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March 2017 VOLUME 1. ISSUE 247 $11.95

paydirt

front and back cover
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Gem town:

Perth back on the diamond map

• Full Mining Indaba review ISSN 1445-3436
• Site visits to Namibia and South Africa 02

• Spotlight on potash and phosphate 9 771445 343007



CONTENTS

PAYDIRT (ISSN 1445-3436) 8 OPINION 20
Published by Columnist Keith Goode looks at Carbine 28
Paydirt Media Pty Ltd. Resources Ltd’s Mount Morgan tailings re- 68
A.C.N. 063 985 133 treatment project in Queensland and finds
an asset capable of producing a variety of
Head Office: revenue streams which could also clean
Suite 9, 1297 Hay St, West Perth up the local river system
Western Australia 6005
P.O. Box 1589, West Perth 20 COVER
Western Australia 6872 There was a time – in the not too distant
Phone: (+61 8) 9321 0355 past – when Australia was a world dia-
Facsimile: (+61 8) 9321 0426 mond hub and although those days may
[email protected] be long gone, there are signs the gem-
www.paydirt.com.au stone is ready to make a revival in Aus-
tralia. The country is chair of the Kimberley
Editorial: Process in 2017 and in Lucapa Diamond
Editor: Dominic Piper Company Ltd, the ASX has one of the
Deputy editor: Mark Andrews most intriguing junior diamond companies
Journalists: Michael Washbourne, in the world
Jonathon Daly
Art director: Marian Noonan 28 INDABA REVIEW
Contributors: Paydirt travelled to Cape Town for the an-
Keith Goode (Sydney), Brendan Ryan nual Mining Indaba more in hope than ex-
(Johannesburg), Ross Louthean pectation but upon arrival, it found a sector
with a new bounce in its step. Dominic
Advertising: Piper, Mark Andrews and Michael Wash-
Advertising manager: Richa Fuller bourne were in the Mother City to provide
Subscriptions: Mitchelle Matambo comprehensive coverage
Phone: (+61 8) 9321 0355
Facsimile: (+61 8) 9321 0426 64 BANNERMAN
Times have been tough for the uranium
Pre-press and printing: sector, which makes Bannerman Resourc-
Vanguard Press 26 John St, es Ltd’s resilience all the more impressive.
Northbridge WA 6003 Michael Washbourne visited the com-
Member of: pany’s Etango project in Namibia to find
out how the company was preparing for
Paydirt Media a desperately needed uplift in yellowcake
Executive chairman: Bill Repard prices
Finance manager: Giovanny Jefferson
Accounts/administration: 68 ORION GOLD
Heather Melling There are not many ASX-listed companies
Conferences: Melita Fogarty, prepared to brave South Africa’s laby-
Namukale Nakazwe-Msiska, rinthine regulatory and political system,
Christine Oelschlaeger however, when they see the project the Er-
roll Smart-Dennis Waddell-led Orion Gold
NL has got its hands on, a number of them
may start reconsidering the country

Cover image: Lucapa Diamond 74 FERTILISERS
managing director Stephen Wetherall Potash and phosphate are notoriously
hard commodities to analyse but with
Member of: world population figures continuing to
Australia-Africa Minerals & Energy Group explode and available arable land falling,
fertiliser products are going to be key to
Registered by Australia Post PP 643938/0071. 21st Century development. Paydirt takes a
No pages or articles in this publication may be look at those ASX-listed companies build-
reproduced in any form without the consent of ing their capabilities in the sector
the publisher. This includes photographs either
taken by Paydirt Media staff or provided by other
parties

Let the risk times roll

I’ve said it before but that doesn’t make it less The excess cash sloshing around the boardrooms of majors
true: it is very easy to come back from a week and mid-tiers may have other added benefits for the junior space.

in Cape Town for the Mining Indaba full of op- It is now accepted that the industry did a fair job of cutting

timism, such is the beauty of the Mother City costs – once companies finally accepted that they must – but

and the hospitality of its people. in most commodities the cuts have been so severe that the

However, this year there was quite development pipeline has almost completely dried up.

obviously more fuelling the opti- Nowhere is this more obvious than in the copper and gold

mism than a few glasses of Stel- sectors.

lenbosch pinotage in Camps Bay. For two decades, the copper industry has been obsessed with

A glance at share prices indicate finding new porphyry systems; the bulk-tonnage, low-grade ore-

the glow which I usually put down bodies deemed genuine Tier 1 assets. The problem is that find-

to the Indaba festivities is being ing and developing such deposits is expensive and takes time.

shared by the wider market. When the copper spot price began its descent and it came time

In review, it is apparent the bottom of the commodities cy- for the majors to eliminate costs, exploration was one of the first

cle occurred in January 2016. Since that time, the ASX/S&P budget items on the chopping block. As a result, the porphyry

200 Resources Index has shown a 75% increase while the ASX exploration and development projects – which in most cases

Small Cap Resources Index is up 85% in the same period. take more than 15 years from discovery to production – were

In the junior space in particular, the change in investor senti- suspended and now, just as the outlook for copper improves, the

ment has been remarkable. For the last three years, companies copper development pipeline has almost completely dried up.

have been releasing scoping and feasibility studies with a cer- Gold doesn’t suffer from the same supply/demand dynamics

tain amount of dread; fearful that the market will punish them. as copper but exploration by the majors was similarly smashed,

Instead of being viewed as the catalyst for new investment and perhaps more so than in copper, during the industry’s cost-cut-

a springboard to development, feasibility studies were acting as ting phase. Now, the gold development pipeline is in worse shape

an impenetrable wall where the fully costed capex numbers only than any other commodity.

“made to highlight the lack of project funding available to juniors. The net result is that majors in both metals are desperately try-

However, in the last four ing to think of ways to swiftly

months, the situation has Despite telling shareholders overcome the paucity of ex-
they have learnt from their
reversed. Following the re- ploration over the last five
lease of a DFS for its Lindi years.
Jumbo graphite project on
I was taken by how many

the opening morning of Min- mistakes of the last boom, majors and exploration and business
ing Indaba, Walkabout Re- mid-tiers are conscious of the need to development teams were on
sources Ltd saw its shares the ground at Mining Indaba,

rise from 9c to 11.5c in the restock the pipeline and the only way scouring the booths, pres-
space of 48 hours. to do so is to go out and buy assets. entations and hotel lobbies
looking for a project capable
The numbers in the Walk-

about DFS pointed to a ro- of filling their barren develop-

bust project but no more so ment pipelines.

than those of a dozen or so juniors who saw their share price fall The flood of cash from the recent commodity price swing will

following the release of studies in 2015 and 2016. intensify this process. Despite telling shareholders they have

Neither can the market appreciation for the Walkabout DFS learnt from their mistakes of the last boom, majors and mid-

be credited to commodity prices for graphite prices have strug- tiers are conscious of the need to restock the pipeline and the

gled to keep up with forecasts in the last three years. only way to do so is to go out and buy assets.

I would argue the change in sentiment comes from the realisa- Such attitudes will be as important to the junior sector as

tion in the market that money is once again flowing through the more welcoming debt and equity markets are.

sector with both new equity players and alternative debt funding

providers actively seeking to boost their resources portfolios.

Instead of highlighting how difficult it would be to raise the re-

quired capital, it appears the market has recognised the Walka-

bout DFS as providing a clear pathway to development and will

now watch the company’s funding discussions keenly.

The flurry of increased profits in the recent half-year reports

will also have a flow-on effect for the junior sector. Companies

and shareholders made more money than expected in the first

half of FY2017 with the likes of Fortescue Metals Group Ltd

($1.2 billion profit), South32 Ltd ($620 million), Evolution Mining

Ltd ($136.3 million) and Northern Star Resources Ltd ($104.6

million) all registering major turnarounds.

As thoughts turn to dividends, shareholders will hopefully be

keen to redeploy their unexpected windfall back into riskier plays [email protected] @DominicPiper
which should be a boon for juniors.

PAGE 4 MARCH 2017 AUSTRALIA’S PAYDIRT

NEWS

Fortescue tops the class

Mining companies ap- to be included in the study.
proached the reporting Regis views McPhillamy’s as

season full of vigour thanks a medium-term development

to a turnaround in commod- proposition, so despite a good

ity prices. outlook for gold, there are few

In general, many of the pre-development opportunities

half year FY2017 results catching the eye of investors at

presented at the time of the moment with Dacian Gold

print further confirmed that Ltd, Gascoyne Resources Ltd

the much-discussed “nu- and West African Resources

clear winter” for resources Ltd among the few to have

was starting to thaw, as near-term gold producing as-

companies prepare for sets.

growth and expansion over “These are all the pre-devel-

balance sheet restructures opment projects, this is where

and production curtailment. the sweet spot for investment

While players in the gold is; get in before they build it,”

sector continue to set the Wilson said of the aforemen-

pace, there were few play- tioned companies.

ers industry-wide to hand He said cashed up gold pro-

in a report card as first-rate ducers like Northern Star, Evo-

as Fortescue Metals Group lution and St Barbara would

Ltd. It’s hard for Fortescue chief executive Nev Power not to smile at the look to organic growth for the
Net profit after tax of moment. Fortescue shipped 86.1mt iron ore in the first half of FY2017, time being, with greenfields
and regional exploration to fol-
$US1.2 billion and EBIT- with guidance of 165-170mt at costs of $US12-13/wmt in sight low; but not quick enough.
DA of $US2.6 billion were

some of the highlights for the first half of the Pilbara in 2017; BHP Billiton Ltd to “The greenfields and regional explora-

FY2017, which also included C1 costs of produce 265-275mt (100% basis) in tion stuff really has to ramp up and there

$US13.06/wmt and debt reduction total- FY2017, while further low cost supply are only a few guys doing that stuff, i.e.

ling $US4 billion. from Roy Hill and the ramping up of pro- Gold Road [Resources Ltd],” Wilson said.

Argonaut Ltd mining and metals ana- duction to a nominal 90 mtpa from Vale’s “We are still yet to see that, we need to

lyst James Wilson told Paydirt it was a S11D mine in Brazil – which may take find more deposits because realistically,

sensational half year for Fortescue, un- some of the sting out of prices. Dacian, Gascoyne and West African are

derlined by its dividend strategy. “We think, that generally, the [iron ore] really the only three development pro-

“They really shot the lights out and market is oversupplied and we think that jects on the ASX of any kind of scale.

showed the rewards for keeping an eye there has to be some moderation in pric- After that there is nothing out there, we

on costs when times were tough. Fortes- es in the short term,” Wilson said. need people to go out there, explore and

cue increased the dividend from 12c/ There appears to be more bullishness find stuff.”

share to 20c/share and are actually re- in the precious metals space, particularly The lack of options in the market is

warding shareholders,” Wilson said. gold, where the likes of Regis Resources placing a high value on existing assets

“They are really turning into a financial- NL, Northern Star Resources Ltd, Evolu- which may mean M&A transactions are

ly attractive yield stock. There are a lot tion Mining Ltd and St Barbara Ltd con- difficult to do now and the appetite to in-

guys predicting strong second halves [of tinue to set the standard in Australia. vest in pre-development projects grow-

FY2017] and Fortescue could double its According to Wilson, they were all ing.

profit and produce full year results bigger standout performers in the first half of “The investment demand for these

than they have already got. Iron ore price FY2017, particularly Regis. things is really strong,” Wilson said.

is up 80% since the same time last year Regis reported gold production of “All these deals [Dacian and Gas-

and if it stays around the $US90/t mark 154,702 oz gold @ AISC of $949/oz to coyne, which Argonaut was involved in]

or goes higher, they are just printing record net profit after tax of $61 million. are getting done in a day. The money is

money. They are really optimising opera- Shareholders claimed a 7c/share divi- coming through and they are big invest-

tions for low commodity prices and when dend. ments in the market. Everybody is look-

commodity prices are high, then they are Shortly after presenting its half-year ing to support it so guys just need more

making a tonne of money.” results, Regis announced the purchase stuff to invest in and you only get that

Assuming the iron ore party contin- of the Blayney gold project – compris- through exploration, organic growth and

ues – the bulk commodity was trading ing the 501,000oz Discovery Ridge new discoveries.”

at $US87/t at the time of print – Fortes- and 595,000oz Bald Hill gold deposits – Mark Andrews
cue and its shareholders can revel in the – which is contiguous with the 2.2 moz

spotlight after a few lean years. McPhillamy’s gold project in New South

However, there is a lot of iron ore cur- Wales.

rently feeding into the market – Rio Tinto Regis is pushing McPhillamy’s towards

Ltd is expected to ship 330-340mt from a feasibility study, with Discovery Ridge

AUSTRALIA’S PAYDIRT MARCH 2017 PAGE 5

NEWS

Tin rattles hard for gold

Dacian Gold Ltd’s $110 mil- Rohan Williams Mike Dunbar
lion equity raising to finance
development of the Mt Morgans also has $150 million secured with three yet to deliver the 100,000 ozpa Dalgar-
gold project in Western Australia banks and is fully funded to build Mt Mor- anga project.
was the headline act in a busy gans which is primed to produce 1.2 moz
February for gold bugs. gold @ AISC of $1,039/oz over an initial In addition to shareholders, new do-
eight-year period. mestic and international institutional in-
Gold Mining Journal’s Ex- vestors participated in the placement in
plorer of the Year 2016 winner All regulatory which Hartleys Ltd was lead manager
had better fortunes undertaking approvals are in and Argonaut Securities co-manager.
a fully underwritten equity raising place and Dacian is
– $15.4 million institutional place- confident first gold While Gascoyne is focused on Dalga-
ment and accelerated non-re- production will be ranga, it also has the 1.1 moz Glenburgh
nounceable entitlement offer for achieved in Q1 of gold project which is also development
$94.4 million – last month than calendar year 2018. ready. Glenburgh will be funded from
it did prior to Christmas when it cash flow produced at Dalgaranga.
launched a bid to raise $148 mil- Following in Da-
lion. cian’s footsteps is Gascoyne and Dacian are examples of
the Mike Dunbar-led the type of companies with near-produc-
With that attempt stifled, Da- Gascoyne Resourc- tion assets investors are willing to back.
cian settled for a $26 million es Ltd.
placement to existing and new Meanwhile, in Brazil, Beadell Resourc-
institutional and sophisticated in- Gascoyne is de- es Ltd has been well supported in its ef-
vestors. veloping the Dalga- forts to improve operations at the Tucano
ranga gold project mine, Amapa State, north Brazil.
In addition to the latest equity raising, in WA’s Murchison
on which Macquarie Capital (Australia) region, which is Hartleys acted as lead manager and
Ltd was sole lead manager, book-runner poised for first gold sole book-runner and Cormack Securi-
and underwriter and Argonaut Securi- pour at about the ties Inc, CIBC World Markets Inc and
ties Ltd was co-lead manager, Dacian same time as Da- Canaccord Genuity Group Inc co-man-
cian. agers, in the $46 million raising through
the placement of 159 million shares and
A placement of a $5 million SPP.
$50 million at 50c/
share and $5 million The money will be used for long lead
SPP at the same items associated with design, construc-
price was issued, to tion and plant upgrades, including the
fund development ball mill at Tucano.
and exploration plus
working capital. Furthermore, with a land package cov-
ering 2,500sq km of a greenstone belt in
The placement Brazil, funds will also be spent on explo-
was heavily over- ration to add ounces into the mine plane
subscribed and now and surrounding tenements at what is
Gascoyne is in its the country’s second largest gold mine.
strongest position

PAGE 6 MARCH 2017 AUSTRALIA’S PAYDIRT

BUSH TELEGRAPH

Steenkamp to find
some Harmony

It’s a rare event when a mining com- synergistic with your existing opera-
pany chief executive puts his head
fair and square on the block so – when tions in an environment that you are
this happens, as it did at a recent Har-
mony Gold Mining Co Ltd investor familiar with and that will produce a
presentation – I feel compelled to re-
cord the event for posterity. lot more ounces.”

The man putting his head on the Not surprisingly, Steenkamp would
block was chief executive Peter
Steenkamp as he sought to re-assure have none of it: “There are a lot of
a number of sceptical analysts in the
audience that what Harmony intended good projects in PNG and we have
doing with the Hidden Valley mine
in Papua New Guinea made perfect built our brand there over the past 12
sense.
years. We have a lot of experience
Steenkamp commented: “Hidden
Valley is a very solid project. You are in PNG and want to stay and grow in
going to be very pleased with this pro-
ject.” PNG.”

In my recollection, the last gold He also explained management’s
company chief executive to “nail his
colours to the mast” like that was for- “volte face” as part of a process that
mer AngloGold Ashanti Ltd chief execu-
tive Bobby Godsell who was under fire Harmony had to go through with part-
from a similarly sceptical bunch of ana-
lysts over developments at the Obuasi ner Newcrest to ensure that Harmony
mine in Ghana.
got the best deal. The partners tried
AngloGold acquired Obuasi when it
merged with Ashanti Gold Fields to cre- to sell the mine but were not satisfied
ate AngloGold Ashanti but the mine – the
flagship operation in the Ashanti Gold with the offers received. At that point
Fields stable – proved difficult from the
outset. – after thoroughly testing the market

As the financial losses mounted and – Harmony made its pitch to buy out
the underground mining problems mul-
tiplied analysts questioned whether the Peter Steenkamp Newcrest’s stake.
mine would ever come right. Godsell’s
terse reply after being grilled at a results According to Steenkamp, Hidden
presentation was: “I stake the techni-
cal reputation of the AngloGold Ashanti kamp with effect from January 2016. In Valley did not really fit into the portfolio of
group on turning Obuasi around.”
September, Harmony did a complete 180 Tier One assets that Newcrest wanted to
Fortunately for Godsell, he was retired
and long gone by the time the axe fell degree turn on Hidden Valley, announc- own and focus on “because it was far too
and chief executive Srinivasan Venka-
takrishnan pulled the plug on Obuasi in ing it would buy out JV partner Newcrest small for them”.
2015, shutting the mine down. Obuasi
has remained on care-and-maintenance for $US1 billion plus take over responsi- “I am quite happy with this acquisition
since while AngloGold Ashanti manage-
ment attempts to figure out what future it bility for all the liabilities associated with which is a good example of when a par-
has… if any.
the mine, including environmental liabili- ticular asset fits one specific company far
So to Hidden Valley which in 2015
Harmony – then run by Graham Briggs ties. better than two companies as a whole,”
–announced was being put up for sale
because both it and partner Newcrest Harmony also announced it intended Steenkamp said. “It was a win-win for
Mining Ltd wanted out.
investing $US180 million into Hidden Val- both parties. We have something we re-
Briggs announced his retirement short-
ly thereafter and was replaced by Steen- ley to double production. Reaction from ally believe we can do well on while New-

analysts at the time was that Newcrest crest can focus on its Tier One assets.

was the clear winner in that deal, being “Hidden Valley is a project that Har-

able to “wash its hands” of Hidden Val- mony has always wanted to do on its

ley and such opinions have not changed own but the key issue was not to pay too

judging by the grilling that Steenkamp much for it.”

got from the analysts at the group’s latest So, there you have it. This is one of

presentation. three major controversial decisions that

In a nutshell, the analysts believe Har- Steenkamp has made since taking over.

mony should be investing its new positive The other two were to chop back drasti-

cash flows into its South African opera- cally on the economic life of the Kusa-

tions and not what they view as a high- salethu mine and “high grade” the opera-

risk, loss-making mine in PNG. tion over the next five years and also to

Steenkamp was even accused of hav- publicly announce Harmony’s intention

ing “money burning a hole in his pocket” of acquiring an operating mine in order to

– a reference to the profits made by the meet management’s stated objective of

group on a sizeable currency hedge plus pushing annual production to 1.5 mozpa

the revenues flowing in from the higher of gold within five years.

gold price. Brendan Ryan is a Johannesburg-based

Standard Bank analyst Adrian Ham- mining writer
mond’s assessment was that Harmony:

“was spending a lot of capital on a mine

that does not have a good history to pro-

duce 180,000oz of gold. If you look at

South Africa, there are projects that are

AUSTRALIA’S PAYDIRT MARCH 2017 PAGE 7

GOODE NEWS

Tailings retreatment:
The way of the future?

Tailings retreatment is not a new con- and deriving value from it is not new at been made at around $US60/t, because
cept and with reasonable commodity Mount Morgan. Recovering copper from no track record of grades has been es-

prices, the potential resources contained the water was applied when the mine first tablished. Pyhäsalmi has been selling its

within tailings dams are gaining greater re-opened in the late 1920s, and aided pyrite to China at around $US110/t, but

scrutiny as illustrated by some of the re- the finance of the open-cut over the origi- this may be related to a historic long-term

cent articles in John Chadwick’s Interna- nal flooded underground mine. And per- contract.

tional Mining. haps that is where the idea and concept The Pyhäsalmi mine’s pyrite orebody

More than one company has looked at of copper recovery from the water was (with copper and zinc by-product cred-

trying to treat the tailings at Queensland’s first considered. its) is coming to the end and is expected

Mount Morgan gold-copper mine that The bulk of the orebody is pyrite, but to close in 2019. Currently, it produces

prematurely closed in July 1990 when not just any pyrite, instead it is capable 800,000 tpa of premium pyrite of which

a connecting wall between two tailings of producing unroasted pyrite that has 400,000 tpa goes to China, 100,000 tpa

dams failed. One of the original tailings high-grade sulphur (more than 49.5%) goes to Germany and 300,000 tpa is ap-

dams – Sandstone Gully – was being with low impurities/deleterious miner- parently used domestically in Finland.

retreated by depositing its tailings (post als (such as arsenic, mercury and lead), Tailings retreatment is under consid-

retreatment), into the previous open pit. which could classify it as premium pyrite, eration after the Pyhäsalmi mine closes,

Many exploration companies have at a time when the current main source of and may be able to produce the 300,000

also unsuccessfully tried to find another premium pyrite – First Quantum Minerals tpa required for domestic consumption.

Mount Morgan; after all its initial grades Ltd’s Pyhäsalmi mine in northern Finland China currently only imports pyrite

were beyond spectacular with discov- – is expected to gradually close. from two sources, the other being the

ery samples in 1882 reputedly assay- Mount Morgan’s pyrite is also very dif- Romanian Baia Mare mine stockpiles

ing around 3,700oz/t (yes, ounces not ferent in that it mostly does not oxidise or at a rate of 200,000 tpa. The Baia Mare

grams, in metric grades around 113,120 break down – even 20 or 30 years’ later mine closed four years ago and has been

g/t or 113 kg/t or around 11.3% gold), and it still looks freshly broken – possibly due selling down its stockpiles, a process

“ultra-high-grade gold ore shoots beneath to its silica/quartz content/association. expected to finish this year. China’s im-the surface enhance-ports were expected to

ment such as 300-471 Carbine expects to achieve a two- increase to 800,000 tpa
year payback from its Mount Morgan
oz/t (9.2-14.4 kg/t) be- by 2020, although it has
tween the 315ft and not been stated where it
450ft levels when the expects to source its re-

shaft pillar at Grasstree operation once it has been commissioned, quired pyrite from.
was mined out in 1912. with initial gold production of 40,000 ozpa After the pyrite has

The copper content been extracted at Mount

has often been the treat- at an AISC of less than $550/oz (ERA Morgan, gold dore is ex-
ment issue at Mount estimates infer that the average AISC could pected to be produced
Morgan, even the origi- from a standard CIL cir-

nal tailings retreatment be closer to $450/oz). cuit fed by sulphide and
scheme (1982 to 1990) silicate leach streams.

struggled with copper The tailings have been

increasing the cyanide re-treated at varying

consumption and gold recoveries closer The greyish lumps can be seen scat- stages of the mine’s life, as metallurgical

to 50%, but it still managed to achieve tered throughout dumps and the mine processes to treat the orebody evolved

average cash costs of around $388/oz in property. and the mine’s orebody changed becom-

FY1990. Previous owners unsuccessfully at- ing increasingly copper-rich with depth

Carbine Resources Ltd now has con- tempted to sell Mount Morgan’s pyrite (copper grades were ~11% to 12%) with

trol of the project and the key difference but since that period a premium pyrite 5cm to 8cm thick “seams” of chalco-

to previous theoretical tailings projects category has evolved with applications pyrite. Some of the early tailings were

at Mount Morgan is Carbine’s plans to in lithium batteries, stainless steel and based on gold recoveries of about 50%

derive revenue from copper and pyrite, grinding wheels, while higher sulphur which resulted in tailings reputedly as-

while at the same time enhancing the re- pyrite may be blended with lower grades saying up to 5 oz/t gold that went into/

covery of the main target – gold. and find demand among the bulk sulphu- over the adjacent Dee River.

Carbine intends to utilise an innovative ric acid producers in China and Europe. The mine actually received tailings li-

simple solution that removes the copper Premium pyrite can sell on spot at cences to deposit tailings over and into

first and produces saleable copper sul- more than $US200/t, although such the river which apparently affects the

phate to the local fertiliser industry. Then prices may be based on what by-product river for at least 20km downstream from

the pyrite is extracted and sold. credits the pyrite is carrying. Expressions the mine (as seen by the discolouration).

Of course, recovering the copper first of interest in Mount Morgan’s pyrite have Perhaps that’s why the Queensland

PAGE 8 MARCH 2017 AUSTRALIA’S PAYDIRT

Government took over

environmental liability in

1993, combined perhaps

with the profits that the

mine generated.

At one stage, Mount

Morgan also had blast fur-

naces and later reverber-

atory and flash furnaces

to produce copper, with

the successive plants de-

molished and built on top

of each other, which has

resulted in the four main

ore resources conforming

to JORC 2012 standard to

be processed; the No 2

Mill tailings, Mundic Gully

tailings, Shepherds tail-

ings and the Red Oxide

(under the Main Slag).

Carbine’s process

should have a significant

impact on upgrading the Carbine plans to produce separate streams of gold, copper and pyrite products from its
Mount Morgan tailings project in Queensland
quality of the Dee River

which the mine original-

ly polluted and still pollutes the river at can be found, tailings retreatment can be Historically, the underground mine
profitable. closed because of low copper prices in
times of heavy rainfall. the early 1920s – yes, it did close due
Carbine expects to achieve a two-year to the miners rioting over wages in which
The Government has so far spent $70 payback from its Mount Morgan opera- the mine caught fire and flooded in 1925,
tion once it has been commissioned, with but it had actually been closed since
million there (including construction of a initial gold production of 40,000 ozpa at 1921-1923 due to low copper prices. It
an AISC of less than $550/oz (ERA esti- re-opened as an open pit (with treatment
water-treatment plant). mates infer that the average AISC could of the mine water to recover copper as
be closer to $450/oz). part of the financing), and that continued
As it should materially improve the until it closed in 1981 again due to low
And there are potentially many ad- copper prices, but also apparently due
environment and impact along the Dee ditional resources, including a possible to increasing zinc mineralisation, which
future bulk underground mining pyrite would have required capex for a different
River, Carbine may even appeal to en- operation under the Mount Morgan mine treatment process.
office’s car park which may be able to
vironmental/ethical investment funds. If produce DSO pyrite (at around 42% sul- Most of the buildings have a heritage
phur) with gold and copper credits. rating on them – which was done about
the project was in China, it would be very 20 years ago. All very well, but they have
The original VMS orebody at Mount hence not been touched since and have
different as it would probably qualify for Morgan was always thought to be trun- consequently disintegrated to a state
cated by faults at depth – something like where they are mostly sealed off as be-
Federal Government funding. a pull-apart slumped graben, but the ing dangerous and unsafe.
truncation may not be that simple but
China’s National Mine Park plan was this is one of the drawbacks of geology; Having a mine at Mount Morgan should
when it can’t be explained, faults are of- have a major impact on the area, as the
started in 2005 and to October 2011 (the ten interpreted. Perilya’s interpretation economically stressed nearby town of
of the 1990s even had an Invoka and an Rockhampton appears to have half of its
last time ERA reviewed it) had resulted Infera fault i.e. they invoked and inferred shops boarded up or closed.
two major faults of which Invoka was an
in 21 national mine parks being created. “invoked” major regional fault east of the Mount Morgan’s mine life, operated by
main Mount Morgan orebody, to explain Carbine could theoretically easily be 20
Construction approval for 28 parks was and simplify the geology. years.

given in 2005 with a further 33 national You’d have thought that with such a Carbine’s proposed Mount Morgan
prominent and rich mine, the geology operation may show that tailings retreat-
mine parks receiving approval in October would have been executed in extreme ment is the way forward, provided as
detail, but it wasn’t. There has been more many products as possible are saleable,
2010. The incentives were being drawn than one comment that miners chased to result in economic viability.
the geologists away as it was all ore, it
from a RMB20 billion ($3-3.5 billion) was only when the orebody appeared Keith Goode is managing director of Ea-
to peter out that the geologists were
government fund to support the mining brought in to try and find the extensions/ gle Research Advisory Pty Ltd
continuations.
industry, with bonuses paid for the suc-

cess that the “green mines” achieve in

improving the environment, and attract-

ing tourism.

China’s green mines initially referred

to the process of converting old mine

worked areas into recreational green

parks funded mostly by government to-

gether with the various companies in-

volved, and has continued with mines

maintaining a “green standard” of en-

vironmental acceptance. There are a

number of examples among the reput-

edly now more than 500 green mines in

China as at October 2015, such as the

sandy beach resort next to a gold mine in

Shandong Province.

If the right processing combination

AUSTRALIA’S PAYDIRT MARCH 2017 PAGE 9

OPINION

Zinc market tightens

The recent history of the zinc It had just been on a merry-
market has been one of real- go-round between on- and

ity trumping great expectations. off-market storage, any price

Everyone loves the zinc nar- signal being obscured behind

rative of pending supply crunch. the smoke and mirrors of the

It’s just that it’s been a long, long financing trade, predicated as

time coming with plenty of false it is on cheap storage.

starts over the last few years. The US port still holds more

Big mines such as Century in LME zinc than any other loca-

Australia and Lisheen in Ireland tion, 346,125t or around 89%

have closed. The resulting tight- of the total.

ening in the raw materials seg- And there is still a sense that

ment of the supply chain has there is more sitting in New

been accelerated by Glencore’s Orleans than is visible in the

suspension of 500,000t of an- LME’s daily stocks reports.

nual mine capacity. February saw 18,525t of

But conspicuous by its ab- zinc put on to warrant at New

sence has been any flow-through The next phase of zinc’s accelerating bull story is on the horizon Orleans in reaction to the

impact on the refined metal mar- flare-up of tightness on the

ket. 2mt (bulk weight) from 3.2mt in 2015. nearby LME spreads.

That, however, has just changed with Chinese figures for mined zinc produc- It’s a relatively small tonnage by com-

Korea Zinc saying it will cut refined zinc tion are notoriously problematic but fall- parison with some of the “arrivals” of the

production by 7.7%, or around 50,000t, ing treatment charges and falling imports past, but it’s a reminder that hidden zinc

to 600,000t this year. suggest supply stress is building there stocks could yet affect the timing of the

The company attributed its decision to too. next chapter of this market’s expected

tight supplies of mined concentrate and Canadian producer Teck Resources development.

the accompanying reduction in treatment Ltd suggested in the market commentary The exact size of any off-market stocks

charges. section of its Q4 results that Chinese is impossible to say. You only get to see

It is the first sign that the raw materials “stocks of zinc concentrates were drawn them when availability is tested in the

shortfall is translating into refined metal down to critical levels last quarter”. form of a squeeze on the LME.

shortfall. The inference is that it’s only a matter That’s what happened earlier this

All that is missing for zinc bulls, of of time before Chinese producers follow month with cash metal trading out to a

which there are many, is for a tighten- Korea Zinc and are forced to curtail run- premium of $US16.25/t over three-month

ing physical market to start impacting rates due to raw materials tightness. metal.

visible stocks of metal. And, particularly All this is pre-written in zinc’s bull nar- It doesn’t sound a lot but it’s the tightest

those sitting in LME warehouses in New rative. It’s why the galvanising metal was the period has been since May 2015. The

Orleans. the best performer among the major reaction came in the form of those deliv-

Outside of China mine supply of zinc LME-traded metals last year and why eries onto LME warrant at New Orleans.

fell by 10% last year, according to the In- it’s up another 9% so far this year at The zinc time-spreads on the LME

ternational Lead and Zinc Study Group $US2,840/t. have eased over the last few days with

(ILZSG). The missing part of the story so far is the cash-to-threes period returning to

That sharp contraction followed four any sign of pressure on visible stocks of contango. It ended mid-February valued

years of mild decline or, at best, flattish metal. at $US6.75 contango.

growth. LME zinc stocks currently stand at But physical availability for LME deliv-

That’s how long zinc’s bull story has 390,850t. They are a lot lower than they ery is likely going to be tested again.

been running but it’s only now that the used to be. This time four years ago the As of the close of business February

accumulating pressures in the mined headline figure was over 1.2mt. 15 one entity held LME warrant and cash

concentrates part of the supply chain are But the decline last year was a highly positions accounting for between 80 and

working their way into the refined metal modest 35,000t despite an assessment 90% of available tonnage.

market. by ILZSG that the global refined zinc Quite what the play is remains to be

Slowing the transmission mechanism market recorded a supply-demand defi- seen but the cancellation of 8,800t of

have been stocks of concentrates, one of cit of 286,000t. zinc at New Orleans [mid-February]

the last visible parts of the supply chain. Filling the gap has been unreported in- should serve as a warning flag.

But quite evidently, if Korea Zinc had ventory sitting off-exchange, particularly Because New Orleans holds the key to

sufficient stocks, it wouldn’t be cutting in New Orleans. LME stocks and LME stocks hold the key

production. The market got badly wrong-footed in to the next phase of zinc’s accelerating

All eyes are now on China and its zinc both 2014 and 2015 by stocks miracu- bull story.

smelters, which have historically had to lously reappearing in the LME system at – Andy Home, Reuters
top up raw materials supply from domes- the US port.

tic mines with imports of concentrates. The metal had apparently been drawn

Imports slumped by 38% last year to down but not for physical consumption.

PAGE 10 MARCH 2017 AUSTRALIA’S PAYDIRT

Gold is good,
market bounces back

After a “very good” Mining Indaba con-
ference in Cape Town, there was no
time for Eddie Rigg to feel jet-lagged after

his stockbroking company – Argonaut Ltd

– co-managed a $50 million capital rais-

ing for West Australian gold hopeful Gas-

coyne Resources Ltd.

The bookbuild was overwhelmingly

supported by new domestic and interna-

tional institutional investors to Gascoyne

and confirmed that the market is open for

business.

“In the 13 days of the month [in Febru-

ary prior to the Gascoyne raising] there

had been $2.6 billion of inflows, that is

the most ever inflows into gold ETFs ever PCF Capital Group managing director Liam Twigger, Argonaut Ltd managing director

in history [in just] 13 days,” Rigg said at Eddie Rigg and Blackham Resources Ltd managing director Bryan Dixon are excited

the WA Mining Club luncheon last month. by a return of positive sentiment in the resource sector

“What we are telling you is that it is

open again. Sure, when these ETFs 2,3,4% [into the resources sector]’and come out of Europe,” Rigg said.

come in and buy gold equities they have these are big funds; multibillion dollar Perhaps another coup for the industry,

to put money in and buy gold. Special- funds. So if they put in 3-4% in resources particularly the smattering of ASX juniors

ist funds firstly buy Northern Star [Re- it makes a lot of difference.” in Africa and Latin America, is that inves-

sources Ltd] and Evolution [Mining Ltd] Specialist resources funds also ap- tors are happy to take on risk again.

and those types of bigger companies pear to be gearing up to take advantage “What I also noticed at Indaba was that

but the money doesn’t take long to get of better sentiment in the sector, with people were happy to do risk. So when

down to the $100-300 million market cap Sprott Global Resources Investments you talked about Cote d’Ivoire, Zambia,

companies. It is just a rising tiger, it is an Ltd reportedly due to announce a major everyone knows that Ghana is a good

amazing thing.” new fund in the coming weeks, Appian place to mine, but there was just an ac-

Rigg and fellow panellists at the lunch- Natural Resources Fund raising $500 ceptance by investors prepared to back

eon agreed gold will be a solid place to million, Greenstone Resources settling companies in these markets,” Rigg said.

invest in this year, and if the positive vibe for a $350 million raising when it could “The thought about doing a project in

from Indaba is anything to go by then have taken more and Hawke’s Point allo- Zambia, Cote d’Ivoire, you would have

resources companies across the board cating $100 million to invest in the mining been laughed out of the place [one year

should also start to feel the warmth after and resources sector. ago] but these guys were getting real in-

what has been a long “nuclear winter”. “These funds didn’t exist [or weren’t as terest, so there is real risk on.”

Company attendance at Indaba was active] maybe two years ago, they have While there is genuine interest and risk

up 60% in 2017 on 2016 numbers and all raised funds in the last three months, appetite returning to the mining sector,

what was more pleasing was the pres- largely from big pension funds. Interest- Rigg said the downside for him was the

ence of fund managers and the like in ingly, traditionally it has been from big number of fly-in, fly-out investors also re-

Cape Town this year, Rigg said. pensions out of the US. This time around turning to the industry.

“What surprised me the most was how though, according to the guys, it has “Most people in this room are genuine

many fund managers there resource people, people that

were, particularly from the The ASX200 resources index is up 75% since January 2016 with have been through the cy-

UK,” Rigg said. the small cap resources index also bouncing back strongly in the cles,” he said

“There were a lot of gener- last 12 months. “But there are people that

alist funds there which hadn’t IPOs have also become popular again this year in a sure sign that come into the cycle when it

traditionally been in resourc- the market has turned. is really hot and then they

es and who we haven’t seen “I think for all of us out there the market has turned, it is looking disappear and go off and do

in resources since 2010/11; very good,” PCF Capital Group Liam Twigger said at the WA Mining apps or biotech or whatev-
there were lots of them there Club luncheon.
er... I saw a number of them
“What we would like to see more of, I think, is a lot of those com- in Cape Town and I don’t like
asking questions. A lot of

them didn’t know what they panies in 2011-2015 which swapped out of the entrepreneurial side that.
were doing but they were and went into cost saving and cost management, with accountants “That is the part of the in-
told by their trustees and running mining companies. Now there are opportunities to do deals. dustry I don’t like.”
their pension funds allocating We need people to go out there and seize the opportunity. We need
money ‘we want you to put deals done by people other than Peter Cook and Bill Beament.” – Mark Andrews

AUSTRALIA’S PAYDIRT MARCH 2017 PAGE 11

NEWS

Artemis camps out in Karratha

Artemis Resources Ltd ject for Artemis.
executive director Ed- Carlow Castle has

ward Mead admits having a 40,000oz gold and 2,500t

multi-commodity asset port- copper, however, there is

folio can complicate things high-grade cobalt poten-

for investors trying to deter- tial emerging.

mine the company’s value Funds from the latest

proposition. raising will be dedicated

However, at this point in to drilling at Carlow Cas-

time, the diversified nature tle, while Artemis will look

of Artemis’ portfolio may to push ahead with the

just entice investors starved Radio Hill acquisition.

of junior companies to sup- Last month a new

port in recent times. nickel-copper sulphide

Gold, nickel, cobalt – zone was identified 300m

commodities which are all from the existing Radio

trading at attractive prices Hill mine, with a high-

amid the rays of light ap- powered, down-hole EM

pearing in the resources survey following up on

sector – are the focus for two previously drilled dia-

Artemis in Western Aus- mond holes, south-east

tralia. of the mine.

“It does become a little Mead said Radio Hill

more complicated for inves- Artemis has a number of projects within 40km of Karratha was a much sought-after

tors with regards to what acquisition for Artemis

commodities they are investing in, but I that should look like,” Mead said. and was excited to start work on the pro-

think our approach to monetise our as- “At the same time, 10km down the ject.

sets, starting with making cash out of road we have Weerianna where we have Low nickel prices forced the closure of

gold and growing [all] our resources for 70,000oz @ 2.2 g/t gold. We are doing Radio Hill in 2008 and it is currently on

longevity, is a good one,” Mead told Pay- trenching there at the moment and look- care-and-maintenance.

dirt. ing at ways to increase that resource. For a total consideration of $3.5 mil-

The company has four key projects – We can truck ore from Weerianna 10km lion, Artemis can acquire Radio Hill,

Nickol River gold, Weerianna gold, Car- down the coastal highway to Nickol River which includes a 425,000 tpa plant, and

low Castle gold, copper and cobalt and or potentially look at getting Weerianna, an extensive land package prospective

an option over the Radio Hill nickel-cop- in Roebourne, down to Radio Hill.” for nickel, copper and zinc.

per sulphide mine. Further south of Weerianna, Carlow While it may appear Artemis has a lot

Also in its portfolio are the Silica Hills Castle is shaping into an interesting pro- on its plate for a junior, the advantage

and Purdy’s Reward pro- Mead and the team has

jects, which will come is that all the projects are

under some attention in close together.

light of Artemis’ $1.425 “The lucky thing for us

million capital raising last is that everything is within

month. 40km of Karratha nothing

The company’s most is more than a 30-minute

advanced asset is Nickol drive,” Mead said.

River, where a treatment “When we are looking

plant is expected to be at logistics it is really sim-

operational by the end of ple. We don’t have projects

the month. all over WA or Australia

Despite investors not where it takes you a day to

placing a great deal of get somewhere. We have

value on alluvial de- people based in Karratha

posits, Artemis can see and effectively we can

Nickol River being a sig- roll between our projects

nificant cash generator to and progress to the next

spur on its other projects. stage.”

“We are really pushing – Mark Andrews
Nickol River into produc-

tion and cash generation

and we have our internal Producing cash from the Nickol River gold project will help Artemis

financial model on what fund activities at its other projects

PAGE 12 MARCH 2017 AUSTRALIA’S PAYDIRT

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NEWS

Western Areas looks to
the drill bit

Western Areas Ltd is set for a bump- The MREP will help Western Areas
er second half of FY2017 after re-
turning to profit for the first half. recover some of the nickel that goes

The company had to absorb nickel out in tailings and if successful there is
price volatility post-Christmas due to
geopolitical events in Indonesia and the potential to apply the process at New
Philippines, which was a major reason
for the lack of a dividend for the first Morning.
half.
“We can look at similar style heap
“The nickel price over the last 120
days is actually higher than what it was leach at the New Morning project and
120 days ago. It is almost a graph of
your emotional well-being as a nickel convert that into a sulphate,” Western
miner; there are times of happiness
and there are times of great sadness Areas managing director Dan Lougher
when things like the Indonesian an-
nouncement came out and then that said.
is counteracted by the Filipino Govern-
ment actions regarding environmental New Morning’s development will be
disputes,” Western Areas executive
director David Southam said. “We just subject to nickel prices, with Odysseus
have to focus on what we can control
and the fact that we have a robust bal- the likely next mine in line for produc-
ance sheet and cash available is very
positive for us.” tion, potentially in 2020/21.

Despite the bumpy price environment In the meantime, Western Areas
in the first half of 2017, the nickel miner
returned to profitability and is ready to is expected to beef up its exploration
deliver a number of key milestones.
game and is excited by the early-stage
A PFS at Odysseus is expected to
be released this quarter and explora- success at Cosmos.
tion success at Cosmos is tipped, while
nickel off-take under improved terms will Intersections of massive sulphide –
have an impact on the company’s bottom
line in the second half. 2.6m @ 12.6% nickel, including 1.6m @

China’s continued demand for high 18% nickel and 5.3m @ 15.2% nickel,
nickel content stainless steel will also be
welcomed, as Western Areas works to- Dan Lougher including 3.4m @ 22% nickel – has pro-
wards an upgraded guidance of 25,000- vided impetus for Western Areas to up
26,000t mine production and 22,000-
23,000t nickel-in-concentrate at unit project (MREP) aimed at producing a the ante at Cosmos.
cash costs of $2.35-2.50/lb nickel-in-
concentrate. high-grade sulphide product grading “We bought Cosmos specifically for

Given some stability, the company will 45% nickel. the southern area which was under ex-
return a full-year dividend as it looks to
maintain “one of the cleanest” balance The company is refreshing the capital plored. Neither Jubilee, Xstrata or Glen-
sheets – no debt and cash and receiva-
bles totalling $124.7 million – in the in- cost of the MREP, with the results ex- core managed to build a relationship with
dustry.
pected to be available in the short term, the local indigenous people to drill there,
Western Areas’ balance sheet strength
has allowed it to return to normal devel- Southam said. we have done geophysics, and now we
opment activities at Spotted Quoll and
Flying Fox, after a decision to defer capi- “We were creating a pregnant nickel have drilled and found nickel sulphide, so
tal expenditure in August 2016.
solution, which was then converted back that is a big win for us,” Lougher said.
Capital will be deployed in a number
of areas and there is great interest sur- to a sulphide, then mixed it with our con- At Forrestania there has been a fair
rounding the mill recovery enhancement
centrate. With the growth in terms of the amount of interest in the pegmatites

battery market, we have some interest in across the tenement package, with a

nickel sulphate and some [people] that deal potentially to be announced on the

have an interest in that high-grade so- tenement this quarter.

lution, which dry is about a 45% nickel Further afield in South Australia, a

product,” Southam said. geophysical programme at Gawler has

Off-take discussions for the sulphide been completed and targets prepped for

and sulphate products have been ongo- drilling.

ing for a year, with Western Areas pro- “In the next budget cycle [April/May]

ducing three batches of nickel sulphate we need to allocate additional funds now

crystals at its laboratory at CSIRO; batch to exploration,” Lougher said.

one produced 5% nickel; batch two 10% “Last year, we were down to about $8

nickel; batch three produced an emerald- million [on exploration], so we will prob-

like product at 20% nickel. ably need to boost that a bit. I think the

The refined sulphate products can board will tick that box and I think we

fetch a $US100-120/t premium on nor- have great areas now that we want to put

mal concentrate material, which could a bit more money into the drill bit.”

provide a boon for Western Areas. At the time of print, Western Areas sold

“We will model what the best outcome two of its Forrestania tenements to Kid-

for us to follow in the sulphate market, man Resources Ltd for $6 million worth

which we know will produce these crys- of shares, plus royalties, but retaining the

tals, or into the battery market directly nickel rights. The ground is adjacent to

with the very high-grade sulphide of Kidman’s Earl Grey lithium project.

about 45% [nickel],” Southam said. – Mark Andrews

PAGE 14 MARCH 2017 AUSTRALIA’S PAYDIRT

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NEWS

Despite being Bullish Paladin ready for
some way
from breaking the “We have also brought
down our full-year C1
cash cost guidance. Both

quarters of the first half

shackles of its debt were extremely low and
burden, Paladin below $US17/lb, so now
we are guiding $US16.50-

Energy Ltd sees 18.50/lb for a full-year ba-
blue skies ahead. sis,” Molyneux said.

During the next half,

“Paladin is heavily ex- Paladin will maintain low

posed to [uranium] spot cost expenditure on explo-

price and it means that ration and the Kayelekera

we have already adjusted mine which remains on

our costs and as the spot care-and-maintenance.

price for uranium increas- Kayelekera remains

es we will see that flow integral to Paladin’s busi-

very clearly into our reve- ness and once uranium

nue and cash flows,” chief prices dictate, the mine

executive Alexander Mol- can be brought back on-

yneux said last month. line and add 2-3 mlb ca-

Buoyed by a turna- pacity upon restart.

round in uranium price, Further supply can also

which reached a 12-year be extracted from Langer

low of $US17.75/lb in No- Heinrich, with mining cur-
vember 2016 and has
since increased by 42% Kayelekera remains integral to Paladin’s business with 2-3 mlb uranium tailment keeping output
capable of being added to group production capacity upon restart to 3.5-4 mlbpa at the mo-
ment, however, as Paladin
to $US26/lb, Paladin is positioned to hover around $US20-25/lb, average pric- shifts away from curtailment towards the
grow its volume of uranium output once es received would fall to about $US30/ end of 2018, production can be increased
a normalised environment in the sector lb by 2019, placing up to 40% of global by a further 1 mlbpa.
was reached, Molyneux said.
supply at risk. “In a normalised uranium price envi-

Molyneux added he was hopeful the Molyneux believes Paladin had the ronment Paladin has the ability to dou-

floor in the uranium price had been best senior leverage to uranium upside ble its existing production through ca-
reached and was encouraged by what over the last six months, with fixed price pacity that is already built. In addition to
analysts were forecasting.
contracts, which have protected high that we obviously have a future pipeline
“Analysts are predicting a uranium cost producers industry-wide, starting to for growth including Manyingee, Mt Isa
price of $US46/lb for the 2018 calendar roll off.
[Queensland] and Michelin [Canada],”
year and for it to continue to grow to a
According to Paladin’s estimates, tak- Molyneux said.
consensus long-term uranium price of ing into account spot and fixed prices,
“Those projects in combination could,
around $US60/lb,” Molyneux said.
the industry is receiving an average of in the right price environment, see Pala-
Should uranium spot prices continue to about $US38/lb uranium.
din grow another 5-10 mlbpa in capacity

“The spot and current term contract over a subsequent six-year period. It is

Summit Resources Ltd was issued with prices are just too low to cover costs for very exciting that we can see the urani-

a speeding ticket by the ASX last month most,” Molyneux said. um market is normalising and that we are

after its share price rose from 2.6c/share “The bulk of global uranium production uniquely positioned to benefit from that

to 9.4c/share within a 10-day period. actually has a cost and by the way this amongst our peer group.”

At the time of print, Summit was trad- is just cash costs, excluding sustaining Positive catalysts for the industry so

ing at 7c/share and had responded to the capex. About three-quarters of uranium far include; Kazakhstan’s KazAtomProm

ASX’s query stating it was unaware of production has a cost above the current announcing a 10% reduction in uranium

any information that had been released to spot uranium price.” production this year, which equates to

prompt such a spike. In the December 2016 half, Paladin ex- about 4% of global supply; the green

In its response, Summit – of which ceeded its expectations and has revised lighting of the Hinkley Point C nuclear

Paladin Energy Ltd holds 82% equity in its FY2017 production guidance to above power station in the UK; legislation

– also noted improving uranium market 4 mlb uranium from previous estimates changes supporting the nuclear indus-

conditions and the spot price increase of 3.8-4 mlb. tries in the US states of Illinois and New

since December. The company produced 2.5 mlb at C1 York and the approval of more nuclear

Summit and Paladin are 50:50 JV part- cash costs of $US16.25/t (all-in cash ex- reactors to be restarted in Japan.

ners in the Isa uranium project in Queens- penditure was $US28.38/lb) in the first – Mark Andrews
land, where limited exploration work has half of FY2017 and expects to improve

been conducted in the past 12 months. on its performance.

PAGE 16 MARCH 2017 AUSTRALIA’S PAYDIRT

uranium green light in Africa

Paladin Energy Ltd remains launch the new equity rais-
optimistic it can return to ing, which is also conditional

being the independent heavy- upon shareholder approval.

weight uranium producer it “Later in April we would

once was. expect to have all the condi-

Time is ticking for one of the tions met; if they are forth-

few ASX uranium producers to coming and then sharehold-

deliver on the balance sheet re- er [approval], new shares of

structure proposed in January. bonds will be issued in late

During the company’s De- April and the company would

cember 2016 half-year results have completed the restruc-

presentation, Paladin chief ex- ture. A number of these el-

ecutive Alexander Molyneux ements of the timetable will

indicated the restructure pro- basically move forward in

posal would potentially be com- parallel. The key result is a

pleted by late April. stronger, more flexible bal-

The indicative timeline pro- ance sheet,” Molyneux said.

vided is dependent on a num- Should all expectations

ber of meetings with bond- of the balance sheet re-

holders and shareholders to structure proposal be met,

approve Paladin’s restructure. Paladin’s total debt will have

The key elements of the been reduced by $US145

proposal include combining million.

the 2017 convertible bond due The company does have

April 30 and the 2020 convert- some cash coming in with

ible bond due March, totalling the sale of Manyingee,

$US362 million. Western Australia, while if

Of that amount, $US145 mil- commitments are fulfilled in

lion will be converted into eq- the new equity raising, Pala-

uity in the form of new Paladin din may well have $US85-

shares at the proposed conver- At the time of print, Paladin’s JV partner at Langer Heinrich – CNNC – 90 million in the coffers go-
sion price of 5c/share. had not indicated whether it would take ownership of the mine ing into the second half of
2017.
The remaining $US115 mil-

lion would then be split into a new se- not signed up were continuing in the Depending on a number of factors,

cured bond due 2022, with a 7% cash “right direction”. including operating performance, Pala-

coupon, while the new 2024 convertible Shareholder approval will also be re- din is estimating to have debt totalling

bond of $US102 million (zero coupon quired for the transaction to proceed, $US150 million at June 30, significantly

bond) with a conversion price of US5.1c/ with a 50% majority sufficient. A notice of less than the $US355 million it ended

share or 7c/share at the time the propos- meeting for shareholder approval is likely 2016 with.

al was announced. to go out later this month. “Today, the average outstanding tenor

“The proposal would then be condition- Furthermore, long-term off-take cus- of our debt to return before it is due aver-

al on Paladin raising a minimum $US75 tomer EDF must also agree to certain ages 0.5 years. That will be pushed out

million in new equity,” Molyneux said. amendments, while Paladin’s JV part- to 4-5 years giving us much more time to

“That equity raising would most likely ner at Langer Heinrich, Namibia, CNNC see a normalisation in the uranium mar-

include a pro-rata element so that our ex- must not exercise a possible 60-day op- ket before future debt comes due,” Moly-

isting shareholders can participate in that tion – triggered on January 10 – to ac- neux said.

raising. We have already received very quire Paladin’s 75% stake in the mine. “Our annual interest cost today annu-

strong indicative support from large in- While Molyneux said the exercise op- alised is about $US24 million, assuming

stitutional shareholders that are existing tion was a standard default clause in the restructure goes forward because,

shareholders of Paladin and quite a bit of partnerships like Paladin and CNNC No.1, we have less debt and, No.2, UCB

inbound support across our shareholder have at Langer Heinrich, the terms un- does not have an interest coupon. Our

base in general.” der which CNNC can take ownership are overall annual interest costs will be re-

Paladin needs 75% approval in meet- unclear. duced to less than $10 million.

ings with both 2017 and 2020 bondhold- “We have sought a waiver from CNNC “The result will also be a further re-

ers, with Molyneux reporting in mid-Feb- to clarify that they would not exercise that duction in our all-in company-wide cash

ruary that undertakings to support the option, such waiver has not been forth- expenditure and a reduction that really

proposal from 72% of the 2017 holders coming yet but we are in discussions with brings our cost of doing business in-line

and 46% of the 2020 holders had been CNNC,” Molyneux said. with the current spot uranium [price] and

received. In the meantime, a meeting of bond- obviously well below most forecasts for

Molyneux said discussions with bond- holders will be held sometime this month the outlook for the uranium price.”

holders with material amounts who were and at the same time Paladin expects to – Mark Andrews

AUSTRALIA’S PAYDIRT MARCH 2017 PAGE 17

NEWS

Low-cost restart for Savannah

Panoramic Resources Ltd moved a Panoramic’s Savannah nickel mine can be restarted for just $20 million
step closer to a restart of the Savan-
nah nickel mine last month after confirm- cobalt for 112,600t nickel, 52,400t cop- Philippines, which supplies 10% of the
ing just $20 million was required to bring per and 7,600t cobalt. world’s nickel, announcing the potential
the mothballed operation back online. closure of a significant number of the
First ore from Savannah North can be country’s nickel mines. All of this is posi-
Savannah has been on care-and- accessed nine months after link develop- tive for the nickel price, hence the strong
maintenance since May due to low nickel ment from the existing Savannah decline rally.”
prices, but mining activities could soon begins, with full production achieved six
resume in the East Kimberley following months thereafter. Panoramic has begun some optimisa-
the release of a positive feasibility study, tion work around a high-grade nickel in
as well as the base metal gaining traction Panoramic has an off-take agree- bulk concentrate as well as studies into
in the market over the past few months. ment with Sino/Jinchuan which expires separate nickel, cobalt and copper con-
in April 2020, although the company has centrate streams.
Panoramic declined to state a specific held discussions with its existing partner
price target for a potential restart, other and others about purchases beyond that “We are also looking into opportunities
than to say it was “ready to recommence date. around contractors and suppliers to re-
operations as soon as the US dollar duce costs where possible,” Harold said.
nickel price returns to more sustainable Nickel rallied during the second half of
levels”. last year before coming off as 2016 drew “We also plan to do more drilling from
to a close. However, the base metal lifted surface this year to the east where there
The nickel spot price was $US5/lb at again in February but most forecasters is a strong off-hole EM conductor.”
the time of print. expect prices to remain under pressure
until potential supply changes in Indone- While the signs are encouraging for
Based on combined resources and re- sia and the Philippines become clearer. Savannah, Panoramic’s other moth-
serves from the existing Savannah mine balled mine – Lanfranchi, near Kambalda
and the undeveloped Savannah North “Most analysts are forecasting a num- – requires a much higher nickel price be-
orebody, the feasibility study supported ber of years of nickel supply/demand def- fore a restart can be considered.
a restart targeting life-of-mine production icits and correspondingly higher prices,
of 114,000t nickel, 53,700t copper and which bodes well for our project,” Harold Lanfranchi was placed on care-and-
7,700t cobalt over 10 years, based on a said. maintenance in November 2015, 10
$US5/lb nickel price. years after the company took control of
“Nickel demand grew over 6% in 2016, the mine.
Estimated NPV ranges from $60 mil- while supply was down 0.6%, with the
lion for a $US5/lb nickel price to $440 “We will continue to review this asset
million for an $US8/lb nickel price. Peter Harold and study the various options we have
before us,” Harold said.
Low life-of-mine cash costs – $US2/
lb C1 cash costs, $US3.30/lb operating “The care-and-maintenance costs are
cash costs and $US4.40/lb sustaining low, which means holding costs are not
cash costs – were a key highlight of the significant. There is a number of exciting
study, according to Panoramic manag- exploration targets we would like to drill
ing director Peter Harold, who said the test once funds are available.”
results had resonated with shareholders.
Several members of Panoramic’s
Panoramic’s stock lifted more than management team will also continue to
40% during February, with the company oversee progress at the Gum Creek gold
trading at a healthy 41c/share at the time project, which the company shuffled into
of print. Horizon Gold Ltd via a $15 million IPO
late last year.
“We’ve already seen new investors
on the register making sizeable invest- – Michael Washbourne
ments,” Harold told Paydirt. “They’re at-
tracted to opportunities like this for sev-
eral reasons. It’s a classic leverage play
to the nickel price.”

Other key findings identified in the
study included five months to first cash
flow and higher nickel production rates
(averaging 10,900 tpa, peaking at 12,300
tpa) during the first five years.

Coinciding with the release of the
feasibility study, Panoramic announced
a maiden reserve of 6.65mt @ 1.42%
nickel, 0.61% copper and 0.1% cobalt
for 94,500t nickel, 40,900t copper and
6,700t cobalt at Savannah North, lifting
the total project reserves to 8.21mt @
1.37% nickel, 0.64% copper and 0.09%

PAGE 18 MARCH 2017 AUSTRALIA’S PAYDIRT

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COVER

Lucapa offers
clarity to Australian

diamond scene

PAGE 20 MARCH 2017 AUSTRALIA’S PAYDIRT

There was once a time when Australia was at the centre of the For much of its first decade as a listed
diamond universe. Following the discovery of Argyle – still the company, Lucapa’s situation was similar.
world’s third largest diamond mine by volume – in the late 1970s, Despite a series of name and manage-
ment changes, its progress was stop-

a new generation of diamond companies sprung up on the ASX, start at best, despite the presence of
determined to prove the country as the next diamond hub. Australian diamond royalty in the shape
of Miles Kennedy and Gordon Gilchrist

on the board.

As recently as 2006, Paydirt was host- companies and a few more Canadian Both men were at the vanguard of

ing the annual World Diamond Confer- companies but the cost of diamond ex- Australian diamond development – Gil-

ence in Perth with more than a dozen ploration and the GFC made it impos- christ as a director of Argyle Diamonds

ASX-listed companies speaking over two sible for these companies to continue. and Kennedy as executive chairman of

days. Just two years later, the confer- There are still a few around but it is a Kimberley Diamonds – but in 2015, Ken-

ence was in its last year, the programme struggle.” nedy, Gilchrist and the rest of the board

barely stretching to more than a day.

In 2017, there are few remnants on

the ASX of those halcyon days for

diamonds. However, with Australia

now the chair of the Kimberley Pro-

cess and Australian junior Lucapa

Diamonds Ltd growing into the larg-

est independent ASX-listed diamond

producer since Kimberley Diamonds

Co. Ltd’s heyday in the mid-2000s,

Australia is back on the diamond

map.

When the company listed as Nare

Diamonds Ltd in 2006, Lucapa Dia-

monds Ltd was just one of a dozen

ASX-listed diamond explorers. To-

day, it is one of just three, the result

of the failure of northern Australia

explorers to find a second Argyle (or

even a second Ellendale diamond

mine) and the devastating affect the

2008/09 GFC had on global dia-

mond prices.

“The junior diamond space glob-

ally has contracted greatly over the

previous decade,” RBC analyst Des

Kilalea explained. “Ten years ago

there were probably 10-15 AIM list- Lucapa’s final repayment on its mining fleet is due this month, leaving it debt-free

ed companies, a dozen ASX-listed and in 100% control of all plant and equipment

AUSTRALIA’S PAYDIRT MARCH 2017 PAGE 21

COVER

The arrival of the Mothae project into its portfolio provides Lucapa with both jurisdictional and asset diversity

decided fresh impetus was needed and in high-level analytics at De Beers but manufacturing division which he eventu-
brought in former De Beers and Gem working for a smaller group I got more ally headed up.
Diamonds Ltd finance expert Stephen involved and was working in new busi-
Wetherall in take the helm. ness development and started assess- He later had a brief spell with Kim-
ing all projects and got a much better berley Diamonds but after leaving the
Having started his career as a char- understanding of what makes a diamond embattled ASX-listed diamond play, he
tered accountant with Deloitte in South mine from exploration and development made contact with its former chairman
Africa, Wetherall had spent time with De to how to sell at the mine gate.” Kennedy, by then at Lucapa.
Beers as a senior division finance man-
ager before joining Clifford Elphick at the The onset of the GFC meant business “Miles sent me pictures of that day’s
newly formed Gem Diamonds Ltd. development and M&A disappeared and announcement regarding Lucapa’s An-
Wetherall instead proposed the estab- golan project. When you see a picture
“That was where I really cut my teeth,” lishment of an in-house marketing and with that quality of diamonds in it, you
Wetherall told Paydirt. “I’d been involved know they’re onto something. I went back

PAGE 22 MARCH 2017 AUSTRALIA’S PAYDIRT

Lesotho Minister of Mining, Lebohang Thotanyana, came to last year’s Africa Down
Under in an effort to drum up interest in the country’s diamond sector, which his
Government hopes will reach production of 2 mctpa by 2018

look at Lucapa’s 40%-owned developing The strategy would see the company

Lulo project – 630km east of the Angolan divert funds into the alluvial operations,

capital of Luande – and by October 2014 ultimately creating the levels of cash

Wetherall was installed as chief commer- flow necessary to stop further dilution for

cial officer. shareholders when it came to ramping

Kennedy had arrived at Lucapa (then up kimberlite exploration.

Lonrho Mining) in 2008, shortly after Two years on, the strategy implemen-

Kimberley was acquired by Gem Dia- tation has worked. The Lulo JV (SML)

monds. The company was focused on delivered gross diamond sales of $US51

the Smitsdrift alluvial project in South million in 2016 (up from $US9.4 million in

Africa but Kennedy and fellow director 2015) at an average price of $US2,983/

David Jones felt the small project didn’t ct, the highest run-of-mine production in

fit Lonrho’s profile and instead chose to the world in 2016. The JV vehicle now

focus on recently granted exploration has cash of $US14.1 million.

permits in Angola. “We actually wanted to execute the

Along with JV partners Endiama (An- strategy in a far quicker manner,” Weth-

gola’s state diamond company) and Ro- erall said. “We had struck a deal with a

sas & Petalas, Lucapa’s focus had been bridging financier but they asked for the

on finding the kimberlite source of the title as security. We decided the upside

high-value diamonds being recovered was such that it was not the best way to

from the small-scale alluvial operations go forward. So, we had to implement the

which had started in earnest in late 2014. strategy over a longer timeframe, raising

“I then wrote a proposal of how I be- $3-4 million every few months to fund all

lieved we could use an alluvial mining the alluvial development.”

operation to generate funding for the Lulo is now achieving its 20,000 bank

kimberlite exploration,” Wetherall said. cubic metres (bcm) per month Phase 1

to Miles and said ‘where did you get a “In that market environment, where rais- capacity and is expecting better recover-

picture of Letseng from?’ Because during ing money was a quick way to halve the ies of “specials” – stones of more than

my time at Gem I had seen every type of value of the share price, the board took 10ct – following the installation of an XRT

“diamond produced in the world and that the proposal on board.” sorter into the flow sheet. Wetherall be-

was what the Lulo stones lieves the XRT sorter – which

were comparable with. And, We have grown on the ASX uses Carbon 6 detection rath-
and that retail support but now
when you realise that came er than the traditional fluores-
from bulk sampling only, it cence or luminescence – will
spoke volumes of the quality increase Lulo’s average value

of the asset.” we are trying to attract institutions per carat even further as it can
After leaving Kimberley, and funds onto the register. pick up better quality but also
larger diamonds.
Kennedy invited Wetherall to

AUSTRALIA’S PAYDIRT MARCH 2017 PAGE 23

COVER

assuage the political risk at-

tached to Angola.

The first part is going well,

even if it is in the hands of the

geology gods.

The company will have

three rigs on site from the end

of the Angolan wet season

this month and the company

plans to hit its myriad targets

hard this year with a budget of

more than $3 million annually

for the next five years.

If Lucapa is to establish it-

self fully, the hard rock discov-

ery is essential.

“The commercial banks just

won’t do alluvials but Lucapa

is a great company with good

assets,” Nedbank head of

mining finance Nivaash Singh

said.

Kilalea agrees and believes

finding the hard rock source

will reduce the risk-reward im-

balance currently in place due

to Angola’s reputation.

“Angola is becoming easier

Lucapa has steadily built up production at Lulo over 18 months. The final piece of the flow sheet and I think if they find a decent
was the installation of the wet front-end processing equipment (pictured) and a XRT machine kimberlite there, it will defi-
to recover larger stones nitely make Lucapa the best
exploration junior around,”

“The entire strategy couldn’t be deliv- good experience with alluvials in the last Kilalea said. “There are others including

ered until late 2016 but now we are show- 10 years and have gotten a miserable re- Kennedy Diamonds in Canada and Bot-

ing the potential to the market,” he said. turn,” Kilalea said. swana Diamonds which have interesting

“And, there is absolutely no corporate Lucapa has never been in denial about ground but Lucapa has the advantage of

debt. We will make the last payment on the issues which have held institutional having cash.”

the fleet next month and it will have all investors back from taking the company To shift perception of the second prob-

“been paid for and owned 100%. All we on. lem – Angola’s political risk – the chal-

need now is for the mine lenge is twofold. Firstly,

to be consistent.” It is up to us to provide the proof the company must prove
That the company is that things do work in Angola and its JV is solid and will al-
low it to repatriate profits
producing high-quality we can get the money out. There will be a on a consistent basis.
diamonds from the Lulo distribution from the alluvials. There is a

JV is undisputable. In In March 2016, Lucapa
February 2016, it sold the received $8.6 million as
404ct 4th February Stone part of a special distribu-

for $US16 million and just lot of cash being generated and we have tion following the sale of
last month announced put a redistribution proposal to the board. the 4th February Stone
the discovery of a 227ct and Wetherall was confi-

Type IIa stone, the sev- dent further distributions

enth plus-100ct diamond would occur this year.

recovered at Lulo. The task now facing “We have grown on the ASX and that “It is up to us to provide the proof that

Lucapa is to convince the market its port- retail support but now we are trying to at- things do work in Angola and we can get

folio contains both the stability and lon- tract institutions and funds onto the reg- the money out. There will be a distribu-

gevity to turn the company into a genuine ister,” Wetherall said. “But, they are all tion from the alluvials. There is a lot of

player in the diamond space. To do this, it raising the same three risks; the single cash being generated and we have put a

has had to confront a number of negative country risk, the risk of alluvial opera- redistribution proposal to the board.”

perceptions. tions because of other failures in the sec- Wetherall admits Angola is a tough

“Lucapa is recovering fabulous stones tor and the risk of having only one pro- jurisdiction to operate in but has noth-

and if they find the source, I expect they ducing asset.” ing but praise for local partners Endiama

will get the institutional support,” Kilalea To address those concerns, the Lu- and Rosas & Petalas.

said. “The current hurdles in front of them capa management team recognised the “This is a genuine JV partnership,” he

are that they are in Angola [which institu- company would need two things; discov- said.

tions are very wary of] and that it is an al- ery of the kimberlite source of Lulo’s al- Other diamond juniors such as Gem

luvial operation. Investors have not had a luvial diamonds and a second asset to and Petra Diamonds Ltd walked away

PAGE 24 MARCH 2017 AUSTRALIA’S PAYDIRT

from the country but Wether- The installation of the wet front-end and XFT machine have allowed Lulo to hit steady-state
all points to the economics of processing of 20,000 bcm a month
their respective projects, rath-
er than the geopolitical risk, as covered during Lucara’s trial mining op- can be brought into production within 12
the overriding factor in their erations. months giving us a second producing as-
retreat. set, thus diversifying the project risk,” he
Lucapa will pay the Lesotho Govern- said.
“It is all about the assets you ment $US9 million over the next eight
have,” he said. “Look at the months for the project. The acquisition Kilalea recognises the logic of the ac-
economics of the Petra pro- includes all on-site infrastructure which quisition.
ject; look at the economics of Lucara spent $US36 million on.
the Gem project; they weren’t “Mothae adds geopolitical diversity to
there. So, it was the assets For Wetherall, the acquisition of Moth- the Lucapa portfolio,” he said. “Angola
they had, not the jurisdiction ae satisfies the market’s desire to see is perceived as high-risk – it as a history
which was the problem. It is balance in the Lucapa portfolio. of being difficult to operate in and there
costly to operate in Angola is the need to have local partners with
but take the costs and meas- “Mothae is important because it is in political connections – so a lot of inves-
ure them against the revenues Lesotho – a well-known diamond pro- tors don’t like it; Lesotho is different and
being generated. That’s what ducer – it is a kimberlite project, and it
Gem and Petra didn’t have.
Antonio Carlos Sumbula, chairman of Angolan state diamond company Endiama,
“Things do take longer in at the 2016 Africa Down Under
Angola but we’ve never been
denied a permit or licence. The
Government has always come
through and we work with En-
diama and Rosas & Petalas
as genuine partners. The kim-
berlite exploration licence took
time but we received it and it
was for five years rather than
three.”

The Angolan Government is also mak-
ing strides to encourage foreign invest-
ment in its mining sector following the
downturn in its oil industry. The Govern-
ment has dropped headline tax rates
from 35% to 25% and is now allowing
majority foreign ownership of mining
concessions.

Regardless of the progress in Angola,
Lucapa would still face questions around
single-asset risk and, with this in mind,
the company began a project search
which culminated in the January acquisi-
tion of the Mothae project in the southern
African kingdom of Lesotho.

A mountainous enclave in the east of
South Africa, Lesotho is heavily reliant
on diamond production which accounts
for nearly 50% of exports. The country
produced 134,445ct in 2015 – up from as
little as 1,794ct in 2003 – and has set an
ambitious target of 2 mct by 2018, driven
by Gem’s prolific Letseng mine and the
recently commissioned Liqhobong mine,
owned by Firestone Diamonds Ltd.

Mothae is just 4km from Letseng and
was won by Lucapa after a competitive
tender process.

TSX-listed Lucara Diamonds Inc had
owned the project, building a 1.06 mct NI
42-101 compliant resource at grades of
2.7 cpht. Like Lulo and the nearby Let-
seng – the world’s highest dollar per car-
at kimberlite mine in the world – Mothae
has shown prevalence for large stones
with 96 diamonds of more than 10ct re-

AUSTRALIA’S PAYDIRT MARCH 2017 PAGE 25

COVER

the diamonds. Lucara’s feasibil-

ity study suggested it wouldn’t get

the return they were looking for and

Lucara gave it back to the Govern-

ment,” he said. “The Government

put it out to auction and Lucapa was

the successful among three bidders.

If they get large diamonds it makes

economic sense. The initial work will

be to prove that up and then go larger

later on.”

Lucapa is now showcasing the new

portfolio to investors across Eastern

Australia and London. Once the road

show is complete, the company will

decide on how to fund Mothae’s de-

velopment.

“We have got cash in the bank

[$US4.3 million at the end of the

December quarter with a further

$US14.1 million in the SML JV]; we

have got $11 million of options due in

April, May and September and there

were a number of proposals which

came to us in and around Indaba for

finance. Or, given our strong desire to

Lucapa managing director Stephen Wetherall with a replica of the 404ct 4th February Stone get institutions on the register, it may

be that we undertake a placement to

although it has difficulties, they are fairly The Phase 1 plan will see a three-year get them on. Or, it could be a combina-

predictable. There are three mines oper- mining plan for the 50m of weathered tion of all four.”

ating and there is a lot of prospectivity. material sitting on top of the kimberlite In bidding for Mothae, Lucapa was

I think the Lucapa board likes that geo- with capex estimated at $US12 million. anxious not to appear to be abandoning

graphic balance it offers.” “That’ll raise cash flow, achieve pay- its flagship asset.

But, if Lucara gave the project back to back in 18 months and give cash flow af- “We have to make sure the market

the Lesotho Government, does it have terwards for Phase 2 development. That understands we haven’t lost any faith in

the economics to become a genuine de- $US12 million capex includes the XRT Lulo. Rather, the acquisition of Mothae

velopment? machine and as has been shown at Lulo, buys us another mine with potential to be

“Lucara had competing projects re- you can pay for that with one large Type a second Lulo but one where all the work
“quiring capital, with Karowe in Botswana IIa stone.”
has already been done,” Wetherall said.

leading the way. They With just $US12 million

had acquired that project We have to make sure the market required at Mothae, Lu-
for $US60 million and capa may find itself sit-

needed $US150 million understands we haven’t lost any ting on additional funds
in development capital faith in Lulo. Rather, the acquisition and Wetherall was eager
and just didn’t have the to point there was one

capital for both projects.” of Mothae buys us another mine with way to convince inves-
Wetherall said there potential to be a second Lulo but one tors Lulo hadn’t fallen out
of favour.
would be little technically

different in Lucapa’s ap- where all the work has already been done. “If we do generate
proach. more cash than we can

“It is just they had dif- deploy, then the natural

ferent constraints and thing to do is return that

we’ve been fortunate with our timing,” he Lucapa is hoping the distribution of cash to shareholders through a divi-

said. large stones will provide the economic dend.”

There will be some adjustments to the impetus for the project. It has been a long time since an Aus-

development plan. “The larger stone mines have been a tralian diamond miner said those words

“Lucara was looking at a large-scale lot more protected in pricing because but it could be enough to convince inves-
development with a R2.6 billion capex production of large stones is so small but tors Lucapa has the assets to become a
which, at an 8.5:1 exchange rate made demand is still robust. So, pricing is still new breed of Australian junior diamond
the margins a lot thinner. At the current strong from Letseng, Karowe and we be- company.
13:1 exchange rate, the financial metrics
are much better and we will also start lieve it will be strong from Mothae,” Weth- – Dominic Piper
erall said.

with a smaller, low-risk development. Kilalea puts Mothae’s chances of suc-

The plan is to start mining early to gener- cess down to the distribution of large

ate cash flow and development funding stones.

then scale up to Phase 2.” “The issue is what price they get for

PAGE 26 MARCH 2017 AUSTRALIA’S PAYDIRT

Australia’s turn at
Kimberley Process

Australia’s new chair of groups want us to tackle human rights guaranteed to be conflict-
the Kimberley Process, and the like but the main focus will be free is if they are synthetic.
Robert Owen-Jones, says on strengthening implementation versus
he will be providing the how much more we can do.” Alluvial and artisanal min-
steady hand the diamond ing is another area to ad-
certification scheme is in Two broader issues Owen-Jones is dress.
need of. keen to address at the first Perth meet-
ing are the Australian industry’s experi- “Three firms dominated
Last year’s chair, the Unit- ence dealing with indigenous communi- global production but the
ed Arab Emirates, came ties and the rise of synthetic diamond real challenge is in small-
under criticism from civil production. scale alluvial diamond min-
society groups who claim its ing,” Owen-Jones said. “It
transfer pricing practices, Australia is the fifth largest producer is a challenge but having
poor due diligence and lax of diamonds by weight, entirely due to those diamonds certified
import controls are under- production from Rio Tinto Ltd’s Argyle and in the supply chain is
mining the scheme. mine in Western Australia. The Argyle good because of the mon-
workforce is 12% indigenous with a 25% ey it generates for African
The Civil Society Coali- target set by Rio Tinto. countries. There is a huge
tion (CSC) is the umbrella amount of jobs created in
group representing civil so- “The experience of indigenous com- places such as Liberia,
ciety observers in the Kim- munities is an important one and I am Guinea, Ghana and Cote
berley Process meetings. It boycotted particularly keen to include the practices d’Ivoire from small-scale operations.”
last year’s meetings in Dubai in protest at of companies from other commodity sec- The Process has been so successful
the U.A.E.’s practices but Owen-Jones is tors such as Fortescue Metals Group that the number of uncertified diamonds
keen to welcome CSC back into the fold [Ltd].” Owen-Jones said. “I want to look has fallen to almost zero. However, Ow-
this year. at employment rates and other cultural en-Jones said the Process would con-
issues.” tinue to tighten its implementation.
“I hope and anticipate civil society will “Just because the problem has largely
engage in the Process once again,” Ow- On the issue of synthetic diamonds, been defeated by the Process doesn’t
en-Jones told Paydirt in Cape Town. Owen-Jones hopes the dialogue can dis- mean we can take the process away,”
cuss way Kimberley Process members he said. “There are other issues arising.
Owen-Jones has been Australia’s sen- can ensure the manmade product stays The sector is very different from 13 years
ior representative in several multilateral out of the natural diamond trade. ago and now we are looking at how ille-
discussions, including the Copenhagen gal diamonds could fund terrorist groups
climate talks, and he is relishing the op- “The makers are trying to get synthet- and the like.”
portunity to chair the Kimberley Process, ics into the supply chain, partly through Owen-Jones pointed to the suspen-
which he describes as having been “ex- the Kimberley Process,” he said. “And, sion of the Central African Republic as
traordinarily successful” in stamping out because there is no inherent value held evidence the Process was still working
the conflict diamond trade. in the rock itself, if you undermine their well.
value you could ruin a nation’s diamond “There are still cases of this happen-
“The Kimberley Process is central industry.” Advertising by US synthetic ing but I think that shows the robustness
to the transparency and integrity of the manufacturers is particularly insidious, of the system,” he said. “The Process
global trade of rough diamonds,” Owen- suggesting the only way you can be suspended Central African Republic and
Jones, who takes the chair as a DFAT we congratulate the country because it
Assistant Secretary, said. “With the has gone all out to get certification again
cooperation of countries, industry and which is a very difficult process.”
civil society, the illicit trade in conflict dia- For Owen-Jones it is the Process
monds has almost vanished. Together which provides the diamond sector with
in 2017 we will forge and implement a its base.
stronger, more comprehensive Process, “The Kimberley Process is the glue
which so vitally underpins the global dia- which keeps the whole industry together.
mond trade.” It is all about customer confidence. If you
walk down Fifth Avenue in New York,
The first meeting of the year will take every jeweller will have something about
place in Perth on May 1-5 and Owen- the Kimberley Process in their window.”
Jones said one challenge of his chair-
manship would be to welcome the CSC – Dominic Piper
back into the fold without overreaching
the Process’ remit.

“People are looking for a very calm,
well run year with Australia as the chair
and I’ve every intention on keeping it
that way,” he said. “Some civil society

AUSTRALIA’S PAYDIRT MARCH 2017 PAGE 27

INDABA REVIEW

Upward sentiment
brightens Indaba mood

If Australian juniors were unsure about the depth of the recent market and adjusted accordingly,” Grose said. “It
rebound, their experience in Cape Town during Mining Indaba week has meant an increase of 70% in inves-
would have confirmed it was more than just a domestic anomaly. tors and 30% in companies.”

Mining Indaba introduced a number of

new innovations this year to entice both

The African resources scene has suf- One accusation regularly levelled at miners and investors to the event – in-

fered as much as any other from the com- Mining Indaba organisers has been that cluding a Dragon’s Den-style forum and

modities downturn and the pain has been the conference lacks investor presence investor-dedicated sessions – but Grose

reflected in the attendance at the annual but this year, potential shareholders were said market conditions had also been

Mining Indaba; the world’s biggest min- thicker on the ground – even if the 121 an important factor in the increased del-

ing investment conference. As new Min- Investment Conference down the road egate numbers

ing Indaba managing director Alex Grose continued to vacuum up many others. “Mining Indaba and the industry are on

admitted, the conference had suffered in According to Grose, both company and the way back up,” he said. “Mining com-

investor numbers were up. panies have been the biggest risers on
“the same way the industry had.
“Many of you have faced challenging “We have listened to your concerns… the FTSE in 2016 and 2017, profits have
times and as the industry went
through the worst, Mining Indaba improved and investors are con-
reflected that; it is a market which
has slowed but which has certain- The interest in Africa siderably more bullish. Take ad-
ly not been defeated,” Grose said. vantage of that upturn.”
“We can look ahead now with has always been there
and now the market has Australian juniors were more
prevalent this year than in any
of the previous five years and all

some optimism.” turned juniors are beginning enjoyed considerable interest in
This year’s event reflected that to do what they promised and their stories. While some commit-
ted only to the side events in and
change. The conference was visi-

bly busier than previous years and ultimately that will be a good around Cape Town, those which
miners were audibly upbeat about thing for the continent. participated in the Mining Indaba
their prospects in the coming year. found their efforts worthwhile.

PAGE 28 MARCH 2017 AUSTRALIA’S PAYDIRT

“There is little doubt the conference Delegate numbers were higher for this year’s Mining Indaba but questions
has turned a corner with regards to the about the sustainability of African mining’s rebound remain
number of investors who were present
and showing interest,” Walkabout Re- Ltd (up 56%), Resolute Mining Ltd (up Alternative financing is also on the rise.
sources Ltd managing director Allan 38%), Bannerman Resources Ltd (up The private equity silver bullet has been
Mulligan said. “We received a strong re- 116%) and many others – have recorded touted for years but in 2017 Mining Inda-
sponse from this year’s event.” strong price performance during the first ba gave the clearest indications yet that
two months of 2017 ahead of project fi- money is being deployed. And, it is not
PwC Australia Africa practice leader nancing discussions later in the year. only equity which is available. Royalty
Ben Gargett believes the change in mar- and streaming groups were conspicuous
ket sentiment will allow junior companies Financing options for juniors have both on the main stage and around the
to realise long-held plans for their African also expanded with the industry majors convention centre as they look to export
development stories. another possible source of funding and their highly successful model from North
their business development teams were America to Africa.
“The interest in Africa has always been out in force around Cape Town during
there and now the market has turned jun- the week. It is an indication that markets are
iors are beginning to do what they prom- switched back onto the continent but
ised and ultimately that will be a good Flush with cash after the unexpected investors still have some reservations
thing for the continent,” Gargett said. commodity price increases of 2016, the about Africa.
majors are looking for new investment
From a commodity perspective, it opportunities and given the hatchet job Mining Indaba’s host country contin-
was gold and copper which dominated they did to their own exploration divisions ues to flounder in economic terms and
discussion throughout the week. The during their recent cost-cutting exercis- while Minister of Mineral Resources Mo-
traditional powerhouses of the African es, the only way to find them is through sebenzi Joseph Zwane struck a concilia-
mining sector, both commodities have M&A. tory tone during his opening address to
suffered downturns at different times in
the last five years but with supply having the conference, ongoing issues
seemingly peaked in both sectors, mar- regarding the MPRDA amend-
ket analysts are now bullish about their ment bill and the Mining Charter
future and the opportunity for new devel- mean South Africa’s investment
opments in Africa. waters remain muddy.

Much of the reason copper and gold Elsewhere on the continent,
projects find themselves in favour is the a series of presidential and na-
ease with which they can be brought into tional assembly elections due
production. While the continent’s con- in the next 18 months could de-
siderable coal, iron ore and vanadium cide the investment climate of
assets largely remain stranded due to the next five years.
infrastructure requirements, copper and
gold developers have enticed financiers As the following 45 pages of
with their lower capex requirements and Paydirt show, the African re-
shorter payback periods. sources sector is off its knees
and optimistic. The question
“African gold [and copper] projects remaining is how far it can ad-
continue to remain attractive given there vance in the current climate.
is no need for infrastructure development
and the relative ease of entering produc- – Dominic Piper
tion. There is a lot of equity money going
into West Africa,” Nedbank head mining Alex Grose
finance, Nivaash Singh tells Pay-
dirt on pages 30-31.

It was not all good news for jun-
iors, with the majority of investors
suggesting early-stage African
projects were still an investment
risk too far.

“Greenfields exploration is still
a very risky part of the business,”
Cadiz Corporate’s Peter Major
said. “Unless a project is within
6-12 months of production, it is
very difficult to raise capital.”

Singh said it would be another
six months before even develop-
ers could secure the funds needed
to build their projects but Austral-
ian junior company share prices
are bucking the trend.

Companies present at Mining
Indaba – including Walkabout (up
58% since January 1), Danakali

AUSTRALIA’S PAYDIRT MARCH 2017 PAGE 29

INDABA REVIEW

Nedbank prepares
for big finale in 2017

The mood in Cape Town was un-
doubtedly more positive but jun-
ior and mid-tier miners may have to

wait until the end of the year before

they can bring projects into develop-

ment.

The start of 2017 has been awash

with renewed optimism for the Afri-

can mining sector with companies

raising equity on the back of the

commodity rebound in the second

half of 2016. This had led to a num-

ber of stalled project developments

regaining momentum but according

to Nedbank head of mining finance,

Nivaash Singh, securing finance for

such projects could still prove chal-

lenging in the first half of 2017.

“I think 2017 will still be a difficult

year for access to capital markets;

they are opening slowly but not fast

enough,” Singh told Paydirt. “There

are tangible signs that the momen-

tum will continue but project devel-

opers have been patient for four

years and now will have to show that

patience for another six months.”

Singh said markets were mov-

ing away from financial, pharmaceutical “To advance debt we have to see the However, despite the withdrawal of

and tech stocks and opening up to min- equity in place but for three or four years some banks, project developers are

ing equities with $US600 million in new the equities have been drying up which finding their debt finance options are

equity deals on the TSX, LSE and ASX has been constraining our ability to pro- expanding thanks to the proliferation of

last year. vide debt,” he said. “Now that equity is “alternative financing” arrangements in-

Most of those transactions were in the returning, our debt business is building volving equity funds as well as streaming

junior and mid-tier space as investors up momentum and projects are becom- and royalty companies. Singh warned

once again warm to the speculative end ing fully funded.” companies of the dangers of such deals.

of the market. Singh described 2016 as “an amazing “We have seen the birth and growth of

““Investors are saying now is the time to year” for Nedbank’s mining business with non-commercial institutions in the lend-buy in to juniors becauseing space such as equity

they can get value up- funds that are becoming

lift immediately that you There are tangible signs that the debt funds. It is a very
don’t see in the majors,” momentum will continue but project risky situation if you have
Singh said. “It’s the jun- equity and debt funds

iors that have massive developers have been patient for four invested in the same
value, looking for high years and now will have to show that company; it can open up
yields from companies corporate governance is-

with clear pathways to patience for another six months. sues for the directors.”
production.” The challenge for such

The opening up of lenders is to find the right

equity markets should investment. Singh said

smooth the way for companies to also the bank closing 24 financing deals, in- the recent downturn had cleared the

land debt finance. Nedbank is just about cluding the refinancing of project debt for decks of a number of companies with lit-

the only commercial lender left in the First Quantum Minerals Ltd’s Zambian tle chance of reaching production, leav-

African junior mining space after the assets and Paladin Energy Ltd’s Langer ing better credentialed peers with a clear

withdrawals of RMB, Standard Bank and Heinrich operation. run.

Standard Chartered and Singh sees his “We really went against the run of “We saw a purging of speculative plays

bank’s book expanding in 2017. play,” he said. during the last four years and that is a

PAGE 30 MARCH 2017 AUSTRALIA’S PAYDIRT

good thing for a bank like Ned- led a number of countries – in-

bank because we want to fund cluding Nigeria, Angola, Gabon

companies who are serious and even Egypt – to turn their

players,” he said. development focus to hard rock

“It is those companies who mining but Singh believes the

have weathered the storm and governments in these countries

come out of the downturn with a need to limit expectations.

strong balance sheet and man- “A lot of work needs to be

agement teams with a track-re- done and mining is not a light

cord for development which will switch you can flick off and on.

thrive.” The sector takes years to get up

Many of these companies will and running,” he said.

have the tailwind of rising com- There was also a warning for

modity prices to push them to- companies and governments

wards development. Commodity who are currently pushing the

prices surprised many analysts potential for battery minerals

in the second half of 2016 with developments. The last three

the strength of their rebound. Optimism returned to the Cape Town International Convention years have seen a mushroom-
With new US President Donald Centre in February as the tailwinds of commodity prices ing of graphite, lithium and co-
Trump apparently determined to reinvigorate the African junior mining sector balt developments in Africa but
deliver on his campaign prom- Singh said expectations should

ises of new job creation and major infra- for presidential elections in 2017 – but be tempered.

structure projects, Singh retains a posi- Singh took heart from the recent political “Not all of these projects will get into

tive outlook for the year ahead. upheaval in the Gambia. development; it is a pipe dream. Capital

“I think there will be some correction Although former president Yahya markets don’t fully understand the com-

in commodities – such as iron ore – but Jammeh initially refused to leave office modities and there is a lot of misinforma-

with industrialisation, manufacturing and following his election defeat to Adama tion in the market about batteries and

construction all part of the Trump policy Barrow, the intervention of neighbouring there is overselling to the point of abso-

agenda, there is likely to be competitive countries prevented any violence. lute confusion,” he said.

tension between the US and China over “ECOWAS [the Economic Community Some companies have benefitted

demand for raw materials as part of an of West African States] acted assertively from the general confusion surrounding

Industrial Revolution 4.0,” he said. in Gambia. It was a victory for democra- graphite and lithium use and their future

“This is a great story for the mining cy and transparency and it demand projections but Sin-

sector.” was a historical event for gh said such opacity would

Singh highlighted copper as a key West Africa. The people ultimately prove detrimental.

commodity for 2017 thanks to greater are saying they are tired “Graphite companies have

demand and continuing questions on the of bad governance and to manage that confusion

supply side. corruption and want more down because if you can’t

“I think copper’s rebound is sustain- transparency. With that identify your market clearly,

able,” he said. “There are a number of is- comes more investment you won’t identify a clear path

sues curtailing supply and if Trump does which will help the mining to production and as soon

what he says he will you’ll see demand industry in the region.” as the bank gets confused it

surging. “But, it is all about the cost of While he expected cop- takes a step back,” he said.

production. If companies can maintain per and gold projects to “There must be a clear path-

$US1.10-1.20/lb cash costs like First attract major investment way to market and backed up

Quantum has, they will continue to do this year, Singh said he by genuine off-take agree-

well.” was less enamoured with Nivaash Singh ments.” developments in
Gold had been expected to rise on the the sustainability of the Lithium

election of the erratic Trump but the spot bulk commodity rebound. Africa are two-three years

price has remained relatively flat since “I don’t think there’ll be new African behind graphite plays but Singh sees the

November. However, regardless of spot developments in the bulk commodities same problems occurring.

price movement, Singh expects the pre- space,” Singh said. “These projects are “If you look at the lithium market, one

cious metal to maintain its prominent less about the mining and more infra- of the biggest producers outside of Chi-

place in African mining developments structure/logistics plays. Capital intensity na is Greenbushes in Western Austral-

with West Africa remaining the preferred is so high it just doesn’t make economic ia and that is operating on a three-day

destination. sense to take iron ore across the world week roster because there is currently

“African gold projects continue to re- when Australia produces it for $40/t. I’m oversupply in the market.

main attractive given there is no need for not convinced the time is right [for new “That may be OK for equity players

infrastructure development and the rela- bulk commodity developments] and gov- who take a long-term view but debt play-

tive ease of entering production. There ernments need to understand the situa- ers have a 5-6 year horizon and I’m say-

is a lot of equity money going into West tion and be realistic in their expectations. ing in the next five years there is no mar-

Africa.” It has to make economic sense for devel- ket for lithium,” he said.

Questions surrounding political risk opment to occur.” – Dominic Piper
are never far from the minds of investors Singh said governments also had to be

when it comes to West Africa – particu- realistic about their ability to build mining

larly as a number of countries are set industries. The recent fall in oil prices has

AUSTRALIA’S PAYDIRT MARCH 2017 PAGE 31

INDABA REVIEW

Watershed year for South Africa

After several years of tacit diplo- on the JSE, black South Africans
macy between industry, govern- own more than 45% of our South

ment and community groups, 2017 African operating assets. If peo-

looms as a make-or-break year for ple want to see transformation,

the South African mining sector. let them come talk to us at Anglo

Last year regulator the Depart- American.

ment of Mineral Resources, lost two “While we are the first to ac-

court cases over its application of knowledge we still have a lot of

the Section 45 safety regulations work to do in this critical area – let

and the awarding of prospecting no-one mislead the public on what

rights. our numbers are in this context.”

The industry also continues to South Africa’s mining industry

wait for the MPRDA amendment has fallen dramatically from its

bill to be resubmitted to parlia- former heights and Cutifani ar-

ment along with the finalisation of gued that it needed policy and

changes to the Mining Charter, both South African Minister of Mineral Resources, Mosebenzi legislative clarity to attract much-
of which the Government has been Joseph Zwane, opens the 2017 Mining Indaba needed foreign investment.
promising were imminent for nearly Zwane – who addressed an au-

12 months. formation agenda but privately the on- dience which included former South Af-

Meanwhile, the ruling ANC party con- going legislative uncertainty is causing rican president Thabo Mbeki – said the

tinues to limp towards this year’s national widespread unease. Opening this year’s Government had improved regulatory

elections following a series of scandals Mining Indaba, Minister of Mineral Re- efficiency including the creation of a one-

which have tarnished Jacob Zuma’s sources, Mosebenzi Joseph Zwane, stop-shop framework for the approvals

presidency. said the MPRDA amendment would be process. However, Cutifani said the sys-

Zuma reiterated the industry’s impor- finalised by June and the Mining Charter tem was still overly complicated.

tance to the South African economy dur- review by March. However, with investor “For investors, it goes without saying

ing his February 9 state-of-the-nation sentiment in the country’s resources sec- that regulatory certainty and the sanctity

address – an event temporary halted tor still on the wane, some of the indus- of private ownership under the constitu-

by violent protests inside the parliament try’s most prominent identities are begin- tion is paramount,” he said. “Mining com-

– but continued reference to the need ning to make their frustrations public. panies [need] a business environment

for more equitable distribution of wealth Anglo American plc’s chief execu- which promotes ease of doing business

placed mining directly in his policy cross- tive, Mark Cutifani, was the first to step over lengthy and complicated processes

hairs. forward at Mining Indaba. Taking to the [which sometimes land in the courts un-

“Political freedom is incomplete with- stage immediately after Zwane, the Aus- necessarily].”

out economic emancipation,” Zuma said. tralian urged the Government and other Sibanye Gold Ltd chief executive Neal

“Today, we are starting a new chapter of politicians to consider the ways the min- Froneman said South Africa’s “mineral

radical socio-economic transformation. ing industry had changed since the ar- heritage [was] at risk of being sterilised”

We are saying that we should move be- rival of democracy in 1994. due to issues in the areas of labour rela-

yond words, to practical programmes.” “Many people still don’t understand tions and the country’s regulatory frame-

For many South Africans, mining re- that the owners of most South African work.

mains a symbol of the old apartheid sys- publicly listed mining companies are not Zwane argued stability in labour rela-

tem, an economic behemoth to which the ‘Randlords’ or magnates of the pre- tions was a focus of the Government and

previously disadvantaged groups strug- vious generations, but rather, ordinary pointed to the conclusion of wage nego-

gle to gain access. South African Cham- pension and investment fund owners; tiations for the coal and PGM sector as

ber of Mines chief executive Roger Bax- that is, average South African citizens of evidence of the improving relations be-

ter acknowledged Zuma’s imperative for all races: black, white, coloured and Indi- tween industry and labour groups.

more rapid economic transformation but an,” Cutifani said. “And so, I hope… peo- Both Cutifani and Froneman urged all

said the mining industry had “done more ple will understand that white and even stakeholders to work towards a common

than most in that regard”. black monopoly capital is a conversation vision for the country’s mining industry.

“We noted with particular interest Pres- that should be condemned to a difficult “It just needs for us to lift ourselves

ident Zuma’s lament regarding economic and dark South African past. above narrow individual interest and

concentration,” Baxter said. “We recall “In today’s world, capital has no colour; serve stakeholders,” Cutifani said. “We

that in the 1980s the bulk of our indus- it is a powerful tool that can help create a need to speak with courage, with hon-

try was controlled by six major compa- better country for all. In our case, 64% of esty and talk to solutions. We need to

nies. Today, interestingly, the Chamber the mines we operate and those we em- put aside personal conversations and at-

of Mines’ direct and indirect members powered are effectively owned by South tacks and take up constructive dialogue.

total more than 100, are spread across Africans – through direct and indirect In today’s world, capital does not have

all commodities and sectors, and include shareholdings. If I assume 27% direct colour,” he said.

many emerging miners.” black ownership in our mines, and add – Dominic Piper
South Africa’s major miners have re- to this the participation by black South

mained publicly supportive of the trans- Africans in pension funds and directly

PAGE 32 MARCH 2017 AUSTRALIA’S PAYDIRT



INDABA REVIEW

Acacia’s vision ahead of time

When establishing its business plan AISC increased net cash to $US318 mil- While continuing to focus on mining
in 2015, many believed Acacia Min- lion, Acacia is well placed to entertain improvements in Tanzania, Gordon said
ing plc’s vision too ambitious. potential M&A opportunities. the market could expect to see the fruits
from exploration efforts further afield.
Market sentiment was poor and Acacia Completing a transaction with Endeav-
was in the early stages of breaking the our will boost total group production to al- “Over the last three years we have
shackles from big brother Barrick Gold most 2 mozpa and help Acacia establish been putting our foot on some of the best
Corp making some onlookers wary of the a good base in West Africa. gold ground in Africa. This year you will
company’s intentions. start to see that delivering results, par-
Despite a willingness to expand its ticularly in West Africa,” Gordon said.
However, Acacia has barely made a footprint in West Africa, namely Burkina
false move since then and has its flag- Faso, Acacia would be deeply rooted in At the time of print, Acacia had 15 rigs
ship assets in Tanzania performing on- Tanzania for some time yet, Gordon said. operating in Kenya, Mali, Burkina Faso
song, a solid pipeline of exploration plays and Tanzania, with a total of $US25 mil-
in waiting and a potentially game-chang- The company will continue open pit lion for 190,000m to be drilled on green-
ing M&A deal on the table. mining at Buzwagi until the end of this fields targets in 2017.
year and delivered its best ever produc-
Earlier in the year, Acacia confirmed tion record in 2015 from North Mara “We make sure that we discover new
interest in a deal with West African gold where it is also spending more than projects,” Gordon said.
producer Endeavour Mining Corp, which $US10 million in expansionary drilling
if it comes to fruition, would see the for- programmes at Gokona and Nyabirama “In our industry the only real asset you
mer deliver on its five-year plan way at the mine. have is land and as the company that
ahead of schedule. has the best land on the planet we’ll be
Meanwhile, Gordon said he expected the company that is successful. We will
“If we do this deal with Endeavour this more improvement to come from Bulyan- match that land with good people, hold-
year, we will have achieved that vision hulu. ing them accountable and ensuring that
in 2017…three years early,” Acacia chief they deliver on their individual potential is
executive Brad Gordon said at Mining In- “Buly has been a challenge but last extremely important.”
daba. year was the best year [for the mine] in
10 years. We are close to getting the – Mark Andrews
Coming off a record breaking 2016 mine to reach its full geological poten-
in which 829,705oz gold @ $US958/oz tial,” he said.

South32 backs SA’s resources

South32 Ltd president Mike Fraser of FY2017 – a large contributor to group operations in New South Wales.
urged the South African Government revenue, while its manganese and coal Meanwhile, a decision to invest $US30
to finalise changes to regulatory frame- operations are also performing strongly.
work as soon as possible to give inves- million to fund study costs and acquisi-
tors and companies some certainty and Revenue for the first half of FY2017 tion of land for the Klipspruit coal exten-
confidence in the sector. was $US3.22 billion, up 8% from the cor- sion project is expected in FY2017.
responding period in FY2016.
The Government has been mulling The proposed expansion of its RSA
over the MPRDA amendment bill and Free cash flow of $US626 million was energy coal division indicates South32’s
changes to the Mining Charter for some generated with the company in a net commitment to operations in the country.
time now, to the ire of industry partici- cash position of $US859.
pants such as South32. “We believe that with the right condi-
The company also announced its tions we will be able to deliver inclusive
Fraser said it was important for the first interim dividend of $US192 million, growth and meet the expectations of
Government to carefully manage provi- equivalent to $US3.6c/share (unfranked). stakeholders, as well as deliver superior
sions of the revised Mining Charter, as returns to our shareholders,” Fraser said.
it has the potential to shape the future of At the time of print, South32 was trad-
the mining sector. ing at $2.69/share compared to $1.20/ “We believe that South Africa’s mining
share at the same time 12 months ago. industry still has potential to grow, how-
“There are provisions in this mining ever, there are challenges, but we remain
charter that many companies would With a strong balance sheet, South32 confident that together we can unlock
struggle to meet while remaining globally is committed to unlocking value through this potential by establishing a more ena-
competitive,” Fraser said. its existing assets, including accelerated bling environment. The resources are
development of the high-grade La Es- here and the challenge is for all stake-
“To build a competitive sustainable meralda nickel deposit at Cerro Matoso, holders to work together to create an
mining industry it is absolutely impera- Colombia, and advancing mining access environment with minimal wealth under-
tive that there is a process to ensure that agreements at West Marradong and ground and converting into wealth above
changes result in proper collaboration exploring southern areas at GEMCO, the ground and thereby creating shared
and consultation with all stakeholders.” Northern Territory. value for all.”

South Africa is a key jurisdiction for On the coal front, the proposed – Mark Andrews
South32’s business with its aluminium $US200 million acquisition of the Met-
division – $US601 million in the first half ropolitan Colliery is expected to compli-
ment the company’s Illawarra met coal

PAGE 34 MARCH 2017 AUSTRALIA’S PAYDIRT

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INDABA REVIEW

South Africa losing its roar:
Holland

South Deep achieved cash breakeven status at the end of last year

Gold Fields Ltd chief executive Nick The South African Chamber of Mines space. We’ve got the skills and we can
Holland fears South Africa is in dan- has been openly vocal about the poten- achieve all of the objectives of society for

ger of missing the next resources boom. tial ramifications of such a requirement, mining, but it’s time to cut us some slack.

In a wide-ranging interview with Pay- claiming mining companies will destroy It’s as simple as that.”

dirt on the sidelines of Mining Indaba, shareholder value. Despite the ongoing regulatory issues,

Holland laid bare his concerns about Legal action has been flagged by some Holland refuses to let a potential stoush

the state of the country’s mining indus- companies, including Gold Fields and with the South African Government dis-

try, joining the likes of Anglo American Anglo American, but both companies are tract him from transforming South Deep

plc chief executive Mark Cutifani and hoping the South African Government is into a profitable operation.
“South32 Ltd president Mike Fraser in listening to the concerns raised.
A week after Mining Indaba concluded,

calling for greater transparency Gold Fields outlined its “rebase

from regulators at a time when I had a lot of people telling plan” for the mine, which is now
money appears to be returning to targeting steady-state production

the sector. me last year ‘shut the of around 500,000 ozpa over the
“I think the incessant laws and mine, it’s a waste of time’, but next five years at an all-in cost be-
low $US900/oz.
rules that are being promulgated,

the additional imposts the Gov- that was really just galvanising It comes after South Deep – the
ernment wants to impose on the us to work even harder. world’s second largest gold ore-
industry from these mining char- body – achieved cash breakeven

ters and updates…it’s just killing status at the end of last year; a

the industry and it’s sending us in goal the company had set almost

the wrong direction,” Holland said. South Africa is a critical pillar of busi- two years earlier after initially stepping

“We’re an industry that’s already in ness for Gold Fields, which is headquar- back to fix ongoing problems at the mine.

recession. I would say the rest of Africa tered in Johannesburg and also operates Gold Fields has operated the mine for

is doing really well, but I can’t help feel- the South Deep gold mine in the north- more than a decade, but its ownership

ing that South Africa is going to miss the east of the country. has constantly been blighted by techni-

boom again. We’re going the wrong way, “It’s quite a worry to us because the cal problems, production and processing

unfortunately.” thing is I think South Africa has a won- delays and workplace accidents.

South Africa is set to unveil a revised derful opportunity here,” Holland said. “I had a lot of people telling me last

mining charter about black ownership “We’re well endowed, there’s lots of re- year ‘shut the mine, it’s a waste of time’,

this month. The latest published draft of sources, so the message I’ve been giv- but that was really just galvanising us to

the charter requires companies to main- ing here is ‘leave us alone, let us do it and work even harder,” Holland said, with a

tain black ownership levels at 26%, even we’ll transform the industry’. We’ll train wry smile.

when original investors sell out. the people, we’ll grow it, but give us the “We believed in the orebody and we

PAGE 36 MARCH 2017 AUSTRALIA’S PAYDIRT

still believe in the orebody. We also “I think we’re in the driving seat
believe that if a mine gets shut down
you lose momentum and it costs for future co-operation on other
you a lot of time. I shut the whole
mine for three months in 2014 on things in their 5,000sq km package.
the back of safety concerns and it
took us a year to get back to steady We’re looking for a win-win and at
state.
the same time adding some low-
“A mine can’t lose its rhythm be-
cause you know what you find when cost, long-life, quality ounces which
you start a mine again? You’re actu-
ally back where you were, so you’ve we can see coming in the next 24
just got to work through it and carry
on.” months.”

Gold Fields started to see the Holland declared Australia the
results of its two-year commitment
to improving mining operations world’s “premier mining destina-
at South Deep towards the end of
2016. This included a 9% year-on- tion”, singling out the country’s work
year increase in new mine develop-
ment and a 47% increase in both overall ethos, safety record and innovative
development and gold production.
approach to mining as key reasons
Growth capital of R2.28 billion (about
$US173 million) will be required over the to keep investing Down Under.
next six years to allow Gold Fields to
achieve its steady-state production tar- Gold Fields has set aside up to
get, with the bulk of this capital dedicated
to underground infrastructure. $US100 million for brownfields ex-

“The change in the mining method and ploration around St Ives, Granny
the change in the geotechnical design
that we implemented in the middle of Smith, Darlot and Agnew/Lawlers
2015 was a game changer and it’s really
changed our outlook on the future,” Hol- Nick Holland in 2017.
land said.
Unlike other majors which ex-
“I think the operators are much happier
with it, it’s safer and I think the morale company’s West African operations ited Australia about five years ago when
at the mine, as a consequence, has im-
proved. People are starting to get bonus- slipped 5% to 644,000oz in 2016 due to the gold price came off, Gold Fields re-
es again and a winning culture is starting
to emerge. But, as we keep saying, we’ve lower production at the Tarkwa and Da- mained and acquired the coveted Gran-
got a long way to go and we’re not there
yet.” mang mines, but all-in costs went down ny Smith mine from Barrick Gold Corp.

Also following Mining Indaba, JSE- 3% to $US1,020/oz. “We were able to buy an asset that we
listed Gold Fields announced normal-
ised earnings of $US191 million for Gold Fields recently committed to in- got a payback on in two years and the
2016, compared to normalised losses of
$US45 million, giving shareholders a to- vesting $US1.4 billion, including project endowment potential we’ve converted al-
tal dividend of R1.1/share.
capital of $US341 million, on extending ready is enormous; we’re going to double
Gold production for the calendar year
totalled 2.146 moz, including 556,000oz the life-of-mine at Damang in Ghana by the resource this year,” Holland said.
in the December quarter, across the
company’s suite of operations in Africa, a further eight years. “I understand the strategic intent [be-
Australia and South America, falling
at the upper end of guidance. AISC of Over the revised life-of-mine plan, hind Barrick pulling out], they were trying
$US980/oz was below guidance.
165mt will be mined and 32mt will be pro- to shrink to greatness as it were, but we
Net cash flow for 2016 was $US444
million, up from the $US254 million gen- cessed at an average grade of 1.65 g/t, were a beneficiary of that process. Could
erated in 2015. South Deep contributed
just $US12 million after losing about resulting in production of 1.56 moz at an we have done a bit more? Maybe, but I
$US80 million in the previous year.
all-in cost of $US950/oz. think I’m reasonably happy with where
“I couldn’t really ask for more out of the
operations,” Holland said. “It takes a lot “I’m very excited about Damang,” Hol- we are. We’re the third largest in Austral-
for me to say that, but I think our teams
in the regions have done themselves land said. “This is a big orebody, but ia…who knows, we might get up to No.1
proud. It’s been that kind of year.”
we’re taking it in cuts and by doing that or No.2, but it’s not about that. It’s about
Attributable gold production from the
we de-risk the technical and financial sustainable cash flow that is generated

parameters, whereas previously the idea safely; we can do that in Australia.”

was ‘big is beautiful, let’s have a massive Holland sang the praises of Australia’s

pit’, but you end up with massive commit- regulators – and also those in South

ment to stripping before you see the ore. America where Gold Fields has an op-

“It’s going to cost less to get there and erating mine in Peru and a development

you’re left the optionality open to do a project in Chile – and was hopeful those

series of other cuts, similar to what the in South Africa would one day take note.

Super Pit in Australia has gone through. “We’ve got to educate our guys here,”

That for me is a much better way to mine Holland said. “The rules here and how

this.” we keep tampering with the rules here

While investor focus was on Africa dur- are, honestly, beyond frustrating. We re-

ing Mining Indaba, Holland was not going ally need to do something different.

to miss an opportunity to spruik his com- “We make long-lead time decisions so

pany’s Australian operations, which ac- we can’t keep having the rules changing

counts for 43-44% of group production. all the time; we need to know what the

Production of 942,000oz gold exceed- rules are. Sometimes we [the miners]

ed the original guidance for 2016 and late maybe aren’t taken as seriously as we

last year Gold Fields took a 50% stake should because we’re the ones affected,

in Gold Road Resources Ltd’s 6.2 moz but I think the more advocacy that can

Gruyere project in the Yilgarn Craton, take place on this matter by independent

Western Australia. parties the better.”

“We love the geology and we love the – Michael Washbourne
area, so for us it wasn’t just about the val-

ue creation; it was the strategic position-

ing of Gold Fields in what could be one of

the most prospective belts over the next

50 years,” Holland said.

AUSTRALIA’S PAYDIRT MARCH 2017 PAGE 37

INDABA REVIEW

AngloGold to grow within

While others are in the mood The company has guided group
and balance sheet position
to entertain M&A opportunities, production of 3.6-3.755 moz gold
AngloGold Ashanti Ltd is not.
and total cash costs of $US750-
The gold major has recon-
structed its balance sheet in the 800/oz and AISC of $US1,050-
last three years and returned to
paying dividends in 2016, giving $US1,100/oz.
shareholders the equivalent of
$US0.10c/share after nearly dou- Capital expenditure of $US900
bling cash flow to $US278 million.
million and $US1 billion is antici-
Net debt has been reduced to
$US1.92 billion as AngloGold’s pated to be spent across its port-
self-help measures to contain
costs and improve efficiencies folio.
start to pay off.
While sticking to its guns on rein-
AngloGold chief executive Srin-
ivasan Venkatakrishnan (Venkat) vesting in its own business, Anglo-
said positive cash flow momen-
tum was expected, with the company lev- Gold made a small investment in
eraged to gold and oil prices.
Australian junior Orinoco Gold Ltd.
Venkat said efforts were under way to
unlock the real value within AngloGold’s AngloGold entered a strategic
current portfolio.
partnership with Orinoco by mak-
“Quite clearly the industry is coming to
a point where companies either need to ing a cornerstone investment in the
reinvest in their business or, as we have
seen increasingly, turn to M&A to sure latter to the tune of $5.9 million.
up and improve your portfolios. We are
firmly in the reinvestment camp with a Srinivasan Venkatakrishnan The commitment gives Anglo-
pipeline of very good high return, broad
field opportunities that will continue our Gold a 15% stake in Brazil-focused
production rates in the medium to long
term,” Venkat said at Mining Indaba. These will see production increases Orinoco.

Although AngloGold has expressed and more importantly life-of-mine exten- Additionally, a regional exploration
a commitment to its existing projects,
which are spread across Africa, Latin sions,” Venkat said about Siguri and Sa- JV over the Faina goldfields, which sur-
America and Australia, any investment
decisions will be carefully considered diola. rounds the Cascavel gold mine has also
and not necessarily based on growing
production, “rather for margin enhance- The growth capital invested at Siguri been entered.
ment”.
and Sadiola can be self-funded by An- For expenditure of $US9.5 million over
“As we often say: ‘If someone gave us
two holes to choose from; one showing gloGold. three years, AngloGold can earn up to
production growth and the other margin
improvement, both sustainable for the Furthermore, the company is expect- a 70% interest in Orinoco’s Faina gold-
long term, we will go with the margin
improvement option’. We are strategi- ing to increase capital expenditure at fields.
cally positioned for sustainable cash flow
giving us the balance sheet flexibility Iduapriem (Ghana), Geita (Tanzania), Meanwhile, AngloGold will also have
to make decisions on our future invest-
ments,” Venkat said. Kibali (DRC), Cuiaba (Brazil) and Sun- the right to earn-in and or acquire 50% of

Two initiatives already committed to by rise Dam (Australia). the Cascavel mine, subject to terms be-
AngloGold are focussed on opening up
new processing capacities at Siguri in “Increases in sustaining capital will ing agreed upon.
Guinea and Sadiola in Mali.
help us access new orebodies as is the AngloGold’s investment will help re-
Sadiola, a JV with IAMGold Corp, is
subject to agreements with the relevant case with Iduapriem in Ghana or im- start Cascavel and accelerate unlocking
authorities in Mali.
provements to stability as is in the case the potential at Faina.
“The opportunity is there to process
different ore types, namely sulphides. at the Cuiaba mine in Brazil,” Venkat Orinoco managing director Mark Pap-

said. endieck said the company would retain

“Both Geita and Kigali are in the early exposure to any upside AngloGold can

phases of ramping up production from deliver at Cascavel and Faina.

underground mining, so we are investing “AngloGold’s cornerstone investment

now in opening up assets to those ore- provides Orinoco with a significant cash

bodies.” injection to help advance the recom-

The efforts being made at Sunrise mencement of operations at Cascavel,

Dam involve work around improving which remains the company’s primary

plant recoveries, while the small amount focus. We’re now close to finalising a

of money allocated to Tropicana – a JV detailed plan to resume operations and

with Independence Group NL – is aimed we remain very focused on recommenc-

at higher volumes and better costs in the ing mining at Cascavel in the near-term,”

future. Papendieck said.

“We also continue to look for ways, as “The potential for AngloGold to nego-

we did recently with our Tropicana mine tiate an earn-in agreement for the Cas-

in Australia, to unlock value by making cavel mine over the next few months also

fundamental but lasting improvements provides Orinoco with additional upside

through innovation rather than a large potential.”

cheque book involving large capital in- – Mark Andrews
vestment,” Venkat said.

AngloGold successfully completed a

plant expansion to 7.5 mtpa at Tropicana

in the December quarter and by the end

of this calendar year capacity is on track

to be further expanded to 7.9 mtpa.

PAGE 38 MARCH 2017 AUSTRALIA’S PAYDIRT

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INDABA REVIEW

The Australia-Africa opportunity

As the Australian Government em- place for an “African hub” to be es-
barks on a contemporary foreign
policy strategy, Senator Lynda Reyn- tablished.
olds’ presence on the Africa conti-
nent in February was timely. Various Australian companies,

Reynolds attended Mining Indaba, technical colleges, government
Cape Town, representing Federal
Minister for Resources Matt Cana- departments and universities are
van, demonstrating the seriousness
in which Australia places its relation- currently running individual pro-
ships with African countries.
grammes, such as in the education
“I think that there are so many
more future opportunities in terms and training spaces, and while all ap-
of developing and deepening that
relationship but what has really im- pear to be highly successful, Reyn-
pressed me is seeing that business
is clearly leading diplomacy here on olds said bringing all these elements
the ground in Africa and sometimes
the power of business is underestimat- together to pursue Australia’s inter-
ed,” Reynolds told Paydirt.
ests in Africa made sense.
Australian businesses have interests in
40 countries in Africa, many of which are “What I have seen here is that the
developing nations and where safety is
often a concern. template is in place, it is now about

Therefore, business often leads the capturing it,” she said.
way, particularly in the mining sector, in
addressing security issues and engage- “I think WA is ideally placed, with
ment with local communities.
Senator Lynda Reynolds so many West Australian compa-
“We should be learning much more
from that at a diplomatic level but also nies that have been operating here
government level and look at new and
smarter ways in this new world for gov- mean the most to Australia in 10 years for many years; they know the countries
ernment to support industry,” Reynolds
said. and what steps should be taken to max- they operate in, they know the communi-

DFAT and Austrade have worked imise Australia’s trade and investment ties, but we also have the skill set, pro-
closely with Australia’s mining fraternity
in Africa, which has done much to en- and commercial opportunities. fessional training and trade training to
hance the country’s reputation on the
continent. In light of attending Indaba, Reynolds deliver.

Reynolds said Australian mining com- intends to share some thoughts on Africa “With the downturn in construction,
panies’ commitment to ensuring local
communities and environments are with Australia’s Foreign, Trade and Min- we have surplus capacity in terms of our
served and protected to the highest de-
gree, and the capacity-building initiatives ing ministries. workforce, not only in professional trades
implemented was something to admire.
What stood out most for Reynolds was but supply chain management and se-
While solid relationships have been
forged in Africa, strengthening ties re- the number of projects Australian com- curity and those sorts of things. I think
mains critical to Australian companies’
prospects of doing business on the con- panies are involved in throughout Africa. WA, with all of those skills, would be ide-
tinent.
The high level of mining activity offered ally placed to be a self-appointed African
Reynolds sees scope for Australia to
have a greater impact in Africa beyond further opportunities in other industries, hub,” she said.
the mining sector and said capturing
what is happening on the ground was an Reynolds said. Building on existing links made in the
important component in enhancing the
White Paper on Australia’s foreign policy. “There are a lot of opportunities to un- mining industry and successfully execut-

The deadline for contributions to the lock here in the mining sector; services, ing a model, which delivers Australian
White Paper was February 28, with
the Government asking people prepar- agriculture, training sectors; there are expertise in training, education, explora-
ing submissions to consider a range of
ideas, including which countries would opportunities but it is not going to just tion, capital raising through to develop-

happen,” she said. ment and mine closure, would then serve

To fully realise the scope of opportu- as a template to tap into other sectors

nities for Australians to participate in, such as agriculture, services and educa-

Reynolds has called for a holistic ap- tion, according to Reynolds.

proach to engagement in Africa. “The opportunities here are very excit-

“I think we should collectively look at ing,” she said of Africa.

what industry is spending, what govern- However to capitalise on the opportu-

ment is spending, what NGOs are spend- nities industry needed to collaborate bet-

ing and how can we take a fresh look at ter to maximise their potential, Reynolds

how we use that money,” Reynolds said. said.

“The mining industry is the perfect “They can still work together in a non-

place to do that because it has done well competitive environment for a common

with 600 projects that Australians are interest,” she said. “Industry is leading

working on throughout Africa; the eco- here in Africa and I think it will be an extra

nomic potential for all of those communi- great step if industry now takes leader-

ties is enormous. So, instead of trying to ship in this and, through politicians like

focus on the entire continent, let’s have myself, say what we should be doing.

a look at how we can work with mining “Industry plays a part, government

companies, in-situ, and also state gov- plays a part, diplomats play a part, NGOs

ernments and communities and really play a part, the tertiary sector plays a

make a difference in every one of those part but it is not something that govern-

mine sites.” ments can do on their own.”

Separated only by the Indian Ocean, – Mark Andrews
Western Australia is the closest Austral-

ian state to Africa and perhaps the best

PAGE 40 MARCH 2017 AUSTRALIA’S PAYDIRT

Anglo puts faith in innovation
to build resilience

With the compa- To achieve this, Anglo centrating the mine” programme has
ny’s asset and American is looking to seen ore-to-waste ratios reduced, result-
balance sheet restruc- other industries for inspi- ing in the mine beating production guid-
turing almost com- ration. ance in 2016.
plete, Anglo American
plc chief executive “We have adopted Anglo American is also tackling the
Mark Cutifani is now open innovation, bring- community-sensitive issue of water.
turning to innovation to ing together experts
build further resilience from academia, the min- “Some 80% of our operations are in
in the 100-year-old ing industry and other water-scarce regions,” Cutifani said.
business. industries – including oil “This is why we are working towards
& gas, technology and building the ‘waterless’ mine. Through
Innovation has been aerospace – to develop innovative and existing technologies we
a persistent theme step-change thinking, are investing in a number of ways to con-
throughout Cutifani’s technologies and pro- serve, and where possible, eliminate, the
various presentations cesses that bring all use of freshly drawn water from our min-
to the Mining Indaba these pieces together,” ing processes. In 2015, 64% of our water
but this year’s address Mark Cutifani Cutifani said. requirements were met by recycling of
contained the most water. We want that figure closer to 95%.”
details yet on Anglo American’s plans for And, he warned, the
the next decade. rest of the mining industry would have to Ensuring Anglo American stays on top
adopt a similarly collaborative approach of the big data revolution is also key to
Cutifani – whose restructuring plans if it was to prosper. Cutifani’s innovation platform. He said
allowed Anglo American to become the data, robotics and machine learning were
best performing stock in the FTSE 100 in “You’re kidding yourself if you think IP being used to create “intelligent mines”.
2016 – said innovation was necessary if will protect your future.”
the company was to withstand the uncer- “To reduce maintenance spending
tainty in present markets. Cutifani said the new approach was and reduce safety risks, we are using
already delivering innovation in mining. advanced analytics to interrogate exist-
“The disruption that we see all around Low-profile tunnelling at its Twicken- ing data and to estimate the probability
us – whether it be social, political, tech- ham platinum mine in South Africa has of component failure in some of our most
nological or economic – can either make increased roof stability and reduced important mining equipment,” he said.
us obsolete or can propel us into the fu- the chances of collapse. At part-owned
ture,” Cutifani said. Kumba Iron Ltd’s Shishen iron ore mine, – Dominic Piper
also in South Africa, the company’s “con-

Moyo predicts US recession

Global economist and author Dambisa ulation of 7.5 billion. sections of the population
Moyo told delegates at Mining Inda-
ba a recession in the US is just around “Across the emerg- employed in sectors where
the corner.
ing markets there is technology and automation
“I do believe that the US will be in a
recessionary environment; my guess will real concern about is having a real impact.
be by the end of 2018,” Moyo said.
what the implications With the global popula-
Moyo’s prediction is in stark contrast to
US President Donald Trump’s ambitions of automation may be tion growing apace, Moyo
to “make America great again” and while
job creation is key, the move towards au- for drivers but also said if the situation was mis-
tomation in the country will test his strat-
egy, with an estimated 47% of jobs in the manufacturing, and managed there was a risk
US to be replaced by technology in the
next 10 years. of course, the mining of multiple generations of

The increasing influence of technology industry in particular,” people who would be un-
is not only a factor for people in the US
to consider, it is something that will need Moyo said. educated and unqualified
to be integrated carefully into societies
worldwide, particularly with a global pop- Automation and to participate in the global

technology have al- economy as it was struc-

lowed mining com- Dambisa Moyo tured today. Moyo called
panies to drive down Therefore,

costs and clean bal- on governments to think

ance sheets, while safety performances hard about the types of public policies to

have also been improved. be implemented.

Moyo said this was a challenge for gov- – Mark Andrews
ernments and how they respond for large

AUSTRALIA’S PAYDIRT MARCH 2017 PAGE 41

INDABA REVIEW

Calls to scrap RSA mining bill

Prominent mining lawyer Peter Leon is effectively an export licensing sions on the MPRDA
has called for the South African Gov- system,” Leon said.
ernment to scrap the MPRDA amend- amendment bill and
ment bill. “I think this is an unfortunate
series of circumstances and I Mining Charter be
The bill was introduced in parliament think the right thing to be done is
four years ago and although the Govern- for the bill to be withdrawn and a held back any longer.
ment indicated it would make a decision fresh start made because there
on the bill in 2016; no decision has been are things in the bill that will have “The Government
made yet. impact on investing money.
has failed to finalise
Leon, global co-chair of Africa prac- “Mining companies investing
tice at Herbert Smith Freehills, said there in greenfield operations will be any decisions and I
were parts of the amend-
ment bill which were un- decimated. Under think the issues are a
constitutional and there- the circumstances
fore no more time should they have no idea bit more fundamental.
be wasted in disputing its what criteria the Minister will
implementation. apply. That is the problem; This bill was intro-
that creates uncertainty in
Leon argued that the ex- terms of your investment. I duced in parliament
port restrictions proposed think that is a big issue and I
under the bill – whereby think that needs to be recon- Godfrey Oliphant in 2013 and is still
mining companies have to sidered.” there,” Leon said.
designate where beneficia-
tion would occur and won’t Leon’s comments came Department of Min-
be able to export minerals Peter Leon as the eyes of the resources
without ministerial approval – were ill- eral Resources, South Africa, deputy
placed. world were on South Africa
during the Mining Indaba in Cape Town. minister Godfrey Oliphant welcomed fur-
“That takes you into World Trade Or-
ganisation territory, that takes you to With the resources world awakening ther discussions with Leon, however, he
agreements on tariffs and trade, which from a “nuclear winter” and people ready
to invest again, South Africa is at risk of defended the Government’s position at
missing out on its slice of the pie if deci-
this point in time.

“We have attracted a lot of investment

in this country before [and can do so

again],” Oliphant said.

“It is constitutional to do what is in the

national interest. Our industry is not in a

crisis, there are challenges we face, but

there is no crisis,” he said.

– Mark Andrews

China still keen on Africa

Chinese capital is available for “You need to be talking to the
mining projects in Africa, a panel
of investors told Mining Indaba del- right investor because the perfect
egates.
investor in your mind... Chinese
However, courting investment is
not easy or straightforward as Chi- investors are different, they have
nese investors scope the globe
broadly to find the right assets and different shareholders and so you
projects, AXIS Capital Advisory man-
aging director Huang Haiwei said. need to be talking to the right peo-

“Africa needs to compete with oth- ple.
er regions for investment capital,” he
said. “In terms of packaging, I think

Haiwei said investment opportuni- you need to articulate the key mes-
ties in Latin America and Australia
were on the radar of Chinese inves- sages of your project and make it
tors who were keen on propositions
which offered them the opportunity crystal clear, so that Chinese inves-
to participate in construction and off-
take of deals. tors can understand, that is very

Haiwei said it was sometimes difficult important.”
for companies to attract financing be-
cause Chinese investors were so differ- China ENFI vice president Wei
ent on many levels. He urged companies
looking to the Chinese market for funding Jia Ming said his engineering group
to prepare well.
Sailing Capital director Xi Xi, China ENFI vice was open to funding African pro-

president Wei Jia Ming and AXIS Capital Advisory jects.

managing director Huang Haiwei reiterated China “China’s appetite for Africa is still

was still keen on investing in Africa’s mining sector there,” he said, using Haiwei as an

interpreter.

“Chinese investors are different in cul- “ENFI is open to funding projects [in

ture and language [among other things],” Africa]. We are targeting the right groups

Haiwei said. of people and will engage in a manner

“Three points are important to remem- that is systematic,” Ming said.

ber; marketing, packaging and engage- – Mark Andrews
ment.

PAGE 42 MARCH 2017 AUSTRALIA’S PAYDIRT

South Africa targets junior push

The South African Government is hop- of Africa during the last exploration boom so far it is Australian small caps which
ing the increased junior company due to a dysfunctional regulatory system are among the most active juniors in the
presence at this year’s Mining Indaba is and difficulty in accessing ground. country. In the Northern Cape, Orion
a portent for renewed interest from the Gold Ltd is resurrecting the Prieska base
sector. However, with the country’s MPRDA metals mine while on the Central Rand
amendment act and Mining Charter re- goldfield, West Wits Mining Ltd has be-
Mining Indaba managing director Alex view set for completion this year, Jacob gun production from its Soweto Cluster
Grose said mining company participa- Zuma’s Government believes the regula- project, Peninsula Energy Ltd is explor-
tion was up more than 50% at this year’s tory environment will attract junior min- ing the Karoo uranium project and White
event. Australian, Canadian and British ers and explorers back to Africa’s largest Rivers Exploration Pty Ltd is in JV with
junior miners were thick on the ground in mining economy. Harmony Gold Mining Co Ltd over the 11
Cape Town and South Africa is desper- moz gold EJV project in the Free State.
ate to entice them to stay in the country Among its strategies is a new 10-year
rather than invest in the exploration hot- pre-competitive data campaign to estab- PwC Australia Africa practice leader
spots of East and West Africa. lish the country’s remaining mineral po- Ben Gargett told Paydirt the change
tential. in market sentiment would allow junior
South African Minister of Mineral Re- companies to realise long-held plans for
sources, Mosebenzi Joseph Zwane said Andrew Lane, Africa Mining Leader for development stories across the African
the Government was conscious of the Deloitte, welcomed Zwane’s comments. continent.
opportunity both the current investment
climate and Cape Town’s hosting of Min- “The new era of junior miners and “The interest in Africa has always been
ing Indaba offered. commitment by government to invest is there and now the market has turned jun-
definitely positive and noble, but is also iors are beginning to do what they prom-
“The Government has a view that there indicative of the fact that larger investors ised and ultimately that will be a good
is a new era for junior mining upon us… have disinvested over the past few years thing for the continent,” Gargett said.
it will have a special focus on junior min- and we do need big capital to come
ers,” Zwane said. back,” Lane said. – Dominic Piper

South Africa failed to attract the same The Zuma Government may have
level of junior investment as other parts hopes that domestic companies lead
the new wave of junior development but

AUSTRALIA’S PAYDIRT MARCH 2017 PAGE 43

INDABA REVIEW

Bulls v Bears: final score

In a resources market that is turning for the better, a panel of experts gave their thoughts on the reasons for being bullish and bearish.
Panellists included JP Morgan Global Natural Resources Fund portfolio manager Neil Gregson, Van Eck portfolio manager Charl
Malan, Denham Capital director Carolyn Donally, Colonial First State Global Asset Management head of global resources Joanne
Warner and BCA Research commodity and energy strategy vice president Robert Ryan

After a prolonged period of depressed that space has yet to peak, according to high on Colonial’s radar and not entirely
commodity prices, the outlook for re- Gregson. because of the gold price ($US1,241/oz
sources companies is as good as it has at the time of print).
been for a while. Government policy in places such as
Indonesia and Philippines is drawing at- “I like gold because there are lots of
Even iron ore players, which just over tention to the nickel industry, with prices projects, the barriers to entry are pretty
a year ago suffered through the lowest up from $US8,200/t in February 2016 to low and if you find a really good gold de-
prices in a decade, have reason to be $US10,900/t at the time of print. posit it doesn’t take a lot of capital to get
optimistic. into production compared to a big copper
Further afield, the decision of Kazakh- porphyry,” Warner said.
“There are positives on a lot of the com- stan’s national uranium operator – Ka-
modity spaces as one by one the supply zAtomProm – to reduce production by “There are lots more choices when
is tightening up,” JP Morgan Global Nat- 10% is behind some positive sentiment it comes to gold and there are lots of
ural Resources Fund portfolio manager driving uranium companies. [good] management teams and some
Neil Gregson said. “Our view would be truly insightful geologists in the world and
that we would be more constructive on The situation in Kazakhstan is simi- we will follow that track record as a way
the sustainability of quite high iron ore lar to that in Indonesia, Philippines and of making money.”
prices for longer, ultimately $US80/t is China – where reductions in the supply of
encouraging [for exploration], as well as coking coal has had a positive impact on The quick turn into production and
restarts but I think we are going to enjoy global pricing – with few people anticipat- subsequent cash flow and returns is an
[good] margins in the iron ore business ing such circumstances occurring. attractive proposition for Colonial, while
for a while.” private equity providers such as Denham
Joanne Warner, Colonial First State Capital aren’t so sure about the “funda-
More recently Gregson has been at- Global Asset Management head of glob- mentals” keeping the gold price solid and
tracted to the fertiliser space and is al resources, said government policy was are therefore more inclined to look at
keen on investing in early stage potash a major influence in investment decisions other commodities.
and phosphate opportunities around the for Colonial.
world. Denham Capital director Carolyn Don-
“For us, the key thing is to find compa- ally said the firm was not mad on pre-
Early stage nickel plays should also be nies that are doing something under their cious metals and preferred to invest in
keenly watched, however, the interest in control that will create wealth,” she said. the base and alternative metals spaces.

Such a strategy places gold stocks

PAGE 44 MARCH 2017 AUSTRALIA’S PAYDIRT

Donally said Denham took a long- put onto the world market.”
term view on investments and would
buy assets with the strategy of hold- If the border adjustment tax
ing onto them for a period of time.
order did become law in the US,
“Therefore, it is hard for us to be
bearish on commodities,” Donally the local currency will rally in the
said.
range of about 10% in addition
“We like zinc, we know that prices
are running at the moment and we to the 5% already being experi-
are pretty fond of lead and copper.
We hold some of the specialty met- enced, Ryan said.
als where it makes sense to do so.
In our portfolio, we have a niobium “That has tendency to depress
asset, tin asset and rare earths. On
the coal side, we find thermal coal demand ex-US for commodities
very difficult but we do like the met-
allurgical coal space. Overall we are generally because these things
pretty constructive on commodities
but very much in certain areas.” are priced in dollars. You are

From the panel assembled, there were increasing the dollar cost and
many commodities to be bullish about,
however, BCA Research, commodity and demand is going to go down.
energy strategy vice president Robert
Ryan said while markets appeared to be You also are making it more eco-
well supported in the short term, circum-
stances and potential policy changes in nomical to produce commodities
the US should not be ignored.
because the local cost of pro-
Ryan said it was the first time for a
significant period that there was a syn- duction will go down. If you are
chronised upturn in the major economies
in the world but the current rise could be Robert Ryan in Canada, the Canadian dollar
short-lived.
depreciates relative to the US
“The big complicated factor that could
derail a lot of this revival on the demand dollar. In Russia the rouble depreciates

side in particular is the border adjust- relative to the US dollar, so your cost side

ment tax [US President Donald] Trump is is going down, you are incentivised to in-

initiating. This will have ramifications for crease your production and sell for dol-

the commodities sector if it is success- lars. It is the perfect arbitrage.”

ful,” Ryan said. Potential changes to US tax policy

“He [Trump] is talking about increas- makes Ryan bearish about global com-

ing taxes on imports by as much as 20%, modity prices, even more so because

immediately anything that is faced with the odds of new tax regimes being imple-

that tax will see a price increase of about mented are 50:50 at the moment.

20%, roughly speaking. What it also en- – Mark Andrews
tails is the subsidy of exports, so domes-

tic producers of commodities in the US

having an advantage exporting their out-

Exploration not for Denham

Despite taking a long-term view on in- think as relatively long-term money; our and Sandfire Resources NL early was
vestments in the resources sector, money is not that long, nobody has that enough encouragement to pursue its
Denham Capital director Carolyn Donally patience,” Donally said. strategy of supporting companies and
sees no value in backing early stage ex- projects on the rise.
ploration plays. “For us, early stage exploration [holds]
very little interest. We far prefer pre-pro- “From the producers bringing on new
Rather the earliest point at which Den- duction assets where we can put in the developments or on the brink of produc-
ham is prepared to take an interest in a construction capital and take them into tion and all the way back to early stage
project is at pre-production phase. production…that is where we see big exploration, we have had a number of
value. successes over recent years,” Gregson
Donally said there was little interest in said.
the market for projects in their infancy “We see that buyers of mining assets
and while Denham’s private equity is are looking for producing assets, they “We are quite happy to take that risk
deemed long-term money, stomaching are willing to pay a lot more than the sum for the big prizes and resource growth.
the gradual build from discovery confir- total of the acquisition cost plus the con- We also do invest in development phase
mation to producing asset was not for the struction capital to get those producing [projects]. We totally agree that various
firm. assets. What that means for us is that we companies tend to go to a quieter… weak
value the risk of taking assets through to period during that development phase
She highlighted the fact that the last production differently than buyers of pro- but we would come in and invest, usu-
of the top 10 world-class copper produc- ducing assets do. That is our sweet spot, ally after their announcements of pro-
ing assets was discovered in the 1980s that is what we are looking for,” she said. ject overruns and capex overruns and
as justification for Denham’s strategy to therefore share price disappointment, so
keep its focus on projects at more ad- Colonial’s Joanne Warner said her firm we do get involved in the development
vanced stages. was keen to fund projects right through phase as well.”
the food chain; a similar position to that
Donally said juniors could drill as many taken by JP Morgan. – Mark Andrews
holes as they liked, however, it would
take an “incredible” discovery to reso- JP Morgan’s Neil Gregson said the
nate with people from Denham. company’s recent success in taking on
the likes of Australia’s Sirius Resources
“For a private equity fund for what we

AUSTRALIA’S PAYDIRT MARCH 2017 PAGE 45

INDABA REVIEW

Bold new beginnings for Rio

All eyes were on new Tinto’s 46.6% stake in the essential to our success.”
Rio Tinto plc ener- project. The Guinea Gov- Baatar also joined the chorus of visit-
gy and minerals chief ernment controls 7.5%.
Bold Baatar on the first ing mining executives at the conference
morning of this year’s “We are working to fi- to call for greater stability from govern-
Mining Indaba. nalise the transaction,” ments across the African continent.
Baatar said. “We believe
It was Baatar’s first that this provides the best “Given the capital intensive nature of
public presentation opportunity for the devel- mining and the long payback of our in-
since assuming the role opment of the project.” vestment, it is critical that we are able to
in December, having operate in jurisdictions that provide sta-
been thrust into the job Baatar, a Mongolian na- ble investment frameworks,” he said.
after predecessor Alan tional who joined Rio Tinto
Davies was sacked for in 2013, told delegates he “We all know that without mining, many
his alleged involvement wanted to see more global of the things that we take for granted in
in a corruption scandal Bold Baatar opportunities for Africans our daily lives would not exist. Without
over the company’s across the company. raw materials like iron ore, copper, alu-
Simandou iron ore project in Guinea. minium, salt, borates, even uranium and
Rio Tinto has been op- gold, there would be no smart phones
Davies and legal and regulatory affairs erating in Africa for more than 40 years – the catalyst for Africa’s technological
group executive Debra Valentine were and is currently mining bauxite, uranium, leapfrog.”
shown the door after leaked emails from ilmenite and zircon across six countries
2011 detailed an alleged $US10.5 million on the continent. Baatar said he expected the industry
payment to help Rio Tinto secure owner- would continue to be tested over the next
ship of the project. “I am always very proud when I meet year as markets remained volatile, but
a fellow Mongolian at one of our opera- he insisted there would no complacency
At Indaba, Baatar said little about tions, or as recently happened, a Zim- from his company despite rebounding
Simandou, one of the world’s largest un- babwean at our Kestrel site in Australia,” strongly in 2016.
developed iron ore deposits, other than Baatar said.
the briefest of updates on the progress “Volatility is here to stay and recent
of a non-binding agreement signed with “I will be championing global talent geopolitical developments mean that we
Chinalco in October. mobility across the operations I am re- have to ensure that we are resilient for
sponsible for. This is something I take all macro-economic conditions,” he said.
State-owned Chinalco, which owns to heart. Diversity is important. Sharing
41.3% of Simandou, is set to acquire Rio best practices is important. And growing – Michael Washbourne
our global talent across our business is

Consultants ready for action

Service providers such as SRK Con- About 40% of SRK’s sultancy firms, has had to
sulting are “cautiously optimistic” current revenue stream is
more work is headed their way, particu- generated from projects adapt to a change in client
larly in Africa. outside of Australia, with
about one quarter of that mentality over the last few
“Everybody still talks about a difficult work based in Africa.
climate for mining, but certainly activity years.
seems to be returning and the interest is Noppe, who was born
there,” SRK Australia corporate consult- and raised in South Africa, “This wouldn’t be specifi-
ant Mark Noppe told Paydirt. said mining consultancy
work on the continent was cally in Africa, but some of
“From talking to other service provid- building as the industry
ers, like laboratories or drilling compa- emerged from a prolonged what we’re seeing with cli-
nies, they are more active. For us that downturn.
obviously means exploration work is ents is they’re trying to get
happening, but it also means information “There’s over 50 coun-
is beginning to flow and when information tries in Africa, which is work done for less money,”
flows then much of what we do is analyse phenomenal, and each country has its
information/data and turn it into what that own unique opportunities and challeng- he said.
means technically and economically. es,” Noppe said.
“What that means is
“We’re cautiously optimistic without “If you break it down into the subsets,
being over the top.” there are still some frontiers and there they’re not necessarily try-
are challenges in some countries more
Founded in the 1970s, with origins in so than others. But, it’s certainly a smor- Mark Noppe ing to hold you down on
southern Africa, SRK employs more than gasbord of opportunities.” price, they’re trying to care-
1,400 people across 45 offices on six
continents. Noppe said SRK, along with other con- fully design what services

can they do internally, so for us it’s how

can you add value without necessarily

doing all the work for them?

“You’re now providing technical peer

review and guidance, or perhaps some

form of assurance, and not necessarily

doing all the work yourself.”

– Michael Washbourne

PAGE 46 MARCH 2017 AUSTRALIA’S PAYDIRT

Iron ore revival on the ropes

Miners and investors have been “Properties sales are al- fundamentals, we want to be-
warned not to expect the resurgent ready declining and while
iron ore price to keep tracking upwards. we think developers will lieve in supply and demand,
still follow through from
Iron ore was trading at an 18-month last year and you’ll see but if you look at typically what
high of $US87.50/t at the time of print, good construction activ-
up more than $US30/t since the start of ity in the first half, we’re happened over the last few
November. worried how rapidly things
might come off in the sec- months, we had rising port
According to a panel of experts, an ond half.”
improving Chinese economy was the stocks and we had rising pric-
key catalyst behind the revival, however, “But even if prices do
Macquarie Bank division director Ian come off from $US80/t it’s es,” Naidoo said
Roper is not convinced the price is sus- still a great story of high
tainable. sustainable margins, certainly for the “There’s something that’s
bigger miners.”
“Supply is now once again abundant countered the fundamentals
and that’s why we think prices will be Roper added he was struggling to un-
coming under pressure, but equally we’re derstand why the iron ore price was hold- that we expected to see. And,
in a way healthier situation than we were ing up this high, particularly with many
this time last year,” Roper said. port and steel mill inventories reportedly Ian Roper with most of the comments we
at record levels. got from customers and ana-
“I’m getting a bit more cautious on
Chinese demand. Right now I think, if Kumba Iron Ore Ltd logistics general lysts, they’re still trying to fig-
anything, things are looking a bit too hot manager Anesan Naidoo said certain as-
and they’re actually looking to cool things pects of the price rise had not followed ure out what is happening as well.”
down a bit. Steel and iron ore were at the historical trends and he also was unable
forefront of the reacceleration last year to explain why this was the case. Elias Scafidas, chief commercial of-
and if there is a slowdown they’re likely to
be at the forefront of that as well. “Naturally we want to believe in the ficer at Rio Tinto plc’s Simandou project,

expects about 40mt additional supply to

come online in 2017.

“Over the last few years we’ve seen

domestic supply decrease from around

400mt to a low of about 230mt, and we’re

currently sitting around 260mt,” he said.

“There’s still a lot of uncertainty and

I think that means we need to continue

to focus on driving a strategy to manage

our way through these uncertain times.”

AUSTRALIA’S PAYDIRT MARCH 2017 PAGE 47





INDABA REVIEW

Paydirt has been a mainstay of the Mining Indaba since the conference began in Cape Town 25 years ago, cementing
its reputation as the best conduit between Australia and the African continent.

The Paydirt & Friends dinner once again proved one of the most important events on the Australian Indaba calendar.
More than 80 guests from the industry and government joined chairman Bill Repard and the rest of the Paydirt team on
the Sunday evening before the conference for a special dinner at the V&A Hotel, on the iconic V&A Waterfront.

Australia’s heads of mission from throughout Sub-Saharan Africa were joined by executives from many of the ASX-
listed miners, explorers and services companies as well as senior Australian government officials for a wonderful din-
ner of fresh local produce. West Australian Senator Lynda Reynolds was also a guest, during her first trip to the Mining
Indaba festivities.

The dinner proved the perfect start to a week in which Paydirt’s team of six – which included three journalists covering
stories from three countries as well the conference – were pleasantly surprised by the level of optimism among miners
and investors.

PAGE 50 MARCH 2017 AUSTRALIA’S PAYDIRT