Central Petroleum Ltd. Will Burbury has resigned as Sheffield’s company secretary, but re- mains non-executive chair- man of the company.
New Talisman Gold Mines Ltd has appointed Rich- ard Justice as company
secretary. Justice, an experi- enced accountant and chief financial officer, replaces Franco Girotto in the role.
R
Coutts as the company’s chief operating officer. Coutts is a mining engineer with experience in both open pit and underground mining in Western Australia, including six years with Harmony Gold Australia and two years with Metals X Ltd.
director. Wong, a director of GWR Group Ltd and West Peak Iron Ltd, has consider- able experience in Indone- sian and Malaysian mining sectors.
Central Asia Resources Ltd, but will remain as a non-exec- utive director of the company. Thompson will continue to as- sist the company in complet- ing its asset sales in Kazakh- stan and driving a process to introduce a new project and management group.
D
its new chief financial officer. Dyker previously held the role at a number of successful mid-tier resource companies, including Sirius Resources, Doray Minerals Ltd and Avo- ca Resources.
M
source-focused law firm EN- Safrica from March 1. Mgudl- wa has served as deputy chief executive since 2006. Outgoing chief executive Piet Faber, who has been at the helm of the firm for more than 25 years, is standing down due to health reasons.
PAGE 96 MARCH 2016 AUSTRALIA’S PAYDIRT
Duncan Coutts
C
Panoramic Resources Ltd. Langdon served on the com- pany’s board for 12 years and was integral in the financing and ramp-up of the Savannah nickel mine in 2004 as well as the acquisition of the Lan- franchi project and the com- pany’s gold and PGE assets.
A
Sthapak as an executive di- rector. Sthapak’s primary fo- cus will be Alara’s Al Hadee- tha and Daris copper-gold projects in Oman.
T
Wong as a non-executive
hristopher Langdon has
retired as a director of
Noel White
uDeco Ltd has appointed
Noel White as its new
independent non-executive chairman. An award-winning geologist, White has worked on several resources projects across the globe and was in- tegral in the discovery of the Cannington silver-lead de- posit, about 130km from Cu- Deco’s Cloncurry operations.
M
ed to the board of Echo Re- sources Ltd. The pair replace chairman Mat Longworth and managing director Ernst Kohler on the company’s board.
lara Resources Ltd has
appointed Atmavireshwar
on-executive directors
Alan Jenks and Rodney
ungsten Mining NL has
appointed Teck Siong
eter Thompson has re-
signed as managing di-
T
zi Mgudlwa will take over
as chief executive of re-
aul Rix has joined the
board of Adelaide-based
ase Resources Ltd
managing director Tim
C
acian Gold Ltd has ap-
pointed Grant Dyker as
ichael Ruane and Simon
Coxhell have been elect-


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LEFTFIELD
Amec Foster delivers for Starlight
Since 2012, Amec Foster Wheeler has been a strong supporter of Australia’s Star-
light Children’s Foundation, raising more than $180,000 for the charity to date.
During the 2015 fundrais- ing campaign Amec Foster Wheeler managed to rake in $49,430 which was recently presented to Starlight.
Over the past four years,
Amec Foster Wheeler has
held an annual three-week
long fundraising campaign,
with events such as bake
sales, quiz nights and family
days in its Perth and Brisbane offices to raise money.
Amec Foster Wheeler president for Australia Malcolm Brown said supporting Starlight, which aims to brighten the lives of seriously ill children and their families, was not only beneficial for the charity but also to the culture of the organisation.
Amec Foster Wheeler raised almost $50,000 for the Starlight Children’s Foundation in 2015
“In this current market, where every- one is under increased pressure to deliv- er more for less, campaigns like this give our people a chance to enjoy some fun engagement activities and give back to their community without comprising their productivity,” Brown said.
“Charities like Starlight are under in-
creasing pressure for funding and it’s important that organisations with the ca- pacity to do so continue their support.”
Amec Foster Wheeler will start this year’s fundraising campaign on Starlight Day, May 6.
INDEX
Acacia 4 Advaita 21 African Phosphate 70-71 Alara 96 Alcoa 95 Altura 12
Dacian 95, 96 Doray 96
Echo 96 Evolution 4 Exxaro 7 Eyre Peninsula Minerals 48
Finders 93 First Graphite 35 Fortescue 68, 96
GAM 50 Gangfeng 14 Gemfields 27 Glencore 91 Gold Fields 4, 60 Gold Terrace 48, 50
Harmony Gold 4, 96 Highfield 90
IchorCoal 82-85 Iluka 78 Impact 96 IMX 33-34 Ivanhoe 74
KBL 6 Kibaran 39, 64 Kidman 94 Kimberley Diamonds 94 Kumba 7
Lincoln 32, 96
Lithex 50 Lonmin 57, 60 Lucapa 54
Magnis 50 Mawson West 96 Metalicity 50
Resolute 68 Rio Tinto 8, 21, 60, 66, 68, 70, 92, 96
Sheffield 96
Anglo American Anglo Platinum AngloGold Ashanti
Aquarius Platinum Archer
Atlas Iron
Aureus
Aurora Ausgold Austin Avanco
7, 56 57, 60 4, 53, 60, 68, 95 57 96 15 66 41 96 6 88
Metals of Africa Metals X
Mineral Resources Mining Projects MMG
Mozambi
Neometals New Talisman Newcrest Newmont Northern Star
Oakdale Orocobre
Panoramic Peninsula Energy Peninsula Mines Pilbara Minerals Pioneer
Promesa
Queensland Magnesia
20-27 96 14 12 33 46
14 96 4 96 4
51 14
96
75 40-41 12, 15, 50 96 6
96
57 64, 94 18 76-81 21 27, 38
29, 44 15, 50 12 38, 96 96 12
82
8 32 91 84, 85
Base 80, BHP Billiton 8, 18, 21, 68 Black Mountain 70-71 Black Rock 36-37 Blackham 6
Centamin 96 Central Asia 96 Central Petroleum 96 Cliffs 94-95
Coal of Africa Continental Coal Crossland Crusader CuDeco
82, 94 71, 82 96 87 96
38 96 18
96
Ramelius
Randgold
Renascor 48, 50
96 4, 53, 68, 92
Sibanye Gold
South32
St George Mining Strandline
Strike
Syrah 21, 24, 25,
Talga
Talison Lithium
Tribal Mining
Triton 27, Tungsten Mining
Tyranna
Universal Coal
Vale Valence Variscan Vunene
Walkabout
West Peak
Western Areas
Woodside 11, 96
Zimplats 72
PAGE 98 MARCH 2016 AUSTRALIA’S PAYDIRT


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