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July - September 2019 Volume 1. Issue 136
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Juniors search
for reconciliation

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GOLD MINING JOURNAL (ISSN 1324-4396) COVER 18
Published by Paydirt Media Pty Ltd.
A.C.N. 063 985 133 Given the strength of the Australian dollar gold price, local companies

EDITORIAL are the talk of the town, but not all find themselves subject to favourable
Editor:
conversation. Gascoyne Resources and Dacian Gold’s underwhelming
Dominic Piper
Deputy editor: performances at their respective operations have not only disappointed
Mark Andrews shareholders, but also impacted the way their peers are being viewed in

Journalist: the market. GMJ speaks to experts and asks what the next generation of
Michael Washbourne
miners can heed from recent failures in the sector
Art director:
Nick Brown D I GG E R S 24
Contributors:
Keith Goode, Kalgoorlie will once again be the centre of the resources world in August
Brendan Ryan (Johannesburg) with the annual Diggers & Dealers Mining Forum set for its 28th edition.
As usual the programme and exhibition hall will be abuzz with the latest
A dv erti s i n g gold stories trending. GMJ takes a look at some of the miners and
Advertising manager: explorers in the spotlight ahead of this year’s event

Richa Fuller AFRICA 48
Subscriptions:
Kate Blanchard Ahead of Africa Down Under (September 4-6) we look at the state of the
African gold sector where Ghana has returned as the top gold producer.
Pay dirt M edia It was therefore an opportune time for Mark Andrews to visit the West
Executive chairman: African country where he caught up with a couple of Australian companies
Bill Repard looking to bolster the country’s gold output
Finance manager:
Giovanny Jefferson Cover image: Mill metallurgy department manager Mae Fatima Ontolan at
the Co-O processing plant, southern Philippines
Accounts/administration:
Lana Luketic CONTACT US

Co n f ere n ce s Suite 9, 1297 Hay St, West Perth, P: (+61 8) 9321 0355
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Christine Oelschlaeger Western Australia 6872
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EDITOR’S LETTER

Production clouds dull
$2,000 shine

Who would have thought that at a time of $2,000/oz gold, GMJ would be forced to
focus on a spate of recent slip-ups in the industry?

This month’s cover story looks at the problems encountered by Gascoyne Resources
Ltd and Dacian Gold Ltd but they are just the latest in a litany of troubled operations;
from St Barbara Ltd at Gwalia to Blackham Resources Ltd at Wiluna and Eastern
Goldfields Ltd.

Our aim was not to point the finger of blame at individuals but to see if there is
something systemic in the Australian gold sector which has led to these issues.

It must first be said that gold mining is not easy. As Argonaut Securities analyst James
Wilson tells us in the cover story, building and operating gold mines isn’t as easy as
the industry often makes it look. The Australian gold scene has enjoyed a remarkable
period of success but that doesn’t mean we have discovered a secret recipe for success.

Often, the allure of getting into production is too strong and companies find themselves cutting corners to meet investor
demands for early production. We frequently witness companies who talk down capex requirements and build a project
with as little capital as possible only to show later they’ve been scrimping on things, rather than saving.

Part of the problem with gold is the familiarity of it. Infrastructure requirements are low, the finished product is
standardised and the sales market is transparent and well understood. However, such simplicity can lead to complacency
among developers.

Where all aspects of a base metals, iron ore or even industrial metals projects are subject to stringent due diligence
and scrutiny by financiers and investors, there is an assumption in the gold sector that there is a standardised path to
development.

The issues we cover in this month’s edition show there is not. Each project, each orebody is unique and requires a
tailored approach to construction and development, from grade reconciliation, to mining and processing.

Lycopodium Ltd managing director Peter de Leo speaks of mills becoming “commoditised”, off-the-shelf units which are
assumed to be sufficient for processing any given orebody.

They are generally cheaper and quicker to build, which is welcomed when a company is attempting to show disciplined
capital management and a quick path to production, but in reality it rarely works that way. No orebody behaves the same
and by saving 10% on the price of a mill, a company may be installing a fatal flaw before they even get started.

It is the same for grade reconciliation. Drilling out a complex orebody can feel like a long and laborious process,
particularly when investors are pushing a company to get into production but it has been proven time and again that a
lack of understanding about the finer aspects of an orebody can quickly bring a project unstuck.

More often, the problems come during the early period of production ramp-up when companies can ill-afford any negative
impacts. And if the developer has tried to keep spending down to an absolute minimum, any setback could prove fatal.

This again comes back to the financing of projects. In the desperation to catch the wave of investment support,
companies go to extreme lengths to tighten expenditure but too often neglect other areas.

One experienced mining executive recently explained to me how he and his colleagues have always looked at mine
development.

“The most sensitive part of any gold project is revenue, then operating costs, then capex,” he said. “If you are a few
million dollars over budget in the construction, it is not terminal but if you are 15-20% out on grade or tonnes, it is going to
affect revenues in that ramp-up period and that’s where things start to go wrong. Too often, though, companies focus on
keeping the capex down and not on revenue.”

The short-term market fallout from this recent spate of production problems has been sharp but the damage should not
be permanent. However, the next generation of gold juniors who are currently lamenting the wider market backlash need
to heed the lessons if they are not to make the same mistake.

[email protected] @DominicPiper /dominicpiper /PaydirtMediaAustralia

Page 4

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Page 5

NEWS

Apollo lands more hits

by Dominic Piper

Apollo continues to rack up the gold hits on its
Lake Rebecca project 150km east of Kalgoorlie

While other companies debate on how they can bridge the he said. “What we didn’t expect was the increased grades at
development gap in a soft market for gold juniors, Apollo Laura and it has really led to a re-evaluation of that surface.”
Consolidated Ltd is happy to stick to what it knows.
Located 300m north of Jennifer, Laura was expected to be one
The Eastern Goldfields explorer has been producing a steady of the “bolt-ons” to Jennifer but the high-grade nature of the
stream of good results from drilling on its Lake Rebecca gold recent drilling has Apollo now considering it a priority.
project – 150km east of Kalgoorlie, Western Australia – for
nearly a year now but managing director Nick Castleden will not “It is one big system and it is looking like it could come out as
be drawn into pushing the button on resource delineation until one pit now the grades and widths at [Laura] are showing up,”
he knows more about what the project holds. Castleden said.

“If we think we have found the limits of the system, yes we Castleden’s reluctance to start resource definition should not be
would look to quantify what we have so it depends on how we taken as a sign of uncertainty about the project. Instead, he is
are travelling with the drilling,” Castleden told GMJ. “There is emphatic in his expectations.
no urgency to put out a resource. If it keeps getting bigger, you
only end up throwing out the previous work anyway. We want “Jennifer and Laura will get mined at some point; there is little
to ensure any resource is big enough to hold shareholders’ doubt about it,” he said. “It is a question of whether they are big
attention for more than a week. If it is less than expected then enough to process them ourselves or elsewhere.
the share price will get punished.
“The nearest plant is 60km away but our belief is that we will be
“In a bull market you can put out resource numbers and the far better served building our own operations. As we hunt for
market will give contained ounces reasonable value. If people more Jennifers, we will find more low-grade material and bolt-
don’t think you can mine it, they won’t value it in this market. on ounces, which gets us closer to being able to fund our own
We are better off exploring for now. Maybe towards the end of capex.”
2019 we could calculate an interim number but we haven’t had a
single shareholder saying: ‘what’s the resource?’ yet.” Before Apollo reaches that point, Castleden would like to have
a good fix on the complex geology being encountered on the
With more than $10 million in the bank, Castleden has the luxury ground.
of committing the company fully to scoping out the size of the
opportunity at Lake Rebecca and early indications are that it “From what the structural geologists are telling us it is quite
could be significant. complicated, with a couple of different plunge directions
identified,” he said. “That makes it quite drill intensive to
Apollo is currently undertaking a 20,000m RC and 2,000m understand geometry, but because it has seen a lot of structure
diamond drilling programme at Lake Rebecca which is infilling it is a good location for trapping gold.”
and testing for extensions to the Jennifer, Jennifer NE and Laura
lodes as well as step-out drilling on other targets including Duke, Drilling is expected to continue with Apollo set to test the
Duchess and Redskin. Duchess and Duke targets 5km from Jennifer.

In late June, results from infill drilling on the Laura lode included “Duchess and Duke are in that 1-2 g/t grade bracket but with
hits of 28m @ 4.83 g/t gold (including 14m @ 8.14 g/t), 18m @ 20-30m true width, so they would add important volume to an
3.96 g/t and 15m @ 2.18 g/t while the Jennifer lode returned operation,” Castleden said. “And, somewhere around there, we
19m @ 4.47 g/t, 19m @ 3.02 g/t and 16m @ 2.7 g/t. will find grade.”

At Jennifer NE, step-out drilling confirmed near-surface Results released in June included hits of 40m @ 1.56 g/t, 31m
mineralisation with a hit of 27m @ 2.44 g/t gold and 20m @ @ 2.07 g/t and 32m @ 1.34 g/t with mineralisation now defined
1.76 g/t. over 200m of strike at Duke.

Castleden said the results from the Laura lode in particular had Castleden expects further hits to add to the overall picture at
been a pleasant surprise. Lake Rebecca as the company builds towards considering the
economics in 2020.
“We knew all along that Jennifer was where the grade lies and
then it would then be about bolting on 1-3 g/t satellite orebodies,” “The milestone for us this year is building enough volume to talk
about funding and capex with a straight face. For that, we need
either high-grade ounces or significant tonnages,” he said.

Page 6

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NEWS

FutureGold could have
miners streaming in

by Dominic Piper

The absence of public equity for mining development has “The Doray shareholders were asking about the lack of a
left a surfeit of junior developers stuck at the gold starting premium but we said there would be a bump in value on the
gate but Liam Twigger and his PCF Capital Group may have a back of growing big enough to enter the ASX300,” Twigger
solution for some of them. said. “Once the merger was complete, they went from $400
million market cap to $700 million in a matter of weeks as they
“Our analysis shows there are 300 companies across the ASX, came to the attention of these funds.”
TSX and AIM with a combined 300 moz gold resources and
market caps of $30 million or less and they have nowhere to For most developers, however, a merger of equals will solve
go,” Twigger told GMJ. “The world wants a self-funding model. few of their financing issues. Instead, they are increasingly
Investors don’t want grassroots exploration plays or even moving towards alternative sources of finance. So far this has
single-asset companies. They want low capital intensity, fast meant investments from larger miners or private equity but
payback and cash-producing assets in safe jurisdictions.” Twigger has developed a new model he believes could provide
juniors with a pathway to development.
Compounding the problem for junior miners is a wider market
malaise with large chunks of global risk capital shifting attention FutureGold is a gold royalty and streaming business designed
to cannabis stocks and cryptocurrencies, while index-hugging to bridge that gap between PFS and decision-to-mine in a way
passive funds outperform traditional active resource funds. which does not threaten shareholders with dilution.

On the TSX and TSX-V, widely regarded as the premier For example, FutureGold would make a $US5 million loan
resources exchange, mining and energy IPO activity has to a development company in return for a 75,000oz stream
fallen dramatically in recent years, down from more than 80 at $US67/oz. PCF’s analysis suggests the investment would
companies in 2007 to none so far in 2019. usually be enough to carry a company from PFS to decision-to-
mine. This results an increase in enterprise value per resource
Instead, risk-friendly investors are getting their fix from cannabis ounce from around $US30/oz to $US50/oz, improving the
stocks which raised $US14 billion in 2018 alone. Meanwhile, project’s bankability. The stream is repaid via 5-10% of annual
blockchain and cryptocurrencies continue to attract investor production until settled and is subordinated in order to support
interest with 650 initial coin offerings in 2018 raising more than senior debt.
$US17 billion.
Twigger said the current market conditions created the
Twigger believes the trend is set for the medium term and may opportunity for FutureGold’s genesis.
even be enduring.
“If equity markets were showing interested in juniors, we
“The junior equity market is gone for at least five years and has wouldn’t have much opportunity but they have softened and
probably structurally changed permanently,” he said. “There banks are less enthusiastic about project finance, so at the
used to be 30 resources funds in Canada, now there are five moment if a company has a development project and a $30
and they are struggling to stay afloat amid a lot of redemptions. million market cap, they either can’t raise money at all or have
All the mums-and-dads investors have piled out of active to do so at a third of the price,” he said. “FutureGold offers a
investments because there are cheaper, better-performing non-dilutive, efficient and flexible source of capital to those
alternatives.” companies.”

The challenge for junior miners and developers is that their The funding model also allows for ongoing support of projects.
metrics are incompatible with the algorithms which dictate ETF
equity investments. “If the company doesn’t get into production, they don’t have to
pay back the stream, so we have an interest in them getting
“Algorithms are not interested in management performance or to production. And, we will be prepared to follow up with up to
exploration potential,” Twigger said. “They are focused purely $US20 million in equity,” Twigger said. “We won’t compromise
on the metrics of production and cash flow and unless you have the bank debt as the stream will sit outside it, leaving plenty in
a $250 million market cap, you can forget it; the ETFs won’t the financing to interest the banks. But, we don’t want to be the
look at you.” last to be paid either.”

Some junior producers have recognised the trend and have Streaming deals have proven increasingly popular in North
moved to change their profile. Twigger pointed to the April America since emerging more than a decade ago. Today, the
merger of Silver Lake Resources Ltd and Doray Minerals as a likes of Wheaton Precious Metals Inc and Franco Nevada
prime example of the merits of smaller companies combining.

Page 8

Liam Twigger “Our analysis shows there are
300 companies across the
ASX, TSX and AIM with a combined
300 moz gold resources and market
caps of $30 million or less and they
have nowhere to go.

Inc enjoy plus-$US500 million EBITDA on the back of their Much of the capital Twigger engaged with in North America
streaming portfolios but the trend has failed to take off in was deployed privately.
Australia where miners have grown frustrated with legacy
streams and royalties in place when buying mature assets. “The private market has been stronger in the US for a number
of years,” he said. “Last year, more money was raised privately
Twigger said the FutureGold model shared many similarities [$US2.4 trillion] than publicly [$US2.1 trillion].”
with the North American streamers but with a few added
differences. Blockchain and related technology is supporting this move to
private funding. The last five years have seen the emergence
“The previous model was just buying a royalty – generally of at least 16 alternative trading systems (ATS) in the US. Using
speaking that was $1-2 million which is not enough to get blockchain technology, ATS allow for the trading of private
to a decision-to-mine,” he said. “They were more focused companies equities among a global group of approved broker
on operating miners short on who needed capital and had dealers and their client bases.
attractive by-products.
PCF has engaged one such ATS group to enable FutureGold’s
“We are deliberately targeting pre-development companies digital securities to be traded but Twigger sees potential for
and projects; we are cutting off the pipeline of the streamers.” junior miners and explorers to migrate to such platforms
themselves.
Twigger has marketed the FutureGold concept extensively in
North America and he is confident he can raise $US250 million “They are for all intents the same as regular securities but at
for the project, just not necessarily from sources junior miners a time when regulators and compliance are suffocating the
would traditionally look to. markets like ever before, they may offer an alternative,” he
said. “Perhaps companies will begin dropping off the ASX with
“There is a very deep pool of capital in North America that its listing fees and compliance issues and move onto these
when you deliver an opportunity to them, they lean forward with alternative trading platforms.”
interest. It was a very different experience to Australia where the
funds have a glazed, fatigued look about them,” Twigger said. Junior companies are finding the leap from
PFS to construction almost impossible

“We are deliberately targeting pre-development
companies and projects; we are cutting off the
pipeline of the streamers.

Page 9

NEWS

Joining forces to bridge
the gap

by Mark Andrews

Alaska’s gold potential has been likened to
that of the Eastern Goldfields in the 1930s

Juniors may be currently languishing in the eyes of rather than an external issue.”
investors but established mid-tiers are emerging as
a potential source of funding as they look to deploy their With mines in Ghana and Ivory Coast, Perseus is a vibrant
growing cash reserves on growth opportunities. participant in the West African gold sector, one of the most
prolific gold producing regions in the world. While security
“We are seeing in recent times investors who left the scene issues have reared in particular parts of the region, bang-for-
now coming back and starting to look more closely at the buck discovery and production costs remain appealing for
business. I guess the reason for the renewed interest is that investment houses of all sizes.
we are now a self-funded company and not going back to the
market for equity,” Perseus Mining Ltd chief executive Jeff Lowell Resources Funds, which has $16 million worth of
Quartermaine said recently. assets under management, is heavily geared towards gold
investment and sees compelling reasons to consider gold
“We are in reasonably good shape, we got through the gate opportunities in West Africa.
fairly early in the piece and we are now self-funded, so we
are not reliant on external forces of funding that we once “We think right now that West Africa represents some
were. In terms of exploration, it is a competition between very good value; it has been very much ignored,” Lowell
deploying capital to development projects versus growth investment manager John Forwood told GMJ.
though exploration and that is an internal decision for us,
“An ounce of gold on a resource multiple basis is cheaper

Page 10

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NEWS

than an ounce of gold in Western Australia. Having said that, to us on the back of assessing our ASX announcements. It
places like Burkina Faso – while wonderful to explore and was great to see that because it gave us a little bit more
prepare a gold mine – do, I think, have a security situation self-confidence that we weren’t barking up the wrong tree,”
which has deteriorated. We are cautious about Burkina Faso, Tabeart said. “Having the attention of big companies gives
but we are more positive about other places in West Africa.” us confidence that they are seeing similar things to what we
see.”
With further strength in the gold price tipped, Forwood
said Lowell would take profits out of the positions it held in One of the highlights for Lundin at Stellar is the Saturn
the sector and look to deploy in other profit-making equity prospect, which sits on a magnetic body comparable in scale
opportunities. and geometry to Grasberg.

However, with over 600 ASX-listed resources companies, An IP survey at the Saturn porphyry target will be followed by

many of which have gold interests, small junior resources- 3,000m of drilling to test both Saturn and the Mars prospect.

focused funds like Lowell can only stretch their investments The heavy lifting by Lundin allows Polar X more room in
so far every year. the budget to go harder at its 100%-owned, 3.4mt @ 1.2%

“What we are seeing in junior mining and back down to the copper and 2 g/t gold Zackly project, which was not included

exploration phase in particular is that the sector is very much in the strategic partnership at Stellar.

unloved in terms of attracting financing,” Forwood said. Northern Star Resources Ltd has a big play in Alaska’s gold

“You could say there is a capital strike on for junior resource sector, while Sandfire Resources NL, through investing in

developers.” White Rock Minerals

No doubt the Ltd, and South32 Ltd
traditional streams have entered on the
of financing have back of base metals
eluded juniors, but targets.

recent trends suggest Tabeart said there

it is by no means was no doubt Alaska

the end of the road was a hot Tier 1

for small caps with jurisdiction and he

promising projects. was happy to be in

St Barbara Ltd has the thick of the action
triggered a range despite the lean times
of farm-in/JV type for explorers.

agreements in the “JVs/partnerships are

last few years, most certainly becoming

recently penning a popular ways of doing

deal with Alice Queen things and right now

Ltd at the Horn Island Lundin Mining Corp is spending up to $US44 million to earn a 51% interest in that certainly tells
gold project, Torres PolarX’s Stella project in Alaska you it is one of the
Strait, Far North ways to remain viable,

Queensland. particularly if you are

St Barbara can earn 70% by spending $4 million on at an early stage it is a lot harder to raise that sort of risk
exploration within three years at Horn Island. capital,” Tabeart said.

The Horn Island JV announcement was closely followed by “There appears to be short windows to raise money and at
Polar X Ltd being recognised for its efforts chasing copper- the same time there is no doubting that the mid-tiers and
gold porphyries in Alaska. majors, particularly in the copper space, are starting to
expand their horizons. It seems that juniors have control
“We had seven companies in total that we had spoken to,” over a lot of good projects, so it is relatively easy for bigger
Polar X managing director Frazer Tabeart told GMJ. companies to get interest in a good project this way and they
appear more willing to do so.
Tabeart said interest had started to build in the company
after promising results from the Stellar project in late 2018 “Alaska has major gold and copper belts and it is a Tier 1
started to resonate in the market. jurisdiction that remains under-explored; which is a unique
combination. It has been relatively poorly explored in the past
In June, Lundin Mining Corp, now a 14.3% shareholder in and it’s like going back and getting access to the Eastern
Polar X, entered an agreement to potentially earn 51% of the Goldfields in the 1920s and 30s; the first phase of discovery
Stellar claims by spending $US24 million on exploration and has been achieved but there is a lot of big potential still to be
making staged payments of $US20 million to Polar X.

“The vast majority of the companies made the initial approach picked through.”

Page 12

Page 13

NEWS

Keeping up
with Jones

by Mark Andrews

There’s no doubting that the mining industry could do Jones has
with more talent like Tashana Jones coming through the
system. leveraged the

At 22, Jones has dabbled with accountancy and tasted the assistance from Tashana Jones
9-5 work life but has now made a career change into the industry to “make
mining sector.
situations work”
Spurred by her father’s role as an environmentalist, Jones
entered Curtin University to major in environmental biology, for herself and encouraged her cohorts to explore every
with geology being the second component of her double
degree. avenue available to enhance their learnings.

That was the original plan “…then I fell in love with geology “A lot of it has to be self-driven. Once I am given a thread, I
and the mining side, it has really blown up from there and I try to pull on it as much as I can and meet as many people
have done a full switch over,” Jones told GMJ. as I can,” Jones said.

Jones’ double degree now comprises a major in applied While shareholders and investors lament the industry’s
geology, and minor in environmental biology. track record of delivering profitable outcomes, the younger
generation is demanding that miners and explorers
Jones is in her second year of the four-year double degree demonstrate responsible and sustainable practices with
and her new-found passion for the mining sector has gone protection of the environment they impact of utmost
to another level since a summer placement with Saracen importance.
Minerals Holding Ltd at Thunderbox.
“Research, environmental projects, deforestation and
“I definitely want a position with them, I got to see the cleaning our oceans are what a lot of people are interested
graduate work and I want one of those positions; that’s my in. Absolutely, they have a good social conscience; if you
goal,” Jones said. bring a sandwich wrapped in plastic to school that is a big
no!” Jones said.
A graduate role as an exploration geologist with Saracen
would fulfil short-term career ambitions for Jones, who is Jones added the mining industry could also enhance its
developing as an advocate for industry as president of reputation by delivering messages pertaining to stable
Women In Mining and Resources at Curtin. employment.

At a time when recruiting people remains a stiff challenge, “I think career reassurance is important. I’ve heard multiple
Jones’ chance connection with the mining industry appears times people tell me I am studying the wrong degree because
on course to serve the sector well. there will be no jobs in the industry in five years,” she said.

She said that roughly 70-80% of her university peers were “People are saying that in five years no-one will hire you in
fresh out of high school and could perhaps have benefitted the mining industry and everything will shut down. I have
from a greater industry presence ahead of time. done a lot of back work and that is so not the case. So, I think
people need greater career reassurance.”
“I think industry definitely needs to be more hands-on, with
more [mining] people coming to talk to us because it is
another world and the first few years are important to get
otherwise you may miss the boat,” Jones said.

“Personally, the industry has over-delivered for me. I didn’t
have much knowledge about mining and the resources
sector, but once exposed to it every company seems to want
to get on board and help.

“The industry has over-achieved for me and while I have
been given opportunities, I’ve also found some opportunities
for myself, but the industry has encouraged me through
wanting people to get on board with mining,” she said.

Page 14

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NEWS

Perth, Western Australia 9
November 12-13

ANNOUNCING KEYNOTE ADDRESSES:

The largest gold deposits in Northeast Asia: the history of discoveries
and exploration. A look from Russia.

Professor Nikolay Goryachev will be presenting a keynote address on the discovery and
exploration of the giant gold deposits in Far Eastern Russia, one of the world’s most important
gold producing regions about which most of our delegates will not be familiar. Prof. Goryachev is
a chief researcher of the North East Interdisciplinary Scientific Research Institute in Magadan in
North East Russia and has published extensively on this subject.

The Gold Deposits of China with particular emphasis on the world-class gold
provinces of Jiadong (E China) and Golden Triangle (SW China).

Professor Franco Pirajno, along with two prominent Chinese geoscientists, will be presenting a
keynote address on the Gold Deposits of China. Prof. Pirajno, Adjunct Professor at the Centre for
Exploration Targeting at the University of Western Australia, has devoted the past 24 years to the
study of China’s mineral systems and published a book on this subject in 2015.

PRESENTATIONS TO DATE INCLUDE:

Fosterville Tabakoroni Karlawinda Osiris

Kirkland Lake Gold Ltd. Resolute Mining Limited Capricorn Metals Ltd ATAC Resources Ltd.
Australia Mali Australia Canada

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COVER

Underground mining issues contributed to Dacian’s
underperformance in the March and June quarters

Reconciliation and resurrection:
How juniors can restore the faith

by Dominic Piper
The Australian gold industry’s celebratory mood generated by a $2,000/oz spot price was soon

tempered as a series of junior miners struck production and/or financial trouble in June.

Dacian Gold Ltd, Gascoyne Resources Ltd and
Blackham Resources Ltd encountered varying degrees of
underperformance during the June quarter which led to
share price depreciation, emergency capital raisings or, in
Gascoyne’s case, voluntary administration.
The market has reacted badly to the disappointing news,
punishing both the affected companies but also junior gold
players more broadly. At a time when institutional and retail
investors are already sceptical about the sustainability of
single-asset miners, the reputational damage has made the
job of gold developers even harder.
How could this occur at such a buoyant time for the local
gold sector? And, what lessons can be learnt by the next
generation of miners? GMJ looks at the setbacks and asks
industry experts how they will affect the sector.

Page 18

With head grades of less than 1 g/t, Gascoyne
couldn’t afford to lose any ounces

The troubles at Gascoyne slowly unfolded over several Mike Dunbar
quarters. The company actually poured first gold from its
Dalgaranga mine ahead of schedule and under budget on May
30, 2018 but by the end of the September quarter head grades
were stubbornly refusing to lift beyond 0.82 g/t, against an ore
reserve of 1.3 g/t.

The company had raised $24 million at 30c/share in August Eventually, on June 3, board and management admitted defeat,
to help it through the commissioning and appeared to be calling in the administrators and resigning en masse, saying
maintaining momentum with former Gold Road Resources that “despite extensive efforts… Gascoyne has continued to
Ltd executive Ian Murray arriving as chairman in October. experience issues with reconciliation to reserves and resource
However, when Murray abruptly departed after two weeks in models”.
the role, followed by chief executive Mike Dunbar, the market
“On the basis of the new model, and urgently prepared pit
began to scrutinise Gascoyne’s problems.
mining schedules… high level cash flow analysis indicates
By the end of March, the company was forced to admit it was that due to lower predicted grades, particularly in the next six
struggling with both grade reconciliation and mining rates. months, Gascoyne will incur a material cash flow shortage in
Reconciliation had been only 45% to the end of October, the near term,” administrator FTI Consulting said in the June
improving only slightly to 66% for the three months to the 3 statement.
end of February. A lack of free dig material had also slowed
“Although Gascoyne has investigated options to address that
mining rates, with the operation 15% below planned material
cash flow shortfall, through obtaining financial accommodation
movement for the March quarter.
from creditors and shareholders, it has become apparent that
A further $24.5 million was raised, this time at 5c, in April and those options will not successfully address the cash shortfall in
Cube Consulting was brought in to redraw the resource model. the time available.”
The result was a higher tonnage, lower grade deposit but with
Like Gascoyne, Dacian struck reconciliation and mining
“Dalgaranga still leaking cash and the Gascoyne share price performance issues at its Mt Morgans operation.

continuing to slide, options were limited.
Although Gascoyne has investigated options to address that cash flow
shortfall, through obtaining financial accommodation from creditors and

shareholders, it has become apparent that those options will not successfully

address the cash shortfall in the time available.

Page 19

COVER

Commercial production was declared on January 1 with performance” in the Westralia underground and the
executive chairman Rohan Williams saying in the December hangingwall lodes at the Jupiter underground. While the
quarterly report that ramp-up was “proceeding to plan”. grade control to mill reconciliation had remained at 98%,
reserve to mill reconciliation had fallen to 85%.
However, before the end of the March quarter, the company
had been forced to admit it would miss its quarterly production Coming just days after Gascoyne’s slide into administration,
target of 50-55,000oz, instead offering a revised figure of the market was in no mood to ignore the production
36-38,000oz. Dacian blamed the slowdown on underground downgrade and Dacian shares took a savaging, falling from
performance with equipment availability a particular issue. $1.58 to 51.5c.

“We are confident that the issues we faced in the March quarter Williams said both equipment availability and mine
have been resolved and we are forecasting a strong June development at Westralia were heading in the right direction
quarter with a corresponding excellent all-in-sustaining-cost and announced a new five-year mine plan would be released
profile which puts us on track to achieve our targeted annualised by the end of June based on an “improved understanding of
production run-rate of 200,000oz,” Williams said on March 25. the geological and structural controls of gold mineralisation”.

“Importantly, mine-to-mill reconciliation…remains very good at While Gascoyne and Dacian shareholders have been obvious
101%. Mining dilution from the underground and the open pit losers in the respective companies’ underperformance, the
remain at or better than feasibility study estimates, which is also reverberations have been felt throughout the gold sector.
a very good result.”
Despite the spot price hovering around all-time highs, the
In the March quarterly results, Williams said the company had disappointments have made life difficult for other gold
handled “some one-off challenges” and was making “strong juniors; whether in exploration, development or operation.
overall progress” towards June quarter guidance.
“We were certainly punished on the market for [our]
However, by June 5, Dacian was facing further production delays, but then we copped a second and a third lashing
downgrades with June quarter guidance revised to 36- as Gascoyne collapsed and then as Dacian put out some
38,000oz. The company cited further underground surprisingly disappointing news, St Barbara [Ltd] also got
performance issues but also “lower-than-expected grade the wobbles and that’s on the back already of the likes of
Blackham struggling and Eastern Goldfields going into
Rohan Williams administration,” Millennium Minerals Ltd chief executive
Peter Cash tells GMJ.

In June, delays to a new sulphide circuit at its Nullagine
operation forced Millennium to reduce FY2019 guidance
from 90,000-100,000oz at $1,300-1,375/oz AISC to 80,000-
90,000oz at $1,370-$1,450/oz AISC. Millennium shares
slipped from 18.5c in March to 5.6c in June but Cash is
confident the company has been able to win back market
support.

“We were surprised at the fall of the share price, but
equally we’ve seen it rebound so quickly and I think once
we give comfort to the market that we have ramped up our
underground and the first phase of the processing plant is
now active and working, I think it will sort of placate those
concerns,” Cash says.

Calidus Resources Ltd is currently in PFS mode on its
Warrawoona gold project in WA. Managing director David
Reeves feels the recent problems have turned investors off
gold development stories.

“We are seeing a lot of interest from producers and others
but not from traditional sources of finance,” Reeves says.
“When the institutions have blown a lot on other gold stories
it becomes even harder in Australia to attract funding.”

Argonaut Securities analyst James Wilson is somewhat
sympathetic to the problems being encountered.

“These things are complicated,” Wilson says. “Underground
mining is a tough business, we often make it look easy

Page 20

“We were certainly punished Keith Goode
on the market for [our] delays,
but then we copped a second and a Gascoyne went into voluntary administration in June after grade
third lashing as Gascoyne collapsed reconciliation issues at its Dalgaranga mine

and then as Dacian put out some
surprisingly disappointing news...

but it isn’t, you have to manage the natural elements and ounces can be critical,” he says. “I think companies are worried
sometimes the orebody doesn’t do what it should. about pre-cash flow spending but it goes back to funding.”

“Historically, operations have underperformed due to weather, That issue is compounded in low-grade operations such as
problems with the mining or with grade reconciliation. Rarely Dalgaranga.
would the due diligence process stress test on problems
occurring on several fronts simultaneously but that is what has Goode believes greater transparency is important for
occurred here.” emerging miners, regardless of the short-term pain involved.

Eagle Research managing director Keith Goode agrees. “I think it is probably better to take the hit early,” he says,
pointing to the commissioning delays at the Gruyere
“Mining always has issues and if you are mining underground, development as an example.
they can be compounded,” Goode says. “So, when mining
underground sometimes you have to change the masterplan. “Look at Gold Road. Its shares rebounded after a
You can reduce the stopes or leave a skin of ore in the commissioning delay and full-year production downgrade
hangingwall to reduce the dilution. Yes, it means the costs go because they told the market early. If you realise you have
up but that’s the life of an underground operation.” got problems, you have to hold the market’s hand and walk
it through the strategy. If you try to keep quiet, you will get
However, wider issues remain. Grade reconciliation points buried because when you leave questions unanswered,
to deficiencies in grade control drilling prior to the start of analysts make up their own answers and their scenarios are
production. usually much worse.”

Wilson says the pressure on companies to get into production Lycopodium Ltd has been the most active gold engineer
as quickly as possible may lead to a lack of preparation. globally in the last decade, building a string of gold operations
in Australia, Africa and the Pacific Islands. Managing director
“The geo-statistics may point to the fact you’ve done your work Peter de Leo said companies must ensure they are ready for
but the plant is the truth machine and the loss of 10% of the most eventualities well before they begin mining.

Page 21

COVER

“You have not only a Plan A but also a Plan B; you have you drilled enough?’ he says. “That assumption that projects
to plan for that worst-case scenario,” de Leo tells GMJ. “It never surprise on the downside will be gone, and actually
is important to optimise – no-one wants to pay more than they will need to be made bullet-proof.”
they need to – but groups get too close to their project and
bank on everything going their way but that’s not enough, Echo Resources Ltd managing director Victor Rajasooriar
you need proper contingency. has taken that path with the help of a supportive shareholder
base. Prior to arriving at Echo, Rajasooriar had briefly been
“It is a tough market and there has not been appetite for with Eastern Goldfields (EGS), another recent high-profile
ongoing spending but I think that talks to the shareholder WA gold disappointment.
base. If the shareholders are supportive they’ll understand
the need to spend more during the study phase.” “I came from EGS where the plant was kind of built before we
even had a resource, so that was an issue that was kind of
For de Leo, spending extra time and money upfront will give in my face when I joined Echo,” Rajasooriar says. “Some of
companies the best chance of avoiding expensive issues the largest shareholders actually said to me before I joined:
during the commissioning phase. ‘Don’t rush into production. Just make sure this project is
technically sound because you’ve got one go at it’.”
“The industry often sees problems with mills or grade
reconciliation or mining rates but by putting effort in at the Evolution Mining Ltd executive chairman Jake Klein urges
study phase you can make sure those problems are not gold companies to “keep our heads” despite the record price
going to hurt you once you’re in development,” he says. environment.

“My advice is to engage expert groups early on and deliver “We’ve got to remain disciplined and we’ve got to not let

quality studies before you try to build the project. The cost of this $2,000/oz gold price go to our heads, because the

“the study, in the scheme of things, is less than 2% versus the distance from hero to zero in this industry is not far,” he says.

ultimate cost of the project.”
Wilson argues the grade reconciliation Historically, operations have underperformed
issues at Dalgaranga and Mt Morgans will due to weather, problems with the mining
force companies to be even more diligent
in drilling out orebodies before moving or with grade reconciliation. Rarely would the due
into production.

“The last time the WA gold sector had diligence process stress test on problems occurring
an issue like this was with Garden Well on several fronts simultaneously but that is what
[owned by Regis Resources Ltd] which has occurred here.
was also an issue around drill density.
The question from now on will be: ‘Have

Sean Russo

Page 22

The successful ramp-up of Gruyere will be “Many people around companies
watched closely in light of recent failures in are cheering them on but, their
risk is not the same as the company’s.
Western Australia’s gold sector
Brokers, technical experts, advisers;
they’re not climbing that [financing]

cliff with you.

“Building a gold mine is like building a house; it’s going to take economic credentials.
longer and cost more than you expect, so make sure the quality
of the project is sufficient to withstand that.” “My advice is; don’t start financing unless you have the resources
to finish it,” Russo said at Latin America Down Under in May.
De Leo believes some companies and investors fall into the “Being in the vicinity of being bankable on a project is not good
trap of assuming there is a conventional approach which can be enough.
applied to all gold projects.
“Many people around companies are cheering them on but,
“It is not a case of a gold project is a gold project is a gold project,” their risk is not the same as the company’s. Brokers, technical
he says. “Orebodies, metallurgy, recoveries, geology; they are all experts, advisers; they’re not climbing that [financing] cliff with
different and you have to do the work to identify that upfront. The you.
simple metrics are throughput, grade, recoveries and availability;
if you hit what you had in the study, you will be fine.” “Most juniors have only one opportunity and are faced with a
complex matrix of risks they can’t control but I see it more as
Heron Resources Ltd managing director Wayne Taylor believes uncertainty rather than risk. And, a little like rock climber Alex
the greater scrutiny applied to his company’s base metals project Honnold in the documentary Free Solo, it is not about reducing
– Woodlawn in New South Wales – meant it was more robust risk but expanding your comfort zone. For junior miners, that
than typical gold operations. means you have to have a big comfort zone, particularly if they
are using debt.”
“We would like to think the level of homework that we’ve done
has been more expensive, it’s not just your basic gold operation, The scrutiny gold development projects are placed under is
so therefore all the way through the process there’s been a already high but will likely increase following the problems
higher level of conservatism applied and we would like to think encountered by EGS, Gascoyne, Dacian and Blackham.
we would see that generated in the results,” Taylor tells GMJ.
“It does make it more difficult for juniors who are raising capital
Noah’s Rule managing director Sean Russo believes too many for development,” Wilson says. “Private equity, corporates and
management teams get carried away with the romantic notion other groups will still be interested but the traditional banks will
of building a mine before they’ve established a project’s employ even more stringent due diligence from now on. Higher
levels of scrutiny by debt and equity financiers are clearly going
to occur. From the first resource model to the levels of working
capital required in the ramp-up phase, there will be increased
levels of due diligence, more stringent funding requirements and
increased levels of scepticism.”

Page 23

DIGGERS & DEALERS PREVIEW

Evolution happy
‘feeling the stones’

by Michael Washbourne

Evolution has guided production of 725,000-775,000oz at an
AISC of $845-895/oz for FY2020

As the Australian dollar gold price smashes through recognition on a global stage. This contrasts his upbeat
$2,000/oz for the first time, one of the industry’s leading promotion of the sector going back as early as 2013 when
voices – Evolution Mining Ltd executive chairman Jake Klein gold stories were barely in favour and Evolution was a
– is treading as cautiously as ever. shadow of the company it is now.

“In a rising gold price environment, quite frankly, I’m even “When we started out, the vision was to build a company that
more cautious than in a falling one because that’s when we was going to prosper through the cycle; so, in the good times
are prone to making errors,” Klein told GMJ. we’re going to make fantastic returns and in the downturns
we’re going to be acquiring things that are going to set us up
“When you back look at history, the reality is the gold sector well for the next turn in the cycle,” Klein said.
has often got caught up in a rising gold price and made
some very bad decisions. “I think we’ve really positioned ourselves remarkably well.
We took advantage of adding world-class opportunities to
“Andy Grove, the founder of Intel, once said ‘only the our portfolio in 2015 and 2016 and now we’re discovering
paranoid survive’. So, I think we’ve got to be careful in significant amounts of new mineralisation at those assets.
getting too caught up in reflecting on how good we are and
focus on the future; one that is filled with opportunity but also “Adding to the discovery sizzle, I’d say the thing I’m most
with challenges.” pleased and proud about at Evolution is that we’re banking
lots of money and we’re making superior returns and
Those familiar with both Evolution and Klein in particular margins during this high gold price environment. That, to
will know this is not the first time he has cautioned his me, is an indicator Evolution is staying disciplined and true
peers against repeating the mistakes of the past. At to its vision.”
Diggers & Dealers in 2016, when Evolution was the toast
of Kalgoorlie having just completed the acquisition spree Evolution was expecting to start this financial year in a net
which transformed the company into a multibillion dollar gold cash position, having paid down debt of almost $1 billion
business, he lectured the audience about not getting carried in the past four years at the same time as returning $357
away with their “moment in Hollywood”. million to shareholders.

Klein has maintained this stance for the past three years as At the end of March, the company reported an enviable
established Australian gold producers have gained greater balance sheet comprising a cash balance of $256 million

PPaaggee 2244

and an undrawn facility of $350 million. Across its Evolution chairman Jake Klein
portfolio of six operating gold mines in Queensland, shares his thoughts on...
New South Wales and Western Australia, each
asset is generating returns of up to 23% per annum. Changes to the industry over the past 15 years:
Looking back at some old Diggers & Dealers
Klein, however, is always striving to make Evolution presentations, the most intriguing thing for me was a
better. A “disappointing” end to 2018 – mostly chart which said 20 moz of gold has been produced
due to one-off unanticipated events at three of its at a cash cost of $US250/oz. Imagine making gold at
mines – appears to have been the catalyst for an $US250/oz today. The other thing is I think we have built
impressive start to this calendar year. too many marginal projects and I think there are probably
too many companies chasing too few quality assets.
Evolution slashed $48/oz off its group AISC for the Finally, in a broader context, the bar keeps getting raised
March quarter ($925/oz or $US659/oz) ensuring with respect to ESG and safety, and that’s all appropriate.
the company retained its position as one of the What the next decade will look like for the sector:
world’s lowest cost gold producers. If we could build fewer but better gold companies, I think
that would be good for investors. That doesn’t mean
“There are going to be bumps in the road and I there isn’t a very important role for generators of projects
keep reflecting on the time I had in China and often and ideas, I just think the way they are currently funded
refer to the saying that Deng Xiaoping used when is too expensive and a relatively inefficient amount of
he opened China to the world, which was ‘we’re that capital actually gets spent on the project or in the
going to cross the river whilst feeling the stones’,” ground. Maybe there’s something we can take out of the
Klein said. hi-tech industry where these companies are incubated in
unlisted companies that have easier and better access
“In many ways, a company is no different. We have to capital.
a very clear vision at Evolution, but not everything How changes to financing can help the industry:
we do is right and we need to be an organisation that Investors, in spite of this increased and buoyant gold
learns from its mistakes and seeks improvement. If price in Australian dollars, have done well on some
we can be a learning organisation, we will fulfil our companies but there still are plenty of investors who
vision and be a great gold company.” would be hurting because they were blindsided by risks
they didn’t anticipate. We need to get better and I think it
Earlier this year, Evolution reported its annual gold would help us all if we were an industry where investors
resources were up by 480,000oz to 14.73 moz were better able to evaluate the prospects of the other
and reserves up 410,000oz to 7.46 moz. This was companies.
underpinned by a 134% increase in underground The role of government over the next decade:
resources, as well as a 27% boost in reserves, at Government has an important role to play in both
the Cowal mine, NSW. helping technological advances, but also providing
a strategic blueprint for rural communities as labour
Cowal is an asset which Evolution acquired for more than its intensity reduces. As miners, we need to be sensitive to
market cap at the time in mid-2015, with multiple sections of the impact which automation may have, so we need to
the investment community telling Klein he had “overpaid” for be building things that add to the labour force of these
the former Barrick Gold Corp operation. communities and supporting what we describe as shared
value projects.
“A bit of courage, a bit of luck and a bit of timing all conspired
to make it a superb acquisition, in hindsight,” Klein said.

“Since we’ve owned Cowal, we’ve produced almost 1 moz,
we’ve generated a lot of money and we’ve added effectively
3.3 moz to reserves, none of which includes our GRE46/
Dalwhinnie discovery.

“We’ve committed to the Stage H cutback, we’ve built a float
tails leach that increases recoveries by 4-6% and we’ve
committed to the decline development which will drill out the
underground potential. We’re also expanding the plant from
its current 7.5 mtpa to upwards of 9.5 mtpa, with a first stage
of 8.8 mtpa.

“We’re starting to think about Cowal as a provincial-scale
opportunity. We’ve articulated our vision of plus-300,000
ozpa of low-cost gold coming out of Cowal over the long
term.”

Alongside Cowal, an economic interest in Glencore’s Ernest
Henry gold-copper operation in Queensland continues to
drive the success of the portfolio, generating more than
$200 million of free cash flow.

Page 25

DIGGERS & DEALERS PREVIEW

The same cannot be said for Mungari in WA’s Goldfields, Ernest Henry is generating more than $200 million a
however, the company is set to commit another $15 million year in free cash flow for Evolution
towards exploration in the district over the next 12 months as
it chases additional plant feed. board as our VP discovery,” Klein said. “He’s really gone
about building a team and a capacity that is allowing us
“We continue to believe in the potential of the district, but we to understand and access some of these earlier stage
haven’t delivered what shareholders expected us to deliver opportunities and we do see that as an important growth
from Mungari,” Klein said. “We’re working on it and are area of our business.
optimistic that with the right adjusted approach and strategy,
we will make it a much better mine than it is.” “The most accretive way you can deliver value to
shareholders is through discovery. I certainly believe that if
Evolution also recently staked a 19.9% interest in Tribune we can give Glen and his team the time and the funding
Resources Ltd in what was a strategic move considering they need to diligently go about assessing and acquiring
Tribune owns 36.75% of the nearby Northern Star Resources these opportunities, it will lead to long-term value creation
Ltd-run East Kundana mine. at Evolution.”

While budgets had not been finalised at the time of print, Evolution has also followed the lead of some of its peers in
Evolution was expected to set aside another $40-55 million the mid-tier gold sector and assessed potential acquisitions
for exploration activities in FY2020. This will include work in North America. However, nothing to date has caught the
on the Drummond and Connors Arc projects, near its Mt company’s eye.
Carlton mine, in Queensland and a separate earn-in JV with
Enterprise Metals Ltd in WA’s Murchison region. “We’ve kicked a number of tyres, we haven’t seen anything
that we think is going to be both accretive and improve the
“This is very much part of our strategy that we commenced quality of our portfolio,” Klein said. “The thing I hope Evolution
a couple of years ago when Glen Masterman came on has done is be bold, courageous and different; that’s what I’d
like us to be known for, so expect the unexpected.”
Evolution is maintaining confidence in the potential of its
Mungari operation

Page 26

Macmahon heading for
the underground heights

by Dominic Piper

The M&A activity in the gold sector is beginning to extend Macmahon has established itself as
beyond the mining companies, with Macmahon Holdings Ltd Australia’s largest contractor group
striking an agreement to acquire specialist underground mining
contractor GBF Group in June. share of casualties in recent months.

The deal comprises an upfront component reflecting an enterprise Finnegan declined to comment on individual examples but said
value of around $48 million, plus two further earn-out payments the company continued to work with clients to ensure value was
which are subject to GBF achieving agreed performance hurdles created across the price cycle.
in the next two financial years.
“Every project has its own unique challenges and our role is to
Based in Western Australia’s Eastern Goldfields, GBF employees offer up solutions to help our clients manage theirs as effectively
around 450 people and is underground mining contractor to Silver as possible,” he said. “Our success has been built on not just being
Lake Resources Ltd, Millennium Minerals Ltd, Pantoro Ltd and responsive to our clients’ needs, but being proactive in offering
Orminex Ltd. Macmahon said GBF founders Michael Foulds and up solutions to the problems that inevitably arise in any mining
Ross Graham would continue in the business with incentives to operation. We look to build great relationships and an alignment of
drive further earnings growth via performance-based earn-out interests on site so that our client’s success becomes our success.
payments in FY20 and FY21.
“Our deal with GBF is more about the medium term – which is why
For Macmahon, the acquisition represents a beefing up of its we like to enter alliance-style contracts with our clients to ensure we
underground capability at a time when new work is up for grabs. can create value across the price cycle.

“The acquisition of GBF is consistent with Macmahon’s strategy One contract which hasn’t run smoothly is the company’s open pit
of growing capability and scale in our underground division, to job at Newcrest Mining Ltd’s Telfer gold mine in WA.
capitalise on the significant level of underground opportunities we
are seeing with both current and potential new clients,” Macmahon Macmahon is seeking an amendment to the contract rates
chief executive Michael Finnegan told GMJ. as a result of recent changes in the Telfer mine plan and works
programme. Both parties have agreed the facilitated negotiation
“Internally, we have been working towards getting our business process will conclude by no later than August 5.
in a strong position, so we can take advantage of these sorts of
opportunities. The acquisition timing works well as it builds scale “We are currently going through the good faith negotiations with
and depth in our underground division following our recent award Newcrest and we are confident in our position and process,”
of the Boston Shaker underground contract at Tropicana.” Finnegan said.

The five-year contract for Boston Shaker is worth $170 million.

Already Australia’s largest contractor, the GBF acquisition allows
Macmahon to be more competitive in an increasingly busy
underground mining space.

“Certainly prices are at record highs at the moment and that will
lead ultimately to further investment in the sector and potential
opportunities for mining services,” Finnegan said. “We see
ourselves building a unique position to offer clients industry-leading
mining capability across the life-cycle of assets from the outset –
from civil mine site works, to surface and underground mining, and
mine rehabilitation. GBF’s well-regarded underground capability
will be enhanced by our balance sheet and reach across the
industry. We feel like this is a very good strategic fit for Macmahon
and our clients.”

While record gold prices are providing established miners with
unprecedented margins, the WA gold sector has also seen its fair

Page 27

DIGGERS & DEALERS PREVIEW

Full spectrum starting to
emerge at Penny West

by Mark Andrews

Spectrum raised $5 million in April which allows it to determine Adams’ 12 years as an analyst and rounded career in gold
a potential approach to the development of Penny West developments had, he said, taught him one thing: Respect
grade.
With the Australian gold price at all-time highs, the
country’s gold mining sector should be flourishing but “Our deliberate strategy has been to not get involved in low-
global uncertainty and domestic “corporate capitulations” grade deposits. Towards the end of the year our likely maiden
continues to give investors reason to remain sceptical about high-grade resource will give us some flexibility in terms of
gold stocks. how we approach development,” he said.

“We’ve had some fairly high profile corporate failures in the The ground occupied by Spectrum sits on granted mining
gold space and that has hurt the gold sector and it doesn’t do leases until 2032, in a brownfields region of WA served by
the industry any good,” Spectrum Metals managing director processing and other infrastructure.
Paul Adams told GMJ.
Back of the envelope estimations of 100,000oz gold @ plus-
“Our last announcement [June 5 results from Penny North] 10 g/t at the Penny West gold project could potentially deliver
we thought was an absolute cracker in terms of the continued Spectrum a bottom line of $100 million against the current gold
down-plunge expansion of our Penny North discovery, which price setting, a scenario Adams would be comfortable with.
effectively almost doubled the down-dip extent,” Adams said.
“Unfortunately, our announcement came out the same day High-grade, high-margin projects don’t incur the capital
as Dacian [Gold Ltd] made their production update and they development costs of low-grade assets which require
announced what appeared to be corporate capitulation, hence economies-of-scale to establish then, when in production, rely
the breaks on the sector and we went down 20% on that day.” on almost perfection in mining and processing.

One company can’t shoulder full responsibility for the fortune “From the get-go we wanted to get away from margin pressure
of others, and while Adams empathises with the situation because when the metal price turns against you, as it inevitably
being faced by the likes of Dacian and Gascoyne Resources does in mining projects, there is no protection for low-grade
Ltd, it also serves as reinforcement of the strategy Spectrum projects,” Adams said.
is pursuing south of the Youanmi mining centre in Western
Australia. “We’re not blinkered by the 100,000 ozpa gold production
profile over 10 years. We want to be a sustainable producer of
gold domestically at whatever the Australian gold price is and
therefore you remain relevant.”

Spectrum skipped to market attention this year with drilling
success at Penny West where phase two drilling at the Penny
North prospect was nearing completion at the time of print.

The latest results indicated the Penny North structure
continues to widen and remains open down-dip and along
strike, with highlights of 7m @ 17.5 g/t gold from 230m, within
11m @ 11.7 g/t from 229m; 1m @ 180.3 g/ t from 206m, within
3m @ 70.8 g/t from 205m; 1m @ 12.3 g/t from 205m, within 3m
@ 6.3 g/t from 205m.

Meanwhile, a round of geophysics completed on the gap zone
between Penny North and the Magenta/Colombia prospect is
being analysed for Spectrum to determine where to drill next.

“We will use the drilling on Penny North as a template to see if
we can find more of these shoot-like deposits up and down the
shear zone,” Adams said.

Page 28

Southern Cross reignited

by Michael Washbourne

Altan Rio Minerals Ltd has unveiled plans to reignite specifically exploration underneath the salt lake that has
Southern Cross as one of Western Australia’s premier never been looked at before.”
gold production centres. According to Stephen, Altan Rio has 17 drill-ready targets and
permits in place for an initial campaign at Southern Cross.
More than 10 moz has been produced historically from the One of the first cabs off the rank will be the Aries target which
Southern Cross gold belt, but output has significantly declined is a northern strike extension of the historic Frasers mine,
over the last 15 years since the once-prolific Sons of Gwalia trending under the Lake Koorkoordine salt lake.
went into administration. Other drill targets include a possible dip-extension of the
Hopes Hill mine which had previously produced 93,000oz at
St Barbara Ltd, then Hanking Gold Pty Ltd and more recently an average grade of 1.8 g/t gold.
Minjar Gold Ltd have kept the 2.5 mtpa Marvel Loch process “We think the chances of us turning up something on one of
plant ticking over, but the amount of available feed has dried these targets, whether it be toll-treatable ounces or whether it
up in recent times due to a lack of exploration in the district. be a standalone opportunity, is extremely high,” Stephen said.
“I think, without doubt, the biggest factor here for us is the gold
Following some strategic tenement negotiations by chairman price. The last time people were actively working on this area
John Jones, Altan Rio has now assumed control of the
northern half of the Frasers-Corinthian Shear Zone (FCSZ). Altan Rio has made the move into Southern Cross

Altan Rio’s tenure effectively extends south from the historic the gold price was less than $400/oz. Now it’s $2,000/oz and
Copperhead mine for 28km to the boundary of the Southern we’ve also got a very available toll milling situation that didn’t
Cross township. exist back then either.
“At one point in time, Southern Cross was the fifth largest gold
“It’s one of those unique situations where you can put a ruler producing belt in WA, but it really hasn’t been properly drilled.
over that 310-degree alignment and every 3-4km there’s So, we think there is an enormous opportunity for people to
some sort of gold mine,” Altan Rio director Paul Stephen told get involved in one of the premier gold belts in WA that has sat
GMJ. in private hands for the last 13 years.”

“The southern portion of this FCSZ has had far more work
done on it than the northern portion, but the northern portion
certainly hosts some very attractive historical and current
mines, and the tenure we have goes right up to the boundaries
of all of those mines.

“While there has been some work done in and around these
areas, there’s actually been very little drilling below a depth of
50m, so we’re really excited about the opportunity to take a
closer look at that.”

Up until recently, Altan Rio was focused on copper porphyry
exploration in Mongolia. However, with market conditions not
favouring any activity by juniors in the country, the TSXV-
listed company is seeking to JV its ground in the Chadman-
Yol district and focus solely on Southern Cross.

One of the main drawcards for Altan Rio in Southern Cross is
the hungry Marvel Loch plant which has recently been made
available for processing of third-party ore by owner Minjar.

“It is very well set-up for toll treatment in that they have a
sorting tower that allows you to deliver ore to the mill and
have it assayed and sorted so you can efficiently toll treat your
feed,” Stephen said.

“That plant is within very economic trucking distance of all
of our tenure, so one of our initial targets will be to look for
shallow, easily treatable tonnes that we can deliver to Marvel
Loch. We can then use that to fund further exploration,

Page 29

DIGGERS & DEALERS PREVIEW

Echo sharpens exploration focus

by Michael Washbourne

Some of Echo Resources Ltd’s top shareholders have started production scenario at Yandal.
referring to managing director Victor Rajasooriar as the
“Steven Bradbury of gold mining”. Echo is now embarking on a strategy to find more ounces across
its 1,600sq km landholding. Travis Craig, who is credited with
Bradbury famously won the gold medal in the 1,000m speed discovering Gwalia Deeps, was headhunted to lead a new-look
skating event at the Winter Olympics in 2002 when his fellow geology team which includes experienced pair Derek Shaw and
competitors crashed out on the final turn, allowing the unfancied Allan Younger.
Australian – who was well back in the field – to cross the finish line
unaffected in first place. The renewed focus on exploration was the catalyst for a $15
million placement in May. Echo is set to spend $6 million on
While Echo’s shareholders are no doubt being facetious with their greenfields targets along the Hadrian trend and $4 million on
analogy, it may not be that far from the mark given the company’s brownfields growth opportunities, specifically at Bronzewing and
cautious approach to development of its Yandal project in the Lotus.
wake of the recent struggles which have plagued Western
Australia’s gold sector. “There was a lot of noise when I started that the area had been
drilled, but our review showed some of the drilling was only 5m
“They said to me, ‘you’ll be the last person standing if you keep deep – who finds an orebody 5m below the surface – and about
doing what you’re doing’,” Rajasooriar told GMJ. “I wasn’t sure 95% of the drilling on our tenements is less than 200m deep,”
initially if that was a good thing or a bad thing, but I don’t mind it Rajasooriar said.
now. He [Bradbury] did win gold.”
“We’ve spent a lot of time reviewing the geology to make sure that
Rajasooriar joined Echo in November, succeeding former chief we could get the best value for the buck and there are so many
Simon Coxhell, and immediately set about finalising a BFS targets that we’ve identified that eventually could be a game-
on Yandal. Published in April, the study found a 100,000 ozpa changer for Echo.
operation could be developed for $42 million and generate pre-
tax free cash flow of $225 million based on a $1,800/oz gold price. “Bronzewing was shut in 2003, but it was only mined to 560m
below surface and the only reason it was shut was because the
Other key economics presented in the study were a pre-tax NPV Aussie gold price was $600/oz. Jundee and Agnew are very
of $172 million, IRR of 198% and life-of-mine ASIC of $1,095/oz. close to us and they are now mining at 1,400m below the surface.
However, what stood out above all else for Rajasooriar was a
mine life of just four years, based on production from the Julius “When it was up and running, Bronzewing alone was producing
and Orelia open pits (combined resource of 6.9mt @ 1.8 g/t gold 250,000 ozpa from one mine. So if we drill it properly, target the
for 411,000oz). areas correctly, I think we have a game-changer on our hands.”

“The independent experts reviewed it and gave us the all clear, Echo’s portfolio includes the mothballed 2 mtpa Bronzewing
the banks were willing to fund us, but when we did the risk processing plant which Rajasooriar believes will help reduce the
assessment it stood out that four years was just too short,” he lead time to production to about six months following a formal
said. commitment to development.

“Some of the largest shareholders actually said to me before I At the time of print, Echo announced an update to the resource at
joined, ‘don’t rush into production, just make sure this project is its 70%-owned Mt Joel project. The revised 1.4mt @ 2.1 g/t gold
technically sound because you’ve got one go at it’.” for 91,600oz resource includes maiden estimates for the Tiger
and Addler deposits.
Rajasooriar, who spent a brief period with the now-defunct
Eastern Goldfields prior to joining Echo, believes the company Mt Joel, 15km from Bronzewing, has not yet been factored into
needs at least six years of mine life before it can consider a viable development plans.

Page 30

Metal Hawk flying
towards ASX

by Mark Andrews Will Belbin

Has there been a better time to be listing a traditional be ready to hit the ground running with drilling planned on
outback West Australian gold and nickel company? our Goldfields projects immediately,” Belbin said.
“All our Goldfields projects are located within an hour of
Probably, but the current tailwinds building behind gold Kalgoorlie. Considering where they are, it is remarkable how
and the EV-driven demand for nickel are providing a nice underexplored they remain. It is an added bonus that when
backdrop for Will Belbin and David Pennock to launch Metal we do make discoveries there are options available to treat
Hawk Ltd later this year. through [nearby] mills.”
In the meantime, Metal Hawk will be conducting auger drilling
Formed as a private company in late 2018, Metal Hawk at Emu Lake in addition to permitting work at the Viking gold
made a bee-line for the Eastern Goldfields and Albany- project and Fraser South, 80km south of Nova Bollinger, in
Fraser regions. the Fraser Range.
It suits Metal Hawk that the Albany-Fraser licences are
Emu Lake and Kanowna East are prospective gold-nickel pending so it can keep costs down, however, it is eager to
plays in the Goldfields, while a walk-up massive nickel get RC drilling under way at the Breaker 2 prospect at Viking
sulphide drill target identified from an EM survey is exciting in early 2020.
the company at Clinker Hill in the Albany-Fraser. Viking was a regional discovery made by AngloGold
Ashanti Ltd in 2011, with intersections from a 50m by 100m
Managing director Belbin told GMJ that Metal Hawk was supergene gold zone at Breaker 2 including 6m @ 64 g/t
primed to start drilling in the Goldfields soon after a targeted gold from 52m, 5m @ 19.8 g/t from 40m, 5m @ 9.3 g/t from
listing date in October/November. 26m and 11m @ 3 g/t from 14m.
Having drill-ready targets offers Metal Hawk an opportunity
“We have a gold target on our Kanowna East project to quickly emerge on the exploration scene upon listing and
which was drilled 12 years ago as part of a nickel sulphide potentially capture some market attention.
programme. They assayed for gold, but weren’t interested in “The market for juniors is challenging, but the gold price
it and there hasn’t been any work done since,” Belbin said. is as good as ever and the fundamentals for nickel price
improvement can’t really be ignored,” Belbin said.
“The closest drill hole is 800m along strike and it is all “These factors are out of our control, but the timing for us [to
shallow aircore drilling. We also have some geochemical list] is looking pretty good in the next 3-4 months.”
soil anomalies at Emu Lake which we will be drilling as soon
as we list.”

Conjuring support to float on the ASX hasn’t been easy
for start-ups recently, however, Belbin is banking on the
quality of Metal Hawk’s greenfields prospects and the value
inherent in early-stage discovery success as the compelling
opportunity prospective investors will recognise.

“In the next six months we hope to establish a supportive
shareholder base to successfully list. The way our projects
are structured and the timeframes we are working in, we will

Metal Hawk has swooped on gold and base metals projects
in the Eastern Goldfields and Albany Fraser region

Page 31

DIGGERS & DEALERS PREVIEW

Musgrave prioritises
exploration

by Michael Washbourne

Musgrave Minerals Ltd is playing a “long game” with its Cue techniques to interpret the data, so that means the chances of
project in Western Australia’s Murchison region. success are not as good as they were when you could just walk
While resources have been defined at the Break of Day and out and stumble across gold at surface.”
Lena deposits and a promising new discovery has emerged at
Lake Austin North over the past year, Musgrave is in no rush to Musgrave’s focus is currently on Lake Austin North where
chase an immediate production option for Cue despite the lure of a mouth-watering discovery intercept of 242m @ 1 g/t gold
today’s elevated gold price. was returned last year from the company’s inaugural drilling
Since the start of 2018, shortly after maiden resource estimates programme on the Cue lake system.
were published for Break of Day and Lena, Musgrave managing
director Rob Waugh has consistently been asked by shareholders Subsequent drilling hits included 36m @ 3.6 g/t gold from
when Cue will be in production. His answer remains the same. 11m (including 20m @ 6.1 g/t) and 52m @ 3.8 g/t from 198m
“We haven’t defined that timeline because we want to build a (including 29m @ 5.1 g/t).
solid resource base,” Waugh told GMJ.
“The first step in any good project is to build the resource base Musgrave has surmised Lake Austin North is potentially
and, to some degree, that’s actually the hardest step in the analogous to the gold systems at Great Fingall and Granny
process. Exploration, no matter how you look at it, is a long Smith which have both produced more than 2 moz.
game. Not every drill hole is necessarily going to be a winner –
and that’s not necessarily aligned with market expectations. “That lake system has been expanded from what we originally
“From our perspective, you have to have a longer term view on thought was 800m long to now over 3km and we’re seeing
exploration. Most projects don’t get from first stage exploration multiple parallel systems that are 300-400m apart running in that
through to mining for 10-plus years, and exploration can take area as well, and individually they’re up to about 1.3km long,”
anywhere between one year, if everything goes perfectly well, or, Waugh said.
more likely, eight years.
“It’s not necessarily what we want or what the market expectation “Having so much anomalism is a really good sign that you’re
is, but that’s the reality of it. On top of that, exploration is getting going to have potentially multiple economic deposits in the
harder. You’re looking in areas where there’s less geology to region, within a basement source which we think is about 8km,
look at because it’s under cover and you’re using more remote so we really need to focus our drilling.

Musgrave has defined more than 440,000oz at its Cue project “We’re flying an aeromagnetic survey now, going back to look at
the bigger picture over the whole 8km and from there we will be
able to focus our basement drilling into the areas where we think
we are going to have a deposit.”

As well as looking for possible resource extensions at Break of
Day (868,000t @ 7.15 g/t gold for 199,000oz) and Lena (2.68mt
@ 1.77 g/t for 153,000oz), Musgrave is keen to sink some holes
into its newly acquired Mainland prospect sometime this quarter.

Since acquiring the Cue project in late 2015, Musgrave has
identified gold potential along more than 28km of strike. As
such, the company has divested the base metals rights over its
northern tenements to Cyprium Australia Pty Ltd.

With more than $5 million in the bank, Musgrave will not be
short on funds for exploration at Cue, however, Waugh said the
company was keeping an open mind on ways to keep the drill
rigs turning.

“Investment markets change and they can change quite
quickly,” he said. “From one quarter to the next, money may
or may not be available to you in the capital markets, so you
need to look at all options to keep the project moving along.”

Page 32

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Bringing energy With the region tightly held, TP Energy
to Kathleen Valley appears to be making the most of its
real estate at Kathleen Valley with two
Exploration has been revived in the Kathleen Valley region holes drilled to date confirming the
of Western Australia courtesy of successes by Bellevue company is in the right address.
Gold Ltd and Liontown Resources Ltd.
A 4m composite sample at the top of
Joining the party is TP Energy Group the KVRC001 intersection returned
Ltd which has entered the mineral rich 2.51 g/t gold and also included 13m
area on the back of a postage stamp- from 132-145m @ 1.65 g/t gold, 3.05 g/t
sized land package where a blind zinc- silver and 1.75% zinc, while KVRC002
gold-silver VMS-style system has been returned 12m from 109-121m for 0.51 g/t
discovered at Kathleen Valley. gold, 3.67 g/t silver and 1.15% zinc.

TP Energy’s Kathleen Valley project While the results warrant follow up
maybe located within one of the world’s and the company is primed to pull the
most prolific mineral belts worth an trigger on a third hole, a decision on
estimated $US100 billion, however, the how the private entity will enter the
7sq km holding the company holds has public sphere is in the making.
been bereft of exploration for over 20
years. In the meantime, TP Energy has
compiled a team of well-known industry
During this period the likes of BHP Ltd people headed by the likes of Arthur
and Western Areas Ltd have kept the Darivas (Director and Chief Executive
region alight with their respective nickel Officer), while the technical clout is
exploits, while Bellevue and Liontown being delivered by Ian Plimer, Russel
have generated significant exploration Mortimer from Southern Geoscience
momentum in recent times. and Ashley Hood.

A boon for the company has been
acquiring the services of West Australian
geologist Neil Hutchison to its expert
advisory board.

Hutchison played an integral role in
the development of the Cosmos nickel
project while at Jubilee Mines, which
was subject to acquisition by Xstrata.

TP Energy’s presence in a prolific
belt commodity rich belt of
Western Australia

Best intervals for each of the metals within the KVRC001 mineralised zone included 11m @ 1.9
g/t gold from 132-143m (including 1m @ 4.04 g/t from 140m); 9m @ 4.01 g/t silver from 136-145m
(including 1m @ 7.38 g/t from 140m); 5m @ 3.88% zinc from 137-142m (including 1m @ 8.82% zinc
from 137m) and 7m @ 0.1% copper from 137-144m (including 1m @ 0.2% from 137m)

www.tpenergygroup.com

Hutchison’s familiarity with the region plus the new age “The follow-up down-hole EM was very supportive of the drill
technology and fine-tuned techniques being carved has TP holes and we are very confident this has potential to turn into
Energy in a strong position to reveal the true potential of something of reasonable scale,” Hutchison said.
Kathleen Valley, north of Leinster. Given surrounding mines in the region occur at depths of about
400m, mineralisation struck at Kathleen Valley at 60-100m
“The ground has always been unavailable because it was an below surface is providing much encouragement for TP Energy.
area of cultural significance, which has now been resolved “It is open in all directions and has considerable width, so we
with the Traditional Owners. It is in the right area, near a main are confident it is not a small system,” the company has stated.
highway, power, gas and accommodating infrastructure; if
you were going to make a discovery it is in the right address,” Best intervals for each of the metals in KVRC002 include 3m @ 1.03
Hutchison said. g/t gold from 114-117m (including 1m @ 1.33 g/t from 115m); 12m @
3.67 g/t silver from 109-121m ( including 1m @ 20.7 g/t silver from
“It has been devoid of exploration for 20 plus years since 114m) 2m @ 3.88% zinc from 119-121m (including 1m @ 6.18% from
Barrick Gold last explored the ground. There’s no favourable 119m) and 1m @ 0.46% lead from 114-115m
outcropping units, no structural exposure and based on
walking the ground you can’t see it [mineralisation]. But,
geophysics and EM has allowed us to make the breakthroughs
we have and Kathleen Valley has everything to make a project
work.”

Furthermore, Hutchison said the board was genuine in its
ambitions and determined to achieve what they set out to do.

As the company plots its next steps, DHTEM results have
backed up the two-hole drilling programme
suggesting that there is potential for a significant
mineralised system at Kathleen Valley.

DIGGERS & DEALERS PREVIEW

Millennium’s tale
of two halves

by Michael Washbourne

Achallenging first half for Millennium Minerals Ltd ended on underground in April 2018 as the first high-grade ore feed for
a high note with confirmation of first gold produced from the new sulphide circuit which was being constructed in parallel.
the new sulphide plant at its Nullagine operation in the Pilbara.
Initial underground stoping at Bartons was scheduled for
Delays in commissioning of the sulphide circuit and its new January, but additional development requirements only
underground mine forced Millennium to revise its production discovered upon accessing the internal aspects of the orebody
guidance for 2019, reducing the planned output from 90,000- meant that exercise had to be pushed back until early April.
100,000oz at $1,300-1,375/oz AISC to 80,000-90,000oz at
$1,370-$1,450/oz AISC. “We had to incur additional development costs, but it had
the net result of increasing the ounces per vertical metre and
With rival gold producers and developers raising the ire of extending the life of the Bartons underground, which is a big
investors, the timing of Millennium’s setbacks was far from ideal positive,” Cash said.
and its shares plummeted to their lowest levels since late 2015.
However, the company has gone to great lengths to remind “I think pleasingly on the Bartons front, we’re now in a pretty
shareholders the gold is not “lost”, just “delayed”. decent cycle. Through April and May we achieved that and in
June we’ve been rotating through two levels and four operating
Millennium is expected to churn out 46,000-54,000oz in the areas. So, while delayed, it sort of sets us up for a big push in
second half, which is on track with its original guidance for 2019. the second half with the Bartons underground.”

“We’re going to be about 10,000oz of gold production down While long-lead items arrived on site as expected, delays with
relative to our expectations at the start of the year, but the the steel and frameworks to support the infrastructure for the
important thing to note is that gold is not lost, it’s just delayed new sulphide circuit also conspired to push back the start of
and I guess that’s where we’re different to some of the failures commissioning.
in the marketplace,” Millennium chief executive Peter Cash told
GMJ. Millennium had actually mined and stockpiled 60,000t of
sulphide material specific for processing through the new circuit
“It’s not because the gold is not there, it’s because it’s been during the commissioning phase, but ultimately the company
delayed through the delay of the underground and the ultra- was forced to revert back to a more modest-grade ore while
fine grind mills. So, the second half of the year is going to be those works were completed.
much stronger and that’s certainly going to be reflected in the
production but also the costs for the second half of the year. Production delays also required Millennium to rattle the tin
for $15 million via an oversubscribed rights issue to provide a
“The first half will be high cost, low ounces and the second working capital buffer. The company’s major shareholder IMC
Group supported that raise and subsequently offered a $20
Peter Cash half – with everything up million mezzanine debt facility, half of which had been drawn
and running – is going to down at the time of print.

be within expectations of “IMC has sat all the way through this, they were very supportive
through the recapitalisation in 2015 and they’re well aware of
our original guidance in what the longer term strategy is of building a five-year-plus
sustainable gold operation,” Cash said.
January.”
“No-one is pleased about these delays – shareholders and
Cash described the us included – but mining is a tough game and to have IMC
first-half milestones as standing there, offering this working facility through a crucial
the culmination of four time, certainly shows their commitment to the strategy.
years of work since
the recapitalisation of “We’ve made a huge capital investment over the last 14
Millennium in 2015 to months, we always knew it was coming, it just hasn’t quite
transform Nullagine away worked out the way we’d hoped as far when we’d be delivering
from modest-grade, these projects. The good news is we’ll go cash flow positive in
oxide-only ore sources. July and start to rebuild from there.”

Millennium committed to
developing the Bartons

Page 36

Millennium is anticipating about 50% of its ore feed over the Millennium has commissioned a new sulphide circuit
next six months to come from sulphide sources. This is set to at its Nullagine operation, East Pilbara
increase from early 2020 when the Golden Gate mining centre is
scheduled to come online. “The redeployment of this technology once we have proof-of-
concept is something very much on our radar and we see that
Early 2020 is also when the company expects its patented in- as being critical to our M&A aspirations, either as an acquirer
mill oxidation and pressured in-mill oxidation processes to be or for someone to come in to look to acquire us, because it has
delivered, as the second and third phases of the overall plant vast uses to a whole heap of stranded orebodies, but also in
expansion respectively, lining up with the scheduled delivery of optimising recoveries for existing operations,” Cash said.
the more refractory material from Golden Gate.
“Other companies with the similar processing challenges could
Cash is expecting the patented technologies to attract interest potentially look to Millennium to resolve some of their challenges.
from outside parties. We’ve already had interest from both listed and non-listed gold
companies very keen on seeing how we’re progressing with this
sulphide expansion project.”

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With a team of over 2000 highly skilled people, we are dedicated to delivering safe, quality projects for our
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Page 37

DIGGERS & DEALERS PREVIEW

Advent faith in NZ

by Michael Washbourne

Staunch opposition to exploration and mining in New Zealand Most of the historic mining activities ceased in the early 1900s,
is holding no fears for newcomer Advent Gold Ltd. but the project has been progressively explored over the past 30
years. OceanaGold was the most recent holder of the Reefton
Despite temporarily shelving plans for an IPO, Advent is upbeat licence before Advent swooped on its availability earlier this year.
about its chances of developing a former OceanaGold Corp
project on New Zealand’s South Island which was historically Having recently raised $1.3 million in private seed capital out of
mined for high-grade gold. Toronto, Advent is currently chasing three targets at Reefton,
including an extension at depth at the Crushington deposit.
Advent’s optimism for the country is in stark contrast to recent
comments from OceanaGold chief Mick Wilkes after his company Advent is also targeting high-grade disseminated mineralisation
had an application to buy land for a new tailings storage facility for at the historic Capleston and Murray Creek mines.
its Waihi gold operation on the North Island knocked back.
“From work carried out by previous holders, we know with
In May, Wilkes was quoted as saying the decision “doesn’t bode certainty that the historic Capleston and Murray Creek mines bear
well for New Zealand mining”. many hallmarks of Fosterville-style mineralisation in that they are
structurally controlled and hosted in mesothermal sandstones,”
However, Advent managing director Adam McKay is unperturbed McKay said.
by some of the struggles others have faced in setting up
operations in New Zealand. “Many of the mines in these areas are associated with a higher-
grade mineralisation which has just been left behind because the
“It all depends on where you’re operating in New Zealand, that’s old-timers couldn’t process it due to presence of stibnite. We think
the key message,” McKay told GMJ. it’s a really interesting tenement because there are a number of
different styles of geological models that we can look at.”
“The west coast of the South Island and in Central Otago; these
are mining-friendly parts of New Zealand. The North Island is Advent had initially hoped to raise $650,000 in private seed before
certainly difficult for newcomers, but people down south actually launching an IPO on the ASX in the coming months, but after
welcome mining and exploration and the local regulatory officers pocketing double that amount the company had decided to defer
welcome it, too. its public float and is now considering a separate TSX listing.

“We got our first approval to get on the ground within 10 days “We’re assessing the merits of just going for a TSX listing now,
and that demonstrates the appetite and support for exploration probably in 2020, as opposed to ASX,” McKay said. “It’s more
and mining in this part of New Zealand. Tasman Mining, who are expensive to list over there, but those guys really get gold and
looking to develop the Blackwater project 15km south of Reefton, love the project and are actively looking for these opportunities,
got their underground permit in under three months, which even even prior to the recent spike in the gold price.
by West Australian standards is very quick.
“I think the market is starting to turn and people are seeing
“People unfortunately have a skewed understanding of how massive value being ascribed to those companies that are
it works in New Zealand. It’s definitely more environmentally fortunate enough to take a punt and test some greenfields targets
sensitive than drilling holes in the desert, but if you choose your with success.”
region right there’s massive support from both the locals and
the regulators and all stakeholders for backing exploration and Advent also has the Carrick gold project, Central Otago, in its
mining.” portfolio and is collaborating with the CSIRO on new exploration
and mining technologies which can potentially be deployed in
Advent’s flagship project is Reefton on the west coast of the environmentally sensitive areas.
South Island. The property is comprised of four historic mining
clusters which collectively have produced about 800,000oz at an
average grade of 20 g/t.

Page 38

Rox reverts to Youanmi

by Michael Washbourne

Rox Resources Ltd is targeting a resource upgrade for its “Mt Fisher is advanced greenfields and while we’re hoping
newly acquired Youanmi gold project before the end of for great success there, we needed an asset that was further
the year. towards development and so that led us to the Youanmi
transaction.”
A renewed focus on gold has seen the previously nickel- Rox will shift drill rigs which are currently turning at Mt Fisher
focused explorer abandon a spin-off of its Mt Fisher gold over to Youanmi towards the end of July, with the company
project earlier this year and strike a multi-pronged JV aiming to publish an updated resource for the project by
agreement with Venus Metals Ltd over the historic Youanmi year’s end.
gold mine, about 80km south-west of Sandstone, Western Passmore forecast a maiden reserve estimate could be
Australia. calculated as early as next year.
“If I really had to crystal ball gaze here, I’d say it could be in
In late June, Rox acquired an initial 50% of the project and production thereafter but we’ll wait and see; there’s a lot of
was subsequently preparing to undertake the first serious gold to be discovered there yet,” he said.
exploration programme at Youanmi in more than two
decades. Rox has acquired an initial 50% interest in the Youanmi gold project

Having spent $2.8 million to acquire its initial interest, Rox “I don’t want to rush into production to the detriment of
is required to tip $2 million into exploration at Youanmi over shareholders, but if we can get into low-risk production we’d
the next two years. A further spend of $3 million will lift the certainly look at that.”
company’s stake to 70%. Passmore said the company was assessing “corporate
growth options” for its Fisher East nickel project, with a
Rox’s immediate goal is upgrading Youanmi’s resource, decision on its immediate future to be made in due course.
currently totalling 12.4mt @ 2.97 g/t for 1.19 moz, including “Base metal projects require a lot more start-up capital,
10.1mt @ 1.65 g/t for 532,700oz near surface. they’re more complex in terms of offtake agreements and
availability to get to early cash flow. You need to worry about
“Youanmi is quite often thought of as a refractory gold concentrate specs, payment pipelines and timelines,” he
orebody, but the reality is its partially refractory and at depth; said.
all shallow material is free milling,” Rox managing director “It’s not that we don’t like nickel, it’s just that a modest-size
Alex Passmore told GMJ. gold project is easier to get into production and cash flow
than a base metals project.”
“No serious exploration has been done since 1997 when
the gold price was $400/oz, and this was a time when
operators were leaving 4 g/t behind in an open pit and 8
g/t underground. So, at today’s gold price it makes a lot of
sense.”

Passmore, who succeeded long-serving predecessor Ian
Mulholland in February, said the JV with Venus was one
which suited both parties. Venus previously struck an option
deal to acquire Youanmi, but needed Rox’s balance sheet
strength to get it over the line.

Rox and Venus have also joined forces on a series of
regional projects, with Rox to acquire up to 50% of the gold
rights via specific exploration contributions.

Youanmi was added to Rox’s portfolio shortly after the
company officially shelved plans to spin-off the Mt Fisher
gold project.

“I was quite happy for various legal and technical reasons
that didn’t go ahead, because I see Mt Fisher as highly
prospective and underexplored,” Passmore said.

“The company’s history in that belt is long, but they’ve been
focused on a nickel project on the eastern side of the belt,
rather than the gold of the western side of the belt.

Page 39

DIGGERS & DEALERS PREVIEW Calidus expects to release a
PFS for Warrawoona in July

Calidus intent
on breaking malaise

by Dominic Piper

Speaking with Calidus Resources Ltd boss David Reeves, company upgraded the global resource to 21.3mt @ 1.83 g/t
you always get a healthy mix of pragmatism, dry wit and for 1.25 moz in February with the PFS focused on the 1.15 moz
honesty. @ 1.79 g/t gold Klondyke deposit.

“The PFS will be completed in four weeks and who knows how Reeves is adamant the study – due for release in July – will be
the market will react to that and then, at this price, please can more than a simple marketing tool.
we get into production?” the managing director told GMJ.
“The PFS is about de-risking the project logically and doing as
The flashing beacon of $2,000/oz gold is obvious motivation for we have done every other project,” he said. “That means using
Reeves’ anxiousness to see Calidus’ 1.25 moz Warrawoona measured resources in the BFS and ensuring there is three
project get into production, but tempering his enthusiasm is the months’ worth of grade control done before we start to ensure
investment market’s current malaise when it comes to junior the resource model is bomb-proof.
gold stories.
“It also means being ruthless with the grades and taking people
Dacian Gold Ltd, Gascoyne Resources Ltd, Eastern Goldfields through the steps we have taken in the PFS. People may
and Blackham Resources Ltd have highlighted just how fraught actually be unpleasantly surprised by the grades in the PFS but
gold mine development can be and their travails have given we know that it is going to come under scrutiny and even having
an already skittish market reason to avoid junior gold stocks massacred it from a grade perspective it still looks robust.”
altogether.
The recent disappointments have only sharpened Reeves’
Reeves understands the sentiment but that won’t stop his belief that a developer needs to ensure its projects stand up to
frustration with investors who are not differentiating between any level of stress-testing.
companies.
“The most sensitive area of the start-up is revenue, followed
“It is unfortunate that as Calidus looks towards production, the by opex then capex,” he said. “If you are a few million dollars
WA gold development scene has been a disaster lately,” he over on the capex, it is not terminal but if you are 15-20% out in
said. “But, we are trying to distinguish ourselves because we grade or tonnes, that’s when things start to go wrong. So, the
have a very experienced development and operations team, focus has to be on grade and tonnes, but most of all grade.”
not an exploration team. We have built and operated numerous
mines across the world and there are certain things we have Having sufficient working capital is also required if a company
always done that have made those mines a success.” is to survive the vagaries of new operations.

Calidus is putting the same pieces in place again at Warrawoona, “Shareholders don’t like dilution, ever, but it is better to get a
20km south-east of Marble Bar, Western Australia. The bit more money early than lose all of it later on,” Reeves said.
“I understand why companies avoid doing this because there

Page 40

is huge pressure from brokers and investors to get it away confidence it can do exactly that. In May, an IP survey produced
cheaply but that is not how you build value over time. a strong chargeability anomaly 400m south of Klondyke.
“It is the big unknown for us on the exploration front,” Reeves
“At $2,000/oz we are desperate to get into production but it said. “We always thought it was probably there but it is buried
takes time.” under cover. The IP signature was a similar response to
Klondyke despite being 60-80m deeper.
A spooked domestic market is no place to be raising capital “We put four holes in it and if they come back with gold in them
and Calidus has already begun a global search for alternatives. it could be a total game-changer for the project and we will drill
the crap out of it.”
“We are seeing a lot of interest from producers and others but
not from traditional sources of finance,” Reeves said. “When Outcrop on Calidus’ 1.25 moz Warrawoona project in the Pilbara
the institutions have blown a lot on other gold stories it becomes
even harder in Australia. We are getting a lot of interest out
of North America, Europe and the UK. We have had private
equity, high-net worth individuals and streaming groups come
to us.”

Corporate transactions are increasingly popular with the recent
Silver Lake Resources Ltd/Doray merger proving how smaller
companies can break the market shackles.

Reeves said Calidus was open to any avenue.

“We absolutely welcome the interest of corporates,” he said.
“It has been shown time and again that you always trade at a
discount as a single-asset company. Once you become a multi-
asset company you trade at a premium. To not look at that is
illogical and detrimental to shareholders.

“We are looking to build it and if we do perhaps we can become
the diner and not the dinner because there is a lot of paralysis
out there at the moment.”

More ounces in the mine plan would only add to the
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Page 41

DIGGERS & DEALERS PREVIEW

Netscher carves
rare niche in gold

by Mark Andrews

Avirgin discovery less than six years ago, the Gruyere JV Tim Netscher has prominent chairman positions with
celebrated its first gold pour at the end of June. Gold Road, St Barbara and Western Areas Ltd

Three doŕe gold bars totalling an estimated 1,139oz were produced from shareholders, giving Netscher comfort that value has been
from Gruyere’s CIL and elution circuits, as commissioning of the delivered for supporters.
gravity circuit remained in progress at the time of print.
Gold production from the $621 million Gruyere project for CY2019
Steady state production of the 8.2 mtpa, 300,000 ozpa @ $1,025/ is expected to be 75,000-100,000oz.
oz, 12-year Gruyere gold project is expected by Christmas time.
Given the recent demise of some fellow West Australian gold
By then Gruyere partners Gold Road Resources Ltd and Gold houses, the ramp-up at Gruyere will be scrutinised to the nth
Fields Ltd can really rejoice in the success of Australia’s newest degree, particularly so given the project was almost stymied.
Tier 1 gold mine.
“Halfway through construction we were in real danger of falling
Before that, Gold Road non-executive chairman Tim Netscher behind,” Netscher said.
took time out with GMJ to reflect on the company’s feat of
becoming an Australian gold producer. “We recruited an owner’s team to build the project and we had
to sometimes step on the contractor’s toes to stay on track. Any
“It is a journey and you never actually really get there,” Netscher contractor is as good as you manage them. Halfway through
said. “It’s great to be able to pour gold. We now need to move [Gruyere] construction there was a real danger of the project going
rapidly into ramping up the mine. It is a big processing plant and a off track, but we recognised that early and got back on track.”
lot of the focus is feeding a lot of ore through the plant. You’re only
making money when you are at 65-70% of throughput, depending As a chemical engineer, Netscher has been schooled in resilience
on gold price.” and critical analytical thinking to look at problems differently and
solve accordingly; essential traits to have in the topsy-turvy world
Gold Road was market capped at less than $100 million when of mining.
Netscher joined the team as non-executive chairman in 2014.
Now, Gold Road is an $850 million company trading at $1/share Early evidence of Netscher’s penchant to push the boundaries
with $49 million in the bank. and be at the cutting edge of the mining sector were seen during
his time as a senior executive at Impala Platinum in South Africa.
The company has grown having raised no more than $200 million
Netscher led a team down the path of taking molecular recognition
technology from a lab-scale concept to being the benchmark for
separating PGMs.

Page 42

“We looked at something completely different to what was being
used and 22 years on no-one has caught up. The delivery was
flawless,” he said.

Unbeknown to Netscher, Impala’s financial controller at time –
Nick Holland – would eventually become a valued ally some 30
years on.

“That personal relationship is very important in a straight up and
down JV. I haven’t looked at the agreement since we signed as
we are both aligned to delivering the same strategy,” Netscher
said.

When Gold Road chose Holland’s Gold Fields as JV partner at
Gruyere, both companies declared an intimate cultural connection
was a driving factor behind the deal.

The cohesion between Gold Road and Gold Fields was seen First gold was poured from the Gruyere JV in late June.
externally, with the former recognised as Dealer of the Year at
Diggers & Dealers 2017.

It turned out to be an award-winning year for Netscher, with St strategy in some parts, he sees it as a personal failure to solely
Barbara Ltd hailed as Digger of the Year. focus on that.

Netscher has served as independent non-executive chairman at “It is shareholders’ money and I view it as a personal failure if we
St Barbara since it was a tiny $50 million company. couldn’t find something better to do with it,” he said.

St Barbara – which celebrated 50 years as an ASX listed company A lot of companies would settle for paying dividends to
in May – nearly collapsed five years ago but now boasts a market shareholders, however, the likes of Gold Road and St Barbara
cap of $2 billion. continue to find value in the market.

“The astute leadership of managing director Bob Vassie has seen Both companies have also embraced diversity in their workforces,
with St Barbara acknowledged as the WGEA Employer of Choice
the underperforming Simberi mine in PNG turned around and for Gender Equality since 2014.
with that the fortunes of the ASX200 company.

At the time GMJ was to hit the stands, Atlantic
Gold Corp shareholders were about to decide The challenging aspects is ensuring that
the fate of St Barbara’s $768 million bid for the

latter, which owns the newly minted Moose River everybody has their say [on the board] and
gold project in Nova Scotia, Canada. then selecting the next chief executive which is

“We have paid full price for that asset. It is
good and we have plans to pay it full attention,” probably the most important thing as a chairman;
Netscher said.
Despite St Barbara receiving a knock down putting the right CEO in at the right time.

in share price this year, due to production

downgrades at Gwalia in Western Australia, the company’s rise “Diversity needs to be more than just gender. People with different

from near-death has been spectacular. cultures need to be integrated and women who succeeded in a

Given St Barbara’s rejuvenation and Gold Road’s success from man’s world by being like a man needs to change. Women need

greenfields explorer to gold producer, Netscher was at pains to to be able to be themselves. It is rewarding to work with people

split which vehicle he found most rewarding in the gold space. like Sharon Warburton [Gold Road] and Kerry Gleeson and Stef

“Both have been really exciting to be a part of, but the real key Loader [St Barbara] as they are all individuals and add great value
is the size of the company. They are both of size where they are to the company,” Netscher said.

big enough for critical mass to do what you need to do,” Netscher No doubt Netscher has drawn upon such influences in his roles at

said. Gold Road and St Barbara and will continue to as the challenges

“And, they are also small enough for guys like me to come keep coming in the foreseeable future.

on board and make a difference; that is satisfying. Taking a It is a dynamic time to be involved in the gold sector and Netscher

greenfields project to having a big plant at Gruyere is similar has no immediate plans to step away and focus more on his golf

to what Gindalbie did a few years ago in iron ore. Turning a swing and backhand, as his energy remains on fulfilling his duties

company around through innovating and solving problems is with aplomb.

also very rewarding and with both companies it is good to stand “The challenging aspects are ensuring that everybody has their

up and look shareholders in the eye and say that value has been say [on the board] and then selecting the next chief executive

delivered.” which is probably the most important thing as a chairman; putting

Netscher pays the utmost respect to shareholders his companies the right CEO in at the right time,” Netscher said.

are beholden to and while paying dividends is a welcomed

Page 43

DIGGERS & DEALERS PREVIEW

Aussies need America assets had its genesis in the divergent performance
to move on of gold equities on the two continents.
North America
“There has been a big difference between the Australian
now and Canadian sectors for the last six years,” he said. “The
Aussies haven’t had to contend with anything like the bear
by Dominic Piper market we have seen. It is less about commodity price and
more about the flow of funds into the space.”
Opportunities remain for cashed-up Australians to grab
North American gold assets but they will have to hurry, The North American gold sector has been ripped asunder by
according to one leading Canadian junior gold executive. investors who were fed up with underperforming producers,
The last 12 months has been a unique period in the history jaded by the sideways movement of the gold price and intent
of Australian-North American gold relations with the likes of on finding other high-risk investments.
Northern Star Resources Ltd, Newcrest Mining Ltd and St
Barbara Ltd reversing a two-decade old trend which saw “The range-bound nature of the gold price in the last few
North Americans swoop into Australia’s gold sector. Instead, years hasn’t made the producers less profitable but the
the Australians have been using their high-value scrip to snap riskier stage investors have switched to cannabis which
up assets in the struggling North American marketplace. dealt a devastating blow to our sector,” O’Dea said.
Mark O’Dea has watched the movement with interest.
O’Dea is attuned to Australia’s resources sector having Meanwhile in Australia, a new generation of mid-tier miners
completed his post-graduate studies at Monash University have grown almost out of nowhere, bringing investors along
in Melbourne and spent his formative professional years in on a multibillion dollar ride.
Mt Isa, Queensland. Since the turn of the millennium he has
focused on the Canadian junior sector, floating a string of “The Australian gold miners did a great job of fixing balance
successful companies, including Fronteer Gold Inc which sheets and cost bases and focusing on profitable ounces,”
was eventually taken out for $US2.3 billion. O’Dea said. “They also began to benefit from the Australian
dollar environment; that leads to a lot of tailwind.
Mark O’Dea
“That has presented an opportunity for Australians to use
their high-value paper to buy assets in North America which
are relatively undervalued. They’ve been incredibly smart in
recognising those opportunities.”

O’Dea sees more Australians going to North America but
believes the tide will eventually turn.

“Now that gold has broken out of $US1,400/oz, it will stimulate
some activity,” he said. “North American investors will wake
up, starting with the hedge funds, which are more nimble, and
they will return to gold.”

The question now is whether other Australian companies will
move before the northern hibernation ends. If they do, you
suspect O’Dea would be happy for them to run the rule over
Pure Gold and Madsen.

Located in the Red Lake district of Ontario, Masden
produced 2.5 moz gold @ 9.9 g/t between 1938 and 1976.
Claude Resources and Placer Dome undertook brownfields
exploration between 2001 and 2013 before Pure Gold entered
in 2014.

Since then, O’Dea’s company has consolidated the properties
along the Madsen mine trend and expanded resources
following an extensive brownfields exploration campaign.

Reserves stand at 3.5mt @ 9 g/t for 1 moz gold with 2.063
moz @ 8.9 g/t of indicated resources and a further 467,000 @
7.7 g/t in inferred resources.

He currently chairs four juniors, the most advanced of which
is Pure Gold Inc, which is developing the Madsen gold
project in Ontario.
O’Dea said the current trend for Australians taking on North

Page 44

O’Dea believes the window for Australians interested in North
American assets will close quickly

Pure Gold is currently assessing the redevelopment of the
Madsen gold mine in Ontario, Canada

“Pure Gold is right on the cusp of being interesting for
companies looking to acquire because we are close to
production,” O’Dea said. “Within a year we will be in commercial
production of this exciting high-grade Canadian asset.
“There has been broad interest from industry groups in what we
are doing. We have completed bulk sampling, we are putting a
lift on the TSF and fast-tracking this thing into production.”
The company released a feasibility study in March showing
a $C95 million capex could deliver an 800 tpd, 100,000 ozpa
operation at Madsen. The equity component of the project
finance was secured in June with the company raising $C32.5
million at 55c. O’Dea said renowned gold bug Eric Sprott took
up to $US20 million of the placement.
While debt financing discussions continue, it is clear O’Dea
would welcome a bid from Australia.
“Australian mining companies and miners are known as good
operators – tenacious and creative,” he said. “They have been
able to take Tier 2 and Tier 3 assets and operate them well.”
O’Dea also said Canadian assets had other traits common with
Australian success stories.
“IfAustralian producers are trying to build on those characteristics
which brought them success and they want similar geopolitical
profile, similar geology and a currency which is running in their
favour, this is the perfect storm,” he said. “We have $C1,850/oz
gold and operations which are hugely profitable.”
If Australians were looking for a similar story with which to
compare Madsen, they wouldn’t have to go far from home.
“Kirkland Lake [Gold Inc] is the shining star in this theme
of brownfields exploration. They’ve taken a tired asset
in Fosterville [in Victoria] and been able to make new
discoveries,” O’Dea said. “Pure Gold fits that trend perfectly.
We are in that sweet spot, exactly the kind of asset where
your fate can turn on one drill-hole.”

Page 45

DIGGERS & DEALERS PREVIEW

After a stint at the Q&A Since stepping away from
prestigious Oxford Business Gold Road Resources Ltd in
School in the UK, Ian Murray late 2018, Murray has travelled
was headed for the terraces and is now starting his way
back into the sector, taking a
of Tuscany to unwind and non-executive position at Black
enjoy some quality time with
Rock Mining Ltd and he is
his family. A paint brush in eager to broaden his horizons
one hand and pinot noir in this year. Before ramping up
the other would do Murray his activities, Murray was kind
for a short while but his next
steps in the mining sector enough to speak with GMJ
are never far from his mind. about his future.

Q Ian, tell us what you have been doesn’t work. Do your targeting in the right areas to get best
A up to? success for your shareholders and minimise your wastage
costs. Fly economy, I did for most of my career.
I was available for Duncan Gibbs [new Gold Road chief
executive] when he needed me during the transition and I Q What key lessons did you take from
had some time off earlier this year. I am getting back in the A your time as exec chair/ MD at Gold Rd?
game now; I am a non-executive director with Black Rock
Mining, a graphite company in Tanzania. Intellectually, I am You do not cut corners when it comes to project studies.
doing this course at Oxford to stimulate me and I am going Companies that go from pre-feasibility to construction or
to try and get onto one of the AICD courses as well. skip pre-feasibility get caught out in the construction phase.
Proudly at Gold Road, we did every stage of study diligently
The Oxford Advanced Management and Leadership so we knew exactly what we were in for. That is what has
programme is a three-week programme run at the Saïd attracted me at Black Rock; [managing director] John de
Business School where you stay on campus. The first week Vries has done every stage of study diligently all the way
covers the global environment and all the challenges faced, through. If you cut corners the cost to rectify the problems
with a big focus on companies being socially conscious. once in operation are much higher than rectifying it in study
Week two focuses on your organisation and the issues you phase. The other lesson is as MD to make sure you have
have faced. I don’t have any current organisation, but the talented people around you. No MD can pull the company,
challenges from Gold Road and the ones Black Rock will be but a team of good people can. Good people must also
facing I can call upon. The third week is about your personal have the autonomy to do what they do well and as the
challenges and how you as an individual work within the leader you need to make sure everyone is pulling in the
global constraints and your organisational constraints. right direction.

Q How satisfying was it to see first gold
A poured at Gruyere?

The most satisfying will be when they reach full production.
Investors focus on first gold, but that is a mere milestone. It
is the ramp-up after that and getting it up to full production
level. That is going to take 6-7 months and that is when it
will be really satisfying for me because that is when we will
see this project delivering on all fronts.

Q Is there light at the end of the tunnel
A for cash-strapped explorers?

For every junior out there you are one drill hole away from
success. So, you have to minimise your non-exploration
costs because investors invest in you to do exploration.
Just keep doing smart exploration, the shot-gun approach

Page 46

Q What advice do you have for the new Q What commodities are exciting you
A emerging mining executives? A at the moment?

Don’t have blinkers on. Make sure whatever you are doing I am a firm believer in the EV movement globally, while it
that you are creating a sustainable future. The last thing is less of a market in Australia given the space and lack of
that anyone wants is to be involved in is a project that gets concentration of people, but in Europe where you have the
developed and leaves a hole in the ground with no benefit population and people tend to not drive that far it makes a lot of
for the local community and the broader community. Make sense. The big lithium players are going to do well and with the
sure whatever we as a resources industry do in Australia it lithium hydroxide plants that are being established and I think
is creating long-term value for everyone that is involved. We it is great for Western Australia’s growth potential. Cobalt has
are not just there to ramp up the share price for a short-term come off but there is potential for non-DRC cobalt discoveries
gain and runaway and pass the problems onto someone and graphite for batteries and in the fire retardant space also.
else. We are there so that in 10-20 years’ time people can I am gold bull and gold at $1,900/oz, there is nothing wrong
look back and say the resources industry in Australia is with that. I will invest in companies with healthy margins at
responsible, look at what they have created. $1,900/oz. In fact, I will only invest in companies that can
survive a $200/oz drop from here. At Gruyere, we did the initial
Q How did your attitude towards mining study at $1,500/oz and the price used was at a discount to the
A change during the emergence of Gruyere? prevailing price. That fat was in there, we were fortunate that
we were in a rising Aussie dollar gold market through studies
Even before that, when I was operating in South Africa, and project construction which gives you a tailwind.
we were operating mines which were 100 years old. I was
working at the tail end of the gold sector and we were Q Where will you be in
trying to eke out another few years life out of that mine. It A 12 months time?
was tough because the mines had been starved of capital,
were high risk from a safety perspective because people I am on the board as non-executive director at Black Rock,
had cut back on expenditure and corners were cut with there’s a Namibian copper explorer that will be listing in the
people working in areas that are not safe. Moving across second half of this year and I have been asked to go on that
to Australia and getting involved in an exploration company as a non-executive chair. Copper exploration in southern
was very much at the front end, where you are creating African is attractive to me but what I have been stressing
the life-of-mine from scratch; that was a big change for me. to the companies I have been talking to is that you have to
I enjoyed that you could do things right from day one. In differentiate yourselves. There are 600 juniors out there and it
terms of dealing with the Yilka people, I spent a lot of time is difficult getting attention. With 600 to invest in, why choose
with Harvey Murray – HM as he is known – on country and your company?
hearing the stories of his family and the challenges that
they had in establishing the Cosmos, Newberry community In 12 months time I see myself probably being on three or four
and how important the country around there is. I have been boards as a non-exec, probably chair of two and non-exec of
hunting with them and shared stories with them, which was eye two and in different commodities – gold, graphite, copper and
opening to realise that everything the indigenous group was one other. I have also enjoyed my time in the last six months
discussing with us to get the Native Title agreement in place mentoring one geologist and one accountant; sharing my
was real for them. They want a sustainable future for their kids knowledge with them and helping guide them in their future to
that are currently at school and they want job opportunities on be the best person they can be has been very enjoyable.
their country in a mine at Gruyere. I really appreciated the time
I spent and being exposed to the indigenous history and my
attitude has changed a lot in that time.

Q Have you stayed engaged with
A the industry?

Going to Paydirt conferences and listening to companies
presenting. When you are running companies yourself you
don’t get to listen to new stories, so spending time listening
to new stories and finding out that there are a lot of good
projects out there the market doesn’t value because the
market doesn’t think they can be funded. Overcoming
the funding conundrum is going to unlock the value for
shareholders and I think that is the biggest challenge for
industry; how to convert the resources and discoveries into
projects. Banks are very conservative and investors who
have been burnt through other projects that shouldn’t have
been developed, become unwilling to fund projects as well.

Page 47

AFRICA

Acacia continues to resist
Barrick

The battle over Acacia Mining plc’s future in
Tanzania is turning ugly with majority shareholder
Barrick Gold Corp refusing to budge on the terms

of its takeover offer.

by Paydirt staff and Reuters

Barrick made its $US787 million all-scrip offer in May after “In Barrick’s view, it is now clear that the relationship of
Tanzanian President John Magufuli said Acacia would Acacia with the Government of Tanzania has been so
never be allowed to operate in the East African country again. damaged by the events that led to the concentrate ban being
The offer was pitched at an 8% discount and subsequently imposed by the Government of Tanzania in March 2017
failed to entice Acacia’s minority shareholders. and by the subsequent arbitration proceedings initiated by
Acacia against the Government of Tanzania, that it is no
Barrick – which currently holds a 63.9% stake in Acacia – longer possible for Acacia to continue to function as an
reached agreement with Magufuli in February over settlement independent public company, with substantially all of its
of a $US190 billion tax bill the Government maintains Acacia value represented by assets in Tanzania.”
owes. The proposed settlement included a $US300 million
payment to the Tanzanian Government and a 50/50 split of By June 21, Barrick’s takeover offer was worth $US979
economic benefits from Acacia’s three mines in the country; million thanks to a 27% jump in the Canadian miner’s share
North Mara, Buzwagi and Bulyanhulu. price but Acacia’s minority shareholders still appear unwilling
to budge.
However, with the Government refusing to deal with Acacia,
it appears only a full takeover by Barrick would avoid the “No one has ever won a takeover by approaching a company,
need for international arbitration later this year. offering a discount ... at the same time going against their
own internal valuation, and then subsequently producing a
Barrick said on June 18 it saw no other credible alternative bunch of new assumptions that make no logical sense for
solution to the standoff. anyone, except the bidder,” one top-10 Acacia shareholder,
speaking to Reuters on condition of anonymity, said.
“The negotiations with the Government of Tanzania have
advanced to the point where draft documentation now has Barrick had valued Acacia’s assets at $US1.3 billion in its
been initialled by the Government of Tanzania, albeit with 2018 annual report but said on June 25 it had concluded,
a number of substantive issues still outstanding,” Barrick based on its review, “that certain of Acacia’s assumptions
said. “The Government of Tanzania has, however, now were not supportable”.
made it clear that it is not prepared to enter into settlement
agreements directly with Acacia.

Page 48

Barrick argues only fresh ownership can break the impasse
between the Tanzanian Government and Acacia’s three mining

operations in the country

Barrick now disputes the accuracy of Acacia’s life-of-mine “not [taken] into account any further discount which could be
plans for Bulyanhulu applied to reflect the significant risk inherent in the Acacia
business and remaining uncertainties of any settlement with
A review of mine plans following site visits earlier in 2019 had the Government of Tanzania”.
“identified significant risks inherent in these operations and
concluded that certain assumptions made by Acacia were Barrick has expressed willingness to Acacia’s minority
not appropriately risked or supportable and that adjustments shareholders to discuss the offer, and expects to engage
should be made”. with them in the coming weeks, Barrick chief executive Mark
Bristow said.
Acacia bit back the following day, saying while a fair offer would
“be an attractive solution for key stakeholders”, Barrick’s “I’ve never been one that draws a line in the sand without proper
view on the life-of-mine plans had no reasonable basis, its engagement, and we’re committing again to engagement,”
offer had ignored the value of the exploration portfolio and Bristow said in an interview. “But no one’s come up with an
its intervention in negotiations with the Government “had the alternative.
effect of undermining Acacia in Tanzania”.
“We’ve looked at the assets, the mine plans, and we felt our
The smaller miner said its life-of-mine plans had been offer was more than fair based on our due diligence,” Bristow
formulated in line with “industry standard methodology”, said. “There’s still significant operational risk in these assets.”
adding that it hosted Barrick representatives for site visits
during the first quarter of 2019 and gave Barrick its draft life- In the absence of a final deal with Tanzania, Acacia is
of-mine plans. expecting to go ahead with an international arbitration hearing
in July, with an outcome expected by the end of this year.
The tit-for-tat continued on June 26, with Barrick saying
Acacia had not raised any points “of which Barrick was not Barrick believes irreparable damage has been done to Acacia’s
already aware”. reputation in Tanzania, particularly at the North Mara mine

On the issue of asset valuation, Barrick said the inclusion
of inferred resources within an optimisation study at
Bulyanhulu was against industry practice and had resulted
in overstating of the mine’s value. It also said its offer had

Page 49

Capital Drilling employees from Egypt, Mauritania and Tanzania at Cairns TAFE, Queensland.

Capital Drilling Limited’s (LON:CAPD) “We also understand our contracts are about more than just
expansion into the West African markets drilling a hole. Most drilling contractors can do this but what
continues to gain momentum. our clients actually need is a good quality sample, they are not
interested in the hole, they want the information they can extract
“We invested heavily in expanding our presence in the West from the core or RC sample. This is what we train our crews
African region throughout 2018, establishing offices, workshops to deliver - while drilling metres is important, delivering quality
and yards in Cote d’Ivoire and Mali, in addition to our existing samples for our customers is the priority,” said Rudd.
facilities in Mauritania. We started to win new contracts in the
region in the second half of last year and this has continued into “ We understand our contracts are about more than just
2019, with the commencement of a new contract with Golden drilling a hole, our clients need good quality samples
Rim Resources, facilitating our expansion into Burkina Faso in and this is what we train our crews to deliver.
April,” said Brian Rudd, Executive Director.
Training and professional development of its team is also a
In addition to increasing the company’s on-the-ground presence, priority for Capital Drilling. “We have always had the approach
Rudd attributes this success to its approach. “Our philosophy that we will offer first world service levels to emerging markets,
has always been to continually look at how things can be from the quality of our rigs on site and our safety standards to
done better, what improvements we can make to our rigs, our ensuring our crews are fully trained and competent to deliver a
processes or even our customer’s operations. We’ll work closely level of service you would expect in countries like Australia or
with them to suggest and implement ongoing improvements any other developed mining region,” said Rudd.
that enhance productivity, reduce costs and improve safety
conditions on site.” He adds, “Our teams undergo regular training to develop their
skills as part of their personal development plans. We want all
“Our crews will take a broader view and look at the other issues our employees to deliver a competent service with confidence,
a client may be facing around their drill programs. We’ll use our regardless of the location they are working in. This investment
team’s on-site experience to come up with practical solutions in our people ensures that our clients can have confidence the
that work. This might mean we can drill the program with fewer crews used on their projects have appropriate knowledge and
rigs to reduce costs or work with our suppliers to design a skills to deliver a professional and safe service.”
solution that solves a specific problem the client is facing. Every
project has its own unique challenges and our team will always “It is also important to us that we provide not only jobs for
look at how they can add value, how they can make it better and National employees in the countries that we operate, but career
safer,” he says. paths. Long-term contracts allow us to really develop our teams,
we have established training facilities at these sites with the aim
This philosophy is formalised through quarterly reviews of upskilling local employees to replace many of the expat roles,”
conducted with clients, involving senior management from explains Rudd.
both Capital Drilling and the client. “We’ll get all the senior
people together regularly, including members of our Executive He continues, “We now have African expats working on some
team to review the KPI’s. As part of that process our team of our projects, with Tanzanian drillers on projects in Mauritania
identifies areas where improvements can be made. We’ll agree and a Tanzanian Project Manager who has supervised projects
on an implementation plan and get it done. It’s our proactive in Kenya and Botswana. At our Egyptian operations our team
approach to looking at all areas of the business for continuous
improvement that our clients appreciate,” explains Rudd.