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Published by Paydirt Media, 2017-07-05 04:05:48

pd251 July mag web

July 2017 VOLUME 1. ISSUE 251 $11.95

OceanaGold:
Outlook bright with Haile

• Digger & Dealers preview special ISSN 1445-3436
• South Australia conference review 06

9 771445 343007

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CONTENTS

PAYDIRT (ISSN 1445-3436) 5 NEWS 5
Published by Pilbara Minerals has finalised development 21
Paydirt Media Pty Ltd. funding for its Pilgangoora lithium-tantalum
A.C.N. 063 985 133 project in Western Australia. The company
is on track to begin commissioning the
Head Office: mine in early 2018, while studies are also
Suite 9, 1297 Hay St, West Perth under way to assess the viability of an
Western Australia 6005 expanded project. Mark Andrews spoke
P.O. Box 1589, West Perth to Pilbara Minerals managing director Ken
Western Australia 6872 Brinsden about the Pilgangoora project
Phone: (+61 8) 9321 0355 and fundamentals driving the lithium sector
Facsimile: (+61 8) 9321 0426
[email protected] 21 COVER
www.paydirt.com.au Despite sitting comfortably in the upper
echelons of the Australian gold mining
sector, OceanaGold is often forgotten
when considering the larger Australian
Editorial: miners. With operations in New Zealand
Editor: Dominic Piper and Philippines and commercial production
Deputy editor: Mark Andrews starting at Haile in the US, OceanaGold is
Journalists: Michael Washbourne, striving to reach production in the realms of
Jonathon Daly 600,000 ozpa gold. Dominic Piper visited
Art director: Marian Noonan, Haile – the newest mine in OceanaGold’s
Gwynneth Cavilla portfolio – and followed up with a buoy-
Contributors: ant chief executive Mick Wilkes, who was
Keith Goode (Sydney), Brendan Ryan happy to report record EBITDA of $US101
(Johannesburg), Ross Louthean million was posted for the March quarter
while net profit was up 26% to $US53.7
Advertising: million
Advertising manager: Richa Fuller
Subscriptions: Mitchelle Matambo
Phone: (+61 8) 9321 0355
Facsimile: (+61 8) 9321 0426

Pre-press and printing: 28 DIGGERS
Vanguard Press 26 John St, Punters returned to Diggers & Dealers
Northbridge WA 6003 in droves last year and the 2017 show
Member of: promises to be just as exuberant. There
still remains volatility in the mining sector,
Paydirt Media however, the big miners have returned to
Executive chairman: Bill Repard profitability and cut debt, while capital is
Finance manager: Giovanny Jefferson starting to trickle down into the junior end
Accounts/administration: of town. Paydirt dedicates more than 50
Heather Melling pages to the stories likely to be topics of
Conferences: Melita Fogarty, conversation in Kalgoorlie in August
Namukale Nakazwe-Msiska,
Christine Oelschlaeger 82 SAREIC
The South Australian Resources & Energy
July 2017 VOLUME 1. ISSUE 251 $11.95 Investment Conference was hosted by
Paydirt in Adelaide recently. Mining and
ng Australia’s Paydirt exploration activities have tailed off in the
lian State in recent times but it was evident dur-
July 2017 ing the two-day conference there is desire
on from stakeholders to reverse the situation.
orld OceanaGold: Addressing the State’s energy problems
Outlook bright with Haile was also high on the agenda and covered
been from all angles in this edition
ating
metals.
r

ng Forum

• Digger & Dealers preview special ISSN 1445-3436
• South Australia conference review 06

9 771445 343007

Cover image: OceanaGold
chief executive Mick Wilkes in the
company’s Melbourne offices

Member of: 28
Australia-Africa Minerals & Energy Group

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rreepprroodduucceedd iinn aannyy ffoorrmm wwiitthhoouutt tthhee ccoonnsseenntt ooff tthhee
ppuubblliisshheerr.. TThhiiss iinncclluuddeess pphhoottooggrraapphhss eeiitthheerr ttaakkeenn
bbyy PPaayyddiirrtt MMeeddiiaa ssttaaffff oorr pprroovviiddeedd bbyy ootthheerr ppaarrttiieess..

Innovation should be a point
of pride for industry

During our conversation to preview that may also be beneficial to those companies with serious in-
this year’s Diggers & Dealers forum tentions. Too much deadwood accumulated on the decks of the

(see page 28) I was struck by con- ASX during the boom and we are only just beginning to sweep

ference chairman Nick Giorgetta’s it away into either tech, biomed or obscurity altogether. It is a

comments about the current state process which should ensure genuine companies survive and

of the market. have a chance to prosper.

“Commodity prices haven’t Another interview I did this month highlighted to me the

changed all that much in the last growing talk of innovation in the sector.

12-24 months but the world is awash with cash and there is The State of Play report – produced by global consulting firm

so much volatility around that people are able to make money VCI in partnership with the University of Western Australia and

out of their own decisions; they don’t have to wait for a buoyant the Federal Government-backed growth centre METS Ignited

market,” Giorgetta said. – suggested innovative strategy was lacking in the sector but I

I think Giorgetta, one of the most experienced and respected would argue the point. Surveys are one thing, but you can see in

leaders in the industry, is right; perhaps industry and investors this issue there is compelling physical evidence of innovation at

have become too used to the state of flux the sector and market play throughout the industry.

have been in for more than a decade now. Instead of noting the From autonomous mining and remote mining centres ser-

tremendous share price runs a growing number of explorers, vicing the majors’ Pilbara iron ore mines to the use of drones

junior miners and even mid-tier producers have gone on in for geological mapping and prospecting, the last five years have

the last three years, too many companies are happy to play a seen a starburst of innovation in the sector.

“waiting game in the hope the market wave will pick them up and It is set to continue, the CSIRO has recently commercialised

carry them to the laps of willing investors. its HyLogger analysis tool and the Deep Exploration Technolo-

In the meantime, they wait and com- gies Cooperative Research Centre is ad-

plain that conditions aren’t right but in ...we should vancing several technologies – including
reality there is enough swell there should the Lab-at-Rig and coiled tubing drilling
be focused on
anyone have the wit and ambition to catch Australia becoming products – towards commercialisation.
the wave. These technological breakthroughs are

When I started at this publication 12 remarkable and potential game-changers

years ago, the gold price was $US421/ the clever country. for mining operations and exploration. By
oz ($A564/oz), copper was $US1.62/lb being at the vanguard of their develop-

and iron ore didn’t even have a spot price. ment, Australia has the opportunity to be

Thinking back, while some producers were making money, many an innovation leader for the rest of the century.

were actually struggling and as the commodity super-cycle nar- Yet, we hear little about these developments in the main-

rative was beginning to grip, the IPO market was hotting up. stream media. When Prime Minister Malcolm Turnbull talks

Today, many company executives I speak to bemoan the state about Australia becoming “the clever country”, this is what we

of commodity prices and the investment climate for resources should be focusing on.

but everywhere I look commodity prices are higher than in 2005. Instead, there is a perception mining is the kind of 20th Century

Sure, costs rose dramatically during the boom but the last five industry Australia should be “innovating” itself away but mining,

years of restructuring has shown costs can be eliminated and oil and gas and agriculture are where we have natural advan-

margins maintained, regardless of the size of a company. tages and being innovative shouldn’t mean abandoning them.

In comparison to 2005, companies cannot blame commodity This country doesn’t have the population to compete with ex-

prices for a lack of ambition or achievement. isting digital technology centres such as Silicon Valley or Delhi

This issue of Paydirt contains numerous examples of why or even emerging centres such as Lagos or Nairobi. However,

prices are no impediment to development. The Australian gold it is the equal of any nation when it comes to mining and related

sector is far more vibrant than it was in 2005. It is no longer technology and the vastness, depth and variety of our mining

dominated by foreign companies who are intent on using local sector means the world’s leading innovators are keen to bring

operations as cash cows without the need to reinvest in explora- their R&D programmes here to test them in the very best mines.

tion. Instead, the main players are emerging Australian players, We should be taking advantage of such opportunities because

all of whom have ambitions of increasing their output and profit- even if we all eventually live in a virtual world as part of one big

ability into the future. Features in this issue on the likes of Evolu- computer game, someone will still need to mine the copper for

tion Mining Ltd and OceanaGold Corp Ltd showcase the fact. the computer wiring, the lithium, nickel, cobalt and graphite for

The situation is similar in base metals where, despite a the batteries powering it and the iron ore for steel to house the

tougher price environment, companies have continued to im- mainframe.

prove their returns to shareholders by driving down costs and

increasing productivity. The likes of Western Areas Ltd, Inde-

pendence Group NL and Metals X Ltd – all featured this month

– are proof of that.

I admit the IPO market is not as vibrant as it was in 2005 but [email protected] @DominicPiper

PAGE 4 JULY 2017 AUSTRALIA’S PAYDIRT

Pilbara green lights Funding pathway
lithium project
Senior secured bond issue
Pilbara Minerals Ltd has ignited the get a mine into operation has driven a lot
lithium sector once again by locking of interest in the downstream part of the Issue amount: $US100 million
in finance for development of the Pilgan- lithium sector.
goora lithium-tantalum project. Tenor amount: Five years with
“With that in mind there is a real dis- maturity date in June 2022
Major shareholder Mineral Resources connect between the demand push
Ltd and cornerstone off-take partner Ji- and the ability of the industry to supply Coupon: 12% per annum
angxi Ganfeng Lithium Co. Ltd showed lithium raw material. I feel that hasn’t yet
strong support, as did existing and new dawned on the investment community,” First drawdown: Expected in
shareholders, in an $80 million place- Brinsden said. October 2017
ment that followed the conjuring of a
$US100 million senior secured bond “Maybe some of the things we are Equity raising
issue to see Pilgangoora in production achieving in being able to fund the on-
next year. going mine development hopefully Total: $80 million placement
sparks some interest in the sector.”
At the time of print, the Pilbara board Structure: $53 million placement
was mulling over a final investment deci- Battery companies buying lithium com- at 35c/share to Australian and
sion. panies is one phenomenon Brinsden international institutional and
sees emerging in the lithium sector, with sophisticated investors; $27 million
The company has all environmental a genuine desire, particularly in China, to equity commitment from off-takers
and regulatory approvals in hand, with get set with long-term, high quality supply.
equipment expected to be delivered to Share purchase plan: SPP to be
site this month. Ken Brinsden offered to eligible shareholders
for up to an additional $15 million
Pilbara has led the lithium charge in “I think it is only a matter of time be- to be completed this month
the Australian development space and fore you start to see capital flow from
has been a highly fancied stock in the them to secure their supply chains; that More broadly in the sector, vertical in-
past two years. is another strong signal for equity and tegration is already happening in a big
the value of equity in the lithium sector,” way led by the likes of China’s Tianqi and
However, after the sector “ran a bit Brinsden said. Albermale investments in Greenbushes.
too hard and a bit too fast” last year, a
genuine softness has started to emerge Mining companies are also expanding “Whether it is the front-end investment
and Pilbara has not escaped a retreat in their agility in the lithium space, with in the supply chain through their invest-
value, according to Brinsden. some taking on the tougher challenge of ments in Greenbushes and even of late
doubling up as chemical companies. buying chemical facilities in China, or
The time taken take to secure devel- even further downstream via battery
opment funding for Pilgangoora, 120km Past attempts by mining companies to companies becoming carmakers or bat-
south of Port Hedland, has been a drag bridge the gap between the two sectors tery companies developing cathode ma-
on Pilbara’s stock in particular, as gener- met with varied success. terials or expertise or technology; it is all
ally the flow of capital in the sector has very much happening right now in the
been directed downstream in the lithium According to Brinsden, co-investing industry,” Brinsden said.
supply chain. with entities with the requisite expertise,
proven technologies and operating his- “It is one of the key paths to free up the
The Chinese lithium market, Pilbara tory in chemical plants would be the ideal flow of capital and make sure everyone
managing director Ken Brinsden told model for any mining-cum-chemical is expanding at the same pace so the in-
Paydirt, remained as “hot as ever” de- company. dustry can grow. It is happening in a big
spite a disconnect between raw material way and there will probably be a lot more
suppliers and the downstream conver- of it.”
sion end of town.
The industry is growing in all direc-
“Our ability to get funding does send tions, meaning the raw materials supply
the message that capital is flowing to the base needs to grow quickly by substan-
raw material end of the lithium supply tial orders of magnitude, which might be
chain, but it hasn’t, not up to this point in quite difficult for industry given the scope
time anyway,” Brinsden said. lithium-ion batteries are being applied.

“The capital is flowing crazy down- “It is becoming the most important bat-
stream in the lithium supply chain and tery technology and probably soon to be
this is where the main disconnect starts one of the most cost effective because of
to emerge; you have got serious capital the speed China is building out its supply
flowing into the construction of chemical chain and lowering the cost of the bat-
facilities and battery-making facilities, teries; I’d say it [lithium] is a great space
especially in China.” to be in,” Brinsden said.

Brinsden said the ability to build chem- Given applications for lithium-ion bat-
ical or battery plants in 12-18 months teries continue to grow, Pilbara is well
compared to a minimum of five years to placed to be an important player in the
sector.

Initial production from Pilgangoora will
be 2 mtpa for 314,000 tpa @ 6% spo-
dumene (44,000 tpa lithium carbonate
equivalent) and 321,000 lbpa tantalite in
concentrate.

Cash operating costs over the first 15
of the 36-year mine life is $U196/t CFR
real, with life-of-mine operating costs es-
timated to be $US207/t.

AUSTRALIA’S PAYDIRT JULY 2017 PAGE 5

NEWS

Pilbara Minerals has secured funding to develop
the Pilgangoora lithium-tantalum project

Commissioning of Pilgangoora is targeted for March 2018,
with EBITDA in the first five years averaging $136 million
($121 million pa average life-of-mine).

Although production is yet to start, Pilbara has already
wrapped a PFS around a 4 mtpa expansion option.

Incremental capital required is $128 million to boost produc-
tion to 564,000 tpa @ 6% spodumene concentrates, including
75,000 tpa technical grade LCE and 579,000 lbpa tantalite in
concentrate.

EBITDA has been estimated to increase to $245 million,
with life-of-mine operating costs reduced to $US180/t.

Further feasibility work is required before Pilbara entertains
the idea of doubling throughput, while the lithium market will
be scrutinised to the Nth degree before any decisions are
made regarding capital outlay.

In the meantime, Brinsden hopes Pilbara’s ability to ad-
vance Pilgangoora will provide impetus for the rest of the
sector to move forward.

“The lithium sector is as hot as ever and there is a really
weird disconnect that has emerged between the lithium mar-
kets as we see it, especially with what we see in China com-
pared with equity markets; it is a very strange disconnect,”
Brinsden said.

“It is a classic mining cycle. The problem with the industry is
that it probably ran a bit too hard, a bit too fast last year. During
the latter part of 2016 and into the first half of 2017 we have
seen a genuine softness start to emerge. But, I don’t think
that is representative of the general direction of the industry.”

– Mark Andrews

PAGE 6 JULY 2017 AUSTRALIA’S PAYDIRT

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NEWS

Finkel review fails to bring accord

The Finkel review into Australia’s Rebecca Knol SACOME chief executive Rebecca
future energy security appears to Knol welcomed the report’s release,
have raised more questions than it has Deloitte National Leader, Energy and saying it defined “the key components
answered with the Minerals Council of Resources, Michael Rath, said the Finkel needed to operate an affordable and se-
Australia and members of the Coalition Review had come “at a crucial time in cure energy future”.
Government party room querying its key providing both market and investment
recommendation. certainty” “We need to address our current chal-
lenges in a collaborative manner, based
Australia’s chief scientist, Dr Alan “To date, the politics of power has on technology neutrality with afforda-
Finkel, presented the final report of the damaged both our competitiveness and bility, security and reliability at the core,”
Independent Review into the Future Se- standing as an energy nation,” Rath said. Knol said.
curity of the National Electricity Market “The market needs clarity and consist-
in June, saying the country’s electricity ency of policy that provides the neces- “Challenges with managing the transi-
system was “entering an era where it sary framework for an orderly transition tion in South Australia to a secure and
must deal with changing priorities and from an old and tiring generation fleet low emissions future has resulted in vol-
evolving technologies. If the world around to a more modern and innovative set of atile prices, outages and uncoordinated
us is changing, we have to change with technologies. withdrawal of thermal generation.
it. More of the same is not an option, we
need to aim higher”. “We need to acknowledge the energy “SACOME has placed a great em-
market is in transition and that renewa- phasis on bringing collaborative solu-
Among the report’s 50 recommenda- bles, gas and base load coal will be part tions to the energy challenges in South
tions was the establishment of a Clean of our ongoing fuel mix as we move to a Australia for the benefit of all users. The
Energy Target (CET) to replace the cur- low emissions environment. They are all ACCC joint buying group is a part of this
rent Renewable Energy Target, as “the part of the same ecosystem.” process to ensure the global competitive-
most effective mechanism to reduce
emissions while supporting security and South Australia suffered more than any ness of businesses in South Australia is
reliability”. other state from last year’s power prob- retained through affordable and secure
lems and the South Australian Chamber electricity supply.
However, the Federal Government ap- of Mines and Energy (SACOME) has
pears split on the issue. Prime Minister moved to address the issues by organ- “This transition pathway will provide
Malcolm Turnbull was forced to defend ising a power buying group made up of both an opportunity to embrace whole-
his Government’s energy policies after 12 companies, designed to bring greater sale price certainty and enable an in-
former Prime Minister Tony Abbott led security to industrial power users in the novative Australia to build a new set of
a number of backbenchers expressing State. capabilities.”
their concerns with the CET during a
party room meeting. Environment & Among those who viewed the report’s
Energy Minister Josh Frydenberg re- finding as opportunity was GE. The
sponded by saying the CET remained global conglomerate’s chief executive
an “important recommendation” of the for Australia, New Zealand and Papua
review. New Guinea, Geoff Culbert said the
report’s findings, and the stability their
The Mineral Council of Australia (MCA) implementation could potentially bring,
chief executive Brendan Pearson said represented an opportunity to “bring the
the report was a “constructive contribu- world’s best energy technology solutions
tion” to the national future energy debate, to Australia”.
saying its most important contribution
was its support for “a technology neutral “Australia has the potential to become
approach to energy markets”. a world leader in hybrid renewable and
battery technology, and the integration
However, it warned the CET would be of renewable energy into traditional grid
“carefully” reviewed, citing the need for systems,” Culbert said.
greater consideration of high efficiency
low emissions (HELE) coal generation in “The technologies necessary to imple-
the future energy mix. ment the Finkel blueprint already exist.
All we need is stable policy and compa-
“It is a simple matter of economics and nies like GE will invest to secure Austral-
engineering that an energy mix that does ia’s energy future.
not include new super-efficient baseload
coal generation will be more costly and “We urge Australia’s political leaders to
less reliable,” Pearson said. “We are also adopt the proposals and stick with them
disappointed the Review’s support for for the long term, because if they do, in-
technology neutrality does not include dustry will meet the challenge.”
a recommendation to remove the prohi-
bitions on nuclear energy, a technology
which currently provides zero emissions
baseload energy to countries with a com-
bined population of 4.5 billion people.”

PAGE 8 JULY 2017 AUSTRALIA’S PAYDIRT

BUSH TELEGRAPH

Teeling’s dose of junior reality

“I am a prospector, an early-stage
explorer. It’s extremely high risk
and I hear people talking about ‘high risk’
expecting that it also means ‘high return’ but

what it really means is that you are going to
lose your money most of the time.

Ithink I have found the person that which was the most lucrative of the three John Teeling
ancient Greek philosopher Diogenes “big hits” that he has had so far in some
reportedly spent his entire life searching 46 years of exploration efforts. “You have to be a good seller as well
for and never found – an honest man – as a good buyer and, in my opinion, most
and, not only that, an honest man in the The shares went from 2p each to investors are bad sellers,” he said.
dubious business of junior mining and 180p each when the company was fi-
exploration companies. nally taken over by Canadian firm Lucara So now you know. Also presenting at
Diamond Corp which is now churning the conference was an ASX-listed junior
Take a bow serial Irish mining entrepre- diamonds and profits from what it has miner to which Teeling’s words of wisdom
neur John Teeling, who told it like it really renamed as the Karowe mine near De could be applied by any investors consid-
is to the Junior Mining Indaba held in Jo- Beers’ huge Orapa operation in north- ering buying the shares. That company
hannesburg in June in a riveting 20-minute eastern Botswana. is Stonewall Resources Ltd which I have
presentation which not only had the audi- written about twice before in this column.
ence in stitches but delivered some hard- According to Teeling, he raised the ini-
hitting home truths about the business. tial funds to explore what was then known Can’t recall? Of course you can’t. No-
as the AK6 kimberlite pipe through a body in this business seems to have a
In a nutshell, Teeling – who in his latest whip-round of private investors who have memory going back three months let
role is the chairman of Botswana Dia- traditionally been prepared to support him alone five years to when Stonewall listed
monds plc – hammered home the mes- even though most of them at that time “did making the most unbelievably optimistic
sage that investors put money into these not even know where Botswana was”. predictions on the production it was going
stocks at their very real financial peril. to get out of the TGME assets – a number
Teeling told the Johannesburg audi- of old gold mines and prospects in South
He commented: “I am a prospector, an ence: “So, if there’s something in it, then Africa’s eastern Mpumalanga gold belt
early-stage explorer. It’s extremely high we will need more money. If the first that nobody has made money out of the
risk and I hear people talking about ‘high shares were sold at 2p each, I will go past 40 years – least of all Stonewall.
risk’ expecting that it also means ‘high re- back to the initial investors and tell them
turn’ but what it really means is that you are I will sell them more shares at 5p each. Stonewall failed miserably. Founder
going to lose your money most of the time. Lloyd Birrell has now moved on and
“They think: ‘Jeez, I have made two Stonewall has new management, a new
“I sell hope, not hard fact. I sell mys- and a half times my money’ which I know board and new shareholder base but it’s
tery, not history. That’s what exploration is a lie and they know is a lie but it makes peddling the same old story – develop-
is. Nobody knows what lies two miles into them feel good. Remember, I am selling ment of a major goldfield at TGME – al-
the ground.” hope not reality.” beit that the new management has toned
down the production forecasts somewhat.
Which begs the immediate and ob- So much for the “blarney,” or “gift of the
vious question – if that’s the case why on gab” around the story but Teeling then Birrell is apparently planning to list
earth do investors put money into these addressed some hard practical realities. another old South African gold mine
stocks only, time and again, to end up The first was that early-stage explora- – Klipwal – through his new company
members of a club that Teeling described tion funding of this nature is too limited in Birrell Mining and has managed to talk
as “a club you do not want to join – the scope to do what he termed “the heavy former Harmony Gold Mining Co Ltd
99 Club – consisting of investors whose lifting work”. After the second round of chief executive Graham Briggs into ac-
shares have dropped in value by 99%”. exploration funding Teeling brought in De cepting an appointment as chairman.
Teeling confessed that he was a multiple Beers as the JV partner to make the major Briggs gave the Klipwal/Birrell presenta-
member of that club. investments needed to prove up the pipe. tion at the conference.

The answer is that – when you do strike His second point concerned how to My advice would be to approach them
real paydirt – the rewards are off the deal in these kinds of shares and his keeping the Gospel according to John
scale as Teeling demonstrated using the view was that investors needed to trade Teeling very much in mind.
example of the former African Diamonds, them and not get greedy.
Brendan Ryan is a Johannesburg-
based mining writer

AUSTRALIA’S PAYDIRT JULY 2017 PAGE 9

NEWS

Top of the pops
start to think

Capex was down 41% to a record low of $50 billion in 2016, according to PwC’s Mine 2017 report

Two years ago was a brutal time for the The bounce in iron ore prices reflects advancement” for the sake of their busi-
mining industry. Blue chip players in the volatility remaining in the mining nesses.
the industry booked impairments, shed sector, a factor likely to lead to keep ex-
staff, stopped exploration and battened ploration budgets slim for some time yet. Having weathered a fierce storm, com-
down the hatches for survival. panies can now look towards growth op-
Money spent on exploration decreased portunities and can do so by applying the
Fortunately, blue skies started to ap- to $US7.2 billion in 2016, which was lessons learnt during the bust cycle in the
pear in the global mining sector in 2016, down for the fourth year in a row and far mining boom.
particularly for the world’s top 40 largest from the $US21.2 billion spent in 2012.
mining companies, according to PwC’s “The danger has passed and the miners
Mine 2017 report, Stop. Think...Act. Caution remains on exploration are in the ‘thinking’ phase; we haven’t
spending in 2017, according to PwC Aus- seen any real decisive actions yet. What
The report’s findings included a return tralia mining leader Chris Dodd. we have seen is a really commendable
to profitability for the big miners. Net debt effort around paying down debt and re-
was also cut while market capitalisation “We will see a trend towards near-field pairing balance sheets,” Dodd said.
of the top 40 companies in the sector in- and brownfield development, rather than
creased by 45% to $US714 billion. new exploration or asset exploration,” The “thinking phase” led to minimal
Dodd said. M&A activity last year, a trend which has
Aggregate net profit of $US20 billion continued in 2017.
was reported, a turnaround in fortunes “2015 was a brutal year with the first
of $US48 billion as debt was reduced by ever collective loss and investors piling in Expected deals, such as the sale of
$US20 billion. to punish the top 40 for perceived poor Barrick Gold Corp’s 50% stake in the
capital management and investment Super Pit in Kalgoorlie, have not materi-
Despite cleaner balance sheets all decisions. The recovery in commodity alised with uncertainty lingering on how
round for the top 40, capex was down prices throughout 2016 helped deliver a that situation will play out.
41% to a record low of $US50 billion. $US48 billion turnaround and some much
needed space to pause and draw breath.” Potential suitor for Barrick’s share in
A recovery in commodity prices last the Super Pit – China’s Tyan Home –
year was one of the reasons for the turna- It was clear from analysis of the 14th ended discussions to purchase a stake
round in fortunes for the top 40, with the edition of PwC’s Mine report, that miners in the mine (for a reported $US1.3 billion)
likes of Rio Tinto Ltd signing off on the de- had adopted the safety mantra of “stop, earlier this year and progress appears to
velopment of the $US338 million Silver- think, act” in 2016 in response to the bat- be scant for the seller.
grass project in the Pilbara region late in tering received from investors in recent
2016. (See page 30). times. Despite Tyan pulling out of Super Pit
talks, Dodd believes Chinese companies
Iron ore prices rallied in 2016 and Dodd said the major mining houses remain in the driving seat to buy assets
surged past $US90/t to start this year should be applauded for showing matu- as access to cash is not an issue and the
but the bulk commodity had retreated to rity in making changes beyond “knuck- motivation to “wean themselves of their
$US56.30/t by mid-June. ling down on cost control and technology dependency on imports” is there.

PAGE 10 JULY 2017 AUSTRALIA’S PAYDIRT – Mark Andrews



GOODE NEWS

Drones to transform exploration mapping

A Phantom 4 Drone being used by Dr Changshun Jia at Alto’s prospects

Many of us have seen the videos taken overlap is 75%, then at 5% increments to The resolution of the individual images as
by drones of mine and exploration 95%). The resolution of the pictures de- shown in the image – apart from showing
properties presented at conferences in pends on the height selected (40-100m), every rock and twig etc – were able to be
the last two years. with the drone travelling up to 10km opened in Adobe Photoshop and with the
away at 70 km/h to locations determined shadow-highlight image adjustment, able
However, in mid-June I saw the next from GPS satellites.The result after the to see down inside the old shafts.
stage, namely that of mapping being 20-minute flight was 16GB of images
used by Alto Metals Ltd at their almost stored on a micro-SD card. The structural strike directions of the
wholly-owned Sandstone goldfield pro- old stopes and shaft workings are easily
ject in Western Australia. Basically, the drone is operated using identifiable in the images taken, and this
a double-joystick controller and a mobile together with the recent results reported
Alto was using a Phantom 4 drone (4th phone. The mobile phone displays the by Alto in June at Vanguard have encour-
generation) developed within about two location of the drone and its progress aged Alto to drill from two different direc-
years, and costing $1,600-1,700 with an in flying the designed grid (as shown in tions than the north/south and east/west
additional $70 cost for the associated the picture). The drone is not capable of applied historically by Troy Resources Ltd.
software. flying into any object or person due to the
four sensors around it. If flown towards Troy did not mine at Vanguard as it ap-
The drone was being operated by Al- someone (Changshun flew it at himself) parently could not work out the geology.
to’s head of exploration, Dr Changshun it simply stops and hovers. On comple- The greenish-grey rock chips are also
Jia, who said it took a couple of attempts tion of its task, the drone returns to its identifiable and were checked as being
in a park near his house in Perth to launch position and hovers until the op- dolerite.
master the contraption. I saw examples erator instructs it to land.
of what the drone is capable of in Alto’s The drone is also apparently capable
head office in Perth. When downloaded and run through of following and recording someone
software, the overlapped images en- wearing some sort of device and hence
Alto was using the drone shown in able a 3D model to be produced, and if providing a map of the area walked or
the picture in the field for the first time required a colour-contoured height plan. passed.
at its Vanguard prospect, flying a 200m Magnetics are a consideration for future
by 200m grid in 20 mins, taking a 40MB models but they are apparently too heavy Clearly, drones are going to transform
RAW/jpeg image every 20 seconds at for the drone at this stage and need to be geological and mapping exploration
a drone speed of 2 m/sec from a height developed to become lighter and smaller. across the industry.
of 60m. There is an 80% overlap of the
images (the minimum recommended Keith Goode is managing director of
Eagle Research Advisory Pty Ltd
PAGE 12 JULY 2017 AUSTRALIA’S PAYDIRT
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NEWS

Red River running hot
at Thalanga

Exploration work is continuing at regional prospects such as Liontown East

Zinc and lead off-take agreements we knock over the other two,” Palancian Under the terms of the off-take agree-
appear to be just around the corner told Paydirt. ment, Glencore will take delivery of the
for Red River Resources Ltd. copper concentrate at the mine gate, with
“We started off with a wide pool of the sales to minimise overall capital re-
At the time of print, Red River was fi- potential off-take partners. We’ve been quirements for the restart.
nalising terms for the lead and zinc con- talking to a lot of people and really ended
centrate streams ahead of the planned up with the most compatible, attractive The restart study indicated just $17.2
restart of its Thalanga project in Queens- offer for Red River. It’s actually quite sur- million would be required to bring
land later this year. prising the amount of interest that’s out Thalanga back online within six months
there – and still is out there. of an investment decision.
It comes after Glencore last month
agreed to purchase copper concentrate “The copper is an important revenue Excitement is building both within the
from the mine gate at Thalanga, about stream for us; it’s an important milestone walls of Red River’s Melbourne office and
60km south-west of Charters Towers, for for our project. It’s all part of the natural from the company’s shareholder base as
the first three years of commercial pro- process of bringing Thalanga back into a production restart at the former Kagara
duction. production. We’re in the final throes of asset draws closer.
working through it all.”
Based on an internal restart study Red River’s stock has dropped to
completed in late 2015, Thalanga is ex- Palancian said copper grades improve 20c/share in recent months after briefly
pected to produce 21,400 tpa zinc, 3,600 in the latter years of the current mine life, peaking at 29c/share earlier this year, but
tpa copper and 5,000 tpa lead, plus which is yet to be secured by an off-taker, the reality of Palancian’s company be-
2,000 ozpa gold and 370,000 ozpa silver, and he expects strong competition for the coming the first pure-play zinc producer
in concentrate over an initial mine life of off-take when Glencore’s deal expires. on the ASX in several years is beginning
five years, focusing on the West 45, Far to strike a chord with investors.
West and Waterloo deposits. Attracting a customer such as Glen-
core to Thalanga also indicates the high “We’ve had great support from our
Commissioning is scheduled to begin regard the Swiss conglomerate has for shareholders and the market in general,”
this quarter prior to the restart of commer- the project, Palancian added. Palancian said.
cial production in the December quarter.
“I think they’re quietly confident that “I think Thalanga’s a unique asset and
Red River managing director Mel we’re going to be able to deliver and it’s when we get into production later this
Palancian said off-take deals for the zinc going to be a good product,” he said. “For year it will be the sole pure-play zinc pro-
and lead concentrates were imminent. us, I think it offers some sort of comfort ducer on the ASX. Currently, there are
to have a good strong counterparty like no pure-play zinc producers on there and
“We’ve been working pretty diligently them in our stable.” our investors and shareholders can see
on all of them, so it won’t be long before

PAGE 14 JULY 2017 AUSTRALIA’S PAYDIRT

that we will be the one and only. Red River hopes to restart production at Thalanga during the December quarter
“Some of them have been with us for
The PYBAR crew digging into the West 45 deposit
quite a few years, they’ve watched our
journey, so I think it will be very gratifying the Mt Windsor volcanics for 20 years,” time before zinc was back in the spotlight,
and very rewarding for them once we get Palancian said. with appetite for the metal still strong
back into production.” among investors.
“Exploration technology, particularly
Palancian, a mining engineer who has in geophysics, has changed remarkably “Zinc is part of a fairly mature and
previously held senior roles at MMG Ltd, in that time. Some of the more modern large market which has been growing at
Oz Minerals Ltd, Zinifex and Newcrest exploration tools have really helped us around 2-3% a year, which means that
Mining Ltd, suggested a lack of genuine hone in on some of the potential targets every year the world uses a little bit more
mid-tier producers on the ASX was an- out there. zinc,” he said.
other reason why investors had turned to
Red River in recent years. “We’ve got a lot of targets to test, we’ve “With the mine supply backing off a
only done just over 22 holes and on the little bit, we’ve seen the zinc stockpiles
“We’ve seen a lot of companies disap- 12th one we discovered Liontown East. on the LME and the SFE dwindle. The
pear, especially in the mid-tier, there’s To make a new discovery on a belt that’s fundamentals are looking really good, the
only a handful of companies left in that been walked over and picked over by demand is there and from a supply side
space now,” he said. many people over decades is pretty re- it’s constrained.
markable I reckon.”
“I think people are genuinely looking for “Everything is pointing in the right di-
companies who can potentially step up Zinc bulls have been anticipating a rection and we can’t wait to get Thalanga
into a mid-tier position on the ASX. We’re boom for the base metal for several back into production to take advantage.”
heavily focused on getting Thalanga up years now, but the market is yet to see
and running and into production now, but a major kick despite the closures of Cen- – Michael Washbourne
hopefully that gives us the opportunity to tury and Lisheen mines last year.
grow the business further down the track.”
Palancian said it was only a matter of
Mining activities began at Thalanga in
late April after PYBAR Mining Services
Pty Ltd was announced as the under-
ground mining contractor. At the time of
print, PYBAR was digging into the West
45 deposit.

“We’re taking development cuts rou-
tinely, we’re bringing ore to the ROM pad
and building up our stockpiles before com-
missioning,” Palancian said. “Currently,
we’re in the process of putting the primary
vent shaft in, then we’ll put the primary
fans in and that will set us up for stoping.”

Refurbishment of the process plant
and related infrastructure was also on-
going, with Palancian and his team – in-
cluding executive director Donald Garner
and operations manager Karl Spaleck –
not expecting any surprises as the com-
pany progressively works through its list
of restart activities.

Despite first concentrate being due
within the next six months, Red River has
not let up on the exploration front, with
three diamond rigs turning at Thalanga in
late June.

Recent drilling at Liontown East re-
turned an impressive hit of 19.1m @
10.5% zinc equivalent from 529.4m, in-
cluding 3.6m @ 20.9% zinc equivalent
from 529.4m and 5.4m @ 13.7% zinc
equivalent from 543.1m.

Success with the drill bit also extended
to Far West where 20.65m @ 7.4% zinc
equivalent from 408.5m, including 5.7m
@ 16.9% zinc equivalent from 423m, was
intersected. The same hole also passed
through a high-grade zone grading 0.5m
@ 49.5% zinc equivalent.

“One of the things that surprised us
when we bought the asset in late 2014
was that there had been no exploration of

AUSTRALIA’S PAYDIRT JULY 2017 PAGE 15

OPINION

Battery demand great unknown

The number of electric vehicles on Volkswagen Golf much sooner than ex- In truth, there is no consensus what-
roads worldwide rose to a record high pected, as early as next year in Europe. soever as to how fast electrification, or
of 2 million last year, according to the indeed automation, of the global vehicle
That would represent a tipping point for fleet will happen.

International Energy Agency (IEA). demand and UBS has lifted its EV sales There are simply too many moving
That represented a doubling from the projections by around 50% accordingly. parts to the equation, far more than the
24 the UBS team found in the Bolt’s pow-
2015 tally but electric cars still only ac- “We now forecast 3.1 million EVs sold ertrain.
counted for 0.2% of the global count. in 2021 [battery-electric cars and plug-
UBS’s research aims to tackle the
How many will there be in five years’ in hybrids] and 14.2 million sold in 2025, problem from a consumer choice model.
time? Or in 10 years’ time? instead of 2.5 million and 9.7 million pre- When does the cost and convenience of
owning an EV outweigh the advantages
The answer to that question will deter- viously.” still enjoyed by existing internal combus-
mine the fortunes of multiple metals over EV’s share of new sales is forecast to tion engine vehicles?

the coming years. rise from that marginal 0.2% last year to But in many parts of the world, con-
Battery materials such as lithium and 3% in 2021 and 14% in 2025. sumer choice will be directly affected by
government edict.
cobalt are already bubbling as supply And if those numbers look a bit on the
chains which have historically evolved aggressive side, UBS’s forecasts look California led the way with its 2012
mandate that automakers selling more
to meet niche applications adapt to the decidedly pedestrian relative to those of than 600,000 vehicles a year in the
much bigger demands of the green tech- RethinkX, a think tank founded by Stan- state must sell a stipulated amount of
zero-emission vehicles or risk losing
nology revolution. ford University’s Tony Seba. the right to sell any at all. China has a
The likes of aluminium and copper can Rethinking Transportation 2020-2030, much tougher system at the draft legis-
lation stage and London has stipulated
be expected to continue benefiting from also released in May, generated a flurry all new black cabs will have to be partly
greater usage across a transport sector of headlines about the imminent demise electric-powered by January next year
at the same time as raising charges for
increasingly defined by “lightweighting” of the combustion engine. diesel cars.

“and enhanced electrical circuitry. “We are on the cusp of one of the It’s the interaction of consumer choice
and government coercion that makes
Analysts at Swiss bank UBS projecting EV growth rates so difficult.
attempted to answer the question by
tearing apart piece by piece a Chevy Bolt, Metals such as cobalt and lithium find
themselves on the front-line of this green
which must top the list of fun things to do transport revolution because of their
core role in batteries.
if you’re a bank researcher.
Explosive price hikes last year in
Platinum and palladium, by contrast, fastest, deepest, most consequential dis- lithium and earlier this year in cobalt
could be losers as electrification reduces ruptions of transportation in history,” the were prime examples of what happens
the need for catalytic converters. report warns. when supply chains are too slow to react
to new demand drivers.
But both supply and price are going One which “will have enormous impli-
to depend on what happens to demand. cations across the transportation and oil Cobalt, as traded on the London Metal
And that is the electric elephant in the industries, decimating entire portions of Exchange, rocketed from $US32,750/t at
room. their value chains, causing oil demand the start of January to $US56,250 in early
and prices to plummet, and destroying April and has since also shown signs of
Analysts at Swiss bank UBS attempted trillions of dollars in investor value.” flattening out at a current $US56,500.
to answer the question by tearing apart
piece by piece a Chevy Bolt, which must Phew! In both cases the initial price shock
top the list of fun things to do if you’re a RethinkX’s core argument is that there has passed.
bank researcher. isn’t one but two technical revolutions
under way in the automotive sector. But there is the potential for more price
They chose the Bolt because it is the Electrification of the global car fleet will volatility going forward because pro-
first mass-market EV with a range of coincide with the roll-out of autonomous ducers, traders and analysts alike are
over 200 miles. It also “has a price tag vehicle technology with both trends struggling to construct consensus de-
and range similar to the upcoming Tesla feeding off each other. mand models.
Model 3, which is Tesla’s long-awaited “By 2030, within 10 years of regulatory
entry into the mass market”, according approval of autonomous vehicles [AVs], That’s the problem with revolutions.
to UBS. 95% of US passenger miles travelled will Once they start they evolve in wholly un-
be served by on-demand autonomous predictable ways.
Their surprise finding is that the Bolt’s electric vehicles owned by fleets – not in-
powertrain was $US4,600 cheaper to dividuals – in a new business model we The great technological jump of ve-
produce than they expected “with more call ‘transport-as-a-service’.” hicle electrification is going to lead to
cost reduction potential left”. It’s an extreme vision but one that serves some equally big moves in price.
to underline the diversity of views as to
Their key takeaway is that the Bolt what to expect over the coming decade. Up? Down? Probably both.
could reach consumer cost of owner-
ship parity with a comparable internal – Andy Home, Reuters
combustion engine vehicle such as the

PAGE 16 JULY 2017 AUSTRALIA’S PAYDIRT

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NEWS

Alderan and the Frisco kid

Brokers posed two key questions to away before the offer even opened. It was geophysics programme over the project
the team behind Alderan Resources good to get all that money in and we were last year and at the time of print was pre-
Ltd as the US-focused explorer prepared well oversubscribed at the end of the day. paring a ground-based IP and EM survey.
to launch an IPO earlier this year. A 10,000m drilling programme targeting
“There’s been quite a few resources the Cactus Canyon and Accrington pros-
The first related to the company’s pri- floats in the offing in the last month or pects is slated for later this month.
orities at the Frisco porphyry project in two, so it’s not an easy time for resources
Utah and required a detailed but simple stocks. To complete the IPO, multiple Frisco hosts three targets with his-
explanation of the potential size of the times oversubscribed and list at the pre- toric mining activity, including the Cactus
mineralised system and the associated mium we did, is a testament to the quality copper-gold-silver mine and the Horn
copper-gold-silver breccia prospects of the asset.” lead-silver mine, which contains sig-
and copper-zinc/lead-silver-zinc skarns. nificant amounts of unmined high-grade
Wanless, chairman Nicolaus Heinen zinc.
The response to a follow-up question and chief geologist Peter Geerdts worked
was not as straight-forward but may well on the project for a number of years prior According to Wanless, copper’s resur-
have helped Alderan complete a heavily to undertaking the IPO, with consolida- gence played a big part in the success of
oversubscribed IPO last month. tion of both land and historical data the his company’s IPO.
foremost priority.
“They wanted to know how these out- “Quite a few of the funds had been
cropping orebodies could still be there,” Frisco covers 231 patented claims and looking worldwide for copper projects
Alderan chief executive Chris Wanless 178 unpatented claims over which Al- to invest in, but simply couldn’t find any,”
told Paydirt. deran holds 100% of the mineral rights Wanless said. “We consider this to be
governed through lease agreements with one of the best exploration plays out
“To them it was quite unbelievable, es- a private landowner. there because not only is it in one of the
pecially in such a good jurisdiction in this best jurisdictions for exploration, it’s got
day and age. “The US is actually quite a difficult ju- infrastructure right up to the doorstep.
risdiction, principally because of its tricky
“With this system, we’re not just dealing tenure system where you have all these “These types of projects are simply un-
with a porphyry prospect; we consider small mining claims and often these older heard of, especially in a good jurisdiction
the skarns and breccia pipes and also mining claims which pre-date modern like the US. We’re talking about outcrop-
the distal zinc deposits to have consid- mining laws,” Wanless said. ping orebodies that we can see with our
erable world-class economic potential in eyes as we walk across it, so it’s quite
their own right. There’s undoubtedly a lot “At one stage these claims would unique in that respect. As I mentioned
of upside in the pipeline and the brokers have been owned by dozens of different before, being the first company to pull
loved that.” groups, but over the years it’s been con- all of that land and all the data together
solidated to the point where we are the and really look at this system through
Alderan listed on June 9 following an first company to hold tenure over the modern geophysics and with modern un-
$8.5 million IPO, debuting on the bourse whole system. derstanding of porphyry systems I think
with an opening day trade of 35c/share. is a very exciting opportunity.”
At the time of print, the company’s stock “It’s taken us two years to firstly get the
was on the cusp of breaking the 50c/ land together and secondly put the data Joining Wanless and Heinen on the
share mark. together. As opposed to Australia, the company’s board is Donald Smith, who
US keeps all exploration data in private will also serve as chief operating officer,
“We had various support from a range hands, but we’ve got that now and it’s put and Syrah Resources Ltd founder Tom
of institutional investors and high net us in really good stead to pick up where Eadie, who was also immediately sold on
worth investors, particularly across the previous explorers left off and also start the outcropping potential.
eastern seaboard,” Wanless said. piecing together the entire system, which
no one else has really done before.” – Michael Washbourne
“We got out pretty early in February/
March and did the rounds and pretty Alderan completed the first modern
much had most of that interest locked

PAGE 18 JULY 2017 AUSTRALIA’S PAYDIRT

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Oceana’s waves of gold

Its journey there may have taken some unusual turns but quite how important that would prove to
production figures in 2017 place OceanaGold Corp firmly be in the 18 months following.
in the upper echelons of the Australian gold mining sector.
OceanaGold’s move for Romarco
The company’s March quarter was its While the market’s gaze was focused came as a surprise to analysts on both
best on record with 147,956oz gold and on Northern Star Resources Ltd and sides of the Pacific (the company is dual-
5,955t copper produced from operations Evolution Mining Ltd after a series of listed on the ASX and TSX), with the
in New Zealand and the Philippines, with brash deals on the domestic scene, Australian finance community scram-
an additional 20,000oz coming from the OceanaGold was apparently building bling to comprehend why OceanaGold
recently constructed Haile gold mine in its portfolio the traditional way – through would head to the US’s East Coast and
the US. organic growth, first through its New North American observers left scratching
Zealand operations and, from 2014, its their head over how an Aussie upstart
Record EBITDA of $US101 million was Didipio development in the Philippines. had managed to secure one of the most
posted for the quarter while net profit sought-after gold projects in the US.
was up 26% to $US53.7 million. This patient approach was rewarded
by industry in 2015 when it was voted “We announced the deal at Diggers in
With commercial production set to be Digger of the Year at that August’s Dig- 2015,” Wilkes recalled. “We had a hell of
declared at Haile last month and political gers & Dealers. a time marketing it in Australia because
problems in the Philippines seemingly the Australian analysts didn’t know about
on the wane, OceanaGold chief execu- Ironic then that the day prior to re- it. They looked at the NI 43-101 resource
tive Mick Wilkes was in a buoyant mood ceiving the Digger award, OceanaGold statement being five years out of date
when Paydirt spoke to him in mid-May. launched a $C856 million all-scrip take- and didn’t believe the project was real. In
over of TSX-listed Romarco Minerals Inc, contrast, the North American investors
“It has been a record March quarter owner of the Haile gold project in the US were surprised that a company of our
and Haile will be hitting commercial pro- state of South Carolina. It was the big- size could do the deal.”
duction this quarter,” he said. gest M&A deal in the company’s history
and the largest gold M&A deal on the According to Wilkes, OceanaGold’s
Despite striving to reach 600,000oz ASX that year. success in the Haile acquisition was, in
annual production, OceanaGold is often the manner of all the best deals, down to
forgotten when considering the larger The move for Haile sated a number of timing.
Australian miners. shareholder needs; restocking a devel-
opment pipeline left bare after Didipio “It was based on being counter-cy-
In 2014-2015, when the Australian was brought into production and also bal- clical,” he said. “We bought at the bottom
gold industry was lamenting the lack of a ancing the geopolitical risk profile of the of the market. At the time, as much as
genuine Australian mid-tier gold miner, it company, although no one could imagine Haile was highly sought-after, there was
was almost as if OceanaGold wandered no one buying, a lot of companies were
in off the street. worried about their balance sheet and
were actually selling assets. We had

AUSTRALIA’S PAYDIRT JULY 2017 PAGE 21

COVER been generating lots of cash, particularly
out of Didipio and had the opportunity
PAGE 22 JULY 2017 AUSTRALIA’S PAYDIRT and the ability to execute while swimming
upstream in the market.”

The timing saw Haile immediately fill
gaps in OceanaGold’s growth portfolio
and deliver on a longstanding ambition to
acquire a North American project.

“The strategy was always to grow the
company to be a mid-tier producer op-
erating around the Pacific and we had
intended to enter North America for a
number of years,” Wilkes said.

How important spreading the geopo-
litical risk was even more apparent last
year. In October, President Rodrigo Du-
terte cemented his anti-mining campaign
position by appointing staunch conser-
vationist Regina Lopez as environmental
secretary. Lopez subsequently ordered
the closure of 22 of 41 mines in the
country, including Didipio.

Wilkes said geopolitical risk had been
a consideration prior to the move for
Haile but not an overriding factor.

“We always talked about that,” he said.
“And, in hindsight, it was a good thing we
did the deal but it wasn’t a burning plat-
form that made us do it.”

Instead, it was Haile’s geological and
economic credentials which spurred the
acquisition. Wilkes described the 2 moz
@ 2.06 g/t gold reserve (with an ad-
ditional 4.04 moz @ 1.77 g/t gold in re-
sources) as “best-in-class” among the
assets considered by OceanaGold over
a three-year hunt.

Since then, Haile has barely missed a
beat. OceanaGold sent first ore through
the plant at the end of 2016 and had
poured first gold on January 20. By the
end of the March quarter it had produced
20,798oz and commercial production
was expected to be declared in June.

“It has been a remarkable achieve-
ment given we’d only taken ownership
15 months earlier and it was essentially a
greenfields site; it has been a great effort
by the team,” Wilkes said.

Although OceanaGold has developed
a reputation for building projects, Wilkes
said the construction team had decided
to change little from Romarco’s original
plans.

“The engineering was 60% completed
when we bought it so there was not much
point in re-engineering things,” he said.
“Instead, it has been just a few tweaks at
the front end of the plant.”

The OceanaGold construction team
did bring its experience to bear by taking
on the EPCM role itself.

“It makes a huge difference. It means
you have no impediments because there
is no EPCM between us and the contrac-
tors which also helps with the scheduling.

There is a real can-do attitude within the production last month. The area was mined intermittently from
company.” “We are happy with how the ramp-up the 1830s until the last major heap leach
operation closed in 1992.
During Paydirt’s visit to Haile in March, is going; mining is ahead of the schedule
it was apparent operations were ahead with the majority of the Mill Zone pit in Only spasmodic exploration has oc-
of schedule. ore and pre-stripping having started at curred since and geologically, the region
Snake. There is some fine-tuning to the retains significant gold potential.
The 2.5 mtpa CIL plant was meeting its circuit and once we stabilise the circuit
83% sulphide recovery targets, with pro- we can announce commercial produc- “There is certainly a scarcity of modern
cessing manager Michael Deal saying tion,” he said. gold mines in the area, but a lot of gold
he was pleased with progress. occurrences and having the only mine
With confidence in Haile high, Ocean- in the district is a big advantage to us,”
“We’ve been processing the sulphides aGold is gearing up for its expansion with Wilkes said.
for one month and there has been nothing an optimisation study planned for release
substantial constraining us so far,” Deal this month. The study will examine Haile’s “We are systematically working our
said in March. “We have met all our ton- capacity to increase production from the way through the opportunities. The more
nage expectations and since making a current 150,000 ozpa to 200,000 ozpa we drill and mine, the more we under-
few modifications we have been at 100% and even beyond to 250,000 ozpa. stand the geology of the orebody. I think
capacity. It is very dependent on grade we will be exploring around there for
but we are meeting our recovery targets “The market should be very pleased many years.”
and the regrind circuit is vital to that.” with the results of the optimisation study,”
Wilkes said. “It will be big news.” The release of the optimisation study
Mining to date has been focused will trigger further permitting to increase
on the Mill Zone pit, with pre-stripping The study will be based on current re- the size of the plant, the open pit, the tail-
starting on the second, higher grade pit, serves and resources, but there is plenty ings facility and to build an underground
Snake, in March. of geological potential at Haile. The Car- mine.
olina region has a history of gold mining
Wilkes said both mining and pro- dating back to the first discovery in 1827. The permitting process in developed
cessing were on target to hit commercial jurisdictions can often fill miners with

Mick Wilkes “There is certainly a scarcity of
modern gold mines in the area, but
a lot of gold occurrences and having the
only mine in the district is a big advantage
to us. We are systematically working our
way through the opportunities. The more we

drill and mine, the more we understand the
geology of the orebody.

AUSTRALIA’S PAYDIRT JULY 2017 PAGE 23

COVER

dread and unlike Australia’s mining cen- The company has had to deal with ground to opponents because we are not
tres, or even those of other US states opposition in both developing and de- getting ahead of community expectations.
such as Nevada and Arizona, mining is veloped jurisdictions and Wilkes holds We are playing catch-up but instead we
not an industry modern Carolinians are strong views on how the mining industry need to get in front of the curve.”
overly familiar with. is portrayed in the public eye.
He said the industry had reacted posi-
Wilkes said the approvals process and “I don’t think we do enough [to engage tively to some public perceptions but
community attitudes were never a con- with the public] and I don’t think we can,” much more work was required if mining’s
cern for the company. he said. “As an industry we are losing image was to be a positive one.

“Once we had the permit, the ball was Clockwise from top: The newly commissioned Haile mill; Macraes’ mining fleet and
back in our court to demonstrate we could 438.9oz of 600,000oz annual gold production
deliver on the promises we had made,”
Wilkes said. “There has been the usual
anti-mining movement but Romarco did a
fantastic job, managing the relationships
with the opposition groups and the com-
munity as a whole. Once we saw that, we
knew it would be a very good fit for our
company.”

The general response in Kershaw
County, the host community, has been
positive. Town Administrator Mitch Lucas
told Paydirt OceanaGold’s arrival had
been an “economic blessing” for the dis-
trict.

“There were a few reservations in the
community but before mining started we
were dying as a community but have now
gone from empty housing to not enough
housing.

“OceanaGold has assisted the town in
infrastructure and has built community
projects. It has built a first-class opera-
tion and has been very gracious and an
active community partner. Their training
will provide skills long beyond the 15-year
mine life and I think we would welcome
other companies who, like OceanaGold,
want to be good stewards both economi-
cally and environmentally.”

The positive endorsement is further
evidence of what Wilkes sees as an in-
grained attitude towards community en-
gagement at OceanaGold.

PAGE 24 JULY 2017 AUSTRALIA’S PAYDIRT

OceanaGold’s Didipio mine in the Philippines has continued operations despite
political upheaval in the country

“Our society is full of intelligent people with former military chief Roy Cimatu, ceived the Presidential Mineral Industry

who understand that we need mining to who has said it was possible to balance Environmental Award in recognition of its

underpin society but they don’t accept mining and natural resources protection, “exemplary efforts in responsible mining”,

the risks and impacts of it,” Wilkes said. but Wilkes admitted it had been a trying Wilkes believes OceanaGold is a model

“Even if benefits are promoted, we won’t time. for responsible operations.

win the battle just by telling people about “It has been a tough six months since “It is likely the more dubious operations

the good things, we need to address the that first press conference,” he said. “We will be closed and we’re fully supportive

negatives. have a very good operation, operating of cleaning it up; it will be very posi-

“What the community is prepared to to the highest international standards tive for mining and the country itself,” he

accept is different now. Thirty years and there is no basis for suspension or said. “I would humbly suggest Didipio is a

ago if an underground worker was killed closure and we have always been highly standard bearer for that in the Philippines.”

“people said it was just part of the job; confident the suspension order will be The political imbroglio has done little

today, you’d have a to stem progress at Didipio

royal commission which achieved record

into the deaths. It has been a tough six months since output in the March quarter
“Attitudes change that first press conference. We have with higher grades out of
the open pit and increased
and industry leader-

ship needs to under- a very good operation, operating to the mill throughput resulting in
stand that. Today, AISC of less than $US105/
highest international standards and there oz gold.
we can’t have any

environmental in- is no basis for suspension or closure and Open pit mining is ex-
cidents or fatalities we have always been highly confident the pected to be completed
and we need to find this quarter with 24mt of

ways to achieve suspension order will be removed. stockpiles to be processed
that. It probably prior to first underground

means innovation ore coming on at the end

to take workers out of 2017.

of the dangerous locations and perhaps removed.” “There will be lower production rates as

ultimately having nobody working under- He is also at pains to point out the we move into the underground before we

ground. It means innovation to remove suspension order has had no effect on see stronger performance as that picks up.”

water from the tailings process to ensure operations. Exploration is also back on the agenda

it is as safe as possible; the industry “There has been not one minute of at Didipio as it is in New Zealand as part

needs innovation to get ahead of com- downtime at Didipio.” of a group $30-40 million exploration

munity expectations.” He also made conciliatory remarks budget for 2017 designed to deliver or-

OceanaGold’s recent travails give following the new appointment. ganic growth for the company.

Wilkes’ comments more potency. Shares “The announcement [of Cimatu’s ap- “At Didipio we will continue to drill as

on the ASX fell from a high of $5.53 in pointment] represents a path forward. we go underground and will also target

July last year to as low as $3.53 in De- He comes well-regarded and we look around the mine,” Wilkes said. “In New

cember following Lopez’s issuing of the forward to working with him and the de- Zealand we are confident of getting an-

suspension order on Didipio. partment to progress the industry.” other 10 years of mine life at Waihi and

Confidence in the company’s Asian There is no doubt some mining opera- have 40,000m of drilling planned for this

venture has returned in recent weeks tions in the Philippines have questionable year in both brownfields and greenfields.”

following the replacement of Lopez environmental credentials but having re- With a full exploration pipeline, there

AUSTRALIA’S PAYDIRT JULY 2017 PAGE 25

COVER Off thin ice

is little incentive for OceanaGold to go “Our plan is to very much stay em- Acompany that has come through
chasing further assets, but Wilkes knows bedded in Australia but the dual listing three corporate identity changes,
the company cannot afford to sleep. means we get exposure to the bigger OceanaGold Corp finally finds itself
North American market and we intend to at the top table of Australian gold
“You have to continue to look for op- keep going there.” miners.
portunities. In this industry, if you stand
still, you wither. We have ambitions to Asked whether the North American Beginning life as Macraes Mining
double the size of the company, adding influence could vault the company into in 1989, the company changed to
substantial sized operations would be the upper echelons of the gold mid-tier, Gold & Resource Developments
ideal, stay engaged with opportunities Wilkes said the focus was on profitability, (NZ) Ltd and later GRD Macraes be-
but the plan is to focus on mine life at ex- not size. fore listing on the ASX and NZX in
isting operations. On existing resources 2003 as Oceana Gold Ltd. Its sub-
we can maintain 500-600,000 ozpa to “There are seven or eight companies sequent arrival on the TSX saw Cor-
2030; beyond that it would be a bonus.” in the world which have much higher poration added.
multiples but you have to be careful you
The one obvious gap in the portfolio is don’t change the secret potion of your By then, it had already been on a
an Australian operation. identity and culture. Our ambition is to rollercoaster ride at Macraes in New
sit comfortably in the mid-tier space. We Zealand’s Otago province. Bought
“We have always been keen to do don’t want to have 15-20 mines but not just before a market meltdown,
something in Australia but it is competi- making any cash. managing director Miles Kennedy
tive here and there are not many oppor- was able to secure Macraes future
tunities,” Wilkes said. “We will focus on our core values; pay through loans and a healthy hedge
dividend, return on investment and being book.
There has been much discussion in an attractive investment proposition as a
the Australian gold sector about the rela- gold company.” Other challenges were ahead
tive values of ASX-listed and TSX-listed – not least when the hedge book
gold miners and OceanaGold’s dual It is a simple proposition but one which turned toxic and recoveries of the
listing betrays the fact gold companies continues to serve the company well. 1 g/t slumped to 65% – before Brett
receive more attention in North America. Fogarty’s Minproc Engineering intro-
– Dominic Piper duced pressure acid leaching (Pox)
“We enjoy reasonable value because into the Macraes process. The Pox
of our North American presence and planted lifted recoveries and opened
the quality of the assets and manage- up the satellite Reefton project on
ment,” Wilkes said. “In a way we have New Zealand’s west coast.
become victims of our own success in
North America. Six years ago, liquidity Further dramatic change came
was 70/30 in favour of ASX but we have with the company’s decision to drop
since put a lot of work into increasing our inhibitions and go ahead with the
brand over there and as a result our li- Didipio gold-copper project in the
quidity is now 10/90 with the ASX liquidity Philippines which, with its copper
shrinking. by-product credits, drove down
group cash costs.

Didipio’s development was pri-
marily driven by two men; Mick
Wilkes, who arrived as chief execu-
tive after completing development
of the Prominent Hill, and chairman
James Askew, who had been deeply
involved with the merger with Climax
Mining which delivered Didipio.

OceanaGold became a darling on
the TSX, subsequently taking a more
acquisitive turn. It came unstuck in
El Salvador thanks to the Govern-
ment’s arbitrary ban on mining but
found succour in its acquisition of
Romarco Minerals.

In late 2015, OceanaGold cele-
brated the 25th anniversary for Mac-
raes in Dunedin at the Forsayth Barr
Stadium, home of the city’s beloved
Otago Highlanders rugby union
team. Wilkes told those present Mac-
raes was a remarkable mine. Out-
siders, he said, often wondered how
Macraes made any money, only to
point out that having been commis-
sioned in 1990 with a seven-year life,
it was still going strong 27 years later.

– Ross Louthean

PAGE 26 JULY 2017 AUSTRALIA’S PAYDIRT

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DIGGERS & DEALERS

A brighter side

Kalgoorlie-Boulder will welcome the Australian resources
community back to the Goldfields Art Centre next month
for the annual Diggers & Dealers forum amid a period of relative
calm for the industry. Despite the stability, Diggers & Dealers
chairman Nick Giorgetta remains frustrated by the industry’s
public image and is intent on rallying the mining community
to better project the benefits it bestows on the country.

Nick Giorgetta company which was centre of attention, chance to visit the Arts Centre audito-
winning Diggers & Dealers awards in rium, something which is difficult given
“I feel very strongly that given the im- each of its first three years thanks to its the myriad commitments which come
portance of industry to the country – if growth from start-up into an $800 million with being the forum’s chairman.
mining goes well, the nation goes well company within six years.
– that it is a maligned sector. There is “I always like listening to the Evolution
plenty of negative coverage in the main- Such success stories have always [Mining Ltd] story because it came from
stream media but no one focuses on been integral to the allure of Diggers nothing to what it is today and Jake Klein
how lucky we are to have so many strong and Giorgetta is confident there will be a always provides a good analysis of the
mining companies in this country,” Gior- number about this year. gold sector. Then, of course, Peter Cook
getta told Paydirt recently. is always entertaining to listen to for 30
Robert Zoellick minutes,” Giorgetta said.
“The idea that we only harm the envi- “Diggers & Dealers always reflects
ronment is wrong and needs to be ad- the mood of the sector and there is a lot The company presentations can cause
dressed. We need to better project the of interest developing in the market so I consternation in the gold industry veteran
benefits this industry brings; not just in expect this year to be upbeat,” he said. at times.
jobs and taxes but in innovation, regional “Commodity prices haven’t changed all
development and education and training. that much in the last 12-24 months but “It is a bit frustrating at the lack of ac-
the world is awash with cash and there tivity. Every year we watch companies
“We need to educate young people is so much volatility around that people which are on the cusp but are never quite
about what we do well and it should are able to make money out of their getting there but I don’t think there has
start at primary school age. We need to own decisions; they don’t have to wait been a better time to build a mine.
change the perception the anti-mining for a buoyant market. Then you have
lobby conveys. new commodities such as lithium and “I think some companies are a bit
graphite. So, there are still quite a few of scared to take the plunge and would
“This industry is at the forefront of in- the 10-baggers which get us all excited.” rather continue exploring on develop-
novation in the country; look at some of Given his own background in the com- ment projects. I would like to see more
the things we have developed around modity, Giorgetta’s attention at Diggers & starters; they don’t have to be big mines,
driverless trucks and remote operations. Dealers is inevitably drawn towards the they just have to be profitable. The
This is technology and innovation we can gold stories. The recent success of the problem for explorers is they keep is-
sell to the world because without doubt domestic miners means he has plenty suing paper and have to dilute so much
Australians are regarded as the best of options to choose from; if he gets a before they get to production.
miners in the world.”
“People need to bite the bullet and get
It is a strong and positive rallying call on with it. Once the operation is under
from the chairman of a conference which way, you can begin to understand the ge-
has always been a thermometer for the ology better, you have got cash flow and
health of the mining industry. Now in its you’ve got a camp where you can host a
25th year – having started in 1992 – Dig- full exploration team. These are all things
gers & Dealers has grown from a home- you can’t do running an exploration pro-
spun get-together into the most important gramme from West Perth.”
event on the domestic mining calendar.
As well as the gold players, Giorgetta
Giorgetta was at the very first event as is always keen to sit in on the keynote
address, which this year will be given
“managing director of Samantha Gold, a by former World Bank president Robert
But the world Zoellick.
is currently
flush with cash... Zoellick served in President George
we’ll see a number of W Bush’s cabinet as US Trade Repre-
international visitors sentative and was Deputy Secretary of
here once again. State in 2005-2006. He currently serves
on the board of Singaporean sovereign
wealth fund, Temasek, and is the former
chairman of Goldman Sachs’ Interna-
tional Advisers.

PAGE 28 JULY 2017 AUSTRALIA’S PAYDIRT

Diggers’ fuel

Last year’s
Diggers & Dealers
forum saw Beaumonde
Catering providing
the following to keep
delegates on their feet
late into the night:

500kg beef
700kg lamb
500kg chicken
800kg seafood
3t vegetables

2t fruit
4t dry store

150 staff
6 semi-trailers
1 x 100-seat private jet

charter
2 buses

Graham ‘Thommo’ Thompson gives Diggers & Dealers delegates
his usual safety induction on the first morning of the conference

Giorgetta said he was keen to hear what Zoellick made of the
current global uncertainty.

“This year has been mindboggling worldwide,” Giorgetta said.
“There is no doubt more uncertainty creates a higher gold price
but I’d rather see a stable world and a low gold price.

“Mr Zoellick has a reputation for being quite outspoken. He ran
the World Bank and has been around Washington for years so it
will be interesting to hear his comments on the election of Presi-
dent Trump, the impact of Brexit and the influences of the changes
in Asia and potential changes in international relationships.”

With North American funds springing up on every Australian
gold company register, Zoellick is likely to find a number of compa-
triots in Kalgoorlie. Giorgetta said the amount of money capable
of being deployed meant Australian companies would continue to
be attractive investments.

“The North Americans have always participated in capital rais-
ings because they’re true believers in gold, particularly as compa-
nies get bigger. But the world is currently flush with cash and even
though the conference has been predominantly Australian, we’ll
see a number of international visitors here once again.”

They may struggle to find accommodation. Organisers say
delegate numbers are expected to exceed 2,000 with a record
number of homes being rented out for the duration of the three-
day event.

– Dominic Piper

Some of the likely highlights of the 2017 Diggers &
Dealers programme: From top – Peter Cook, Neve Power

and Jake Klein

AUSTRALIA’S PAYDIRT JULY 2017 PAGE 29

DIGGERS & DEALERS

Silvergrass in cruise control

Rio Tinto Ltd’s iron ore game in the $US2.2 billion included a dry crushing As for the truck drivers, many are
Pilbara is set to be expanded with and screening plant, non-process infra- being taken from the driver’s seat to
the addition of the Silvergrass mine from structure, stockyards, rail loop and load other areas of the mines, including
next year. out and a 170km rail link to the main line. gaming-style pit controlling occupa-
tions.
Given the nod for development last Assuming study economics are com-
year, the $US338 million Silvergrass pro- pelling, construction could potentially It takes less than week for a truck driver
ject is on track for commissioning in Q4 start in 2019. to be schooled on handling AHS opera-
this year. tions and word from site is the response
Koodaideri is a different beast to Sil- has been positive from all concerned.
At full tilt, 20 mtpa of low phosphorous, vergrass, particularly from an infrastruc-
high quality Marra Mamba ore from Sil- ture perspective. Productivity and efficiency is crucial to
vergrass will be added to Rio Tinto’s ca- Rio Tinto’s iron ore business, particularly
pacity in the Pilbara. Silvergrass is essentially a satellite in an age where South American and to
deposit adjacent to the Nammuldi mine, a lesser extent African companies have
The low phosphorous nature of the ore with the two operations to be connected. the ability to extract iron ore at the bottom
from Silvergrass ensures Rio Tinto’s lon- end of the cost curve.
gevity in producing 62% Pilbara blend. A primary crusher and 9km conveyor
belt from Silvergrass to the the Nam- Late last year, the company outlined a
Although Silvergrass won’t initially be muldi operations are being established, strategy to generate $5 billion over five
one of the lower cost mines – payback eliminating haulage requirements and years, with the emphasis on increasing
is expected to take three years and IRR keeping costs low. productivity.
on the investment is estimated to exceed
100% – the low phosphorous material Cost curtailment will also occur through Growth and innovation will be key and
from the mine affords Rio Tinto the op- use of an autonomous haulage system recognition for its innovative mine technol-
portunity to open up other deposits con- (AHS) from the get-go at Silvergrass. ogies was received at the Austmine Miners
taining high phosphorus content. Innovation Awards ceremony in May.
Rio Tinto uses AHS fleets across its
Rio Tinto is not short of iron ore tonnes other mines, however, Silvergrass will be Rio Tinto was awarded a gold medal for
in the Pilbara with its newest play in the the first operation where they are used its mine automation system (MAS) and
region – Koodaideri – now in study mode. from day one. trademarked RTVis 3D visualisation tool.

A $30.9 million feasibility study on By having an AHS fleet at its disposal Currently, Rio Tinto uses these tech-
Koodaideri was approved in May after a Rio Tinto is acheiving an increase in pro- nologies at 95% of open cut mines in its
PFS outlining a 40 mtpa operation was ductivity of 15% and usage of about 1,000 portfolio, resulting in significant produc-
released last year. The capital cost of more hours per year, per truck compared tivity boosts and saved costs.
to manually controlled operations.
– Mark Andrews

PAGE 30 JULY 2017 AUSTRALIA’S PAYDIRT

The grand urbanisation of the Pilbara WA Mines Minister Bill Johnston, Rio Tinto Pilbara Mines’ Michael Gollschewski and
was once a dream for the region’s Member for Pilbara, Kevin Michel, overlooking Brockman 4 operations in the Pilbara
politicians and business leaders but
ensuring the resources powerhouse Michel looks to local content
has sustainable future is now central to
regional decision-making. Nevertheless, Michel is committed to for the Pilbara regions? No, I want the re-
doing what he can to revive the Pilbara gions to be sustainable and I understand
Mining is at the heart of everything that and so far the response from mining what mining companies are saying – you
happens in the Pilbara, however, building companies to his call for assistance has can’t depend on mining – but one thing
the agriculture sector, identifying different been positive. that they must understand is that mining
energy sources and boosting tourism is what makes this region tick.”
are areas to be harnessed, according to One of Michel’s requests has been to
West Australian Labor Member for Pil- consider reducing FIFO numbers and Job creation and subsequent stimula-
bara, Kevin Michel. commit more to the people and towns tion of the local economies in the Pilbara
that make up the Pilbara. is the ideal Michel is working towards but
Michel shifted to the Pilbara in 2002 he knows there is no quick-fix solution to
and experienced the boom/bust cycle, “We have to ensure people that work make that happen.
driven largely by unprecedented Chinese here, stay here, so one thing I am
demand for iron ore. working on with all mining companies is Day-by-day though, Michel notes he is
to ensure that they reduce FIFO,” Michel making steady progress regarding local
During the period 2000-2014, con- told Paydirt after a recent trip to the Pil- participation at blue chip mining houses
struction and expansion of mines and bara hosted by Rio Tinto Ltd. such as Rio Tinto, BHP Ltd and Wood-
accommodating infrastructure led to an side Ltd.
influx of people to the Pilbara, stretching “Everyone has the choice of where they
the capacity of services and facilities in live or work, but what I am finding is that “We are in discussions and they are on
the region. there is a very real fine line we are walking board,” Michel said.
on and the choice is mainly FIFO.”
The migration led to severe pressure on “You would have noticed Rio Tinto
housing, with both availability and afforda- Michel knows incorporating a FIFO has reduced its 45-day payment plan
bility issues for the region. Once the com- workforce to run and maintain mines for businesses to 30 and they have also
modity boom ended, the situation went in the Pilbara is unavoidable, however, introduced a new policy that gives small
into reverse and three-bedroom houses in building the region and justifying large businesses a chance of winning con-
areas of the Pilbara which were snapped capital investments to establish infrastruc- tracts. I am working hard with them on it
up for $800,000 at the peak of the boom ture will be driven by population demand. and it has been productive.”
are now worth less than $300,000. Once
relied upon local businesses are now According to Michel, currently 60% of At the time of print, Michel was touching
grossly underutilised due to a lack of ac- Pilbara’s mining workforce is FIFO, with base with people in his electorate in
tivity in the resources sector. 40% locally employed. Marble Bar, Jiggalong and Pardoo.

Needless to say, the spirit of the people “Unfortunately, sometimes we do have In 2017, 21,000 electors made up the
left behind at the end of the boom is in to rely on FIFO because the population is seat of Pilbara which spans an area of
desperate need of upliftment and their not there and that is fine. But, if everyone 406,525sq km.
hopes could rest on the impact Michel has has a certain kind of quota in regards
during his tenure as Member for Pilbara. their employees locally it will create jobs Having covered much of that area
and work in favour of the mining compa- during his election campaign, Michel
Michel knows that delivering on the nies. At the end of the day, it also has knows how far and wide he needs to take
Government’s promises to the region is to be understood that mining compa- his message.
a must, but spending will remain prudent nies have a duty of care to the regions,”
and investment in infrastructure consid- Michel said. He is up for the challenge and is com-
ered carefully under the Mark McGowan mitted to ensuring Aboriginal and Torres
Government, Michel said. “At the moment, it is more like taking Strait Islanders are afforded greater op-
the easy way out with FIFO people and portunities to further their participation in
Rio Tinto’s newest Pilbara iron ore mine, they are making more money doing it all aspects of mining and other occupa-
Silvergrass, is set for commissioning this that way. Is that what we want as a future tions that will ensure the Pilbara keeps
year. AHS (inset) are used widely across for Australia? Is that the future we want ticking well into the future.

Rio Tinto’s mines – Mark Andrews

AUSTRALIA’S PAYDIRT JULY 2017 PAGE 31

Occupational health and safety (OH&S) innovation Vehicle | People | Infrastructure Interaction
has taken a back seat in recent years with companies
often more focused on productivity gains but leading Woodford pointed to the company’s collision avoidance systems
Brisbane-based technological solutions provider, LSM as an example of how OH&S improvements could be combined
Technologies Pty Ltd is finding ways to marry the two. with productivity gains.

According to LSM chief executive Peter Woodford, the firm’s “According to a recent report the Queensland Department
product technologies provide solutions geared to extending critical of Natural Resources and Mine vehicle interactions are the
component service life, reducing equipment damage, providing second highest cause of serious accidents and high potential
significant costs downs in maintenance, increasing productivity and incidents in Queensland mineral mines and quarries,” he said.
enhancing workplace safety and operator health/compliance. “It is acknowledged that 80-90% of fatalities, injuries and high
potential incidents are a result [or a significant factor] of restricted
“Each one of our product technologies, combined with our operator visibility around vehicles and equipment.”
technical services, should not be considered as capex, rather
as an immediate return on investment in assisting you to achieve Woodford said companies undertake a risk assessment before
significant cost reduction within an organisation,” Woodford said. employing at least two “lines of defence” to mitigate such
incidents including implementing ISO 5006/16001 to eliminate
LSM provides 12 specialised product technologies applicable to a “blind spots” and installing proximity/warning/detection sensor
number of industries and the company has been providing these systems and fleet track, positioning and situation awareness
field proven solutions since 2004. systems.

“Our collision avoidance systems – including
camera viewing and radar proximity detection solutions

– both require minimal investment and little ongoing
maintenance,” he said.

“As well as leading to increased operator awareness and
lower fatigue, the systems can also deliver operational cost
savings including reduction of vehicle/equipment damage and
infrastructure and quicker turnaround of vehicles such as dump
truck fill-dump cycles.”

Under pressure In 2015, the West Australian Department of Mines and Petroleum
updated its tyre safety machinery guidelines to include tyre
Tyre monitoring systems is another technology area where obvious monitoring systems are installed in mining equipment and all
OH&S gains can be married with productivity improvements rubber-mounted vehicles.
to eliminate incidents of tyre blow outs, roll-overs, wheel-offs
and tyre fires. Woodford said not only could monitoring systems improve OH&S
outcomes, they do drive down operational costs.
According to a New South Wales Office of Transport Safety
Investigation, 43% of bus fires in 2016 were confined to the wheel “By implementing TMSystem technologies, vehicle operators are
well and in 2015 one worker died and another was serious injured able to dramatically reduce maintenance costs, extend tyre service
after a tyre exploded during work at a Queensland coal mine. life, reduce fuel consumption, improve braking/handling and control
– and of course – less downtime,” he said.

Hundreds of tyre monitoring products exist on the market but,
Woodford said, the most effective displayed robustness, were
fit-for-purpose and contained heavy duty components to ensure
reliability and longevity of the system.

Woodford said he favoured external tyre sensors as they could
be quickly and easily transferred and used on any type of
pneumatic tyre with no special skills required and virtually no loss
of productivity.

16 Bluestone Circuit, Seventeen Mile Rocks QLD 4073

A breath of fresh air Wake-up driver

Some OH&S/productivity issues are so misunderstood Driver distraction and fatigue has been recognised
industry regularly fails to grasp them. by industry as a key hazard and LSM’s Driver
Fatigue (and Distraction) monitor combines a dash
Woodford points to the continued presence of workplace mounted, day/night, infrared illuminated camera with
respiratory disease as evidence of industry’s inability to intelligent video algorithms to provide an easy to
recognise the extent and ramifications of airborne particulate install, autonomous, turnkey solution.
and fibre exposure of harmful/carcinogenic “dust”.
“It’s no secret driver fatigue is one of the
“It is the “dust” we do not see that is more of an issue,” biggest killers on our roads and worksites,”
Woodford said. “The best protection against exposures is
a certified cabin pressuriser/filtration system but care must Woodford said.
be taken in the design of the system and that it is applied
correctly, compliant and will mitigate effectively.” Queensland Rail (QR) has been the latest group to
adopt LSM’s driver fatigue products, having trialled
Woodford said a cabin pressuriser/filtration system design them over the last two years and is now planning a
should consider several aspects: fleet-wide implementation.

• correct function of the heavy vehicle air conditioning “This technology will form a vital part of QR’s overall
system to maintain proper thermal comfort of the fatigue management practises and procedures for
occupants field maintenance operations,” a QR spokesperson
said. “The system is a cost-effective solution to
• filter media type and arrestance efficiency for help protect drivers from fatigue-related incidents
exposure of particulate/fibre component occurring while providing of additional reporting
capabilities for management.”
• recirculation air filtration
• correct cabin pressurisation Woodford said the system’s unique pupil
identification and facial recognition technology
LSM’s Q-CABAIR/RESPA systems monitor dust levels but allowed it to detect and analyse the changing
also address other concerns. Woodford said monitoring of characteristics of pupils and signs of drowsiness
carbon dioxide levels in pressurised cabins was an area in such as yawning.
which industry had failed to grasp the dangers and potential
productivity gains. “When the DFM identifies, a driver has become
inattentive, either due to drowsiness or distraction,
“If the air conditioning system is operated on 100% it will provide in-cab audible/visual warnings and
recirculated air and if the external filter is blocked, carbon subsequent alarms to the driver.”
dioxide concentration will occur quickly,” Woodford said. “It
is an area no one is talking about when it comes to driver Producing and capturing such data has become vital
fatigue. On some recent trials of vehicle cabins measured to modern mining but storing, using and analysing
the allowable standard of an average of 700-1,000 ppm it can often prove a burden. Woodford said LSM’s
carbon dioxide inside the cabin but within five minutes of SAFETRAX web based software management
closed windows and recirculating air conditioning increases system allows users to glean useful data out of the
more than 4,000 ppm which will cause sleepiness, loss of company’s product technologies.
concentration and alertness, fatigue and acidosis.
“It integrates data from our tyre management
“We believe it is a significant systems, DFM camera and cabin filtration-
contributor to premature fatigue and pressurisers to assist our customers in collecting live
telemetry information for analysis, alerting, reporting
resulting micro-sleeps.” and ensuring compliance,” Woodford said.

lsmtechnologies.com.au
+61 (0)7 3725 8100

DIGGERS & DEALERS

Miners, METS need to lift collaboration

Anew survey indicating miners are A recent example of innovation in the “We have identified a range of areas
dropping their sights on long-term Australian METS sector, the HyLogger around the theme of ‘the mine of the
innovation should be taken by industry future’,” Gros said. “Grades are drop-
as a call to action, according to a leading mineral analysis and logging tool has ping, mines are getting deeper and the
METS industry body. been licenced by CSIRO to Australian social licence to operate is paramount.
We are identifying projects which can
The State of Play survey – commis- firm Corescan help address these themes. Industry 4.0
sioned by global consulting firm VCI will create new and better ways of doing
in partnership with the University of tors of the industry need collaboration things.”
Western Australia and the Federal Gov- to underpin their progress,” he said. “In
ernment-backed growth centre METS mining, we have seen more innovation Digitisation is a major focus of cur-
Ignited – found Australian mining ex- in the last five years than in the previous rent innovation strategies with big data
ecutives ranked last in the world when it 30 and it is the same in other industies. analytics and artificial intelligence set
came to their company’s focus on a long- We are entering an age where multiple to change the face of all industries, in-
term innovation strategy. METS companies have to seriously con- cluding mining. State of Play founder
sider collaboration because otherwise Graeme Stanway said although Aus-
While the majority (66%) of Australian they will miss out; a single company will tralian mining leaders had an overall
mining executives surveyed said their no longer be able to keep up.” understanding of the impact digitisation
companies were prepared for digitisa- would have on their business, for many
tion, only 26% said they were focusing METS Ignited’s mission is to strengthen the ability to define a long-term plan has
on innovation plans which extended be- Australia’s position as a global hub for remained elusive.
yond three years. This was considerably mining innovation – the Australian mining
less than other major mining jurisdictions ecosystem as Gros describes it – and is “To a degree Australia’s local industry
such as South Africa (63%), India (38%) offering $50 million worth of grants to is gridlocked when it comes to the me-
and North America (32%). promote collaborative projects. chanics of preparing for digitisation and
tech disruption,” Stanway said. “While
METS Ignited chief executive Rick “The idea is to encourage multiple there’s an intuitive understanding among
Gros said both miners and METS com- METS companies to solve problems to- mining leaders that the time to prepare for
panies should heed the warnings implied gether for larger miners within a two-year the digital revolution is now, companies
by the survey results. period. We have been talking to METS aren’t always equipped to wade through
companies and miners about identifying the plethora of tech options, such as AI
“There is a very positive view towards those opportunities.” or data analytics. These technologies are
innovation in the Australian mining sector a significant departure from what the in-
but we could see this report as a call to The fund is centred on themes “the dustry is used to and more often than not
action,” Gros told Paydirt. “Australia is a mine of the future”. result in a project-by-project approach
leader in a number of mining-related sec- that stifles change at scale or pace.”
tors and we can take a stronger position
if we move quickly. But if we don’t move Stanway said while the report high-
quickly the sector is under threat.” lighted a gap which needed to be ad-
dressed, it also revealed more positive
Gros said the resources construction findings in relation to Australia’s short-
boom and subsequent downturn had term level of innovation compared to the
led to major restructuring within mining rest of the world’s mining centres.
houses and may have have caused a lag
which was then reflected in the survey “Although we’re lacking in long-lead
report. planning, when it comes to the success
of current innovation programmes, Aus-
However, with the industry apparently tralia is leading the charge against all
returning to a period of relative stability, other regions, with the majority [68%]
Gros called on miners, METS compa- of Australian companies indicating they
nies, researchers and integrators to take are ‘meeting’ or ‘exceeding’ expectations
a more collaborative approach to innova- when it comes to performance of innova-
tion. tion programmes.”

“Globally, it is recognised we have the Gros said adopting collaborative ap-
quality to innovate at the research level proaches to innovation in mining would
but we don’t commercialise enough,” he increase Australia’s pre-eminence in the
said. “There is a need for universities to mining world.
be closer to the METS companies and for
the METS companies to develop a more “There is evidence of collaboration and
collaborative relationship with mining innovation happening but we should be
companies as opposed to the more tradi- moving faster,” he said. “Success will
tional transactional relationship.” mean any company which wants to be in
METS will be attracted to Australia and
The speed of innovation in 21st Cen- bring the talent here. That will in turn
tury R&D makes collaboration between allow us to leverage off our global mining
groups essential, according to Gros. advantages.”

“The rate of change is much faster – Dominic Piper
today and therefore companies in all sec-

PAGE 34 JULY 2017 AUSTRALIA’S PAYDIRT



DIGGERS & DEALERS

Auris releases Wodger strategy

It is no guarantee of longer term success Auris Minerals identified 165m of disseminated bornite with chalcopyrite in the first
but the early drilling results from Auris diamond hole drilled on its Wodger prospect in the Bryah Basin
Minerals Ltd’s exploration efforts in the
Bryah Basin have sparked plenty of initial as indicator minerals but we have found areas in which little work has been done
interest. other pathfinder elements and by using – but Fullerton is not prepared to give
geochemistry, stratigraphy, alteration away too much, too early.
Auris began drilling on the Wodger and the pathfinder elements we find we
prospect on its Forrest project in the get a much better picture.” “The company has picked up all the
Bryah in early May. The initial plan was right ground left in the Bryah and it is a
for a single diamond hole to be drilled but This approach is being used throughout highly strategic package because you’ve
upon visual analysis and portable XRF Auris’ 1,400sq km landholding in the got big players around who want to get
results identifying a 20cm zone of sul- Bryah. their hands on it,” she said. “We are not
phides with 30% copper, the company going to be unrealistic [regarding deals],
quickly expanded the programme to in- “At our Doolgunna project we applied but we won’t let people steal the ground
corporate down-hole EM and a second the methodology at the Cuba prospect and off us. As we enhance our understanding
diamond hole. managed to elevate it in ranking. We have we will no doubt become a target for
also got a lot of drilling which hasn’t been M&A but we need to build that under-
It was a great start for the rebadged assayed for the pathfinder elements.” standing first.
Auris (previously RNI) and its hunt for the
Bryah’s next VMS deposit but executive Part of Auris’ challenge is ensuring it “We get approaches for deals all the
director Debbie Fullerton is urging cau- remains focused. While Wodger has un- time but if it is not a reasonable offer we
tion among shareholders and investors. doubtedly become a key target, there is would rather spend the money ourselves.”
a need to keep up minimum expenditure
VMS exploration is notoriously tricky requirements on the rest of the large ten- The recent capital raising also brought
due to the deposits’ relatively small geo- ement package. new investors into the company and Full-
physical and geochemical footprint. The erton believes they share common objec-
Bryah Basin was thought to be a new “The minimum spend on the entire tives for the company based on long-term
West Australian frontier for the high-grade landholding is $1.5 million but you have growth rather than short-term opportunism.
orebodies following Sandfire Resources to get results to justify that spend,” Full-
NL’s DeGrussa discovery eight years ago erton said. “The last capital raising was “Following the share consolidation [a
but the region is only just welcoming a certainly designed to enhance Wodger 5-for-1 consolidation] and the placement,
second development – the Sandfire/Tal- but we still have to keep up the tene- we have quite a new group of investors
isman Mining Ltd Monty deposit. ments. So, while we are waiting on as- now on board who would support the stra-
says from the Wodger drilling we plan to tegic approach we are taking,” she said.
“You can’t sink holes left, right and do work elsewhere.”
centre; it takes a systematic approach,” “I can’t control the share price but if we
Fullerton told Paydirt. “You have to do Another option would be to divest produce results the share price will take
the groundwork and you can then move ground – either the high-profile targets or care of itself; let’s get on with the work.”
the prospects forward.”
– Dominic Piper
Auris started its “disciplined approach”
in January with an aircore programme
and Fullerton is determined the success
of the diamond drilling will not mislead
the company into overcommitting funds.

“Investors sometimes want you to dia-
mond drill all over the place but you must
ensure you get value out of every hole
and every assay. That means being dis-
ciplined and every step we have taken
has enhanced the project. Our activity
has been focused and that is what has
got Wodger to where it is.”

In May, the company raised $2.5 mil-
lion to continue work at Wodger and on
receipt of the assay results from the first
two diamond holes Auris will begin plan-
ning a second round of drilling.

“Once we have the assay results, we
will be able to better interpret the stratig-
raphy and start planning the next stage,”
Fullerton said.

The immediate focus may be on VMS
pathfinder elements.

“Historically, exploration for VMS de-
posits has focused on copper and gold

PAGE 36 JULY 2017 AUSTRALIA’S PAYDIRT



DIGGERS & DEALERS

No setbacks for approved Vimy

Vimy Resources Ltd has delayed the lishing an access track to one of the on March 11. However, new WA Mines
release of a DFS on its Mulga Rock borefields, have also begun. Minister Bill Johnston confirmed shortly
uranium project – but for good reason. after taking on the portfolio that Mulga
“What we’ve done is some basic pre- Rock was one of four undeveloped pro-
A recent optimisation drilling pro- liminary work that will allow us to com- jects given the green light to proceed by
gramme found the resource model being mence construction once we’ve got the previous Liberal State Government.
used for the DFS has underestimated the approval,” Young said.
amount of contained metal in the Ambas- “I think in reality there’s a sovereign
sador deposit. “We can land a twin-engine plane on risk if they suddenly turned around and
the airstrip now. We had some really said, ‘we’re not going to let you mine’,”
The DFS was scheduled for public re- great help from the Goldfields Air Ser- Young said.
lease in May, however, a 5-15% increase vice on that, they actually flew to site, did
in contained metal in the area drilled an inspection of the airstrip before we did “Mark [McGowan] was always pretty
prompted Vimy to go back to the drawing the upgrade and came back during the open, both publically and in meetings,
board to do some recalculations. upgrade to give us some extra advice.” about what his policy was. It was clear
that if you had your permits – your pri-
Vimy managing director Mike Young With his project team busy on the mary approvals – you would be allowed
said the DFS was now likely to be com- ground, Young is mainly focused on fun- to continue. So we’re over the line.
pleted in October, with substantially draising and marketing strategies, and
lower operating costs and a higher NPV presented Vimy’s case to investors in Eu- “My view is we can work with this Gov-
anticipated than what was reported in the rope, Canada and Australia’s east coast ernment quite easily. And this Govern-
earlier PFS. during the first half. ment is about jobs; they’ve opened the
cupboard and the cupboard is bare, so
“We’ve actually ended up with much Several utilities have expressed interest the last thing they need is a multi-billion
more metal than we expected and that in Mulga Rock, with Young hinting the US lawsuit from a multi-national like Cameco
will have a really positive effect on the will be a key market for his company. [Corp] who have shown their not afraid of
outcomes of the DFS,” Young told Pay- taking unjust decisions to court.”
dirt. “Utilities in America are particularly
excited we’re coming into the market be- Sentiment towards uranium continues
“We decided it was better to release cause they only get 6% of their uranium to be the major sticking point for yellow-
the DFS with the most up-to-date data, domestically; while 40% comes from cake aspirants such as Vimy, but Young
so that meant delaying it a few months so Kazakhstan and Russian-allied entities,” has seen enough in recent times – in-
we could get the new resource models Young said. cluding a 45% uptick on the back of Kaz-
done. We’re pretty excited about it, atomprom announcing plans to cut 10%
they’re looking like good numbers.” “To the Americans, that’s a risk so of production – to suggest the prices will
they’re pretty keen to see new sources recover longer term.
The PFS, completed in late 2015, found of supply. They’re keen for us to be suc-
Mulga Rock – about 240km north-east of cessful because the way they approach “I think you’re going to see some struc-
Kalgoorlie – could support a 2.65 mtpa their supply is they want both diversity tural shifts in the way Kazakhstan ap-
operation over at least 17 years for capex and security ahead of price. proaches the market and that can only
of $US254 million plus a mine pre-strip be good for the price,” he said.
cost of $US33.6 million, with operating “Notwithstanding the politics of ura-
costs of $US31.47/lb before by-product nium mining in Western Australia, they “Kazakhstan is the key. Together with
credits and $US27.77/lb after by-product still see us as being a fairly safe jurisdic- Cameco, they control 60% of the world’s
credits also estimated. tion in terms of security of supply.” uranium and when the CEO of Kazatom-
prom declares he wants to be the ‘OPEC
Vimy announced an upgrade of 67.9mt Vimy’s future was clouded earlier this of uranium’, you’ve got to take him seri-
@ 525 ppm uranium oxide for 78.5 mlb, year when the Mark McGowan-led Labor ously.
including a maiden measured resource Party romped to a landslide victory in the
of 5.1mt @ 1,105 ppm uranium oxide for WA State Election, with several uranium “When they start implementing some
12.4 mlb, to the project’s resource in late projects – including Mulga Rock – seem- of these changes, that’s when you’re
May. A further resource upgrade is due ingly up in the air due to Labor’s long- going to see a more positive and sustain-
in early July. term opposition to uranium mining. able price rise.”

Early construction activities, including This was despite the project receiving – Michael Washbourne
an upgrade of the airstrip and estab- Federal Government approval just days
before West Australians went to the polls

PAGE 38 JULY 2017 AUSTRALIA’S PAYDIRT

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DIGGERS & DEALERS

Magmatic lists
fully loaded

Few juniors can boast a portfolio on listing filled with projects previously picked over by Gold Fields

Better sentiment in the resources projects is also part of the strategy, with come up trumps followed by successful
sector in recent times has not trans- JOGMEC on board in a JV at the Parkes drilling outcomes for gold-copper at
lated into an easy listing. project. JOGMEC can earn a 51% in- Myall (Q4) and Wellington (Q3).
terest in Parkes by spending $3 million.
“I think the market recognises it has “In the next 6-12 months, we would
been a difficult time to list, I think the A total of $1 million will be spent on ex- like to have a minimum of one JORC
feedback we have had has been ‘con- ploration in the first year of the JV, with resource in our portfolio. We would
gratulations, you have done a really good near-surface gold and additional gold- also certainly liked to have advanced a
job to list in this market place’,” Magmatic copper, copper-gold-molybdenum por- number of others to JORC or pre-JORC
Resources Ltd managing director David phyry mineralisation being targeted. stage and we would certainly like to sure
Richardson told Paydirt in early June. up our long-term capital future by po-
The exploration campaign at Parkes tentially partnering with someone that
“Our share price has gone from 20c is just one of seven programmes in the understands the upside our copper port-
to 15c [within two weeks of listing], we pipeline for Magmatic over the next 12 folio offers,” Richardson said.
would hope that is the traditional flow of months, giving Richardson confidence
the short-term punter pulling out.” success can be struck. Early indications of the gold potential
in the portfolio will help Magmatic gain
Despite the early knock in Magmatic’s “With assays coming out of Carlisle some near-term traction in the market,
share price, Richardson said the vol- Reefs [gold] and with six other explora- however, it is copper’s place in modern
umes traded out were low, indicating his tion programmes we have in the next 7-8 society – particularly in the make-up of
company had strong investor support. months, that news flow will be the share electric vehicles – and the company’s po-
Directors own 53% of Magmatic shares, price driver,” Richardson said. sition in the East Lachlan which will un-
a sign of how convinced they are about derpin success, according to Richardson.
the suite of projects compiled in the East In the medium to long-term, copper-
Lachlan belt of New South Wales. gold and base metal porphyry targets at He also believes that China’s One Belt,
Myall, Parkes and Wellington will be po- One Road infrastructure initiative and
Magmatic’s four projects, comprised tential company-makers for Magmatic, Australia’s role as a copper supplier is
of seven tenements and 40-plus targets, however, right now the multiple shallow understated.
have been verified for their prospectivity gold targets primed for drilling are ex-
by heavyweight Gold Fields Ltd. pected to garner some interest. “Not just the shortfalls that are pre-
dicted in copper and shown in terms of
Gold Fields – which retains a 20% “I think more and more people are production coming out, but four times as
shareholding in Magmatic – had com- jumping on the gold story now,” Rich- much copper is required in an electric ve-
mitted $13.5 million in exploration on ardson said. “I think it is interesting at the hicle than a normal vehicle. Furthermore,
the projects hosted in Australia’s famed moment that gold hasn’t followed tradi- what is still not recognised in the medium
copper-gold porphyry region. tional pathways and I think the market is and long term is the potential effect of
starting to realise gold maybe diverged One Belt, One Road which is basically
Magmatic’s projects – Moorefield, from the US dollar and the gold price an initiative by the Chinese Government
Myall, Parkes (two tenements) and Wel- could go up the same time as the US to create jobs,” Richardson said.
lington (three tenements) – are in close dollar goes. Almost certainly this month
proximity to the Cadia Valley, Cowal and [June] the Fed will raise interest rates, “That means infrastructure and that
North Parkes mines. which will drive the US dollar, which is means copper. One Belt, One Road is
great news for Aussie dollar-priced gold. real. I am bullish on China and demand
Richardson knows the enormity of the If the Aussie dollar stays and the gold for copper. I am very bullish on the Aus-
challenge in uncovering another world- price holds its price, you know we are tralian costs on copper. People think Chile
class deposit in the region and while opti- heading to all-time high gold prices.” is cheap; Chile is a high-cost environment
mistic about the company’s fortunes, he is with the cost of electricity and water.”
also realistic on the capabilities of juniors. Favourable gold prices will help Mag-
matic’s standing in the market during its – Mark Andrews
Richardson said he would not “fall in infancy, particularly so if pending drilling
love with assets and if we see a moneti- results at Carlisle Reefs (Moorefield)
sation opportunity we will take it”.

Entertaining partners at Magmatic’s

PAGE 40 JULY 2017 AUSTRALIA’S PAYDIRT



DIGGERS & DEALERS

Honeymoon continues for Boss

Boss Resources Ltd is about to embark A recent PFS found Boss could restart Uranium One walked from Honey-
on what new chief executive Duncan moon, one of only four permitted uranium
Craib has termed the “final technical vali- the Honeymoon uranium project for just mines in Australia, in 2013 after pro-
dation” for the restart of the Honeymoon ducing 670,000lb over 18 months during
uranium project in South Australia. $US10 million commissioning of the solvent extraction
plant.
A field leach trial at Honeymoon, 80km recently identified a new resin with over
north-west of Broken Hill, was due to 100% higher loading capacity than previ- “We recognise that due to the history
start at the time of print following the re- ously tested resins, with Craib describing of Honeymoon, there may be some un-
lease of a robust PFS which found the the outcome as a “game changer” for the certainty [among investors] but it’s un-
project could be restarted for just $US10 project. founded,” Craib said.
million.
Preliminary bench-scale leach test “At the time [of Uranium One’s exit], this
“I view this as the final technical vali- work also showed a modified leach liquor was their 11th project out of a stable of 11
dation of the project,” Craib told Paydirt. helped improve recovery in the Honey- and their core focus was in Kazakhstan.
moon ores. Both results were fed into the It was viewed that their ‘far-flung’ Aus-
“We as a board are very confident that PFS and will be incorporated into the up- tralian operation, in a declining uranium
we can produce in that lowest quartile of coming field leach trial. price market, was too difficult to manage
sub $US24/lb.” and not their core focus, so they walked
“It’s now about putting these test work away.”
Undoubtedly the key highlight of results into a real testing environment,”
the PFS was an estimated low AISC Craib said. “We’ll be doing it live on the Boss holds several mining permits
of $US23.90/lb over the life-of-mine, ground on the Honeymoon mining li- and regulatory approvals, including Na-
placing Honeymoon among the lowest- cence. We’re confident we can enhance tive Title agreements with the Adny-
cost uranium producers in the world. this project significantly.” amathanha and Wilyakali people and
export approval for 3.3 mlbpa, which will
A direct operating cost of $US15.60/lb Boss has made rapid progress at Hon- help fast-track the restart of Honeymoon.
at the mine gate was also flagged in the eymoon since picking up the former Ura-
PFS. nium One Australia Pty Ltd asset in late The SA Government and a number of
2015, with former Kalahari Minerals chief local community groups have also ex-
“To achieve an AISC of sub $US24/lb financial officer Craib joining the com- pressed public support for the restart.
is a phenomenal result,” Craib said. pany in January.
“We don’t have to jump over the hur-
“The other highlight is the ability to Craib, who played a key role in devel- dles some of our competitors do, it’s just
increase the volume of production. Cur- oping the Husab uranium mine in Na- a timing issue now for when we get back
rently the plant volumetrically can pro- mibia for China Nuclear General Power into production,” Craib said.
duce 880,000 lbpa. The PFS confirmed Group, is looking forward to working on a
that Honeymoon can produce up to 2 project he said carried “unfounded” bag- Craib, who was lured to Boss through
mlbpa [by incorporating an ion exchange gage. his previous working relationship with
plant] and then up to 3.2 mlbpa with ad- chairman Mark Hohnen at Kalahari, has
ditional expansion. That makes us quite embraced the challenge of restarting
a sizeable player in the market.” Honeymoon during a depressed uranium
market.
Capital costs for the addition of the ion
exchange plant and the Stage 3 expan- “We believe the smoke is beginning to
sion from the potential inclusion of the clear on the price when you look at Japan
Gould’s Dam deposit were estimated at bringing its reactors back online, China
$U58 million and $US78 million respec- ramping up its nuclear power, general
tively. global power demand growth, carbon
fears and of course Kazatomprom’s
Restarting the existing plant at Honey- supply cutbacks,” he said.
moon will take up to a year, with payback
to occur within 3.6 years of first produc- “The general consensus in the ura-
tion. An initial mine life of seven years nium industry is that prices will rise. It’s
has been estimated for the project, which difficult to say exactly when – and there’s
hosts a global resource of 43.5mt @ 660 a lot of literature out there to support a
ppm for 63.6 mlb. whole bunch of different views – but our
approach as a company will really be a
Further boosting the company’s con- bricks-and-mortar approach.
fidence in Honeymoon were results of
“The way to manage that is by being
“ongoing ion exchange test work, which very cost conscious, with a strong em-
To achieve phasis on managing cash flow and that’s
an AISC of probably where I can utilise my financial
sub $US24/lb is a capabilities. We have a very lean team
phenomenal result and management structure; most of our
workers are on a contractual consultancy
basis. In fact, I’m the only employee.”

– Michael Washbourne

PAGE 42 JULY 2017 AUSTRALIA’S PAYDIRT



DIGGERS & DEALERS

Mincor readies for first gold

Mincor Resources Ltd’s producer Darlek is one of the pits Mincor hopes to put into production later this year
status could be reinstated before
year’s end, albeit in a different commodity. further due to the already shallow nature And then we’ve found mills with lower
of the mineralisation. costs, but a coarser grind with lower re-
Since mothballing its nickel mines early covery.
last year, Mincor has focused on the gold “We’re not drilling down to 100m, we’re
potential of its ground in the Kambalda drilling down to 40-50m because these “When you add all the parameters to-
region and is now on the cusp on joining are near-term, simple, low capital pits,” he gether, the trade-off studies show they’re
the exclusive club of Eastern Goldfields said. pretty much generating the same result,
producers. which means all the mills are available to
“You’ll get a lot of feedback on how you us in terms of traditional toll treatment.
A feasibility study released in late April should approach it, but what we believe And it’s no secret there are plenty of
found the company was on track to pro- is you should do enough to get into pro- hungry mills around.”
duce gold from mining a series of low duction and then start scaling it up after
capital open pits at North Widgiemooltha, some very strategic exploration to show Mincor has no intention of parking up
with ore to be processed via toll treatment. this is a starting point. the drill rigs, with plans in place to boost
the confidence of the existing reserves at
Using a constant gold price of $1,600/ “That’s very much in our company’s Widgiemooltha as well as investigate the
oz and a toll treatment capacity assump- history and I feel we’ll start getting appre- gold potential at North Kambalda.
tion of 60,000 tpm, the study estimated ciation when we can show people that it’s
Mincor could recover 65,863oz gold not static and we can get this done very “We’re in the middle of a major gold
over an initial mine life of 19 months, much within our financial ability.” district, so it’s not a surprise to anyone re-
based on the maiden start-up reserve of ally, but we need to do a little bit of smart
823,590oz @ 2.7 g/t gold from 72,580oz. Mincor’s strong cash position also pre- exploration to show our shareholders
sented the company with the option of there’s a lot of upside here,” Muccilli said.
Mincor would be required to fork out building its own processing facility, but
just $2.8 million of upfront capital, in- the idea was quickly rejected due to the “We’ve got a good feel for it now
cluding pre-production and infrastructure abundance of free gold milling capacity in terms of what we can do out here.
costs, to become a gold producer. At in the region. Funding future exploration with cash flow
the end of April, the company reported is not a bad thing to do because we can
a healthy cash balance of $13.83 million “Every mill is a little bit different and keep a nice, tight shareholding, so that’s
minus an outstanding debt of $320,000 what we’ve found is there are trade-offs the aim.”
from equipment leases. between recovery and grind and their re-
spective costs, but they’re all very much Muccilli said his company would also
Key financials from the study included delivering the same net result in terms of look to work up some of the lithium-
undiscounted cash flow of $28.3 mil- cash flow,” Muccilli said. bearing targets on its Widgiemooltha
lion, C1 cash costs of $970/oz, AISC of tenements following successful surface
$1,126/oz, maximum cash drawdown of “For example, a mill which has higher sampling of outcropping pegmatites.
$7.3 million and NPV of $25.7 million. grind has a higher recovery but it costs
more because it requires more energy. – Michael Washbourne
The study flagged first gold production
early next year, but Mincor managing di-
rector Peter Muccilli was optimistic his
company could hit that milestone a lot
sooner than forecast.

“We have the cash balance, we have
the ability and we have the experience
to put this into operation, and the quicker
the better,” Muccilli told Paydirt.

“While we’ve officially said we could
get into production in the first quarter of
the new calendar year, we’re going to try
and make every effort to get there this
year. There’s still some key conditions –
permitting is still to come through and it’s
still subject to a board decision – but I
feel pleased that we have a credible path
to get back to cash flow.”

The five key prospects at Widgie-
mooltha – West Oliver, Bass, Hronksy,
Darlek and Flinders – assessed in the
feasibility study comprise a total resource
(indicated and inferred) of 3.795mt @ 2
g/t gold for 238,040oz. Jeffreys Find was
not included in the final calculations.

Muccilli said his company had resisted
the temptation to drill out the resource

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DIGGERS & DEALERS

St George pitches sexy angle
Glencore has predicted exponential they see it as being one of the few com- For the reasons pointed out, the nickel
growth in demand for nickel over the modities that hasn’t had a run yet and is market dynamics will be well known to
next 20 years, with lithium batteries and bound to have a run in due course; it is North American investors, however,
the growing electric vehicle market the an essential commodity.” Prineas may need to delve a little further
catalysts. into why he thinks St George is the hot-
Prineas said the London investment test emerging stock on the block.
“I think the smart investors will start to community was prepared to be more pa-
see that growth profile and will want to tient with nickel players and look at their At Mt Alexander, where St George
try and back a company that can keep prospects 2-3 years from now, while and Western Areas are JV partners on
growing through that increase in demand Australian investors were expecting to exploration licences E29/638 which host
for nickel,” St George Mining Ltd execu- see upside potential at a faster rate. the Cathedrals, Stricklands and Investi-
tive chairman John Prineas told Paydirt. gators nickel-copper-PGE discoveries,
At the time of print, Prineas was high-grade nickel and copper mineralisa-
Although disappointed the nickel making a trip to New York to test the tion continues to be intersected.
price has trended “sideways” and “re- North American market for the first time.
mains in the doldrums”, sitting at about “We continue to drill out at Mt Alex-
$US10,000/t for the past 12 months, Prineas was hoping to get a similar re- ander and hit some wonderful miner-
Prineas is confident St George is shaping sponse in New York to the one received alisation – massive nickel sulphides in
as the nickel stock of choice for investors in London and was banking on an under- some of the richest komatiite-hosted sul-
to consider. standing of the electric vehicle and lithium phide ever seen – the quality of our min-
ion battery market to get his pitch across. eralisation is fantastic. It is shallow, 30m
The reason for Prineas’ bullishness is from surface, which is freakishly unheard
the drilling success at Mt Alexander – a “It takes a bit to explain the nickel of. We have gone down 150m and still
75:25 JV with Western Areas Ltd – and sector; Australians get nickel, the London hitting that high-grade type of mineralisa-
the reaction from some punters willing to crowd get it even better,” Prineas said. tion,” Prineas said.
take a long-term view on the nickel market.
“Certainly with electric vehicles, which “We definitely have got the minerali-
“The reception from institutional-type are getting a lot of attention in the North sation to grow the company. The magic
investors has been very good. I did a trip American market with lithium batteries, thing now is to get the nickel price
to London a couple of months ago with we all know nickel is a major component moving. If we continue to discover nickel
some of our institutional investors and of those. All of a sudden nickel is not sulphides and grow our resources and
got a very good response there. Institu- just about stainless steel; it has the sexy then if the nickel price rises that is going
tional investors like the nickel thing at the angle to it with the lithium batteries and to turbo-charge shareholder value.”
moment; nickel is in the doldrums, but electric vehicle story, which both have
huge growth potential.” Results from drilling released early
in June confirmed extensions to known
Mt Alexander – a JV between St George and Western Areas – continues to emerge with mineralisation in the Cathedrals belt and
exciting massive nickel sulphide potential revealed new zones of mineralisation in
areas previously untested by drilling.

St George was awaiting results from
DHEM surveys conducted at the time
of print, while surface EM surveys also
taking place may lead to more potential
drill targets.

Meanwhile, a major reconnaissance
MLEM survey over the structural corridor
1km south of the Cathedrals belt was ex-
pected to be completed at the end of June.

Once the MLEM survey is completed,
a high-powered SAMSON EM survey
over the western part of the Cathedrals
belt is planned after drilling at Investiga-
tors indicated that massive sulphides are
present at increasingly deeper levels.

In addition to the work at Mt Alexander,
120km south, south-west of the Agnew-
Wiluna belt, St George will be active at the
East Laverton gold project where about
3,000m of RC drilling (results pending at
the time of print) has been completed and
another 3,000m planned, while diamond
drilling of the Windsor nickel sulphide
target was under way in June.

– Mark Andrews

PAGE 46 JULY 2017 AUSTRALIA’S PAYDIRT

Image courtesy of Western Areas Ltd 17 October 2017
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DIGGERS & DEALERS

Western Areas The price movements of the
keeps the ball last five years may have
moving left it isolated at the bottom
of a particularly rough nickel
PAGE 48 JULY 2017 AUSTRALIA’S PAYDIRT ruck, but Dan Lougher is con-
fident his Western Areas Ltd
team has the wit and innova-
tive thinking needed to keep its
forward momentum.

“It is a tough game,” Lougher admits.
“You just have to keep working hard;
working hard to bring down costs and
working hard to bring growth into the
company.”

Just how tough the nickel game has
become is evidenced by Western Areas’
standing on the ASX. Five years ago,
it was one of several nickel miners but
today it is the lone pure-play nickel com-
pany in Australia.

Towards the end of last year, the com-
pany’s endurance appeared set to reap
rewards. Thanks to political events in
Indonesia and the Philippines, the LME
nickel price was at its highest point
for more than 12 months and with Chi-
nese stainless steel production also re-
bounding, the sector outlook was at its
brightest for several years.

However, as always seems to be the
case with nickel, setbacks were just
around the corner. In early May, Regina
Lopez – the environmentalist-turned-en-
vironment minister who had suspended
many of the Philippines’ small nickel lat-
erite mines – failed to win endorsement
from the Philippine Government’s com-
mission on appointments. Her replace-
ment, former military chief Roy Cimatu,
immediately adopted a more conciliatory
stance and nickel exports to China have
already begun to rebound.

To the south, Indonesia’s Government
has also performed a U-turn on its ban
on the export of unprocessed ores, re-
leasing previously locked up nickel lat-
erite stockpiles.

Speaking to Paydirt last month,
Lougher acknowledged the return of
tough times for nickel but said his com-
pany was in even better shape to manage
challenges than it was two years ago.

“The price has gone south but we have
demonstrated over the last 18 months we
can improve the business and our mar-
gins, even in hard times,” Lougher said.

Innovation has come on three fronts;
operational, financial and marketing.

Better nickel recoveries are planned for Cosmic Boy

While lower costs and higher margins cash cost of $2.23/lb was the lowest begin thinking about how they can im-
at its Forrestania operations in Western since June 2015. Lougher said the down- prove every aspect of performance.”
Australia is essential to the improve- ward trend on costs was part of an on-
ment, Lougher also views the company’s going savings programme. The quest for better margins has also
cleaner balance sheet as vital. led Western Areas back to the mill re-
“We’ve taken a lot of money out of the covery enhancement project (MREP) it
“Becoming debt free and adding cash big ticket contracts – mining, haulage put on hold in 2016.
in the first half [of FY17] and the March and shipping – in the last two years but
quarter has helped a lot,” he said. we did it together with our contractors The project uses the company’s pat-
because we don’t want suppliers going ented BioHeap leaching technology to
In July 2015, Western Areas repaid its to the wall because of our desire to re- improve nickel recovery, particularly
$125 million of convertible notes in full, duce costs.” where the suppression of arsenic has led
leaving it debt free for the first time since to lower recoveries.
2004. In May last year, it raised $60 mil- The company also engaged contrac-
lion through a placement to institutional tors as well as all employees in its inno- “We were looking at how we could
and sophisticated investors and a further vation programme which was launched unlock material from the tailings and
$15 million through a share purchase to achieve cost savings and productivity get it back into the mill. When we found
plan. The funds were used to pay Glen- bacteria which could work in low pH,
core the remaining $12.5 million for the Dan Lougher high saline water in atmospheric – not
$30 million purchase of the Cosmos high pressure – conditions, it was a real
nickel complex. improvements throughout all the com- breakthrough.”
pany’s operations.
“Repaying the bond was a critical Having deferred the project last year,
turning point in the company’s history,” “It was extremely successful and I was the board has now approved the restart
Lougher said. “It allowed investors to actually slightly surprised how people of the MREP with commissioning ex-
view us as a long-term opportunity in a participated in the programme; all the pected to start in January 2018. For a
tough market. Shareholders don’t want to way from underground contractors and capex of $17.5 million, Western Areas ex-
see you go into a difficult part of the cycle milling groups to senior management,” pects to produce an additional 1,400 tpa
carrying debt because you may not come Lougher said. nickel at $2.44/lb by using the BioHeap
out the other side and we have seen process to leach tailings.
many examples of that in recent years.” The company believes it has derived
millions of dollars in savings from the From there, Western Areas can
The balance sheet exercise has added programme and will run it again in FY18. choose to blend the 40-50% nickel grade
ballast but it is the continuing perfor- material into the existing concentrate or
mance of the Forrestania operations “Some of the innovations are one-offs bag it separately and sell it as a unique
which provides Western Areas with but the entire process opens people’s product.
structural stability. eyes to the idea of innovation and they
“We could produce a nickel sulphide
As a mining engineer with more than concentrate or perhaps a nickel sulphate
30 years’ experience, Lougher knows which is used in electric vehicles [EVs],”
where to look to assess a mine’s perfor- Lougher said. “To produce the sulphate
mance. we would have to put it through an ion
exchange and crystallisation process but
“You can tell a lot about an operation the expanded flow sheet wasn’t in the
from its safety record and maintaining original capital estimates and we need to
safety is our number one priority; it is do more work on that market.
something we are serious about. We’ve
had one LTI this year but have still had “The strategy for now is to produce a
strong safety performance over a long high-grade sulphide concentrate, dry it
time. In fact, Spotted Quoll hasn’t had a and bag it separately because we have
LTI yet.” already received a number of requests
about the sale of such a product.”
The continuation of Western Areas’
near impeccable safety record has not “Once we have demonstrated the plant
come at the expense of productivity or work we can then look to strike off-take
cost containment. The March quarterly deals over the high-grade nickel sulphide
concentrate – which can be fed directly

AUSTRALIA’S PAYDIRT JULY 2017 PAGE 49

DIGGERS & DEALERS

into refineries – or develop a deeper LEFT: An innovation programme has delivered cost savings across all operational
knowledge of the sulphate product and aspects of the Forrestania operations. RIGHT: Cash costs in the Flying Fox and Spotted
market and retrofit the ion exchange.”
Quoll mines were down to a $2.23/lb average in the March quarter
Western Areas’ interest in the EV market
could again be described as innovative; producer in China and because it is incor- We have a very mature middle and senior
and it was marketing where the company’s porating roasting of the nickel concen- management team and 5-10 year service
new innovation push truly began. trate, it allows us to bypass the smelting is not uncommon in our company. That
and refining, allowing more margin to flow experience becomes critical when you
While the rest of the WA nickel sulphide through to the company. There is also are talking about the type of orebodies
industry was locked into life-of-mine con- fewer penalties for deleterious elements we are dealing with, the style of mining
tracts with BHP Nickel West, Western in the roast process, meaning there are we are using and the marketing we are
Areas has always been free to negotiate benefits that flow all the way back to the undertaking. That’s our view; continue
its own off-take arrangements and when mining schedule as well.” working hard at organic growth and im-
its existing deals with Nickel West and proving our margins by looking out of the
Jinchuan entered their final phase, the Lougher puts the Tsingshan deal, the square; whether through BioHeap, the
company began assessing options. operational innovations and the overall deals we have, operational innovation or
strength of the company down to the cul- new marketing opportunities.”
“The first part of the innovation was the ture embedded within Western Areas.
negotiation of the new off-take agree- – Dominic Piper
ments,” Lougher said. “It has been a big part of our success.

In November, a three-year, 10,000 tpa
off-take agreement was signed with Tsing-
shan Group, China’s largest nickel user.

“It is a deal we have been working on
since 2012,” Lougher said. “Tsingshan
is leading the charge in China to pro-
duce a greater proportion of the higher
quality 300-series stainless steel which
contains up to four times the amount of
nickel as the 200-series stainless.

“It is the largest integrated stainless steel

Back to exploration roots for Western Areas

More than eight years on from the start Western Areas is hoping a successful
of the Cosmic Boy concentrator at DFS on the Odysseus deposit will allow
Forrestania, Western Areas Ltd is con-
sidering how long it will take to fire up a it to restart production through the
second mill. Cosmos concentrator

The company took possession of the “This will be mainly spent on Cosmos
mill via its 2016 acquisition of the Cosmos and our Western Gawler greenfields pro-
nickel complex from Glencore and is now ject,” he said.
putting the Odysseus nickel sulphide de-
posit through a DFS to determine how and “Exploration potential was the main
when it can restart the Cosmos concen- driver of the Cosmos acquisition and with
trator which has been idling since 2013. the results from Odysseus and Neptune
it is delivering the goods already.”
Aiding that process has been a bout
of exploration success at Cosmos, in- On the Western Gawler JV with Stran-
cluding hits of 2.57m @ 12.6% nickel and dline Resources Ltd, Lougher preached
5.3m @ 15.2% nickel (including 3.4m @ patience from shareholders.
22% nickel) from drilling at the Odysseus
North prospect and 17m @ 1.33% nickel “It is early days and after two years
from the Neptune prospect. of target generation we are still looking
at the basic geochemical sampling, li-
Western Areas managing director Dan thology drilling, etc,” he said. “The
Lougher said the Odysseus North results Western Gawler is a large system; but
would be fed into the resource upgrade it is a lookalike to the Fraser Range and
and subsequently the DFS, scheduled we have first mover advantage but it will
for release in January 2018. take time. Our shareholders can live with
a 5-7 year timeframe whereas those of a
The results from Odysseus could junior explorer probably couldn’t.
herald a start to a new era of explora-
tion at the former Jubilee Mines asset. “We have appointed former LionOre
Lougher said Western Areas’ exploration geologist Ian Gregory as exploration
budget would increase from $8 million manager for the Western Gawler so that
in FY17 to $10-15 million in FY18, “de- will boost the talent in that group. It has
pending on cash flow from Forrestania”. a $3 million budget and we will move into
drilling after we strike access agreement
PAGE 50 JULY 2017 AUSTRALIA’S PAYDIRT with traditional owners.”

– Dominic Piper


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