April 2015 VOLUME 1. ISSUE 226 $11.95
front and back cover
Bannerman set for
South Australian Resources Conference preview
Uranium back in focus ISSN 1445-3436
Potash and phosphate defy market slump 9 771445 343007
PAYDIRT (ISSN 1445-3436) 7 OPINION 18
Published by Brendan Ryan, our South African-based 42
Paydirt Media Pty Ltd. columnist, recently attended the Fossil 61
A.C.N. 063 985 133 Fuel Foundation conference in Johan-
nesburg. There, he discovered blame
Head Office: for the failures of Southern Africa’s once
Suite 9, 1297 Hay St, West Perth blossoming coal sector is being laid at the
Western Australia 6005 door of Australian miners
P.O. Box 1589, West Perth
Western Australia 6872 18 COVER
Phone: (+61 8) 9321 0355 Speaking to Bannerman Resources man-
Facsimile: (+61 8) 9321 0426 aging director Len Jubber, it is obvious he
[email protected] is leading a company that is not set up for
www.paydirt.com.au short-term gains. Instead, Bannerman in-
tends to turn its flagship Etango uranium
Editorial: project in Namibia into an operation that
Editor: Dominic Piper will be a safe, sustainable and reliable
Deputy editor: Mark Andrews source of clean energy for decades to
Journalists: Michael Washbourne, come. Dominic Piper travelled to Namibia
Rhys Dickinson to discover how the company is setting
Sub-editor: Lisa Shearon out to achieve its goals
Graphics: Marian Noonan
Contributors: 26 URANIUM
Keith Goode (Sydney), Brendan Ryan There have been few tougher commodi-
(Johannesburg) ties to be involved in over the last five
Advertising: years than uranium. However, there are
Advertising executive: Tony Mwarey signs the sector could be about to pull
Subscriptions: Harriette Smith itself out of the doldrums. Paydirt looks
Phone: (+61 8) 9321 0355 at the companies ready to take advan-
Facsimile: (+61 8) 9321 0426 tage of any upswing, including extended
Pre-press and printing: features on Paladin Energy, Deep Yellow
Vanguard Press 26 John St, and Peninsula Energy
Northbridge WA 6003
Member of: 42 SAREIC PREVIEW
The South Australian Resources &
Paydirt Media Energy Investment Conference (SA-
Executive chairman: Bill Repard REIC) returns to the Adelaide Convention
Finance manager: Giovanny Jefferson Centre on April 13-15. In the build-up to
Accounts/administration: the event, Paydirt looks at the state of the
Heather Melling SA resources sector, featuring some of
Conferences: Tammy Caldwell, its leading players and an interview with
Melita Fogarty Minister for Mineral Resources & Energy
Cover image: Bannerman Resources
managing director Len Jubber (right) 61 POTASH/PHOSPHATE
and country manager Werner Ewald Global demand for most bulk mining com-
on site at the company’s Etango pro- modities has waned in recent years but
ject in Namibia with the global agricultural industry des-
Member of: perate to improve its productivity, potash
and phosphate have bucked the trend.
Registered by Australia Post PP 643938/0071. We take a tour of the ASX-listed compa-
No pages or articles in this publication may be nies involved in the fertiliser space and
reproduced in any form without the consent of find out whether it is possible to develop
the publisher. This includes photographs either a bulk commodity project in the current
taken by Paydirt Media staff or provided by other economic climate
Policy direction: What
These are strange times for the relationship election campaign.
between the Australian resources industry If only there was as much policy clarity elsewhere however we are
and the country’s state and federal govern- currently in an Australian political landscape where even a conserva-
ments. tive government in the country’s largest resources state is considering
In Canberra, the Tony Abbott-led increasing royalties.
Federal Government is rightly winning Western Australia is currently mired in a debate over gold royalties
plaudits from industry for its efforts to which threatens to turn ugly.
implement the exploration development The State Coalition Government is struggling with budget problems
incentive (EDI) scheme. and, having surveyed the resources landscape for solutions, has ap-
The EDI passed through the Senate unopposed in March, a surprise parently decided that the gold industry could be the one sector that can
given the fractious nature of the Australian upper house these days. shoulder the burden.
It is also a surprise, given the amount of back-flips the Government Even if the WA Government doesn’t go ahead with any recommenda-
has performed in recent months, that it had not only the fortitude to pass tion to increase the royalty rate, it shows a remarkable lack of under-
the legislation, but also the gumption to realise it should do so without standing and breaks down trust between an embattled sector and the
Prime Minister Abbott has “reset” the political agenda in recent In Queensland, the newly-elected ALP Government has shown even
months in order to concentrate on what his Government has achieved less understanding of... well, rational debate.
but announcing tax credits to the mining industry, albeit only the junior Faced with myriad issues, including a stuttering economy, a coal in-
sector, would have been like a red rag to a bull for the Greens, and ele- dustry which is both underperforming and under fire from environmental
ments of the ALP. groups, the Government’s newly appointed Resources Minister Andrew
For this, much credit must go to Minister for Industry (and by default Lynham announced he would be putting a moratorium back on uranium
resources) Ian Macfarlane. He has managed to get through parliament mining in the State.
legislation that, although eminently sensible and of little consequence This is a remarkable decision, one without any discernible political
to the nation’s economic fortunes, could potentially make a big differ- advantage, particularly when the ALP was elected (or rather managed
ence to struggling exploration companies and the ability for them to to form a minority government) on the back of the previous govern-
make Australia’s next major
discovery. ment’s willingness to bend to the
will of coal miners.
This is a remarkable decision,Designed to encourage in-
And there was I thinking the
vestors to put more money into argument within the ALP over an
acceptance of the merits of ura-
one without any discerniblesmall explorers undertaking nium mining had been won back
“political advantage, particularlygreenfields exploration, the EDI at the national party conference
will allow companies to pass on when the ALP was elected (or in 2007.
tax credits to shareholders. rather managed to form a minority
The 2014/15 Federal Budget Yet, over in South Australia, in
provided an allocation of $100 government) on the back of the the shape of the Jay Weatherill-
million over the next three previous government’s willingness to led ALP we have perhaps the
bend to the will of coal miners.
years for the scheme. Accord- most progressive government in
ing to modelling by the Associa- the country.
tion of Mining and Exploration
The launch of the Royal Com-
Companies, this represents mission into the nuclear fuel cy-
around $350 million in eligible cle shows there are members of
exploration expenditure and will create about $1 billion in subsequent the ALP who are willing to consider not only uranium mining but nuclear
economic activity. processing and waste storage in Australia.
I do, however, reserve doubts about the chances of this pilot scheme It is an enlightened viewpoint but one that is sadly at odds with so
being fully adopted once its three-year trial period is completed. much of the political debate we experience in Australia at present.
For one, sources in Canberra have suggested to me that Treasury is
very uncomfortable with the scheme and will therefore be monitoring it
for any misuse with a fine-tooth comb.
Additionally, it is capped at $100 million over the forward estimates.
This will be neither enough funding to create the silver bullet many in the
junior sector hope it will be.
Furthermore, it will be subject to review after the three-year period.
It is one thing to give the exploration sector a shot in the arm but in
itself that is a futile gesture unless it results in the discovery, delineation
and development of new world-class mining projects. This, as all of our
readers would understand, is unachievable in the space of three years.
As I have said in this column previously, I am still not convinced of – Dominic Piper
the merits of a tax credit system for exploration or indeed any form of
flow-through share system but it is credit to Macfarlane – who, as with
his predecessors Martin Ferguson and Gary Gray, has always been
a strong advocate for the sector – that this Government is the first to
deliver on a promise originally made by Kevin Rudd during the 2007 [email protected] @DominicPiper
PAGE 4 APRIL 2015 AUSTRALIA’S PAYDIRT
RNI secures debt for
A recent $60 million project finance package secured by RNI will be used to restart operations on its Grosvenor gold project in WA’s Bryah Basin
RNI NL has provided proof there was still price. The modelling was completed using a be put to use on the refurbishment of the plant
life in the junior sector, announcing it had $A1,620/oz gold price and showed a 95% in- and restart of mining operations.
signed a term sheet with a London-based fixed crease in free cash flow to $172 million.
interest fund for $60 million to restart its Gros- “We have got some dewatering to do in the
venor gold project in Western Australia. McAuslane said despite the spot price main pit and then that will allow us to begin the
coming off in the intervening period, the eco- five months of pre-stripping required. There is
Under the deal – which is still subject to due nomic update still showed the potential of the some refurbishment of the plant to do but the
diligence – the fund will provide $60 million project. dewatering and pre-strip are the main chal-
in debt and take a $3.7 million placement in lenges.”
RNI. The company did not provide any further “The gold price has come off a bit since
details of the terms of the funding package then [about $A1,530/oz at time of print] but it RNI released the mining contract tender
announced in March. is still above the $A1,420/oz we worked on last last year and now has three contractors short-
year and it is still looking like a pretty strong listed. McAuslane said the recent downturn
Managing director Royce McAuslane told project,” he said. in WA’s resources sector had led to greater
Paydirt RNI had been working on securing competition among contractors, making for
a debt funding package for Grosvenor for six Regardless of the prevailing gold price, a more competitive marketplace: “Everyone
months. juniors have generally failed to attract debt or has been sharpening their pencils,” he said.
equity financing in the last 18 months but RNI
“We set out the strategy in September last has won support on both fronts. McAuslane The company is proposing to produce be-
year when we announced the revised plan for put this down to the fact Grosvenor was es- tween 318,000oz and 510,000oz over four to
Grosvenor,” McAuslane said. “Since then it sentially de-risked. six-year mine life at Grosvenor but with debt
has been six months of hard slog but we are expected to be paid back within little more
very pleased to have reached terms.” The project – previously known as Fort- than three years, the restart of operations is
num – was acquired in a $35 million cash and likely to be the start of RNI’s wider growth
McAuslane said negotiations around debt scrip deal with British private equity group strategy in the Bryah Basin.
funding had become more palatable as the BlueCrest Mercantile Master Fund Ltd in
outlook for Australian gold stories improved. 2012. It includes a 1.2 moz gold resource and “It is just the first step for what we want to
a 1 mtpa CIP plant which allow for a rapid re- do there,” McAuslane said. “We want to be
“From January, we started seeing some of start of operations. a producer but just as importantly, given the
the key factors beginning to work in our fa- current market, we want to generate our own
vour; the Aussie dollar dropped off and that “Most financiers are not into taking on risk cash flow if we can. Restarting Grosvenor will
led to an improved Australian dollar gold price at the moment and this project is attractive allow us to do this rapidly.”
and we also began to see the potential ben- because it doesn’t have a lot of risk. There
efits of lower diesel prices.” are none of the usual barriers to development If the deal is finalised within the 60-day set
because there are only a few permitting boxes period, RNI hopes to be in operation at Gros-
On January 23, the company released to tick and the construction is simply about re- venor by the end of 2015.
updated modelling for Grosvenor – 170km furbishment,” he said.
north-west of Meekatharra in WA’s Bryah – Dominic Piper
Basin – based on a stronger Australian gold The funds from the debt financing deal will
AUSTRALIA’S PAYDIRT APRIL 2015 PAGE 5
No wrong-un with
BHP Billiton Ltd has done a great job in mak- South Africa, will be worth
ing its spin-off South32 look attractive, per-
haps to the point where it may be a better bet up to $13 billion.
than its parent.
The South32 assets con-
The world’s largest miner released docu-
ments in March outlining details for the new tributed net profit after tax of
company, which will take over BHP Billiton’s
aluminium, manganese, nickel, silver and $738 million to BHP Billiton
some coal assets.
for the half year to Decem-
These assets are often described in the
media as “unloved,” but the outlook for many ber 2014, again an upside
of them is better than the core of iron ore, pe-
troleum, copper and metallurgical coal that surprise that bodes well for
will remain with BHP Billiton.
the new company’s recep-
South32, so named for the line of latitude
that links its main operating centres of South tion.
Africa and Australia, will get a head start from
its parent. The documents also state
The new company will assume only $674 that South32 intends to pay
million in net debt, about half the level ana-
lysts had expected, providing a boost to the out at least 40% of its under-
management should they decide to pursue
mergers and acquisitions. lying earnings in dividends
Analysts expect the new company, which each half year.
will list in Australia, the United Kingdom and
This is a further sweet-
ener and makes South32
attractive to investors chas-
ing dividends over capital BHP Billiton shareholders will vote on the proposed South32 spin-
growth, such as some pen- off on May 6. If approved the new company will list on May 18
Assuming BHP Billiton shareholders ap- turing, particularly in the United States.
prove the demerger in a vote on May 6, the The next biggest contributor to South32 is
new company will list on May 18. silver, lead and zinc at 26% of EBITDA, fol-
Overall, the picture that emerges from lowed by manganese ore and alloy at 21%.
the documents is of The key to these businesses will be to run
a company with low them as efficiently as possible to ensure that
debt, solid earnings they remain cost-competitive and able to with-
and with assets well- stand the current commodity price weakness.
positioned on the cost The soft spot in South32’s armour is the
curves of the indus- coal assets, with energy coal, largely located
tries in which they op- in South Africa, contributing 11% of EBITDA
erate. and metallurgical coal, in New South Wales,
Aluminium was the adding 8%.
biggest contributor to The prime metallurgical coal assets of the
South32’s earnings, BHP-Mitsubishi alliance in Queensland are
accounting for 29% of staying with the parent company.
EBITDA, in the year to Both the Australian and South African coal
June 2014. assets sit in the second quartile of the cost
The poor perfor- curve, according to BHP Billiton’s documents.
mance of the indus- This likely means they are struggling to re-
trial metal in recent main profitable with coal prices near six-year
years may well have lows and little sign of relief ahead from the
provided the impetus oversupply that has bedevilled the sector.
for BHP Billiton to con- However, this makes them a good prospect
sider the spin-off, but to either be sold or as a base to tack on ad-
it now appears that ditional coal assets, some of which are likely
aluminium is set for to be on the market at discounted prices given
better times. the sector’s woes.
While London-trad- The point is that South32’s management
ed aluminium futures will have plenty of opportunities to expand or
have lost about 16% rationalise their various businesses, and with-
since their recent out having to consider the needs of the rest
peak in September of BHP Billiton, they should be more flexible
last year, this is a bet- and nimble.
ter performance than – Clyde Russell, Reuters
iron ore and oil.
The outlook for Disclosure: At the time of publication Clyde Rus-
aluminium outside of sell owned shares in BHP Billiton as an investor in
China is also positive, a fund
with rising demand
from vehicle manufac-
PAGE 6 APRIL 2015 AUSTRALIA’S PAYDIRT
Aussies accused of misleading
Australian mining juniors and Aus- which reported gross losses from its
tralian mining expertise – particu- Mozambique operations of $US507
larly concerning coking coal – took a million in 2014 and $US397 million in
beating at a Fossil Fuel Foundation 2013.
conference on “solid fossil fuels in Asked to elaborate, Hancox cited
Southern Africa and Madagascar” held depressed coal prices; difficult min-
recently in Johannesburg. ing conditions; poor overall yields
Much of the conference was highly from the deposits and the high trans-
technical but several presenters made port costs involved in getting the coal
a point of “putting the boot” into Aus- out of Moatize and loaded onto cargo
tralian miners and consultants; point- vessels.
ing to them as one of the key reasons The most pointed comments came
for the problems in Mozambique as from mining consultant Peet Meyer –
well as the failure of the Botswana of PC Meyer Consulting – who has
coal sector to live up to its much-hyped been in the consulting/contracting
prospects. game since 2007 prior to which he
Other “culprits” cited included Es- worked for Anglo American plc, BHP
kom, the Botswana Government and, Billiton Ltd and Total Coal.
of course, the collapse in the price of He flayed mining juniors for the
both coking and thermal coal over the misuse of JORC code terminology
past two years. in a way which he said “is potentially
According to one experienced South misleading and it has misled”.
African coal executive: “at coking coal Referring to mining companies
prices of $US250/t and above it was which had declared inferred resourc-
all viable. At below $US130/t, probably es of billions of tonnes of coal Meyer
none of it is.” commented each deposit probably
I am not a geologist but one thing had a mineable resource of about
came through loud and clear – the 100mt
geology of the coalfields around Tete He said, “companies do not accept
in central Mozambique is extremely the fact that you cannot report the bil-
complex. lions of tonnes... you tell them what
That fundamental fact does not the Code says and they say, ‘stuff the
seem to have been taken seriously Code – I want the billions of tonnes’.”
enough by both exploration geologists According to Meyer, the number
and mine managements who were ac- Presenters at a recent coal conference in Johannesburg accused widely bandied about that Botswana
cused of not doing sufficient proper Botswana’s coal sector of misleading statements regarding the hosts coal resources totalling 212bt is
drilling work and then using geophysi- country’s coal endowment “bull and nonsense”.
cal modelling “to connect the dots”;
He commented: “That 212bt in
often with unfortunate results. the Australians and the belief that, because Botswana is not there and, if it is there, it is
According to independent consulting geolo- it’s coking coal, the Australians are supposed coal inventory. It is not a number that should
gist Gerhard Esterhuizen; “the coal geology of to know all about it. “ even be in the public domain. There is no jus-
the deposits in Mozambique is more difficult Rio Tinto Ltd – of course – has been the tification for that estimate because 77% of it
to understand than that of the Waterberg coal- biggest loser so far in Mozambique follow- is accounted for as [being at a] hypothetical
field in South Africa”. ing its disastrous acquisition of Riversdale speculative level.”
“The best explored area was in and around Mining’s Mozambique coal assets in 2011 “Coal inventory” carries a far lower ranking
the town of Moatize and the geology was rela- for $US4 billion. Rio Tinto subsequently took in terms of accuracy of estimation than an in-
tively well understood but new entrants had to $US3.4 billion in impairment charges against ferred resource.
investigate unknown coal deposits mainly to those assets and then sold them off to ICVL So, all very informative stuff but which has
the north and west of Moatize. for just $US50 million in October 2014, in do- sadly come after the event “with the wisdom
“The correct correlation of the main coal ing so exiting Mozambique altogether. of hindsight.” Equally sadly, it will probably all
zones and the sub-zones and the sample in- Also speaking at the conference was John have been forgotten by the time the commod-
tervals were not consistent in many aspects Hancox, managing director of CCIC Coal, ity cycle turns again.
and the preparation of the sample material for whose talk was a technical one titled “An over- So, take a bow AMCI Capital executive
washability testing (was) technically not ap- view of the coal deposits of Mozambique”. But Egon Mauss who sold the Minas Moatize
propriate.” during it he declared that, so far, “not a single mine to AIM-listed Beacon Hill Resources plc
Andy Lloyd, currently manager – strategy, tonne of coal mined in Mozambique has been in 2010 and got out of Mozambique citing a
exploration and resources at International exported at a profit and I do not expect that string of negative issues likely to affect the de-
Coal Ventures (ICVL) and previously resource any will be for the next five years.” velopment of coal businesses in the country.
and exploration manager for Rio Tinto Coal His comments were made against the Beacon Hill went into administration in Jan-
Mozambique – told delegates at the confer- background of losses incurred by Brazilian uary this year.
ence to “be wary of the global coal experts”. resource giant Vale SA – now the only real Brendan Ryan is a Johannesburg-based min-
He then added, “that’s my knock against player left in Mozambique’s coal business – ing writer
AUSTRALIA’S PAYDIRT APRIL 2015 PAGE 7
How to read the changing
signals from China’s
China will be the key determinant of indus- comes to China’s metallic trade. So, what are Chinese demand for aluminium continues
trial metal prices this year. the key themes to watch out for this year? to grow faster than just about anywhere else.
Nothing new there then; the country has Chinese exports of several base metals The problem is that its own production has
played the starring role in the sector for boomed over the second half of last year due been growing faster still with a conspicuous
many years, thanks to its stellar contribution to the Qingdao port scandal, which revolved lack of supply discipline in the face of price
to global demand growth for everything from around the multiple pledging of metal as col- weakness.
aluminium to zinc. lateral in the country’s shadow banking sec- Exports of products – some of which push
What has changed over the last couple of tor. the boundaries of what might be classified as
“years, though, is the country’s own surging
The net effect was a flight of collateralised a product rather than minimally transformed
output of refined metals fol- metal – are a safety valve for
lowing years of production In the case of metals such as nickel Chinese surplus but a red
capacity growth. flag for the market outside of
In the aluminium market, and tin, the question is whether China.
for instance, what China China can sustain its own production in The export flow of products
imports from the rest of the
accelerated by almost 20% to
world is far less significant the face of raw material constraints. The 3.67mt last year culminating
for prices than what it ex- in a record high of 492,000t in
ports. current betting in both is that it won’t with December itself.
In the case of metals bullish price implications. That may have been an
such as nickel and tin, the outlier month, reflecting con-
question is whether China cern, so far unfounded, that
can sustain its own produc- Beijing was poised to adjust
tion in the face of raw material constraints. metal from Chinese bonded warehouses to the favourable tariff rules on exporting prod-
The current betting in both is that it won’t with safer-haven storage in the London Metal Ex- uct rather than primary metal.
bullish price implications. change warehouse system. Exports dropped back to 379,000t in Janu-
Copper is arguably the last of the base This forced destocking showed signs of ary and a similar amount in February, judging
metals in which China is still an unequivocal losing momentum as 2014 grew to a close by the preliminary figures.
importer. As such, its trade figures might still and exports of metals such as zinc and nickel But these are still very high levels by any
be viewed as a gauge of the country’s manu- should fade as this year progresses. historical measure and the trend is still firmly
facturing health, but even then only through a Exports of aluminium semi-manufactured upwards.
highly distorted lens. products, by contrast, are structural in nature, Moreover, what’s happening with products
But copper now occupies only one end of a reflection of the country’s aggressive build- dwarfs China’s trade in primary aluminium.
a shifting spectrum of price signals when it out of its own smelting capacity. The country imported a marginal net 4,600t in
China’s Refined Copper Trade Chinese product ex-
ports are swamping the
Tonnes Asian market and have
Imports Exports Net Imports been one factor in the
softening of the local
physical premium mar-
350,000 If the current trend
continues, it bodes ill for
300,000 both premiums and out-
right prices as Chinese
250,000 material fills the deficit
200,000 elsewhere created by
150,000 Chinese exports also
hold the key to the lead
100,000 market. The country
50,000 turned net exporter of
refined lead at the end
0 of 2012 and it has re-
Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 mained net exporter
Source: General Administration of Customs Andy Home 09/03/15 The volumes aren’t
huge, just 34,650t on a
PAGE 8 APRIL 2015 AUSTRALIA’S PAYDIRT
net basis last year, but China’s
apparent self-sufficiency has China’s Net Nickel Imports
undermined the lead market’s
previous bull narrative and goes Tonnes
a long way to explaining why it 60,000
has fallen so out of favour with 50,000
the investment community. Refined Nickel Ferronickel
In the nickel market, it is the
sustainability of China’s nickel 40,000
pig iron (NPI) production that will
determine whether the anticipat- 30,000
ed bull script unfolds.
One year on from the cessa- 20,000
tion of nickel ore exports from In-
donesia, the single most impor- 10,000
tant raw material input for NPI
producers, the market is looking 0
for signs of NPI supply stress.
China’s imports of Indonesian
ore have dwindled to nothing in -10,000
recent months, leaving the Phil-
ippines as the only alternative -20,000
Both production and exports Mar-13
of nickel ore from the Philippines May-13
tend to be disrupted by the an- Source: China’s General Administration of Customs Andy Home 09/03/15
nual wet season over the year-
end. And that pattern is clearly
evident this year with imports slumping from helping it boost production even while do- for prices, since it translates into greater de-
over 5mt in June and July 2014 to just 1.1mt mestic raw materials supply struggles to keep mand for primary refined metal. The latter is
in January. pace. bearish since it implies higher domestic pro-
The implication is a further drawdown in al- The market implications are twofold. duction to feed that demand.
ready diminishing Chinese stocks of ore and Firstly, China’s official imports of refined tin China’s impact on the copper market this
putting more pressure on NPI producers to have steadily decreased, falling to just 8,700t year will be a function of all three trade seg-
shutter. in 2014 from 14,300t in 2012 and 31,300t in ments, refined, scrap and concentrates.
Nickel bulls argue that as China’s NPI sec- 2011. Equally complex will be the country’s inter-
tor retreats, so the country’s import appetite Secondly, and more significantly, Chinese action with the global zinc market.
for refined nickel will rise, providing much exports have risen, albeit mostly in a form Refined zinc imports were another casualty
needed relief for an over-supplied Western of the metal that doesn’t show up on official of the Qingdao scandal. Indeed such was the
market. trade figures. outbound surge in previously collateralised
Refined imports collapsed last year to the Such unofficial seepage has been estimat- metal that China turned net exporter in the
point that China was a net exporter of refined ed by industry group ITRI as at least 6,000t fourth quarter of last year.
nickel for the first time in many, many years. last year. Look no further as to why the tin It flipped back to net importer in January,
The export flow was all about Qingdao and price has underperformed despite an appar- albeit to the tune of just 7,500t, a highly mod-
a reflection of just how much nickel had been ent market deficit. est outturn by historical standards.
sucked into China’s collateral financing trade. Whether these trends extend into 2015 will The story in zinc, however, is all about a
China reverted to net importer of refined in large part be determined by whether the looming raw materials crunch as some of the
metal in January, suggesting the Qingdao ef- flow of ore from Myanmar continues at last world’s largest mines reach the end of their
fect is fading. year’s pace. lives.
To what extent refined nickel imports revert At least China remains a consistent net im- The question is whether China will itself
to historic norms will depend on the scale and porter of refined copper, indeed of copper in succumb to this crunch or mitigate it through
speed of NPI closures in China and that, in just about every form. lifting its own production.
turn, will depend on the extent to which ma- Import flows are still viewed as a proxy for The interplay of the country’s refined zinc
terial from the Philippines fills the gap left by manufacturing activity in China, albeit an ex- and zinc concentrates import trends will bear
Indonesia’s ban on exports of unprocessed tremely problematic one given the signalling close watching for clues.
minerals. complexity of stock cycles, both commercial With the former falling 78% and the latter
The flow-through to refined metal trade, and state, buyer behaviour and demand for rising by 29% in January, however, any an-
however, may be mitigated by imports of fer- the metal as collateral. swer right now looks highly elusive.
ronickel, a cheaper form of the metal and one Imports of refined metal totalled 300,000t – Andy Home, Reuters
ideally suited to stainless steel producers. in January, a five-month low and they look to
Ferronickel net imports grew by 40% to have slowed further in February, judging by a
270,000t last year and January’s net figure of particularly low preliminary estimate.
52,500t was an all-time high. A post-Qingdao clampdown on collateral
Worth watching in particular will be imports financing and a ratio shift by buyers from an-
from Myanmar, a relatively new name on the nual to spot contracts this year are the most
list of Chinese suppliers. China imported likely culprits.
59,000t of ferronickel from the country last But somewhere in the mix may also be a
year, equivalent to 21% of the total. step-change in China’s copper trade profile
And imports from Myanmar will also be away from refined metal towards raw materi-
closely tracked by the tin market. als.
The country has emerged as a major sup- Scrap imports slid and concentrate imports
plier of tin ore for China’s tin smelting sector, boomed last year. The former trend is bullish
AUSTRALIA’S PAYDIRT APRIL 2015 PAGE 9
Kasbah shakes up
Tin prices have continued to descend this Kasbah has enhanced DFS numbers at Achmmach for financiers to consider
year and with uncertainty surrounding sup-
ply stemming from Asia, the future of the mar- A spot price of $US17,400/t would see life- With an enhanced DFS to take to financi-
ket remains an unknown. of-mine free cash post-tax of $US151 million ers, Bramwell is confident of making a deal
based on C3 costs of $US13,180/t from Ach- this year and starting construction at the 1
In mid-March tin traded at its lowest levels mmach. mpta Achmmach project, northern Morocco,
in 31 months and at the time of print was at this year.
about $US17,500/t after starting the year at “The cash flow model is good making it far
$US19,500/t. easier to bank,” Bramwell said. “The overall “All the banks have now got the updated
capital cost has come down which will shrink project cash flow model and they will be able
The tin free-fall started mid-2014, forcing our equity requirements and the cost of pro- to update their proposals during April. We
some companies to reassess their projects duction shows that even if Achmmach was should be able to put those proposals to the
and ultimately pull the plug on operations. operating today at $US17,500/t we would still board in April and being able to have more
Few people would have foreseen the head- have a very strong operating margin.” clarity over the debt means that we will be
winds coming in the tin sector, but some closer to doing an off-take deal. Then if there
players steeped in the game have not devi- Pre-production capital costs are about is any equity left to do and if the equity re-
ated from their strategy to enter the ranks of $US150 million which Kasbah hopes to fund quirement is small, there will be a rights issue
producers. via a debt package. to existing shareholders,” Bramwell said.
For instance, ASX-listed Kasbah Resourc- “Effectively what people can see is that we
es Ltd has been plugging away at its Achm- are largely removing risk and highly dilutive
mach tin project in Morocco for some time equity raising which is their main concern in
and is now positioned to finance start-up. driving peoples’ fears about this project.”
“We’d like to get into construction later this With the likes of Metals X Ltd treating its
year, so we can target the end of 2016/early Renison JV with MMG Ltd in Tasmania as
2017 for production,” Kasbah managing direc- more of a subset for its gold projects, there
tor Wayne Bramwell said. Despite the fall in are few peers in the Australian market to com-
prices, Brawmwell retains confidence in the pare to Kasbah.
metal’s ability to bounce back.
With tin being a boutique industry, gaining
“I don’t think anyone saw this [price decline] traction on the ASX has been a challenge for
coming but the tin price has tested this level Kasbah, however with competitors at home
four times [since 2011] and every time it has and abroad falling from the perch it may well
found some resistance and bounced back up. be Kasbah’s time amid a forecast increase in
You can expect to probably see that again be- tin demand.
cause demand in the tin sector is coming up.
What is spooking the market is the unknowns – Mark Andrews
about production out of Myanmar and the er-
ratic market behaviour by the Indonesian pro- Wayne Bramwell
“Both BNP Paribas and CRU talk of the price
heading towards $US23,000/t or $US25,000/t
and going north. So, to be able to hit produc-
tion at a time when tin is $US25,000/t on a
cost base of $US13,000/t would be a pretty
compelling argument given that it would also
allow us to pay back debt very quickly.”
Market dynamics have failed to take the
shine from a string of positive results Kasbah
announced in March.
A 9% increase in ore reserves to 9.2mt @
0.77% tin for 71,300t was followed by eye-
catching improvements on the 2014 Achm-
An enhanced DFS was highlighted by a
base case NPV increase of 35% to $US171
million, an 18% reduction in pre-production
capital to $US148 million, a 13% decrease in
C3 costs to $US13,296/t and 10% increase in
production to 5,850 tpa.
The new study was done on a 12-month
average of $US21,511/t which would net the
company $US316 million life-of-mine free
cash at C3 costs of $US13,296/t, while the
company also modelled Achmmach on a
much lower price.
PAGE 10 APRIL 2015 AUSTRALIA’S PAYDIRT
As the mining industry across the globe
grapples with the “new normal” of change
and volatility, there is an obvious and strong
imperative to manage costs, innovate and
drive improved productivity.
While investment in technology has tra-
ditionally been curtailed in times like these,
things feel different this time around. There
is a sustained conversation around the trans-
formative potential of technology, and lead-
ers in mining are turning towards, rather than
away from, the opportunities that have been
demonstrated in other industries.
Mining organisations are being inspired
by examples such as airlines that are able to
“print” replacement parts onsite in their hang-
ars rather than manufacturing them on distant
assembly lines; or doctors who are harness-
ing artificial intelligence to improve cancer
diagnosis and treatments; or preventative
maintenance systems which feature sensors
and robotics that aim to virtually eliminate un-
anticipated mechanical breakdowns.
Deloitte’s Technology Trends 2015 report
examines the things which, over the next 18-
24 months, could potentially disrupt the way
businesses engage, how work gets done, and
how markets and industries evolve. And the Could the mining industry be about to embrace 3D printing and other cutting-edge technologies?
report’s title and theme – The fusion of busi-
ness and IT – is particularly relevant to the
reporting, as the planning, scheduling and fence, while also being able to support new
mining industry. mining processes become heavily technol- innovations, is not as incompatible as it might
Mining leaders need to collaborate with ogy enabled, the technology team is now in- seem at first.
their IT executives more than ever, as technol- tegral to delivery of production. This comes Core renaissance
ogy becomes fundamental to leveraging dis- with relationship changes on both sides, with Organisations have significant investments
ruptive change in order to succeed. Chief In- the CIO needing to balance the demands of in their core systems, both built and bought.
formation Officers (CIOs) can be, and should focusing on flexibility and speed to support Beyond running the heart of the business,
be, the catalyst of change, helping a business operations with leading the organisation to these assets can form the foundation for
understand the “what”, the “so what”, and the mitigate the risks that come hand in hand with growth and new service development – build-
“now what”. ing upon standardised data and automated
Here’s a quick look at
some of the trends that
we believe will impact Across industries we are seeing To this end, many or-
mining in 2015. ganisations are mod-
CIO as chief inte- companies taking a few different paths to ernising systems to pay
gration officer their use of additive manufacturing – reducing down technical debt,
of information and op- reliance on distributed spares through local tions to remove barri-
production of temporary or permanent spares; ers to scale and perfor-
changing the supply chain by removing
erational technology mance.
is a key driver of the Across the mining
changing role of the
industry we are seeing
technology executive movement of highly specialised components organisations actively
within mining organi- between locations; and product innovation by embracing cloud ap-
sations. Increasingly, plications to augment
CIOs needs to view allowing consumer-level customisation. their core traditional
their responsibilities ERP solution, while si-
through an enterprise- multaneously looking at
wide lens, and may find ways to reduce IT costs
themselves being the key “integrator” who is Approaching risks such as cyber security by migrating their infrastructure services to
called upon to bring together information and with a compliance-heavy, reactive mindset the cloud.
processes across the organisation. will also be incompatible with rapid innova- In this regard, organisations in the manu-
A mining company’s IT team is no longer tion. However, integrating a pragmatic risk facturing industry are setting a strong ex-
restricted to corporate systems and financial management approach, including cyber de- ample for miners to follow. For example, a
PAGE 12 APRIL 2015 AUSTRALIA’S PAYDIRT
Mining leaders are turning towards a sustained conversation around the transformative potential of technology
leading semiconductor company set a goal advanced meter infrastructure access points, By applying the exact amount of material
of achieving 15% higher production with 15% the company decided to place the network required for each layer, additive manufactur-
less overheads, and as they examined the physically higher than was needed at the time ing can also reduce waste in the production
options they identified four major areas that – because doing so could make it possible process. For mining companies, seemingly
could yield significant value – operation plan- to repurpose the existing residential mesh simple steps such as on-site manufacture of
ning, supply chain, business-to-business and network. Only one year later, the company is customised safety glasses may be a good in-
warehouse operations. Ultimately, the com- piloting new LED streetlights powered by the troduction to the potential for additive manu-
pany decided that, rather than be tied to one repurposed network. facturing in the industry.
vendor, it would deploy several best-of-breed Additive manufacturing Across industries we are seeing companies
cloud-based solutions from boutique vendors 3D printing is democratising the manufac- taking a few different paths to their use of ad-
to fill ERP functional gaps. Implementing it all turing process and changing what we can ditive manufacturing – reducing reliance on
on a private cloud, this upgrade approach is physically create. The simplicity of the sup- distributed spares through local production of
estimated to have cost roughly half of a tra- port tools means that companies can digitise temporary or permanent spares; changing the
ditional servers and infrastructure approach. existing objects, tailor open-source designs, supply chain by removing movement of highly
Ambient computing or create new designs based on structural specialised components between locations;
Ambient computing is the backdrop of sen- and industrial engineering know-how. and product innovation by allowing consumer-
sors, devices, intelligence, and agents that Advances in materials science are unlock- level customisation.
can put the “Internet of Things” to work. Possi- ing the potential for new manufacturing tech- In one example, an aircraft manufacturer
bilities abound from the tremendous growth of niques, including the printing of electrical used additive manufacturing to produce
embedded sensors and connected devices. circuits, composite structures, and biological brackets that reduced the weight of an aircraft
Translating these possibilities into business matter. by around 10kg. While this may seem a slight
impact requires focus – purposefully improvement, it saved the airline
bringing smarter “things” together with more than $400,000 annually in fuel
analytics, security, data, and integra- costs per plane.
tion platforms to make the disparate This is only a selection of some
parts work seamlessly with each other. of the key technology themes which
While miners are rapidly increasing are emerging for the mining indus-
their deployment of sensors in the field, try, and with the primary focus re-
it is worth taking the time to consider maining strongly on the bottom-line,
the longer term strategy. Designing the mining executives (and especially
underlying communications and sensor CIOs) need to continue to develop
network for future potential can help an artful approach to scanning for
avoid having many “point solutions” on Steven Walsh specialises in Roger Jeffrey is also a technology opportunities and bal-
mining equipment across the site. technology and innovation for Deloitte Consulting partner. ancing when and where to commit
the mining sector. He is a De- Based in Melbourne, he leads their resources.
For example, an electricity provider loitte Consulting partner based the firm’s energy and resourc-
in the US is in the midst of a smart in Perth. es technology practice.
grid project to enhance operational ef-
ficiency. When it installed its network of
AUSTRALIA’S PAYDIRT APRIL 2015 PAGE 13
No rush on deal for Little Eva
Altona Mining Ltd managing di-
rector Alistair Cowden is not
rushing to sign up a partner for his
company’s Little Eva copper-gold
project in Queensland.
And why would he be in a hur-
ry? Altona’s sale of its Finnish op-
erations last year showed the right
deal can come along at any time,
even if you’re not looking to part
with the asset.
Altona returned $80.2 million at
15c/share to shareholders in Feb-
ruary following the $US98.3 million
sale of the Outokumpu copper op-
erations in Finland to Swedish base
metals miner Boliden Mineral AB.
The sale left the Perth-based
junior company with an extremely
healthy cash position of $48.5 mil-
lion to put towards the develop-
ment-ready Little Eva project, near
Debt-free Altona released an up-
dated DFS for Little Eva in March
2014 and despite the technical re-
view greatly reducing a number of Altona concedes the $294 million Little Eva project is too big for the junior company to develop on its own
costs, the $294 million project is
still far too big for the company to develop on es are anything to go by, the right partner for intercepts from a drilling programme at Tur-
its own. the project will eventually come knocking on key Creek last year were 44m @ 1.09% cop-
So for now Cowden is happy to sit back and his company’s doors. per (including 23m @ 1.5% copper), 46m @
wait for the right offer to come along instead of “We’ve had parties from inside and outside 0.61% copper (including 20m @ 0.94% cop-
“destroying” value for shareholders by trying Australia that have shown interest in Little Eva per) and 42m @ 0.89% copper (including 26m
to raise debt to develop Little Eva in a con- and we’ve been engaged with them for some @ 1.22% copper).
strained market. time, but you’ve got to be patient with these The inclusion of Turkey Creek (maiden re-
“Every day we’re seeing companies that things,” Cowden said. source of 21mt @ 0.59% copper for 123,000t
were former market darlings who raised a “You can go out targeting people for a contained copper) in the overall resource will
bucket load of money from shareholders and transaction and never find them, but they al- force some minor re-jigging of the project de-
raised a bucket load of debt – often aggres- ways find you. I’ve never once found the coun- sign as the proposed tailings dam was to be
sive debt – and then had a technical prob- ter party to a transaction by looking, but by built directly above the new discovery. Fortu-
lem and died as a single project company,” being out there and looking they will find you.” nately, Little Eva is within 4km of an existing
Cowden told Paydirt. “I think the lesson here is there is no such and fully permitted tailings facility which could
“We don’t want to go down that route. thing as being highly skilled at these things. be a worthy replacement.
We’ve created a lot of value in the project so If you have a compelling deal in front of you, Cowden was insistent the only explora-
preferably we would like to get someone else you do the deal because you never know what tion programmes his company would engage
in to share the risk either through a merger tomorrow might bring.” in during these tough economic times were
with a larger, stronger Little Eva is fully per- on Altona’s current tenement package in
balance sheet or a JV mitted and has a pro- Queensland.
with a larger, stronger posed annual production “A lot of my reputation is based on explo-
balance sheet or do like of 38,800 tpa of copper ration success in the past, but I’ve been in-
we did in Finland and and 17,200 ozpa of gold volved in enough of it to know that exploration
sell the asset; whatever for a minimum of 11 years is not a business,” Cowden said.
option realises value for from the 1.5mt contained “If you look at the industry as a whole and
shareholders.” copper and 410,000oz the cash that is consumed for exploration
Altona was not looking contained gold resource. success, it’s a poor return unless you’re lucky
to sell Outokumpu when The recent discovery enough to be a Sirius [Resource NL] or a
first approached by Bo- of the Turkey Creek de- Sandfire [Resources NL], but for every one of
liden in February 2014, posit, about 1.5km east those there’s 100 or 200 more where money
but Cowden said the sur- of the proposed Little just gets consumed to no end.
prise offer was too good Eva open pit, has taken “Exploration dollars are dollars you’ve got
to refuse and the trans- the global resource of to be prepared to lose and cash is just too
action was settled last the project to 286.8mt @ valuable now to do that, so we will only devote
November. 0.57% copper and 0.4 g/t money to things that directly enhance the Lit-
Cowden is hoping he gold for 1.65mt contained tle Eva project.”
can bring the same type copper and 400,000oz – Michael Washbourne
of realism to Little Eva contained gold.
and if his own experienc- Alistair Cowden Some of the better
PAGE 14 APRIL 2015 AUSTRALIA’S PAYDIRT
Windward cashes in on
One of the nickel hopefuls looking to Windward has raised $6 million for more advanced nickel exploration in the Fraser Range
emulate Sirius Resources NL’s suc-
cess in the Fraser Range has raised $6 “We’ve still got a very large land package had been discovered at the Plato prospect at
million for advanced exploration in the out there and it takes a long time to collect the recently formed Orpheus JV base metals
prospective region. enough data to start bringing up targets. project.
We’ve done that now and we’ve got three tar-
Windward Resources Ltd defied con- gets we need to drill straight away then other The discovery was made from an inde-
strained capital markets for juniors, par- things we need to do some follow-up work on.” pendent review of a 2014 drilling programme
ticularly those involved in greenfields conducted by previous owner Enterprise Met-
exploration, to not only boost the com- Sirius started mining at Nova earlier this als Ltd. Results were compared to all availa-
pany’s cash reserves but the chances of year and while first ore to be processed re- ble data from the Nova deposit and showed a
unearthing the next Nova. mains a few years away, the market darling similar style of nickel sulphide mineralisation.
will not escape the limelight as it leads a new
The $6 million placement is expected wave of Australian nickel companies. Apollo is acquiring 70% interest in the pro-
to keep Windward active in the Fras- ject and Enterprise will remain free-carried
er Range, where it holds a mammoth Windward raised $7 million for an IPO in until its JV partner delivers a BFS for a mining
9,000sq km of prospective tenure, for at November 2012 – four months after the Nova area.
least the next two years. discovery – and was quickly dubbed Sirius
Mark II because of the strong links to the Mark Five priority targets have also been iden-
Windward managing director David Bennett-led company, including original tene- tified within the 665sq km project area from
Frances told Paydirt he was surprised ment packages created by prospecting king a combination of detailed soil geochemistry,
with the relative ease in which his com- Mark Creasy. ground EM surveys and evaluation of regional
pany was able to raise the funds usually magnetic and gravity datasets.
reserved for much more advanced pro- “No doubt about it, if Sirius
jects. hadn’t found something out Apollo plans to target Plato and the other
there it would still be wilderness priority areas over the coming months using
“It was actually a lot easier than I ex- country,” Frances said. the above exploration methods and will follow
pected it to be. In fact, we could have up with RC and diamond drilling as required.
taken more but we decided to cut it back,” “Mark Creasy pegged it ages
Frances said. ago and everyone thought he The company is also considering using
was mad, but as it turned out other high-powered electrical geophysical
“It’s amazing the amount of interest it gen- he’s a pretty savvy guy and I techniques to identify deeper targets for drill
erated and shows that people are still watch- don’t think you can be lucky as testing.
ing that part of town. Obviously Sirius is a many times as he has without
fabulous success and lots of people are trying having a bit of intelligence and Apollo has three projects in South Australia
to emulate them, but it’s still early stage for us knowing what it’s all about.” – Commonwealth Hill, Eaglehawk and Aurora
and we need to drill it to find out exactly what Tank – it will continue to explore in a bid to
we’re dealing with.” Sirius and Windward were not earn further interest in each asset.
the only two companies from
Windward plans to use the funds raised to the Fraser Range to finish the All three projects are contained within the
drill a number of targets at its Fraser Range first quarter on a positive note. company’s Titan base-precious metals prov-
North project, including the recently identified ince in the IOCG-rich Gawler Craton.
WMA1 conductor, about 4km south-east of Apollo Minerals Ltd confirmed
Nova. David Frances a new nickel sulphide system – Michael Washbourne
It is the strongest conductor identified by
Windward to date and boasts similarities to
the EM conductor which eventually led to the
discovery of Nova almost three years ago.
Drilling at the Western Margin prospect
which hosts WMA1 is expected to begin later
Funds will also be directed
to ongoing regional explora-
tion at both the Fraser Range
North and Fraser Range
South projects, as well as for
general working capital pur-
“The Western Margin is
our first and foremost focus
because that stuff is close to
Nova and is a similar geologi-
cal package to Nova, so we’ll
be focusing quite a lot of work
there and also at some of the
more advanced prospects
we’ve got ready for drilling,”
AUSTRALIA’S PAYDIRT APRIL 2015 PAGE 15
Canyon pairs with Acacia
in Burkina Faso
Canyon Resources Ltd is the Birsok bauxite project in Cam-
latest Australian gold junior eroon.
to make a significant deal in “We could potentially move
Burkina Faso. into production at Birsok very
While standout explorer Or- quickly... this isn’t a pure explo-
bis Gold Ltd recently accepted ration play,” Gallagher said.
terms of a takeover from Se- “Whilst we haven’t defined
mafo, fellow ASX-listed gold a resource, what we are try-
hopeful Canyon Resources ing to do is develop the three
Ltd managed to pen a deal prongs together; developing
with Acacia Mining plc. the geological side in which we
Of course, Acacia is the are comfortable that we know
former African Barrick Gold there is a resource there, while
vehicle led by Australia’s Brad we are doing the infrastructure
Gordon. work at the same time as en-
In March, Canyon and Aca- gaging with the Government to
cia entered into an earn-in get their support.”
agreement over the Pinarello Birsok is comprised of two
and Konkolikan projects in permits covering over 1,400sq
south-west Burkina Faso km of ground in central Cam-
where Acacia has assets eroon.
along the Hounde belt. Being several hundred kilo-
Acacia can earn a 75% in- metres from the coast, specifi-
terest in the projects over a After welcoming Acacia’s participation in some of its gold assets in Burkina Faso, cally the Douala Port, means
two-year period by completing Canyon Resources can focus on its bauxite project in Cameroon infrastructure will be a chal-
a variety of commitments to lenge for the high grade DSO
Canyon, including cash payment of $US1 mil- on to the projects,” Canyon managing director bauxite project.
lion upon defining 1.5 moz gold and explora- Phil Gallagher told Paydirt. Canyon has made inroads to overcome
tion expenditure of $US1.5 million. “In my opinion a lot of these big guys have some of the logistical concerns relating to
It is a timely agreement for Acacia after been sitting on the sideline watching smaller Birsok with a MoU executed with rail and port
it moved to consolidate more of the South companies explore these projects but valua- operators in Cameroon earlier this year.
Hounde project area by signing an earn-in tions have come off to the point where it is Operators of Douala Port and Camrail SA,
agreement with TSX-listed Sarama Resourc- obviously now better for them. Bolloŕe Africa Logistics Africa, have entered
es Ltd. “At the end of the day Burkina Faso still into a MoU to investigate rail, port and logis-
By spending $US14 million over a number has the fundamentals we all went in for; it tics services for Birsok.
of staged payments, Acacia can earn up to is a well-endowed gold greenstone belt that “Camrail runs the rail-line from Burkina to
70% (and increase to 75% subject to condi- runs through the country. The opportunities Cote d’Ivoire and runs most of the main rail
tions) of the project which is comprised of are there, they are still there for really good line and ports down the west African coast,”
seven contiguous exploration licences over discoveries, but rather than being a function Gallagher said.
814sq km. for disparate juniors spread all over the place, “With bauxite being a logistics play, the
The package includes the 1.5 moz gold these larger companies are taking these re- MoU is crucial for us, particularly as our baux-
Tankoro resource plus hosts a number of gional holdings and they have the budget to ite project is quite a way inland. Each route
highly prospective targets which a company spend.” to market is down the CamRail rail-line and
with the financial clout of Acacia (FY2014 Gallagher said that Burkina Faso is suffer- through the Douala port that Bolloŕe operates
operating cash flow of ing the effects of a plung- as well. Bolloŕe has been great to work with,
$US290 million and ing US gold price and the data they have provided and the positiv-
EBITDA of $US253 mil- poor exploration senti- ity they are giving us in terms of solutions to
lion) can exploit. ment more than most of get the bauxite out of the country is something
Moving on such oppor- its West African counter- we’re really pleased with.”
tunities not only bodes parts. The first stage of the MoU is to finalise a
well for Acacia’s growth Nevertheless, for the contract for rail and port export services for
ambitions, but also pro- time being Canyon will re- the export of DSO Birsok material, while lo-
vides companies such as tain a meaningful interest gistics and transport services to develop and
Canyon with an outlet to in its Burkina assets, with operate Birsok will also be investigated under
extract maximum value an option to participate in the MoU.
from assets that would the future. – Mark Andrews
otherwise remain idle as However, the company
sentiment stagnates for is far from waiting on Aca-
gold explorers in West cia to produce exploration
Africa. results to decide its next
“The deal in Burkina move and is actively en-
give us an option to hold Phil Gallagher gaged in developing the
PAGE 16 APRIL 2015 AUSTRALIA’S PAYDIRT
Case histories of discovery
The world’s pre-eminent
gold exploration event
Pan Pacific Perth $A141aE,v2Aaa9riull5ayg.bu0Bls0eitridu2nn0crt1.ai5ltGeST
Presentations will include:
Gruyere (Australia) – Gold Road Ltd Galat Sufar South (Sudan) Orca Gold Inc.
Didipio (Philippines) OceanaGold Corp Salares Norte (Chile) Gold Fields Ltd
Aurora (Guyana) Guyana Goldfields Inc.
Invincible (Australia) Gold Fields Ltd Haile (USA) Romarco Minerals Inc.
Natougou (Burkina Faso) Orbis Gold Ltd Amaruq (Canada) Agnico Eagle Mines Ltd
Cukaru Peki (Serbia) Reservoir Minerals Inc./
Kiaka (Burkina Faso) B2Gold Corp Freeport McMoRan Inc.
Petowal (Senegal) Toro Gold Ltd
Pan Pacific Perth
Jointly organised by:
Keith Yates & Associates Pty Ltd
Sponsors to date:
For all enquiries about exhibiting or attending please contact Tammy Caldwell
on (+61) 8 9321 0355 or email [email protected]
about concreting its
I’m very much driven by challenging opera- price environment and an even more de- to Jubber and the rest of the management
tions where you have to look outside the box,” pressed equity environment. team, it is apparent the focus is not on rais-
Bannerman Resources Ltd managing director ing the share price in the next few months. It
Len Jubber tells Paydirt. And, in 2015, there Despite all the compelling talk of looming is instead on turning the company’s flagship
are few greater challenges than being the supply shortages and impending demand in- Etango project in Namibia into an operation
managing director of a junior uranium com- creases, the uranium spot price has remained that is a safe, sustainable and reliable source
pany. dampened and uranium equities have refused of clean energy for decades to come.
to budge from their low bases.
Four years after the Fukushima incident left Jubber was born and grew up in Namibia
the industry in a state of turmoil, the uranium Such a climate could leave a company like and along with country manager Werner
sector continues to wallow in a depressed Bannerman – market cap around $30 mil- Ewald – who spent 30 years working at the
lion – in an unenviable position but speaking
PAGE 18 APRIL 2015 AUSTRALIA’S PAYDIRT
Bannerman Resources’ Etango project demonstration plant peaks out of the Naukluft National Park.
“ Bannerman swiched on the demonstration plant in late March
country’s largest uranium mine, Certainly coming back occupied since early 2008. “It is a
the Rio Tinto Ltd-owned Rossing to Namibia and building mix of personal and professional
mine – he admits there is plenty of pride; of taking on something oth-
personal pride associated with his an operation from scratch ers deem too challenging, building
vision for Bannerman. a project that can make a differ-
“Certainly coming back to Na- were contributing factors in me ence to the host community and
mibia and building an operation accepting the challenge. It is a mix indeed to wider society.”
from scratch were contributing
factors in me accepting the chal- Despite such claims, there is
lenge,” he says of a position he has
of personal and professional pride. little sentimentality attached to
what Jubber and Bannerman are
AUSTRALIA’S PAYDIRT APRIL 2015 PAGE 19
The mobile crushing plant on site ahead of the demonstration plant ramp up. The bulk sample campaign not only allowed Bannerman
to test its metallurgical flow sheet but also its mining, crushing and rehab plans
doing. Instead, there is clarity of purpose and in February, the company was nearing com- – with more detailed metallurgical information
steely-eyed determination to take advantage pletion of a $1.4 million heap leach demon- on the low-grade project for which capital es-
of a uranium market which is showing signs stration plant. timates are around $US870 million.
of imbalance. The plant is designed to provide the com- It is a brave decision in a market which is
The company is eschewing the usual junior
mentality of constantly watch-
ing the share price. Instead,
We know the nuclear renaissanceit is preparing itself for what it
– and many others – sees as
is coming so the companythe inevitable upturn in the ura-
nium sector’s fortunes.
believes it prudent to keep moving theJubber is more aware than
“project forward and that will allow us tomost just how far out of favour
pany – and potential development partners barely listening, especially as its effectiveness
will only be measured once the
market does turn. However, it
is in keeping with Bannerman’s
strategy to ensure Etango is
best placed to take advantage
of that upturn.
First pegged by well-known
Australian explorer Clive Jones
retain our early-mover advantage.
uranium companies have fall- during the Namibian uranium
en with Australian investors – rush of the early 2000s, Etan-
Bannerman’s share price was go – 38km from the coastal
languishing at 5.2c at the time town of Swakopmund – has
of print compared with its 2007 always been ranked among the
high of $3.65c/share – but that better quality uranium projects
has not led him to put Etango in Namibia.
on ice. Although low-grade, its
Instead, the company has sheer size – the resource cur-
continued to build its develop- rently stands at 212 mlb – puts
ment case, refining mining and it among the top three unde-
processing techniques first es- veloped uranium projects in
tablished in 2007. Namibia. The 205 ppm grade
“The project is live; it is not means it was never likely to
sat in a box under the bed,” be a quick, early cash-flow de-
Jubber says. “There may not velopment and since the first
have been a lot of marketing project concepts were drawn
to do in recent times but we up, Bannerman hasn’t deviated
have used that opportunity to from its plans for a low-grade,
get closer to the project and bulk-tonnage operation.
see where we can drive further There is recognition within
value through engineering.” the company that such a pro-
The company is providing ject will need a favourable
physical proof of its long-term A sample of the alaskite mineralisation at Etango. Despite the 205 ppm grade, price environment to justify the
commitment to the project. the alaskites have proven easy to process with low acid consumption and capital outlay but Bannerman’s
When Paydirt visited Etango fast leaching times strategy has been to ensure
PAGE 20 APRIL 2015 AUSTRALIA’S PAYDIRT
that, once such a market does materialise, Construction on Bannerman’s demonstration plant was in full swing when Paydirt
everything is in place for Etango to be put into visited Etango in February
development before rival projects.
Bannerman selected a 40t bulk sample from this area because mineralisation
“When in production this will be a top 10 occurs close to surface and is easy to access
global producer,” Jubber says. “That is why it AUSTRALIA’S PAYDIRT APRIL 2015 PAGE 21
has been our sole focus; we knew the com-
pany could achieve critical mass through this
“We know the nuclear renaissance is com-
ing so the company believes it prudent to
keep moving the project forward and that will
allow us to retain our early-mover advantage.”
Such clarity has been evident throughout
Bannerman’s involvement in Namibia. Since
listing on the back of Etango in 2006, the com-
pany has worked through a series of resource
upgrades and economic studies.
“The company started drilling in 2006 and
we had year-on-year resource upgrades right
through to 2010 when we reached 212 mlb
uranium oxide,” Jubber says.
Those upgrades have coincided with a me-
thodical approach to development. Etango
was subject to a scoping study in 2007, a PFS
in 2009 and, following several reviews of pre-
vious studies, a DFS in 2011/2012.
Throughout that time, Bannerman has
stayed true to its original concepts of a low-
grade, bulk-tonnage scenario at Etango. It
has not tried to find ambitious new ways to
make the project attractive in a subdued ura-
nium market. Instead, it has concentrated
on making the project as robust as possible
when the winds do change.
“The intention has not changed from Day
1 and that is the strength of the project; it
is large, has consistent geology and is low-
For Jubber, the challenge is not in finding a
way to avoid the low-grade nature of the de- Bannerman country manager Werner Ewald leaching and finding how best we can make
posit but finding a way to make it work. worked at the Rossing uranium mine for more that work.”
than 20 years. He also heads up the Namibian
“I’m driven by challenging scenarios and While Rossing has used sulphuric acid
I’ve been fortunate to spend much of my pro- Chamber of Mines safety committee leaching for nearly four decades and Areva
fessional life working in such scenarios,” he used an alkaline heap leach on its Trekkopje
says. “The met work has focused on heap leach mine, acid heap leaching is uncommon in ura-
from Day 1 and that has proven an advantage nium processing. That led Bannerman to the
Having spent his formative years as a min- because it meant we haven’t had a divided fo- world of copper mining for guidance.
ing engineer at the world’s largest low-grade cus. We have concentrated on the acid heap
uranium mine, the nearby Rossing mine, Jub- “Heap leach itself is not new but we are
ber is anything but intimidated by the chal- looking at big volumes so material handling is
lenge of grade. Indeed, he developed a spe- a big aspect of getting things right. We went
cialised skill set in such projects having later to South America and looked at many cop-
managed the low-grade Macraes gold mine in per operations where they use dynamic heap
New Zealand and been at the helm of Perilya leach. They are very sophisticated operations
Ltd as it tackled remnant mining at Broken Hill. – we visited some where they were moving
60 mtpa of material – and are very efficient in
“With projects like this you need to go to moving material and that is exactly what we
greater detail to manage risk and realise op- need at Etango.
portunity. You need to have a focus on op-
erational excellence and making incremental “The entire challenge is about finding how
improvements. It is about volume multiplied we can move the material as efficiently as
by efficiency and economies-of-scale and we we can and extract as much uranium as we
have applied that thinking to Etango.” can. It is almost adopting a manufacturing ap-
proach; maximising the options you have.”
The processing flow sheet in the 2012 DFS
consisted of primary and secondary crushing Having internal confidence in the process-
followed by high-pressure grinding with mate- ing flow sheet is one thing but Jubber rec-
rial extracted from the uraninite ore through ognised the need to convince the market of
acid heap leaching methods. Bannerman’s ability to process the low-grade
Etango ore efficiently and ultimately profit-
Jubber said the approach had changed lit- ably.
tle from the original 2007 scoping study.
PAGE 22 APRIL 2015 AUSTRALIA’S PAYDIRT
“The first question we always get from in- Bannerman managing director Len Jubber on “With a project like this you need to go to
vestors is about the grade and often they site at Etango. Jubber has led the company greater detail to manage risk and realise op-
mentally switch off when you tell them it is 200 for seven years, instilling a “big company” portunity. The building of the plant has al-
ppm,” he says. attitude to what is still a junior explorer lowed us to test our mining and crushing
methods and our rehabilitation of those areas.
In an effort to dispel investor doubts and we are committed to the project by conduct- It is an important step in showing we can mine
stick to the strategy of maintaining momen- ing meaningful in-country activity.” in a responsible manner.
tum in the project, Bannerman has taken the
surprising step of building an entire demon- Furthermore, establishment of the demon- “This is not work we are just doing to say we
stration plant on site to process bulk samples stration plant has allowed the company to test are busy but work that eventually needs to be
of Etango material. done on the project anyway. It means we are
other aspects of its DFS. already heading down the construction route
“In lab test work we were getting very con- in a meaningful but modest way.”
sistent and fast leaching so the company de-
cided that a demonstration plant would prove Jubber expected construction to be com-
the heap leach concept,” Jubber says. “We pleted before the end of March with process-
see it as the next step in the detailed engi- ing to begin in the June quarter.
neering of the project.”
Although its primary function will be to pro-
The plant not only satisfies Bannerman’s vide Bannerman with more detailed metallur-
desire to keep Etango moving but will also gical information, Jubber has already identi-
provide concrete evidence to potential inves- fied potential to recover some of the capital
tors about the legitimacy of both project and costs.
“There hasn’t been a demonstration plant
“It is in keeping with the overall strategy of this scale available in Namibia before now.
and continues the early-mover advantage we It is large-scale testing infrastructure and
have established for ourselves. It will demon- while it will initially be only available to Ban-
strate the robustness of our design and per- nerman there will no doubt be interest from
formance to potential partners; it allows us to
maintain and build project knowledge, and; it
shows to stakeholders in Namibia that
Crushing at Etango was completed in February, paving the way for a start to leaching tests from late March
AUSTRALIA’S PAYDIRT APRIL 2015 PAGE 23
The demonstration plant will treat 40t of material, giving Bannerman further
evidence of Etango’s suitability to acid heap leaching
other companies in using it.” Fukushima downturn that has dragged on
Before then, the company must much longer than anticipated, there are signs
continue to pay construction costs of renewal.
and in March launched a $2 million In March, Japanese Prime Minister Shinzo
share purchase plan to fund remain- Abe stepped up efforts to restart the country’s
ing development. stalled nuclear power capacity. Meanwhile,
“A capital raising was required to China claims it remains on track to increase
sustain the business, to complete the its nuclear capacity from 18GW to 58GW
demonstration plant and for working by 2020. India has also recently announced
capital. We restricted it to $2 million plans to increase nuclear capacity to 63GW
to minimise dilution with a view that, over the next two decades while hydrocar-
once we start receiving results from bon-rich states such as Saudi Arabia and
the demonstration plant, here will be UAE are also building reactors.
an opportunity to update the market These proposals have analysts predicting
fully on our progress. the market will fall into severe deficit by 2020.
“We recognise that at a low share Convincing investors of an imminent price
price it is very important to minimise recovery may require a leap of faith but extol-
dilution to respect shareholder value ling the virtues of Namibia as a mining invest-
and hopefully the demonstration ment destination does not.
plant will allow us to go back to the Since its re-emergence as a uranium juris-
market with a lot more confidence on diction in the early 2000s, the Southern Africa
the back of some good results.” nations have become renowned for being one
The share purchase plan will tide of the most politically stable and progressive
the company over but ultimately countries on the continent.
Etango’s development will depend on In the Fraser Institute’s most recent Survey
Bannerman securing a development
of Mining Companies report Namibia ranks
partner. 25th internationally and highest of all African
With a market cap of around $30 countries for its investment attractiveness and
million and an estimated capex of 20th internationally and second in Africa in
$875 million, a cornerstone investor, the Policy Perception Index.
either at project or company level, is The last decade has seen Paladin Energy
imperative. Ltd open Langer Heinrich, Areva build Trek-
“Our strategy all along has been kopje and more recently CNNC construct
to attract a development partner for the massive Husab mine. Rio Tinto has also
Etango,” Jubber says. extended and expanded Rossing’s mine life,
Much will depend on the state of reversing a decision which had it set to close
“the uranium market. After a post- in coming years.
There hasn’t been a demonstration
plant of this scale available in
Namibia before now. It is large-scale testing
infrastructure and while it will initially be only
Commissioning of the demonstration plant was available to Bannerman there will no doubt
set to start before the end of March be interest from other companies in using it.
PAGE 24 APRIL 2015 AUSTRALIA’S PAYDIRT
The demonstration plant is expected to cost $1.4 million
As a Namibian, Jubber is keen to stress the tory dating back to Rossing’s development in have set out to make a difference. We have
geopolitical and economic stability within the the mid-1970s. been an active participant in the Uranium In-
country. stitute and the Uranium Association and Wer-
“The uranium industry in Namibia is an ex- ner has sat on the board of the Chamber of
“This is essentially like a 10 moz gold ample of how an industry can work respectful- Mines Safety committee.
equivalent orebody in a geopolitically benign ly with stakeholders; operating within the legal
jurisdiction,” he says. “And that has to be very framework of the country but with the ability to “This is not just about building a mine but
attractive to groups which are looking for sub- regulate itself,” he says. building a company in Namibia which can
stantial amounts of low-risk uranium supply.” make a difference, both nationally and glob-
Having grown up in the country and spend- ally.”
The country ranks alongside Kazakhstan, ing his early professional years at Rossing,
Canada and Australia as a major uranium Jubber is keen to see Bannerman take its It is a noble pursuit but one that will also
producer but while the geopolitical state of the place among the giants of an industry that is be fed by commercial reality if market trends
Central Asian country is always opaque and well respected both locally and at a national blow in the company’s direction.
Australia battles with state-level opposition level.
to uranium mining, Namibia’s industry enjoys – Dominic Piper
strong government support. “Even though we are a small company, we
Such stability can be viewed as Crushed ore is stockpiled ahead of commissioning of the processing plant
priceless in the volatile and highly
regulated uranium space.
“I think the battle over Husab
showed the strategic importance
of stable uranium supply,” Jubber
The largest undeveloped urani-
um project in the world, Husab was
discovered to the south of Rossing
by another ASX-listed junior explor-
er, Extract Resources Ltd, in 2008.
The discovery attracted the at-
tention of a host of uranium com-
panies and shares shot from 35c in
October 2007 to as high as $7.25 in
Chinese nuclear group CNNC
eventually won control of Husab
and is currently building the 15
mlbpa project with first production
expected in 2016.
Rather than being treated with
suspicion as it is in Australia, the
uranium sector is the leader of Na-
mibia’s mining industry with a his-
AUSTRALIA’S PAYDIRT APRIL 2015 PAGE 25
The G1 pit at Paladin Energy’s Langer Heinrich mine in Namibia
John Borshoff’s confidence in the future of said that while the company’s Kayelekera price is below $US70/lb,” Borshoff said. “That
the uranium market is such that Paladin En- mine in Malawi and its proposed Stage 4 ex- is not because that is the minimum threshold
ergy Ltd will not switch on or expand existing pansion at Langer Heinrich in Namibia would on their rate of return but we will not be wast-
projects until such a time that they can start be profitable at lower prices, they would not ing any more reserves. That $US70/lb is our
paying a worthwhile return on the company’s be initiated until they could deliver sizeable threshold to recoup some of the losses we’ve
considerable investment. returns. made and we feel we have earned the right
to do that.”
Speaking to Paydirt in March, Borshoff “We won’t touch anything while the spot
“ Drill and blasting in Pit G2 on the eastern side of Langer Heinrich Paladin has been mining a series of separate pits at Langer
Other commodities have a lot of fixing Heinrich although both the western and eastern portions will
up to do now but in uranium there
isn’t. Uranium missed getting its dress and eventually join up
going to the ball in that post-GFC period.
Although uranium is not at such levels yet tions in recent months, Borshoff
(spot was trading at $US39.25/lb at the time of believes the reset button has
print), there is a discernible change in attitude been pressed.
from Borshoff and Paladin.
With 22 reactors in operation, and a further is that the Fukushima hangover has created
Gone is the anger directed at markets and
investors who have been wilfully ignoring ura- 26 under construction, China is leading the even greater problems on the supply side of
nium plays. In its place is a confidence that
regardless of current mood, investment will nuclear expansion with aims to raise its total the sector.
eventually flow back into the uranium sector.
domestic nuclear power capacity to 58GW by “The demand side is not a challenge but
Having peaked at more than $US130/lb in
2007, uranium suffered as much as any com- 2020, up from 20.3GW at the end of last year. there has been destruction on the supply side
modity from the onset of the GFC in 2008.
However, while other commodities returned “Take those four post-Fukushima years out and supply-side morale, with 50% of supply
to positive territory thanks to the monetary
policies of governments around the world, and the dynamics are about to start happen- under water at current prices,” he said.
any potential uranium bounce was stalled by
Mother Nature. ing again with nuclear demand coming back And, with the future of many uranium mines
“The uranium price may have got back up to what it was.” under threat, fear may begin driving the spot
to $US80-90/lb you know,” Borshoff said. “It
may, like we have seen with iron ore, eased The only difference, as Borshoff sees it, price up again, according to Borshoff.
off into a mature phase by now but because
of Fukushima, none of that ever happened.” Tailings storage facility 3 which Paladin is lifting to give an additional two years of capacity
Instead, it could be on the rise again as de-
mand for other commodities slackens.
“Other commodities have a lot of fixing up
to do now but in uranium there isn’t. Uranium
missed getting its dress and going to the ball
in that post-GFC period.”
The Fukushima incident led to countries
across the world reconsidering their nuclear
ambitions. Demand for yellowcake plummet-
ed but with the likes of China, Japan, India
and France reaffirming their nuclear ambi-
AUSTRALIA’S PAYDIRT APRIL 2015 PAGE 27
URANIUM FOCUS “We’ve been everywhere in the
world and they are all now
confident the restructuring of the balance
sheet has de-risked the company. It
means we can talk about Paladin again,
about our growth, about building a
project nursery; all those things we used
to talk about as being there for the future.
“Supply will be driven by “All other uranium miners in the world are
security; the price is just an using old technology and nothing new had
appendix to that. The price been developed for more than 20 years be-
has risen from $US28/lb and fore we built Langer Heinrich. Those risks im-
even when it gets to $US70/ pacted on operating costs and it always takes
lb, fear won’t stop so it could longer for new technology to be bedded down.
go further. The problem is
that extra capacity takes 6-7 “These plants [alkaline leach in the case
years to come on-stream.” of Langer Heinrich, resin-in-pulp in the case
of Kayelekera] are not like CIP plants in gold.
In an effort to ensure that You can go to Woolworths, buy a CIP plant off
it is ready to take advantage the shelf and take it to your gold project and
of favourable changes in get exactly the outcome you were expecting
market fundamentals, Pala- with the same recoveries. But the technology
din has spent the last two we have used isn’t like that.
years trying to reaffirm its
only corporate and opera- “However, the benefits of the alkaline leach
tional fundamentals. are starting to come through.”
In February, the company The latest initiative at Langer Heinrich is
announced the issue of a a bicarbonate recovery project, designed to
new $US100 million convert- reduce reagent consumption in the alkaline
ible bond. The funds raised leach process. Borshoff declared himself
from the bond were to be happy with the progress of a project which the
used, along with existing company’s hopes will eventually drive costs
cash reserves, to repay the down from $US27/lb currently to $US22/lb by
$US300 million of convert- 2017.
The main western pit at Langer Heinrich. Karibib Mining ible bonds due in November
is the operation’s mining contractor this year. “That will be the real breakthrough at
Langer Heinrich,” he said.
Borshoff said the previous
uncertainty of the $US300 million bond had When Paydirt visited Langer Heinrich in
overshadowed Paladin’s business case in re- February, Langer Heinrich Uranium Pty Ltd
cent times, putting “undue pressure” on the managing director Simon Solomon said the
company’s share price. company had also achieved savings on the
mining and operational front.
At the time of issue, Borshoff said the new
bond “eliminated all of the near-term refinanc- “With prices low we looked at where sav-
ing risk and both reduces and extends the ings could be made and mining was the most
company’s debt maturity profile. This signifi- obvious,” Solomon said. “We are in the initial
cant de-risking of the balance sheet, along negotiations of working towards an alliance
with the expected recovery in uranium prices, style contract with our mining contractor
ensures Paladin remains well positioned to [Karibib Mining] and in the meantime we are
capitalise on its unique standing in the ura- breaking other activities up between core and
nium market.” non-core.
Borshoff told Paydirt the new bond issue “We are trying to ensure our own employ-
had been well-received by global investors. ees are doing the core activities and contrac-
tors are doing the non-core. This will result in
“We’ve been everywhere in the world and
they are all now confident the restructuring John Borshoff
of the balance sheet has de-risked the com-
pany,” he said. “It means we can talk about
Paladin again, about our growth, about build-
ing a project nursery; all those things we used
to talk about as being there for the future.”
On the operational front, the company has
been focused on driving down costs at Langer
The company has received criticism in the
past for ramp-up and operational difficulties at
With uranium prices forecast to rise, Paladin is Langer Heinrich, however Borshoff is proud of
again considering its Stage 4 expansion project the company’s achievements at what he sees
at Langer Heinrich as the vanguard of uranium processing.
PAGE 28 APRIL 2015 AUSTRALIA’S PAYDIRT
Paladin will be moving 700,000 bank cubic metres a month from July 2015
with a plan to return to 1 million in 2016
more efficiencies being realised. It is about Borshoff sees Paladin as unique
using less management time and making sure
you have direct control over key areas of the in a uranium space dominated by
majors and state-owned compa-
“For instance, we had a contract crew doing
the maintenance on the front end of the plant. nies.
But maintenance is very important so we took
control of that ourselves.” “We are the only company of its
Benefits are beginning to flow with costs ex- kind in the world because all the
pected to fall in the 2015 financial year while
production guidance is 5.2-5.5 mlb, following other uranium producers are ei-
5.59 mlb production in the 2014 financial year.
ther state-owned ore very mature Problems with one of the pre-leaching thickener tanks led
Borshoff said the breakthroughs at Langer companies. Areva has blown up to the loss of 10 days production at the start of March
Heinrich would not only deliver optimisation financially, Rio Tinto [Ltd] and BHP
on site but would set the company up for its
next stage of growth. Billiton [Ltd] are not sure where they are go- in a good position with the uranium price in-
“It will also, ultimately, deliver transferabil- ing and Cameco is a mature company. We are evitably coming up. And, we are coming off a
ity,” he said.
the company with all the upside.” low base because of the debt issues we previ-
And, should uranium prices increase and
cost pressure lessen, Paladin may be able to Before Paladin approaches development at ously had.”
fund much of that growth on its own terms.
Manyingee and Michelin however, it will look It is an enviable position to be in for a com-
The company has two key development
projects; the 26 mlb Manyingee project in to reactive both the Stage 4 expansion project pany that has suffered through the long ura-
Western Australia and the 100.8 mlb Michelin
project in Canada. and switch Kayelekera – parked since early nium drought and it is for that reason alone
“We went from zero to 8 mlbpa produc- last year – back on. that Borshoff retains his faith.
tion by using debt but we can go further now,
possibly to 25 mlbpa, through more organic Borshoff said neither project took prec- – Dominic Piper
means.” edence but it was likely Kayelekera would be
“It will come on first because
it will take only 6-9 months to
get cash flow back into the sys-
tem while the Langer Heinrich
expansion will take 18 months,”
Paladin has developed
these new opportunities. We’re
Paladin expects to produce 5.2-5.5 mlb of uranium oxide in 2015 Crushed ore is stockpiled at the Langer Heinrich
AUSTRALIA’S PAYDIRT APRIL 2015 PAGE 29
Deep thought puts
Namibia on top
Deep Yellow has returned to drilling of palaeochannel targets on its Tumas uranium project in Namibia
Deep Yellow Ltd managing director Greg exactly what direction the company was
Cochran does not hide away from the heading.
fact these are tough times for the global “It had just never stopped so we paused
uranium industry; perhaps the toughest of and did some fundamental analysis of
times if you’re a junior uranium explorer. where the company was going.”
“It is different now and everyone knows The analysis saw the company tighten
that,” Cochran told Paydirt. “When I joined its portfolio, dropping almost all of its Aus-
the company it had eight rigs turning and tralian projects in preference to focusing
was drilling about 15km a month but you on its Namibian assets. However, Cochran
have got to adjust your horizons accord- was careful not to place Deep Yellow into
ingly.” complete hibernation.
That unprecedented level of activity “It is important to maintain momentum,”
came just before the Fukushima incident he said. “You can’t expect to awaken from
devastated the uranium sector in March a deep slumber and hit the ground running
2011. Four years on and the much-talked and so that is how we are trying to position
about recovery has still not materialised. ourselves; as a company that is not spend-
How, then, can a junior company such as ing a lot of money but is still active.”
Deep Yellow recover its composure? Ensuring those limited cash reserves
“The uranium downturn led to dramatic are put to best use is also of critical impor-
cutbacks and job losses both in Australia tance in such austere times.
and Namibia but it also provided us with an For Deep Yellow, that meant assessing
opportunity to reassess our portfolio and exactly what kind of projects it was looking
“the projects within it,” Cochran said. Deep Yellow managing director Greg Cochran to develop.
In 2010, the Deep Yellow “The review also in-
cluded a complete re-
portfolio comprised early assessment of our flag-
ship project, Omahola,”
stage uranium projects The uranium downturn led to dramatic Cochran said.
spread across Namibia, cutbacks and job losses both in
Queensland and the North- Omahola – 25km
south of the Husab
ern Territory. Cochran said Australia and Namibia but it also provided project in Namibia’s
the need to halt drilling and us with an opportunity to reassess our so-called “Alaskite Al-
ley” – had always been
other expensive exploration
meant the new manage- portfolio and the projects within it.
ment team could ascertain
PAGE 30 APRIL 2015 AUSTRALIA’S PAYDIRT
considered a high-grade prospect capable of Peter van Niekerk puts the scintillometer to work on the Tumas project
being developed using tank leaching process-
ing. cut-off grade to 100 ppm, in line with other Na- optimisation and mine scheduling exercises
mibian acid leach operations. with DRA International providing capital and
A PFS – focused only on the INCA deposit operating cost assumptions.
with supplemental feed from the lower grade Cochran said the review had saved the
Tumas Sand deposit – highlighted the poten- company both time and expense. Results from the work are expected this
tial for a 12-year 2.2 mlbpa operation costing quarter with Deep Yellow then set to press on
$US340 million using conventional acid tank “It clearly suggested that heap leach, not with development studies.
leaching and solvent extraction. tank leach, was the preferred method and that
saved us a lot of money on metallurgical test “Once the assessment is complete we will
As the MS7 and Ongolo deposits began to work,” he said. move into more detailed metallurgical test
grow, the company separated the low-grade work, then onto a scoping study and a PFS,”
Tubas Sand deposit into a standalone project, There is also plenty of evidence within Cochran said.
instead focusing on the three hard rock pros- the “Alaskite Alley” to fortify the company’s
pects. stance on heap leach. Regardless of the outcomes of economic
studies, the project will remain an expensive
While the focus remains on those three de- “It gives us a lot of confidence that down proposition with any operation likely to require
posits, Deep Yellow’s internal review threw up the road Bannerman [Resources Ltd] already a 7-10 mtpa capacity. In the current economic
other propositions. has a good resource that is proving very ame- climate, companies the size of Deep Yellow
nable to heap leaching and the Garnet Valley (market cap $24.77 million at time of print) are
“It really led to an entire reassessment of deposit – which is essentially an extension to unlikely to find immediate funding. However,
Omahola. The back-end study we completed Omahola – has already been subject to inde- thanks to the internal review, Omahola is no
internally alerted us to the fact that it was un- pendent studies which proved it economic.” longer the all-consuming focus for Deep Yel-
likely to be a tank leach operation but rather a low.
heap leach one.” The company brought Perth-based con-
sultants Orelogy to conduct more detailed pit
Tank leaching of uranium requires a high-
er cut-off but Deep Yellow’s internal review
found the 250 ppm uranium cut-off applied
to Omahola meant economic resources from
its three deposits (Ongolo, MS7 and INCA)
would likely be ignored, resulting in lower
overall metal recovery. Deeper higher grade
resources could also have been sterilised
when applying the 250 ppm cut-off.
Assuming heap leaching as the preferred
processing route allowed for a lowering of the
AUSTRALIA’S PAYDIRT APRIL 2015 PAGE 31
The in-country team of Deep Yellow’s Namibian subsidiary Reptile Uranium Namibia Pty Ltd;
“Pieter van Niekerk (manager – field operations), Klaus Frielingsdorf (technical consultant) and
Geoffrey Gee (exploration geologist)
Toll treatment is not common in uranium
but there are models that work successfully
and that sort of low capex proposition does strike
a chord with potential investors.
“The changes at Omahola were just one resources in the Swakopmund region, the
The barren landscape reveals little on surface outcome from the review,” Cochran said. Namibian Government is also likely to look fa-
but Deep Yellow believes it could build a “It also showed we need to reassess the vourably on a toll-treatment option rather than
potential of the palaeochannel targets we the construction of another uranium process-
project capable of producing a high-grade have and return to greenfields exploration.” ing plant.
uranium concentrate at Tumas
At the heart of this change of emphasis “We are looking for something that we
PAGE 32 APRIL 2015 AUSTRALIA’S PAYDIRT is a recognition that the company needs to can part process riding on the back of oth-
find something other than big capex pro- ers who have already built processing plants;
jects if it is to continue growing. toll-treatment or the like,” Cochran said. “Toll
treatment is not common in uranium but there
It has already been down this road. The are models that work successfully and that
decision to separate the Tumas Sand pro- sort of low capex proposition does strike a
ject from the rest of Omahola was made in chord with potential investors.”
an effort to attract an off-take partner.
A sample of the palaeochannel
“We made a good project out of the Tu- mineralisation at Tumas
mas Sand, one which was predicated on
an off-take partner taking a partially ben-
eficiated product. We put the economics
together but unfortunately couldn’t find a
partner and have since put it on hold.”
Instead, attention has turned to the pal-
aeochannel potential of Deep Yellow’s Na-
Like with Tumas Sand, Deep Yellow’s
strategy for the Tumas palaeochannel tar-
gets is to delineate a project capable of
providing a low-cost entry point to produc-
tion. Marenica Energy Ltd has previously
tested samples from the palaeochannel
resources – currently 6.8mt @ 288 ppm
for 36 mlb uranium oxide – which indicated
potential to beneficiate the material using
Marenica’s U-pgrade technology.
Beneficiated material could then be sold
or toll-treated through the likes of Langer
Heinrich or Rossing.
With strain on water and infrastructure
Deep Yellow undertook a short
drilling programme in December
to further test the palaeochannels,
specifically Tumas Zone 1, with a
particular eye on identifying higher
Grade improvements could prove
vital with a 10 ppm increase in re-
source grade potentially translating
into a 100 ppm increase in concen-
“Hopefully there will be some
good news out of that but we also
hope it can be used as a feedback
loop into the old data. There was a
sizeable exploration target on the
palaeochannels which disappeared,
we are now asking ourselves whether there in uranium it is
was enough work done to actually write that hard to believe
target off.” that Western Aus-
The company will also investigate the use tralia outranks Na-
of geophysics to enhance its palaeochannel mibia because it has
targeting. a regulatory regime that
“Historically we had some wonderful geo- has been in existence for 35
physics work that perhaps never had the full years and has approved the
benefit of interpretation. Now is the time to go likes of Rossing, Langer Heinrich
back and get a lot more out of it. We can then and now Husab.
drill again and, this time, not miss the chan- “I have lived through the regula-
nels.” tory nightmare in Australian ura-
The third leg of Deep Yellow’s renewed nium and there is no comparison,”
strategy is greenfields exploration on the he said.
company’s 3,000sq km of granted exploration So it is clear where Deep Yel-
licences in Namibia. low’s future lies; in uranium and in
Cochran said the company would be cau- Namibia. And, with more than $4
tious and deliberate with its greenfields strat- million in the bank it is the envi-
egy. able position of being able to bide
“We are looking for low-cost ways of con- its time, waiting for market winds
ducting exploration and that leads us to geo- to blow in its favour.
physics,” he said “We have had some great – Dominic Piper
radiometrics in the past and we were the first
company in Namibia to use IP but there is
more that could be done. We have
completed initial interpretation but
interpreting geophysics is a bit
like squeezing a lemon and we
have only started squeezing the
first lemon. We have to squeeze
that one a bit more and then go
and pick some more.”
In a wider sense, the internal
review reaffirmed Deep Yellow’s
commitment to uranium.
“I think it shows we are still very
capable of being a focused ura-
nium explorer and there has been
no suggestion from sharehold-
ers or potential investors that we
should look to diversify,” Cochran
said. “My career has been the
definition of diversification but the
clear message from shareholders
and investors is ‘keep focused’.
We are a respected uranium ex-
plorer and should keep it that
Cochran is also convinced the
decision to favour Namibia over
Australia was a good one.
“Namibia has jumped ahead A hole from the December 2014 drill programme
of Botswana in the most recent is marked with a wooden stake. Aluminium is not
Fraser Institute survey as the best used because local ostriches like to pick at the Tumas makes up part of Deep Yellow’s 3,000sq km
landholding in Namibia
jurisdiction in Africa. Particularly metallic pegs
AUSTRALIA’S PAYDIRT APRIL 2015 PAGE 33
to be ASX’s next
Peninsula has 7,500sq km of ground in the Karoo Basin
Peninsula Energy Ltd is lighting up uranium Late in 2014, Peninsula secured a $69.4 tions at Strata Energy Inc – Peninsula’s whol-
circles around the globe however it has not million fully underwritten institutional funding ly-owned subsidiary in the US.
discounted its prospects on home soil. deal to take Lance in Wyoming into produc-
tion this year. Fajgl will manage operations at Lance
“We are looking at projects in Australia. Our which technical director Alf Gillman has
intention isn’t to do it this year and probably The funding arrangement included an insti- steered towards construction of stage one at
not in the first half of next year. However, in tutional placement ($16.8 million), institutional a capex of $US33 million.
the second half of 2016 and early 2017 we will entitlement offer ($23.9 million) and retail en-
certainly be on the move,” Peninsula execu- titlement offer ($28.7 million), with the major- Originally, debt was the preferred method
tive chairman Gus Simpson told Paydirt in ity of funds coming from institutions such as of financing for the entire three-stage Lance
Cape Town during Mining Indaba 2015. Resource Capital Fund VI L.P. (RCF), Pala project which is in a jurisdiction accustomed
Investments Ltd, BlackRock Funds and JP to uranium production since 1951.
Indaba is generally the forum for com- Morgan Asset Management UK.
panies to spruik their African assets, and However, the long run to nameplate 2.3
while Peninsula has the Karoo uranium play Pala’s participation in the raising netted the mlbpa production at Lance had debt provid-
in South Africa, interest in the company was firm a spot on the board with senior execu- ers insisting Peninsula lock more of its prod-
centred on its Lance ISR project in the US. tive Evgenij Lorich joining the likes of Warwick uct in contracts which prompted the company
Grigor, Neil Warburton and John Harrison as to chase alternative funding streams.
After all, Peninsula had just managed what a non-executive director at Peninsula.
uranium players and many others in the re- “We didn’t like that idea of contracting our
sources sector haven’t been able to in recent Meanwhile, former Uranium One Inc and product at this current pricing structure be-
times; structure a deal to get a project off the Cameco Corp mining engineer/manager, Jan cause we believe prices are going to get a lot
ground. Fajgl, was appointed vice president of opera- stronger,” Simpson said.
Contracted prices are largely kept between
Peninsula’s share price was less than 2c at the time of print An extensive trial exercise by Esso took place at Ryst Kuil in 1979
PAGE 34 APRIL 2015 AUSTRALIA’S PAYDIRT
supplier and utility with Peninsula guiding Esso took 162 bulk samples for 4,050t material during the trial mining phase
production from stage one at Lance to be
700,000 lbpa at an average $US53/lb. la, considering its interest in Wyoming started toxic substance or radioactive substance;
in 2006. it is just the whole mining licence process. I
All-in cash costs for stage one have been haven’t permitted a uranium mine in Australia
estimated at $US41/lb however that will re- “The permitting process in the US was a but from what people tell me it is probably
duce over life-of-mine to $US29/lb in stage rigorous process. It is a multi-agency pro- faster in the US. With more people applying
three (2.3 mlbpa by 2020) when Peninsula will cess, yellowcake is not considered to be a for uranium licences there, it means there are
be receiving about $US65-75/lb of uranium more agency resources allocated to assess-
sold. There is immediate uranium detection as soon ing uranium applications,” Simpson said.
as the meter is turned on at Karoo
Peninsula entered its first sales contract “It has been a rigorous and lengthy process
in 2011 for 1 mlb uranium to be delivered be- but we are fully permitted and in construction
tween 2015-2020 (about 35-50% of annual mode. There is significant potential here for
sales) at a weighted daily price of $US73-75/ us in what is a first world mining environment
lb. Additionally, Peninsula committed to sup- and a first world commercial environment.
ply a major US power utility with 912,500lb And, it is a place with the leading consumers
under current term contract prices. of uranium in the world.”
At the time of print, Peninsula was negoti- It is almost 10 years since the company en-
ating with several other utilities for additional tered the north-east flank of the Powder River
sales agreements and hoped to land another Basin, which had been explored between
contract to further de-risk cash flow for stage 1970-1979 by the NuBeth JV – made up of
one. Nuclear Dynamics Inc, Bethlehem Steel Cor-
poration and later Pacific Power and Hydro.
Simpson said the company had tested the
waters in Asia however it was pursuing con-
tracts in the US and European markets.
“A very important part of our strategy that
isn’t directly related to mining is the ability to
build relationships with our customer base.
About 80-90% of uranium is sold under term
contracts to utilities, these are not typically
publicised and terms not disclosed at the re-
quest of the utility,” he said.
“When you hear noise around uranium
prices and so forth, it is really around a small
portion of the business which is the spot
price [UxC spot price at the time of print was
$US39.25/lb]. The important thing to under-
stand of this business is that aligning yourself
with utilities and contracting with them over
the longer-term is fundamental. Our strategy
is really to meet the requirements of these util-
ities which are looking for security of supply.”
Peninsula is on track to be one of those re-
liable sources of uranium supply, with stage
one at Lance about 60% complete at the time
of print. Simpson was confident that produc-
tion would start in the second half of 2015 af-
ter site works begun in 2013.
Seeing the first of its yellowcake baked this
year will be somewhat of a relief for Peninsu-
Karoo is about a five-hour drive from Cape Town
AUSTRALIA’S PAYDIRT APRIL 2015 PAGE 35
An exploration target of 250-350 mlb uranium has been set at Karoo
The NuBeth JV had discovered a small ing resources for 70 years or more.
resource at the Lance projects which Penin-
sula has now developed into a 20-year project The company has set an explo-
boasting 51.2mt @ 476 ppm for 54 mlb ura-
nium resources discovered at $US1/lb. ration target of 158-217 mlb ura-
“There is no exploration currently happen- nium (including the current 54 mlb
ing at Wyoming. We have 54 mlb there, with
28 mlb recovered for a 20-year mine-life as it resource) for 169-196mt @ 426-
is. We will wait until we are cash flow positive
out of Wyoming then we will put $2-3 million 530 ppm uranium.
a year into exploration to replace the pounds
that we are mining,” Simpson said. “We are also looking at other
There are currently 13 historic resources at projects in Wyoming that would
Lance, with 22 roll fronts extending for a com-
bined 312 line-km which Peninsula sees hav- compliment what we are doing
Gus Simpson there because we now have a
central processing facility that is
licensed to do 3 mlbpa although
we will only ever get 2.2-2.3 mlbpa
of our own properties at any one
time. There are a couple of satel-
lite orebodies sitting in central lo- A DFS at Karoo is expected to start in the second half of 2015,
cations in Wyoming, or close to.
with production targeted in 2017/18
We believe if we can acquire one
of those, we can put a satellite ion exchange up it is very low-risk and produces significant
plant there and shipload some of the resin to cash flows for the company,” Simpson said.
the central processing facility,” Simpson The company has estimated net cash flows
Simpson’s vision for the future is not blur- for 2015 of $US3.2 million, free cash, increas-
ring his plans for the present. ing to $US80 million in 2020.
A successful stage one operation at Lance While Lance is forecast to take Peninsula
will lead into a 1.2 mlba project in 2018 (stage into cash flow positive territory mid-2016 and
two) followed by 2.3 mlba (stage three) in offers potential scale-ability for Peninsula,
2020. Simpson won’t be pigeonholed into one pro-
With $60 million equity secured to build ject.
stage one, Peninsula has debt facilities it can “Our plan over the next 5-7 years is to build
drawdown to fund stage two capex at Lance a company with diversified supply of about
of $US35 million, while $US25 million in debt 8-10 mlbpa. The first project to get off the
and $US53 million working capital would be ground is in Wyoming and the second will be
required for stage three. our projects in the Karoo,” Simpson said.
“Stage two and three will be dependent on “What we are looking to do is have three or
the contracting situation we have going on be- four mining operations in different geographi-
hinds the scenes, they are progressing very cal locations. We obviously want those mines
well at the moment and our expectation is that to be long life and in the first quartile of costs.
we will see stage two and three ramp-up to The diversity of supply also makes us much
2.3 mlbpa. At that rate we have a very robust more appealing than a single supplier.”
project with an NPV of $US280-290 million; it Simpson mentioned Australia as a destina-
is low capital intensity relative to other com- tion of choice however the likes of Canada,
modities. Also, because of the staged ramp- Namibia and other African nations are also
PAGE 36 APRIL 2015 AUSTRALIA’S PAYDIRT
George van der Walt, Peninsula exploration manager (South Africa), with managing
director Gus Simpson and country manager Tefo Maloisane at Indaba
attractive uranium propositions for Peninsula. ant resources at the moment
Before branching out, the company has
at very good grades. We have
the advanced Karoo project, about five hours
along the N1 Highway from Cape Town, to completed a scoping study
here and are in a PFS. We
A PFS is under way, with the company ex-
pecting to start DFS activities in the second expect at some time between
half of 2015.
the mid and end of 2016 to
As of February 2014, a resource of 56.9
mlb @ 1,108 ppm uranium stood at Karoo, complete the DFS and we will Karoo currently hosts a resource of 57 mlb @ 1,108 ppm uranium
with an additional 49 mlb of historic material be looking out for financing for
that could be converted into JORC resources.
this project and a second production centre at its second mine.
An exploration target of 250-350 mlb @
900-1,200 ppm is a possibility within Penin- for ourselves,” Simpson said. “We are in a very good position for a junior
sula’s holding in the Karoo Basin.
A scoping study in 2013 highlighted the company, with two very large project groups
“We have a very large project landholding
of about 8,000sq km. It was originally ex- potential for a 3 mlbpa operation at Karoo, with upside exploration potential. We believe
tensively explored by Esso in the 1970s and
again we have another 57 mlb JORC-compli- with Peninsula indicating possible start-up in there is a major re-rating for both company
2017/18. and the sector, particularly for our company
With a project on the cusp of production, as we have a clear path to production and the
$54 million cash, a market cap of $110 million project is committed and we will be the next
and available debt to be drawn down to fund uranium producer on the ASX,” Simpson said.
expansions at Lance, Peninsula is poised to – Mark Andrews
be even better placed when it cuts the ribbon
The trial mining processing facility is 30km from the township of Beaufort West which has a population of 30,000 people
AUSTRALIA’S PAYDIRT APRIL 2015 PAGE 37
Queensland Government casts
doubt on uranium future
The Queensland Resources Council (QRC) Queensland’s uranium industry faces another U-turn new jobs generator for the region,” he said.
has urged the State’s new Labor Govern- “An option open to the Government is only
ment to reconsider its plans to reinstate a ban portunity to take advantage of the excellent
on uranium mining. work undertaken by the Department of Natu- to consider uranium mining projects in the
ral Resources and Mines in the past few years north-west of the State where some of the
Labor was strongly opposed to the previous to develop a world-leading regulatory frame- most valuable uranium deposits are located.”
Liberal Government’s plans to overturn a 25- work for assessing and overseeing uranium
year ban on uranium mining in Queensland mining projects.” Queensland’s stance on uranium mining
while in Opposition and indicated last month it is expected to bode well for pro-yellowcake
would not change its views on exploitation of Roche said each uranium project should states such as Western Australia.
the energy metal. be judged on its merits instead of applying a
blanket ban on all mining of the controversial More than $300 million has been invested
Former Queensland Premier Campbell resource. in uranium exploration in WA since the Liberal
Newman first announced plans to allow ura- Government lifted the ban on uranium mining
nium mining in 2012 and officially declared “Reimposition of a blanket ban on uranium in 2008.
applications for uranium exploration open in mining will come as a particular disappoint-
August last year. ment to the people of north-west Queensland WA Mines and Petroleum Minister Bill Mar-
who rightly see uranium mining as a valuable mion said the looming ban on uranium min-
But the future of uranium mining in Queens- ing in Queensland “defies logic” and publicly
land is now under a serious cloud following backed his State’s advanced uranium pro-
Labor’s comprehensive win at the State elec- jects.
tion earlier this year.
“The industry can rest assured we are
Queensland’s last operating uranium mine, working to maximise uranium opportunities
Mary Kathleen, between Mount Isa and Clon- in WA, as opposed to Queensland Labor’s
curry, was closed in 1982, seven years before short-sighted approach,” Marmion said.
uranium mining was banned in the State.
“What is so exciting is that exports from
QRC chief executive Michael Roche de- WA’s four advanced projects could top one
scribed the Labor Government’s plans to re- billion dollars a year by 2020, if uranium pric-
instate the ban on uranium mining as “disap- es recover to economic levels. These mines
pointing but not surprising”. could employ more than 1500 people during
construction and 500 people during opera-
“Before rushing to a decision, we would ask tions, not to mention the indirect employment
the Government to consult the QRC and com- opportunities.”
panies with uranium interests on its intentions
concerning uranium,” Roche said last month.
“This new Labor Government has the op-
Low-cost US uranium miners
await price signal to boost
Three US. uranium producers say they are under eight utility contracts. If the spot price Cameco is aiming for production of 6-8
poised to ratchet up production quickly if climbs to $US50/lb from $US38.75 currently, mlbpa at its new Cigar Lake, Saskatchewan,
prices swing higher after a four-year slump. Ur-Energy would push production at Lost mine this year. Hitting the upper end of that
Creek to 1 mlbpa, chief executive Wayne Heili range depends on technical factors, not pric-
The uranium spot price has bounced off told Reuters at PDAC in Toronto. es, Cameco’s chief corporate officer Alice
the bottom it hit following Japan’s 2011 Fuku- Wong said.
shima disaster, but it remains below the level “The $US50 mark is probably where we
needed to boost production. would say, if we can get more on the spot mar- Heili said now may be the time to consoli-
ket than from our contracts, that’s what we’ll date, before the market rebounds. On a big-
Although they are small, some US produc- do: produce additionally for the spot market,” ger scale, US producers could attract greater
ers benefit from lower costs than conventional he said. investment, he said.
miners of the radioactive metal because they
use an in-situ mining techniques to extract Uranium Energy, which has operations in In January, Energy Fuels said it would buy
ore. Texas, placed producing assets on standby fellow US producer Uranerz Energy Corp for
in late 2013. A spot price around $US45/lb $US150 million.
That allows companies such as Ur-Energy would lead it to raise production from minimal
Inc and Uranium Energy Corp to increase out- levels, chief executive Amir Adnani said. “The market is down and valuations are
put at lower market prices than can be done at low,” Heili said. “It’s probably a good time to
conventional mines owned by Cameco Corp UEC’s plant is permitted for 1 mlbpa. get serious about the business of consolida-
or Areva SA. Conventional US producer Energy Fuels tion.”
Inc produced 800,000lb last year. A price of
Colorado-based Ur-Energy wants to pro- $US60-65/lb would spur more production, – Rod Nickel, Reuters
duce 750-850,000 lbpa this year at Lost chief executive Steve Antony said.
Creek, Wyoming, most of which it would sell
PAGE 38 APRIL 2015 AUSTRALIA’S PAYDIRT
Vimy busting uranium myths
It is a little-known fact that Mike Vimy is expected to release an updated resource estimate and scoping study later this month
Young’s first job was in uranium. In
fact, his second and third jobs also from the market because it contained too that will come out, it reduces by about 50%
involved working with yellowcake the amount of freshwater that needs to go
as a young geologist in his native much inferred material. through the plant and it reduces your reagent
Canada. costs. And really importantly you’re not put-
That will lead straight into a PFS slated for ting a bunch of silicate sand through the plant
People often only associate the which is just abrasive.”
charismatic Young with iron ore be- release in the third quarter before the com-
cause of his founding role in guiding Vimy’s stocks jumped 29% on the back of
BC Iron Ltd from maiden drill hole pany goes into full feasibility mode ahead of the beneficiation announcement and were
to first ore on ship in less than four trading at 37.5c/share at the time of print. It
years. the 2017 construction target date and first followed an 800% rise last December after
the company announced a name change and
Now he’s back to do it all again, production the following year. an initial resource upgrade for Mulga Rock.
but this time he has returned to his
first love and hopes to steer uranium Funding will of course be a major hurdle to Young is clearly buoyant about the market
hopeful Vimy Resources Ltd along as his company looks to advance the project
the same successful path as his for- overcome at some point in the next few years, in a tough economic environment and at a
mer company. time when uranium is still on the nose.
but Young believes a recent metallurgy break-
“I’m from Ontario where 40% of Most of Young’s optimism stems from re-
the power is nuclear so I don’t get through will have a big impact search conducted by his offsider and former
the heebie-jeebies from uranium Fortescue Metals Group Ltd executive Julian
like a lot of people do here in Aus- on reducing capital costs. Tapp, including calculations around long-term
tralia, which still mystifies me to this uranium pricing contracts.
day,” Young told Paydirt. Metallurgical testwork identi-
“If I’m a Chinese utility looking to put in
“When I first looked at Vimy I fied up to 65% of the ore host place a long-term contract for my reac-
thought, ‘this is the next BC Iron, tor which I’m planning to switch on in 2022,
let’s do it all again’. It’s in a good jurisdiction, rock is silica-rich sand and sup- I need five years of supply before then so I
the same time zone as one-third of the world’s need to start in 2017 and that means I need
population and it’s got no red flags, apart from ported an earlier interpretation to be writing those contracts now,” Tapp said.
a few environmental things that need to be
managed as with all uranium projects.” that the majority of the uranium “I don’t think people realise there is this
massive, almost seven-year time lag between
Vimy’s flagship project is Mulga Rock, ore is hosted by carbonaceous when you write a long-term contract for a new
about 240km north-east of Kalgoorlie in the reactor and when you are going to switch on
Great Victoria Desert of Western Australia. and clay sediments intermixed that reactor.”
It is the third largest undeveloped uranium
project in Australia with a global resource of with silicate sands. Tapp said Japanese reactors were coming
59.2mt @ 490 ppm uranium for back on much slower than initially forecast,
63.5 mlb uranium. Vimy believes the silicate but it would have limited impact on the mar-
ket because all purchases were made under
The Perth-based company, sands can be removed via a long-term contracts.
which traded on the ASX as
Energy & Minerals Australia Ltd simple beneficiation process, – Michael Washbourne
until late last year, is looking to
develop a 3 mlbpa uranium op- with minimal loss of uranium,
eration that will run for at least
12 years and hopefully change before the final ore concentrate
attitudes towards the often divi-
sive commodity. is introduced to the processing
Young has lured a number of plant.
key personnel into his corner to
help with that push, including Mike Young “One of the things our metal-
mining magnate Andrew For- lurgist looked at was the size
rest as the company’s largest
shareholder and former WA distribution of the ore and found
Minister for the Environment
and Attorney-General Cheryl the material between 0.045mm and 2mm is
Edwardes as chairman.
predominantly sandy and doesn’t have much
“I’m not an expert at anything, but one thing
I’m good at is getting people who are good at uranium in it, so it’s going to be a big burden to
what they do to make sure you’ve got all the
gaps filled,” Young said. put all of that through the plant,” Young said.
“The next thing we need is a good mining “It’s about 50% of the mass, so what you’re
engineer – hopefully with coal and sand ex-
perience – to start thinking about how we’re basically doing is putting a whole lot of inert
going to mine this deposit.”
waste through your mill and out your tailings.
Vimy will announce an updated resource
estimate early this month before finalising a So we thought, ‘what if we can filter that out
scoping study that was previously withheld
easily at the front-end and not put it into the
“That reduces by about 50% the tailings
AUSTRALIA’S PAYDIRT APRIL 2015 PAGE 39
‘Made in China’ nuclear reactors
a tough sell in global market
As China signs global deals to export its following Japan’s Fukushima disaster in 2011. Westinghouse, China secured a significant
nuclear power technology, it faces a huge Beijing has promised to stick to the high- technology transfer agreement in 2007.
obstacle: it still needs to show it can build and
safely operate these reactors at home. est safety standards, using so-called “third China has been absorbing and localising
generation” reactors like Hualong 1 and the technology to develop the CAP1400 and
Aided by foreign technology acquired dur- CAP1400, another home-grown model identi- says it has full intellectual property rights on
ing three decades of development, China has fied for future export. the model and Hualong 1.
the highest number of reactors being built and
ambitions to export its home-grown models to Due to be based on technology transferred The Beijing office of Westinghouse, which
an overseas market worth hundreds of billions from Westinghouse, the launch of CAP1400 is now controlled by Japan’s Toshiba Corp,
of dollars. will depend on the completion of a pilot West- did not immediately respond to requests for
inghouse third-generation reactor in Zhejiang comment.
Premier Li Keqiang told an annual parlia- province, which is facing a three-year delay
mentary meeting in March that China aimed because of technological problems. While technology rights may not stoke ten-
to increase its share of global sales in a range sions, Beijing’s pledge to aid the overseas
of advanced industries, including implement- Reflecting the obstacles of breaking into expansion of Chinese firms risks raising the
ing major projects in nuclear a market dominated by the likes of France’s hackles of competitors if sectors like nuclear
Areva and Russia’s Rosatom State Nuclear are deemed unfairly subsi-
And in a sign of progress Energy Corp., Beijing is encouraging consoli- dised.
on exporting its own nuclear dation to cut internal rivalry and pool intellec-
technology, China signed tual property and financial resources. A fax sent to China’s Na-
a preliminary agreement in tional Development and Re-
February to sell its flagship Plans for a merger between SNPTC and form Commission seeking
Hualong 1 reactor to Argen- state-run electricity producer China Power In- comment on the country’s
tina. vestment were unveiled on February 3, poten- nuclear strategy was not re-
tially creating a firm with total assets of more sponded to.
But despite state media than $US96 billion, industry experts estimate.
describing the deal as the Along with Argentina, pro-
model’s “maiden voyage”, The strategy is similar to one used in the gress was being made on
China has not yet built Hua- high-speed rail sector. By adapting foreign potential nuclear deals with
long 1, raising questions technology for a huge home network, China’s Turkey and South Africa,
about the country’s capac- train-makers are now emerging as global Wang Zhongtang, chief engi-
ity to deliver reactors for the competitors for Siemens, Alstom and Bom- neer at SNPTC said.
global market. bardier.
But an official at the China
“Our fatal weakness is our Under a hotly-fought multibillion-dollar nu- National Nuclear Corpora-
management standards are clear power deal struck with Pittsburgh-based tion, which is leading efforts
not high enough. There is to export Hualong 1 to Ar-
a big gap with international gentina, said China still has
standards,” State Nuclear “huge amounts of work to
Power Technology Corp do” before it can become a
(SNPTC) senior expert, Xu nuclear powerhouse, includ-
Lianyi, said, referring to the ing rolling out Hualong I at
challenges China faces ex- home. The official declined
panding its nuclear power to be named because he
sector. was not authorised to speak
to the media.
SNPTC, which was set up
to receive technology trans- With 22 reactors in opera-
ferred from Westinghouse tion, and a further 26 under
Electric Co., is trying to develop another re- construction, China aims
actor ultimately targeted at the world market. to raise its total domestic
nuclear power capacity to 58GW by 2020,
Although China has operated Western- up from 20.3GW at the end of last year, in a
designed reactors at home for more than 20 programme estimated to cost $US100 billion.
years, it will need to convince buyers of the Nuclear capacity would still only meet 3% of
reliability of its own technology, particularly total electricity needs by 2020.
given a chequered reputation on industrial The China representative of the World Nu-
standards and safety in some other areas clear Association, an industry body, said Chi-
such as mining. na needed to show it had operational experi-
ence, particularly in a foreign environment, to
China’s first Hualong 1 project, in Fujian sell its new designs abroad.
province, may not be completed until 2020, “It is a question of confidence from outside
assuming it breaks ground this year and con- of China,” the association’s Francois Morin
struction goes smoothly, according to Li Ning, said.
dean of the School of Energy Research at
Xiamen University. – Charlie Zhu and David Stanway,
China has been slow to approve new nu-
clear projects after a year-long safety review
PAGE 40 APRIL 2015 AUSTRALIA’S PAYDIRT
Juniors to get time in the sun:
If the embattled juniors Paladin Energy Ltd share price 1995-2015 when other commodities
of the uranium industry $10 are suffering from over-
need cheering up, they $9 Borshoff points to forecasts of impending supply.
uranium demand as evidence that spot prices
could do worse than pay $8 are likely to surge in coming years, providing “At $US60-70/lb, in-
a visit to Paladin Energy $7 buoyancy for uranium juniors who were left vestors start taking a
Ltd managing director $6 behind when their peers in other commodities gamble on those junior
John Borshoff. enjoyed the post-GFC surge. stocks. And there are
He may not be the $5 probably only 60 uranium
“The price will come back and it will be ben- companies in the world
most impartial judge of $4 eficial to uranium juniors. The entire uranium and if you think there is
industry missed out in that post-GFC ramp up going to be a uranium
the uranium market, but $3 because of Fukushima. Those dynamics are boom, $20,000 into a jun-
returning now with nuclear demand returning ior is not very much but
Borshoff presents a well- $2 to what it was. will make a big difference
to the company.
rehearsed and compel- $1 1995 “And, the uranium uptake will benefit not “Once it does go up I think you are going
ling case for why long- $0 1995 only the producers but the juniors.” to see some of these companies going from
suffering uranium juniors 1996 3c to 20c.”
1996 He said that once investors recognised the If any junior uranium company executive
1996potential for uranium prices to rise, specula- wanted evidence for Borshoff’s confidence,
1997tive money would re-enter the sector at a timethey need only look at the Paladin story.
1997 Having listed on the ASX in 1994, Paladin
1998 remained a pure uranium play despite the in-
1998 vestment market showing little interest in ei-
1998 ther yellowcake or Africa. Its share price stut-
1999 tered along at less than 15c for more than a
1999 decade before the uranium boom of the mid-
2000 2000s saw it gain traction.
2000 The company’s valuation eventually
2001 reached $9.34c/share in February 2007 be-
2001fore the GFC and Fukushima struck the global
2001nuclear energy industry down.
may be about to enjoy a
The entire junior resources sector is suf-
fering one of the leanest periods in recent
memories as investors refuse to speculate on
high-risk exploration plays.
However Borshoff believes the fundamen-
tals in the uranium sector could provide the
kind of boost to yellowcake juniors that their
peers in other commodities are unlikely to ex-
“For the entire junior sector, the mums-and-
dads investors and high wealth venture capi-
talists have all been out of the game for four
years and it’s tough,” Borshoff told Paydirt.
“And, I don’t see where the general explora-
tion energy is going to come from but for ura-
nium things might be different.”
Uranium explorer Denison Mines
may buy to grow, but open to sale
Canadian uranium explorer Denison Mines with junior miner Fission Uranium Corp, stein said.
Corp is willing to be either a buyer or seller owner of one of the world’s most promising The mill is undergoing an expansion to
once M&A activity in the sector accelerates, its pre-production uranium deposits, and is eye-
top executive said in March. ing possible acquisition of other Athabasca 24 mlbpa capacity from 13 mlbpa, making it
projects. one of the largest facilities of its kind in the
“We could be on either side of the fence, world. The more it processes, the more rev-
quite frankly,” chief executive Ron Hochstein A partial recovery in the spot uranium price enue Denison earns, but all of the expansion’s
told Reuters during PDAC in Toronto. has offered hope that the sector’s four-year costs are born by Cigar Lake’s owners, mainly
slump since Japan’s Fukushima meltdown Cameco and Areva.
Denison, part of the Lundin group of com- is nearing an end. The spot price of about
panies, owns what analysts say are two par- $US38.75/lb is about 38% higher than last Denison is talking with four parties interest-
ticularly attractive assets in northern Sas- year’s low. ed in buying its deposits in Africa and Mon-
katchewan’s Athabasca Basin that could put golia, which could make it a company solely
it in play. Hochstein said the company would not sell focused on the Athabasca Basin by the end of
its mill stake or Wheeler River project except 2015, Hochstein said.
They include 22.5% of Areva SA’s McClean as part of a takeover of the entire company,
Lake mill, which processes uranium from describing them as “crown jewels”. Denison sold its US assets, including a mill
Cameco Corp’s new Cigar Lake mine. and operating mines, to Energy Fuels in 2012,
The eastern Athabasca Basin, one of the to focus on development.
Denison is also developing the Wheeler world’s richest uranium sources, has two
River project, which includes the high-grade other mills that are owned by Cameco and – Rod Nickel, Reuters
Phoenix deposit. Areva. Owning a piece of McClean Lake sets
Denison apart from other explorers, Hoch-
On the buyer side, Denison is one of sev-
eral parties to sign nondisclosure agreements
AUSTRALIA’S PAYDIRT APRIL 2015 PAGE 41
SA Government turns
Mining will become increasingly important in South Australia given the departure of the State’s car and shipbuilding industries
With car and shipbuilding industries about mitted to supporting the industry. projects throughout their development.
to depart, the importance of the resourc- “The South Australian Government’s fo- “Mining is cyclical and investment is be-
es sector to South Australia’s future is more cus for this year is exploration,” Koutsantonis ing challenged again, but the Government is
vital than ever. Fortunately, the State has a said. “The Government is investing in the re- taking a long-term approach,” he said. “The
government which recognises this. sources industry, continuing to support pre- Government’s $50 million investment in PACE
South Australia has been at the vanguard competitive geoscientific knowledge through has unlocked $2.4 billion of new mineral pro-
of mining and exploration policy initiatives in the Plan for Accelerating Exploration (PACE) duction and brought forward world-class dis-
Australia for more than a decade with the ALP and is partnering with resource companies to coveries that have delivered jobs and benefits
“governments of Mike Rann and his succes- go and unlock the next discovery.” to the State.”
sor Jay Weatherill invigorat- With BHP Billiton Ltd having
ing a once moribund min- [It] sends a clear signal to other put the expansion of Olympic
ing sector with improved Dam on hold, Oz’s development
regulatory frameworks, resources and energy companies of Carrapateena looms as the
increased financial support that South Australia has the capacity to State’s most important develop-
become the nation’s resources hub.
and investment in pre-com- ment project and the company’s
petitive geological data. decision to relocate its corporate
head office to Adelaide could
The policy initiatives led
the State from resources have wider ramifications for the
backwater to a leader in industry.
exploration expenditure. However, with the PACE has been the Government’s corner- Koutsantonis welcomed Oz’s decision
global commodities boom having stalled, the stone policy for more than a decade and has as part of a wider government strategy to
SA Government is desperate to find new ways been directly and indirectly responsible for the increase SA’s standing in the Australian re-
to retain the State’s reputation as a choice ju- discovery and development of some of the sources community.
risdiction among explorers. State’s largest mines, including the Oz Miner- “In November last year, the State Govern-
Speaking ahead of the 13th South Austral- als Ltd-controlled Prominent Hill and Carrapa- ment released an economic priority aimed
ian Resources & Energy Investment Confer- teena projects. at unlocking the full potential of South Aus-
ence, SA Treasurer and Minister for Mineral Koutsantonis said despite the recent down- tralia’s resources, energy and renewable as-
Resources and Energy, Tom Koutsantonis, turn in exploration investment, the Govern- sets. This included a target of attracting three
told Paydirt the Government remained com- ment continued to see value in supporting resources companies with a head office in
PAGE 42 APRIL 2015 AUSTRALIA’S PAYDIRT
“ The South Australian Geological Survey’s popular Core Shack display
will return to SAREIC this year
The Centre of Excellence supports the
development of local supply chains to enable
South Australian-based companies to compete
nationally and globally, providing high value added
products and services to the resources sector.
Adelaide – Oz Minerals is the first company The company and Government are already been committed over five years for innovation
to move to SA after this target was set,” Kout- working in partnership on research into cop- seed funding towards developments in other
santonis said. per concentrates and Koutsantonis’ welcom- areas such as deep resource exploration and
ing of Oz is also part of a wider strategy to deep mining, next generation minerals pro-
“[It] sends a clear signal to other resources build on the State’s resources base. cessing and leading practice in mine rehabili-
and energy companies that South Australia tation and environmental protection.
has the capacity to become the nation’s re- No longer content with SA being a popular
sources hub.” exploration destination, the State Govern- Other areas covered by the funding com-
ment wishes to build the METS capabilities mitment include mine-to-mill optimisation, ore
Having Oz set up base in Adelaide not only of SA. selection and pre-concentration, mine logis-
gives SA a reputational boost but will deliver tics, automating the resource sector through
added benefits to the State’s economy, ac- Koutsantonis said the Government had in- innovative ICT applications across the entire
cording to Koutsantonis. vested $32 million in “knowledge assets and mining lifecycle, leading practice in multiple
infrastructure” including the new State Drill land use policy and community engagement
“Adelaide benefits from not only having Core Library and the Mining and Petroleum and, deep gas well operations and training.
well-paid executive positions at an ASX-listed Services Centre of Excellence.
company being available in South Australia On the exploration front,
but the flow-on effects of having Oz Minerals Koutsantonis said the the Mineral Systems Drill-
purchase corporate and other services from Centre of Excellence would ing Programme 2015 on the
local South Australian businesses.” provide a pathway for min- far Northern Eyre Peninsula
ing and energy companies, will be “the flagship drilling
He said the move would also allow the Gov- research institutions and program through 2015” (see
ernment to partner with the company more South Australian business- page 48).
effectively. es to work together to find
solutions that will make the This year’s SAREIC will
“[It] also creates an opportunity for a stra- State’s resources globally take place at the Adelaide
tegic partnership with the South Australian competitive. Convention Centre on April
Government to facilitate the development of 13-15. For sponsorship,
the state’s major mineral assets including the “The Centre of Excel- registration and attendance
Carrapateena copper gold project. As the lence supports the develop- information, please contact
company grows to achieve its ambitions, that ment of local supply chains Tammy Caldwell on (08)
growth will be reflected in the workforce here, to enable South Australian- 9321 0355 or [email protected]
creating opportunities for highly skilled South based companies to com- dirt.com.au
Australians.” pete nationally and globally,
providing high value-added Tom Koutsantonis
products and services to the
resources sector,” he said.
A further $10 million has
AUSTRALIA’S PAYDIRT APRIL 2015 PAGE 43
Giant search for Maximus
Maximus Resources Ltd is on the lookout Maximus has farmed out ground from its Millers Creek IOCG project to the Monax-Antofagasta vehicle
for a new company-making project out-
side of South Australia. mit that amount of cash to a single hole.” exist, then we would be out to try and get an-
Maximus will remain active in SA, including other JV partner into that area,” Malaxos said.
The Adelaide-based company has had lim-
ited success from its existing projects in SA keeping a close eye on exploration at Millers “Although it’s probably not as deep as it
– Millers Creek, Welbourn Hill and Adelaide Creek, despite the company’s Australia-wide is at Millers Creek – we’re talking 400-700m
Hills – so the search for a new exploration search for a more advanced project. deep – we’d want to hit that area reasonably
play will extend to other states. quickly, so it would be nice to have someone
A heli-borne gravity survey was flown over with a few million dollars in the bank who can
Maximus also has two projects in Western the Welbourn Hill copper-gold project in the commit to drilling three or four holes in this
Australia, Narndee and Ironstone Well, but is Northern Gawler Craton last month and re- ground.”
yet to unearth a resource of any significance sults of that survey were due at the time of
at either prospect. print. Maximus is also expected to be back on the
ground in the Adelaide Hills towards the end
So far, the company has looked at potential “We’ve got some historic diamond drilling of this quarter after a long exploration hiatus
projects in WA, New South Wales and Victo- results from up there so if we can prove a from the region.
ria with a focus on precious metals. couple of these other targets we’ve identified
The company holds four tenements in
Maximus managing director Kevin Malaxos the Adelaide Hills which are prospective
said his company was advancing talks on the for gold. Maximus previously held more
potential acquisition of one project, but was ground in the region, but sold much of it
not in a hurry to sign on the dotted line. to Terramin Australia Ltd in 2013 for a vital
“If you expect to go and get something for
a penny or nothing, you’ll be sadly disappoint- Maximus was able to convert 25 million
ed, so we’re just making sure we put an offer shares held in escrow to $1.6 million last
that’s going to be attractive to Maximus and November and if Terramin reaches a deci-
our shareholders and it’s going to be reason- sion to mine later this year, the company
ably attractive to the other people as well,” can expect to see another $1 million come
Malaxos told Paydirt. through the door.
“We’re reasonably advanced down that Malaxos, who spent the best part of
path and I’ve now got a geologist dedicated two decades working in Kalgoorlie be-
to basically looking for projects, mainly gold, fore joining Maximus, was confident the
and we’ve extended the search radius up into gold industry was on the cusp of another
the Northern Territory. There’s still some ar- strong run in the gold price.
eas that are highly prospective up there and
haven’t really been looked over in the last “It might drop back a little more to say
decade.” $US950-1,000/oz, but I think that’s going
to turn around in the next 6-12 months,”
The search for a new project comes after Malaxos said.
Maximus signed a farm-in agreement with
Monax Alliance Pty Ltd – a subsidiary of “Just look at Bill Beament and his North-
fellow SA junior explorer Monax Mining ern Star [Resources Ltd] juggernaut. He’s
Ltd’s partnership with Chilean copper pro- showing an enormous amount of faith,
ducer Antofagasta Minerals plc – over the but rather than compete with those guys
Millers Creek IOCG project. – and we’re nowhere near the big end of
town – we’ve been looking at some small-
Under the terms of the agreement, er projects because we like where gold is
Monax Alliance can earn up to 80% equity headed.”
in the Maximus tenements by spending
up to $US3 million on exploration over the Monax Alliance drilled the first hole at the Oliffes Dam – Michael Washbourne
next three years. target in late March
Monax Alliance was set to drill at the
Oliffes Dam target, within the Woomera
Protected Area (WPA), at the time of print.
Malaxos said his company had no op-
tion but to bring a cashed-up JV partner
into the project because of the deep na-
ture of the IOCG systems within the WPA.
“In the area we are drilling it is some-
where in the order of 800-1,000m deep
and it’s not cheap drilling so if you want
to be in that space – and we’ve got four
tenements in that area – then realistically
you’re going to need a partner that has ac-
cess to fairly significant funds,” Malaxos
“It’s probably the only avenue we have
to seriously explore in that area. The first
hole Monax is proposing to drill is just over
1,200m deep, so you’re probably talking
$300,000-350,000 per hole and no small
junior explorer has the capability to com-
PAGE 44 APRIL 2015 AUSTRALIA’S PAYDIRT
13 – 14 April 2015 15 April 2015
Adelaide Convention Centre Adelaide Convention Centre
w w w. s a r e s o u rce s co n f.co m
Exhibition and sponsorship opportunities are available by contacting
Tammy Caldwell on (+61) 8 9321 0355 or email [email protected]
Sales strengthen Valence
Emerging graphite producer Valence managing director Chris Darby on site at the Uley graphite mine in South Australia
Valence Industries Ltd has se-
cured sales contracts for the entire Up to 174,000t of stockpiled ore is being the programme were 20.9m @ 24.7% TGC,
first year of production from the processed at the site as part of the Phase I including 7m @ 42.3% TGC from 28.9m and
Uley mine in South Australia. development, with mining of the new Uley Pit 2.2m @ 44.4% TGC from 42.2m, and 17.4m
2 slated to begin in the December quarter. @ 27% TGC, including 5.3m @ 36% TGC
Valence confirmed last month from 26.6m and 3.3m @ 43.8% TGC from
it had signed six new sales con- Phase II involves the construction of a new 34.8m.
tracts for the supply of more than processing plant for $37 million and a ramp-up
8,000t of flake graphite across all in production to 64,000 tpa by 2019 in staged “We don’t see ourselves having any trouble
sizes (+35 to -300 mesh) and puri- increments of 25,000 tpa. A recent feasibil- finding graphite and that was basically prov-
ties (90% to 95%). ity study confirmed Valence could make a en by what we’ve been discovering through
relatively easy transition through these vari- those releases on the extensional drilling,”
It takes the number of sales ous stages, including the Phase III advanced Darby said.
contracts the Adelaide-based product handling strategy.
company has signed this year to “It all matches and looks very much like
nine and the total number of end- None of this has come as a surprise to what we found to establish our ore reserve
user customers to 11, including Darby. [2mt @ 12.9% TGC for 261,000t contained
three MoUs. graphite] and so we’re looking to transform
“It’s been a hard 18 months to get to where that extensional drilling into another mineral
The first export shipments were we are now, but we’ve never once underesti- resource and then an ore reserve.”
expected to leave Port Lincoln last mated the challenges involved and the learn-
month. ing that is going on every single day,” he said. Darby welcomed the ongoing support from
the SA Government and acknowledged the
Production at Uley is tipped to “We have been able to put a very good impact Uley was having on the local commu-
reach full capacity by mid-year team together, all the way from mine op- nity in Port Lincoln after just a few months of
and about 8,000t of graphite is erations through to processing, refining and operations.
forecast to be processed through sales. That whole team structure is working
the refurbished plant in 2015. very well to make sure we’re delivering value “It has been really heartening how people
for our shareholders, but also for our custom- are so pleased to see something that has
Valence managing director ers who are pretty much stakeholders in the been part of their community restart,” he said.
Chris Darby said building a strong company as well because they are very reli-
customer base was vital to the ant on making sure that the production actu- “We’ve got more than 25 local contractors
success of his business, particularly while de- ally arrives at their door.” who supply services and/or material to the
mand for graphite remains high. site each week and all of our local person-
Darby said there was likely to be some nel have been employed from the region or
“Without those actual sales contracts, in- overlap in production of existing stockpiles now live in the local region. We don’t have any
dustrial minerals companies and particularly (average grade 6-9% TGC) and new material FIFO workers so it’s really adding a lot back
graphite companies really don’t have anything from Uley Pit 2 (average grade 12.9% TGC) into the local economy and they’re starting to
to lean upon,” Darby told Paydirt. later this year and into 2016. see the value of that and the opportunities for
young people to learn their trade with us.”
“People talk about having arrangements Valence continues to have exploration suc-
with single off-take partners, but that isn’t cess at the project, with an ongoing drilling – Michael Washbourne
really what happens in the graphite industry. campaign at Uley Pit 2 recently confirming the
You need to have direct technical sales con- continuity of the mineralisation from the exist-
tracts with your end-user customers.” ing reserve.
Darby’s approach is supported by market Some of the better drill intercepts from
commentators such as Nedbank’s Mark Tyler
and Far East Capital’s Warwick Grigor. Both
have recently stated that off-take agreements
and associated sales contracts were critical
to the commercial success of a graphite mine.
Valence restarted operations at Uley, about
23km from Port Lincoln on SA’s Eyre Penin-
sula, last December and is currently the only
producer of Australian graphite listed on the
Few graphite producers can boast having
such a solid portfolio of customers like the
one Valence has compiled in recent months.
“It shows our thinking around diversity and
when we say we think diversity we mean hav-
ing multiple customers in multiple locations
from multiple industries so we can insulate
ourselves against fluctuations in the market
and maintain a good price for graphite sales,”
“You can have as much dirt as you like,
but that doesn’t actually help you sell it so
we’ve really focused on sales because we
knew we had an exceptional resource, exten-
sive amounts of graphite and the processing
mechanisms to have that graphite ready for
PAGE 46 APRIL 2015 AUSTRALIA’S PAYDIRT
Kingston ready for innovative
While most junior explor- to build a better understand-
ers are preoccupied with
unearthing a company-maker, ing of the region’s mineral
Kingston Resources Ltd could
deliver a much bigger prize, an systems, Rechner is keen
to see Kingston’s own goals
Perth-based junior Kingston
has been exploring on South achieved.
Australia’s northern Eyre
Peninsula since a reverse “The programme repre-
takeover saw its assets listed
in 2013. The company has 11 sents a huge force multi-
tenements covering more than
4,400sq km in the region and plier for a junior company
its target is IOCG orebodies in
the Olympic Dam style. like Kingston,” he said. “It
South Australian explor- gives us access to the best
ers have long chased a new
generation of IOCG orebod- government geoscientists,
ies to follow in Olympic Dam’s
footsteps but due to the pres- cutting-edge technologies
ence of deep cover and lack
of infrastructure, success has and substantial government
been limited to a handful of
However, thanks to an inno- “It will give us the greatest
drilling programme, Kingston chance of discovery at Six
could play a leading role in un-
locking a new wave of IOCG Mile Hill and our goal is dis-
covery. We have collected
The company’s initial focus has been the
Six Mile Hill project, 45km west of Port Au- our data; we have defined
gusta on the northern tip of the Spencer Gulf.
Little previous work had been done on the our targets; now it is time to
project but as Kingston executive director
Stuart Rechner explained, the company is drill test. By the end of the
convinced it is in the right address.
programme we should have
“We have several compelling targets at Six
Mile Hill,” Rechner told Paydirt. “It straddles a good idea whether there
the boundary between the Spencer and Olym-
pic domains and we believe the deep crustal is a serious copper prospect
structure which separates the two could pro-
vide a conduit for mineralising fluids.” worth further evaluation at
Drilling in the 1970s produced several cop- Six Mile Hill.
per shows from sediments overlying the base-
ment rocks at Six Mile Hill. While these never “Our technical team is
proved to be economic, Kingston has taken
some encouragement from their presence. working hand-in-glove with
“There is shallow sediment-hosted copper scientists from the South
mineralisation in the sediments above our pri-
ority target area,” Rechner said. “The historic Kingston’s three projects cover 4,400sq km on the Gawler Craton Australian Geological Sur-
drilling data away from the main target areas vey and the DET-CRC. We
support the interpretation that the prospective
IOCG host rocks are shallow.” “We have several coincident gravity/mag- share all data and develop exploration con-
Kingston has completed a detailed infill netic targets that could be indicative of hema- cepts in unison.”
ground gravity survey, collecting more than
1,400 new gravity stations over key target tite/magnetite IOCG alteration,” Rechner said. The South Australian Government has
areas. The company’s analysis of the results
suggested several IOCG targets were both “Geophysical modelling suggests the depth to hailed the programme as a “world-first” in col-
denser and at shallower depths than originally
thought. the top of targets in our top priority areas are laboration between government and industry.
less than 250m.” It will also be the first time some of the DET
Depth has always been a problem for South CRC’s state-of-the-art exploration technology
Australian explorers in their hunt for IOCG – including its lab-at-rig and coil tubing rig –
mineralisation, with the State’s abundant have been used in field trials.
cover proving both difficult when identifying Rechner said the programme was an ex-
targets and expensive to drill through. ample of SA’s “innovative and effective sup-
That is where Kingston’s role in the Mineral port to geosciences”.
Systems Drilling programme comes in. “As the quest for discovery becomes more
The programme is a joint collaboration challenging, the sector will have to evolve fur-
between the SA Department of State Devel- ther. The technologies of the DET-CRC and
opment (DSD) through the South Australian programmes like this are the result of some of
Geological Survey, Deep Exploration Tech- our finest minds looking to the future of explo-
nologies Cooperative Research Centre (DET ration. Should there be more programmes like
CRC), Kingston and fellow explorer Minotaur this? Absolutely.”
Exploration Ltd. Kingston has adopted a low-key approach
Its aim is to map and understand various to marketing since taking on the projects in
components of mineral systems in the north- 2013, but Rechner said this would change in
ern Eyre Peninsula region of South Australia, coming months.
addressing the many scientific and technical “We will be making a major presentation at
challenges to exploration in the region. the South Australian Resources and Energy
DSD is providing $2 million in funding for Investment Conference in mid-April and in-
the programme, DET CRC is providing the vestors can expect a comprehensive update
drilling and analysis technology and Minotaur and indicative time line there,” he said.
and Kingston are providing the resources and – Dominic Piper
While the programme is primarily designed
PAGE 48 APRIL 2015 AUSTRALIA’S PAYDIRT
First commercial success for DET
An IOCG discovery as part of the recently hole collapse prior to or dur- nologies Cooperative Research Cen-
launched Mineral Systems Drilling pro-
gramme would cap off an impressive start to ing logging. tre (DET CRC), Kingston Resources
2015 for the Deep Exploration Technologies
Cooperative Research Centre. DET CRC chief execu- Ltd and fellow explorer Minotaur Ex-
Established four years ago, the Adelaide- tive Richard Hillis hailed the ploration Ltd.
based Deep Exploration Technologies Co-
operative Research Centre (DET CRC) was agreement with Boart Long- “The mineral systems programme
created to find innovative technologies capa-
ble of improving the cost, speed, safety and year as a success and said is being conducted through the South
environmental impact of exploring at depth in
Australia. the start of work on the Min- Australian Geological Survey,” Hillis
The DET CRC’s work is focused on four ar- eral Systems Drilling pro- said. “The original rationale was try-
eas in drilling, analysis and geophysics and in
February announced its first major commer- gramme could lead to further ing to map mineral systems under
cialisation breakthrough when it signed an ex-
clusive agreement with Boart Longyear over innovation. cover to vector to deposits at depth.
its in-hole sensor technology, AutoSonde.
“The deal with Boart The Survey was also keen to help the
The AutoSonde, provides geophysical log- Longyear gives us more le- Richard Hillis CRC pull through some of the tech-
ging information similar to that recorded by
conventional wireline logging, but with signifi- gitimacy, particularly in the nology because they recognise it is
cant reductions in costs, inconvenience and
the risks involved. It is lowered inside drill rods eyes of those in the industry that wanted to potentially vital for South Australia.
to the bottom of the hole on completion of drill-
ing and the hole is geophysically logged while see that the CRC could do something,” Hillis “Some 80% of South Australia is under
the rods are being pulled out of the hole, re-
moving the need for a separate conventional told Paydirt. cover and we know there are more IOCGs out
wireline logging crew or additional rig time, as
well as almost completely negating the risk of “It doesn’t justify all the investment and there but just drilling one hole into a gravity
there is still much work to be done but having anomaly is not proving successful. This tech-
prototyped them all we are confident we will nology is in tune with finding IOCGs in SA.”
see commercialisation of the Lab-at-Rig tech- The Lab-at-Rig technology is designed to
nology this year and the coiled tubing drilling provide assay data on site, in real time, reduc-
in a year from now.” ing the delaying in awaiting lab-based assay
Those technologies will be field tested dur- results and allowing exploration programmes
ing the Mineral Systems Drilling programme to be altered in accordance with results.
when it is launched this month. Hillis said the DET CRC planned to run a
The programme is a joint collaboration demonstration on live data from the drill site.
between the SA Department of State Devel- “And, there might even be a discovery to
opment (DSD) through the South Australian report on,” he said.
Geological Survey, Deep Exploration Tech-
AUSTRALIA’S PAYDIRT APRIL 2015 PAGE 49
Endeavour keeps its
From a portfolio of six, Endeavour Discov-
eries Ltd has streamlined its focus on two
budding gold and nickel prospects in South
The Theseus gold and Tarcoola (gold and
nickel) projects have taken precedence at En-
deavour, executive chairman Duncan Ches-
sell told Paydirt.
Initially, the company had six projects in its
portfolio however a variety of reasons, includ-
ing technical viability, cost of exploration and
level of prospectivity led Endeavour to shelve
three of its projects.
The Roxby Too project, south of Olympic
Dam, remains on hold, while the 3,229sq km
ground across 11 tenements at Theseus and
Tarcoola are high priority for Endeavour.
“We had economic results at Theseus so
it seemed prudent to focus all our efforts and
finance on that region around the Tarcoola
township,” Chessell said. Endeavour originally started with six projects in 2009 and has since narrowed its focus to the best two
“The Theseus project is about 27km of
strike at the moment; it is a big shear zone “We have managed to save on costs which ploration and high risk greenfield companies.
and we are seeing a lot of mineralisation has been one of the reasons why we have I don’t think there is any light at the end of the
along that structure. It is fairly early stage for been able to drill,” Chessell said. tunnel, not even a train,” he said.
us. We’ve only had two cursory programmes “We are able to deploy our available cash While the market isn’t conducive to invest-
in there.” into the ground which might otherwise be ing in small caps right now, Endeavour has
As SAREIC 2015 is in full flow, Endeavour spent on listing fees and corporate compli- an enthusiastic cornerstone investor willing to
will have kick-started a 3,000m RC drilling ance required on the ASX.” fund its exploration programmes in the Gawl-
programme at the Minos prospect within The- There may be a time when Endeavour er Craton.
seus. seeks an IPO, but Chessell isn’t in any hurry. Parts of the Gawler Craton, particularly in
“We will try and get a small resource out if “I think the listing of the company will now the east, are embedded with thick cover rang-
grades scrub up,” Chessell said. much more likely happen via a reverse takeo- ing between 400-600m in some instances.
In addition to Minos, the Theseus project ver or backdoor listing. If and when you get These areas demand high-cost exploration
also comprises the Ariadne prospect along enough significant results to warrant a BFS that possibly only majors could afford howev-
the Main Lake Labyrinth Shear Zone (LLSZ). or a decision to mine, you might then list, er Endeavour’s prospects, including the Lake
Historical drilling along the LLSZ included depending on how shareholders decide they Harris nickel project, are in far more explora-
hits of 4m @ 3.5 g/t gold at the Hicks Tank want to progress with it. tion-friendly areas of the Gawler Craton
prospect, while early 1900s mines Lake Laby- “I don’t see an IPO for three to four years. “As a broad generalisation South Australia
rinth (2m @ 11 g/t and 6m @ 2.34 g/t) and We have taken the view that the market is go- is underexplored, it suffers from a little bit
Company Well (2m @ 11 g/t) provide evi- ing to be in a deep dive for a long time in ex- more cover than some of the Eastern Gold-
dence of the region’s pro- fields in Western Aus-
spectivity. tralia, which adds a little
Endeavour has had its bit more complexity and
own success at Minos challenge for the junior
(56m @ 1.2 g/t gold includ- explorer. But I think over
ing 24m @ 2.07 g/t, includ- time you will start to see
ing 8m @ 5.2 g/t) and at Ar- a renewed interest in SA,
iadne (24m @ 1.76 g/t from especially in the Gawler
28m including 1m @ 5.8 g/t Craton. The depth of cov-
from 46m and 20m @ 0.46 er in the central and west-
g/t from 72m) where deep- ern side of the Gawler
er drilling is required. Craton is not great, where
Given current circum- we are is anywhere from
stances in the junior explo- 2-30m, and that is why we
ration sector, Endeavour have chosen that area to
is fortunate to be privately explore,” Chessell said.
held, which has allowed – Mark Andrews
it to continue drilling dur-
ing times when some of its
peers in the public arena While some companies contend with deep cover in the Gawler Craton, Endeavour
are dormant. Discoveries’ Theseus and Tarcoola projects are under only 2-30m of cover
PAGE 50 APRIL 2015 AUSTRALIA’S PAYDIRT