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Published by Paydirt Media, 2015-12-07 03:16:33

Paydirt December/January

pd234 Dec15 - Jan16 mag-web

December 2015 - January 2016 VOLUME 1. ISSUE 234 $11.95

paydirt

front and back cover
supplied seperately

Platinum plated:

Sibanye strengthens its base

• Interviews with industry heavyweights: ISSN 1445-3436
Creasy, Bristow, Holland, Briggs 11

• Full Indaba preview 8–11 9 771445 343007

FEB 2016



CONTENTS

PAYDIRT (ISSN 1445-3436) 5 NEWS 5
Published by South32 Ltd has endured a tough start to 20
Paydirt Media Pty Ltd. life outside the BHP Billiton Ltd stable as 28
A.C.N. 063 985 133 commodity prices continue to weigh down
operations in both Australia and South
Head Office: Africa. Michael Washbourne attended the
Suite 9, 1297 Hay St, West Perth company’s AGM in Perth and asked chair-
Western Australia 6005 man David Crawford whether the decision
P.O. Box 1589, West Perth to demerge was the right one
Western Australia 6872
Phone: (+61 8) 9321 0355 10 PROFILE
Facsimile: (+61 8) 9321 0426 Mark Creasy has entered legendary status
[email protected] in the Australian exploration community.
www.paydirt.com.au The veteran prospector has played a hand
in some of Western Australia’s largest
Editorial: finds in the last four decades and contin-
Editor: Dominic Piper ues to set the exploration standard in the
Deputy editor: Mark Andrews State. In a rare interview, Creasy spoke
Journalists: Michael Washbourne, with Mark Andrews about his motivations,
Rhys Dickinson his take on the current state of the sector
Graphics: Marian Noonan and his plans for the future
Contributors:
Keith Goode (Sydney), Brendan Ryan 20 COVER
(Johannesburg), Ross Louthean Originally seen in some quarters as a Gold
Fields Ltd cast-off, Sibanye Gold Ltd has
Advertising: continually quashed doubters in the three
Advertising executive: Tony Mwarey years since its listing on the Johannesburg
Subscriptions: Magda Thibaut Stock Exchange. South Africa’s largest
Phone: (+61 8) 9321 0355 gold miner has shown that profits are still
Facsimile: (+61 8) 9321 0426 achievable in the once great gold produc-
ing nation and having proved its point in
Pre-press and printing: gold, the company is now set on shaking
Vanguard Press 26 John St, up the platinum sector. Dominic Piper
Northbridge WA 6003 spoke with chief executive Neal Froneman
Member of: about the company’s new direction

Paydirt Media 28 INDABA PREVIEW
Executive chairman: Bill Repard The majority of this edition is dedicated to
Finance manager: Giovanny Jefferson the world’s largest preview to the annual
Accounts/administration: Investing in Mining Indaba in Cape Town
Heather Melling in February. Ahead of the largest event on
Conferences: Tammy Caldwell, the African mining calendar, Paydirt ad-
Melita Fogarty dresses some of the issues facing the re-
sources sector on the continent, including
Cover image: Sibanye Gold chief interviews with the likes of Mark Bristow,
executive Neal Froneman Nick Holland and Graham Briggs

Member of: 108 REGIONAL ROUND UP
Africa may dominate this month’s Paydirt
Australia-Africa Minerals & Energy Group coverage but Australian companies con-
tinue to find success in other parts of the
Registered by Australia Post PP 643938/0071. globe. Rhys Dickinson spoke to European
No pages or articles in this publication may be Metals Holdings Ltd managing direc-
reproduced in any form without the consent of tor Keith Coughlan about his company’s
the publisher. This includes photographs either lithium venture in the relatively unheralded
taken by Paydirt Media staff or provided by other Czech Republic
parties

EDITORIAL

Africa’s potential gone or
just re-emerging?

As this last edition of Paydirt in 2015 looks at diversification are futile.
towards February’s Investing in Mining In- “It is not necessarily the countries which are endowed with minerals

daba in Cape Town, we find an industry land- which will be best placed to process them. But if Africa can establish

scape bereft of hope in many corners but its capabilities in this regard it can begin attracting investment from

there are some, especially in Africa, who other regions, ensuring industries such as manufacturing can outlast

can retain optimism. resource development.”

The days of bulk commodities are over The problem is that countries such as South Africa, Botswana, Na-

for now. A decade ago it appeared the mibia and Ghana have been too prescriptive in their efforts to encour-

great iron ore and coal discoveries would age in-country beneficiation, forcing miners to consider manufacturing,

be at the vanguard of a new era for African mining, generating massive which they usually are unwilling to do.

investment, employment and healthy returns for all. In this climate of low commodity prices, the inclination to add pro-

Economic realities have, however, muddied this vision and in most cessing and manufacturing to the mining business is even less and

cases washed it away completely. The slowdown in China’s economic companies will willingly leave countries if they are forced to do so.

growth has been the most prominent of a number of factors which have However, even in this current market there is still opportunity to add

weighed heavy on spot prices in iron ore and coal, making some of the value to raw materials in Africa; in the process helping other industries

discoveries uneconomic at current prices. such as agriculture and manufacturing, either in-country or on a region-

Even for those high-grade projects, the infrastructure requirements in al scale.

remote and infrastructure-poor African locations are so immense that Given Africa’s inefficient agricultural practices, the rise of potash and

phosphate developments on the continent could be the most exciting
opportunity.

As you will read in this edi-
tion, potash and phosphate
projects are sprouting up
across Africa as miners rec-
ognise a looming global food
crisis.
risk-averse capital markets have no appetite to fund such capital-inten-
sive, large-scale projects. Africa has long been touted
as a potential solution to this
This change means African
governments have also had
to lower expectations and can

... there is an admirable purposeno longer expect to lean heav-
around the common policy amongily on investors. Given how

“many African countries of beneficiationmuch margins have shrunk,
any additional tax burden will and in-country value-adding.
only mean closure for most of

the continent’s operations and crisis but needs a better per-

governments are, belatedly in forming agricultural sector.

some cases, beginning to recognise this. What is needed? Investment from major fertiliser companies to build

They have also lost the ability to make further demand on foreign processing and manufacturing hubs in Africa would be a start but per-

investors. haps countries like Australia could also play a part. Australia excels at

Over the last decade, governments have increasingly demanded both mining and farming; the two sectors could combine to provide true

more from miners in the areas of taxation and royalties, CSR commit- leadership on the continent.

ments and local job creation. Graphite also offers opportunity for downstream processing inside

This is quite right; if a mine or any other commercial venture can- Africa. The majority of spherical graphite production occurs in China

not generate benefits for the host community why should a government which dominates the market. As graphite demand increases across

support it? the world, Western end users are becoming increasingly desperate to

And, there is an admirable purpose around the common policy break China’s hold on production.

among many African countries of beneficiation and in-country value- Could Africa provide the solution? Like potash and phosphate, graph-

adding. Countries should pursue opportunities to add value to the raw ite has become a favourite of explorers in Africa, with East Africa in

materials which are extracted from their land. Governments see the particular producing some world-class discoveries.

value being ascribed to finished materials and quite understandably ask A regional hub of spherical graphite production and even battery

why they aren’t seeing more of it. manufacturing could provide a boon to the East African economics of

Indeed, the African Mining Vision compels countries to pursue down- either Mozambique or Tanzania. Kibaran Resources Ltd has already

stream processing and linkages to other industries such as manufac- begun assessing the feasibility of such a move and could see it uniquely

turing. positioned to take advantage of this new generation of power.

The problem with such policies is twofold; miners are not manufac- It will be a tough road and such developments will need incentives

turers and the place where the raw materials are extracted does not rather than prescriptive legislation from African governments. It will also

always make the most efficient place to process and manufacture them. need the financial support of the development banks and international

Sheila Khama, director at the African Development Bank’s Natural community and it will of course need stability in the individual countries.

Resource Centre, and a contributor to the design of the African Mining If all that is in place, Africa could find itself at the heart of downstream

Vision, told me last year that value-adding should be a long-term objec- processing in three key commodities of the 21st century.

tive of all African countries but warned it was not a simple exercise and

forcing the mining industry to prop up downstream industries will only

result in economies becoming wholly uncompetitive.

“If your only advantage is that you have raw materials then you will

not be competitive for long,” she told me at the 2014 Africa Down Un-

der. “To attract investment in downstream sectors, certain decisions

need to be made. For manufacturing you need the available skills, the

energy, the infrastructure, the IT capabilities. Without these, attempts [email protected] @DominicPiper

PAGE 4 DECEMBER 2015 - JANUARY 2016 AUSTRALIA’S PAYDIRT

NEWS

South32 bosses back demerger

South32 Ltd chairman David in Brazil, coal business in Illa-
Crawford believes the de- warra, New South Wales, and

cision to split non-core assets manganese interests in Aus-

from BHP Billiton Ltd remains tralia and South Africa.

justified despite the new com- “We always talk about the

pany’s underperforming shares. fact these are high quality as-

It took BHP Billiton execu- sets and most are positioned on

tives more than two years to the first and second quartile of

complete “one of the most com- the cost curve,” Kerr said.

plex demergers in mining histo- “They all have decent-sized

ry”, according to Crawford, and lives, they do come with a great

South32 arrived on the ASX, set of people and have been

JSE and LSE with much fanfare well-maintained and well-con-

on May 18. structed under BHP Billiton, but

South32 debuted on the we do believe there is an op-

Australian bourse with a list- portunity by running them in a

ing price of $2.05/share, which different way, under the same

quickly climbed to $2.45/share management, board and strat-

in the ensuing days. However, egy, to extract more value.”

the company’s stocks have More than 300 people attended South32’s inaugural AGM in November On the eve of the AGM,

gradually fallen since and were South32 announced it was sus-

trading at just $1.30/share at the time of print. what South32 has. So we’re very thankful we pending operations at the Samancor manga-

Investors and shareholders have queried have a strong balance sheet and it continues nese JV mines in South Africa until mid-Jan-

whether BHP Billiton’s decision to spin out to get stronger.” uary while it completes a strategic review of

the non-core assets of manganese, alu- South32 reported a net debt position of the asset.

mina, coal and bauxite in Australia, Africa $402 million at the end of FY2015, but re- Kerr said his company’s manganese arm,

and South America was worth the time and comprising both ore and alloy production, ac-
money spent on the demerger process, given counted for about 20% of global production,
the depressed state of the
resources sector. but low prices ($US1.63/
kg at the time of print) were
Speaking on the side- having a negative impact.

It was right at the time it waslines after South32’s inau- “The Kalahari, while it has
conceived, it was right at the timegural AGM in November, 80% of the world’s manga-
nese deposits, at the mo-
“the demerger took place and it’s right now.Crawford was adamant the
duced that outstanding figure to $196 million
during the September quarter.

demerger was justified. ment it is hard to see a lot

“It was right at the time of people making money in

it was conceived, it was right at the time the The company expects to reduce sustain- that space, which is why we are doing a stra-

demerger took place and it’s right now,” Craw- able capital expenditure by 9% to $650 million tegic review,” Kerr said.

ford said. during FY2016 and is looking to cut all con- “There’s excess supply in that industry and

“In any competition for capital, those assets trollable costs by at least $350 million per an- it needs to fall out.”

with a greater return [iron ore, copper, gold, num over the next three financial years. South32 is also reviewing – internally and

petroleum] are going to get all of the expo- Kerr said $282 million of productivity-led externally – its tailings dam operations follow-

sure, so a concept of separating, or demerg- cost efficiencies were embedded into the ing the recent disaster at Samarco in Brazil.

ing, meant that South32 could be set on its business during FY2015 as the company Samarco is a JV between BHP Billiton and

own path and not be caught in that competi- looked to fast-track its regional operating Vale SA.

tion and really be able to operate in a number model. Kerr said he was satisfied with the perfor-

of sectors where in fact those assets are lead- It came as South32 achieved annual pro- mance of the company’s assets in their first

ing assets. duction records across its alumina operations six months under the South32 banner, but

“They’re either first-tier or second- portfolio growth would most likely come

tier [assets] and they’re very important from existing projects rather than M&A.

in those sectors, so yes, I’m very com- “We have an eye out…but we’re very

fortable the rationale still remains.” disciplined and 95% of our time is ac-

Crawford’s sentiments were echoed tually focused on the existing assets

by South32 chief executive Graham where we can get the safety right, we

Kerr, who pointed to rival companies can get the volume right and the opex

with similarly underperforming share and the capex,” Kerr said.

prices under current market conditions. “We do believe there is a big oppor-

“Obviously the share price is disap- tunity to create lots of wealth from the

pointing, but across the broader sector, assets we have today and going back to

especially across the mid-tier mining the original thesis for the demerger, we

companies, I think we’ve performed in still have a lot of resource in the ground

line with what you’re seeing with our that has never been converted to re-

peers,” Kerr said. serve. We will look at things, but it’s not

“The one exception to that would be the primary focus.”

you have seen the companies that don’t – Michael Washbourne
have a strong balance sheet being im-
pacted more on their share price than South32 chairman David Crawford and chief executive Graham Kerr

AUSTRALIA’S PAYDIRT DECEMBER 2015 - JANUARY 2016 PAGE 5

NEWS

Afghanistan starts riding for
next super cycle

The train left without Afghani- “Right now oil and gas [devel-
stan at the height of the last
commodities super cycle and the opment] is our priority because it
country is determined to book a
ride next time the mining sector is quicker to achieve our objec-
is set for take-off.
tives we have rather than mining
Extracting capital from in-
vestors is difficult at the best of which takes longer [to develop],”
times, let alone during a market
as bare as the current one. Dr Saba said.

What chance then does a While the country is eager to
country which is perceived to be
dominated by terrorists, namely get its resources sector off the
the Taliban, have of courting for-
eign investment? ground, Dr Saba understands

At the moment, the obvious the current environment is not
answer is little.
providing encouragement for
That is a reality the democ-
racy of Afghanistan is dealing investors to throw money at
with, but willing to address in the
face of widespread media cov- speculative projects in unknown
erage portraying the country as
a war-torn habitat. mining destinations.

“I am not here to ignore the Rich in oil and gas, gold, chro-
problems in Afghanistan; we
mite, copper, lithium, industrial

minerals, uranium, rare earths,

gemstones and emeralds are

some of the other opportunities

for miners and explorers to cash

in on.

Dr Saba said the Government

Paydirt caught up with Afghanistan Minister of Mines and would welcome partners to ex-
Petroleum Dr Daud Saba in Perth in November ploit its mineral wealth, but with
prices for most commodities in

have security issues the red, no appetite exists in any jurisdiction

with international ter- to chase the mines of tomorrow, particularly

rorism but it is not that Afghanistan.

the whole country is Therefore, Afghanistan is using the cur-

in flare,” Afghanistan rent down time to prepare for the next min-

Minister of Mines and ing boom and Australia is seen as the logical

Petroleum Dr Daud place to build its capacity in the resources

Saba told Paydirt on space.

a visit to Perth in No- “I believe that Australia is no doubt one of

vember. the leaders in the mining sector and they have

“Terrorism acts are used the last mining boom in a very good

very sporadic in differ- way,” Dr Saba said.

ent places at different “I think we could use the resources here

times, but most of our in Australia, whether it is financial or techni-

country is stable and cal resources, to develop our capacity. We

good and work can be are focusing on the small enterprises which I

done. We have a pol- think is a good foundation for developing the

icy of not offering any extractives industry in Afghanistan. Hopefully

area of Afghanistan with a successful model from Australia and

in which the Govern- many other countries we can succeed in this.”

ment cannot sustain From the outside, it appears Afghanistan is

security and cannot starting to build its resources industry from a

help investors secure blank canvas, and while the paint may not be

investment. There are there for picture just yet, an outline is in place

a number of strate- to work with.

gies to secure JVs During the Soviet era in the 1980s, Afghani-

with Afghan investors stan was mapped and in the last decade or

that have money, but so, with assistance from the US Geological

not the know-how and Survey. That information has now been dig-

technology to develop itised.

their own companies.” “We are probably the only country in Asia to

Afghanistan sees oil have done lots of geological and geophysical

and gas as the sector surveys in the last 10 years, so that material is

with the best chance there and readily available,” Saba said.

of creating some hype – Mark Andrews
for its resources in-

dustry.

PAGE 6 DECEMBER 2015 - JANUARY 2016 AUSTRALIA’S PAYDIRT

BUSH TELEGRAPH

Lonmin drops jaws with
rights issue

Desperate times call for desperate Lonmin chief executive Ben Magara has been tasked with saving one of South Africa’s largest
measures” and the terms of the rights platinum producers
issue being held by Lonmin plc to avoid
going out of business certainly match that “this is an ex-investment”. mining group and currently employs some
proverb. Although, I have a gnawing feel- I see no point in coughing up another R9.66 38,000 workers. Were it to go out of business
ing that management may have left this the economic and political repercussions
one too late. per Lonmin share to maintain exposure to “the would be horrendous for SA.
weakest link” in South Africa’s platinum indus-
Reason is shareholders – other than try which faces a monumental, uphill struggle But, keeping the group going at all costs to
South Africa’s Public Investment Cor- to trade its way out of the abyss. save jobs will also have major repercussions
poration (PIC) which has declared itself for the rest of the platinum mining sector. Not
committed to the new plan but may have a If you still believe in the future of platinum removing Lonmin’s 700,000 ozpa platinum
different driving motive behind its actions – and, funnily enough, I do – rather stick the supply will extend the current oversupply in
– have lost so much already that what’s money into another platinum producer better the world platinum market which is holding
left is not really worth trying to save. placed to cope with the current grim market down the price of the metal.
conditions. Consensus analyst views appear
Better to cash in what’s left of your to be that company is Anglo American Plati- The longer the platinum price stays down
chips – assuming you still believe in plati- num Ltd (Amplats) because of its ability to cut the longer the entire SA platinum industry will
num – and stick the money into another back on high-risk, high-cost, labour intensive struggle to make money and provide jobs but
platinum company better placed to ben- deep-level mining and expand into low-risk, letting Lonmin collapse would probably result
efit from the long-awaited upturn in the low-cost mechanised operations. in further massive social unrest in the already
platinum market. volatile South African situation.
The rights offer documentation makes
The alternative is to plough more mon- much of the fact that the PIC is fully behind the You can argue over such dilemmas until
ey into Lonmin to ensure your investment issue. The PIC is wholly owned by the South the cows come home. You can spend just as
is not massively diluted and then hang on African Government and invests funds on be- much time playing the blame game over who
in the hope that management will eventu- half of public sector entities. is responsible for the current situation. For my
ally be able to dig its way out of the hole money former chief executive Brad “mecha-
– make that the chasm – in which it cur- The PIC owns 7% of Lonmin and has not nisation zealot” Mills has a lot to answer for
rently finds itself. only committed to take up its full entitlement in terms of his spectacularly unsuccessful at-
in the upcoming rights offer but has also sub- tempt to mechanise sections of Lonmin’s op-
The terms of the rights issue offer are underwritten “a material portion” of the rights erations a decade ago.
jaw-dropping. I have never seen the like in my issue in excess of its entitlement. The rights
time covering the South African mining indus- offer is fully underwritten by HSBC, JP Mor- But, from the perspective of the small indi-
try for the past 35 years or so. gan Cazenove and Standard Bank. vidual shareholder, there’s one clear course
of action...cut your losses and leave this one
Lonmin intends to raise $US407 million by I suspect the PIC’s support has more to do to the underwriters.
offering 46 new shares for every one existing with the SA Government’s campaign to save
share held at R0.21/share. That’s a 93.85% jobs in the mining industry rather than a cold Brendan Ryan is a Johannesburg-based min-
discount to the closing price of R3.74 on the assessment of the value of its stake in Lon- ing writer
JSE on November 6, but keeping in mind that min.
by that stage Lonmin had already lost more
than 90% of its value over the previous 12 Lonmin is the world’s third largest platinum
months dropping from a high of R35/share.

Furthermore, back in 2012 in the wake of
the disastrous events at Marikana, Lonmin
held a rights issue raising $US767 million af-
ter the share price tumbled from around R120/
share.

So, long-term Lonmin shareholders have
already given both arms and a leg to keep the
group going. It seems the strategy behind the
latest rights offer is to pitch it at such a deep
discount as to force shareholders to take up
their rights or face massive dilution.

That approach is backed up by the mes-
sage from Lonmin’s directors that – unless
the rights issue takes place along with vari-
ous measures to cope with the group’s debt
– “the group is unlikely to have sufficient funds
to meet its obligations and commitments as
they fall due” and “ the group may be unable
to continue as a going concern at that time”.

But, for a threat to be effective the person
being threatened has to have something gen-
uine to lose and – IMHO – that’s no longer the
case with Lonmin. To misquote Monty Python

AUSTRALIA’S PAYDIRT DECEMBER 2015 - JANUARY 2016 PAGE 7

GOODE NEWS

OBOR (One belt, one road)
but not in China’s GDP

While the Western world pre- Rio Tinto’s production recovery could see iron ore prices pegged back to $US50/t by the end of 2015
senters at China Mining’s Oc-
tober conference in Tianjin focused OBOR was expected to require $US8 tril- cost, relatively cheap, mined ore sources.
on standard supply and demand lion in infrastructure as China rebuilds the China does not have to use its stockpiles yes-
forces holding back commodity ’Stans (by road then rail) along with Russian terday, due to ongoing construction demand.
prices, the Chinese presenters fo- infrastructure (initially oil and gas pipelines)
cused on the new normal (of lower partly in return for mineral rights/resources. There is also the CAREC (Central Asian Re-
commodity prices) and OBOR (One Russia has allocated its poorly developed gional Economic Co-operation) programme
belt, one road). eastern region to China for mineral exploita- upgrading six transport routes (initially road)
tion, while Kazakhstan has granted many ten- to international standards in the ’stans, com-
For iron ore, CRU thought that ements in its mineralised areas. prised of a block of countries that include:
Rio Tinto Ltd’s production recov- Pakistan, Afghanistan, Kyrgyzstan (actually
ery could pull iron ore prices back The issue is that none of this construction now a republic), Turkmenistan, Kazakhstan,
to $US50/t by the end of 2015, is going to be reflected in China’s GDP and Tajikistan and Uzbekistan. The CAREC pro-
with iron ore remaining depressed hence may not have any impact on metal gramme includes around $US28 billion worth
based on lower steel demand ex- prices. of projects in 2015, due for completion by
pectations for China in 2015 and 2017, and in which China is strategically in-
2016 before recovering in 2017 China is currently constructing about volved as part of its 2011-2020 programme.
back to $US55/t, gradually increas- 5,000km of rail in Ethiopia, of which its most
ing to $US70/t by 2019. Wood Mac- recent was a 700km link between Addis Aba- Kazakhstan, aided by China, is hosting a
kenzie was about the same but with ba and the north, following a 30km light rail number of major conferences building up to a
a possible short world recession in link in another major Ethiopian city. If the rail mega world expo at Astana in 2017 on “future
2018. and rolling are manufactured in China and energy” to be held over three months with an
shipped to Ethiopia where they are offloaded anticipated 3-4 million passenger trips, and
The general comment was and used, it goes in China’s GNP (not GDP). If possibly €1 billion of foreign investment with
around there being no China 2, so China sends “metal” it has produced from ore new buildings, new roads and a new urban rail
basically any perceived slowdown processed in China and exports it for manu- system.
in China results in extending ex- facture in Ethiopia, then it is not recognised in
cess supply. China dominates the any official figures. China is involved in nuclear energy con-
metal markets with 2015 estimated demand struction in Kenya and now the UK, to add
(US in brackets) in aluminium 49.7% (9.6%), So, any construction that China is involved to the electrical construction taking place in
nickel 51.8% (7.9%), zinc 47.7% (7.9%) and in worldwide outside of China (new Silk Road Azerbaijan, Bangladesh, Indonesia, Turkey
copper 46.0% (8.4%). And, that’s why LME routes, Africa and South America – there is a and Vietnam. All of that is besides the exten-
week in October was apparently so gloomy, proposed rail route on the Pan Pacific high- sive construction occurring in Africa.
with a still wobbly recovery in the rest of the way through Chile and Peru) is not in China’s
world and so many varying negative forecasts GDP but still involves metal consumption im- The oft-repeated comment that China’s
on how Europe is recovering (with the Syrian ported into China. GDP numbers are “just numbers” was raised
situation) and the pace of the US recovery. again at China Mining. China’s GDP number
This explains why China has not turned any is released just a few days after a quarter and
Only Australia was a positive, due to the ships away, everything is offloaded. Stock- the variable weightings in each year mean
low Australian dollar. Some delegates hoped piles at current prices simply become low- that, any year may not strictly be comparable
it would weaken further, hence supporting
commodity prices in Australia.

World GDP growth was expected to pick
up to 3.4% in 2016 (from 3% in 2015) even if
China drops back to 6.4%, in part due to Rus-
sia’s expected turnaround driven by China.
Copper was seen as flat at $US2.30/lb with
reductions in supply by Freeport McMoRan
Inc, etc stabilising any production increases.
In fact, most metal price forecasts were flat for
2016, largely because the models are based
on GDP and PMI forecasts heavily weighted
to China. Prices were forecast to recover in
2017 from growth outside of China.

However, China was promoting heavily on
the basis of OBOR, which is the re-installation
of the Silk Road by land and sea as shown in
the image.

OBOR affects 4.4 billion people (about 63%
of the world’s population), around 81,000km of
the Eurasian rail network, 29% of the world’s
economy at ($US21 trillion), 26 countries and
regions, and around 24% of the world’s goods
and services exports.

PAGE 8 DECEMBER 2015 - JANUARY 2016 AUSTRALIA’S PAYDIRT

to that of a previous year. However, they are China is spending massive amounts of capital on rejuvenating the Silk Road
being used as a basis by traders for metal
prices. metal unit refineries with the first 15,000 tpa now (one of the IMF requirements of reserve
aluminium refinery due in mid-2016 (assum- currency status), and is increasing by 15-
Service sector growth, though, has been ing the power station is completed on time), 19t per month. But there is still debate over
spectacular in China, up 8.6% in the Sep- then the first 20,000 tpa nickel refinery in 2017. what China’s banks actually completely hold
tember quarter (apparently the highest since The nickel refineries are added as 20,000 tpa as some also group gold into their “currency”
2011), with Apple’s growth in China up 99%, units costing $US200-300 million each, with holdings.
Alibaba retail earnings up 48% and Baidu the next in 2019 and the last in 2022 for a total
(China’s Google equivalent) up about 120% to of 80,000 tpa nickel. The aluminium refineries The RMB was expected to become a re-
$US9.5 billion for its transaction services. It is total 60,000 tpa, and that is just those built by serve currency in the next IMF meeting in
no wonder China now has more billionaires in China Hanking Holdings Ltd. October 2016 (the five-year decision on
US dollar terms than the United States. China what currencies form the SDR (special draw-
added 242 billionaires in the past year, with its Although not elaborated on, there ap- ing right – if the world ever went to a world
total now 596, whereas the US only has 537. peared to be an increasing focus on recover- currency it would be SDRs) was delayed by
ing tailings retreatment and recycling and was one year from 2015, and when that delay oc-
China has a lower threshold to its own mentioned in the keynote opening Ministry of curred, China devalued. Until the 2016 deci-
rich list set at 2 billion RMB for which there Land and Resources speech. sion, China knows that it has to support the
are 1,877 individuals (up 606 in the past US dollar because the US has a veto vote as
year) who hold a total wealth of $US2.1 tril- Among the base metals, copper was seen to who can be allowed to be a reserve cur-
lion. China’s top three are; Wang Jianlin and as probably the best bet, simply because Chi- rency in the SDR.
family of the Dalian Wanda Group, whose na only produces a sixth of its requirements
wealth increased by 52% in the past year to domestically. In fact, it was said in a presen- The other catalyst for gold (as far as I am
$US34.4 billion; Jack Ma and family of Aliba- tation that about 83% of China’s copper re- concerned) is the US election. The Dow
ba ($US22.7 billion), and Zong Qinghou and quirements are imported, along with 57% of Jones appears to be being kept up because
family of Hangzhou Wahaha ($US21.1 billion). its crude oil, 57% of its bauxite and 56% of the Democrats probably don’t want it to fall
its iron ore. ahead of the next election – far better to po-
I asked a China-based CRU consultant why tentially blame it on the Republicans if they
so much construction could be seen across Gold’s expected range for 2015/2016 was get in. Post the 2016 election, the US dollar
China but didn’t appear to impact GDP. Their still $US1,100-1,400/oz, although it should be can then fall too, it would dovetail nicely with
reply was that current levels were only keep- recognised that $US1,050/oz is probably still its historical pattern of six years up, 10 years
ing the pace steady. $US1,100/oz from China’s viewpoint, with the down with 2016 being six years after the pre-
recent fall to below that level a test of the de- vious fall.
Tianjin is still relatively booming, with its bate over who controls the gold price; Comex
GDP for the first three quarters of 2015 at or Shanghai. At $US1,100/oz, about 30% of As for the rest, coal was glossed over, ura-
9.4%, and it expected to benefit from be- China’s mines are apparently uneconomic. nium was perceived to be undersupplied with
coming China’s first free trade zone (FTZ) in At $US1,000/oz, it is reputedly around 50%, China having 23.34GW of nuclear capacity
the north (complementing the other FTZs in so gold was not expected to go down to that and an additional 25.2GW under construction
Shanghai and Guangdong), along with the ur- mark. and oil and gas was to be fed from the pipe-
banisation growth corridor being established lines being constructed (mostly through Rus-
from Tianjin, to Beijing, to Hebei. China wants the gold; mines can close sia), with an increasing chunk of energy com-
in other commodities, but not gold. It is well ing from China’s own shale gas discoveries.
I also asked what happens to all the weap- known that at low prices, China’s uneconomic Oil itself was like most commodities expected
onry as far as GDP is concerned (China had gold (and other) mines don’t stop. The work- to drift sideways between $US45 and $US55/
just had a mega military parade which was ers are paid in rice, and then get back pay barrel during the remainder of 2015/16.
shown on almost all the train journeys I un- when profits resume. Gold mines are reput-
dertook this year but apparently it is a state edly subsidised in an arrangement between It appeared to be very clear that commodity
secret), all metal consumption for military pur- the majors and the smaller, barely economic, prices were mostly expected to simply drift in
poses is not included in GDP. operations. 2016, especially if traders continue to partly
mis-guide their focus on China’s GDP as the
One session that I attended at the confer- Chinese gold demand was expected to ex- key guideline for growth and commodity de-
ence contained a very surprising segment, in ceed 550t in 2015 but as with most statistics mand, thus allowing China to continue to con-
which China made it very clear that if coun- it depends on what is included, with the World sume and use ore at relatively low prices.
tries don’t help it to achieve its aims the busi- Gold Council having China’s gold demand at
ness is likely to go elsewhere to countries that 497t in the first half of 2015 and 974t for 2014. Keith Goode is managing director of Eagle Re-
are more accommodating. search Advisory Pty Ltd
China’s gold reserves (of its official storage
The Thai Mines Minister came in for criti- area) are being reported on a monthly basis
cism when asked when approval would be
given for the high speed rail link and Gulf of
Thailand canal in his country.

After the reply, the Thai Minister was cut
off, as was the representative from Burma
although Laos was able to present, but then
also came in for a historical “battering” by a
retired person on how much they had been
“ripped off” operating in Laos.

Both Australia and Canada were classified
as high risk (mining-wise) for the money that
had been lost there, and were noticeably not
included in the opening forum. Apparently in
Canada, a project was bought for $US4 billion
in 2011 and sold three years later for $US50
million. Peru, however, was allowed to pre-
sent in the opening session and highlighted
how it expected to benefit from OBOR, al-
though China regarded Chile as number one
for investment in South America.

In Indonesia, China is starting to roll out its

AUSTRALIA’S PAYDIRT DECEMBER 2015 - JANUARY 2016 PAGE 9

NEWS

Creasy not done yet

M “The Jundee gold mine in Western Australia, considered by Mark Creasy as his most outstanding discovery
any have fallen out of love with Austral- I have been in the harness so long, young
ia’s resources sector, but not legendary chap, that I would probably feel uncomfortable
prospector Mark Creasy. out of the harness; I’d be twiddling my thumbs
After all, despite his fame and wealth,
Creasy is an explorer at heart and true be-

liever that there are blue skies ahead amid wondering what I am going to do next.
some of the darkest clouds the mining and

exploration sector has seen.

“It is a wonderful time to be exploring, it In November, Creasy’s Yandal Investments deposit. Challenger was found by Dominion

always is,” Creasy told Paydirt. ploughed $250,000 into South Australia- Mining when Creasy was a shareholder.

“This is the sixth market collapse I have foucsed Marmota Energy Ltd. Marmota is on Anyone who thought the 70-year-old was

been in and, as always, it is the time to do the hunt for the next Challenger-style gold preparing to slow down needs to think again.

things, the time to get on with things, the time “Not at the moment,” was Creasy’s reply

to drill and all the rest of it. There is no pres- when asked about retirement.

sure on getting contractors, you can get com- “I have been in this business for 50 years

petitive rates from everyone and things can and I have not thought about not being in the

happen faster and cheaper; now is the time business, or changing the business or retir-

to do things.” ing or whatever. I have been in the harness so

If there is anyone giving the mining sector long, young chap, that I would probably feel

a pulse right now it is Creasy with his vow to uncomfortable out of the harness; I’d be twid-

invest as much money into exploration today dling my thumbs wondering what I am going

than in better days gone by. to do next.”

“I am carrying on exactly as I have always Many wouldn’t have a problem coming up
done,” Creasy said. Mark Creasy with ideas of how to spend $558 million – the

PAGE 10 DECEMBER 2015 - JANUARY 2016 AUSTRALIA’S PAYDIRT

Creasy wouldn’t be surprised if 10 moz gold is extracted from Jundee,
which is now in the hands of ASX-listed Northern Star

figure attributed to Creasy, ranking him No. said. at least once you have identified the horizon,
92 on BRW’s Rich 200 List 2015 – but with “I think it has produced somewhere near 7 you can then follow the horizon. It [magmatic
the belief there are replicas of what made him nickel-copper deposit] is a much more difficult
famous still to be unearthed, passion for the moz gold now and it looks like with Northern target to define. I am a bit surprised though
game remains. Star owning it, there are several more years that someone hasn’t [found another Nova],”
in it. I’d be surprised if it can’t get past the 10 Creasy said.
Creasy’s rise in Australia started with the moz mark, which will make it one of the largest
discovery of the Jundee gold deposit in the gold deposits we have in Western Australia. However, more drill holes punched into
1980s. The mine has since produced 41.8mt the ground should generate enough hits for
at an average 5.1 g/t gold for 6.4 moz (June “Without a shadow of a doubt there are something else to eventually materialise in
2015), as reported by current owner Northern more Jundees out there, the only question is: the Fraser Range, which has fast become
Star Resources Ltd. how well are they hidden? Are they outcrop- “Creasy’s Patch”.
ping? I think there is still a chance for major
To the end of June 30 2015, Jundee re- gold deposits outcropping in some way, but Just how much ground in the Fraser Range
serves totalled 3.5mt @ 5.3 g/t for 596,000oz do we have more 10 moz plus deposits? With- Creasy controls or has an interest in escapes
gold, while current resources are 11.9mt @ out a shadow of a doubt,” he said. him, but one dares not back against a Creasy-
3.5 g/t for 1.4 moz. supported venture – the latest being a deal
Recent exploration history suggests las- with Legend Mining Ltd covering 2,530sq km
Production at Jundee, which Creasy sold soing Australia’s next elephant will be tough of the region – from striking it rich again in
along with the Bronzewing deposit to Great work. It can be assured though that Creasy’s WA’s hottest exploration destination.
Central Mines for $130 million in the mid best endeavours will be to put another world-
1990s, started in 1995, with Northern Star class project on the map. While there are still signs of smoke in the
mining 1.3mt @ 5.9 g/t for 237,883oz at AISC Fraser Range, no doubt Creasy followers will
of $1,008/oz in FY2015. Persistence is key to success and perhaps be watching where he blazes his next trail.
the best modern day example of Creasy’s
Northern Star paid Newmont Mining Corp sheer persistence is the Nova nickel project in “A real classic place to look is Lake Cow-
$82.5 million for Jundee in 2014. the Fraser Range. an [north of Norseman, WA], where S2 are.
There is a 20km strike length within the S2
“It is an absolute standout for me,” Creasy The discovery reads like a fairy-tale; bat- tenements and there has been some gold dis-
tling junior on its last dime, drilling its last hole covered right at the southern end of that line
hits pay dirt. of country and then there’s the Baloo discov-
ery right at the north,” Creasy said.
Creasy-backed Sirius Resources was that
battler and in 2012 struck hole SFRC0024: S2 is formally known as S2 Resources Ltd
4m @ 3.8% nickel and 1.42% copper. The – the ASX’s newest explorer led by the old
rest is history. band from Sirius Resources.

Nova-Bollinger – 13.1mt @ 2.1% nickel, Creasy is a major shareholder of S2 and he
0.9% copper, .07% cobalt for 273,000t nickel, was careful not to talk up the company’s cre-
112,000t copper and 9,000t cobalt – now be- dentials too much.
longs to Independence Group NL after the
$1.8 billion takeover of Sirius, which delivered Nevertheless, he is confident S2, which
Creasy more riches. listed on the ASX in October 2015 cashed
up with over $20 million, is in the right place
Despite enthusiastic companies arriving on to mimic the success of its mother company
the scene since 2012 to find the “next Nova” Sirius Resources.
in the Fraser Range, in boxing terms; a few
haymakers have been thrown but noone has “Undoubtedly there will be many more ma-
landed a killer blow to match Sirius, yet. jor discoveries [in WA], but you may have to
adjust your attention to an area where most
“Magmatic nickel-copper deposits are one of it will be under cover. You have to penetrate
of the toughest you can think of to find, as op- through the cover to find them, even though
posed to the Kambalda-style of nickel where

AUSTRALIA’S PAYDIRT DECEMBER 2015 - JANUARY 2016 PAGE 11

NEWS

there may be ones that are outcropping and Creasy’s legend was further burnished by Sirius’ Nova nickel discovery
still not recognised. I think there is a reason-
able chance for that and a classic place to While the JV with Harmony is gold focused, said.
look would be somewhere like Lake Cowan,” White Rivers entered another partnership “It is not on the radar for most investors. In
Creasy said. with Windfall Energy over gas assets in the
Witwatersrand Basin. general the exploration mining business is of
Navigating through cover is one challenge reduced interest to investors for the time be-
for this generation of hopeful-miners, while Both JVs cover large areas and Creasy ing. I guess we’ll have to wait and see what
overcoming taxation burdens and the regula- said it was unlikely to expand over and above happens. I suspect that people’s interest in
tory environment will continue to be sticking what they are currently doing. South Africa will only perk up once the com-
points for industry, according to Creasy. modity market is seen as not going down any
In fact, Creasy said he had no interest in further and things are improving.”
“They are certainly getting very oppres- other parts of Africa at the moment, however,
sive,” Creasy said about government regula- improving markets could spur change atti- – Mark Andrews
tions. tudes towards investment in South Africa, he

“They have not quite got to the stage where
the burden has got so great that people are
prepared to collapse, but I do believe there is
a lot of room for governments to cease add-
ing burdens on us. At some stage hopefully
the [WA] Government will see we are regu-
lated enough and even if they don’t reduce
the amount of regulation, at least they won’t
increase it. We spend an awful lot of time
which we would otherwise be using for active
on the ground exploration fulfilling regulatory
requirements – filling in bits of paper for the
Mines Department. You can’t do a thing with-
out a form being filled in.”

For the time being, Creasy will continue
putting pen to paper to get things done in WA,
but he is not without interests elsewhere.

One such example is the Creasy Group en-
tity – White Rivers Exploration Pty Ltd – JV
with South Africa powerhouse Harmony Gold
Mining Co. Ltd. (see pages 58,59)

Case histories of discovery Pan Pacific Perth
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PAGE 12 DECEMBER 2015 - JANUARY 2016 AUSTRALIA’S PAYDIRT

Millennium raises survival cash

Pilbara gold producer Millen- unless the operations had turned
nium Minerals Ltd has capped around and we had demonstrated

a remarkable turnaround in perfor- that we could produce more ounc-

mance with a $20 million capital es with less people at reduced

raising that will enable the compa- costs.”

ny to retire its senior debt in early Millennium’s $20 million capital

2016. raising is similar to the one Atlas

Millennium looked dead and struck with its own contractors in

buried when it announced a re- the Pilbara earlier this year.

serve impairment for its Nullagine Western Plant Hire, Redline

operation in late 2014 and was Drill & Blast Pty Ltd and PYBAR

forced to restructure its senior Mining Services, along with IMC

debt facility with lenders BNP Pari- and Millennium directors and

bas and National Australia Bank. management, helped underwrite

However, vastly improved op- the raising before the company

erational success and financial approached other investors and

backing from its major share- shareholders.

holder and key contractors has put “By creating these partnerships,

Millennium back on track, posting you’re going to have these con-

record production for the Septem- Millennium achieved record gold production in the September quarter tractors start thinking outside their

ber quarter. own box on how they’re going to

Millennium raised $20 million in late Oc- the bank facility, while about $14 million from make Millennium a better company because

tober after receiving commitments from IMC the recent capital raising will be used to re- ultimately if Millennium is a better company,

Group ($17.6 million) and its contractors, sup- tire the company’s remaining debt with IMC, the contractors are going to be better off as

pliers, directors and management ($2.4 mil- which holds 35% of Millennium. well,” Dovaston said.

lion) to underwrite the bold capital raising. IMC opened a $5 million drawdown from a “This is outside their normal frame of busi-

At the time of the raising, Millennium had a subordinated working capital facility for Mil- ness – completely outside – but they’ve seen

market capitalisation of just over $10 million lennium following the announcement of the what’s happened with the business from

and subordinated debt of more than $21 mil- reserve impairment in December 2014. It was when they started to now and I think they can

lion. the second time in 12 months IMC had come see the future. We just need to extend the

The turnaround in fortunes began when in to help prop up the company in an hour of mine life and that’s really what our next focus

former Atlas Iron Ltd mine manager Glenn need. will be.”

Dovaston was appointed Millennium’s chief Despite its operational turnaround, Mil- At the time of print, Millennium was look-

executive in December 2014, but even he is lennium was still faced with only a two-year ing to drill a number of untapped prospects

surprised at the speed of the company’s res- remaining mine life at Nullagine and the com- around Nullagine as well as test extensions

urrection. pany knew it needed money to drill some ex- of existing pits.

“I have to admit I didn’t think it would be this citing prospects and keep the operation going Dovaston was confident gold grades as

quick,” Dovaston told Paydirt. for at least another five years, as originally high as 10 g/t could be uncovered.

“Usually a turnaround might take 12-18 planned. “We’re very confident we’re going to be able

months, but we’ve probably turned it around “We knew we had to start drilling now so to pull up the reserves we need to be able to

in 6-9 months and our aim now is to be able that by the time we got to the end of our life-of- increase the mine life to five years, in the first

to sustain that. mine schedule there was something there for instance,” he said.

“It came to a point where if we didn’t change us, but we couldn’t do that under the current “We obviously need to keep our costs in

the business would have gone under, but peo- structure with senior debt,” Millennium cor- control, but throwing in this exploration activ-

ple jumped on board and it’s been an amaz- porate development general manager Peter ity is vital for us right now. It’s going to be a

ing effort by everyone up on site to turn things Cash said. quick programme. We could be mining some

around.” “It was quite a bold plan [to raise $20 mil- of these in 6-8 months.”

Millennium posted record production of lion] on the back of a strong operational turna- – Michael Washbourne
27,238oz gold in the September quarter, up round. We couldn’t have sold this to anybody

26% on the previous mark achieved in the

June quarter, lifting the company’s total pro-

duction for the first nine months of 2015 to

68,959oz.

Full-year guidance from Nullagine is cur-

rently slated at 88,000-93,000oz at an AISC

of $1,190-1,240/oz.

Record gold sales helped the company

take net cash flow before financing activities

to $9.4 million for the September quarter. Rev-

enue of $42.1 million was also up 26% on the

June quarter.

Senior debt is now just $6.1 million after

$5.1 million was repaid on September 30.

The company expects to have cleared all

outstanding debts by the end of March, three

months ahead of the deadline.

Strong cash flow is expected to help pay off Millennium’s key contractors contributed to the $20 million capital raising

AUSTRALIA’S PAYDIRT DECEMBER 2015 - JANUARY 2016 PAGE 13

NEWS

Can crowdfunding save
the mining sector?

Mineral Intelligence has more than 70 projects and 6,000 mining stakeholders on its database. Plans are under way to expand its
scope to 200 projects and almost 15,000 investors in the next six months

Crowdfunding – some think it’s a fad, others “Mineral intelligence is not just targeted at commercial brokers and corporate advisors
think it’s the future. people with $1 million to $500 million to invest that provided input into transactions.
Perth-based Mineral Intelligence is banking in a mining asset, but also to those who have
on the latter, having recently launched a web- got $500 that they want to invest in a mining Transparency issues aside, Tyler said he
site aiming to help small companies struggling project that’s got potential,” he said. didn’t think there was enough of an appetite
for finance tap into the new funding phenom- in the mining sector for crowdfunding to work.
ena. “Crowdfunding adds an exciting alternative
method of raising capital that is cheaper and He also thought casual investors would
Current prohibitions under the Corpora- faster than the traditional methods at a time quickly disappear if a deal went belly-up.
tions Act limit the capacity of crowdfunding where it is extremely difficult to raise funds.
in Australia, but Mineral Intelligence found- We already have a number of projects lined “If individuals invested and their funds
ers Cameron McLean and Joe Treacy hope up to put through the programme, which is drowned I think it would be the last time any-
the Turnbull Government’s innovation agenda exciting.” one invested in crowdfunding,” he said.
and New Zealand’s enthusiasm for the con-
cept will influence policy change shortly. There is no question the industry is desper- “And I think it will go wrong. It is not if, it will
ate for alternative funding streams, as juniors go wrong. It’s the nature of mining. It’s a great
Read Corporate’s Paul Armstrong probably struggle to keep their head above water in a fad at the moment and it sounds wonderful,
described Mineral Intelligence’s vision best at brutal marketplace. but I think you do need those reviews I men-
its official launch last month, describing it as tioned.”
the modern evolution of tried-and-tested clas- But crowdfunding isn’t the answer to the in-
sified advertising for mines. dustry’s funding woes, according to Nedbank McLean and Treacy know the concept has
Capital head of resources Mark Tyler. its doubters, but they are already making
McLean provided a cleaner corporate pitch. plans to expand Mineral Intelligence.
“Mineral Intelligence is a global register of He told Paydirt the concept was fraught
mining projects that are looking for invest- with danger. McLean said the website had more than 70
ment,” he said. projects and 6,000 mining stakeholders on its
“That investment might be a JV, an out- “I’m a bit nervous about it,” Tyler said. database and it planned to expand that to 200
right sale or for royalty reasons. Mineral In- “The basic issue with mining, and Mark projects and almost 15,000 investors in the
telligence offers two services; to vendors Twain said it best, is that a mine is a hole next six months.
it promotes their projects to the investment in ground with a liar standing next to it. The
community and to subscribers and investors problem with crowdfunding is there is no re- “We are building momentum and the plans
it gives them a greater capacity to see mining view of what the guys tell you. You don’t re- for the future include translation to Spanish,
projects that they can invest in.” ally put out a prospectus; you just stand up Mandarin and French,” McLean said.
McLean said the website offered retail in- on the internet and say ‘give us money’. That
vestors an opportunity to tap into a market in used to work in mining, but over the years it’s Treacy added: “We want it to be the preemi-
which secrets of sleeping giants were tightly been necessary to develop JORC and other nent mining site worldwide that has the widest
held and shared only between those “in the standards. Even with the codes, people can range, biggest content and the biggest spread
know”. be quite liberal with the truth.” of projects on a worldwide basis.”
McLean said Mineral Intelligence had a
growing team of geologists, financial and – Rhys Dickinson

PAGE 14 DECEMBER 2015 - JANUARY 2016 AUSTRALIA’S PAYDIRT

BOOK REVIEW

Pope Francis and the green
philosopher’s coal

Twenty-five years ago, those because it does not fit the narra-
scientists pointing to the poten- tive?” Plimer asks.

tially disastrous effects of human- His second argument is that hu-

induced climate change were in a man-induced CO2 emissions into

minority, a fringe collective. the atmosphere are but a drop of

Today, they frame the climate the total carbon dioxide emissions

change debate but for more than the Earth experience s each year.

a decade author and geologist Ian “Since the Industrial Revolu-

Plimer has been challenging that tion... some 400 gigatonnes of CO2

right and their preference for mod- have entered the atmosphere. The

els over evidence-based scientific total amount of C02 in the ocean-

theories. atmosphere system is 32,000 gi-
In his latest book, Heaven and gatonnes and there is at least two
orders of magnitude more CO2
Hell: The Pope condemns the poor locked up in sedimentary rocks,
to eternal poverty, Plimer takes his

attack to Pope Francis’ Encyclical metamorphic rocks and igneous

of May 2015 in which the leader of rocks.

the Catholic Church implored Cath- “One volcanic fart over a few

olics to accept theories of human- days can put far more CO2 into the

induced climate change and sup- atmosphere than burning all our oil

port efforts to curb carbon dioxide and gas,” he writes in another pas-

emissions. Ian Plimer signed copies of his latest book, Heaven and Hell: The Pope con- sage.

Among the many passages Plim- demns the poor to eternal poverty, at this year’s NewGenGold conference For Plimer, the suggestion that
er extracts from the Encyclical, per- the climate change we are current-

haps the following sums it up most succinctly: and should not be held captive by what he de- ly experiencing is human-induced is not only
“We know that technology based on the
use of highly polluting fossil fuels – especially scribes as “another period of romanticism in misleading but also arrogant.

coal, but also oil, and to a lesser degree, gas the Western world when former times with al- “It helps not to be narcissistic or be blessed

– needs to be progressively replaced without leged social and environmental harmony are with human arrogance.”

delay.” seen with nostalgia”. From here, Plimer investigates just why

Plimer rejects this claim and dismissed the the Pope has chosen his stance. He argues
Pope’s argument “the elderly lament that once
For Plimer, such an attitude from the leader beautiful landscapes are now covered with the Pope’s “conclusions... were set when

of 1.2 billion Catholics around the world goes the Pope was an Argentinean Cardinal” and
“against Christianity’s history of alleviating rubbish”.
that climate “science” is bespoke science for

poverty and slavery. governments. It is not driven

“The Pope should speak The Pope should speak for the by curiosity. It is not driven by
for the poor who need an attempt to make the world a

cheap reliable base-load poor who need cheap reliable better place”.
coal-fired electricity and po- base-load coal-fired electricity and Elsewhere, he debunks the
potable water. Does the Pope’s Encyclical
table water,” Plimer says in arguments for renewable en-
the book. “Does the Pope’s ergy technology, claiming they
Encyclical express this care are not only inferior and unreli-

for the poor? I argue that it express this care for the poor? I argue able power producers but also
is the exact opposite and that it is the exact opposite and the require the input of millions of
the Church is siding with the Church is siding with the wealthy tonnes of steel and concrete,
wealthy prophets and profi- prophets and profiteers of doom. effectively negating their posi-
teers of doom. tive impact on carbon dioxide
emissions.
“The papal Encyclical is
the road map to push bil- Ultimately, Plimer’s argu-

lions of people into poverty.” ment is that by believing “green

As with his other books on the subject, “His Holiness is wrong,” Plimer counters. left ideology” Pope Francis is eschewing his

Plimer’s scientific argument is twofold. “Life is better. Compared to former times, we responsibilities.

The first is that the Earth has always gone live longer; have better health, better educa- “Balance and perspective were needed

through periods of natural warming and cool- tion, more food and more assistance from sci- in the papal Encyclical rather than parroting

ing. During human history, Plimer argues, the ence and technology.” green propaganda.”

warmer periods have led to greater prosperity. He also rails against the demonisation of Released ahead of the Paris Climate Talks,

“In the High Middle Ages, the agricultural coal in the letter, arguing it has brought untold Plimer’s book is clearly a plea to conserva-

and technological output of Europe greatly in- prosperity to the world. tive Catholics around the world to reject the

creased because of a natural period of warm- “In the papal Encyclical, there is no recog- Pontiff’s position. How that political argument

ing. There were no CO2-emitting industries nition that coal brought millions of people out plays out could decide the future of millions

that made the planet warmer in what is called of poverty and there is not one mention of the around the world.

the Medieval Warming, it was natural.” Industrial Revolution. Has this great change – Dominic Piper
Plimer suggests we are in a similar period in the Western world been wiped from history

AUSTRALIA’S PAYDIRT DECEMBER 2015 - JANUARY 2016 PAGE 15

NEWS

SA graphite expandable
in so many ways

In a graphite market teeming a very major player; that would ing use of its derivative product; graphene.
with new and evolving prod-
ucts and applications, it is be huge for a company the size Graphene is being touted as important to
difficult to accurately assess
where an individual project’s of Lincoln.” this century as steel was to the 19th Century
prospects stand, but some
clarity is emerging. Building a spherical graphite or plastic was to the 20th Century with new

Archer Exploration Ltd plant would require a leap from potential applications in an array of industries.
managing director Gerard
Anderson is convinced Aus- traditional mining and process- Metallurgical test work has already shown
tralian and other Western
producers must offer an en- ing capabilities to a more man- the Sugarloaf graphite is amenable to simple
hanced product if they are to
survive in the ever-expand- ufacturing-based focus; a major graphene production but while European in-
ing marketplace.
task for a single junior. novators are testing graphene’s use in tertiary
“Australia and other west-
ern world producers face a “What you would probably industrial applications, Archer believes it has
greater challenge in regards
capital and operating costs see would be collaboration be- found a primary industrial scenario for its use.
versus China and those companies operat-
ing in Africa,” Anderson told Paydirt. “Com- tween various South Australian “We tested it but didn’t get fantastic
panies in developed jurisdictions must value-
add to their products or they are stuffed.” graphite companies with a view grades,” Anderson said. “But when we ana-

Archer’s home state of South Australia is to producing spherical graphite lysed it again we realised it was not a typical
evidence of the need for Western juniors to in-
novate. Archer is one of half a dozen compa- here,” Parker said. crystalline graphite but a carbon which could
nies aiming to exploit the State’s well known
but long neglected graphite endowment. Anderson agreed, saying a be readily processed to produce graphene

Valence Industries Ltd was the first of the John Parker number of SA companies would and actually had 11 of the 13 elements which
SA graphite companies to reach production likely welcome the opportunity
through the reopening of the Uley graphite are critical to plant nutrition.”
mine at the beginning of 2015. In doing so,
Valence was seemingly ushering in a new to value-add to their product. Test work at the University of Adelaide fol-
generation of graphite production on the Eyre
Peninsula. “If everyone pursued beneficiation in South lowed and found potential for the Sugarloaf

However, with prices for graphite con- Australia we could end up sharing the same product to be used as a soil-conditioner and/
centrates largely refusing to meet the levels
forecast a few years ago, all the hopefuls are facilities,” he said. “If you simply produce run- or fertiliser.
considering ways they can glean more value
from their products. of-mine graphite, you are asking for trouble.” “The research tested extracting the gra-

“Four years ago prices were on the up and He also believes junior miners will have to phene and then applying a graphene coating
forecasts were bullish but it hasn’t happened
quite how it was predicted,” Anderson said. “A adapt to a different business mindset if they to superphosphate to try to slow the release
paradigm has developed which sees the mid-
dle men cornering the market with the miners are to be successful graphite producers. rate of nutrients but it would likely be too cost-
largely forced to be price-takers.”
“You have got to do your homework on ly.”
This has led would-be miners to investigate
value-add opportunities for their projects with products and marketing and then do it right,” Further research looked at applying the
the valuable and growing lithium-ion battery
market an obvious target. he said. “You have to understand what you Sugarloaf carbon directly to soils.

Lincoln Minerals Ltd chairman John Parker can produce and where your competitive ca- “The initial plant trials have been very
told Paydirt his company had identified the
production of spherical graphite – the product pabilities lay. Higher grade and purity material encouraging. Over 21 days, the addition of
which is a key ingredient in batteries – as a
potential pathway to profitability as Western are more sought after but are also more diffi- the Sugarloaf carbon to control samples
end-users pursue new sources of a product
currently dominated by China. cult to get certified by customers. As a graph- increased root length by more than 45%,

“Some 90% of spherical graphite is current- ite producer you are really a manufacturer increased shoot length by more than 30%
ly coming out of China but a lot of it is either
low quality or expensive,” Parker said. “If we and it is a very unforgiving and led to noticeably thicker
can produce spherical graphite we would only
have to take half of the Chinese market to be industry. You need exhaustive stems.”

metallurgy to give customers Further extensive test work

confidence you can deliver is needed but Anderson en-

the same product specifica- visages a low capex opportu-

tions every week.” nity for Sugarloaf.

Archer’s Campoona project “Our product wouldn’t dis-

on the Eyre Peninsula has al- place superphosphate but

ready proven to host high-pu- could aid it and, with no ben-

rity graphite, suitable for use eficiation necessary, it would

in lithium-ion batteries. just be mining and crushing.

“We have undertaken ex- Being on the Eyre Peninsula

haustive testing of the mate- also means we could mine it,

rial and it showed the per- crush it and sell it at the mine

formance of the Campoona gate where local farmers

graphite in terms of charge could buy it.”

capacity was equivalent o Anderson said Sugarloaf

or better than commercially Gerard Anderson would be developed in line
with Archer’s traditional ap-
available synthetic graphite,”

Anderson said. proach.

However, Archer is keen to expand its op- “The company has always had a business

tions further and test the outer and ever-ex- strategy of finding it, adding value and then

panding limits of graphite’s applications with finding the logical owner for it. We may be

interest growing over its Sugarloaf project. looking at seven years of trials for this but is

Graphite has developed a reputation as a there a fertiliser company out there who could

21st Century material, not only for its key role come in as a JV partner? We will see.”

in the rapidly expanding electric vehicle and – Dominic Piper

battery storage sectors but also for the evolv-

PAGE 16 DECEMBER 2015 - JANUARY 2016 AUSTRALIA’S PAYDIRT

WPG the best for Challenger

Kingsgate Consolidated Ltd has and the other half in M1/M2,” Jacob-
chosen its preferred buyer for sen said. “We think we can get back

its Challenger gold mine in South the 500,000oz in resources.”

Australia but it may yet have to The mining will be undertaken by

convince shareholders. PYBAR which has partnered with

Kingsgate announced on Oc- WPG in the kind of contract min-

tober 30 it had offered a JV com- ing agreement which has become

prised of WPG Resources Ltd popular in recent times.

and PYBAR Mining Services an Jacobsen said the JV agreement

exclusive option to acquire Chal- handed WPG two main advantag-

lenger, in SA’s remote west. es.

The offer comprised a $25,000 “It provides equity and a strong

option fee and $75,000 exercise balance sheet which WPG couldn’t

fee. The full purchase price of $1 otherwise offer. And, it allows us

million will be payable over four to manage the risk of underground

quarterly payments once mill- mining better,” he said.

ing operations have restarted. WPG Resources has secured an option over the Challenger gold mine in If the deal is approved, WPG

An additional royalty of $25/oz is South Australia and will pay just $1 million to secure the operation plans to have Challenger back into

also payable on potential future production in the first half of 2016

production from the Challenger South South lenger mill and exploiting fixed costs in both by which stage the company will also be con-

West discovery. infrastructure and personnel. sidering development of its Tarcoola project.

The acquisition includes all bonds, assets However, the synergies represent just one At 973,000t @ 3.12 g/t for 97,500oz gold,

and infrastructure, including the existing CIL of several opportunities WPG is intent on pur- Tarcoola is only a small project but one “fit for

plant, camp and airstrip. suing at Challenger. our times”, according to Rossiter.

However a week later, SA junior Marmota “There are two [other] limbs to the strategy “At the time we were attracted because it

Energy Ltd urged Kingsgate shareholders to around acquiring Challenger; the chance to was a small capex but could generate good

reject the WPG/Pybar bid in favour of its own reduce dilution and then exploit the remnant cash flow for three years and meant no dilu-

$2 million offer. Kingsgate swiftly rebuffed resources,” Jacobsen said. tion to our shareholders,” he said.

Marmota’s proposal, saying no written of- Rossiter said WPG’s due diligence had Tarcoola is 160km from Challenger and

fer had been lodged and that the junior had included detailed mine, stoping and develop- WPG is anticipating trucking ore from the

“provided insufficient evidence it could pro- ment scheduling. small resource to the Challenger mill.

vide a fully funded quantified offer” and hadn’t “We think there is a lot of unexploited re- “There are a lot of synergies in fixed costs,

demonstrated to “Kingsgate’s satisfaction that source still down there in the Challenger West people, etc. Challenger has an established

they have the financial capacity to fund such and M1/M2 orebodies; the challenge is to camp and there may be the opportunity to

an offer”. keep dilution down,” he said. “These are nar- move some kit around but we will see what

For WPG managing director Martin Jacob- row veins and Kingsgate was mining at 5m by happens,” Jacobsen said. “A majority of the

sen, the WPG/PYBARoffer remained the best 5m. We believe the opportunity lies in tighten- workforce is SA-based and there’s not many

and most reliable on the table for Kingsgate. ing those up; probably to 3m by 3m. That will opportunities for them at the moment and we

“Kingsgate looked at other options and de- lead to a scaling down of the project but an anticipate getting the bulk of the people for

cided we were the most viable because we’ve increase in the grade. It is currently producing Tarcoola from the existing workforce at Chal-

been dealing with them for a long time, we did at 4 g/t; we think we can get it to around 6 g/t.” lenger.”

due diligence as far back as 15 months ago,” Rossiter said mine management had done WPG’s larger development asset, Tunkillia,

Jacobsen said. “To Kingsgate, it is important “a good job” controlling costs in the last 12 will likely also benefit from a start-up of opera-

to have a credible party to sell to because of months and Challenger was now profitable tions at Challenger and Tarcoola, if the com-

the history of the mine. The level of due dili- after a tough few years but it remained an op- pany can get its economics to stack up.

gence we have done and the regard we are eration “starved of capital”. “It will make for a much better exploration

held in by the SA Government gave them that “The operation was always chasing devel- campaign at Tunkillia,” Rossiter said of the

confidence in us.” opment for production; drilling was never far cash flow generated from Challenger and

Kingsgate had been looking for an exit from ahead of mining,” he said. “And, there is up- Tarcoola. “We are getting results out of our

Challenger for more than 18 months as the side elsewhere. There have been sniffs eve- calcrete geochemical programme now and

company turned its focus to international op- rywhere which have not been followed up.” we intend to start drilling some of those tar-

erations in Thailand and Chile. The mine has An immediate target for exploration follow- gets soon.”

struggled to relive its mid-2000s heyday when up will be the Challenger South South West Tunkillia has a resource of 12.32mt @ 1.41

then-operator Dominion Mining was among prospect which will be subject to a royalty if g/t for 558,000oz gold but WPG believes

the lowest cost and highest margin producers brought into development. more ounces are needed to prove the project

in Australian gold mining. “It has had good hits but we will now put economically viable.

WPG sees opportunity for a smaller, more an exploration drive in and start advancing “The premise is to have a central mill be-

focused operator at Challenger. exploration there,” Rossiter said. “It will have ing supplied by the existing resource and then

“It didn’t fit into Kingsgate’s corporate pro- to be trial mined to see if we can turn it into finding satellite deposits to provide further

file and while it did not have much value to a something. The royalty doesn’t kick in until feed,” Rossiter said. “We think we can add

company of that size it potentially does to us 30,000oz of production so that allows us to simple resources which will allow us to amor-

and not just through synergies,” chief financial do some trial mining and see what we can do tise the capex over a wider resource.”
officer Wayne Rossiter told Paydirt.
The synergies referred to by Rossiter are with it.” – Dominic Piper
Remnant resources in the existing develop-

with WPG’s two existing gold projects in the ments will also be targeted.

region; Tarcoola and Tunkillia. Those syner- “There has been a lot of the resources writ-

gies could include trucking ore to the Chal- ten off recently; half of it in Challenger West

AUSTRALIA’S PAYDIRT DECEMBER 2015 - JANUARY 2016 PAGE 17

NEWS

Oz set to revamp Carrapateena

Oz Minerals Ltd is set to take a fresh ap- Oz Minerals’ Prominent Hill operation is now serviced by the Ankata and Malu underground mines
proach to its Carrapateena project in South
Australia with the deep-lying copper orebody to of cash. That is a strong position to be in and had been actively hunting for new projects but
be re-imagined as a high-grade proposition. claimed the search was based on opportunity
there’s not another company I can think of in rather than necessity.
In October, the South Australian copper
producer announced a revised resource for that position.” “The reason we have a growth strategy is
Carrapateena, based on a high-grade core of because of the state of the market. We see
61mt @ 2.95% copper equivalent. Release of It is an enviable situation for the company most companies selling assets because they
the new resource paves the way for a revised are overleveraged but we’re not in that posi-
look at Carrapateena, which up until now has to find itself in following three years of scour- tion. We have that luxury because we have
been viewed as a low-grade, large tonnage got a good balance sheet. That is the only
project. ing the market for projects with which it could reason we have a growth strategy; opportu-
nity, it is not a matter of having to do it.”
Oz has been investigating its development stock its sparse development pipeline.
options for Carrapateena as part of a compa- There is undoubtedly opportunity to move
ny-wide strategic review launched in April this Cole said M&A wasn’t an imperative for Oz, on assets in the current market downturn, so
year. It had been assumed the company was why then has Oz not yet announced a major
sticking to the low-grade plan through either which has always seen its existing assets as deal?
a standalone operation being supported by
a development partner or an integrated ap- being the most value accretive. “We have looked at a lot of projects but
proach, which would see Carrapateena ore quite often deals fall over in the due diligence
railed to the company’s operating Prominent “I’ve never seen phase because if the resource quality is not
Hill processing facility. robust, we are not interested. It comes down
acquisition as a re- to the quality of the resource. We’ll keep look-
However, the new resource has presented ing and we are seeing more value now than
a third option and a new scoping study has quirement and the six months ago and I suspect that trend will
been launched, focusing on development of continue. Larger companies are in distress
the high-grade core only. best value for any and juniors can’t raise equity for their projects
so opportunity continues to present itself.”
“When we launched the new strategy for company is to find
Carrapateena we had begun by looking at With a strong balance sheet, Prominent Hill
two main options; a $3 billion capex, $1 billion more resources
NPV, 13% IRR standalone project or a com-
bined project which would see Carrapateena around an existing
ore railed to Prominent Hill,” chief executive
Andrew Cole told Paydirt. “We realised we processing plant.
hadn’t given enough consideration to the third
option of a smaller, high-grade operation. So, Prominent Hill and
in the last six months we have been rebuilding
the resource models on much finer meshes.” Carrapateena pro-

The result was a new high-grade resource vide decades of po-
which has the company seriously contemplat-
ing this new third option. tential for the com-

“I must admit to being a little surprised at pany.”
just how high the grade is, how large it is and
how robust it looks,” Cole said. “I suspect the Despite such as-
scoping study will show it has a much lower
risk profile and is more robust than the larger sertions, Cole ad-
options. My gut says the high-grade option
will prove the best.” Andrew Cole mitted the company

If that transpires, it could represent a major
recalibration of Oz’s growth prospects.

The company has struggled to define Car-
rapateena’s economics since acquiring the
project for $250 million in
2011 and had taken it off
the JV market earlier this
year in an effort to improve
the value proposition.

The possibilities for a
smaller, high-grade option
are numerous.

“The first option has a
fairly high risk profile for a
company of our size and
would require a partner to
develop. The advantage
of the high-grade option is
that we could do it on our
own. We could fund it out

PAGE 18 DECEMBER 2015 - JANUARY 2016 AUSTRALIA’S PAYDIRT

Andrew Woskett Exploration in South Australia has taken a back seat in recent years but Oz is hoping an
innovative agreement with Minotaur Exploration can reinvigorate it
enjoying strong production results for a third
successive quarter and Carrapateena seem- cycle in mind however,” he said. “This is about drive costs down further.”
ingly reinvigorated, Oz has even had time to getting fitter, leaner and more agile to allow Reserves at Prominent Hill are defined out
give a junior explorer a helping hand. the company to prosper in any part of the cy-
cle. to 2028 but with no resource-to-reserve drill-
In October, the company announced it was ing having taken place in the last two years,
opening up its exploration data room to fel- “We are getting fundamental things right Cole sees ample opportunity to extend the
low South Australian company Minotaur Ex- and the leaders we have in all parts of the mine beyond its current life.
ploration Ltd. Under the agreement, Minotaur business are well aligned to the strategy so
will conduct due diligence on the Mt Woods we make decisions with a common outcome “We will start a drilling programme next
tenements around Prominent Hill with a view in mind.” year to convert resources to reserve,” Cole
to identifying potential drill targets on the rel- said. “It is a trade-off between what you can
evant tenements. The new strategy extends beyond merely spend money on today and waiting but I do
business-speak however. At Prominent Hill, think there is merit in looking at the resource
If Minotaur identifies any potential drill tar- the company has achieved consistent safety because there is much more opportunity at
gets, the two companies will negotiate a for- and cost improvements this year and Cole is Prominent Hill.
mal JV over designated projects. now confident enough to predict a second de-
cline will be built. “It is also the cheapest way to increase
It is a return to the Mt Woods area for Mi- production. It would be different if there was
notaur, which first discovered the Prominent “We continue to see records being set in massive capex required to develop those re-
Hill orebody before Oz acquired it in 2005. the underground,” Cole said. “And we are now sources but there is not, the infrastructure is
Speaking to Paydirt in November, Minotaur looking at putting in a second decline, which already there and we will do it irrespective of
managing director Andrew Woskett said Oz’s will allow us to increase annual output. The anything else the company does.”
move was a rare one in Australian exploration decision will be based purely on the econom-
circles. ics but I think they will be robust and will help – Dominic Piper

“This is unheard of, usually it’s the juniors
opening up to the majors, the flow of informa-
tion is never the other way,” he said.

For Cole and Oz, it is an opportunity to
bring expertise and energy into an asset
which would otherwise lay dormant.

“We see real value in this deal. Minotaur
has expertise in this area; it is really good
at exploration and has got a track record of
discovery and a level of experience we don’t
have in the company,” he said.

“We have this large database that we are
not currently looking at. It is almost a free op-
tion, to see if they come up with any explora-
tion targets.”

Cole’s enthusiasm for the near future is not
only restricted to exploration. With three suc-
cessive quarters of improved performance at
Prominent Hill Oz is one of the few base metal
miners in Australia to have enjoyed 2015.

“I am happy with the recent performance.
The September quarter was a good one and
that is three in a row now,” Cole said. “We
have made really good progress at Prominent
Hill but these results are just one step along
the road. It demonstrates that the strategy
we set out at the start of the year is reaping
rewards. But, one quarter does not make a
business.”

That strategy was designed to turn Oz into
an agile market mover rather than predictable
plodder, one that would be better suited to un-
stable markets.

“The changes were not done with the down

AUSTRALIA’S PAYDIRT DECEMBER 2015 - JANUARY 2016 PAGE 19

COVER

Sibanye bunkers
down in second dig

If the modern South African resources indus- spun out of one of the majors, can benefit That ability to decipher just what it is
try resembles the last days of the dinosaurs, from a similar attitude. that investors want has been a key plank to
Sibanye Gold Ltd chief executive Neal Frone- Sibanye’s early strategy.
man may be about to play the role of ambitious “I got my original grounding in a large com-
small mammal, taking advantage of the out- pany [Harmony Gold Mining Co Ltd] but then The company was spun out of Gold Fields
dated behemoths to thrive among the seem- spent a large part of my career building junior Ltd in 2012 as the major decided its future lay
ingly desolate landscape. companies,” Froneman told Paydirt. “That away from South Africa. Many market watch-
experience has been very useful at Sibanye. ers read it as evidence of the terminal decline
Mammals survived where dinosaurs didn’t Juniors are a lot more entrepreneurial and ag- of the South African gold sector, one of the
because they were smaller and more adapt- ile. Adapting that to Sibanye, we have been industry’s iconic names all but abandoning
able to changing environments than the larger able to move quickly, and work on a junior the domestic scene. This was not a spin-out
reptiles; as climates and vegetation altered, company cost structure. Junior companies designed to generate greater value, it was an
they flourished. After many years in the junior are also attentive to shareholders and interact attempt to ring-fence assets Gold Fields felt
resources sector, Froneman has developed well with capital markets, understanding what were placing a drag on its share price.
similar skills and feels Sibanye, a company they want.”
Rather than enjoying the old “gold premi-

PAGE 20 DECEMBER 2015 - JANUARY 2016 AUSTRALIA’S PAYDIRT

um”, the likes of Gold Fields, Harmony and African assets work and one which delivered in South Africa but in its first two years the
AngloGold Ashanti Ltd suffered from a “South superior return on investment to sharehold- company delivered on its promise to turna-
African discount” in the eyes of many as ris- ers. round the underperforming Kloof, Beatrix and
ing cost structures, deeper, more technically Driefontein operations it inherited from Gold
challenging orebodies, disruptive and often Installed as Sibanye chief executive prior Fields. It also picked up a number of smaller
violent labour disputes and government in- to its listing on the Johannesburg Stock Ex- assets such as the Cooke underground mine
tervention placed untold pressure on industry change in early 2012, Froneman has always from Gold One International Ltd as it looked to
performance. seen opportunity in Sibanye rather than bar- consolidate operations on the Witwatersrand
riers. He believes the discount South African Basin.
At the same time, a perception was grow- producers were suffering was about much
ing globally that the gold industry had lost its more than political circumstances, their fail- The impact was almost immediate,
way – focusing on size rather than margin – ure to deliver compelling returns to investors Sibanye’s share price outperforming that of
with its returns on investment poor. Sibanye’s was at the heart of their strife. parent company over its first two years, up
creation was designed to address both chal- 12.41% compared with Gold Fields’ 57% re-
lenges; a company which could make South He freely acknowledges the issues and treat over the same period.
challenges facing companies operating

AUSTRALIA’S PAYDIRT DECEMBER 2015 - JANUARY 2016 PAGE 21

COVER

In its first two years, Sibanye delivered improvements across its gold portfolio, including the underperforming Beatrix mine

However, Sibanye’s most ambitious move “It was an early strategy of the company,” Anglo Platinum for an initial upfront payment
of R1.5 billion. In October, it followed up with
came in September, when it fulfilled Frone- Froneman said. “In the first nine months we a full, all cash $US294 million takeover bid for
ASX-listed miner Aquarius Platinum Ltd.
man’s long-term ambition of moving into the developed a strategy about realising value
Froneman sees opportunity within the two
platinum space. and sustaining our dividend yield, everything sets of assets. Sibanye’s early strategy was
based on Harmony’s successful model of re-
If the South African gold sector is stag- is underpinned by the dividend yield play. But, structuring and reorganising operations – in-
deed Froneman was known in South African
gering, its platinum industry is on its knees the gold premium is no longer there for gold mining circles as “Mr Fix-it” during his time at
Harmony – but he doesn’t see the same im-
as the fall in prices and the operational chal- miners, mainly because of the rise of gold perative in the platinum mines.

lenges facing the deep level mining squeeze ETFs, so the imperative to be gold focused is “When we first entered the gold business
there was a lot of the Harmony way of fixing
margins. The likes of Aquarius Platinum Ltd, not as strong. We recognised that we would assets, although with a modern take on it. In

Lonmin plc and Anglo American Platinum Ltd have to move into other commodities if we these platinum projects, we are not purely
focused on fixing them. The opportunity
have endured massive share price deprecia- were going to retain a strategy of being South lies in the ability to implement a gold culture
in these mines. These assets have been
tion and production shortfalls in the last three African-focused.” run really well, especially the Aquarius as-
sets and don’t require a radical overhaul. It
years. That strategy was eventually realised this is about putting them into a position where
they can benefit from the eventual turna-
“So, why then, is Sibanye taking such a risk year. In September, Sibanye announced the round in commodity prices.”
acquisition of the Rustenburg operations from
now?
The company has a lot of high risk operational
experience in deep level gold mining. We are

right at the forefront of work on seismic activity and
environmental concerns and we think we can apply
those skills and knowledge to platinum.

PAGE 22 DECEMBER 2015 - JANUARY 2016 AUSTRALIA’S PAYDIRT

As it looked to consolidate operations on the Witwatersrand Basin, Sibanye acquired

“ the Cooke underground mine from Gold One International Ltd
Because we have this sole focus on South
Africa we have been able to deal with the
labour disputes better than perhaps some other
companies have. There is no hidden agenda [to
withdraw capital from the country] and we don’t
get bullied by unions or government into making

short-term decisions.

So, Sibanye picked up quality assets at a “The company has a lot of high risk opera- on seismic activity and environmental con-
discounted price but Froneman refutes any tional experience in deep level gold mining,” cerns and we think we can apply those skills
claim the deals were driven purely by oppor- he said. “We are right at the forefront of work and knowledge to platinum.”
tunism.
Neal Froneman The company’s growing stature, both finan-
“We were fortunate that we had seen the cial and political, will also be used to improve
market deteriorate but it was far from oppor- the platinum assets.
tunistic, it was a very structured process. You
can’t put these sorts of deals together in a few “It is very beneficial to have the financial
weeks. It often takes months to get to the dis- ability to invest through the downturn,” Frone-
cussion stage and then another four months man said. “Clearly, the strength of our balance
to reach final conclusion. sheet means we can attract capital at low cost
and there are certainly synergies to be ex-
“Some of the transactions were embarked plored within certain services across gold and
on earlier but had been running for 12-18 platinum.”
months and they did come to their logical
conclusion all around the same time. Perhaps The company is also planning to leverage
we did push them harder towards the end be- off its increased investment in South Africa.
cause we recognised the market was at the
bottom.” “Because we have this sole focus on South
Africa we have been able to deal with the la-
Now in possession of Rustenburg and soon bour disputes better than perhaps some other
to have control of Aquarius’ Kroondal mine companies have. There is no hidden agenda
and Platinum Mile retreatment operations [to withdraw capital from the country] and we
(as well as a 50% share of the Mimosa JV in don’t get bullied by unions or government into
Zimbabwe) Sibanye will put its own deep-level making short-term decisions.”
gold mining skills to use in the platinum space.
It is perhaps slightly ironic that Sibanye is

AUSTRALIA’S PAYDIRT DECEMBER 2015 - JANUARY 2016 PAGE 23

COVER

“ Sibanye’s September quarterly report saw production guidance downgraded for the first time. Production is expected
to be 4-6% lower than the 1.51 moz gold forecast at the beginning of 2015
I’m a lot more optimistic; a lot of what we are Froneman points to the in-
seeing is noise and rhetoric. Certainly what the dustrial unrest as a key reason
for the company’s poor perfor-
international community is seeing must look horrific but mance. Labour tensions in the
South African mining industry

South Africa is only as difficult as anywhere else in Africa. rarely run at anything less than
high but with the 2015 gold sec-

tor wage negotiations coinciding

spreading its influence into platinum at pre- over Kloof, Driefontein and Beatrix. with the rising conflict between the traditional

cisely the time it has begun to hit hurdles on “We were really pleased with our first two unions and upstart AMCU, discussions were

its gold operations. years of operation but that was low hanging particularly taut.

After enjoying successive years of improv- fruit,” Froneman said. “We are at steady-state For Froneman, the impact of the unrest

ing performance in 2012, 2013 and 2014 production and now is where the hard grind went further than simply work stoppages.

Sibanye has found things tougher in 2015. starts.” “The last half year has certainly been nega-

Its September quarterly report tively impacted by the wage dis-

saw production guidance downgrad- putes. To maintain operations like

ed for the first time. It now expects this is about keeping people fo-

production to be 4-6% lower than the cused on the job. There is intense

1.51 moz gold forecast at the start union rivalry but three of the four

of the year. Performance has been unions [AMCU remains opposed]

hampered by two fires at the com- have come to agreement over

pany’s Kloof operation and ongoing wage increases and it has been

labour unrest that was only resolved well accepted. We know there is

in October with a new wages agree- little appetite for strike action.”

ment struck with unions. The unrest has played a major

“It has not been a good 2015 for role in lifting South Africa’s risk

various reasons,” Froneman said perception among international

“Some of the blame has to go to investors but Froneman, while

management and for the first time we critical of militant unions, retains a

have had to revise guidance down- positive outlook for the South Afri-

wards which is disappointing but can mining sector.

there are no fatal flaws in the opera- “I’m a lot more optimistic; a lot

tions and we look forward to deliver- of what we are seeing is noise and

ing on our promises in 2016.” rhetoric. Certainly what the inter-

Part of Sibanye’s problem may be national community is seeing must

that it enacted such a rapid turna- Despite earning respect from industry during his short stint as Minister for look horrific but South Africa is

round in performance when it took Mineral Resources, Ngoako Ramathlodi has been replaced only as difficult as anywhere else

PAGE 24 DECEMBER 2015 - JANUARY 2016 AUSTRALIA’S PAYDIRT

“If South Africa was to introduce a carbon tax, internal modelling has shown Sibanye would be forced to close five shafts and shed 15,000 jobs
in Africa. Threats by unions all becomes rhet- It is a really sad situation that an industry
oric if you’re doing the right things; they end as important to the country as mining is so
up becoming less relevant. Our employees badly managed from a government perspective.
recognise the good work we are doing on up-
liftment, housing, etc. Unions will never disap-
pear but all the threats mean little if you have

the hearts and minds of your employees.”

The other major issue proving a strain on

investor sentiment towards South Africa is the

Government’s inconsistent attitude towards

the resources sector. In September, Mose-

benzi Joseph Zwane was announced as suc-

cessor to Minister for Mineral Resources to

Ngoako Ramathlodi, who himself had been in

the post little more than 12 months.

Zwane has no experience in the resources

sector and in Ramathlodi replaces a minister

who had appeared to earn respect from both

business and unions.

“It is a really sad situation that an industry

as important to the country as mining is so

badly managed from a government perspec-

tive,” Froneman said. “It is clear that govern-

ment despises the historical industry and

there is a total lack of leadership.

“We had just started to make headway with

the previous minister when he was replaced

and no one in the Government has the indus-

try experience needed to provide leadership

in this most difficult of economic environ-

ments.

“It is very difficult to distinguish what the

Government’s motives are. I understand the

ideology is deeply rooted. So let’s put it on the

table and discuss it and let’s get the Minister Despite the signals for investment in the country, Sibanye remains committed to South Africa

AUSTRALIA’S PAYDIRT DECEMBER 2015 - JANUARY 2016 PAGE 25

COVER

With power issues blighting miners’ operations in South Africa, Sibanye has acquired coal licences in the Waterberg to generate its own energy

good advisers. There is a lack of understand- ping the 100% capital investment deduction vis Committee’s recommendations likely to
cause severe damage to the mining industry,
ing of what it takes to run a business and what and gold tax formula for new mines and the they fell outside of its original remit.

is required for what capital markets are.” discontinuation of the special indexation al- “The official objectives of the Davis Tax
Committee are very appropriate but I don’t
Contentious issues continue to build up in lowances that compensate for the cost of see it as having considered changes they’re

“the sector, with the recent findings of the Da- capital. proposing on original objectives. More tax
vis Tax Committee review suggesting scrap- Froneman said not only were the Da- will lead to further job losses and shaft
closures. There is constant pressure from
There is the option of partnering with juniors or government to retain jobs but something
even taking up a secondary listing in Australia. has to give.”

South Africa is also preparing to imple-
ment a carbon tax which, combined with
electricity prices which are rising well above
inflation, Froneman believes would force
Sibanye to close five shafts and shed 15,000
jobs. However, he feels the company’s com-
mitment to the country offers a unique oppor-
tunity to make its concerns heard.
“In all, we are looking at an additional R500
million in tax a year. Government’s role is to
create an environment where business can
flourish, so we will continue to resist policy
that is ill-informed and talk about it much more
than we used to.
“Because we are South African focused
and have the ability to invest more capital we
do have the ability to have our voice heard.
We have stood our ground on legal issues and
are intent on protecting shareholder interests.
We are going to be quite outspoken on this is-
sue with a view to making government aware
of what policy can do to the economy.”
To mitigate against rising power prices,
Sibanye is examining generating its own elec-
tricity.
Earlier this year it acquired coal licences

PAGE 26 DECEMBER 2015 - JANUARY 2016 AUSTRALIA’S PAYDIRT

A secondary listing on the ASX is an Froneman blows the kudu horn to herald Sibanye’s arrival as the largest gold miner on the JSE
option for Sibanye
company’s evolution as a high margin invest- “We’ve made our first step into Zimbabwe
in the Waterberg region. Froneman said the ment house regardless of commodity. “If we but we see so much opportunity in South Af-
company would use its new energy division to had to promote Sibanye on the basis of high rica because there is no competition here, no
ensure its gold and platinum operations were quality gold and PGM mines in South Africa one wants to invest here. Also, we have not
sheltered from rising power costs. we would get zero traction among internation- had the equity rating to look elsewhere but
al investors. Instead, we have had to highlight once we are established as a high yield divi-
“We’ve had a spate of under-delivery from the benefit of being a benchmark dividend dend payer we can look offshore,” Froneman
Eskom which has created two issues; unreli- yield payer. That way you generate a lot more said. “There is the option of partnering with
able power and electricity prices increasing at interest in your company. However, the risk juniors or even taking up a secondary listing
rates 2-3 times inflation. In energy-intensive associated with operating in South Africa in Australia.”
industries such as gold and PGMs you have means we have to meet higher hurdle rates.”
to do something more proactive. We tell gov- – Dominic Piper
ernment about the job losses which will occur So, having diversified the commodity base,
but more importantly we looked into solar and is geographic expansion on the agenda?
coal and will have our own coal division.

“It is designed primarily to keep a cap on
power (it is the second largest cost and 20%
of operating costs). If you can’t tell investors
what you are going to do to manage costs
then you are failing them.”

Despite servicing its own power needs,
Froneman said Sibanye would look at further
sales.

“We are looking at entering the energy mar-
ket in a way that will be value accretive for our
gold and platinum business but we will look at
other markets as well.”

It appears Sibanye has grown from gold
specific to diversified miner by a mixture of
strategy, opportunity and serendipity and
Froneman is clearly ready to continue the

AUSTRALIA’S PAYDIRT DECEMBER 2015 - JANUARY 2016 PAGE 27

INDABA PREVIEW

When the resources world gathers in February for the annual Investing in African
Mining Indaba delegates will be glad to feel the warm Cape Town sun on their
backs; because in every other way the industry is experiencing the bleakest of winters.

Another year of commodity price retreat has meant equities and debt markets have
remained shy of resources stories and with China’s slowdown set to continue and the
international terrorism threat adding to investor uncertainty, there currently appears little
prospect of a rapid turnaround.

In the world’s largest preview to the event, Paydirt examines the issues confronting
the sector, including those which will be broached during the conference. In an innova-
tion, the main programme will feature panel discussions on topics as diverse as global
exploration trends, investment in African infrastructure, sustainable development, M&A
and alternative sources of financing.

This preview also shines the spotlight on the companies who are likely to make an im-
pression at the Mining Indaba; from Australian potash juniors to the world’s gold majors.

Such a mix has been integral to the success of, not only Mining Indaba, but a wider
African resources sector which continues to represent the best opportunity to fuel sus-
tainable development on the continent.

PAGE 28 DECEMBER 2015 - JANUARY 2016 AUSTRALIA’S PAYDIRT

AUSTRALIA’S PAYDIRT DECEMBER 2015 - JANUARY 2016 PAGE 29

INDABA PREVIEW

Bristow ready to take advantage

At a time when the global gold “Such has been the success at Kibali, DRC has become one of Randgold’s key exploration focuses
sector is still struggling to over- The gold industry is in dire Randgold performed solidly in
come the avarice and profligacy of straits because there is no 2014, posting production of 1.147
last decade, the chief executive of pipeline of projects. moz at total production costs of
one of its best performers thinks the $US548.48/oz but its peers have
struggled to match such achieve-

solutions should be obvious. ments.

“I’ve been talking a negative story around try-wide cost-cutting initiative but Bristow be- Bristow said the global industry was in a

the gold sector for some time and there is lieves that further tightening is not achievable. sorry state.

now reluctant agreement that it is not going to “Cost-cutting can’t pull the industry out be- “The rest of industry, bar Newmont [Mining

improve through the gold price. It is obvious cause grade is the problem, but the industry is Corp], posted a net loss in 2014 and wrote

that the industry is not doing enough explora- not investing in solving such problems. Com- off millions in valuations. That can’t con-

tion,” Randgold Resources Ltd chief executive panies can’t just keep sucking away at the tinue. If you run models over the industry at

Mark Bristow told Paydirt. above reserve grade ore.” a $US1,000/oz gold price, all covenants are

Data from SNL Metals & broken and the global mine

Mining supports Bristow’s life is five years,” he said.

claim. Having peaked at “And, we are not even at a

$US9.68 billion in 2012, global relatively low gold price.”

exploration budgets fell more For Bristow, Randgold’s

than 50% to $US4.57 billion latest corporate deal betrays

in 2014, just two years after the trouble gold’s majors find

the peak and 2015 is likely to themselves in.

be even lower with budgets of In September, the London-

$US3.94 billion in the first nine listed company announced it

months of the year. had been invited by Anglo-

For Bristow, the problem is Gold Ashanti Ltd to come up

amplified because those pro- with a development plan for

jects being discovered and the 5.3 moz @ 6.7 g/t Obuasi

developed are not of sufficient mine in Ghana.

quality to improve the indus- Randgold will attempt to

try’s performance. design a “more focused, effi-

“The gold industry is in dire cient and mechanised” high-

straits because there is no grade underground operation

pipeline of projects,” he said. at the 100-year old mine. If

The sector has pulled itself it chooses to go ahead with

back from the abyss in the last Randgold’s Kibali JV partner AngloGold Ashanti has now asked the London-listed the development, Randgold

few years thanks to an indus- company to investigate options for the Obuasi mine in Ghana will form a JV with AngloGold

PAGE 30 DECEMBER 2015 - JANUARY 2016 AUSTRALIA’S PAYDIRT

Mark Bristow Randgold’s Kibali JV has been one of Africa’s modern gold success stories

Ashanti and fund the venture on a 50/50 ba- be approved through parliament. Instead, Randgold is putting greater ef-
sis. “Ghana is a tough place to work and noone fort into its own exploration portfolio where it
plans to spend $US50 million in 2016.
“It is a reflection of the dire straits the ma- has made a lot of money there,” Bristow said.
jors of the industry find themselves in,” Bris- “By mid-2016 we will know more about Obua- “At a time when industry is cutting back on
tow said of AngloGold Ashanti’s decision to si’s chances.” exploration we are expanding,” Bristow said.
invite his company in. “It is a free option for “We have seen a reinvention of our explora-
Randgold and highlights the point that one Regardless of what transpires at Obuasi, tion strategy and we think we are well posi-
of the largest gold producers in the world Bristow is confident other similar opportuni- tioned.”
couldn’t do anything with this asset and had ties will continue to present themselves.
to ask Randgold to come in and take over.” The company’s geographic spread in Af-
“I know there is going to be more of these rica – DRC, Mali, Cote d’Ivoire – is such that it
AngloGold Ashanti has struggled with com- opportunities,” he said. “Look at Barrick [Gold can comfortably select any region around the
munity and operational issues at Obuasi and Corp], it is a tragedy. It has six of the 12 world- continent in the knowledge it has an existing
Bristow admitted the challenge in front of class operations in the world but has got 12 footprint.
Randgold was immense. other dogs on its books and has massive debt
problems.” “Our big focus regards exploration is Cote
“It has got grade but it has also got a lot d’Ivoire, both in exploration effort and expend-
of baggage and liabilities attached to it,” he However, a combination of stubbornness iture,” Bristow said of a West African country
said. “Operating in Ghana is very difficult. It is and financial overhang often stymies deals. where it already operates the Tongon mine.
a sophisticated country but with that sophisti- “And, it is appropriate on balance of risk as it
cation comes sophisticated complexity. “We’ve tried to work with the majors using is most attractive geopolitically and geologi-
our clean balance sheet. But the problem is cally.”
“The challenge for Randgold is whether dealing with the debt these operations have
we can come up with a plan good enough to on them and also that these companies want Cote d’Ivoire largely missed the early-
carry the liabilities and also fit our 20% return to hold onto those assets,” Bristow said.
hurdle.”

Although the JV is still in its early days,
Bristow admitted the challenge was already
considerable.

“We are spinning the wheels on it right now.
The chances of success are slim but we can
see the gaps and it is a free option.”

Whatever strategy Randgold employs at
Obuasi, it appears Bristow is prepared to walk
away from the venture if the project begins to
prove a burden.

“I don’t want Obuasi to get into our share
price; we consider it part of our exploration
strategy.”

So, Bristow does not want its new Ghana-
ian venture to reflect badly on investors, but
neither does he want the host government as-
suming Randgold’s entry will mean more tax
and royalty receipts being generated from the
struggling mine.

“I’ve just been to Ghana and put it to the
Government that they’re going to end up hold-
ing the baby in their lap [if Randgold doesn’t
commit to the project]. The Ghanaian Govern-
ment found it difficult because we were say-
ing: ‘We are partnering with you, not Anglo-
Gold and as such we want our participation to

AUSTRALIA’S PAYDIRT DECEMBER 2015 - JANUARY 2016 PAGE 31

INDABA PREVIEW

2000s West African gold explosion as it was “In an effort to drive down costs, Randgold has switched to owner-operator at the Lulo mine in Mali
mired in civil war. However, with the coun- There’s a bullish story for gold; it just needs
try host to 22% of the well-endowed Birim- crystallising. And, the next major discovery
ian greenstone belt, most gold explorers ac- will make a massive difference.
knowledge its potential. “We have done all the right things; the last “You contribute nothing to your host coun-
being the move to owner-operator at Lulo. tries unless you make profits. Building a school
Randgold is planning to step up its explora- may be good but it costs around $100,000. In
tion efforts there in 2016. Tongon has paid its capex off so operating Mali, we cover the entire public sector payroll
costs are now the all-in costs. That should with our contribution and we have to educate
“There is a high barrier to entry because help the cash coming in and Gounkoto is be- the Government on that contribution, showing
there is no pre-existing geological data. So, ing paid off quickly.” it is a positive thing,” he said.
the company is building that up and flying a
massive survey. That is key part of building Bristow also believes Randgold is winning Positivity remains at the heart of Bristow’s
the information database.” its battles with government. Operating in po- beliefs around the gold sector.
litically sensitive jurisdictions such as Mali,
DRC is another country where Randgold is Cote d’Ivoire and DRC come with unique “There’s a bullish story for gold; it just needs
keen to expand its footprint having success- challenges but the company’s operations crystallising. And, the next major discovery
fully started mining at its Kibali JV with Anglo- have never been affected by political turmoil. will make a massive difference.”
Gold Ashanti.
Bristow has long-been a vociferous voice – Dominic Piper
“We have consistently added to our knowl- for the need for investment stability.
edge in the DRC and are building an under-
standing of the environment and expanding
our footprint there,” Bristow said. “It is hard
to explore because they are small, skinny de-
posits but they are always good quality and
high-grade so it is worth it.”

The successful ramp-up of Kibali – in north-
eastern DRC – has been one of the biggest
success stories in the gold industry in the last
decade. The mine is set to achieve 700,000
ozpa capacity this year and its reserve grade
of 11 moz @ 4.07 g/t gold is among the best
in Africa.

“It is a very efficient operation,” Bristow
said. “It is ramping up to 700,000 ozpa and we
have got grade, throughput and power costs
on our side.”

Elsewhere in its five-mine portfolio, Rand-
gold is enjoying relative success.

“We are beginning to lift profit again as we
have managed to lower input costs while the
grade has remained the same,” Bristow said.
“The September quarter was particularly
good because we were able to deliver on our
efficiencies.”

He said the company had done everything
it could to adapt to the low price environment.

With capex now paid off on the mine, Randgold expects Tongon to be a strong cash flow contributor in coming years
PAGE 32 DECEMBER 2015 - JANUARY 2016 AUSTRALIA’S PAYDIRT

Platinum fails to fill breach left
by gold in South Africa

When South African miner Papi Soke went As gold began to slide in the 1990s, platinum was expected to fill part of the gap,
from gold to platinum, he thought he was but now platinum’s prospects are as dire as that of gold
trading a sunset industry for one with a brighter
future. “The industry is in a tough space and the “Harmony offered a voluntary retrench-
companies have to do what’s necessary ment package and I switched to platinum to
In October, the National Union of Minework- to ensure they survive,” Roger Baxter, the advance my career,” he said.
ers (NUM) shop steward was one of over 800 chief executive of South Africa’s Chamber of
workers laid off at the Eland platinum mine, Mines, said. South Africa sits atop about 80% of known
closed by Glencore. reserves of platinum. The industry still has a
In October, Lonmin said it planned a larger labour force, but its numbers peaked
“I don’t know what to do now. I am think- $US400 million rights issue of new shares, in 2008 at almost 200,000. It was 188,400 in
ing of maybe going to a diamond mine,” the a last-ditch effort by a company on the brink. 2014 and will almost certainly decline from
34-year-old father of two, whose wife was here.
expecting in December, told Reuters as he In 1987, according to Chamber of Mines
sipped juice in a mall in the mining town of data, there were almost 554,000 people work- In 2014, only Anglo American Platinum
Brits north of Johannesburg. ing in South Africa’s gold sector. Platinum that among the big producers had a positive re-
year employed around 83,000. turn on equity which measures a company’s
Glencore is not alone. Platinum producers profitability of 1.2%, according to Thomson
Lonmin plc and Anglo American Platinum plc But as the century-old gold mines around Reuters’ data.
are also planning to cut jobs and the Govern- Johannesburg plunged deeper into the earth
ment has held meetings with companies and for lower grade ore, pushing up costs, the in- Northam Platinum Ltd’s was -10.1%, Im-
unions to try and prevent widespread lay-offs. dustry began shedding jobs. plats was at -7.1% and Lonmin was -5.7 per-
cent.
Impala Platinum Holdings Ltd (Implats) is Soke’s father was among those.
closing operations that will affect 1,600 jobs “He worked in the gold mines for 25 years, In gold, Harmony was -15.1% but two of
but it has said it hopes to absorb many of but in 1996/97, when the price went down, he the big gold producers were positive; Gold
those workers elsewhere in its business. lost his job. I now support him,” Soke said. Fields Ltd was 0.3% and Sibanye Gold Ltd
As the fortunes of the industries changed, was 12.9%.
As South Africa’s gold industry – which has platinum began employing more miners, pick-
produced a third of the bullion ever mined – ing up some of the men who lost their jobs Sibanye, the most profitable bullion pro-
began a steady slide in the 1990s, platinum in gold. ducer in South Africa, offers a bright spot for
was expected to fill part of the gap. But plati- In 2006 for the first time, platinum’s em- platinum, having snapped up Aquarius Plati-
num’s prospects are now as dire as that of ployment levels exceeded gold’s, reaching num Ltd and Amplats’ labour intensive assets.
gold. 168,500 compared to 160,000.
In early 2008, when platinum scaled its re- Sibanye chief executive Neal Froneman
The local industry is still recovering from cord peak of almost $US2,300/oz, its premi- has said that, with the right market conditions,
a five-month strike in 2014, and an oversup- um over gold was $US1,257. Gold’s premium he might even expand the workforce.
ply and low demand has pushed the price of over platinum is now $US165.
the metal used in autocatalysts and jewellery Soke made the switch in 2008, after five “I wish an investor would come and invest
down almost 40% from 2014’s peak. years at a mine run by Harmony Gold Mining in Eland,” Soke said.
Co Ltd.
In October 2015, it slid to seven-year lows – Ed Stoddard, Reuters
below $US900/oz on worries about a drop in
demand for diesel cars after carmaker Volk-
swagen admitted rigging diesel emissions
tests.

Diesel autocatalysts account for 40% of
global platinum consumption, so weaker de-
mand for diesel cars will further hurt the met-
al’s price. It’s now trading over $US1,000/oz,
but is still less than half the $US2,290/oz peak
it hit in 2008 and the outlook remains bleak.

“At current prices, fully 70% of the plati-
num shafts in South Africa are losing money,
across the industry, by our calculations,” Im-
plats spokesman Johan Theron said.

A Reuters poll in October pegged an av-
erage platinum price forecast for 2016 at
$1,105.50 /oz, 12% below the forecast of a
similar poll conducted three months earlier.

Further job losses are certain, a sensitive
issue in Africa’s most advanced economy,
where the unemployment rate is around 25%,
the mining workforce is restive, and income
disparities are glaring.

The layoffs may prove a serious test for the
ruling African National Congress (ANC) in lo-
cal elections in 2016, as it counts on a declin-
ing base for much of its political support.

AUSTRALIA’S PAYDIRT DECEMBER 2015 - JANUARY 2016 PAGE 33





INDABA PREVIEW

South Deep still on notice

Going back to basics helped Gold decreased by 7% to $US962/oz and
Fields Ltd deliver 42% more gold net cash flow totalled $US32 million.

from its South Deep mine in South The Damang mine also churned

Africa during the September quarter, out 7% more gold for the quarter due

but chief executive Nick Holland re- to higher volumes and grade.

mains unsatisfied with the operation’s Holland said Tarkwa was going

overall performance. through a “purple patch” on the back

South Deep produced 54,900oz of AISC lowering to $US870/oz, but

gold during the three-month report- the future of Damang remains cloud-

ing period, driven by a 30% increase ed.

in tonnes milled and a 13% rise in un- Gold Fields has commissioned

derground yield. AISC also reduced an independent study on Damang to

from $US1,895/oz to $US1,404/oz. assess the viability of the operation,

Improvements were also achieved with a focus on technical parameters

in mine development (58% increase and logistics such as pit wall angles,

to 1,486m) and South Deep posted grade and continuity of the minerali-

an operating net profit of $US1 mil- sation.

lion after recording a $US12 million “Damang is a different kettle of

loss in the previous quarter. fish and although it’s improved this

Holland said his company has quarter, we are pausing to reflect on

been working behind the scenes what is the best long-term exploita-

to improve efficiencies at the mine, tion strategy for the mine,” he said.

including short interval control and “We’re looking at possibly doing

long-hole stopes, but he conceded a pushback of the original pit which

South Deep was still underperform- we mined out in 2013 because there

ing. is a lot of gold under there at good

“Because South Deep has operat- grades; a continuation of what we’ve

ed at such a low level for so long, any mined for over a decade.

kind of improvement has a material “We’ll make a decision, I think, by

impact,” Holland told Paydirt. the end of Q1 as to whether or not

“We’ve gone up 42%, which is we’re going to recapitalise the mine

great, but we’re still a long way be- to expose that ore, which will prob-

low where we should be and we’re ably take us a good 18 months or so,

expecting another sizeable increase or whether we actually scale back

in Q4 and another sizeable increase and go on to care-and-maintenance

again in 2016.” and wait for better times and then go

South Deep converted from low- and mine it.”

profile (2.5m vertical height) to high- Gold production at South Deep lifted 42% in the September quarter Holland said his company re-

profile (5m vertical height) destress mained on the lookout for additional

during the September quarter and Gold Fields quarterly production was consistently above assets in Africa, most likely keeping within the

expects this to simplify and de-risk the mining 500,000oz. West African hub which services its existing

process. “I can’t see why we can’t get back to that operations in Ghana.

The transition to high-profile destress is in a reasonable timeframe,” he said. “I’m not Further investment in South Africa appears

expected to continue until at least early 2017. saying we’re going to be there [in 2016] but I unlikely and Holland warned rival miners in

Describing the long-hole stopes as the think we have to start working towards that. the country faced troubling times unless min-

“meat and potatoes of the mine”, Holland ad- “The reason we couldn’t sustain that is be- ing practices changed.

mitted his company had not done a good job cause there were blockages in the full value “The reason we’ve persevered with South

in this area for several consecutive quarters. chain. We weren’t doing proper follow-on Deep is because it’s a mechanised mine

“We get gold from a number of sources… ground support and we ran out of ground as and we really wouldn’t want to be involved

but the stuff that makes a difference is the a consequence because of geotechnical con- in labour-intensive narrow veins deep in the

open stopes – big cavities that we blast 20m straints. orebodies, which I’m afraid is the bulk of the

high, 60m long – we weren’t blasting those in “We weren’t filling voids with paste after remainder of the South African gold industry,”

the earlier part of the year,” Holland said. we were mining them timelessly and when Holland said.

“We’ve had intense grade control drilling to you don’t get the whole value mining chain in “I think if those mines don’t reinvent them-

make sure we understand the design and the sync, you end up bringing the operation to a selves in some way, where they can man

area of the stope and we’ve concentrated on standstill.” away from the face, it’s going to be difficult to

executing the stope ramp, mining on grade Holland said operations were unaffected by sustain them.

and on strike and reducing the external waste a security breach at South Deep in early Au- “That’s the reason we kept this particular

and dilution. gust. During the incident, a security services project. It’s the second largest undeveloped

“It’s early days yet, but I don’t think we’re contractor was killed and two others injured orebody in the world and it’s a mechanised

anywhere near where we want to be…but it by armed intruders. operation, otherwise I don’t think we would be

shows what a difference it can make when Production from the company’s Ghanaian investing more in South Africa.”
you start doing things better.” operations decreased by 2% to 174,000oz but For more of our exclusive interview with
this reduction was anticipated due to lower
Gold Fields is eyeing full-year production output from the Tarkwa mine because of the Nick Holland, look out for the January edition
of 190,000-193,000oz from South Deep, of sister publication Gold Mining Journal

but Holland wants to see the mine return lower grades mined during the quarter. – Michael Washbourne
to its glory days of several years ago when Despite the lower overall production, AISC

PAGE 36 DECEMBER 2015 - JANUARY 2016 AUSTRALIA’S PAYDIRT



INDABA PREVIEW

Base reveals Kwale
success secrets

Base Resources Ltd has finally Carstens was wary finding you can’t find it in fence one, you step out, and
lifted the lid on the strategies suitably skilled staff for the that continues until ultimately you can bring in
implemented to successfully es- construction stage of project an expat.”
tablish Kenya’s first ever mining could slow the project’s pro-
operation. gress and thus Base devel- Carstens said the strategy, and particularly
oped a clear-cut strategy for the software’s geo-fencing feature, helped
The company acquired its recruitment. Base mitigate an influx of countrywide job-
flagship Kwale mineral sands seekers.
project, 50km south of Momba- “One of the things we did
sa, in 2010 and started construc- early on was establish a com- “As soon as it became public that there was
tion of the pioneer mine in 2011. mittee that was the Mining going to be a mine the risk, and it happens all
Project Liaison Committee over Africa, is that you are going to get peo-
In late 2013, Base started (MPLC),” Carstens said. ple coming from everywhere wanting a job,”
production of ilmenite, rutile and he said.
zircon from Kwale and achieved “It comprised local parlia-
first export sales in 2014. mentarian representatives, “You’ve got to have ways to keep that tide
Tim Carstens government representatives, back. People had to provide proof of resi-
As the market watched on community leaders and a dence so that they could be located in the
from afar, admiring the speed range of people.” right fence. That fencing system is what ena-
in which Base ticked off its mile- The core element of Base’s recruitment bled us to push away all of the influx, because
stone checklist, the tome of challenges faced strategy was the design of an employee da- anyone from outside the fences was never go-
between acquisition and first production tabase software system containing a virtual ing to get a job and people realised that pretty
slipped into irrelevance. geo-fence feature, which the MPLC utilised quickly.”
to define areas in which the company could
Base managing director Tim Carstens told source differently skilled employees for Base distributed employment application
attendees of a recent Australia-Africa Miner- Kwale. forms to “every nook and cranny” of the local
als and Energy Group (AAMEG) seminar the “They figured out where the priority areas community and had more than 17,000 people
periods from acquisition to first production were and we drew the lines,” Carstens said. apply for work.
were some of the hardest, but most rewarding “It focused most of our initial employment
of his long mining career. opportunities, in the first instance, in the im- Carstens said relentless transparency and
mediate surrounds of the mine. The next step unwavering consistency in Base’s hiring poli-
Carstens said Base’s first point of order out was a slightly further distance and that cy got the community onside with the recruit-
was to manage the local community’s expec- continued. The basic principle is if you need a ment process.
tations of the project. certain skill set for a job you identify that skill
set and the people will be identified from the “We created 3,285 Kenyan jobs during con-
“There is high unemployment on the coast, database on the basis of skills and priority. If struction and 1,350 were from the local area,”
which creates enormously high expectations Carstens said.
for people,” Carstens said. Managing community expectations has been
one of Base’s best achievements “Most of those people in the local area had
“When you have many thousands of people never had a job before, let alone in the mining
who are looking for work, you need to spend industry. One of our proudest achievements
an enormous amount of time managing those was sending every single one of those em-
expectations. Everyone expects that it is them ployees home in the same condition that they
who will get a job when there’s discussion of a arrived in. It was no mean feat.”
mining project coming to town.”
At present, Base employs 800 people, of
Carstens said communicating the real op- which 94% are Kenyan and 62% are from the
portunities Base’s project could offer saved local community.
the company a lot of heartache.
The company is yet to experience any in-
The same couldn’t be said for other first- dustrial unrest and employs just 42 expat
time operators in Kenya, he said. staff. Its goal is to have 15 or less expats at
Kwale in the near future.
“It’s always easier to get support for a min-
ing or gas project by promising the community Carstens said the success of Base’s hiring
the world,” he said. and training strategies was recognised and
adopted by Kenya’s National Industrial Train-
“They will invite you in because they think ing Authority (NITA).
it is going to completely change their world.
Once you’ve done that there is no coming “One of the interesting things is the NITA
back. Then you’ve got to try and spend an was established not too long ago and it went
inordinate amount of time to go back on that on a global search for an industrial train-
and you can’t. We learnt fairly early, because ing model. They spent six weeks travelling
some of the people on our team are highly around the world and about two weeks after
experienced in this area, that we needed to they came back…they came down to visit us
spend a huge amount of time bringing peo- and spent five or six days at site and came to
ple’s expectations down from the outset. We the conclusion that ours was the model they
weren’t going to create 5,000 jobs and not wanted to roll out to the rest of the country.
everyone was going to get a job.” We are now working with the NITA to roll out a
Kenyan template for industrial training.”
Base had momentum at Kwale after secur-
ing a $170 million debt facility, completing the – Rhys Dickinson
project’s DFS and nailing down a cornerstone
off-take partner in 2011.

PAGE 38 DECEMBER 2015 - JANUARY 2016 AUSTRALIA’S PAYDIRT



INDABA PREVIEW

Kibaran gets Epanko
financing in order

On-the-ground work may have slowed but Andrew Spinks that 10,000 tpa, likely into the battery market.
Kibaran Resources Ltd has managed to The plant can actually do 44,000 tpa which
maintain momentum in the development of its market has opened up a potentially massive is important because the battery market is
Epanko graphite project. new market. currently only around 30,000 tpa. So, if we
can capture 10% of the battery market with
Kibaran completed a BFS and received The challenge is defining when and exactly what we have now, it would take very little to
all relevant approvals for Epanko – 400km how large this growth surge will be. increase production to 50-60,000 tpa if that
south-west of Dar Es Salaam in Tanzania – market expands. That would make us, we
in July and is now fully focused on the most “There is no doubt emerging markets are believe, the cheapest entrant into that growth
challenging aspect of any project develop- coming but it is still some time before there is market. We could double capacity for $20-30
ment; financing. direct impact on demand,” Spinks said. “It is million.”
all about electric vehicles and there will be a
However, with a mandate agreed with Ger- tipping point in the take up of electric cars but Such plans betray Kibaran’s belief it can
many’s KfW IPEX-Bank and a German Gov- it is likely to be at least five years away.” build Epanko alone. While other graphite de-
ernment debt guarantee in place, managing velopers consider partnerships with end-us-
director Andrew Spinks is confident project fi- Kibaran has designed Epanko to fit in with ers, Kibaran is ploughing on with plans to start
nancing can be achieved despite the desolate current demand. It already has two off-take construction on the project next year.
funding landscape. agreements in place; one with a European
commodities trader for 10,000 tpa and a sec- “We have just appointed Bob Pett as chair-
“We are now waiting on a draft term sheet ond with German industrial group ThyssenK- man which adds more credibility to our strat-
from KfW and that will give us a clear outline rupp for 20,000 tpa. That leaves 10,000 tpa egy of bringing this project into production,”
of the coverage we can expect,” Spinks told for the spot market and potentially the lithium- Spinks said. “Bob has a wealth of experience
Paydirt. “We think we can finance 65-75% of ion battery sector and also the possibility for in operating in Africa and was founding chair-
the capex through debt, largely underpinned low-cost expansion should the electric vehicle man of Resolute Mining [Ltd] and built the
by the $US40 million government guarantee, revolution take hold. Golden Pride mine in Tanzania for that com-
which would be phenomenal.” pany.”
“We are still working on further off-take for
The securing of finance and off-take agree- Pett will also add his considerable expe-
ments is highly advantageous for Kibaran. rience to discussions over Kibaran’s wider
plans for its Tanzanian assets.
Equity and debt markets are still inhos-
pitable environments for junior miners and Spinks said the company was planning
despite graphite’s emergence being a rare to start a PFS on its Merelani East graphite
highlight for the commodities sector in recent project, in northern Tanzania, next year as it
years, it is still a small market dozens of jun- looks to build its graphite capabilities.
iors are competing to supply.
“It is a strategic asset and part of our growth
“In this market we have got the certainty of plans for Tanzania,” Spinks said.
debt, which is a huge advantage. Equity fund-
ing will then come from institutions or funds Those plans include the possibility of down-
or even potential end-users from the supply stream processing of graphite in-country.
chain,” Spinks said.
“We are looking at producing spherical
Kibaran plans to produce 40,000 tpa flake graphite and building a battery plant in Tanza-
graphite concentrate from Epanko. A BFS nia,” Spinks said. “The Government has been
released in July showed a 15-year operation very welcoming of such discussions.”
could be built for $US77.5 million with a pre-
tax NPV of $US197.4 million, IRR of While new sources of natural graphite are
41.2% and annual EBITDA of $33.6 being developed around the world,
million. China remains the dominant pro-
ducer of processed spherical
While far from the largest of the graphite used in batteries and
new graphite players, Epanko’s Spinks sees opportunity in the
smaller scale could prove an ad- deals Kibaran has already made.
vantage in later years. “China will continue to domi-
nate the spherical graphite mar-
“I think the company is positioned ket but with the rise in demand
perfectly because the market has other countries are looking for
not grown as some thought it would. alternative sources of supply and
So, 40,000 tpa is enough to get into Tanzania could fit. With KfW, the
production based on current de- German Government and Thys-
mand and then it is about accessing senKrupp already on board, we
future growth.” are becoming a new graphite sup-
ply for Germany and that will have
That “future growth” is what eve- a flow-on affect when Germany
ry graphite hopeful is pinning wider becomes a leader in the battery
hopes on. For decades, graphite market.”
has been a largely moribund com-
modity, used mainly in refractories Kibaran is close to completing project financing for its – Dominic Piper
and carbon graphite products such Epanko graphite project in Tanzania
as sporting equipment however the
growth of the lithium-ion battery

PAGE 40 DECEMBER 2015 - JANUARY 2016 AUSTRALIA’S PAYDIRT



INDABA PREVIEW

Africa finds ally in Nedbank

The risk of doing mining deals and picking on them next week,
in Africa has been grossly next year or whenever the mar-

exaggerated, according to Ned- ket turns.”

bank Capital head of resources Interestingly, Tyler attributed

Mark Tyler. much of Africa’s malaise to for-

Arguments against doing eign NGOs.

business on the continent were “A lot of these ‘fair share of

often flawed and who said any mining’ concepts were driven

solid project could be success- by a bunch of NGOs outside

ful in most of Africa’s 54 na- Africa, who said to countries

tions, he said. that they were giving away their

“We’ve done a lot of mining birth right and revved up the

deals around the world and in governments,” he said.

only two cases we could blame “It takes these NGOs a while

the country for the project’s to apply the pressure and by the

problems,” Tyler told Paydirt time they get the government all

during a business trip to Perth. worked up and ready to go, it’s

“One landed in the arbitration too late. The reverse will hap-

court in Paris and one is still pen when the industry comes

happening, and that was low- to a standstill. When prices

level interference. The mines Despite the threat of political instablity and Ebola, countries such as take off again they will prob-
can operate through all sorts Mali have managed to offer a stable mining environment for investors ably be slow to react again and
of situations. They are in the
miss the boom. When the boom

country, but they are not part of the country.” translate it into cost advantage for the mining comes explorers will be getting stuff at a steal.

Mali, Sierra Leone and Liberia were prime industry. It’s no secret that a lot of projects are By function this always happens in Africa.”

examples of countries that had managed to in trouble and business is not as good as it Tyler said there was a perception that

offer a stable mining environment in the face once was.” banks had shut up shop in Africa, but that cer-

of political instability and the threat of Ebola. The effect of Africa’s real and perceived tainly wasn’t the case for Nedbank.

“Mali has been through insurgencies and problems is most evident in the lack of early In fact, he said there was still a host of

coups and it has survived because people stage exploration investment. banks willing to do deals in Africa, but their

know how its industry works and they have no Tyler said this was a worst-case scenario specific investment strategies rendered many

fear,” Tyler said. for Africa, which is on the cusp of negative deals unsuitable.

“We’ve been involved in two of the Ebola- growth. “It’s not a question of the deals being bad,

affected countries, Liberia and Sierra Leone, Just five years ago Sub-Sahara Africa’s they just don’t fit for the banks,” he said.

where we funded Aureus Mining Inc and Si- growth rate was a credible 7%, but in 2014 it “Standard Bank will only do greenfields pro-

erra Rutile Ltd. Both of those companies were slumped to just 5%. jects where they have an office, and they only

never affected by anyone potentially contract- London-based Capital Economics execu- have offices in English-speaking Africa, so

ing Ebola. In the case of Sierra Rutile, they tive chairman Roger Bootle recently went as West Africa is practically off-limits for them.

were merely shipping material in and out of far to predict the continent’s growth rate could Rand Merchant Bank is probably not willing

Sierra Leone, but with Au- slip to as low as 3% by the end to do any form of greenfields unless it’s really

reus they couldn’t get people of this year. great; so even English-speaking Africa is iffy

in or out of Liberia during the “I don’t think we will see for them. The banks we are really competing

construction phase of the pro- many projects for develop- with at the moment are the French banks; So-

ject because staff were being ment the year after next,” Ty- ciété Générale and BNP Paribas.”

constantly quarantined. At ler said. Such is the state of the lending market, Ty-

the end of the day, the pro- “In 2016 I think there will be ler reckons explorers and miners should pri-

ject was only slowed because a few things that come to pro- oritise acquiring debt ahead of getting a good

of Ebola. It is very rare for a duction, but in 2017 I don’t see deal on the money.

mining company to be shut a lot happening.” “You can get money and borrow, but it’s ex-

down or investors to lose their With their economies wan- pensive,” he said.

money because of the state of ing and a lack of revenue on “You can’t afford to trade the banks or fi-

a country.” the horizon, several African nanciers off against each other anymore.”

With that being said, Ty- governments have increased Although Africa appeared to be a basket

ler conceded the continent’s their royalties to levels that case for some, Tyler said Nedbank saw a

most developed nation, South Mark Tyler have companies running bright future in the jurisdiction.
Africa, was a different kettle scared. “We are committed to the whole continent,

of fish. Tyler said Africa tended to which is more than you can say about many

South Africa’s fiscal regime is much ma- “follow fashions out of sync” and several gov- of our competitors, and we will stay like that,”

ligned by miners as companies cannot hold ernments were chasing “boom-time” royalties he said.

their funds offshore or run their businesses in in a bust economy. “We have an ambition to grow into Africa

foreign currencies. “Countries new to the game, on the east and to grow Eco Bank as a bank, and part of

“South Africa is a special case,” Tyler said. coast particularly, are trying to push up royal- that is growing a mining business. We’ll stick

“The country’s issues hugely influence its ties in these times and that’s a recipe for dis- out these tough times.”

mining projects. You have to run everything aster,” Tyler said. – Rhys Dickinson
in rand and can’t hold offshore currency. It “There is a lot of pressure now to raise rev-

has political issues, economic issues and al- enues and get control of the bad miners, but in

though the currency has weakened, they can’t fact they should be courting the investors now

PAGE 42 DECEMBER 2015 - JANUARY 2016 AUSTRALIA’S PAYDIRT



OPINION

Africa is rising

Ahead of the financial crisis,
few investors gave Africa the
attention it deserved – but with

growth across the continent ac-

celerating and huge demand for

vital investment, capital is now

flowing into and across Africa at

an unprecedented rate. It is an

exciting time to be doing business

in Africa.

Africa is experiencing a period

of extraordinary growth, and one

that a decade ago would hardly

have seemed possible. The Inter-

national Monetary Fund predicts

that 14 of the 22 economies set

to grow fastest in the five years to

2019 will be in Africa.

This growth remains primarily

due to the continent’s massive

mineral and natural resource

wealth, and has spurred develop-

ment in other sectors including

energy, infrastructure, financial

services, retail and consumer

products.

Today, Africa’s underdeveloped Africa is experiencing a period of growth which seemed impossible a decade ago

resources, huge demand for pow-

er and infrastructure investment, increasingly In addition to these stalwarts, other Asian Importantly, it’s not only the identities of

urbanised population, rising entrepreneurial investors including Japan, Korea and Singa- the mining investors that are continuing to

middle class and general demographic profile pore are stepping up their level of investment, diversify – it’s also where they are investing.

point to long-term sustained growth and make while investors from Australia and Latin Amer- Traditionally, foreign investment in Africa has

it increasingly compelling to foreign investors. ica retain their interest in the African mining been focused on a small number of key juris-

There is a palpable shift in sentiment to- sector. Development banks from around the dictions, for example South Africa and Nigeria

wards Africa – stemming in part from the fi- world are also increasingly active in the re- are often portrayed as being two key nations.

nancial crisis, when the continent seemed to gion, and there’s growing interest from the However, it’s becoming evident that new

offer a much better balance of risk and reward Middle East – often led by sovereign wealth areas of interest for foreign investment are

than in the past (particularly when compared funds and state-owned enterprises – in a va- emerging, with countries like Botswana, Na-

to other traditionally less risky areas for in- riety of sectors. Further, a growing number of mibia and Mozambique increasingly enjoying

vestment). That growth could be even more big private equity firms have established dedi- foreign attention and offshore funding, largely

dramatic if a sustainable way could be found cated Africa investment funds. focused on mining projects. As the perceived

to attract the increasing, but risk of investment in many

still much needed, foreign in- traditional “off limits” African

vestment into the infrastruc- nations has subsided, inves-

ture required to get mining tors are willing to take more

projects off the ground. calculated risks and push

The investment challenge into new frontiers.

in Africa is huge, running The growth in foreign in-

to tens of billions of dollars vestment has been assisted

a year. Until it is met, the by the focus of many African

continent will continue to governments on developing

struggle to reach the lev- transparent and consistent

els of GDP growth it could regulatory and contractual

achieve. There has been frameworks in the mining

historic underinvestment in sectors. We are seeing on-

the infrastructure sector, but Meredith Campion, Partner – Allen Tim Scales, Partner – Allen & Overy going regulatory reform from
it is broadly acknowledged & Overy Perth, practises in the areas of London, heads the firm’s Africa Group and a variety of nations, and de-
that infrastructure develop- corporate, commercial and energy and has been working day-to-day on projects velopment agencies such
ment is critical for the growth resources law and has advised on a in Africa for over 15 years. He has exten- as the World Bank and Afri-
of the mining sector across wide range of commercial transactions, sive experience of project development can Development Bank are
Africa. including takeovers, mergers, acquisi- and finance in the mining, power (including working hard to assist vari-
tions, disposals, capital raisings and renewable energy), oil & gas, petrochemi- ous countries in this area. As
We are seeing progress joint ventures. She has considerable cal, telecoms and other industrial sectors a result, the African mining
in this area. Africa continues experience in African transactions, hav- and particular experience of multi-lateral, environment is becoming in-
to attract a diverse range of ing advised clients in relation to transac- development finance institution and export creasingly investor-friendly.
investors, with Chinese, US tions involving Africa for over 15 years. credit agency backed financings
and European entities lead-
ing the investment charge.

PAGE 44 DECEMBER 2015 - JANUARY 2016 AUSTRALIA’S PAYDIRT



INDABA PREVIEW

All eyes on Burkina

Gryphon Minerals Ltd has elected to offload Steve Zaninovich to some stability and normality, even though
its Mauritania assets to focus solely on de- things are still stable for us,” Zaninovich said.
veloping its interests in Burkina Faso, including terim president Michel Kafando detained for
the Banfora gold project. two days in September. “We still love being in Burkina, it’s still a
good address from our point of view, but we
Algold Resources Ltd is acquiring the Sab- Forthcoming presidential and legislative understand that outsiders looking in just want
oussiri (copper-gold), Tijirit (gold) and Akjoujt elections were supposed to take place on Oc- to make sure that what everybody thinks is go-
(copper-gold) projects for a total considera- tober 11, but were rescheduled for November ing to happen will transpire and the elections
tion of up to $4.5 million, including a 14.9% 29. will be calm and everything will go smoothly.”
interest in the Canadian company’s issued
shares, valued at roughly $1.3 million. Zaninovich said the company’s day-to-day It appears increasingly likely Gryphon will
activities were unaffected by the second ma- pursue the simultaneous build of a 2 mtpa
Gryphon is also entitled to receive a further jor case of political unrest in Burkina Faso in heap leach facility and 1 mtpa CIL processing
$3.2 million on achievement of certain mile- the last 12 months, following the 2014 popu- plant, as confirmed in an upscaled scoping
stones, potentially lifting the company’s avail- lar uprising which saw long-serving president study released to the market in July.
able cash reserves above $23 million. Blaise Compaoré unseated after 27 years at
the helm. Based on a $US1,250/oz gold price,
Minimal exploration activities have been the study found the project could produce
carried out on the Mauritania projects in re- However, further project due diligence to 133,000 ozpa gold over seven years of mine
cent times, however, the company was still be completed by Macquarie Bank is yet to life for $US130 million in capital costs, return-
forking out up to $1.2 million a year in holding restart, delaying Gryphon’s plans to finalise ing an NPV of $210 million (up from $90 mil-
costs. funding arrangements for development of lion in the 2014 DFS) with an IRR of 42.2% (up
Banfora. from 20.5%).
Gryphon chief operating officer Steve Zani-
novich said the timing of Algold’s offer could Gryphon has a financing mandate of up to Other compelling project economics in-
not have been better as the company looks to $US60 million with Macquarie. cluded life-of-mine revenue of $US1.16 billion
progress development at its flagship Banfora (up from $US808 million), C1 cash costs of
project. “As you can imagine, everyone is sitting $US707/oz (down from $US743/oz) and AISC
back and just waiting to get past these next of $US800/oz (down from $US868/oz).
Work will continue as planned at the Gold- couple of months so that we can get back
en Hill and Gourma projects in Burkina Faso “The balance of the heap leach and CIL is a
in conjunction with JV partner Boss Resourc- really good mix for Banfora and has probably
es Ltd. given us the best economic results of any of
the scenarios we’ve looked at over the years,”
“When you’ve got multiple projects, they Zaninovich said.
each take a bit of your attention so from a
management point of view we can now focus “We’re out there looking at some of these
all our efforts on Burkina,” Zaninovich told alternative funding solutions that can help
Paydirt. balance the Macquarie debt. We’re very inter-
ested in doing what we said we would do and
“We still have a good relationship with the that’s to get Banfora developed.”
Ministry [in Mauritania] so we’ll continue to
keep the finger on the pulse there and hope- Gryphon has submitted the documentation
fully see Algold bring their cash to bear on in- required for the receipt of a mining convention
creasing exploration.” and remains confident it will be signed off by
the president, possibly before the forthcoming
Gryphon’s plans to develop the 3.6 moz elections are held.
gold Banfora project have been somewhat
halted by a failed military coup which saw in- A new mining code has also been put to
parliament for presidential sign-off and will
determine whether or not Gryphon is sub-
jected to the proposed increases in tax rates.

Preparation work for the ESIA has been
placed on hold in the wake of the failed mili-
tary coup, but the company has continued
to hold meetings and oversee literacy pro-
grammes in the communities around Banfora.

During the September quarter, Gryphon
also helped restore a bridge following a col-
lapse near the town of Sindou.

“The people on the ground are just as im-
portant as the major shareholders in the com-
pany,” Zaninovich said.

“We have meetings with the stakeholders
on the ground every two months and it’s a
total representation of all the impacted com-
munities. It’s something I know they are very
grateful for and it’s something we continue to
hold as an important part of what we do; our
social licence to operate.”

– Michael Washbourne

Gryphon expects to increase its focus on Banfora following the sale of its Mauritania projects
PAGE 46 DECEMBER 2015 - JANUARY 2016 AUSTRALIA’S PAYDIRT



INDABA PREVIEW

ECG’s heartbeat in down market

Resources commentators seem to agree Jurisdictions in West Africa are most likely to Africa at the moment is in the West of the
that the mining sector hit rock bottom in present opportunities for Perth-based electrical continent.
2015, however, that does not mean an imme-
diate recovery is on the horizon. engineering company ECG Engineering “West Africa is the area most likely to pro-
vide opportunities for us. Our key staff have
Despite torrid conditions for miners and lution for the project’s study. In this market, vast experience in Africa and this is an area
explorers and everyone else connected with clients can ill-afford large project teams and we are focused on,” Bailey said.
the industry, the fittest have survived and are expect an ‘A Team’ with an efficient execution
looking to thrive. strategy. With this approach ECG has man- While there is an emphasis on West Africa,
aged continuous growth despite the difficult ECG picked up a significant contract across
ECG Engineering is one such company economic environment in the mining sector.” the continent in Tanzania in the back end of
which reported a fruitful 2015 campaign and 2015. ECG was selected to deliver power gen-
regardless of predictions of an uptick in the Its core services of power system provi- eration and transmission systems solutions
market, the electrical engineering specialist sion (grid connection or power station), plant for the highly regarded Epanko graphite pro-
has vowed to stick with a formula capable of electrics (substations, motor control, instru- ject for Kibaran Resources Ltd in Tanzania.
weathering the harshest of environments. mentation) and automation (PLC, SCADA,
Historian) for materials handling plants have There is a raft of emerging graphite pro-
“While there are signs of improved market been in high demand, particularly in Africa jects in East Africa, however, few have many
conditions for our clients in 2016 , the focus of where about 30% of ECG’s current projects of the bases covered like Kibaran does.
the ECG team will remain with what we can are located.
control, delivering on our commitments and German bank KfW IPEX-Bank has signed a
being available to support our clients with the Australia, Malaysia and the Manilla office formal mandate letter and are well advanced
best people in the business. Robust projects are keeping ECG busy, while the hotspot in with Kibaran in exploring financing options
will always get off the ground and by focus- to build the proposed $US77 million Epanko
ing on project delivery for our clients we will graphite mine, subject to due diligence, while
always be kept busy,” ECG Engineering prin- there are binding agreements in place for off-
cipal Geoff Bailey told Paydirt. take.

“In a relatively short time ECG Engineering “ECG is honoured to be associated with a
has capitalised on sourcing the best special- high quality, innovative and pioneering client
ist engineers in the business and is well po- such as Kibaran Resources,” Bailey said at
sitioned to target projects where clients are the time of the contract award.
looking for a low overhead, economical so-
– Mark Andrews

PAGE 48 DECEMBER 2015 - JANUARY 2016 AUSTRALIA’S PAYDIRT

Magnis believes in own destiny

Speaking to Frank Poullas about the Poullas said interest in debt and equity
often confusing world of graphite one
thing is clear; the Magnis Resources NL financing was growing as the company
chairman is convinced his company is
near the head of the class. closed in on development and inves-

Magnis is developing the Nachu tors became more comfortable with the
graphite project, west of the port of Mt-
wara in southern Tanzania and despite graphite market.
the increasing competition among graph-
ite players in East Africa, Poullas is con- “We’re speaking to the largest players
fident Nachu has all the right ingredients
to be one of the sector’s success stories. and demand from them is huge. We have

“In this graphite rush, it is quality that private equity groups getting in contact
will determine which companies get into
production,” Poullas told Paydirt. “We with us; all this in a very opaque market.”
think we have a similar sized deposit
to some of the other companies but we Poullas believes Nachu could prove
don’t see the point in drilling out a 40-
year mine life. We are focused on pro- a game-changer in graphite supply and
duction and on the area where there is
the very large flake and that is why we demand.
have got the highest quality off-take
agreements out there.” Battery market supply is currently

The different requirements of end-us- dominated by synthetic graphite sup-
ers means comparisons between graph-
ite projects do not fall easily into the tradi- plied out of China but as electric vehicle
tional tonnes-by-grade equation of gold
and base metals. Many of the emerging and storage markets continue to grow,
end-users in lithium-ion batteries and
other markets often value flake size and producers are looking for cheaper, more
carbon purity over grade and size and
Magnis is taking advantage of Nachu’s reliable sources.
qualities in these areas to move the project
along at a rapid rate. “End-users continue to use synthetic

Magnis has been exploring around Nachu graphite but they are turning away from
for a decade with uranium its original target.
However, when it uncovered graphite miner- the unreliable Chinese product and are
alisation in March 2013, it quickly switched
focus to the emerging commodity. looking at us,” Poullas said. “We are able

Less than three years on, the company is to produce a product that matches syn-
in the middle of applying for a special mining
licence for the project and has already locked thetic graphite for use in batteries, the
in off-take agreements over 75% of Nachu’s
graphite production. nuclear industry, the aviation industry

Those agreements are with SINOMA – Chi- and others because of our processing.
na’s and the world’s largest graphite producer
– and Chinese steel giant Sinosteel. “There are not many stages and few

Poullas said the Chinese companies and impurities, we are getting more than 99%
others were attracted by Nachu’s
unique properties. purity just from basic flotation. We think

“The product has unique thickness, Magnis Resources expects to release a DFS for its Nachu we can produce at half the price of syn-
isotopic crystal structures, is very
strong and has next to no impurities,” graphite project in Tanzania during the March quarter thetic graphite, allowing us to be disrup-
he said.
tive in this marketplace.
Metallurgical test work points to the
greatest distribution of jumbo and large off-take agreements but we now want to “Operating costs for Nachu are $US450/t
flake graphite (the highest value of the
graphite products) of any of the East Af- spread the risk to include Western off-takers. and the basket price in the PFS was
rican graphite projects; 60% jumbo and
24% large. We are talking to groups in Korea, Japan, $US2,100/t. Even that is quite conservative

Discussions over the remainder of Germany and the US and we would really like because the work we have done since then
Nachu’s 260,000 tpa graphite produc-
tion – SINOMA is committed to taking a household name to be involved,” Poullas has shown we can produce a superior prod-
80,000 tpa and Sinosteel 100,000 tpa
– are ongoing with Magnis keen to di- said. uct.”
versify its client base.
In October, Magnis signed a MoU with Ko- Poullas said the Nachu DFS, due for re-
“We could sign hundreds of Chinese
rean industrial conglomerate POSCO over lease in the March quarter, would reflect the

Nachu. The MoU sees POSCO mandated to higher quality products but would also include

arrange senior loads and provide EPC servic- a larger capex, a reflection on the company’s

es to the development and construction of the decision to increase the size of the plant.

mine. Magnis also has a debt financing agree- With nearly 30 ASX-listed companies now

ment in place with SINOMA and is awaiting a professing to be graphite players, competi-

term sheet. tion in what is still a relatively small market is

The December 2014 PFS highlighted a high. Poullas believes that not only is Magnis

capex of $US171.4 million for the project and placed well enough to have no need to con-

sider consolidation but that a number

of other companies will also make it to

production.

“We’ve had approaches from almost

all the graphite players in Tanzania but

we have got enough graphite. But, we

think the market is going to be so large

anyway that there will be many win-

ners.”

Whether peers end up as winners is

not Poullas’ concern. He and Magnis

remain focused on getting Nachu over

the line in order to take advantage of the

graphite demand boom

“We can see the dynamics playing

out and we’ve got the best product in

the market that is in its infancy,” he said.

Flotation tests showed Magnis could achieve plus-99% – Dominic Piper
purity from the Nachu ore

AUSTRALIA’S PAYDIRT DECEMBER 2015 - JANUARY 2016 PAGE 49

INDABA PREVIEW

Walkabout starts jogging

It may have started later than its Gilbert’s Arc structure where Walka-
peers but Walkabout Resources
Ltd plans to overtake a few of the bout believes it has the best chance
other runners in the graphite race in
coming months. of producing a quick resource.

The ASX-listed junior only drilled “It is wide and flat; easy to mine
the first holes on its Lindi graphite
project – west of Mtwara in south- and no complications at all,” Mulligan
ern Tanzania – in October but is al-
ready preparing a maiden resource said. “The first hole returned 20m @
estimate for release in early 2016.
It is part of a strategy designed to 12.6% TGC from 12m, including 8m
get to market early.
@ 22.7% TGC from 24m. And, the
“We will get a resource model off
1,400m of drilling and from there most recently received assay of 16m
will look to fast-track the project,”
Walkabout managing director Allan @ 19.5%, including 3m @ 19.17%
Mulligan said. “Since we started
the strategy early in the year we was from Hole 6, which extends the
have raised money and completed the drill-
ing on budget and on schedule. We are now structure further.”
awaiting the metallurgical results and begin-
ning mine and process design. We may be The company has also started en-
starting late but think we can be ready a little
earlier.” gineering design at an early stage.

Walkabout has no grandiose plan for Lindi. Walkabout has engaged a Johan-
Instead, its strategy is based on defining a
high-quality product and building a fit-for-pur- nesburg group to work on a process-
pose operation around it.
Walkabout is preparing to release a maiden resource for the ing plant for Lindi. The group can

Lindi graphite project in early 2016 build a 50 tph plant in Johannesburg
before dismantling it, trucking it to

“We could get the resource to 20mt but Tanzania and reassembling on-site, avoiding

there is no point if you only need 5-6mt for a the need for time-consuming and expensive

10-year mine life. It is all about right-sizing the fabrication.

project. Once up and running there is nothing “We have had them draw up the plans and

stopping us locking in a second and third off- the capex would be less than $US6 million for

take and expanding the mine.” the plant,” Mulligan said.

For now, the focus is on a small start-up The level of planning and budgeting which

operation. has gone into Walkabout’s work is impressive,

The drilling programme of 21 RC holes and with a detailed work schedule and budget set

three diamond holes has been focused on the out to March 2017.

PAGE 50 DECEMBER 2015 - JANUARY 2016 AUSTRALIA’S PAYDIRT


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