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Published by Paydirt Media, 2016-03-02 23:29:03

Paydirt April 2015

Paydirt April 2015

Keywords: Australia's Paydirt,Mining,South Australia mining

Hillgrove with the copper goods

While many companies
are the counting cost of
poor commodity prices and

bearish attitudes to resources

stocks from investors, Hill-

grove Resources Ltd is in a

different boat.

After starting a restructure

at its Kanmantoo copper pro-

ject in 2013, the fruits of the

exercise showed in the com-

pany’s performance in 2014.

Hillgrove reported net prof-

it of $3.8 million, underlying

profit of $10.1 million and rev- Having paid down a substantial amount of debt, Hillgrove has re-
enue generation of $167 mil- started exploration in South Australia
lion last year, with managing

director Greg Hall telling Paydirt his company by Hillgrove staff using new machines intro-

was destined for greater success. duced in the restructuring process.

“We reshaped ourselves from 2013 to have Improvements in operations were almost

a very good year in 2014,” Hall said. immediate with bank cubic metres (bcm) Greg Hall

“That was on the back of the restructure costs reducing from $13-14/bcm mined in moving those costs down,” Hall said.
“We have been concentrating very much
work we did in 2013, changing from contrac- April to just over $11/bcm by Christmas.
on cost reductions and productivity, a lot of it
tor to owner-operator mining. We have had Hillgrove is now eyeing bcm costs of $10/ has been productivity gains rather than cost
reductions.”
continuous improvements in unit rates, both bcm.
To page 52
mining and processing, throughout the last “If we can start to get to $10/bcm we are

16-18 months.” getting close to $3.20-3.30/t, then all of a sud-

Last year was the first full year Kanmantoo, den we can bring more resources into the pic-

55km from Adelaide’s CBD, was operated ture which is a substantial attraction to keep

AUSTRALIA’S PAYDIRT APRIL 2015 PAGE 51

SAREIC PREVIEW

From page 51

Production guidance in the 2014 calendar

year of 20,693t copper in concentrate and

90,163t dmt of copper concentrate was hit

at C1 unit costs of $US1.97/lb was achieved,

while 90,583 dmt copper concentrate was

sold.

“As a business we met our guidance in cop-

per production and bettered our unit costs.

We are now a sub-$US2/lb copper producer,”

Hall said.

In the past 18 months the company has

reduced mining unit costs by 48% and in-

creased mining production by 81%.

Trucking (24%), drilling (17%) and blast-

ing (17%) efficiencies have improved in con-

junction with a decrease in fuel consumption

(29%) and mining dilution (75%) at a time

when copper prices are volatile.

Copper prices have rarely burst through the Moving into owner/operator status has vastly improved costs and efficiencies at Kanmantoo

$US3.20/lb mark in the last 12 months and at

the time of print the spot price was trading at Copper production will come from primary effort to stretch Kanmantoo – which is com-

near five-year lows of $US2.80/lb. ore and secondary oxide stockpiles, as Hill- prised of a series of orebodies – beyond its

Concerning as it is for the wider copper grove works towards accessing the higher current 2021 mine life.

market, Hillgrove is somewhat protected from grade areas of the Kanmantoo orebody at the A three-pronged exploration strategy – tar-

the downward spiral of spot prices. completion of the Giant cutback. geting areas on the Kanmantoo mining lease

The company has a fixed corporate hedg- Hillgrove expects to complete the cutback and near-mine potential, evaluation of existing

ing strategy which saw it hedge almost 90% of in early 2016 at a total cost of $30 million. prospects on Hillgrove’s tenure and defining

its production at times between January and About $8 million was spent in 2014 with an- new prospects – will be executed on a budget

November 2014 at better than spot prices. other $17 million budgeted for capital devel- of $1 million in 2015.

Such was the success of its short-term opment on the cutback this year. Having paid back $23 million in debt in 2014

hedging ploy, Hall had no hesitation in for- “Then there will be a portion to finish it off in and with $18 million remaining, plus being in a

ward selling more of copper. the first part of 2016, but by then we will actu- cash generating position, Hillgrove can afford

“We put a bit more hedging in place in De- ally be back in the orebody. That [cost] can such exploration activity.

cember as the Australian dollar price was still vary a little bit because it depends on how Wheal Ellen, a historic copper-zinc-lead

good. We are still 78% hedged for copper pro- much ore we find on the way down as we are prospect within Hillgrove’s exploration lease,

duction out to March 2016 at an average price actually going through small or sub orebod- was subject to drilling late in 2014, while a

of about $A3.50/lb,” Hall said. ies on the way. So, when you come into ore, number of ground gravity surveys of potential

“Our current C1 costs are about $A2.20/ it might not be capital costs, rather it may be ore extensions on the Kanmantoo tenement,

lb, we keep a very active hedging policy and operating costs,” Hall said. near-mine prospects and the Kitticoola pros-

we maintain that on a short-term basis. We In preparation for continuation of the cut- pect started in January.

would hedge on a 1-2 year basis, maximum, back, Hillgrove stripped back the two satellite Hall said the area around Kanmantoo was

we don’t want to do it too far out and hedge all pits at Kanmantoo where mining will be un- riddled with small copper mines 100 years

of our production.” dertaken this year. ago, with 17 high-grade, underground copper

Output from Kanmantoo in 2015 is expect- Pre-stripping down and around the main mines active in the area in the 1850s.

ed to be 20,000t copper in concentrate, de- orebody has already started, while Hillgrove Gravity surveys have indicated extensions

spite the Giant pit cutback continuing. has also returned to exploration mode in an to the existing orebodies on the Kanmantoo

mining lease, providing Hillgrove with a high

level of optimism in increasing the life-of-

mine.

“We’re about to do a heli-borne ETM and

we’re just about finished doing some RC drill-

ing and hopefully we’ll have the results out in

a few weeks,” Hall said.

“We anticipate getting extensions to the ex-

isting orebody and we are hopeful of getting

some extensions within the mining lease, but

we’re also looking broader. We have a very

large exploration lease which extends over

75km north-south of the mine and we also

have rights over Kitticoola, which is an old un-

derground copper-gold mine within trucking

distance of our existing plant.

“Our tailings dam is equipped with enough

capacity up until 2028, so we don’t need to put

any major capital into a new dam. We don’t

have to do anything to the plant, so we can

continue to run to 2028 if we can find the ore,”

Hall said.

Despite a cutback on one of the main orebodies at Kanmantoo, Hillgrove will still – Mark Andrews
produce 20,000 tpa copper in concentrate in 2015

PAGE 52 APRIL 2015 AUSTRALIA’S PAYDIRT

8 October 2015
Pan Pacific Perth

Register now for Australia’s
only nickel event

australiannickelconference.com

To present, exhibit or attend as a delegate please contact Melita Fogarty
on (+61) 8 9321 0355 or email [email protected]

SAREIC PREVIEW

SA takes the next step

The South Australian Government could “Whilst many people have strong views
change the entire dynamic of the nuclear at both ends of the pro-nuclear anti-nuclear

and uranium debate in Australia after launch- spectrum, overall I have been impressed

ing a Royal Commission into the nuclear fuel with the maturity of the debate to this point,”

cycle in March. Weatherill said of the submissions. “It is im-

Premier Jay Weatherill announced the pro- portant to note that there will be many more

cess in early March, saying it was designed opportunities for people to have their say dur-

to provide a comprehensive investigation into ing this process – this is just the beginning.”

South Australia’s participation in four areas Treasurer and Minister for Mineral Resourc-

of activity that form part of the nuclear fuel es & Energy, Tom Koutsantonis, told Paydirt

cycle; exploration, extraction and milling, fur- the Royal Commission had been established

ther processing and manufacturing, electric- to ensure intelligent debate over uranium and

ity generation and management, storage and Jay Weatherill nuclear energy.

disposal of waste. “After more than 25 years of uranium pro-

The Royal Commission’s first day on March More than 1,000 submissions were re- duction, the time has come to engage in a

19, Weatherill said, was a significant moment ceived from community and industry during mature and robust conversation about South

in the State’s history. the initial four weeks of consultation, helping Australia’s future role in the nuclear industry,”
The Commission, the first of its kind in Aus-
tralia, will have until May 2016
to provide a final report to the

After more than 25 years ofSA Government and will look

into the production of nuclear

uranium production, the time hasenergy, as well as the enrich-
come to engage in a mature and robustment of uranium and waste

storage.

“conversation about South Australia’sWeatherill said it would not
to shape the final terms of reference. he said. “A Royal Commission provides South
Australians with an opportu-
nity to explore the practical,
financial and ethical issues
raised by a deeper involve-
ment in the nuclear industries
so that they can make an in-
formed decision about our fu-
ture.”
future role in the nuclear industry,” –
look into withdrawing from ura- With the new ALP Govern-

nium mining or nuclear use for Tom Koutsantonis ment in Queensland planning
military/defence purposes. to reinstate a ban on uranium

PAGE 54 APRIL 2015 AUSTRALIA’S PAYDIRT

mining and exploration in the “It is clear nuclear power

State, Koutsantonis was quick that will play a critical role in

to remove any doubt that the sustainably producing elec-

South Australian ALP Gov- tricity in the world in the 21st

ernment was using the Royal century. This is clear in fore-

Commission to reposition itself casts by the International En-

in regards to uranium mining. ergy Agency and in repeated

“South Australia has a long, calls by the IPCC for the world

successful history of min- to triple or quadruple all low

ing uranium. We already host emissions energy sources in-

Australia’s major uranium cluding nuclear power.”

mines and we continue to look Uranium industry veteran

for more prospects. The Royal and Paladin Energy Ltd man-

Commission won’t be an op- aging director John Borshoff

portunity to follow Queensland lauded the SA Government’s

down the road to banning ura- move, contrasting its actions

nium mining. to those of its Queensland

“While we respect the right counterpart.

of Queensland to determine its “The ALP in South Australia

own resources policy, South is looking at broadening the

Australia is proud of its sta- debate for the benefit of the

tus as the nation’s uranium whole nation and bring it back

capital. Those companies to authentic analysis,” Bor-

who were looking to invest in shoff said. “But then in comes

Queensland, will continue to the new Queensland Govern-

be welcomed here in South South Australian could change the dynamic of the nuclear and uranium debate in ment with economic issues
Australia. Investors looking Australia with its Royal Commission into the nuclear fuel cycle and the coal industry under
for stability and security in the siege, and despite all that it

mineral resources sector should look no fur- be widely applauded. takes five minutes to make an irrational deci-

ther than South Australia.” “Premier Jay Weatherill’s bold policy an- sion based on fear and a Cold War mentality

The decision has been hailed by industry nouncement reflects the contribution that to ban uranium mining. It ends up looking like

groups with Mineral Council of Australia ex- nuclear energy could play in Australia in pro- a dinosaur.”

ecutive director uranium, Daniel Zavattiero viding safe, low emissions, base load energy,”

saying the SA Government’s decision should Zavatierro said.

AUSTRALIA’S PAYDIRT APRIL 2015 PAGE 55

SAREIC PREVIEW

Phoenix explores asset sales

Difficulty raising cash for early stage explo- Phoenix Copper is turning its attention to base metals projects in the Northern
ration projects has forced Phoenix Copper Territory such as Iron Blow
Ltd to consider selling its South Australian as-
sets. Two diamond holes were drilled at the Iron lead from 156.5m. Results from the second
Blow deposit in December after Phoenix an- hole were still pending at the time of print.
Phoenix has shifted its focus to exploring nounced a resource estimate of 2.6mt @
the Iron Blow and Mount Bonnie deposits in 4.8% zinc, 2.4 g/t gold, 130 g/t silver, 0.3% Fox believed the acquisition of 1,700sq km
the Northern Territory after acquiring 14 min- copper and 0.9% lead containing 125,000t of prospective tenure within the typically gold-
ing licences from Crocodile Gold Australia Pty zinc, 200,000oz gold and 10 moz silver for the rich Pine Creek region was the right move for
Ltd. deposit. his company.

Tough equity markets for all junior explor- One of the holes intercepted 50.39m @ “A big part of any junior company is manag-
ers prompted Phoenix to make a play for 25 10.12% zinc, 2.66 g/t gold, 283 g/t silver, ing risk and obviously there are a number of
tenements within the Hayes Creek base met- 0.57% copper and 1.39% lead from 155.72m, different ways that you can manage risk and
als project area and ponder the future of its including 19.45m @ 15.48% zinc, 2.65 g/t one of those is to acquire assets that are more
three SA projects. gold, 492 g/t silver, 0.56% copper and 2.52% advanced so you reduce your exploration risk
and then the risk is mostly on the metallurgi-
Phoenix is already in advanced discus-
sions with an interested party over the future cal, funding and development side of
of Leigh Creek and is currently weighing up things,” Fox said.
what do with the Adelaide Geosyncline and
Yorke Peninsula projects. “We took the view as a company
that this was an ideal opportunity to
“Each tenement is still held in good stand- get something more advanced, but
ing and we’ve done a reasonable amount of also gave us access to a fairly large
work on them, but given our difficulty in rais- exploration portfolio and some fairly
ing money directly for those projects they will significant base metals resources.”
likely just sit there in the short-to-medium
term,” Phoenix managing director James Fox Further exploration, including
told Paydirt. ground and down-hole geophysics,
is planned for both deposits once the
“Clearly we’ll look at all options and we’re wet season is over.
in reasonably advanced discussions with an-
other party at Leigh Creek. It’s not like we’re A major focus of the next drilling
going to set the world on fire, but it should re- campaign will be to establish a maid-
duce our liability and allow someone else to en resource for Mount Bonnie.
have an interest to move that forward.”
Historical intercepts from the de-
The Yorke Peninsula IOCG project, adja- posit include 9.6m @ 16.6% zinc, 2.55
cent to Rex Minerals Ltd’s Hillside copper- g/t gold, 312 g/t silver, 0.65% copper
gold development, remains largely unex- and 3.47% lead from 75.2m and 5.7m
plored despite a maiden drilling programme in @ 12% zinc, 2.8 g/t gold, 439 g/t sil-
early 2012 returning encouraging results. ver, 0.56% copper and 3.55% lead
from 77.9m.
Phoenix also started drilling at the Adelaide
Geosyncline project three years ago “We will be very busy – which is
and intercepted a number of high- good – and obviously we need to gen-
grade copper sulphides, including erate some good results to get the im-
one drill hit of 26.3m @ 2.86% copper pact we want,” Fox said.
from 50.7m (including 15.7m at 4.65%
copper from 61.1m) at the Eagle pros- Phoenix Copper is exploring the possible sale of its three – Michael Washbourne
pect. South Australian projects

“We’ve got several other IP anoma-
lies in the area that exhibit similar IP
signatures to the anomaly that we
drilled on and the inference is that
there are other areas with dissemi-
nated sulphides that are ready for
testing,” Fox said.

No exploration activities have been
undertaken at any of the SA projects
since the company acquired Hayes
Creek in August last year.

Hayes Creek had great appeal for
the then cash-strapped Phoenix be-
cause it was a slightly more advanced
exploration opportunity in the rising
base metals market.

Phoenix was able to raise $2.69
million before costs in October on the
back of the Hayes Creek acquisition
and finished the December quarter
with a much stronger cash position of
$2.17 million.

PAGE 56 APRIL 2015 AUSTRALIA’S PAYDIRT

South Australia’s new mining
force: Havilah

Havilah Resources Ltd managing di- “We have other copper projects as
rector Chris Giles believes the com-
pany better understands the operating well, such as Mutooroo, south of the
environment in South Australia now.
main highway. We could bring that up
Having had its Portia gold mine ap-
proved and ready to mine, Havilah could for processing at Kalkaroo. Once we get
have a second asset – Kalkaroo – into
production in quick time. Kalkaroo up and going, it will be a cen-

“Having been through the Portia ex- tral processing hub and it will actually
perience we know roughly what is re-
quired, which I think is going to help us. make quite a number of the projects we
We are well advanced, we have com-
pleted the mining lease proposal, which have in the area economic,” Giles said.
is a very big document. It has passed
the public comment stage and we are “We have got quite a few prospects
advanced with permitting at Kalkaroo,”
Giles said. where we have ore grade hits, but we

“We are talking to the Aboriginal na- never really followed them up and
tive title claimants and knowing the ex-
perience gained with Portia, we feel that drilled out to resource status. Hav-
it is realistic that come the end of the year we
will be pretty well done with all our permitting. ing a processing plant in the vicinity is
There is always the possibility of unforseen
hold-ups, but based on what we know and also going to give you the ability to get
given the Government is very keen to see new
development projects, I think we can push it those other prospects to an economic
through by the end of the year.”
resource stage.”
By that stage, gold production at Portia will
be in full flow and importantly spinning cash With plenty of mining potential in the
for Havilah.
Native copper from Kalkaroo where Havilah is planning area, Giles said keeping the plant active
Gross revenues based on a gold price of a second mine in South Australia won’t be an issue.
$1,580/oz is estimated at $40 million, with However, the company has com-
about $5 million needed to cover Havilah’s
processing plant and equipment acquisition Projected annual output from Kalkaroo is pletely wound back on exploration for now, as
costs.
estimated at 34,000t copper and 108,000oz the focus has been on production and cash
Havilah is in charge of processing gold ore
from Portia, while Consolidated Mining & Civil gold from measured and indicated resources flow.
Pty Ltd (CMC) will take care of mining for its
50% stake. of 620,000t copper and 2 moz gold. Havilah owns its own rig and field crew and

Mining activities are expected to tail off at In its latest mining study, Havilah factored in can start exploration programmes at its dis-
Portia mid-2016, at which point Havilah hopes
to make a development decision at Kalkaroo, two start-up scenarios, with high-end capital cretion.
near Broken Hill.
of $340 million for a 9 mtpa operation, while “There is no point in finding more and more

the alternative is starting with gold production mineralisation if you can’t mine it,” Giles said.

recovered from a CIP plant and copper cap- “Once we get cash from Portia we have

tured in a gravity plant. many very good prospects, quite a few with

Upfront capex for this option is estimated ore grade from one or two holes but we have

at $83 million, with 35,000 tpa copper and never followed them up.”

106,000 ozpa gold the target from year six When funds allow, Havilah can start to ex-

onwards. pand the Portia story with further exploration.

Financial models used by Havilah assume While Havilah has pulled back on its own

a $US2.80/lb copper price and a $US1,300/ exploration efforts, its JV partner in the Cur-

oz gold price for Kalkaroo to be successful. namona province – MMG Ltd – continued

Kalkaroo is poised to become Havilah’s drilling in 2014, with a total 27 diamond holes

flagship and potentially a hub for Havilah’s completed for 8,133m at a cost of $3.7 million.

other projects. MMG has spent over $12 million in the last

Giles said there was potential for projects three years and will use 2015 to assess work

near Portia to be developed, with material to completed to date, while retaining the option

be processed via facilities at Kalkaroo. to continue exploration by committing $2.5

million to activities per calendar year.

As MMG reviews its data, Havilah will con-

tinue to sit on its Maldorky hematite-magnet-

ite project and wait for the appetite to return

to the iron ore market before deciding a way

forward.

Giles said an uptick in iron ore prices or

drop in US dollar exchange rate will determine

the timing of production, Giles said.

“There are very good logistics – close to rail

and Port Adelaide has the capacity – so there

are some opportunities to get iron ore down

the railway line. That’s not the immediate ob-

jective, but it is there for us. We would look to

crank it up if it became attractive again,” he

said.

– Mark Andrews

Chris Giles

AUSTRALIA’S PAYDIRT APRIL 2015 PAGE 57

SAREIC PREVIEW

Oakdale tracks graphite
footsteps on Eyre Peninsula

South Australia’s Eyre Peninsula is Oakdale is aiming to produce an inferred resource of 10mt @ +8% graphite on the Eyre Peninsula
arguably the home of graphite in
Australia. 120km from Port Lincoln, can quickly join the petitors, the company potentially has a ready-
ranks of prospective graphite miners emerg- made route to market.
After restarting operations at the ing on the Eyre Peninsula.
Uley mine, near Port Lincoln, Va- Oakdale is 20km from a sealed highway,
lence Industries Ltd leads all com- “Our aim is to get to an inferred resource while environmental and native title issues are
ers on the domestic front, however, in the near-term of 10mt @ plus-8% graph- minimal, Lynch said.
there is a raft of wannabe producers ite. That is the desired objective because if
prevailing. we reach that our shareholders, who carried “Furthermore the success of Valence and
me in the private company – Lymex – will get the job they are doing promoting Eyre Penin-
The likes of Lincoln Minerals Ltd a small bonus. Even if we get 9mt @ 8.5% sula graphite bodes well for us. To have more
at Kookaburra Gully and Koppio and graphite that is still sufficient to move for- than one supplier in one place that is logisti-
Archer Exploration Ltd at Campoona ward,” he said. cally well serviced is good for potential cus-
and Wilco South have graphite re- tomers also,” Lynch said.
sources considered in the top brack- “We’re aiming for about 1 mtpa to produce
et of near-term producing assets in 100,000 tpa graphite. The other thing that we With demand for graphite driven by the
the world. will be doing is four or five diamond drill holes technology and battery sector, annual re-
for metallurgy because we can’t really send quirements are expected to increase from
While significant work has gone aircore samples off for metallurgical testing.” 1.3-1.5 mtpa to as high as 2.7 mtpa.
into these projects, one company
starting out and looking to making an Having samples for potential customers to “I am saying that I want to supply less
immediate impression as a graphite assess is key for any graphite player and if than 5% of that. I am looking at 3 or 4% of
player is Oakdale Resources Ltd. Oakdale’s material stands up against its com- the increased production which I don’t think
is an unreasonable target, given our location,”
The company has been exploring
the Eyre Peninsula for more than 20 Lynch said.
years, with the Oakdale project origi- No doubt Oakdale has a definite end
nally targeted as a base metals play under a
JV between Lymex Ltd and Anglo American game in mind and it has started its jour-
plc. ney there.

Therefore, Oakdale, where 60% of the The company received a permit to
graphite is flake, was somewhat stumbled undertake 10,000m of aircore drilling
upon accidentally by managing director John and four diamond holes to collect in-situ
Lynch and his team. metallurgical samples for testing.

“Absolutely it was, but I think you’ll find that Aircore drilling to a maximum of 60m
most of them are. Everyone that has graphite depth is planned at Oakdale, which
would have already known about the poten- was discovered by two diamond holes
tial,” Lynch said. drilled 400m apart.

The Oakdale package was acquired last Preliminary results from holes
year along with a number of other prospective BLDD025 and BLDD026 in the ox-
assets from Lymex, where Lynch was previ- ide zone included 2-10% jumbo flake
ously managing director. graphite at about 425 microns.

A total of eight exploration licences were Oakdale’s former JV partner may have been keen on copper- – Mark Andrews
acquired covering 2,008sq km of graphite, zinc, however, graphite is the company’s game now
base metals and iron ore potential in the Eyre
Peninsula.

However, with iron ore on the nose of in-
vestors and volatile base metals markets,
Oakdale’s attention will purely be on its
namesake graphite project.

“We recognise that we are behind some
of the other companies in the area, which
is a bit frustrating, but we can look ahead
and piggy-back off the work done by
them,” Lynch said.

“We can see where the opposition is
going and I think our friends down the road
are doing a good job in promoting the Eyre
Peninsula graphite story.”

Having spent over 20 years in the re-
gion, Lynch has established a good rap-
port with the local community and farmers
and understands the operating environ-
ment.

Therefore he is confident that Oakdale,

PAGE 58 APRIL 2015 AUSTRALIA’S PAYDIRT

Road opens for bigger resource

Aresource upgrade has boosted the mining will lead to a further bust nature of the Central Eyre
inventory at Iron Road Ltd’s Central Eyre
magnetite project on the Eyre Peninsula by increase in the total re- iron project,” Stocks said.
22%.
source. “Our optimisation and value
Central Eyre now boasts a global resource
of 4.5bt @ 16% iron, including 3.5bt of meas- Since 2009, Iron Road engineering programme over
ured and indicated resources.
has set out to reach the the past 12 months validates
It is the largest known measured and in-
dicated magnetite resource in Australia and upper end of its 2.8- our diligent and innovative ap-
makes up 77% of the total resource at Central
Eyre. 5.7bt exploration target proach in positioning Central

Iron Road managing director Andrew and Stocks believes his Eyre as the next credible and
Stocks said the resource upgrade confirmed
Central Eyre’s standing as a project of global Adelaide-based compa- long-life producer of high qual-
significance.
ny will soon exceed that ity iron concentrates. Our con-
“The general attitude of the orebody lends
itself to large scale, efficient extraction and estimated guidance. fidence in a low operating cost
due to the distinctive nature of the mineralogy,
we believe it will be one of the most straight- This latest resource profile has been enhanced dur-
forward magnetite deposits in the world to-
day,” Stocks said. upgrade will also be ing this programme.”

“The project has clear advantages over the used to help Iron Road The biggest hurdle for Iron
extremely hard and fine-grained banded iron
formations typical of many other magnetite refine and update the Road to overcome on the path
deposits.”
current mine plan for to production remains the
Information from the most recent drilling Central Eyre, as set out Iron Road managing director $US3.98 billion capex to build
programme at Central Eyre also confirmed in a DFS released in
the down-dip potential for the Boo-Loo/Dol- Andrew Stocks the project.
phin orebody and Iron Road is confident this
February last year. Project development discus-

Iron Road is targeting a 24 mtpa output sions with strategic investors, infrastructure

from the project over at least a 25-year mine developers, constructors and operators and

life and has engaged the Thiess-RWE JV to project financing talks with Australian and

help updated the mining model outlined in the overseas intuitions have been ongoing since

study. the company first revealed the economics of

“Declining capital costs, current mine plan- Central Eyre.

ning work incorporating mobile crushers, Iron Road has already signed a MoU with a

an expected sizeable increase in mining re- major grain handler for third-party use of the

serves and high quality concentrate specifica- proposed capesize port facilities to be built at

tion are together expected to underpin the ro- Cape Hardy.

13 – 14 April 2015 15 April 2015

Adelaide Convention Centre Adelaide Convention Centre

The CD-Rom of the 2015
South Australian Resources and
Energy Investment Conference

will be available soon

CD-Rom for conference delegates – $115 (inc. GST)
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Phone (+61) 8 9321 0355 or email [email protected]

AUSTRALIA’S PAYDIRT APRIL 2015 PAGE 59

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POTASH/ PHOSPAHTE

Minbos ready for high-grade
Cacata future

Anew, streamlined own-
ership structure for the
Cabinda phosphate project

has Minbos Resources Ltd

chief executive Lindsay

Reed confident his com-

pany will soon be supply-

ing the growing fertiliser

market.

Minbos is in a 50/50 JV

over Cabinda, in the Cab-

inda province of Angola,

with social infrastructure

builder Mitrelli. Under the

proposed deal, ASX-listed

Minbos would acquire pro-

ject partner Petril’s 50% in-

terest in the Cabinda rock

phosphate JV in exchange

for 50% of its ordinary A recent long section from Minbos’s Cacata phosphate project highlights the high-grade nature of the deposit’s core

shares.

“There was a mutual recognition between “That is potentially DSO-like material with Minbos then in a position to begin project fi-

all parties that the best way to take the project only limited beneficiation and no flotation tak- nancing discussions.

to the next stage. It makes particular sense at ing it to more than 32% phosphate. That gives “We have already had some discussions

this stage of the project,” Reed told Paydirt. us real potential for a low capex operation for with royalty funds, off-takers, equity, debt and

“It gives us a single point of entry for any new the first nine years at least,” Reed said. even infrastructure funds because they are

equity and it removes one level of decision “I think we are seriously lucky to be in the already involved in the building of the port.”

making from the process. And in country it will position we are in.” Port facilities are being constructed at Cab-

be easier to have one face presenting to both In order to prove whether the Cacata mate- inda but with access there not likely to be

government and community groups.” rial stands up to such promise, Minbos plans granted before 2017, Minbos is also consider-

He said the deal would allow the two par- to start pilot plant test work at Mintek’s Johan- ing exporting product out of Pointe Noire in

ties to combine their respective skills under nesburg facility. Reed said the results of that neighbouring Republic of Congo, a plan Reed

one banner. work held the key to the project’s future. said the Angolan Government was sympa-

“It is a top quality JV. Mitrelli is big into so- “If the first question investors used to ask thetic to.

cial infrastructure – villages, agriculture fa- was how we were going to simplify the own- He said defining the project finance route

cilities, health facilities – in Angola. They do ership structure, the second one they always would be dependent on what Minbos could

a lot on a turnkey basis so they have a lot of asked was how we were to implement it. And achieve without too much shareholder dilu-

in-country expertise and presence which is for that, the next stage is the pilot plant. tion.

great for Minbos because we bring the re- “We will get some bulk samples from the “We will look at everything. And it will prob-

source development experi- early stages of mining and ably be a case of forfeiting some of the oper-

ence to the project.” that will give us some idea ating margin to reduce the capex in order to

Reed’s assertion that the of what processing we avoid dilution for our shareholders. That is the

decision “makes particular need, which may be very world we are in currently.”

sense at this stage” is based little. That will give us an The company has also ensured its focus

on the project milestones indication of capex and will be fully on Cacata by initiating divestment

Minbos and its partners are whether we need to go to a of its Kanzi phosphate project in the DRC.

nearing. full-blown BFS or not. “We have announced we are looking for

Having previously defined “The pilot plant will also someone to take on our DRC JV,” Reed said.

a global resource of 391.3mt give us some product sam- “Trying to get two projects up and running

@ 9.2% phosphate for the ples which we can get out to within five years of each other is very difficult

Cabinda project, Minbos is customers because we be- for a company of Minbos’ size and so we are

now honing in on the poten- lieve this will be a premium looking for a party that is focused on that pro-

tial for a high-grade starter product. ject; it is only fair to the project and our JV

project, focused on the “There are very few DSO partner.

15.2mt @ 24.5% phosphate projects in the world so – Dominic Piper
Cacata deposit. There, re- where we go next and how

cent drilling confirmed the we fund it will depend very

presence of a 10-12mt high- much on what the results

grade core which has the from the pilot plant are.”

potential to deliver material The pilot plant results are

that will essentially produce expected to be available

a DSO-style product. Lindsay Reed by the end of 2015 leaving

AUSTRALIA’S PAYDIRT APRIL 2015 PAGE 61

POTASH/ PHOSPAHTE

Fast funds wanted for Colluli

South Boulder Mines Ltd managing director South Boulder is eyeing first production at Colluli in 2018
Paul Donaldson hopes his company can
lock in financing for the Colluli potash project fields projects globally that have got a com- in dietary preferences, you can’t ignore India
in Eritrea before the DFS is completed later pleted DFS and the geological scarcity of suit- in any of that equation,” Donaldson said.
this year. able resources for primary production is high,
relative to potassium chloride. “Globally, I think our resource is better posi-
A PFS released early last month found Col- tioned than any other to support that market.
luli could support a 425,000 tpa operation for “Potassium sulphate prices have gone up Plus you’ve got all of the Middle East, but for
$US442 million before ramping up production and stabilised at a very high level and we me the key one is going to be India.”
to 850,000 tpa for an additional $US282 mil- don’t see them coming down any time soon.
lion. There’s still lead time for new projects to The PFS also found production could ramp
come into the market, but while they are going up quicker than most potassium sulphate
Cash flow from the first five years of opera- through that lead time the demand will con- projects because the harvest salts could be
tion will partly fund the second phase of the tinue to grow.” mined in solid form due to the shallow nature
two-part development module covering a 30- of the deposit.
year mine life and the potential to accommo- Colluli is also one of only three potassium
date further expansions. sulphate projects to pass the PFS stage and This also reduces the need for the larger
the other two are both in Utah, about 1,200km solar evaporation ponds typically found in the
The phase one development includes capi- from the nearest port facilities in the USA. processing plant alongside the standard flota-
tal set aside for the construction of a project- tion circuits.
owned haulage road and 900,000 tpa product The project’s location on the north-east
export terminal at Anfile Bay on the Eritrean African coast opens up markets which South Piloting and optimisation work for the pro-
coast, about 75km from the proposed mine Boulder and state-owned JV partner ENAM- cess flow diagrams was continuing at the time
site. CO could sell to, including the emerging In- of print and Donaldson was confident lower
dian markets. revised costs from the technical review could
South Boulder opened financing discus- be factored into the DFS.
sions with construction groups capable of “India is right there and not importing huge
bringing debt to the project several months amounts of potash fertilisers currently, but if “The processing approach itself has been
ago, but the sticking point from those talks you look at the fundamentals of dry potash; used and proven in other projects around the
was the exact development costings. population growth, arable land and changes world – albeit there are limited projects – but
no project starts off with the salts in solid
With those figures now declared and South form, so we just wanted to make sure we have
Boulder not expecting the economics to a robust design before we go any further,”
change substantially before the planned re- Donaldson said.
lease of the DFS in the third quarter, Donald-
son wants to secure a funding partner as soon “We’ve called in a number of experts to run
as possible. our own internal due diligence on the process
design and the underlying methodology and
“I’d like to see a partner who is going to they’ve all endorsed it and identified a num-
bring some debt funding into the project come ber of opportunities for improvements, so we’ll
on board by the time we get to DFS,” Donald- blend that all in with the work we’re currently
son told Paydirt. doing at the pilot plant and get more definitive
costings for the DFS.”
“It would be nice for somebody to be able to
stand back and say the DFS is just a simple – Michael Washbourne
exercise of ticking boxes and everything we
thought we knew is right and now we should Paul Donaldson
just proceed.

“We want to be able to bring the facility into
production as quickly as we can, given potas-
sium sulphate prices are at their second-high-
est levels in history, so the sooner the better.”

Other key economics from the PFS include
bottom-quartile C1 mine gate cash costs of
$US141/t and total cash costs of $US189/t.
Post-tax NPV is estimated at $US462 million
with an IRR of 22.3%.

First production is slated for 2018 from the
world’s shallowest-known potassium-bearing
evaporate deposit with a resource of 1.289bt
@ 10.76% potash for 152.7mt contained pot-
ash.

Open-pit mining operations will focus on
production of potassium sulphate, a speciality
fertiliser with a price premium over the more
commonly used potassium chloride.

“There are a number of potash types that
are differentiated by chemistry and when peo-
ple talk about potash they are mostly referring
to potassium chloride, but that’s not what we
have at Colluli, although we have got the abil-
ity to make it,” Donaldson said.

“The thing about potassium sulphate is
demand is increasing, there’s only two green-

PAGE 62 APRIL 2015 AUSTRALIA’S PAYDIRT

Centrex steels for potash focus

With its iron ore division taken
care of, Centrex Metals Ltd
has diversified its interest into zinc,

copper and now potash.

In March, the South Australi-

an-based company swooped on

Sheffield Resources Ltd’s Ox-

ley potash project, near Three

Springs in Western Australia’s Mid

West.

Subject to various approvals,

including FIRB consent, Centrex

will take full ownership of Oxley

for a payment of $2.5 million to

Sheffield, which is focused on

the budding Thunderbird mineral

sands and Red Bull nickel projects

in WA.

The deal is set to be completed

on May 31, with Centrex managing

director Ben Hammond hopeful it

can be wrapped up mid-April.

Hammond said it was more of a

development project than an ex-

ploration play, with the company

keen to establish an idea of costs

to bring Oxley to fruition.

Oxley was discovered in 2013

by Sheffield after a maiden 17-

hole RC drilling programme and Centrex’s search to acquire a new project ended with the Oxley potash project in WA’s Mid West. It is believed
returned thick, high grade potash only TSX-listed Verde Potash’s Cerrado Verde project in Brazil shares the same rarity as Oxley
intervals including 75m @ 8.38%

potash, including 17m @ 10.1% potash from it through to full production,” Hammond said. A strike length of 32km currently exists at

50m, 72m @ 8.53% potash from 35-107m, in- In SA, it has JVs with Wuhan Iron & Steel Oxley, with host rocks exposed at surface.

cluding 11m @ 10.1% potash from 40m, and Group Co and Baotou Iron & Steel Group, “I think there is a great opportunity here to

48m @ 9.84% potash from 3-51m, including while it is partnered with Shandong 5th Geo- develop a process route to get that potassium

39m @ 10.4% potash from 6m. Mineral Prospecting Institute at Goulbourn. out of the feldspar in the project and not just

“We have been looking for an acquisition The company has forged good relation- settle for the lower order fertiliser products,

for some time and there were a number of ships in both China and India, both host to but target the higher order fertiliser products,”

things that attracted us to the project. Firstly, large fertiliser companies. Hammond said.

it is such a rare orebody that we have only This bodes well for Centrex at Oxley which “Once we can leach out the potassium, it

found one other like it in the world and that is comprised of six exploration licences cov- will be a relatively easy direct route to those

is well and truly in-land in Brazil,” Hammond ering an unconventional hard-rock style of higher order products where most of the pro-

told Paydirt. potash mineralisation, containing up to 90% duction is done by using potassium chloride

“Not only is it rare but it is relatively homog- potash feldspar. as the base. Also, to produce those non-chlo-

enous and large scale, so that means what- ride fertilisers where there is a growing mar-

ever project we develop has the potential to ket for more organic fertilisers that don’t harm

be that tier one asset of scale. Given it is rare the land as much.”

whatever we develop it will be hard to repli- With Oxley a bulk commodity project – an

cate.” area of expertise for Centrex considering its

Further enhancing Oxley as a hard-to- iron ore history – Hammond said the company

match project is its location to infrastructure, has the knowledge required to make a suc-

particularly a port that can be used to access cess of Oxley.

markets in Asia. He said iron was the main contaminant at

Oxley is 125km from Geraldton Port, while Oxley and the company was equipped to deal

power and water infrastructure are also ac- with it.

cessible. “The processing, certainly for the benefi-

Therefore, with Centrex’s iron ore JVs in SA ciation stage, is the reverse of what we have

largely taken care of by its Chinese partners, been doing on our iron ore projects and the lo-

Oxley and the polymetallic project in Goul- gistics scenario is almost identical to Wilgerup

bourn, New South Wales, are focuses for the [Centrex’s 100% owned DSO hematite project

company. in SA], so we have already got a lot of knowl-

“Outside of iron ore, zinc and copper have edge on what options we can use there. There

been focuses but now potash will also be a are a lot of synergies with the iron ore project,”

focus. Centrex itself will be focused on this Hammond said.

potash project for a number of years before Ben Hammond – Mark Andrews
we repeat our model and find a partner to take

AUSTRALIA’S PAYDIRT APRIL 2015 PAGE 63

POTASH/ PHOSPAHTE

Full plate for Potash West

With a financial evaluation ject’s potential to host multi-billion
completed at its Dandara- tonnes of potash.

gan Trough project in Western “We hope to have the drilling

Australia, Potash West NL is plan finalised at Kuellstedt within

back drilling in the field. six months and then go for ap-

The purpose of its current provals on that. The drilling pro-

programme is a resource drill gramme is probably about 12-18

out on the Dinner Hill project, months away because it is a long

managing director Patrick Mc- planning process. We have iden-

Manus said. tified 4-5bt [at 7-25% potash] as

“In the three to six month peri- an exploration target,” McManus

od we expect to be finishing the said.

resource drill out on the Dinner As it ticks off the necessary ap-

Hill project [results of] which will provals in Germany, where it holds

probably be announced in about 450sq km of ground including the

May/June. The material is very Grafentonna licence, near Kuellst-

easy drilling and less than 100m edt, Potash West will also be mak-

from the surface, so we can do ing sense of the opportunity it has

about 300-350m a day,” he said. in the tech sector.

“That will allow us to deline- In February, the company an-

ate the mining area for Dinner nounced it had been granted a

Hill and there will be another 25% interest in Strategic Metal-

programme in the feasibility lurgy (SM); Potash West’s tech-

study later [in the year] to take nology partners in developing

the resource to measured and the K-Max technology which will

indicated status.” produce potash and other com-

Earlier this year the company modities from glauconite at Dan-

announced improved econom- daragan.

ics to produce phosphate and While Potash West is the owner

potash fertilisers from Dandara- of K-Max, SM has advanced the

gan in a two-stage process. technology further to treat lithium-

The scoping study indicated rich micas and developed a recov-

the potential viability of a stan- ery process to produce battery

dalone 4.2 mtpa for 390,000 tpa grade lithium.

superphosphate (SPP) project It is estimated that lithium de-

for the first five years of opera- mand in the next 10-15 years will

tion. grow at a rate of 12-18% per an-

A standalone plant to produce A sample of a sylvinite seam in an existing potash mine, 15km from num however there are limited
SPP in stage one of the project the Kuellstedt exploration licence mines existing to keep up with
has been estimated to cost demand.

about $135.7 million. The project will be better Within the larger 60sq km holding Dinner “There won’t be a large number of projects

defined in a feasibility study expected to be Hill is based, an exploration target of 1-1.5bt to come on and there will be an opportunity

completed late 2015/early 2016. has been reported. for technology to be used on what are cur-

Assuming the success of stage one, Pot- There is even better exploration upside for rently not seen as lithium ores.

ash West may be in a position to fund some the company at its prospects in Germany, It will open up a whole new area where [tra-

stage two capital requirements – $590 million particularly at Kuellstedt, where potash ex- ditionally] lithium might not come from which

– for the integrated K-Max plant. perts ERCOSPLAN have indicated the pro- is very important in a market like this,” Mc-

Finding a strategic partner is Manus said.

also a likely scenario for Potash “We’re not sure how it will unfold

West to bring the K-Max operation but Cobre Montana [NL] is busy

into play by about 2023. looking at opportunities to use this

The plan is to have the K-Max technology as is Lepidico [Austral-

plant constructed and commis- ian mineral processing technology

sioned in years four and five of company] and we are doing the

stage one, ready to process phos- same thing.”

phate- and potassium-containing Cobre Montana has been li-

minerals which are in the layers censed by SM to look at opportuni-

below the SPP material in the Dan- ties to apply the technology and its

daragan Trough. success should be a fillip for Pot-

Initially, the project is slated for ash West, with Adrian Griffin – the

20 years averaging revenue of managing director at Cobre Mon-

$380 million a year (life-of-mine), tana – also non-executive chair-

however, the current resource – man at Potash West.

120mt @ 2.8% phosphate, 3.1% – Mark Andrews
potash and 8.2% calcium oxide – is

limited to just 10sq km of the Dinner

Hill project. Patrick McManus

PAGE 64 APRIL 2015 AUSTRALIA’S PAYDIRT

FertAg fuels North
American assets

Phosphate hopeful Fertoz Despite only having a mar-
Ltd plans to use cash flow ket cap of $11.5 million at the

from a newly formed Austral- time of print, Fertoz is taking

ian JV to fund the develop- on the financial risk associat-

ment of its North American ed with establishing FertAg.

projects. The ASX-listed company re-

The Brisbane-based com- ported just $890,000 in cash

pany formed FertAg with pri- at the end of the December

vately held Vast Resources quarter.

Pty Ltd last November to im- However, it is not some-

port and market a speciality thing Szonyi and his fellow

fertiliser from Asia to a net- directors are overly con-

work of Australian farmers. cerned about as they aim to

FertAg is marketing the im- transition Fertoz into a cash-

ported phosphate product as generative business by the

a cost-effective substitute for end of 2015.

the widely used superphos- “Our whole focus is on

phate fertiliser and expects generating cash and becom-

the business to be running at ing a commercial business as

a profit later this year. quickly as possible,” Szonyi

Those funds will be tipped FertAg agronomist Andrew Kennett, executive director Prem Akhil, agronomist Paul said.
into Fertoz’s three North Moorhouse and managing director Les Szonyi with the imported phosphate product “We’ve got plenty of expe-
American projects – Wapiti
rience in phosphate and we

and Fernie in Canada and Dry Ridge in the soluble in water, when you get heavy rainfall saw an opportunity that fitted our model to

US – to fast-track development of those as- most of it gets washed away, so our product distribute and market a product in Australia,

sets for production in 2016. is a very attractive solution to stopping phos- which is a low-risk venture because we don’t

Fertoz managing director Les Szonyi said phate getting into rivers, creeks and water- have to manufacture anything and we don’t

the product, known as FertAg 0-8-0 and con- ways,” Szonyi said. have to explore for anything.”

taining about 8% phosphorus, was suitable “The second thing is superphosphate, Fertoz has submitted a small mine applica-

for both organic and conventional agriculture. when used in acidic soils, approximately only tion for Wapiti to extract up to 75,000 tpa of

“We’re bringing in an established product 20% of the phosphorus is available to the rock phosphate. The company expects that to

which is being used in lots of countries around plant and the rest of it gets tied up by other be approved in the second half of the year.

the world and we have signed up a national elements in the soil. With our product, the Marketing and distribution agreements

distributor because the product is known, has silica protects the phosphorus so 95% of the have also been signed with three different

been formulated and is available for sale right product is available and you end up using a suppliers to sell rock phosphate from both

away,” Szonyi told Paydirt. lot less of it compared to the amount of super- the Wapiti and Fernie projects. These agree-

“It’s a phosphate product formed by com- phosphate.” ments cover the rich agricultural regions of

bining natural elements and fusing them to- The calcium and magnesium content in the British Columbia and Alberta in Canada.

gether at a high temperature. Also, because FertAg product also greatly reduces the need Exploration has been on hold over the

there is no chemical change, it’s suitable for to lime the soil before applying the fertiliser, North American winter, but Szonyi said it was

organic agriculture.” Szonyi said. unlikely to resume when the snowy weather

FertAg has exclusive rights to supply and Since forming FertAg, Fertoz has signed clears because his company’s focus would

distribute up to 50,000 tpa of the fused cal- a national supplier agreement with a major remain on ensuring the FertAg business was

cium-magnesium-silicate phosphate product agribusiness to sell and distribute the product generating cash.

and expects to sell about 4,000t in the first across Australia through its extensive retail However, the industry veteran insisted the

year of operation. outlet. development projects remained on track for

Initially, profits from the JV will be weighted Fertoz has also executed a loan facility of phased production in 2016 and was confident

towards Fertoz until annual returns exceed $1.25 million with Lenark Pty Ltd – an entity the global phosphate markets would react

$1 million. Profit distribution will then favour associated with company chairman James kindly to the start of operations in Canada.

Vast until cumulative points are equal for both Chisholm – and a $1 million working capital “Canada does not have any operating phos-

companies and profits will be shared evenly facility from Moneytech Finance Pty Ltd to ac- phate mines so we’ll have the only one when

thereafter. celerate the growth of the FertAg business. our application is approved,” Szonyi said.

FertAg has already received interest for “We’ve also tried to make it more attrac- “Both Canada and the US are importers of

the product from a number of farmers across tive to farmers by introducing a shareholder phosphate, but the amount of phosphate that

Australia as an alternative to superphosphate rewards programme where farmers can get a is available for production in the US is going

fertilisers. According to the Australian Bureau further $15/t rebate if they own 5,000 shares to drop off with time so we think we’re very

of Statistics, more than 700,000t of super- in Fertoz,” Szonyi said. strongly placed to take advantage of that be-

phosphate is sold within the country annually. “This becomes quite attractive for a poten- cause we’re right next to the main agriculture

Szonyi said the FertAg product had a num- tial shareholder if you’re looking at a share areas in North America.”

ber of advantages over superphosphates, in- price of 30c/share for a $1,500 investment – Michael Washbourne
cluding insolubility in water. and it’s a one-off payment that can be easily

“Because single superphosphates are incentivised.”

AUSTRALIA’S PAYDIRT APRIL 2015 PAGE 65

POTASH/ PHOSPAHTE

Positive scope for Elemental

Elemental Minerals Ltd could fore hitting 2 mtpa nameplate ca-
have two of its potash projects pacity in the years which follow.

up and running by 2019 following Kola remains the company’s

the release of a positive scoping priority, although Sanders ad-

study from Dougou in the Repub- mitted it was a bonus to have a

lic of Congo. multiple projects in a production

A recent scoping study on the portfolio which is yet to factor in

carnallitite project found Dou- the high-grade Yangala deposit.

gou could support a 400,000 tpa “What we’ve done is prove

phased operation for an unlever- there is a pipeline of production

aged capex of $US430 million here which is almost second to

(including 20% contingency) and none to anywhere else in the

operating costs of $US68/t over a world at the moment from a junior

47-year mine life. perspective,” Sanders said.

Free cash flow of about “The economics on both pro-

$US100 million a year from phase jects are relatively similar and

one would likely be used to fund the final product is the same, so

the next two phases (800,000 tpa it really will be a function of how

after five years and 1,200 tpa af- successful we are on raising the

ter eight years). project finance and as a junior

Dougou has a global resource The Kola and Dougou deposits are part of Elemental’s larger company we need to be as flex-
(measured and indicated) of 1.1bt Sintoukola project in the Republic of Congo ible as possible in those discus-
@ 20.6% potash and carries a sions.”

post-tax NPV of $US880 million with an IRR last year after previously serving for three A drilling programme at Yangala last year

of 21.67%. First production is slated for 2019. years as general manager until 2012, did not returned one of the world’s highest sylvin-

The encouraging economics around Dou- expect potential financiers to be deterred by ite intersections – 4.2m @ 59.48% sylvinite

gou follows the release of an updated study the large capex numbers for either project. (37.56% potash) – from one of the hangingwall

on the Kola sylvinite project last year. “If you look at the [capex] number of seams. An exploration target of 235-470mt @

The original capex at Kola of $US1.85 bil- $US430 million for Dougou, although it’s pret- 55-60% sylvinite has been set for the deposit.

lion was reduced to $US908 million. Elemen- ty large in terms of some other junior projects Some forecasters have predicted a poten-

tal is targeting first production from Kola in out there, from a potash perspective that’s a tial potash shortage from 2017 onwards, par-

2018. pretty decent entry price from a capital point ticularly in some of the key fertiliser markets

Both capex estimates are expected to of view,” Sanders said. such as Brazil and Asia, which bodes well for

be further reduced by the time each project “That’s an unlevered number and if you split Elemental and the company’s proposed pro-

reaches final feasibility. it 60:40 it looks very possible from a debt-to- duction pipeline in the ensuing years.

Elemental managing director John Sanders equity perspective. Once we’re about one- However, Sanders said the timing was

said the scoping study on Dougou had con- third of the way down the next study, I expect purely coincidental and his company was

firmed both the quality and commercial poten- that’s when we’ll see a lot of traction on pro- more focused on becoming one of the world’s

tial of the deposit. ject finance.” lowest cost potash producers capable of with-

“We had a really good understanding of Elemental investigated a phased imple- standing any bumps in the inevitable cycle.

the orebody and what the grades and what mentation plan for production at Dougou after “If you look at the margins we carry, they’re

the thicknesses were, so what this study did success with the same strategy at Kola. Last pretty wide so there is a lot of flexibility in the

was just confirm the economics on what we year’s study looked at an initial rate of 1 mtpa potash price for us and if it does come under

thought was a really good deposit already,” for the first years at the flagship deposit be- pressure, unlike a lot of others, we will still

Sanders told Paydirt. have a relatively good margin,”

“We’re now going into pre- Sanders said.

feasibility with this in the next “We’ve taken note of where

couple of months and we’ll drive the potential window of oppor-

it hard through to the middle of tunity is to bring product on to

next year. We’re targeting the the market, but we’re not par-

third quarter [of 2016] for re- ticularly focusing on that. We’re

lease.” just making sure that the mar-

Elemental has begun project gins we have are sustainable

financing discussions with po- and we can take any price fluc-

tential partners for both Kola and tuation if necessary.”

Dougou, which are both part of – Michael Washbourne
the larger 1,400sq km Sintouk-

ola project on the west coast of

the Republic of Congo.

Those financing discussions

include talks with some of the

majors, although the Johannes-

burg-based company remains

open to funding part of the de-

velopment on its own.

Sanders, who returned to the

company as managing director Dougou has 1.1bt @ 20.6% potash in measured and indicated resources

PAGE 66 APRIL 2015 AUSTRALIA’S PAYDIRT

In over-built potash sector,
tiny segment commands

Excess production capacity over-hangs the demand-supply deficit,” chief executive Guy have plunged 28% and 68% respectively
price of potash, but its premium form may Bentinck said during PDAC in March. since mid-2014. Potash Ridge cut jobs and
offer upside that investors have yet to cash in management salaries.
on. Norwegian nitrogen producer Yara Inter-
national owns a 17% stake in IC Potash Inc, “Juniors have not received much attention
Sulphate of potash (SOP) is a chloride- which plans a $US1 billion SOP mine in New from investors given general market apathy,
free fertiliser suited to sensitive crops such Mexico. particularly for those with capex in the billion-
as fruits and nuts. Standard SOP traded over plus range,” Paradigm Capital analyst Spen-
five years to mid-2013 in north-western Eu- “We see strong growth for SOP and an cer Churchill said.
rope for 20% more than granular muriate of underlying weakness in supply,” Yara’s Bern-
potash (MOP), but that premium averaged hard Mauritz Stormyr said. Compass is expanding production to match
50% in 2014 as supplies became short and U.S. demand, but further volumes could dra-
MOP prices fell, CRU’s manager of fertiliser Yara and Allana Potash are also gearing up matically change market dynamics, Keith Es-
Paul Burnside said. their own potential SOP production. pelien, senior vice-president of plant nutrition,
said.
“Demand has proved to be very sticky and Major producers include Compass Miner-
consumers have accepted that SOP prices als International, which produces SOP from The biggest fertiliser company, Potash
aren’t going to fall,” Burnside said. salt water ponds in Utah and Belgium’s Tes- Corp, isn’t convinced about SOP.
senderlo Chemie NV, which combines sul-
Global SOP production is 5 mtpa, but de- phuric acid with MOP to make SOP. “Right now the premium is there,” chief ex-
mand may be 10-12 mtpa, according to Pot- ecutive Jochen Tilk said in late January. “Will
ash Ridge Corp, a company developing a New production could force out higher-cost it be there down the road? We really don’t
645,000 tpa Utah mine. supplies and, if the premium falls enough, ex- know.”
pand demand as consumers switch to SOP
“You can take all the SOP projects on the from MOP, Burnside said. – Rod Nickel, Reuters
drawing board and it won’t make a dent in that
Investors aren’t excited about SOP yet.
Shares of IC Potash and Potash Ridge

Allana seeks partner to produce
premium potash in Ethiopia

Canada’s Allana Potash Corp will talk Allana is in talks with a number of companies about can imagine” with Yara, Abasov told
with Norwegian fertiliser producer developing its fertiliser business in Ethiopia Reuters at PDAC in Toronto. “It probably
Yara International and three other com- makes sense to combine it and produce,
panies about sharing costs and output in say, 1 mtpa for both companies.”
its plan to produce premium fertiliser in
Ethiopia. Yara released a study last month con-
firming potential for 600,000 tpa of SOP
A partnership would involve Allana’s at its site. It could not immediately be
plan to produce sulphate of potash reached.
(SOP), a niche, premium product that is
in short supply, unlike the commodity mu- The company would sell its SOP to
riate of potash (MOP). China, where SOP sells for more than
double the MOP price, Abasov said.
Yara would be a logical partner since it
is pursuing its own SOP project in Ethio- “We want to move pretty fast on this
pia and owns land that adjoins Allana’s. because we think there’s a huge latent
Both projects would depend on the same potential there.”
road, port and power infrastructure to be
built. Allana aims to secure financing for
MOP construction by mid-2015, and
Allana released a positive PFS in start building a mine by next year. MOP
March for SOP production at its Danakhil production could start by 2018, with
site, where it also plans to build a $US642 SOP output following a year later.
million mine to produce 1 mtpa of MOP.
Allana signed a partnership for the
Chief executive Farhad Abasov said MOP mine last year with Israel Chemi-
the company would decide within weeks cals Ltd.
whether to structure its 1 mtpa, $US787
million SOP project as a JV, subsidiary, Allana’s MOP mine would face com-
or spinoff. It will then talk to Yara about petition from new capacity built by Pot-
combining projects, but is also speaking ash Corp of Saskatchewan, Germany’s
to two other fertiliser producers and an K+S AG and others. Concerns about too
industrial company. much global MOP capacity make SOP a
useful option, Abasov said.
“There are a lot of synergies as you
– Rod Nickel, Reuters

AUSTRALIA’S PAYDIRT APRIL 2015 PAGE 67

REGIONAL ROUNDUP AFRICA

Presidential support for
Mofe Creek

Iron ore hopeful Tawana Resources years before ramping up to 2 mtpa
NL had extra reason to celebrate the and then a 10-year steady-state of

restart of activities at Mofe Creek last 2.5 mtpa with the potential to increase

month. further if more economic tonnes are

Liberian President Ellen Johnson added to the resource.

Sirleaf all but gave the project her The project carries a capex of

tick of approval when she appointed $280 million – staged over the first

an Inter-Ministerial Concessions four years of production – and oper-

Committee (IMCC) to assist with ne- ating costs of $US40.60/t. Estimated

gotiations for a mineral development revenue over the life of the project is

agreement (MDA). $2.5 billion, including an NPV of $435

Tawana was due to present its million and a pre-tax IRR of 55.8%.

case to the four-person committee “We have been able to move this

– chaired by the country’s Minister project very rapidly and show the

of Lands, Mines and Energy – at Government of Liberia and other

the time of print before a bill is likely stakeholders that this is a business

passed through parliament as early model which has been successfully

as June. Tawana has been given the all-clear to restart activities at Mofe used in Australia and will work ex-
If approved, the dual-listed compa- Creek following the eradication of the Ebola virus in Liberia tremely effectively in Liberia,” Rich-
ards said.
ny will receive concessional rights to

build, operate and sustain a mining operation ever, Tawana intends to focus on the new Za- “It’s not all about big capital intensity pro-

within the Grand Cape Mount County, about way North-West exploration target. jects and commissioning 20-50 mtpa plants.

85km from Monrovia. It is the highest priority target in the project It’s about developing a staged project with

The presidential backing coincided with the area and the company believes it has the po- minimal capex and high profit margins and

return of Tawana employees to Mofe Creek tential to add plenty more tonnes to the ex- growing the business from a start-up produc-

following the eradication of the deadly Ebola isting friable itabirite resource of 61.9mt @ tion rate of 2.5 mtpa.”

virus which claimed the lives of more than 33% iron, including an indicated resource of During the enforced operational hiatus,

4,000 people in Liberia and more than 10,000 16.2mt @ 35.4% iron. work progressed on the environmental and

people in the West African region. Tawana released a scoping study on the social impact assessment (ESIA) and the

No new cases of the virus have been regis- project last July and found it could support a company opened discussions with other par-

tered in Liberia since February 19, according 2.5 mtpa start-up operation for $US52.9 mil- ties near the project about potential infrastruc-

to the World Health Organisation (WHO), and lion and produce a 65-68% iron product over ture deals.

the country’s last Ebola-infected patient was a 14-year mine life. Mofe Creek is just 20km from the coast and

discharged in early March. Operations will run at 1 mpta for the first two hosts the high-grade friable itabirite minerali-

Interest in Tawana and the Mofe Creek pro- sation which typically produces a 65-68% iron

ject remains strong, if sideline discussions at product that attracts price premiums.

Mining Indaba are anything to go by, despite Richards called for calm on the current

the company’s stock recently dropping to its state of the iron ore market and appealed

lowest level since 2013. to investors to not group his company in the

Tawana executive chairman Wayne Rich- same category as producers struggling to

ards said the formation of the IMCC was a stay afloat.

major boost for his company, particularly with “We’re not a producer, we’re an explora-

global markets still concerned about the fall- tion company moving into development phase

ing iron ore price. and we’re looking to produce a product which

“I think we have demonstrated some mo- can displace nearly any hematitic ore in the

mentum and performance over the past 18 current market because of our superior grade

months, including the release of a maiden and quality,” Richards said.

resource, the presentation of a robust, viable “Our product will attract a premium over the

scoping study, advancing it to a pre-feasibility 62% iron price which everyone watches daily

stage and creating a professional, proactive and the project fundamentals still stand – it’s

presence in country outlining who Tawana is free dig, soft material, low in impurity levels,

and what we’re intending to achieve,” Rich- capable of producing a 64-68% iron product

ards told Paydirt. and is located within 20km of the coast, with

“Obviously that still resonates in the various highways traversing our tenements.

circles throughout Africa and our investment “For those reasons, we’ve just got to keep

communities and it is humbling to think people reminding people that we’re developing a low

know us and want to see us progress, even in capital intensity, bottom quartile opex, high

the current tight iron ore pricing market.” margin project in a country that speaks Eng-

The date and specifics of the proposed lish and has mining laws and iron ore mining

drilling programme that would mark the of- experience dating back more than 50 years.”

ficial restart of activities at Mofe Creek were A scoping study found Mofe Creek could produce – Michael Washbourne
still being negotiated at the time of print, how- a 65-68% premium iron product

PAGE 68 APRIL 2015 AUSTRALIA’S PAYDIRT

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REGIONAL ROUNDUP

Strandline strings large HMS
package in Tanzania

Drilling success in Tanza- and Strandline is encouraged
nia has spurred Strandline
Resources Ltd on to make its by the fact that most of the drill-
Madimba HMS project a priority.
ing completed has been very
Although the company has
advanced projects in Western shallow, sub-6m.
Australia, including the con-
struction-ready Coburn HMS Furthermore, the holes drilled
project, Madimba is climbing
towards the top of the tree at are mineralised at depth from
Strandline, according to manag-
ing director Richard Hill. surface and getting better by

“I reckon it is because it is the bottom of the hole, Hill said.
only a few kilometres from an
active port that has capacity “This gives us confidence
and given the grades and as-
semblage work we have done, it that there is depth potential and
is promising and if we could ad-
vance that rapidly to a resource also potential in other parts of
then it will become a focus very
quickly,” he said. the tenure as well. Our view is

Weighing heavily in the company’s favour that we can get a resource out
is the level of expertise it has on board, with
former Iluka Resources Ltd managing director of the next programme and
Mike Folwell serving as non-executive chair-
man, while proven discoverer of tier one min- that’s what we will be targeting,”
eral sands projects in south-east Africa, Mark
Alvin, is the company’s consultant geologist. he said.

“My understanding is that south-eastern Af- “In terms of advancing pro-
rica represents a third of world mineral sands
production right now, certainly in resource jects, Madimba is the one we
base, so we are well positioned, I think, in
terms of Tanzania to feed into that and the Strandline hopes to produce a resource from its next drilling would look to push along the
markets that represent that,” Hill said.
programme at Madimba chain as quick as we can, given
“Given that we have taken this from soil
anomaly to something that definitely appears where it is on the coast of Tan-
to us as something we can put a net on and
cast a resource over is pretty exciting.” recoveries, so we’ve ticked a lot of boxes and zania.”

Strandline received further confirmation can get a rig in there that can drill deeper and Madimba is the not the sole mineral sands
of Madimba’s potential after mineral assem-
blage results from 13 samples taken from two really flesh it out.” project Strandline has in Tanzania, as it holds
holes each at Madimba (6m @ 2.31% THM
and average 23.92% slime, 6m @ 2.65% Hill said mineralisation remains open at 2,000sq km of ground, either granted or in ap-
THM, average slime 24.32%) and Madimba
East (6m @ 2.72% THM, average slime 16%, depth, with follow-up drilling planned for the plication, including Ziwani (southern Tanza-
7.5m @ 4.1% THM, average slime 14.09%).
second quarter of 2015. nia) and Kitambula, south of Base Resources
Furthermore the rutile grades averaged
10.85% and zircon 13.08% across the two The grades received to date indicate the Ltd’s Kwale project in Kenya.
prospects, with low-levels of contaminants
reported from the VHM contents. potential for a project of scale at Madimba While operating in a different jurisdiction,

“We have a nice level of valuable heavy Hill said the Base example is encouragement
minerals [VHM] within the heavy minerals.
Within those valuables we are getting high- for Strandline as it looks to move from explor-
grade zircon and zircon plus rutile numbers
averaging over 12% and some nice high tita- er to producer fast.
nium dioxide percentages in the ilmenite,” Hill
said. “That sort of model drew us to this strat-

“We are not seeing any nasties in there, no egy and seeing how quickly the likes of Base
trash and contaminants that will be a problem
in the processing route and the slimes are can go from resource to producing a product,
moderate to low, which is good. The grain size
is at a level which you would think are good for being fully funded and contracted in about

a four-year period is the economic rationale

behind what we are doing. Madimba is right

next to a port and we are careful to focus on

projects close to infrastructure,” Hill said.

The company has exclusive access to the

only major country-wide mineral sands data-

base but with prices currently low, the value

of such a database will only be known in time.

Strandline’s view is that prices are “bounc-

ing along the bottom”, however, zircon supply

issues are on the horizon, particularly when

the gates at Iluka’s Jacinth-Ambrosia mine

are eventually shut.

Just where the next major deposit comes

from could be the question answered by

Strandline in Tanzania.

“The reason why we focused on Tanzania

was because we saw a big gap and a lack of

deposits and the only reason why that was the

case was because the work hadn’t been done.

We have been operating in Tanzania for about

4-5 years and we have had no issues in terms

of exploring and advancing programmes, so

we are all positive about it all,” Hill said.

All of Strandline’s mineral sands projects are within – Mark Andrews
20km of the Tanzanian coast line

PAGE 70 APRIL 2015 AUSTRALIA’S PAYDIRT

AFRICA

Robust result for Mankarga 5

West African Resources Ltd (WAF) has ject funded and into produc- are too big in this market and I think
wasted no time getting to work on a BFS
for the Mankarga 5 project in Burkina Faso tion, even at the current gold if you try and make the project big-
following the release of robust PFS on the
$US46.6 million gold asset. price,” Hyde told Paydirt. ger, you end up incurring more capital

The study found the project could support “Right now we’re focused costs and it makes it more and more
a 69,000 ozpa oxide heap leach operation
for the first three years at C1 cash costs of on getting the BFS com- difficult to meet those ratios between
$US428/oz and all-in site costs of $US538/oz.
pleted and getting the pro- debt and equity.”
The remaining four years of mine life would
operate at 49,000 ozpa for C1 cash costs of ject funded. We’ve already WAF was working on an environ-
$US635/oz and all-in site costs of $US749/oz.
been in discussions with the mental social impact assessment
Strong early cash flow would see payback
occur with 14 months of first production and banks and project financiers (ESIA) at the time of print and expects
a pre-tax NPV of $US117 million with an IRR
of 63%. and we’re looking to con- that process to be completed late in

Work has already started on a BFS, includ- clude those discussions by the first half. Once that is finalised, the
ing a geophysical drilling programme, and the
company expects to have that finalised within the middle of the year.” Richard Hyde company is eligible to apply for an en-
six months before launching first production WAF plans to start an vironmental licence as well as a mining
in early 2016.
aircore drilling programme licence.
WAF managing director Richard Hyde said
the PFS had delivered the robust result his at Mankarga 5 this month to convert some of Hyde said the company was bracing for
company was expecting, particularly over the
first three years. the 15.2mt @ 1.6 g/t gold for 791,000oz of in- potential application delays around October

“We’ve got very low cash costs and what ferred resource to indicated status. when Burkina Faso goes to the polls to elect
that does for the project is show we’re going to
get some serious interest from project lenders The PFS increased the project’s inferred a new president following last year’s popular
and banks which will allow us to get the pro-
resources by 39% and indicated resources by uprising.

57% to 8.4mt @ 1.8 g/t gold for 495,000oz As for the gold market, Hyde said he was

from scoping study estimates. only worrying about what he could control.

Hyde said his company would continue “I’m a geologist so I’m not an expert on the

to look at ways to reduce the overall capital gold price, but what we can do is make our

cost of the project it acquired from TSX-listed project as economic as possible by focusing

Channel Resources Ltd in January 2014. on costs and looking to reduce our capex fur-

“If we can keep the capex below $US50 ther,” Hyde said.

million, the whole funding scenario works for – Michael Washbourne
the company,” Hyde said.

“It can be quite tricky to fund projects that

AUSTRALIA’S PAYDIRT APRIL 2015 PAGE 71

REGIONAL ROUNDUP LATIN AMERICA

Chilean Court backs Barrick
over Pascua-Lama

Chile’s Environmental Court
has ruled that Barrick Gold
Corp’s halted Pascua-Lama

gold and silver project has not

damaged glaciers within its

“area of influence,” the Toron-

to-based gold producer said.

“Preserving and protecting

glaciers from harm is essen-

tial to the work we do every

day at Pascua-Lama. That is

why Barrick worked with lead-

ing independent experts and

glaciologists to develop and

implement one of the most

rigorous glacier monitoring

programmes anywhere in the

world. We are pleased that

the court has confirmed what

the technical and scientific

evidence demonstrates, that

these ice bodies have not

been damaged by activities

at the Pascua-Lama project,”

Eduardo Flores, Barrick’s ex-

ecutive director for Chile, said

in a statement on March 23.

Barrick, the world’s biggest

gold producer, said in Octo- An environmental court has found that Barrick’s Pascua-Lama project has not damaged glaciers near the project

ber 2013 that it was stopping

construction of the multibillion dollar project Barrick said its Pascua-Lama team was and covered three glaciers and the valley into

that had been plagued by lower bullion prices, working on resolving the project’s outstand- which their waters flow, according to a state-

permitting issues, political opposition and ing legal and regulatory hurdles, completing ment from the court in Santiago.

cost overruns. a new execution plan for the remaining con- – Nicole Mordant, Rosalba O’Brien,
It stressed at the time, however, that the struction activities and minimising project Reuters
costs.
decision to stop development was not the end

of the road and that it would resume construc- The claims against Barrick were brought

tion when conditions warrant. by local farmers and environmental groups

Zijin not phased by Peru drama

China’s Zijin Mining Group Co. Ltd is in talks The Rio Blanco copper project in northern Zijin said its net profit rose 10.3% to 2.3 bil-
to buy gold and copper mining assets Peru was struck by bouts of violence before lion yuan in 2014.
abroad and expects to finalise some acqui- and after it was bought in 2007 by Zijin.
sitions this year as well as complete the Rio The company mined 33.727t of gold in
Blanco project in Peru, its chairman said in The problems it has faced in the Peru pro- ores, 138,462t of copper in ores and 96,261t
March. ject would not affect the company’s appetite of zinc in ores in 2014.
for new investment, Chen told Reuters.
Chen Jinghe said that current market con- Zijin’s metal production reached 125.197t
ditions were favourable for acquisitions but Zijin, China’s leading gold producer and a of gold, 235,150t of refined copper cathode,
did not identify targets. medium-sized refined copper producer, ex- 204,223t of zinc ingots and 146t of silver in
pects global gold prices and copper prices to 2014.
“Some (talks) have almost reached matu- fluctuate around current levels this year as a
rity...this year there will be some important re- strong US dollar weighs on prices, Chen said. In 2015, metal production is targeted at 117t
sults,” Chen told a news conference in Hong of gold, 250,000t of refined copper cathode,
Kong after presenting the company’s 2014 Copper prices on the London Metal Ex- 200,000t of zinc ingots and 169t of silver.
earnings. change have fallen more than 3% so far this
year to trade at $US6,066/t in late March, hav- – Polly Yam, Reuters
Zijin was also likely to conclude develop- ing dropped 14% in 2014.
ment of its stalled copper mine project in Peru
this year after facing opposition from the local Spot gold has dropped more than 1% this
community, Chen said. year and was trading at $US1,182/oz on
March 23.

PAGE 72 APRIL 2015 AUSTRALIA’S PAYDIRT

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REGIONAL ROUNDUP

AusQuest goes big in Peru

On the surface, it appeared 2014 was a Peruvian majors Zahena and Southern Copper are expected to drill a combined total
quiet year for AusQuest Ltd. of 46,000m on AusQuest’s projects in the next 12-18 months
However, the vain in which it has started
this year would suggest otherwise. months. AusQuest is free-carried throughout or equity in your projects and we have had
these programmes, with Zahena entitled to history of doing it in our projects and we will
In a dull market for explorers, AusQuest 70% of both projects by drilling 50,000m and continue to do so. At this point in time, it is
has landed some big fish which will allow it making total option payments of $US7 million. very much the right way to go for us, espe-
to carry out significant exploration activities in cially with the large-scale targets that we are
Peru in the next 12-18 months. Meanwhile, at the Lana JV, Southern is dealing with. For copper porphyries in Peru,
obliged to conduct 5,000m of RC or diamond you need fairly deep pockets, particularly in
The company, led by managing director drilling within 12 months or spend $US1 mil- the initial phases of testing, so we think it is
Graeme Drew, has entered three JVs with Pe- lion on exploration, while drilling a further the way to go.”
ruvian majors worth $34 million. 15,000m over a three-year period and making
payments of $US3 million will see Southern Drew said the bulk of drilling in Peru would
“There was a lot of work going on sorting fulfil its commitment to earn 70%. take place in the second half of 2015 but the
our JVs and getting other people to spend work is already under way on another JV in
money. The placement we have just put away “They are key players in Peru, they are min- Burkina Faso, West Africa. There, AusQuest
attracted a high degree of interest and was ers in Peru and we are in their backyard. We is locked in the Banfora gold JV with Semafo
very positive. We are looking forward to a lot think it is a good partnership and I think they subsidiary, Burkinor, which is expected to
of activity and hopefully we turn the corner will do the right thing by us. They have a his- spend about $7 million on exploration, includ-
and this year is a good year for us,” Drew told tory of doing a lot of drilling. They are a very ing up to 39,000m RC drilling and 150,000m
Paydirt. pragmatic group so the drill bit will tell the sto- auger drilling.
ry. It is difficult drilling under cover and we are
In essence, by courting major copper play- not expecting every hole to be successful but Having the luxury of other parties spending
ers Zahena SAC and Southern Peru Copper we expect some of them to be and the sooner their cash on exploration opens the way for
Corporation Sucurs del Peru, AusQuest has we get to that, the better,” Drew said. AusQuest to focus on its 100%-owned nick-
enhanced its prospects of being linked to a el tenements in Western Australia’s Fraser
major discovery in Peru. JVs, he said, remained the preferred model Range.
for AusQuest.
While the agreements with Zahena and To do so, the company hopes to lock away
Southern have been locked away, AusQuest “You either trade equity in the company
retains 100% interest in other tenements in
Peru which could also become subject to
farm-in arrangements in 2015.

“The plan is to get us into a position where
that is a possibility,” Drew said.

“The plan is to do enough surface work
to identify quality targets that we take to drill
permitting and possibly take the project to
majors like Zahena, Southern or others that
may be interested. There is a bit of work to be
done but we are already confident that there
is at least two that we can take to drill permit-
ting now and we are expecting another two
to come on stream following a bit more field
work.”

Drew hoped to have up to 8-10 targets test-
ed by other companies: “Then the numbers
game is starting to stack up in our favour; the
more of these things you test, the more likeli-
hood you have of success,” he said.

AusQuest is no stranger in taking its pro-
jects to the big boys, with US company Cliffs
Natural Resources Inc previously partnering
with the company in Peru.

However, Cliffs’ troubles in the past few
years have seen it back away from AusQuest,
leaving the door ajar for others.

Zahena and Southern have filled some of
the void for AusQuest, with the companies
acquiring the opportunity to earn up to 70%
in four projects (subject to three JV agree-
ments) for a series of cash option payments
and exploration expenditure estimated at a
combined $34 million.

The two JVs signed by Zahena allow it to
drill large-scale porphyry copper-gold targets
near Ilo in southern Peru.

Initial commitments from Zahena include
5,000m of RC or diamond drilling at Cardonal
within 18 months and a minimum of 10,000m
(RC or diamond) at Puite-Colorada within 20

PAGE 74 APRIL 2015 AUSTRALIA’S PAYDIRT

LATIN AMERICA

a $3 million capital raising soon, with half of AusQuest has pulled off a major coup by signing JVs worth about $34 million for
the proceeds earmarked for nickel-copper ex- its Peruvian copper projects
ploration in the Fraser Range and the remain-
der for drill permitting in Peru. With a full project pipeline in regions “We are a complex company but we have
many consider exploration hotspots – Latin three main areas that we are working on and
AusQuest has been watching the progress America, West Africa and the Fraser Range each one of them could, at any time, show us
made by Mt Ridley Mines Ltd at its namesake – AusQuest isn’t feeling any added pressure the goods. Once that happens the company
project in the Fraser Range. to unearth the next world-class deposit but is gets transformed and the board will look at
rather excited by being in the best possible how we move forward. I don’t think there is
AusQuest has had its Gibson Soak tene- position to do so. more pressure there; I think it is great to be
ment, south of Mt Ridley, granted in Sep- in places where there is greater probability
tember 2014 and has since upgraded the Fast forward four years, with a potential $41 of success and we certainly think we have
project’s potential on the back of Mt Ridley’s million for 110,000m drilled and funded by JV a chance in Burkina Faso, Peru and in the
results, including reports of olivine-bearing partners and assuming exploration success, Fraser Range.”
mafic-ultramafic intrusions with disseminated which project will AusQuest will be looking to
nickel and copper sulphides at the prospect. make its flagship? – Mark Andrews

Magnetic and gravity data comparisons “You can take your pick really,” Drew said.
over Gibson Soak and Mt Ridley suggest con-
tinuity of regional structures across the tene-
ment boundaries.

Based on Mt Ridley’s success, AusQuest is
ramping up its exploration efforts and is plan-
ning aircore drilling and/or ground EM surveys
this year at Gibson Soak, where AusQuest
may seek a partner in time.

The company has 2,300sq km of ground
in the Fraser Range, about 180km south of
Sirius Resources NL’s Nova deposit.

“There are companies working on projects
in adjacent titles which can impact on our val-
ue. You learn a lot by results in the area. At Mt
Ridley for example, if they drill and have suc-
cess they will announce it and we can learn
from that and they can learn from what we do.
The more companies spending money, the
better; it gives you a better chance of learn-
ing more which means you have greater dis-
cretionary ability in defining what targets you
should be testing. Hopefully, that means less
money going into success rather than drilling
anywhere and everywhere,” Drew said.

Ecuador, seeking investment,
buffs up mining sector

Rebranding itself as a mining-friendly ju- at this year’s show, which included a speech Odin Mining and Exploration, whose big-
risdiction, Ecuador has high hopes that by the minister of mining and project presen- gest investor is Canadian mining magnate
incentives and tax benefits will polish its tar- tations. Ross Beaty, is exploring for copper and gold
nished image and attract $US5 billion worth of in southern Ecuador.
investment over the next five years, a senior While a handful of foreign miners have ven-
minister told Reuters. tured into Ecuador in the past decade, invest- Still, the country faces hurdles.
ment has been minimal. Ecuador’s mining projects face tax rates
The small Andean nation believes that in- that are among the highest of any in the re-
centives passed in October will attract foreign The country’s reputation took a hit in 2013, gion, with the Government’s take around
miners to help develop its gold and copper when large Canadian-based producer Kin- 51%, according to a study by consulting group
riches. They include 30-year investment con- ross Gold Inc pulled out of the largest gold Wood Mackenzie last June.
tracts that promise tax stability, and acceler- project, Fruta del Norte, saying the Govern- While the country has some “wonderful
ated depreciation. ment refused to compromise on a 70% tax. mineralisations,” it remains to be seen if Ecua-
dor has learned from past mistakes, accord-
“We have made the decision that mining When Kinross sold the high-grade venture ing to John Gravelle, global mining leader at
constitutes a central axis of our development last October, to a company belonging to the consultancy PwC.
plans,” Minister of Strategic Sectors, Rafael well-regarded Lundin family, the deal sparked “You have to make sure that the price is
Poveda, said. Poveda’s portfolio also includes some optimism even though the $US240 mil- right to justify what the geopolitical risk is,”
Ecuador’s mining ministry. lion price tag was a fraction of the $US1.2 bil- Gravelle said.
lion Kinross paid in 2008.
“We want mining to constitute the axis – Nicole Mordant and Susan Taylor,
which will allow us to improve living conditions “I went down and met them (the Govern- Reuters
for communities and 15 million Ecuadorians,” ment) before I did the deal. I got a very strong
he said at Toronto’s PDAC in March. feeling that they are committed to getting the
mining sector going finally,” Lundin Gold Inc
The country sponsored “Ecuadorian Day” chairman Lukas Lundin said.

AUSTRALIA’S PAYDIRT APRIL 2015 PAGE 75

REGIONAL ROUNDUP ASIA

Money comes for Gulf Minerals

New York-based Sigur
Holdings Inc has com-
mitted $US20 million to Gulf

Minerals Corp Ltd’s smelt-

ing business in Indonesia.

Sigur entered a term

sheet covering a commit-

ted equity funding agree-

ment to provide $US20

million via a 10% annual

interest, four-year senior

credit facility and preferred

shares.

Gulf executive technical

director Bruce Morrin told

Paydirt it was a watershed

moment for the start-up of

manganese smelter and

furnace operations in West

Timor.

Sigur Holdings, a sub-

sidiary of private South Af-

rican group Sigur Capital,

has shown its faith in Gulf’s

project model by fronting

up with a $500,000 invest-

ment in the company. A total of eight smelting plants will be built by Gulf. Each plant is estimated to produce revenues of $US25 million

Final funding arrange-

ments are subject to due diligence by both be in the order of $US50 million growing each “They have developed a one-stop shop,”

parties. year by an additional $US50 million up to a to- Morrin said.

“The arrangements we have with Sigur we tal of $US200 million at full production. Basi- “This, plus us having dealt with techni-

are very pleased with, simply because as cally each furnace will produce about $US25 cal risks [at project level] and with our back-

everybody knows it is very difficult for a small million of revenue,” Morrin said. ground, having Sigur further reduces the fi-

company to get significant funding support Gulf plans to establish facilities, costing nancial risks.”

within Australia,” Morrin said. an estimated $5.6 million per furnace, in the Operationally, Gulf will implement proven

“To have a substantial international group West Timor capital of Kupang and expects to South African technology at its furnaces,

such as Sigur step up to the mark and offer to produce 78% ferromanganese with the bulk while at board level there is more than 250

become part of our project and to facilitate ini- of the ore to be sourced from local mining years of experience, including Michael Kier-

tial funding and through a possible listing on groups in West and East Timor. nan as the president of Gulf’s Indonesian sub-

NASDAQ to facilitate potential future funding, Gulf’s operations shall provide direct and sidiary, in the manganese game.

it really de-risks the project.” indirect employment for up to 5,000 people in With a wealth of manganese experience,

Sigur’s preference is for a NASDAQ listing, West Timor, one of the poorest areas in In- Gulf has divested its early stage gold interests

however, with about 30% of primary invest- donesia where unemployment is about 80%. in Queensland and Western Australia, while it

ment into Indonesia coming from Singapore, “There are several islands close to West has also let go its copper stake in the North-

an SGX listing is also a possibility. Timor which are prolific in manganese. We ern Territory.

“I think everyone has intentions of getting plan to have 30% of ore imported from over- “When the current directors took control

it done quickly [listing] but I think in practical seas into the port of Kupang to blend with the of the company, it was a little bit unfocused,”

terms it will probably take at least a six-month high-grade Indonesian ore. At full production Morrin said.

period. If NASDAQ is decided on then that is the requirement will be 400,000 tpa manga- “The directors are fully experienced one

where we’ll go but we also have Singapore as nese, so we project that three-quarters of that way or another in manganese. Historically it

a backstop if required,” Morrin said. will come from within Indonesia and 30% from has been a very low key commodity until re-

Gulf’s plan is to source high grade manga- areas in and around the ASEAN region,” Mor- cently when people have become aware of

nese ore and convert it into a premium alloy. rin said. manganese as a significant cash producer.

“This is in-line with the Government’s re- Annual ferromanganese exports – des- Three of our directors were associated with

quest/desire to value-add their ore, not just tined for the globe’s major steel producers, developing Consolidated Minerals in WA,

export it but value-add,” Morrin said. including China – will start at about 60,000 which was a significant cash generator and

Indonesia’s ban on the export of unpro- tpa, increasing by 30,000 tpa up to a total of the directors consider that the Indonesian op-

cessed ore came into effect in January 2014 180,000 tpa in 2018. portunity will also be a cash producer.”

and has increased the demand for smelting Confirmation of Sigur’s commitment will – Mark Andrews
businesses in the country. see these targets hit, particularly with the

Gulf initially plans to build two furnaces and Joko Widodo Government keen to attract

over a four-year period bring eight into opera- more foreign investment to Indonesia.

tion. To encourage international mining houses

The first two will be built this year and are to participate in the country’s resources sec-

expected to come on-stream in January 2016. tor, the Government has combined the activi-

“Based on current pricing, first-year in- ties of 22 ministries into one area to facilitate

comes once we start producing [in 2016] will the fast-tracking of permitting and licensing.

PAGE 76 APRIL 2015 AUSTRALIA’S PAYDIRT

REGIONAL ROUNDUP EUROPE

Talga steps up graphene process

Talga Resources Ltd continues to defy wider Talga Resources will build a demonstration plant to discovered, shows electrical and thermal
market difficulties, most recently by com- prove the viability of producing graphene from its conductivity greater than copper at a fraction
pleting a $5.5 million placement. Vittangi graphite project in Sweden of the weight and absorbs only 2.3% of the
light passing through it. These properties are
Talga – intent on developing the world’s first The company said the decision to estab- expected to see graphene revolutionise many
commercial graphene mine at its Vittangi pro- lish the plant in Germany was taken following industries.
ject in Sweden – announced in March that it “considerable interest” in the company from
had placed 13.75 million shares at 40c/share graphene technologists and potential end- The possibilities for graphene-based ap-
to Australian and international institutions and users in Europe’s largest economy. plications are endless and are limited only
sophisticated investors. by the imagination. It has many potential
Graphene is being widely tipped to be the applications which include mechanical rein-
Talga will use the funds generated from the 21st Century’s most revolutionary material. forcement, transparent conductive materials,
placement to continue work on its graphene It is the thinnest and strongest material ever flexible and printable electronics, super-ca-
commercialisation strategy. pacitors, thermoelectric materials and ther-
mal management materials.
The company announced last year that it
had identified a unique process to liberate Talga managing director Mark Thompson
large quantities of graphite and graphene di- said the demonstration plant represented the
rect from the graphitic ore at Vittangi. next stage of development for the company’s
graphene ambitions.
The mining model and economics for Vit-
tangi were established in an October 2014 “The decision to proceed with a demonstra-
scoping study which confirmed a pre-tax NPV tion plant followed Talga’s success in moving
of $490 million for a project with a capex of its high-grade Swedish graphite ores from
$29 million. laboratory to bench top scale and replicating
graphene process results in multiple coun-
With the mining project seemingly in hand, tries with several parties,” he said.
Talga has recently turned to fine-tuning the
processing model and has spent the last six “The next stage of development will ex-
months building its credentials in Europe’s pand to a locked-cycle demonstration scale
fast-developing graphene development sec- plant able to produce meaningful quantities of
tor. graphene and by-product graphite for larger
customer samples and/or material graphene
On March 3, it announced it would build a sales in 2015. Pending final design, the new
graphene demonstration plant capable of pro- German plant has the potential to be one of
ducing 100-200 tpa of graphene at a cost of the largest graphene production facilities in
$1 million. The plant, to be built in the second Europe.”
half of this year, will be located in central Ger-
many.

Wolf approved to operate 24/7

Wolf Minerals Ltd has ficiently working steady state
been granted approval
to temporarily increase the and we can schedule mainte-
operating hours of the prima-
ry crusher at the Hemerdon nance periods when we need
tungsten and tin project in
Devon, England. them rather than when the

The Devon County Council plant has been turned off as
will allow the ASX-listed com-
pany to operate the primary part of a planning permission
crusher on the Drakelands
open pit mine for 24 hours a requirement.
day, seven days a week on a
six-month trial. “This change will, if perma-

Previously the primary nently approved, provide us
crusher was restricted to run-
ning for only five and a half with over 27% more operat-
days a week.
ing time, giving us the option
The trial is designed to give
Wolf an opportunity to demonstrate it can to produce significant ad-
operate and comply with the required noise
limits at all times of the day and night. If suc- ditional tonnage of tungsten
cessful, the company will apply to make the
change permanent. and tin concentrates with no

Construction of the Drakelands mine is additional capital expenditure
nearing completion and the trial will begin as
soon as the first ore is crushed. requirements. It also pro-

Wolf is approved to operate the primary crusher at Drakelands vides the opportunity to lower
without interruption for the next six months operating costs, pushing the
operation further down the

Wolf managing director Russell Clark wel- cost curve of tungsten production.”

comed the chance to commission the plant Clark said the project remained on sched-

and ramp up production without interruption. ule for handover of the plant in August and his

“Commissioning is always challenging and company was fully funded through to positive

it will be considerably easier if we don’t need cash flow.

to schedule downtime every weekend for a

day and a half,” Clark said.

“The processing plant will run far more ef-

AUSTRALIA’S PAYDIRT APRIL 2015 PAGE 77

SIGNED, SEALED AND DELIVERED

Mineral Technologies has won the engineering contract for King Island ship of the Aboriginal Foundation of South
Scheelite’s Dolphin project in Tasmania Australia and McMahon Services to provide
contracting services to the mining and civil
Contractor makes a It also includes the erection of structural construction industry.
splash at Dolphin steel, mechanical equipment and piping,
electrical and instrumentation works, and the Como to build Kupang
King Island Scheelite Ltd has appointed provision of crane services. smelter
Mineral Technologies Pty Ltd, a member of
the Downer Group, as engineering contractor Decmil is currently working on three port, Como Engineers will manage the construc-
for the next stage of development at the Dol- rail and fuel infrastructure projects at Roy Hill. tion of the Kupang smelter project for Gulf
phin project in Tasmania. Minerals Corp Ltd.
TNG teams up with NT
The contract covers the project “definition leading contractors XRAM Technologies Pty Ltd has been
phase” during which the process flow sheet, nominated as the pyrometallurgical engineer
design parameters and execution methodol- TNG Ltd has signed a MoU with McMahon on behalf of Como.
ogy will be finalised. Services Australia Pty Ltd and Intract Austral-
ia Ltd for civil engineering and construction Major site work is due to start on July 1
The definition phase will also include devel- work at the Mount Peake vanadium-titanium- ahead of first production of a high carbon
opment of design and project documentation iron project in the Northern Territory. ferro-manganese alloy in July 2016.
for execution of a fixed price contract. The
company hopes to conclude this contract by The MoU covers all aspects of the civil en- Santos partners up with
the end of the month. gineering and construction work, including Alcoa
construction of the mine, camp, airport, rail-
More work for Decmil way siding and mine haul road. Santos Ltd has entered into a contract to
at Roy Hill supply natural gas to Alcoa Australia Ltd from
All parties have begun a 90-day due dili- 2018.
Decmil Group Ltd has been awarded about gence period and, subject to satisfactory com-
$40 million of additional work at the Roy Hill pletion, may enter into binding agreements for The contract involves the supply of 82PJ of
iron ore project in the Pilbara region of West- all civil engineering and construction require- gas to Alcoa over an initial term of five years
ern Australia. ments related to the development of Mount from the John Brookes field in the offshore
Peake; potential funding or investment in TNG, Carnarvon Basin.
The new contract, which will be undertaken either on a project or corporate basis; and any
for Roy Hill EPC contractor Samsung C&T, in- other mutually beneficial arrangements. The pending arrangement also allows for
cludes various underground services such as two five-year extension options by mutual
installation of conduits, pits, fire-water pipe- A DFS is scheduled to be completed by agreement.
work and HV cable. mid-2015. Construction is slated for early
2016, followed by first production in 2017. WorleyParsons taps
into Geelong refinery
Intract is a business formed by the partner-
WorleyParsons Ltd has been awarded the
contract to provide project management and
engineering services at Viva Energy Austral-
ia’s Geelong refinery.

The contract is for three years, plus two
one-year renewal options, and covers the pro-
vision of project delivery services associated
with the sustaining capital which Viva plans
to invest in operational support and improve-
ments.

Viva is the operator of the Geelong refinery
following Vitol Group’s $2.9 billion acquisition
of Shell’s downstream business, excluding
aviation, in 2014.

Decmil’s work profile at Roy Hill has increased following the award of a new $40 million contract

PAGE 78 APRIL 2015 AUSTRALIA’S PAYDIRT












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