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CONTENTS
PAYDIRT (ISSN 1445-3436) 5 NEWS 20
Published by The South Australian Nuclear Fuel Cycle 28
Paydirt Media Pty Ltd. Royal Commission has brought down its 52
A.C.N. 063 985 133 Tentative Findings which indicate the State
Head Office: could generate revenue of more than $257
Suite 9, 1297 Hay St, West Perth billion, with total costs of $145 billion over
Western Australia 6005 120 years if it built an integrated storage
P.O. Box 1589, West Perth and disposal facility. Could this be the
Western Australia 6872 boost Australia’s ailing uranium sector
Phone: (+61 8) 9321 0355 needs?
Facsimile: (+61 8) 9321 0426
[email protected] 20 COVER
www.paydirt.com.au Metals of Africa managing director Che-
rie Leeden admits she used to look at
Editorial: graphite projects – and the wider graphite
Editor: Dominic Piper market – and struggle to make sense of
Deputy editor: Mark Andrews it. But 18 months into exploration and
Journalist: Michael Washbourne development of the company’s graphite-
Graphics: Marian Noonan laden ground in northern Mozambique
Contributors: and Leeden is preparing to release a PFS.
Keith Goode (Sydney), Brendan Ryan Dominic Piper visited the company’s Mon-
(Johannesburg), Ross Louthean tepuez and Balama projects to see how
Advertising: this had been achieved
Advertising & marketing manager:
Tony Mwarey 28 GRAPHITE PREVIEW
Subscriptions: Magda Thibaut Graphite can be a bewildering sector at
Phone: (+61 8) 9321 0355 times with investors unsure of what to
Facsimile: (+61 8) 9321 0426 make of projects that cannot be judged
by traditional tonnes-by-grade valuations.
Pre-press and printing: In an effort to bring clarity to investors,
Vanguard Press 26 John St, Paydirt will host the first ever Australian
Northbridge WA 6003 Graphite Conference on March 22. In the
Member of: build-up to the conference, we provide
an overview of the sector and some of
Paydirt Media the companies proving their worth to the
Executive chairman: Bill Repard market
Finance manager: Giovanny Jefferson
Accounts/administration: 52 INDABA REVIEW
Heather Melling More than 6,000 people made the annual
Conferences: Tammy Caldwell, pilgrimage to South Africa’s Mother City
Melita Fogarty for the Mining Indaba in February. Del-
egate numbers may have been down and
Cover image: Metals of Africa the general outlook for the African mining
managing director Cherie Leeden sector generally bleak but Dominic Piper
inspects core from the company’s and Mark Andrews found more than a
Balama Central graphite project few chinks of light during the four days of
presentations
Member of:
Australia-Africa Minerals & Energy Group 76 STRANDLINE
Mineral sands may not be lighting the mar-
Registered by Australia Post PP 643938/0071. ket up at the moment but that has afforded
No pages or articles in this publication may be Strandline Resources the opportunity to
reproduced in any form without the consent of put together a large and very prospective
the publisher. This includes photographs either tenement package all along the Tanzanian
taken by Paydirt Media staff or provided by other coast. Mark Andrews travelled to East
parties Africa to find out Strandline’s plans
EDITORIAL
Mining Indaba’s opportunity
for the future
Ihave always argued it is difficult to be in continued. “And at the end of it, the industry was back where it
Cape Town in February and feel down- started. Any value created had been lost.”
beat but this year’s Mining Indaba was
so sombre at times that I began won- The only hope, then, is that industry and government use this
dering if anyone was enjoying them- lull to prepare themselves adequately to take advantage of the
selves. next upswing with policies and strategies designed to deliver
As the sector enters a sixth year long-lasting benefits to shareholders and citizens.
of downturn, even those eternal opti-
mists who have retained their sunny outlook are suffering from Royal Commission doubts mining’s impact
battle fatigue.
So, were there any bright spots to be gleaned from the four- The South Australian Nuclear Fuel Cycle Royal Commission
day talkfest? Certainly gold equities appear to be back in the has handed down its Tentative Findings (see page 5) and the
ascendency. In Australia, this has been the case for more than news is both good and indifferent for the State’s uranium indus-
18 months as a higher Australian dollar gold price has conspired try.
with falling diesel costs and the softening of other input costs
(particularly labour) to create the best margins the industry has One of the report’s key findings was that “an expansion of
experienced in nearly a decade. uranium mining has the potential to be economically beneficial”
Coupled with this is the general growth narrative of most Aus- which is good news for those hardy companies still trying to
tralian gold producers. Apart from Newcrest Mining Ltd – which make a go of uranium development despite more than five years
is still struggling at 10-year share price lows – Australian gold of depressed spot prices. However, the Royal Commission went
producers are on the up. Led by the likes of Northern Star Re- onto say “it is not the most significant opportunity”.
sources Ltd and Evolution Mining Ltd, the Aussie gold miners
are lean, efficient operators, many of whom appear headed for That was reserved for the management, storage and dispos-
a new mid-tier, a sector of the domestic gold industry that has al of spent nuclear fuel. Financial assessments and economic
been empty for more than 15 years. modelling in the report indicated an integrated storage and dis-
On the African continent, the growth narrative is less convinc- posal facility could generate revenue of more than $257 billion
ing. Few gold companies on the continent are on the up. Instead, for SA, with total costs of $145 billion over 120 years.
the likes of Gold Fields Ltd, AngloGold Ashanti Ltd, Acacia Min-
ing plc and Harmony Gold Mining Co Ltd are looking for ways The news, though, is not necessarily a ringing endorsement
to either revive underperforming assets or extricate themselves for the uranium exploration and mining industry. Indeed, the re-
from long-held operations. port also found that “there would be no opportunity for the com-
All of these companies have enjoyed improved performance mercial development of further uranium processing capabilities
in the last year but their growth profile is stunted and even where in South Australia in the next decade” and electricity generation
there is projected growth, it is usually associated with problem- from nuclear was out of the question for even longer; “it would
atic mines. not be commercially viable to generate electricity from a nuclear
Only the remarkable Randgold Resources Ltd still has mo- power plant in South Australia in the foreseeable future”.
mentum among the African gold miners, having performed
strongly through all phases of the gold cycle. So, SA could profit from taking and disposing of others’ nu-
Randgold chief executive Mark Bristow always makes an im- clear waste and spent fuel but cannot expect to make much out
pression on the Mining Indaba stage and this year he gave hope of mining, processing or production. This is bad news for the
to companies in every commodity that good companies can be uranium mining industry.
established in any market circumstances.
“The great stride the mining industry took during the early With spot prices so low, the only way it could generate strong
2000s was in a low commodity price time,” he said. “Africa was political support is by pointing to the added economic benefits
open to business and Randgold was set up to capture this. In of establishing a wider uranium industry, one that incorporated
2005 [when the upward cycle began] the company was well value-adding processing and refining.
placed to take advantage.”
The problem was, few other companies and a great many The Royal Commission did find that nuclear energy could be
countries – and not just in Africa – were not ready and made part of a low carbon emissions future but said “it would be wise
hasty decisions in an effort to catch the commodities wave. For to plan now to ensure that nuclear power would be available
industry, this resulted in wasteful acquisitions, and growth pipe- should it be required”.
lines that concentrated on ounces or tonnes produced rather
than profits made. For governments it meant super profit taxes, As political will on all sides of politics appears to be leaning
nationalisation debates and irresponsible budgets. towards support for renewable energy, such long-term planning
More than a decade on, both industry and government have would appear unlikely.
been dumped on the beach with little to show from the ride.
“The industry and countries didn’t respond very well,” Bristow The Royal Commission’s Tentative Findings have doused the
hopes that uranium mining could lead to a greater uranium and
PAGE 4 MARCH 2016 AUSTRALIA’S PAYDIRT nuclear industry and it appears increasingly likely Australia’s
uranium reserves will remain in the ground for another few gen-
erations yet.
[email protected] @DominicPiper
SA’s nuclear future
Uranium mining and spent fuel of $145 billion over 120 years,
storage and disposal could in the process generating 1,500
provide substantial economic full-time jobs and up to 5,000
benefits to the South Australian jobs during the 25-year construc-
community, the South Australian tion stage.
Nuclear Fuel Cycle Royal Com- Industry groups welcomed the
mission has found in its Tentative report, with the South Australian
Findings. Chamber of Minerals and Energy
Released on February 15, the (SACOME) saying the findings
report found SA could safely in- supported its call for the removal
crease its participation in nuclear of “unnecessary and onerous du-
activities – particularly uranium plication in regulation for uranium
mining and storage and disposal mining and milling”.
– without compromising social, “There is no reason why ura-
environmental, safety or eco- nium should be treated any differ-
nomic risks. However, the Royal ently to any other mineral that is
Commission warned this could mined here and the findings con-
only be achieved with bipartisan The South Australian Nuclear Fuel Cycle Royal Commission’s firm the detrimental impact our
support at both state and federal Tentative Findings report indicates the State could find a safe dual system is having in terms
political levels. and profitable position in the global nuclear fuel cycle of increased costs and unnec-
SA Premier Jay Weatherill in- essarily long approvals times,”
stigated the Royal Commission last year nium processing with its eventual return SACOME chief executive Jason Kuchel
as part of his Government’s push to find for disposal, is more likely to be com- said.
the State – which contains more than mercially attractive, creating additional “The findings also confirm the value in
30% of Australia’s uranium reserves – an employment and technology-transfer op- increasing our involvement in the enrich-
active role in the nuclear fuel cycle. portunities. ment and further processing of uranium,”
The SA Labor Government has been • Electricity generation he added. “While the tentative findings
a long-time supporter of the State’s ura- Taking account of future demand and suggest the economics for nuclear en-
nium industry and it was former Premier, anticipated costs of nuclear power under ergy in Australia are not favourable in
Mike Rann, who pressed the Federal the existing electricity market structure, the current climate, nuclear power has
ALP to drop its “three-mine” uranium it would not be commercially viable to the scope to be viable in the future and
policy at the 2007 National Party confer- generate electricity from a nuclear power deliver significant advances for reducing
ence. plant in South Australia in the foresee- carbon emissions.
It was hoped that decision would lead able future. “In the not too distant future, small
to a new era of uranium development in However, Australia’s electricity sys- scale modular reactors could be used to
SA but the Fukushima incident and sub- tem will require low-carbon generation power remote mine sites and communi-
sequent fall in uranium prices has sty- sources to meet future global emissions ties. For these reasons, the Commission
mied any such efforts. reduction targets. Nuclear power may is right in calling for Australia to remove
However, the SA Government remains be necessary, along with other low car- the outdated legislative impediments that
keen to pursue the development of a bon generation technologies. It would be stop the potential for nuclear power.”
uranium industry and Weatherill set the wise to plan now to ensure that nuclear Chamber of Minerals and Energy WA
Royal Commission the task of finding power would be available should it be re- (CME) chief executive Reg Howard-
whether the State could successfully and quired. Smith said the Royal Commission’s
safely insert itself into the nuclear fuel • Management, storage and dis- tentative findings were also a boost for
cycle. posal of waste Western Australia’s 16 uranium projects.
Among the key findings of the report The storage and disposal of used nu- “CME is encouraged by the Commis-
were: clear fuel in South Australia would meet sion’s tentative findings which recognise
• Exploration, extraction and mill-
ing a global need and is likely to deliver sub- South Australia can safely increase its
stantial economic benefits to the commu- participation in nuclear activities and
An expansion of uranium mining has nity. An integrated storage and disposal generate significant economic, environ-
the potential to be economically benefi- facility would be commercially viable and mental and energy security benefits for
cial however it is not the most significant the storage component could be opera- the state,” Reg Howard-Smith said.
opportunity. tional in the late 2020s. “As acknowledged by the Commission,
• Further processing and manufac-
ture Such a facility would be viable and it is wise to plan now to ensure nuclear
highly profitable under a range of cost power would be available should it be re-
In an already oversupplied and uncer- and revenue assumptions. quired. CME is hopeful [this] announce-
tain market, there would be no opportu- Financial assessments and an eco- ment will pave the way for further support
nity for the commercial development of nomic model by external consultants for nuclear energy in Australia and looks
further uranium processing capabilities indicated an integrated storage and dis- forward to considering the Commission’s
in South Australia in the next decade. posal facility could generate revenue of Tentative Findings and final report, once
However, fuel leasing, which links ura- more than $257 billion, with total costs released in May, in further detail.”
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 5
NEWS
Lanstead happy with ASX
investment progress
Retail investors may be unlikely to A 2014 placement in Blackham Resources has proved one of Lanstead’s
come out of hibernation in 2016 but most successful Australian investments
specialist resources funds such as Lan-
stead Investors have continued to stay “There has been a fabulous response “If share price goes up, we’ll give more
active throughout the bleak post-boom in Australia and we have now got a fair money but not ask for any more shares.”
winter. bit under management,” Sparke said. “In
the first year we had to educate the mar- The sharing agreements are in keep-
Speaking to Paydirt last month, Lan- ket on what we were about and that work ing with Lanstead’s model which identi-
stead director Andrew Sparke said the has paid off because now we are a capi- fies companies which need help reach-
fund was seeing green shoots in the Aus- tal partner of choice.” ing key development milestones.
tralian resources sector.
He said Lanstead “We look very closely at the milestones
“We believe now is the time to get back had recently been a company has in front of it and take a
into Australian resources juniors be- particularly keen view based on whether we think those
cause some are doing very well off the on gold, lithium and milestones will be value accretive. If a
back of good news flow,” Sparke said. graphite plays. company needs $10 million to reach the
milestone and we can see positive news
Lanstead has around $300 million to “Australian gold flow being generated from that, we will
commit to ASX-listed companies and has actually been invest,” Sparke said. “It is about dangling
has funded $39 million in placements performing for more the carrot.”
in 13 companies since arriving on Aus- than 12 months but
tralian shores, including placements it has taken the mar- In the current market, many companies
in companies such as KBL Mining Ltd, ket time to work that are just happy to survive but Sparke said
Austin Exploration Ltd, Promesa Ltd and out.” that sometimes became an end in itself.
Blackham Resources Ltd over the last 18
months. The fund will look “A lot of companies are very good at
at all commodities, staying alive during the tough times but
Sparke saying its they are not progressing their business
long-term invest- because they don’t have the capital.
ment focus meant it If they can benefit from a capital injec-
was not affected by tion, we will look at it. If you can deploy
market volatility or a strong cash injection correctly, we be-
restricted to looking lieve we will see a lot of interest in the
at only fashionable stock.”
metals.
Sparke pointed to the example of
One of Lanstead’s Blackham, in which Lanstead placed
unique attributes is $2.2 million in October 2014 as the com-
its sharing agree- pany pursued its development of the Ma-
ment model, which tilda gold project in Western Australia.
has so far seen an
additional $8.5 mil- “At Blackham, it was a new manage-
lion paid out to com- ment team and gold was on the nose but
panies as part of an we looked at the project and saw a big
incentive scheme. resource and access to a plant and could
see the milestones the company was
“It is a strong likely to hit.”
performance incen-
tive,” Sparke said. – Dominic Piper
PAGE 6 MARCH 2016 AUSTRALIA’S PAYDIRT
BUSH TELEGRAPH
Cast adrift Kumba prepared
for journey
Kumba Iron Ore – one of R627 million in 2015 from
the most profitable min-
ing companies ever set up in R14.1 billion in 2014 and no
South Africa and the linchpin
of arguably the country’s most dividend was declared.
successful black economic em-
powerment (BEE) structure – is In January, Kumba an-
to be cut loose from parent An-
glo American Corporation plc. nounced it was to lay off near-
The Northern Cape iron ore ly 4,000 workers – about half
producer will either be spun out
or sold off from Anglo as part of its work force – as it chopped
the group’s drastic restructur-
ing programme to reduce debt back on operations at the age-
and focus on three designated
core businesses – platinum, diamonds ing Sishen mine.
and copper.
Chief executive Norman
That was confirmed on February 16
by Anglo chief executive Mark Cutifani Mbazima laid out the group’s
when he presented the group’s results
for the year to end-December. Cutifani survival plan in detail when he
added the unbundling of its 69% stake in
Kumba was the “base case option” the presented Kumba’s financial
group was currently studying.
Kumba will be cut from Anglo American’s portfolio results on February 12.
There’s a reason for that. Under cur-
rent grim commodity market conditions The measures taken over
– particularly for iron ore – it seems
highly unlikely that Anglo is going to get All that ore is railed to the port of the past year had already succeeded
anything like the price it might want for
Kumba. Saldanha Bay on South Africa’s west in chopping net debt by 42% while con-
It’s far more likely a successful buyer coast where it is exported, except for the trollable costs had been reduced by R4
would be able to negotiate terms very
much in its favour and that buyer could domestic sales supplied to ArcelorMit- billion and the group’s breakeven cost
well end up with the mining purchase
of the decade should market conditions tal’s steel mill situated near the port. brought down to $US41/t against a prior
turn and also judging by the sweeping
measures Kumba management has tak- The operation was set up in the mid target of $US45/t set in the first half of
en to keep the operation profitable and
which are already paying off. 1970s by the former state-owned Iron 2015.
Investors seem to be taking that posi- and Steel Corporation (Iscor) which was Mbazima said there was more to
tive view judging by the share price move-
ments. The Kumba share price jumped subsequently privatised and split into two come, indicating that Kumba manage-
7% on the day Cutifani confirmed Anglo
was getting out, bringing total gains over major listed corporations – Kumba and ment was targeting a further drop of up
the fortnight leading up to the announce-
ment to 20%, Exxaro Resources Ltd. to $US10/t in “controllable costs” during
That still only brought the Kumba share Over the past decade those two cor- 2016. He said the overall target was for
price back to around R60, compared with
a high of R600 in 2013 at the peak of the porations have been among the most a reduction in “total cash break-even
commodities boom.
successful in the RSA mining sector costs” to below $US40/t but the actual
Kumba operates two mines in the
Northern Cape – the long-running with Kumba being one of very few RSA level achieved would depend on some
Sishen operation and the much newer
Kolomela mine – which between them mining groups able to capitalise on the factors outside Kumba’s control such as
exported 43.6mt of iron ore in 2015 and
supplied another 4.3mt to the RSA do- commodity boom as it boosted exports freight rates; the lumpy ore premium paid
mestic market.
through Saldanha Bay. by customers; the oil price and currency
Exxaro benefited through its direct fluctuations.
stake in the Sishen mine – which pro- He said these “uncontrollable fac-
vided Kumba with the necessary BEE tors” could have a significant impact on
credentials – from which it earned an- Kumba’s final cash breakeven cost num-
nual dividends of typically more than R2 ber and added he believed the group’s
billion. breakeven cost could drop to as low as
The largesse also extended to Kum- $US32/t “if everything goes well”.
ba’s workforce because in December Mbazima commented: “We hope that
2011 6,208 employees each received an these [uncontrollable factors] will be fa-
after-tax payout of R345,627 when the vourable in 2016 but we cannot base our
group’s first broad-based employee eq- business on that being the case. That is
uity share scheme matured. why we have taken the tough and painful
That’s a fortune in South African terms decisions required to adapt our opera-
and came on top of each employee hav- tions to this environment.”
ing already received up to R55,000 over What was that old adage about “when
the previous five years through payouts the going gets tough, the tough get go-
in terms of the scheme. ing”? Mbazima came across as some-
But the good times came to an end one committed to ensuring his business
last year when Kumba’s total revenue for would survive which is yet another plus
2015 of R36.1 billion dropped 24% from factor for Kumba’s future outside of An-
the 2014 level of R47.6 billion mainly be- glo.
cause of the drop in FOB iron prices to Brendan Ryan is a Johannesburg-based min-
$US53/t from $US91/t in 2014. ing writer
Group profit for the year plunged to
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 7
NEWS
BHP Billiton slashes dividend,
posts $US5.67 billion net loss
BHP Billiton Ltd slashed its BHP Billiton posted its first net loss in more than 16 years for the December half
interim dividend by 75% last
month, abandoning a long-held of BHP Billiton’s corporate structure in zie said BHP Billiton was still generating
policy of steady or higher pay- a bid to simplify operations, creating EBITDA margins of 40%, which is ahead
outs, as it braces for a longer- US and Australian mineral divisions in a of the reported figure of around 34% for
than-expected commodities move that will see its iron ore chief Jimmy Rio Tinto.
downturn. Wilson and petroleum head Tim Cutt de-
part. At today’s spot prices, the company
The end to BHP Billiton’s so- would expect to generate $US10 billion in
called progressive dividend BHP Billiton shares closed 2.5% high- operating cash flow for the year, he said.
policy came as the world’s larg- er at $17.62/share on February 23 – the
est diversified miner slumped day the company posted its half-year re- BHP Billiton’s results included an after-
to a net loss of $US5.67 billion sults – in a slightly weaker overall market. tax charge of $US858 million following a
for the six months to December dam disaster in Brazil at its Samarco JV
31, its first loss in more than 16 Australian Shareholders Association with Vale SA, which killed 17 people in
years. director Geoffrey Bowd said the dividend that country’s worst environmental dis-
cut was “very prudent” in light of the com- aster.
“We need to recognise we are modities outlook.
in a new era, a new world and A total of $US6.1 billion of exceptional
we need a different dividend Shares in close peer Rio Tinto Ltd items included an impairment charge of
policy to handle that,” BHP Bil- have lifted some 9% since it swapped its $US4.9 billion against the carrying value
liton chief executive Andrew progressive dividend policy for a payout of its US onshore oil and gas assets and
Mackenzie said on a media call, ratio on February 11. $US390 million for global taxation mat-
warning of a prolonged period of ters
weaker prices and higher volatil- BHP Billiton’s underlying attributable
ity. profit plunged to $US412 million, down Mackenzie said there were no immedi-
from $US4.89 billion a year earlier, ate plans to expand shale operations in
The dividend cut to just missing analysts’ forecasts for around the United States, but BHP Billiton re-
$US0.16c was more severe $US585 million, as commodities prices mained committed to the business.
than market expectations for a plummeted to multi-year lows.
payout as high as $US0.35c. BHP Billi- – James Regan, Reuters
ton pledged a minimum 50% payout of “While the miss looks big in percent-
underlying profit going forward. age terms, the numbers are quite frankly
disappointingly low anyway,” Connor
“Given months of anguish and market said, pointing to BHP Billiton’s $US100
debate regarding the dividend, we expect billion asset base.
that $US0.16c, while disappointing, is
cash flow positive and therefore will likely Despite the tough outlook, Macken-
be absorbed by the market,” Shaw and
Partners analyst Peter O’Connor said.
Mackenzie said the shift was part of
a broader strategy to help BHP Billiton
manage volatility.
“The financial flexibility we will gain as
a company from this move...will allow us
to invest counter cyclically,” he said. “It
will allow us to look at tier one assets in
distress.”
Standard & Poor’s cut BHP Billiton’s
credit rating to ‘A’ from ‘A+’ last month
and warned it might downgrade again if
the company failed to take more steps
to preserve cash and review its dividend
policy.
“I can’t see [the ratings agencies]
downgrading. They probably would have
if the commodity outlook was still poor,
but I think the outlook is starting to turn in
BHP’s favour,” Fat Prophets mining ana-
lyst David Lennox said.
Mackenzie also announced a revamp
PAGE 8 MARCH 2016 AUSTRALIA’S PAYDIRT
Boxing on despite market gloom
It is no secret mining stocks have horizon, then it could be perceived
toppled dramatically in the last few
years due to falling commodity pric- as a good time to invest in mining,”
es, with many investors left feeling
scorned by the downturn which has Rushton said.
crippled the industry.
“But if you’re somebody that’s
But are those investors partly to
blame for the financial pain they obviously close to retirement, or in
have suffered as a result of bad in-
vestments? That’s the question be- retirement, and you’re looking for
ing asked by a leading investment
fund manager. an income stream, then maybe it’s
Glenn Rushton, of Rushton Fi- not such a good time to invest in
nancial Services Pty Ltd, believes
too many investors have placed mining.
“all their eggs in one basket” and
adopted investment strategies “However, if you can comple-
which cannot survive all economic
conditions. ment that with another income
Rushton says investors should stream that works well through
not be discouraged from buying
shares in mining-related enter- rising and falling markets, then it
prises, but warns against stocking
up on too many investments from could be quite lucrative.”
within the same industry.
Rushton said several mining ex-
“I look at a person’s total position
and ask how much of their assets ecutives have requested meetings
they have allocated to that particu-
lar sector,” Brisbane-based Rushton told with him in recent times, as they
Paydirt during a recent trip to Perth.
look to restructure asset portfolios
“If someone was to say they’ve allocat-
ed 80-90% of their wealth to the mining which are heavily weighted on the
sector – and they’re looking to generate
a consistent income stream – I would say success of the resources industry.
they’re probably being quite foolish.
“A lot of them are looking at what
“But if someone can see past these
current problems and get their asset al- they own and saying, ‘I’m in seri-
location right, they can survive and make
good returns over the long term. And ous trouble here if things go re-
that’s the key – can you survive long
enough to reap the long-term growth? ally bad. And what if I also lose my
Investing is a long term problem, but un-
fortunately most investors take a short- job?’,” Rushton said.
term view.”
“It’s very important to stress-
Rushton is a former property devel-
oper who co-founded Rushton Financial Glenn Rushton with boxer Joe Goodall test your asset allocations. Have
Services with his son, Lee. The pair be-
lieved the average investor could gener- a look at everything you own and
ate strong financial returns through all
economic conditions by adopting invest- years of experience managing invest- run ‘what if’ scenarios; What if oil drops
ment models similar to the ones typically
used by the world’s most sophisticated ments for high-net worth investors, the to $US10/barrel? What if China’s growth
investors.
father and son team set up the Rushton drops to 4%? What if the Federal Govern-
The Rushtons studied the strategies
successfully implemented by some of Global Market Neutral Fund – a regis- ment continues to raise interest rates?
the world’s richest families, including the
Rockefellers, Rothschilds and Oppen- tered, managed investment scheme that “One of the things we always need is
heimers, as well as cashed-up tertiary
institutions such as Yale University and can perform equally well in both rising cash – cash is king. A lot of investments
Harvard University.
and falling markets, with very moderate are focused around capital growth, but
From their investigations, coupled with
volatility. you need a cash cow. You need an in-
“In tough times, it’s important to look vestment that can generate revenue in
for alternative income sources,” Rushton bad times, not just the good times.”
said. “You need something that’s lowly Also a prolific boxing coach for more
correlated to growth, something that can than four decades, Rushton will often
perform when things are contracting. use the same approach when instructing
“That’s what makes the Rushton Glob- both his sporting pupils and investment
al Market Neutral Fund a great addition clients on their next move.
to most investment portfolios, because “One of the things we often talk about
our highly diversified global market in boxing is having someone in your cor-
neutral strategy can generate income ner who is experienced, really capable
equally well through good and bad times, and who cares about you,” Rushton said.
but with very moderate volatility. It also “That’s exactly who you want in your
provides valuable downside protection, corner in the investment arena; someone
which is desperately needed by investors who knows what they’re doing, with a lot
heavily biased to resources.” of experience, who really cares about
Inquisitive investors are pondering you as well.”
whether to buy shares in mining compa- Rushton guided Jeff Horn to the quar-
nies with prices at or near decade-long ter-finals of the London Olympics in 2012
lows. Others are looking to sell out in a and Joe Goodall to a silver medal in the
bid to recoup some of their cash. super-heavyweight division at the 2014
Rushton said any decision to stock up Commonwealth Games in Glasgow.
on mining investments was entirely de- – Michael Washbourne
pendent on what the individual was seek-
ing from the financial venture.
“If you’ve got a long-term investment
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 9
NEWS
Macfarlane cuts political chain
Former Federal Minister
for Industry and Science
Hon Ian Macfarlane will retire
from politics later this year af-
ter deciding not to contest the
next election.
Macfarlane’s decision to
quit parliament comes after
he was dumped from his fa-
voured portfolio shortly after
Malcolm Turnbull was sworn
in as Australia’s new Prime
Minister last September.
The 60-year-old attempted
to switch from the Liberal
Party to the Nationals in De-
cember, but his defection
was blocked by the Queens-
land LNP executive.
“After almost 18 years
representing the constitu-
ents of Groom, serving nine
of those years as a Cabinet
Minister and Minister under
the Howard and Abbott gov-
ernments, and a further six
years as a shadow minister,
the time is right to pass the
baton,” Macfarlane said. AMIRA International managing director Joe Cucuzza, with former Federal Minister for Industry and
“After 32 years in public Trade Hon Ian Macfarlane and WA Minister for Mining and Petroleum Bill Marmion in Perth last year
life in agripolitics, I will now
be looking for new challenges to use my tion, Macfarlane served as Shadow Min- Bennison said. “During his time as Min-
wealth of knowledge and experience in ister for Trade, Infrastructure and Water, ister for Industry, Ian was central to the
the resources, industry and science sec- Energy and Resources. implementation of key policies that the
tors for the betterment of our great na- Macfarlane was sworn in as Minister industry will continue to benefit from for
tion. for Industry following the election of Tony many years to come, including the repeal
“I am truly grateful for the opportuni- Abbott as Prime Minister in September of the Mineral Resources Rent Tax, the
ties to serve the nation over the years 2013. His portfolio was expanded to in- introduction of the EDI, and re-instate-
and greatly appreciate the support I have clude Science in December 2014. ment and indexation of the diesel fuel
received from my family, my electorate Association of Mining and Explora- credit in line with inflation.”
and ministerial staff, and members of the tion Companies (AMEC) chief executive Turnbull also paid tribute to Macfar-
LNP.” Simon Bennison lauded Macfarlane’s lane, describing his outgoing colleague
Macfarlane was appointed Minister for contribution to the resources industry, as “one of my closet friends in politics”.
Small Business in early 2001 and held particularly his support of the Exploration “His retirement from parliament is the
the portfolio for almost a year before he Development Incentive (EDI). end of an era, but I have no doubt he
succeeded Kim Carr and Martin Fergu- “The Hon Ian Macfarlane was a strong will go from strength to strength in a new
son as Minister for Industry, Tourism and advocate for the industry and worked stage of his career and continue to make
Resources. closely with AMEC to ensure that mid- a formidable contribution to our nation,”
Following the defeat of the Coalition tier miners and explorers’ views were Turnbull said.
Government at the 2007 Federal Elec- represented in the Coalition’s policies,” “Ian Macfarlane always has his sleeves
rolled up. This is his personal signature
What you didn’t know about Ian Macfarlane: and also a metaphor for how he has gone
about his work.
“Ian said in his maiden speech that it
• Born in Kingaroy, the agricultural town former Queensland Premier Sir Joh Bjelke- was his ambition to turn Australia’s future
Petersen once called home challenges into opportunities, and this is
• Served as president of the Queensland Graingrowers Association for several years exactly what he has done.”
before entering politics in 1998
• Affectionately nicknamed “Chainsaw” because of his raspy voice, although he
believed it was because of his ability to “cut through red tape”
PAGE 10 MARCH 2016 AUSTRALIA’S PAYDIRT
No more shades of Gray
in politics
After almost a decade in federal par- Gary Gray “In that role he continued and cement-
liament, popular advocate for the ed the bipartisanship on issues impact-
resources sector Hon Gary Gray AO has includes seven years as national secre- ing the sector.
called time on his career in politics. tary and nine years in federal parliament.
“I would like to take this opportunity to
Currently serving as the Shadow Min- CMEWA chief executive Reg Howard- thank Gary for his tireless work, both in
ister for Resources, Northern Australia Smith said Gray was a passionate sup- government and in opposition, working
and Special Minister of State, Gray in- porter of the sector who fully understood to advance the causes of the resources
formed his electorate of Brand he would the issues industry faced. sector.”
not recontest the seat at this year’s elec-
tion. “Gary has had a long and distinguished Howard-Smith’s sentiments were
career in the resources sector, from his shared by Association of Mining and Ex-
“At my regular Brand Electorate Coun- time at Woodside, being elected to Fed- ploration Companies chief executive Si-
cil meeting I informed members that after eral Parliament in 2007 and then being mon Bennison.
nine years I felt it was time to move on, given the honour of becoming Australia’s
and to support renewal in the WA Fed- Resources Minister in 2013,” Howard- Bennison was particularly keen to point
eral Parliamentary Party,” Gray said in a Smith said. out the important role Gray played in
statement. pushing the uranium cause in Australia.
Gray said he would serve the Labor “The Hon Gary Gray was a great sup-
Party in whatever capacity Bill Shorten porter of the industry and recognised the
requested and threw his support behind value of uranium exploration and mining
the current opposition’s election bid. for the Australian economy,” Bennison
said.
“I wish Bill Shorten and my colleagues
in the Federal Parliamentary Labor Party “Gary was extremely understanding
well. They are a terrific group of people; and excellent to deal with across the
they will form a great government,” he range of policy issues that related to his
said. roles as Minister for Resources and En-
ergy, Shadow Minister for Resources and
Gray has been a member of the Aus- Shadow Minister for Northern Australia.”
tralian Labor Party since he was 16 and
his 41 years of continuous membership
Gary Gray was a regular fixture at Paydirt conferences
Gary Gray career highlights:
• One of the Australian Labor Party’s youngest and longest-serving national
secretaries
• Executive director of the Western Australian Institute of Medical Research, now
the Harry Perkins Institute of Medical Research
• Appointed Officer of the Order of Australia in 2003 for his contribution to electoral
reform and affirmative action in the Australian Labor Party
• A member of the executive team at Woodside Energy from 2001 to 2007
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 11
NEWS
Mining Projects looks to lithium
Offering shareholders groups to come together.” Mining Projects’ Pilbara project borders
some value right now the more advanced lithium assets owned
is a tough task. Diversifying into the by Pilbara Minerals (80mt @ 1.26% lithi-
um) and Altura Mining Ltd (26mt @ 1.2%
Nevertheless, a vast lithium hotspot of the Pil- lithium), which could help the company
number of ASX-listed attract capital when required.
juniors are up for the bara does not mean Min-
challenge and willing to “It has probably just started to take off
explore areas and com- ing Projects has gone in that [Pilbara] area. A number of com-
modities outside their panies have gone in there to spend capi-
main game. cold on its flagship nickel tal in the ground, which is very encour-
aging. I think a lot of the lithium regions
One of these compa- project, Roe Hills, in the globally are now starting to get atten-
nies is Mining Projects tion from a capital perspective as well,”
Group Ltd which has Fraser Range. Wellisch said.
hopped on the lithium
train in Western Australia. A total of 10 RC and Mining Projects recently completed a
$1.2 million capital raising and is eye-
The company acquired the Lynas Find diamond drill holes were ing a drilling programme at the Pilbara
assets, renamed the Pilbara lithium-gold project which has historically produced
project, from Tyranna Resources Ltd completed at Roe Hills 125,000oz gold.
and Tribal Mining Pty Ltd in January via
shares and cash worth $2 million. last quarter, with results The company has started a series of
exploration programmes, including map-
“As an exploration company you are Josh Wellisch subject to assessment at ping, rock chip and soil sampling while it
constantly looking to ensure the portfo- the time of print. is also conducting geological, geophysi-
lio of assets you are working on is in line cal and geochemical data evaluation.
with the current trends of the market to Wellisch said the com-
ensure that you maintain ongoing viabil- An ultra detailed low level airborne
ity,” Mining Projects managing director pany was preparing the next round of magnetics/radiometrics survey (25m line
Josh Wellisch said. spacing) covering the 29sq km Pilbara
drill targets at Roe Hills, which is the ad- project will also be undertaken.
“It has certainly made a lot of sense for
us and the group [Tyranna] that we part- vanced project in the portfolio alongside Data recovered from this programme
nered with in that transaction because will be used to define and prioritise target
they are excited about our nickel project Dingo Range, Fraser Range and Pilbara. zones.
and are keen to participate in that pro-
ject in some form as well, so it made for “We have to take heed of the current – Mark Andrews
a very sensible opportunity for our two
situation in nickel and ensure we protect
value for our shareholders. Certainly
diversifying is an important part of the
company, providing an opportunity for
shareholders to see value in their invest-
ment in what is a pretty difficult period in
the market,” Wellisch said.
Despite difficult market conditions, lith-
ium and graphite projects are attracting
some interest and investment.
Lithium players, particularly in the Pil-
bara, have provided some excitement in
the market with the likes of Pilbara Miner-
als Ltd lighting up the region.
Altura signs potential off-take customer
Altura Mining Ltd has signed a non- Spodumene concentrate pricing for including completion of a DFS scheduled
binding letter of intent with China- the first 150,000t will be based on the for delivery by the end of the month.
based Lionenergy Ltd for off-take of up to prevailing market price, in US dollars.
150,000 tpa of spodumene concentrate Subsequent pricing will be based on An independent mining study on the
from its Pilgangoora lithium project in published sales prices for spodumene or project, released in mid-February, pre-
Western Australia. negotiated between both parties. sented a base case 150,000 tpa produc-
tion of spodumene concentrate via pro-
Lithium specialist Lionenergy has also A formal spodumene concentrate cessing of 1 mtpa ore feed.
agreed to subscribe to shares in Altura sales-and-purchase contract is condi-
by way of a $3 million placement at 8.1c/ tional on Altura obtaining the required Key economics from the base case
share. Altura was trading at 10c/share at regulatory approvals and a decision to scenario included a mine life of 19 years,
the time of print. proceed to mine within three years of the capex of $97.6 million, LOM revenue of
letter of intent being signed. $1.35 billion, LOM cash flow of $609 mil-
Under the terms of the letter, Lionener- lion, NPV of $277 million, IRR of 42.5%
gy will purchase a minimum of 100,000t Both parties have also entered into dis- and payback within 2.3 years.
of spodumene concentrate from Pilgan- cussions regarding possible investment
goora each production year for the life of and other project funding opportunities A 2 mtpa production case was also
mine, nominally 20 years. by Lionenergy and its associates regard- presented, increasing the project NPV to
ing the construction of a mine and pro- $392 million and IRR to 60%, offset by a
Should Lionenergy elect not to pur- cessing plant at Pilgangoora. shortened mine life of 10 years and an
chase the full 150,000t in any one year, increased capex of $146.7 million. Pay-
Altura will have the option to place ton- Funds raised from the private, non- back is 1.6 years.
nages in excess of Lionenergy’s require- brokered placement will be directed to-
ments with other customers. wards the development of Pilgangoora, Orelogy Consulting Pty Ltd is oversee-
ing the completion of the DFS.
PAGE 12 MARCH 2016 AUSTRALIA’S PAYDIRT
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NEWS
Perfect run by Neometals
Neometals Ltd is a few steps ahead of
a number of companies looking to im-
pact the lithium market.
While many of its peers try to make
sense of what they actually have in the
ground, Neometals is steaming towards
first production of lithium concentrate
from its Mt Marion project by mid-year.
“We are starting mining this quarter
and start processing next quarter, with
shipping in the September quarter, which
is a pretty good timeline. We have done
all this with no capital down for us, we
have actually taken money off the ta-
ble,” Neometals managing director Chris
Reed told Paydirt.
Output from Mt Marion – 45% Neomet-
als, 30% Mineral Resources Ltd and 25%
Gangfeng Lithium Co. Ltd – is designed
for 200,000 tpa of chemical grade spo-
dumene concentrate.
The deposit currently contains indi-
cated and inferred resources of 23.24mt Shipping of lithium from Mt Marion is scheduled for the September quarter
@ 1.39% lithium oxide and 1.43% iron
oxide. and 6% chemical grade lithium concen- that additional spodumene product can
be made through the addition of a flota-
Reed said the market can expect sig- trates were worth $US440/t. tion circuit to the beneficiation plant.
nificant changes to the resource from Reed said current strains on the lithium Therefore, Gangfeng has agreed to
take a further 80,000 tpa spodumene
a 335 RC and 30-hole diamond drilling market was due to a variety of reasons, concentrate of between 4-6% content.
programme currently under way. including the lack of new projects in con- Reed said having Gangfeng onside
was a major fillip for the company.
Early results from the infill and exten- struction and Chinese demand for elec-
“Prices are going up but there are 500
sional drilling programme prioritising tric and hybrid vehicles increasing. lithium battery producers and there are a
few – probably a dozen small lithium pro-
near-surface mineralisation include 18m “It generally takes four years to start ducers and only really 2-3 big ones. Tian-
qi [in JV with Rockwood Holdings Inc]
@ 1.76% lithium, 6m @ 1.39%, 11m @ a new greenfields operation for brine have got half of Greenbushes, Gangfeng
have got us and the rest are private and
1.87%, 17m @ 1.69%, 21m @ 1.76% and producers and there are no new ones in not really capable of financing any new
operations,” he said.
18m @ 1.24%. construction, apart from Orocobre [Ltd],
“We are very lucky to have those re-
“We are belting them out and we’ll but by their own admission they are a fair lationships with Gangfeng. We have just
increased our relationship, looking at a
have another update this way behind,” Reed said. MoU to add a float circuit to recover the
fines product to send that up there.”
quarter and another one “The Chinese have
Last month, Gangfeng requested to
early next quarter and been adding the convert- accelerate its option to acquire an addi-
tional 18.1% in Reed Industrial Minerals,
a new resource,” Reed ing capacity and creating signalling the strength of support Neo-
metals has from the Chinese.
said, referring to the drill- this demand for lithium.
Gangfeng are not the only ones
ing campaign. There are geopolitical backing Neometals. The market has
warmed to the lithium player in the past
Additionally, the com- constraints on the brine 12 months, which is reflected in a share
price rise from 3.3c/share in February
pany is working on a DFS producers, the Chinese 2015 to 25.5c/share at the time of print.
for its lithium hydroxide need more hard rock and – Mark Andrews
project (70% Neometals, we are obviously ready,
30% Mineral Resources). so we are well positioned
The project, named the for an uplift in the sector.”
Eli Process, has been Off-take is of course a
patented into the Reed key component to Neo-
Advanced Materials metals’ lithium strategy
Pty Ltd vehicle, with the Chris Reed and in Gangfeng – Chi-
na’s leading lithium pro-
downstream process-
ing technology designed ducer and most diversi-
to be used in a 15,000-20,000 tpa LCE fied and most profitable – it has a reliable
lithium hydroxide plant. partner.
“The DFS will be ready about mid- Neometals and Mineral Resources
year,” Reed said. originally signed Gangfeng to take-or-
Earlier this year, battery grade lithium pay 100% of the 6% chemical grade spo-
hydroxide was fetching $US9,000/t, dumene concentrate from Mt Marion.
while lithium carbonate was $US7,000/t However, metallurgical work has found
PAGE 14 MARCH 2016 AUSTRALIA’S PAYDIRT
Brinsden’s backyard in the Pilbara
Ken Brinsden knows a thing or two A DFS at Pilgangoora is expected to be released mid-year
about the Pilbara, but admits the lithi-
um sector is foreign to him. 200-300 ppm tantalum. Therefore, unlike juniors currently
Brinsden said expanding the resource pondering what lithium potential they do
Nevertheless, Brinsden was chosen to have in the ground, Pilbara Minerals is
be the main man at Pilbara Minerals Ltd was important, but it would mean little if at the advanced stage of assessing how
late last year and will look to guide the there wasn’t quality in it. it will impact the supply story in the next
emerging lithium player through to pro- few years.
duction at Pilgangoora in the near future. “We have a quality resource and we
have that in spades,” he said. A DFS is expected to be completed
“I don’t profess to be a lithium expert, I mid-year, with permitting, project funding
have a lot to learn in that area but what I “We have a high-grade resource as and a decision to mine to follow by the
do know is the Pilbara and what it takes far as global lithium is concerned and end of 2016.
to get mines built there and to be honest perhaps even more importantly we have
it feels a bit like the backyard there for already demonstrated some ability to hit By then, investors at odds with the lith-
me,” Brinsden told Paydirt. the more sophisticated end of the lithium ium space should be up to speed as to
market regards a technical grade end why there is so much hype in the market
“I know it really well and the people product. That is a very important string to today.
involved; key community groups, infra- have in your bow. We have more work to
structure providers and all that sort of do to prove up the orebody but we have “People have started to work out that
thing, so I guess I can help there. Also, made a really good start.” the material supply is not there and that
being able to create the link between the is why everyone is now scrambling for
Pilbara [Minerals] resource in the ground Lithium is definitely flavour of the supply,” Brinsden said.
and how people can take advantage of month and is fast becoming popular
that in downstream markets.” with junior explorers down on their luck “The institutional market hasn’t had to
in more traditional commodities such as be exposed to lithium in a big way, but
Brinsden remains an executive direc- base metals. because there is a fundamental shift
tor at Atlas Iron Ltd, where he was for- globally in how we use power and store
merly managing director, so his contacts Interest in lithium stems from a market power and how that affects transport and
in key markets such as China will bring strained tense by insufficient supply.
tremendous value to Pilbara Minerals. power supply industries, the scale of
the change is huge.
A PFS on Pilgangoora is expected to
be completed soon, while the company “We have a situation now where in-
is continuing to conduct RC and diamond vestment markets are rapidly trying to
drilling to expand resources and define a catch up to understand that change
mining reserve. and it just so happens that lithium
is an important link in that chain. It
Last month, Pilbara Minerals an- doesn’t take long for investment mar-
nounced a resource update of 80.2mt kets to work it out. While there is a
@ 1.3% lithium with 1.08mt of contained bit to learn they are very fast learn-
lithium, including 42.3mt @ 0.02% tanta- ers. Judging by the number of calls
lum for 18.3 mlb contained tantalum. we have been fielding of late, they are
going to get up to speed very quickly.”
The company already has the second
largest hard rock lithium resource glob-
ally – behind Talison Lithium Pty Ltd’s
Greenbushes – and in time it could po-
tentially have the biggest.
Through infill and step-out drilling, Pil-
bara Minerals has set an exploration tar-
get of 100-110mt @ 1.3-1.5% lithium and
An exploration target of 100-110mt @ 1.3-1.5% lithium – Mark Andrews
and 200-300 ppm tantalum has been set at Pilgangoora
Ken Brinsden
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 15
OPINION
Low prices and distressed mines:
Brave decisions needed to survive
Mining companies need to adapt to an environment where lower commodity prices are the new normal
Our recent global mining report, Track- Producing at a loss is not generally tions are generally to focus on cost and
ing the Trends 2016, looks at the lat- a good place to be for anyone. But for operational optimisation. This is an effec-
est trends, trouble spots and travails that companies with a strong balance sheet, tive response to price pressure and pre-
should focus the minds of miners – here it’s a simple enough strategy to continue serves margin. It also happens to be the
in Australia, as well as around the world producing at the lowest possible cost and option that mining executives feel most
over the next 12 months. see out the bad times. In fact, some min- comfortable with as it generally fits their
ers are expanding production to lower own area of expertise and is something
We also present strategies they can unit costs through economies of scale to they can control.
employ to adapt to changing industry claw back margin. An added luxury for
dynamics, across the likes of China’s those fortunate enough to be in this posi- However, every mine has a level be-
economic transition, the need to focus tion is that they may even be able to use low which it simply can’t produce and, at
on areas such as operational excellence, the opportunity to add to their portfolio. current price levels, the number of mines
innovation and safety and security. producing at a loss is significant across
For others, however, the ongoing low most commodities.
One key trend is the need to adjust to price environment has forced a retreat
the “new normal” when it comes to com- into survival mode. Mining companies that find themselves
modity prices and demand. Demand low on cash and high on debt, however,
might be down, but global production In a low price environment (and with no face an altogether different picture.
isn’t necessarily falling. real sign of recovery in sight), first reac-
A strategy of just hoping for a recovery
PAGE 16 MARCH 2016 AUSTRALIA’S PAYDIRT
can be fatal as management teams lose ment teams need to consider a range of er group who can make or break chal-
control and creditors and other stake- potential scenarios lenging times. Remember this is likely to
holders start to drive the agenda. This is • The skill-set within the team. Be
already playing out, with increased com- be more a marathon than a sprint
pany debt restructurings and corporate honest about the level of expertise • The supplier profile, risks and
collapses. and get help from experts where a
skills gap exists their expectations. Get their support
early
So, once cost reduction options have Your people have got you this far, and Suppliers and contractors will become
run out, what’s left to ensure miners pre- done a great job operating during good creditors should an insolvency appoint-
serve value for their stakeholders? Wak- times. But are they equipped to man- ment become necessary and, for some,
ing up to the reality of a “lower for longer” age during the lean times and with the their success or failure, will be directly
environment, or even lower prices as a competing needs of different stakehold- linked to yours. Understand their indi-
“new normal” is a very good start. ers? An independent view can give confi- vidual positions, and seek their support
Thinking long term and being prepared dence to you and your stakeholders and as valued partners, even to the extent of
to make brave decisions are the next provide additional resource support to converting their support in the lean times
steps, and management teams, under your team into equity when better times return
the oversight of smart-thinking boards, • The implications of putting opera- • Short-term cash flow needs. Plan
have to gain a granular understanding of
key areas that drive decision-making in a tions on care-and-maintenance. Do weekly cash flow, daily is even better
distressed environment. this while management can still con-
trol the process It goes without saying that taking a
granular approach to managing cash
Areas that need the highest levels of Care-and-maintenance is certainly a when revenues are weak is critical
knowledge and understanding include: consideration, but miners need to care- • How the regulatory environment
fully examine the pros and the cons. Put-
• The real value of the mineral as- ting an operation on hold comes with its can provide protection to distressed
sets own costs, supply chain impacts and the businesses in the relevant mining ju-
risdiction
The current sustained low price and
outlook is resulting in an increase in im- need to consider the risks and costs to Regulatory and/or tax relief can cer-
pairments to asset values. Impairments ramping up production when operating tainly help with some jurisdictions open
carry the risk that balance sheet cov- conditions improve to, for example, a suspension of royalties.
enant breaches may be triggered where • How the situation is impacting Once distress hits, things can go
debt exists. Understanding the potential
staff. Communicate openly with them downhill fast, and management teams
impact of this and early engagement with The people equation remains impor- need to adapt quickly and be unstintingly
debt providers is critical tant. Employees remain a key stakehold- proactive in engaging with these issues
• The rights, motiva- in order to stay in control of
the situation.
tions and interests of debt This requires clear vision
providers
Power can shift quickly, on what the options are,
and knowing how to appro- and decisive action to pur-
priately engage and commu- sue the route that preserves
nicate with this potentially di- the most value and ensures
verse group of stakeholders the best outcomes for all
is important stakeholders.
• What operating cash
flows look like at current
and an appropriate range
of forecast prices, not the
prices we all hope for
The current volatility has Based in Perth, Jason Tracy is Chris de Vries is an Associate
challenged established a Deloitte Restructuring Services Director with technical mining ad-
norms about how future pric- partner. visory firm Venmyn Deloitte.
es might move and manage-
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AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 17
NEWS
St George stamps ground
on nickel
Shortly after completing the made at similar levels to today’s
acquisition of Mt Alexander spot price, giving Prineas some
from BHP Billiton Nickel West heart that nickel is not all doom
Pty Ltd, St George Mining Ltd and gloom at $US8,350/t.
confirmed significant explo- “Nickel is weak but when Siri-
ration upside at the project, us discovered Nova, nickel was
120km south-southwest of the pretty weak too. When Cosmos
nickel-rich Agnew-Wiluna belt. was discovered back in 1997/98
“It’s already had a high- prices were also pretty weak,
grade nickel-copper-sulphide so there is a history of discov-
discovery and importantly it is eries when the nickel price has
at a shallow depth. That is very been weak and they have gone
important for economics, a lot on to be extremely successful
of these mines that are closing and rewarding,” Prineas said.
down now are very deep, which “We are very focused on
is one of the biggest problems; this project [Mt Alexander] and
the high cost because they are East Laverton and even though
very deep,” St George execu- nickel prices are weak we know
tive chairman John Prineas told we are going to be here for the
Paydirt.
longer term.”
“[Mt Alexander] is potentially With the likes of graphite and
open-pittable and if we find lithium in vogue, Prineas firmly
more of it the economics could stated that St George had no
be extremely favourable at low interest in pursuing such oppor-
costs. Even though it is a weak tunities.
price environment we may get a “The only other thing we will
lot of interest and a lot of excite- be progressing is gold because
ment if we get more high-grade Mt Alexander has been added to St George’s nickel portfolio. St that is an organic growth pros-
hits at these kinds of levels. We George has a 75% interest in the project; Western Areas has 25% pect for us and we have fantas-
tic prospects there. We will be
have lots of drilling in store and
hopefully that will fire up some interest.” includes a number of properties in East developing that and if a new project was
At the time of print, a drilling pro- Laverton. to fall into our lap, we’d look at it but we
gramme was being finalised for Mt Alex- While nickel prices aren’t conducive to certainly won’t be going after graphite or
ander, 25% of which belongs to Western investment from the market, the current lithium; we are standard WA nickel and
Areas Ltd. environment is an opportune time to pick gold,” he said.
Western Areas is also now a share- up assets at a discount. Last month, St George started a maid-
holder in St George, something Prineas Previous major nickel discoveries were en drilling programme at the Atlas gold
welcomed. prospect at its East Laverton project in
“They have taken a small sharehold- the hub of multimillion ounce deposits
ing in St George, they have a double like Tropicana and Gruyere.
dip interest so I think between the The campaign at Atlas will test the
two of us we have an extremely good bedrock geology below an extensive
technical brain. We are definitely go- composite gold-in-soil anomaly, which
ing to find more mineralisation as we was identified two years ago by St
go along and get a feel for the kind of George.
scoping or feasibility studies to do,” he The Atlas soil anomaly has a strike
said. of about 5,000m and is characterised
“It is another sort of validation that by a gold-molybdenum-arsenic geo-
this is a good project and we are a chemical signature.
good company. It is a great bonus they In addition to Atlas, the Cambridge
have taken a shareholding and are North gold target has become a pri-
prepared to contribute to the process ority alongside Ascalon, Bristol and
as we go along and we are happy to DD010 for drilling this year.
have a relationship with them.” – Mark Andrews
The Mt Alexander acquisition ex-
pands St George’s nickel-gold inter-
ests in Western Australia, which also John Prineas
PAGE 18 MARCH 2016 AUSTRALIA’S PAYDIRT
20 October 2016
Perth, Western Australia
Register now for Australia’s
only nickel event
australiannickelconference.com
To present, exhibit or attend as a delegate please contact Melita Fogarty
on (+61) 8 9321 0355 or email [email protected]
Image courtesy of Western Areas Ltd
COVER
Metals of Africa
prepares launch into
graphite sphere
PAGE 20 MARCH 2016 AUSTRALIA’S PAYDIRT
A deepwater port at the northern Mozambican city of Pemba caters for handimax vessels
Graphite is a competitive, confusing space for investors and compa- was a mineral worth investigating.
nies alike as they battle to understand not only the confusing nature “We pegged the ground in 2012 at the
of its mineralogy but also the markets it serves. Shorn of the simplicity of
precious metals and LME-traded metals projects, an assessment of the same time as Syrah started putting out
graphite market requires analysis of another layer of complexity. their positive drilling results,” Leeden
said. “I always keep an eye on what peers
Metals of Africa Ltd (MoA) managing A sample of the graphite outcrop Metals are doing and Syrah’s results sparked my
director Cherie Leeden admits she used of Africa has been finding on the Balama interest. I knew there must be further
to look at graphite projects – and the mineralisation up there.”
wider graphite market – and struggle to Central project
make sense of it. Leeden had moved to Mozambique in
2011 and MoA was subsequently envis-
“There is a lot of complexity in graph- aged as a project generating company.
ite,” she told Paydirt. “You can’t say a Its first major project was the Rio Mazoe
project is good just because it has high base metals prospect – previously ex-
grade and even flake size alone is not plored by BHP in its hunt for another Bro-
enough.” ken Hill – but as zinc prices retreated and
funding for junior greenfields exploration
Leeden is well experienced in junior collapsed, Leeden realised the company
exploration circles, having previously had to look further afield.
worked with LionOre International, Rio
Tinto Ltd, Strike Resources Ltd and Ad- “The fall in the zinc price made Rio
vaita Power Resources. She has always Mazoe much less attractive to inves-
had an affinity for base metals and coal tors,” she said. “So, when the Montepuez
and had never previously considered graphite licence was granted in 2014 it
industrial minerals as an attractive sec- was a good time to switch focus.”
tor. However, when MoA’s neighbour in
Mozambique, Syrah Resources Ltd, be- MoA was far from the first ASX junior
gan enjoying rapid share price apprecia- to jump on the graphite bandwagon and
tion on the back of encouraging drilling even before the company started drilling
results at its Balama graphite project in at Montepuez, local investors were ques-
northern Mozambique, she decided it tioning the longevity of the graphite run.
Leeden herself admits to initial concern
as to whether the company was joining
a bubble.
“But as I looked into the sector more I
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 21
COVER
Metals of Africa managing director Cherie Leeden (second right), operations manager Sam Sweet (far left) and country manager
Bruno Carmo (second left) join the Balama Central field crew for a team photo
saw global demand didn’t correlate with where rapid growth is expected to come However, Leeden sees even greater
supply.” from. demand for MoA’s product, if the com-
pany can get its cost structures right.
According to Benchmark Mineral In- Graphite demand from the battery
telligence, global graphite demand is sector is forecast to grow 40% p.a. in “For me it comes down to opex and
645,000 tpa. Traditionally, this demand coming years as battery storage technol- suitable quality,” she said. “Battery usage
has come from the refractories and ogy takes hold throughout the globe. As is obviously growing and I think an even
foundries, recarburiser, lubricant and graphite is a key component of lithium- greater opportunity comes in replacing
other industrial sectors, but it is graph- ion batteries (it is used as the anode to synthetic graphite with natural graphite in
ite use in lithium-ion batteries (currently lithium’s cathode), this growth is expect- the spherical graphite market.”
accounting for 14% of annual demand) ed to fuel demand.
Spherical graphite is a physically and
PAGE 22 MARCH 2016 AUSTRALIA’S PAYDIRT
Evidence of the high-grade nature
of the graphite can be seen on
Leeden’s hand
users will switch from synthetic to
natural graphite.
“The spherical graphite market
Despite initial reservations about jumping is much larger than the current
to graphite, Leeden has led a rapid
natural graphite market and most
development push of both Montepuez
and Balama Central observers are not highlighting that
chemically altered form of graphite used potential in the natural graphite
in lithium-ion batteries. Its rounded shape
allows for more efficient packaging of par- demand projections. There are Metals of Africa was still awaiting some assay
ticles which increases the energy capac-
ity of the anode. advantages, particularly for West- results from Balama Central at the time of print but
China dominates the spherical graph- ern end-users, in sourcing natu- early indications were it hosted a high-grade zone
ite market which produces most of it from
synthetic graphite; an expensive and en- ral graphite as it is around a third of 17-22% graphite within a wider zone of 5-9%
vironmentally hazardous exercise.
cheaper than synthetic graphite.” graphite, almost from surface
Leeden – and others – believe if natu-
ral graphite producers can deliver a low- For those companies such as
er cost product, spherical graphite end-
Tesla, Panasonic and LG who are mar- fundamentals and opportunities in the
keting the entry into the storage battery graphite market, MoA pressed ahead
market as a victory for green technol- with exploration.
ogy, the allure of a cleaner and cheaper Mitchell Drilling was engaged almost
source of spherical graphite is proving immediately and MoA then went from li-
compelling. cence issue to an indicated resource in
Beginning to be convinced by the less than a year.
The new Pemba Port facility will expand Metals of Africa’s export options in the town
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 23
COVER “How we proceed all depends on because the major question
what the PFS says and how off- is whether we will have a
The resource at Mon- take discussions go. Montepuez has central processing facility or
tepuez – 260km west of the the superior purity and larger flake just focus on one of the de-
port town of Pemba in north- posits – it makes no sense
ern Mozambique – stands to build separate plants on
at 62mt @ 10.3% TGC. On
February 10, MoA released
results of a concept study, size distribution but Balama Central both,” Leeden said.
showing Montepuez could has the similarities to Syrah’s Balama. “How we proceed all de-
produce 100,000 tpa of
pends on what the PFS says
graphite concentrate at an and how off-take discus-
opex of $US300/t and capex of $US86 at the time of print and would lead direct- sions go. Montepuez has the superior
million. ly into a PFS for both prospects. Leeden purity and larger flake size distribution
Montepuez, however, is just half of the said the PFS would judge the merits of but Balama Central has the similarities to
company’s Mozambican graphite story. building a central processing facility be- Syrah’s Balama.”
Forty kilometres south, the company has tween the two deposits against a stan- So, while Montepuez appears to have
also drilled out the Balama Central pros- dalone operation at just one of them. the potential to produce the higher val-
pect which abuts Syrah’s 1.15bt @ 10.1% While in precious and base metals this ue product, the similarities between the
TGC Balama project. assessment would be largely driven by two Balamas (they are essentially the
Nineteen of the 20 holes drilled at the traditional tonnes-times-grade equa- same deposit) may make finding an off-
Balama Central returned visible graphite tion, the nature of the graphite market take partner for MoA’s Balama an easier
with assays returned in January includ- means MoA’s decisions would be equally proposition.
ing hits of 85.55m @ 9.33% TGC from influenced by other aspects, chief of all Syrah is building the world’s largest
8m including 15.85m @ 22.69% TGC what potential off-takers are willing to graphite mine at Balama with the 300,000
from 39.2m. buy. tpa project expected to be in production
A resource and related concept study “Only when we have both concept later this year. The company already
for the Balama Central prospect was due studies can we start the PFS in earnest has an 80,000 tpa off-take agreement in
place with Chinese firm Chalieco as well
Metals of Africa mourns Ruli as a number of smaller off-take contracts
with industrial end-users but negotiations
with several major battery and electronic
companies regarding construction of a
Metals of Africa Ltd lost one of its most influential and proposed spherical graphite plant in the
dedicated employees late last year, Bangun Maruli United States have greatest relevance to
Tua Napitupulu. MoA.
Napitupulu, or Ruli as he was known to his family All of these companies currently use
and friends, died on site at the company’s Balama field Chinese spherical graphite produced
camp from natural causes. from synthetic graphite but are consid-
Metals of Africa managing director Cherie Leeden ering the switch to natural graphite. If
said Ruli was more than a colleague, he was her dedi- one or more do come to agreement with
cated, affable and inquisitive sidekick who was instru- Syrah, Leeden expects them to look to
mental in every major discovery she had been involved MoA’s own Balama Central project to
in since 2007. provide diversity of supply.
“We met in Kalimantan, Indonesia and he actually “We are next door to Syrah and there
featured on the cover of a Paydirt edition back in 2009,” are numerous end-users who have indi-
Leeden said. cated publicly they are seeking similar
“Since 2007 he has been my right-hand man; the col- product to what is coming out of Syrah
league that I’ve depended upon most. Over the past because they are interested, not only in
eight years he worked with me across Indonesia, Australia and Africa and was loved by long-term supply, but diversity of supply.
colleagues across the globe.” So, being close to Syrah is actually an
Leeden said Ruli was an exceptional geologist and had a particular passion for mak- advantage to us.”
ing greenfields discoveries. Project development will therefore be
“He specialised in coal until switching to graphite in Mo- largely dependent on how off-take nego-
zambique a few years ago,” she said. tiations unfold.
“Ruli was instrumental in discovering our Montepuez “We have got end-users conducting
Central graphite resource. I pegged the license; however test-work at the moment but this is not
it was Ruli who went in there and mapped it, which led to simple work and requires months of test-
the discovery of our company’s main asset. Since map- ing the product under pressure, tempera-
ping it he has spent the majority of his time based on site ture, etc,” Leeden said.
in Mozambique defining our resource.” If agreement with an end-user was
Ruli leaves behind his pregnant wife, Mindoirene, and reached, it would lead to MoA building
two children; Manuella, aged five and Marco, aged 3. its own spherical graphite plant, a fac-
“Unfortunately, our company’s life insurance does not tor already considered in the Montepuez
cover natural causes for non-Australian residents, so we concept study.
are seeking assistance to help Ruli’s family,” Leeden said. “Like all commodities, the opportunity
If you would like to donate to Ruli’s fund, please visit lies in processing and value-addition
www.forruli.com
and there is the opportunity to exploit
PAGE 24 MARCH 2016 AUSTRALIA’S PAYDIRT
Pemba is in the Cabo Delgado province of northern Mozambique and is host to one of the world’s largest natural bays
spherical graphite processing in the US $US3,200/t.” which offers the MoA the greatest costs
or elsewhere. All end-users are currently While the mineralisation’s friable na- savings.
sourcing spherical graphite from China; it
doesn’t make sense that there shouldn’t ture means mining will be conducted on Since the country began its recovery
be other supplies.” a relatively cheap, free-digging basis from a 20-year civil war in 1993, infra-
($US59/t unit costs in the concept study), structure across the country has im-
The concept study showed MoA could it is Mozambique’s level of infrastructure proved dramatically.
produce coated spheri-
cal graphite for application Both Montepuez and Bal-
in lithium-ion batteries for ama Central are serviced by
$US3,200/t with Indus- more than 200km of sealed
trial Minerals research in- highway, leaving MoA need-
dicating current prices of ing to build just 50km and
$US5,000-10,000 for the 20km of road respectively.
finished product. The 210km highway leads
to Pemba Port on the Indian
Establishment of a spheri- Ocean coast.
cal graphite plant would
necessarily be in conjunc- A deepwater port, Pemba
tion with an off-take part- has been in operation since
ner and it is in MoA’s cost the early 1900s and is ca-
structure where Leeden pable of handling handi-
sees great advantage for max vessels. However, with
end-users. MoA expecting to ship only
100,000 tpa of graphite con-
“The biggest advantage centrate, much smaller ves-
we have is our opex,” she sels will be sufficient.
said. “At less than $US300/t
FOB Pemba Port, we will be With Syrah choosing to
the cheapest graphite pro- cart its concentrate 350km
ducer in the world. Most of south to the port of Nacala,
the others will be consider- questions have been asked
ably higher and that is im- of Pemba’s suitability for
portant as it translates into MoA’s needs. Leeden is
the spherical graphite mar- confident the company can
ket where opex is around provide robust answers to
such questions.
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 25
COVER
Leeden, Carmo and Sweet hunt for Metals of Africa’s recent drill holes at Balama Central
“We have done our due diligence and said. “Instead, the end-users see value in matic MoA’s shift to graphite has been
have had a consultant reaffirm the cur- investing at the exploration stage. It gives over the last 18 months for a company
“rent port’s capacity and capabilities. them optionality in the value chain.” which was previously focused on, and
And, construction has now started on a Such comments highlight how dra- still has a portfolio of, base metals pro-
second, new port which is jects. Leeden is conscious
even more spacious,” she I think we are now demonstrating of the company’s diverse
said. portfolio looking like a lack
Mining, processing and we are focused on a world-class of focus but she explains it
infrastructure in place, MoA graphite mine but in hindsight, if we was never her intention to
has stepped up its off-take house all of the assets un-
marketing. hadn’t been diversified, we would’ve der one roof.
Leeden has held in-depth been in trouble by now. “The diversity of the com-
discussions with a number pany’s assets has definitely
of major battery and elec- been a challenge,” she said.
tronics companies and is “The original idea around
confident of closing an off- Metals of Africa was for it
take deal this year. It is sur- to be a project generator
prising to hear of a junior but the market has been so
without a PFS to its name tough it just wasn’t plausi-
already in discussions ble to get funding for green-
with major end-users, but fields exploration in order
Leeden said there was to spin out assets. We’ve
recognition among these proven that all our projects
companies that entering at have mineralisation and in
the junior end of the market better times we would have
was a way of ensuring their had separate companies
price structures remained for each set of projects but
intact. the current market is all
“At the kind of prices about getting cash flow and
they are looking for, they you can do that in graphite
are struggling to secure a lot easier than you can in
supply from the estab- base metals.
lished producers and cer- “I think we are now dem-
tainly not the traders,” she onstrating we are focused
PAGE 26 MARCH 2016 AUSTRALIA’S PAYDIRT
on a world-class graphite mine but in interest in the Montepuez ruby project, ministry, the main one being the increase
hindsight, if we hadn’t been diversified, which abuts Gemfields plc’s namesake in exploration licence rents. That resulted
we would’ve been in trouble by now.” mine and is the largest ruby producer in in us relinquishing the bulk of our base
the world (see below). metals ground. For greenfields explora-
The company is not likely to abandon tion it is a major disincentive but the Min-
its other assets, however. As well as Rio The company’s retreat from Rio Mazoe ister has pledged to revisit it this year.”
Mazoe in Mozambique, the portfolio in- led to doubts about the ability to operate
cludes the Kroussou zinc project in the in what is still a nascent Mozambican With the country’s coal and gas sec-
Central West African nation of Gabon. mining sector but Leeden, who lived in tors stunted by low prices, it could be the
the capital Maputo between 2011 and graphite industry, led by Syrah, MoA and
“I am still bullish on zinc so we are aim- 2016, remains a firm believer in the coun- fellow ASX-listed company Triton Min-
ing to keep the assets and find a partner try’s potential. erals Ltd which finally delivers Mozam-
for them. The first to find a home would bique the robust resources sector it has
probably be Gabon. There is a lot of in- “It has been a pleasure doing busi- been striving for.
terest from London funds for zinc, they ness in Mozambique,” she said. “There
are taking a long-term outlook on it.” have been a couple of frustrations that – Dominic Piper
we have voiced our concerns over to the
The company also holds a controlling
Ruby potential won’t distract
from graphite story
Local villagers search the riverbed gravels Artisanal miners have dug down at least 13m as they chase the contact between the
for highly valuable rubies at Montepuez East primary amphibolites and alluvial gravels on the Montepuez East ruby licence
The ASX ruby exploration sector is not tors from the recent move into graphite, on exploration to acquire a 75% interest
exactly a vast one, indeed Metals of MoA has chosen to JV its own ruby- in the project. MoA will be free-carried
Africa Ltd (MoA) can lay claim to being prospective ground out to Mozambican for that portion and all exploration until
about the only company with prospective Ruby Lda. Under the terms of the JV, Mo- the first commercial ruby sale.
ruby ground on the Australian bourse. zambican Ruby will spend $US400,000
“The ruby potential of our Montepuez
MoA managing director Cherie Leeden Leeden takes a look at waste rock at East project is very exciting, especially
has always kept track of mineral suc- Montepuez East considering what our neighbouring li-
cesses around Mozambique and when censes are pulling out of the ground,”
London-listed Gemfields plc announced Leeden said when announcing the JV. “I
exploration success at its Montepuez am delighted to be partnering with Mo-
ruby project in Cabo Delgado province, zambican Ruby Lda, who will provide
she quickly pegged the adjacent ground. MoA with 25% of the upside without
the requirement to contribute any of our
Gemfields started mining in 2014 and cash. This allows us to remain focused
has since produced more than $US122 on our zinc and graphite assets. I believe
million worth of rubies from the region. that the Montepuez region has the poten-
It has defined an indicated-inferred re- tial to be the largest ruby gem field in the
source of 467 mct @ 62.3 ct/t and now world.”
has a 21-year mine life for the project.
However, not wanting this new ground
to distract the exploration team or inves-
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 27
AUSTRALIAN GRAPHITE CONFERENCE PREVIEW
Graphite players lay
the cards on the table
Graphite’s supply/demand dynamics may be opaque, its pricing own off-take agreements and even in this
structures may be opaque and future growth projections may be space, investors are struggling to com-
opaque, but one thing is becoming clearer by the month – lithium-ion prehend exactly what it is these compa-
batteries and the battery storage market are well on their way to so- nies are proposing to supply.
lidifying their place in the base-load energy mix of future decades.
Competing companies are making
Graphite is a key component of such investors more used to the traditional differing and even conflicting claims re-
batteries. In fact, there is more graphite tonnes times grade equation, discus- garding what precisely it is that off-take
used in a lithium-ion battery than there is sions about flake size, purity and prod- customers are looking for. This is not to
lithium. Lithium is the cathode, graphite uct specifications often lead to confusion suggest companies are being mislead-
the anode. And, as the likes of Tesla, Pa- and disillusionment. ing, just that even for those involved in
nasonic and LG ramp up their ambitions the market the signs are difficult to de-
for the sector, their demand for graphite It is to counter this confusion that Pay- cipher.
supply is only set to increase. dirt has chosen to launch the Austral-
ian Graphite Conference, to be hosted China currently dominates all facets
However, while lithium stocks on in Perth on March 22. The conference of the graphite market from mining to
the ASX have catapulted in the last 12 will bring together the best of the ASX’s processing into spherical graphite to its
months, their graphite counterparts have graphite players to share their experi- eventual application but there are a num-
flat-lined as investors continue to strug- ences of the sector and their strategies ber of international rivals who are intent
gle to come to terms with the vagaries of for development. on breaking this stranglehold and estab-
the sector. lishing their own spherical graphite and
Without a traditional trading market, battery-making plants.
For brokers, fund managers and retail companies have been left to source their
The challenge until now for these
companies has been securing reliable,
affordable supplies of graphite. If the
emerging crop of Australian juniors can
PAGE 28 MARCH 2016 AUSTRALIA’S PAYDIRT
offer a solution to this problem, wide- Graphene’s properties are staggering. Like other graphite products, the only
spread adoption of natural graphite may It is the thinnest and strongest material restriction on graphene’s application is
turbo-charge graphite demand. ever discovered (breaking strength of 42 availability. Until Talga Resources Ltd
The same reasoning can be applied to Nm-2, 100 times greater than steel). It became the first company to success-
other applications. While the lithium-ion shows electrical and thermal conductiv- fully produce graphene from raw natural
battery market provides the most easily ity greater than copper at a fraction of the graphite, samples had been restricted to
identifiable market, other uses for graph- weight and absorbs only 2.3% of the light just a few kilograms.
“ite are growing. Expandable graphite has passing through it. These properties are With Talga now having built a graphene
been widely adopted as a fire retardant expected to see graphene revolutionise pilot plant in Germany, it is beginning to
in high-end electrical provide samples to some
goods and now building The challenge until now for these of the world’s leading elec-
materials in China. As tronics and technology
with batteries, the mar- companies has been securing companies.
ket has been stunted reliable, affordable supplies of graphite. Other graphite hopefuls
by supply. Expandable
have followed suit and the
graphite makes use of If the emerging crop of Australian juniors sector now has another
the larger flake graph- can offer a solution to this problem, potential avenue to get its
ite products and while head around.
China is still the world’s widespread adoption of natural graphite Such speculation and
largest producer of flake may turbo-charge graphite demand. imagination are both a
graphite, the quality of boon and hindrance to the
its production has been graphite sector. While in-
in decline for years. vestors warm to the idea
Even Chinese end-users are eager to many industries and its potential applica- of a junior miner being at the vanguard
find new sources of supply. tions are endless. of a new commodity boom, they are also
Further down the development pipe- In just a decade, its discovery has led wary due to the lack of hard evidence to
line, graphene, a derivative of graphite, is to an exciting and elaborate array of po- prove such a boom is on its way.
the sort of material science fiction ideas tential applications, from the glamorous – Dominic Piper
are born of. (tablet devices able to be folded up like a
First identified at the University of newspaper, or touch-sensitive ink), to the Paydirt will host the inaugural Austral-
Manchester in 2003, graphene is a two- life-altering (bio-electronic applications ian Graphite Conference at the Novotel
dimensional allotrope of carbon and con- in humans), to the more mundane but Perth Langley Hotel on Tuesday, March
sists of single atomic layers of carbon equally transformational (anti-corrosion 22. For more information please visit:
(around 0.3nm thick) while extending additive to paints and strengthening ad- www.australiangraphiteconference.com
many hundreds of nanometres in the lat- ditive to concrete or other building mate-
eral dimension. rials).
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 29
GAURSATPRAHLIIATNE
22 March 2016 - Novotel Perth Langley
Preliminary programme Tuesday 22 March 2016
Session One
09.00 Welcome: Bill Repard, Executive Chairman, Paydirt Media (5)
09.05 Keynote: Jason Chesters, Resource Analyst, Patersons Securities (25)
09.30 Andrews Spinks, Managing Director, Kibaran Resources Ltd (20)
09.50 Dr John Parker, Managing Director, Lincoln Minerals Ltd (20)
10.10 Cherie Leeden, Managing Director, Metals of Africa Ltd (20)
10.30 Mark Thompson, Managing Director, Talga Resources Ltd (20)
10.50 Questions (10)
11.00 Morning Tea, sponsored by CSA Global (25)
Session Two
11.25 Keynote: Andrew Scogings, Principal Geologist, CSA Global (25)
11.50 Allan Mulligan, Managing Director, Walkabout Resources Ltd (20)
12.10 David Christensen, Managing Director, Renascor Resources Ltd (20)
12.30 Steven Tambanis, Managing Director, Black Rock Mining Ltd (20)
12.50 Bruce Richardson, Managing Director, Anson Resources Ltd (20)
13.10 Questions (10)
13.20 Lunch (60)
Session Three
14.20 Phil Hoskins, Managing Director, IMX Resources Ltd (20)
14.40 Alan Armstrong, Executive Director, Mozambi Resources Ltd (20)
15.00 Peter Adamini, Senior Metallurgist, Independent Metallurgical Operations (20)
15.20 TBC
15.40 Questions (10)
15.50 Afternoon Tea (20)
Session Four
16.10 Closing Panel Debate (45)
16.55 Closing Cocktail Drinks, sponsored by Lithium Australia
* This programme is subject to change without prior notice
Conference Sponsors to date:
www.australiangraphiteconference.com
GAURSATPRAHLIIATNE
22 March 2016 - Novotel Perth Langley
Register NOW!
For all enquiries please contact Dominic Piper on +61 424 934 494
or email [email protected]
AUSTRALIAN GRAPHITE CONFERENCE PREVIEW
Lincoln clears flora hurdle
The path has been cleared for Lincoln Kookaburra Gully is set to become Australia’s second graphite mine
Minerals Ltd to be granted a mining
lease later this month for its Kookaburra a larger setting. 15.1% TGC, ranking it in the world’s top
Gully project in South Australia. Drilling of the Kookaburra Gully Ex- 10 graphite deposits based on grade.
Established infrastructure such as water,
Following an exhaustive review, the tended targets could also begin this electricity and port facilities are readily
Commonwealth Government Depart- month. The company has been offered a accessible.
ment of the Environment ruled in late SA Government PACE grant to fund part
December the company’s proposal to of the cost of the programme. Lincoln has flagged the potential start
build and operate an open-cut mine was of mining and construction in the fourth
“not a controlled action if undertaken in Lincoln is currently finalising the de- quarter if all approvals are in place, put-
a particular manner”, meaning no further signs for its proposed mine and process- ting Kookaburra Gully in the frame to
federal-level approvals are required be- ing plant facilities, as well as making ini- become only Australia’s second graphite
fore development can proceed. tial preparations for the Programme for mine after the nearby Uley operation.
Environmental Protection and Rehabili-
Lincoln also lodged its public response tation (PEPR) documentation. Uley has been on care-and-mainte-
document with the SA Department of nance since late last year due to unreli-
State Development in January, paving “That’s basically our mining lease pro- able equipment and groundwater issues,
the way for a mining lease to be awarded posal plus a whole set of detailed man- which attracted large debt for operator
before the end of this month. agement plans on how we’re going to Valence Industries Ltd.
manage the environmental issues, how
Federal authorities raised concerns we’re going to manage rehabilitation and “While that’s shut down at the moment,
about a patch of Eyre Peninsula Blue all those types of things,” Parker said. we’re all expecting that will reopen in the
Gum in the middle of Lincoln’s tenement not too distant future,” Parker said.
and have requested a fence and signage “We’ve got to prepare a transport man-
to be erected around the threatened agement plan for the local council as well, “From our point of view, we believe
woodland. so there’s quite a few things we need to we’ve got a deposit which is equally as
do. On that note, we should be able to good, if not better than Uley, and in theo-
The company will not be allowed to prepare our PEPR this year such that if ry sometime next year we’ll be develop-
clear the woodland under any circum- everything goes smoothly we would ex- ing and mining.”
stances and must also ensure a 20m pect to have all our approvals in place by
buffer between construction and the ex- the end of this year.” Parker welcomed the heightened inter-
clusion zone, as per the conditions set est in the graphite sector and expected
out in the Environment Protection and Kookaburra Gully, 35km north of Port his company to attract plenty of attention
Biodiversity Conservation (EPBC) Act. Lincoln, boasts a resource of 2.2mt @ because Kookaburra Gully is housed in a
stable jurisdiction.
“While it’s not an approval as such, it John Parker
is a big tick because it gives us a clean “Companies like the Panasonics and
slate going forward from the flora and the Samsungs, they are not going to put
fauna point of view,” Lincoln managing all their eggs in one basket in a country
director John Parker told Paydirt. where there is a certain amount of sover-
eign risk,” Parker said.
“We now know exactly what we’ve got
to do, and what we can’t do. That particu- “I suppose the other advantage we
lar decision enabled us to finish off our have over some of the other players, cer-
mining lease proposal, which we actually tainly here in Australia, is a direct link to
submitted back in February last year, but China and certainly part of the market
the State Government held up the pro- we’re looking at is channelling our graph-
cess on the basis of the EPBC referral. ite into parts of China. Our chairman is
Chinese and we have two or three major
“In theory, that’s it. That’s the end of Chinese investors, so we’re getting plen-
our input and it’s now in the hands of the ty of support in that area.”
State Government to make their final as-
sessment and decide whether we’re go- – Michael Washbourne
ing to be offered a mining lease or not.
“If the State Government sticks to its
decision-making process and the sched-
ule they’ve given us, we should expect to
be offered a mining lease by mid-to-late
March.”
While Lincoln awaits confirmation of a
mining lease, the company has plenty of
other work to keep it busy, including final-
ising samples for pilot plant testing.
Parker said his company had advanced
its potential graphite product beyond ba-
sic laboratory testing and now needed to
assess the suitability of bulk samples in
PAGE 32 MARCH 2016 AUSTRALIA’S PAYDIRT
IMX’s graphite opportunities
infinitely expandable
IMX Resources Ltd is pressing ahead to a number of JVs, IMX had decided to lion. Opex for the production of high-
with plans to spin out its graphite assets test its large tenement package for other quality flake graphite was estimated at
into a separately listed company, just 18 prospects. $US490/t.
months after it entered the sector.
“When MMG [Ltd] withdrew from the The PFS in hand, IMX is now pursu-
Speaking to Paydirt in February, IMX Ntaka Hill JV, the graphite market was ing off-take agreements and appears
chief executive Phil Hoskins said the de- strong and we knew we had it on the close to binding contracts having struck
cision to spin out the graphite component ground,” Hoskins told Paydirt last year. a MoU with one of China’s largest mining
of the company reflected both the rapid “Tanzania and Mozambique are well- houses.
progress the company has made and the endowed with coarse-grained graphite
opportunities opening up. and that is why they have quickly risen to In February, the company announced
prominence.” it had signed a MoU with China Gold
“When we started on the graphite Group Investment Co Ltd (a subsidiary
prospects we saw the other companies The company’s progress at Chilalo has of China Gold, the country’s largest gold
and thought we would have to play catch- since been rapid, culminating in the De- miner) and CN Docking Joint Investment
up. Eighteen months later we have a PFS cember release of a positive PFS for the and Development Co Ltd (a subsidiary of
which has shown we have a high quality project. China National Material Group Corpora-
project and product,” Hoskins said. tion).
Conducted by BatteryLimits Pty Ltd
The project is the Chilalo graphite pro- and based on the resource produced Hoskins said the agreement was
ject in south-east Tanzania. IMX started by CSA Global, the PFS indicated a 10- reached following exhaustive efforts
work there in late 2014, having been in year, 69,000 tpa concentrate operation throughout 2015.
the East African country for more than a would deliver average annual EBITDA
decade through its exposure to the Ntaka of $US47 million at an NPV of $US200 “[We have the] MoU now which is the
Hill nickel asset. With Ntaka Hill subject million for an initial capex of $US74 mil-
To page 34
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 33
AUSTRALIAN GRAPHITE CONFERENCE PREVIEW
culmination of 72 days spent in standards which recommend the
China in 2015,” he said. use of flame retardant building ma-
“China Gold is looking at consoli- terial in all new construction and
dating the entire graphite market building renovation projects.
in China but this is the first over- The problem has been finding
seas project it has aligned with. It a reliable supply of expandable
is particularly interested in secur- graphite.
ing off-take from Chilalo due to the “The market is 5 mtpa with ex-
high quality and highly expandable pandable graphite making up be-
graphite product it can produce.” tween 5% and 50% of those ma-
While it has long been accepted terials,” he said. “People are rightly
that large flake graphite is desir- talking about batteries because
able because it demands higher that market is going to be massive
prices than finer products, Hoskins but they haven’t really looked at ex-
believes Australian investors are pandable graphite.
still coming to terms with exactly “If the new standards are ap-
why this is the case. plied, it could blow current expand-
“Many companies have spoken able graphite demand out of the
about the value of flake graphite water.
for a long time but not really in rela- “But the market never really ex-
tion to expandable graphite which isted previously because there
is curious. Spherical graphite [the wasn’t enough supply.”
processed product which is used With many of Tanzania’s graph-
in lithium-ion batteries] uses finer ite projects proving to have a ma-
material so there isn’t really a need Phil Hoskins jority of larger flake sizes, Hoskins
to pay higher prices for larger flake believes the country could provide
graphite when it is to be milled anyway.” Expandable graphite is used in a the supply impetus needed to spark de-
Instead, IMX is looking to place the range of applications which make use of mand.
Chilalo product into another emerging its heat resistant characteristics. Graph- He also hopes the MoU with China
market for large flake graphite; expand- ite foil – thin, highly workable sheets of Gold puts IMX at the front of that queue
able graphite. graphite – is widely used in high-end and expects to have a binding agreement
“We recognised we were amateurs electronic products where it draws dam- in place by mid-2016.
in the graphite space so we engaged aging heat away from electrical compo- “Having had plenty of experience in
Benchmark Mineral Intelligence to look nents. Graphite paper is used for similar China from our dealings in iron ore we
at potential markets for our product. It purposes in manufacturing applications know it is about relationships first, deals
showed the expandable graphite market such as sealing gaskets, graphite tapes second. But I think the fact China Gold
“was the most suitable for our project and and packing.
was happy to be named in our market an-
more likely to drive nouncements shows
higher prices.” The market is 5 mtpa with expandable how serious they are
A relatively new taking it.”
product, expandable graphite making up between 5% and By the time a bind-
graphite is a com- 50% of those materials. People are rightly ing agreement is in
pound of graphite place, Chilalo will like-
which expands or ex- talking about batteries because that market ly be housed in a new
foliates when treated is going to be massive but they haven’t really ASX-listed company.
looked at expandable graphite. If the new
with acid and then Hoskins said the
heated to around move to spin-out the
1,000ºC. The result is graphite assets would
a product which has standards are applied, it could blow current allow shareholders to
unique properties of expandable graphite demand out of the water. realise some of the
heat resistance, cor- value in Chilalo.
rosion resistance, “The new company
softness, compres- will be owned by IMX
sion resilience and radiation resistance. However, it is its use in the emerging shareholders and we will target an ad-
Almost all graphite is expandable but applications of flame retardant polysty- ditional $5 million through IPO,” he said.
different flake sizes expand at different rene insulation foam which is proving “China Gold will probably take exclusive
rates. Early test work has indicated to most alluring. off-take with the option for us to buy 10%
IMX that Chilalo’s expansion rates – the “This is one of the most interesting back at any time for opportunities in
volume of expandable graphite produced sectors and why China National Building graphene. They will also likely bring the
per gram of graphite, expressed in grams Materials has come on board. They are project debt and equity and we will then
per litre – far exceed those of Chinese looking to use expandable graphite as a incorporate a JV between IMX and China
graphite deposits. flame retardant material in their building Gold.”
“In China, graphite is expandable to products.” – Dominic Piper
about 250 g/l. On the test work we have Hoskins said discussions with end-
done, our coarse flake expands at 1,000 users had indicated the Chinese Govern-
g/t,” Hoskins said. ment had introduced new building safety
PAGE 34 MARCH 2016 AUSTRALIA’S PAYDIRT
Spotlight on Sri Lankan graphite
First Graphite Ltd has entered into of graphene pre- ing January. First
agreements with two separate parties
to provide samples from its Sri Lankan pared by synthetic Graphite was await-
graphite projects for graphene testing.
routes”. ing final approval
The company, formerly known as MRL
Corporation Ltd, confirmed on February A further 6t of for a permit from
10 it had made arrangements with sepa-
rate organisations in Europe and South Sri Lankan graph- the Central Envi-
Asia to have its graphite samples tested
for graphene capabilities. ite was shipped to ronmental Authority
“Although the terms of these agree- Adelaide in Janu- at the time of print,
ments are currently only in respect of the
confidentiality requirements regarding ary for additional but had completed
the work and potential intellectual prop-
erty developed, First Graphite will con- graphene testing all of the necessary
tinue to keep the market advised of any
further arrangements or other material and production. preparations for the
information following the results of the
sample testing,” the company said in a Some graphene start of underground
statement. has already been First Graphite is providing samples for mining activities.
passed on to Im- graphene testing in Europe and South Asia C o n s t r u c t i o n
Earlier performance testing of a 50kg
sample of high-grade Sri Lankan vein agine Intelligent work at Aluketiya
graphite conducted by the University of
Adelaide last year found the quality of Materials (IMM). First Graphite will be- has begun, with the company targeting
the prepared graphene was “outstand-
ing” and “comparable with the quality come a certified supplier of graphite/gra- underground mining towards the end
phene to IMM if the material meets cer- of this month. The headframe is under
tain price and performance objectives. construction following the completion of
IMM has provided First Graphite with work on the first concrete pad.
material specifications required for the Further drilling is planned for unex-
manufacture of its graphene-based prod- plored areas of the Aluketiya mining li-
uct Imgne X-3 GT, which was subject to cence.
field trials last month. First Graphite holds almost 40,000ha
Construction of the Pandeniya pro- of tenure in Sri Lanka, having recently
ject is complete, with hoist load testing secured a further two exploration licenc-
conducted and shaft-liner boxes run dur- es covering 12,900ha.
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 35
AUSTRALIAN GRAPHITE CONFERENCE PREVIEW
Black Rock to reveal resource
Black Rock Mining Ltd could poten- preparing to release a maiden resource Furthermore, a 54.2% distribution of
tially be in production at the Mahenge at Mahenge, with a scoping study also on coarse and jumbo flake in concentrate
graphite project in Tanzania by the end of the horizon. graded 98.27% purity from a simple
next year. three-stage flotation process.
Tambanis said the plan was to enter a
This is, of course, assuming every- feasibility study immediately after com- There is scope for improvement, which
thing proceeds without a glitch for the pleting the scoping study. might just separate Black Rock from its
company between now and then. peers in the graphite space.
Metallurgical test work being carried
“If we have a good year this year...all out is only confirming Black Rock’s belief “I think what is going to differentiate
this is really good but until you get off- that it is on a winner at Mahenge, where one company from another is going to be
take it is all a bit of an academic exer- an exploration target of 115mt @ 8.66- based on endowment, scale, grade, and
cise. If we can achieve that you could be 10.34% TGC has been set for the Ulanzi, your operating costs; can you get mains
producing within 18 or 20 months, so it Cascade and Epanko North prospects. electricity? Do you have to use gen set
is technically possible to be in produc- power? That is certainly a $100/t cost dif-
tion by the end of next year,” Black Rock “Everything is going swimmingly well, ferential,” Tambanis said.
managing director Steve Tambanis told the [met] results are preliminary and not
Paydirt. optimised, which is fantastic. I am not “We only finished drilling at the end of
expecting any issues with capital costs December and will announce a JORC
“By that time you have managed and and metallurgy and we are going to be resource [by the end of February]. I think
met all of your requirements for getting announcing a very nice resource,” Tam- everything will fall into place. I know there
a mining lease and designing a plant, banis said. are a lot of graphite companies out there,
which for a graphite is pretty simple.” but at the end of the day it is going to be
Full results from the first stage met- the healthiest three or four that succeed.”
While Black Rock hopes to achieve its allurgical programme are expected in
production ambitions in the not too dis- mid-March, with results from the Epanko Mahenge is 125km by road from Dar
tant future, at the forefront of Tambanis’ North primary mineralisation zone re- Es Salaam and within close proximity to
mind are the near-term milestones to be turning high proportions of coarse (great- power, rail and port facilities, potentially
ticked off. er than 180 microns) and jumbo flake making for low capex and opex require-
(greater than 300 microns) graphite. ments.
At the time of print, the company was
PAGE 36 MARCH 2016 AUSTRALIA’S PAYDIRT
Black Rock’s Mahenge project is 125km from Dar Es Salaam otherwise I think it could be quite diffi-
cult,” he said.
Therefore, it appears Black Rock is in “It depends entirely on how you struc-
a favourable position in the global graph- ture it, but a lot of companies have an- “At the end of the day it is about how
ite race. nounced resources and that is about as you differentiate yourself and I am hop-
far as they can go, unless you get the ing to be able to do it on tonnes, grade
But Tambanis knows the company has sale and the interest and hopefully a little and costs.”
a task ahead of it, including project fund- bit of participation from some off-takers,
ing. For the few companies able to suc-
ceed, Tambanis is bullish demand funda-
mentals will make graphite businesses
sustainable in the long-term.
“I think what you are going to see is
so much growth and development in the
battery sector,” he said.
“You don’t want to sell all of your hope
just on batteries but unit costs are going
to be going down quite dramatically and
you are going to see so much more in-
vestment in the battery sector. There is
going to be quite a bit more demand than
the existing 1 mtpa or whatever you be-
lieve production to be at the moment, so
I think it is not going to be a one or two-
year wonder and then die in the arse,
there is a lot more to it and it is sustain-
able.”
– Mark Andrews
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 37
AUSTRALIAN GRAPHITE CONFERENCE PREVIEW
Walkabout anchors in Tanzania
Walkabout Resources averse development ap-
Ltd hopes to have a proach for a modular first
mining licence approved stage operation.”
for its Lindi Jumbo project Since the release of the
in Tanzania in July. resource and start of tech-
The company is pre- nical studies, Walkabout
paring an application for has had a few wins with
an initial start-up opera- the metallurgy at Lindi
tion of about 25,000 tpa Jumbo, 60km from Lindi
graphite concentrate, port.
while also focusing on Test work has confirmed
regulatory issues around target recoveries and im-
water and environmental proved flake size reten-
permitting. tion, with flake size ratios
Walkabout managing of jumbo flake up 40%
director Allan Mulligan (+300 microns) and large
has spent a considerable flakes (+180 microns) up
amount of time in Dar Es 60-74% in concentrate.
Salaam addressing such Walkabout is banking on Tanzania’s mature mining fiscal and regulatory The company also re-
works and it is hoped the regimes to enable it to reach graphite production quickly ported consistent high-
positive strides taken will grade recoveries of be-
attract investment in the company. likely not going to be realised,” Mulligan tween 95-97%.
“We will be announcing the introduc- said. “Further metallurgical optimisation [will
tion of a cornerstone partner that will “So, the challenge then into a growing be carried out] to produce targeted flake
underpin the development costs at Lindi supply and demand profile is to produce size distributions at market-related con-
Jumbo,” Mulligan told Paydirt.
as high a revenue product as possible at centrate grades and further limited infill
Walkabout is no different to many other as low a cost as possible.” drilling will take place on site to expand
juniors grappling for cash in a tight mar- Helping Walkabout curtail costs will be the high-grade resource,” Mulligan said
ket, and at the time of the manageable size and of the company’s short-term work plans.
print had a SPP open at overall high-grade nature Results so far have confirmed that re-
0.32c/share. of the Lindi Jumbo pro- covery into concentrate is not an issue,
Cash raised will help ject. with the main challenge being finding a
Walkabout through the Accustomed to operat- grinding regime to liberate the graphite
regulatory approvals pro- ing on lean budgets and from the gangue without breaking the
cess, while studies on a despite its low spend – large flakes present.
modular mine set-up can $1.3 million last calendar “More work needs to be done on the
also start. year compared to $3-13 comminution or grinding regime in order
“We have identified an million by peers in its to preserve the integrity of the large and
engineer [in Johannes- group – Walkabout re- jumbo flakes. As you attrition the ore,
burg] that has their own mains a meaningful play- the larger jumbo and super jumbo flakes
test laboratory and they er in the graphite space. fall victim to breakage first and while we
design and construct a Allan Mulligan An accumulation of know from petrography they are there,
plant on their workshop work done in 2015 result- they must be protected while still break-
floor and assemble all the working parts. ed in a maiden resource at Lindi Jumbo ing the gangue material away from the
They then break it down and put it into in January. graphite material,” Mulligan said.
several containers and ship it to site The Gilbert Arc inferred resource was Graphite in the Lindi region, south-
where it is re-assembled,” Mulligan said. estimated at 15.3mt @ 10.1% TGC for eastern Tanzania, is known to have some
“This modular form of construction is 1.54mt contained graphite. of the highest ratios of jumbo (+300 mi-
very cost-effective and time saving. Much A high-grade core of 2.6mt @ 20.6% crons) and super jumbo (+500 microns)
of the project management is based off- TGC is enveloped by 6.9mt @ 8.9% flake in the world.
site, so logistics are highly reduced.” TGC, which provides Walkabout with It is forecast that jumbo and super jum-
The success of this modular mine con- an option to pursue discrete and flexible bo flake will be in short supply by 2020
cept could prove the point of difference mining practices. and Walkabout hopes to be able to fill
for Walkabout against its peers in the On release of the resource, Mulligan some of that gap.
graphite race. said: “The possible option of mining To fast-track the process, the technical
Executing the modular mine plan will higher grade zones during periods of study will be run alongside the process
potentially allow Walkabout to enter pro- economic downturn as opposed to be- plant design by the same Johannesburg-
duction faster than many of its competi- ing locked into a grade of around 5% are based engineers, effectively cancelling
tors. huge project enablers. We remain confi- out the need to re-study and design.
“This is a key market risk amelioration dent that the resource size is adequate – Mark Andrews
because the forecast prices are most and in line with our prudent and risk-
PAGE 38 MARCH 2016 AUSTRALIA’S PAYDIRT
Epanko build on the way
Kibaran Resources Ltd may be in a Spinks said. “Once that is stakeholders,” Spinks said.
position to start development of its
Epanko graphite project later this year af- complete we can then look Once finance is completed,
ter raising $2 million to complete its debt
due diligence work. at the equity component of Kibaran plans to move straight
The placement – at 15c/share with an the project finance. We are into construction.
attaching half option at 20c – was com-
pleted on February 22. The company looking at a number of op- “We still expect to be on
said proceeds will be used in part to
complete the due diligence process on tions, including project level schedule to allow earthworks
Epanko – in Tanzania – being undertak-
en by KfW IPEX-Bank, the development equity, as we want to ensure to begin by the end of 2016
funding agency of the German Govern-
ment, and engineering firm SRK. the least amount of dilution with production starting in mid-
KfW is set to provide $US40 million in as possible.” 2017,” Spinks said.
debt funding for the Epanko development
with a further $US40 million to be provid- Spinks said although fi- Off-take agreements are vi-
ed by Nedbank. With Epanko’s 40,000
tpa operation demanding a capex price nance was debt driven, both Andrew Spinks tal in graphite and Kibaran is
tag of $US77.5 million, this will leave equity and debt provisions comfortable its two contracts
Kibaran needing to raise around $US15
million to cover the remaining capex and would be dependent on with ThyssenKrupp (20,000
working capital requirements.
each other. He couldn’t put a time frame tpa) and a European graphite trader
“This capital raising will essentially
take us through the debt financing stage,” on completion of the debt component but (10,000 tpa) will prove cornerstone’s of
Kibaran managing director Andrew
said the company hoped to receive the Epanko’s 40,000 tpa output.
final term sheet in April or May, “but that The company also recently struck
is outside of our control”, he added. a MoU with Sojitz Corporation which
The project itself is almost ready for Spinks described as a “phenomenal
construction to start. achievement”.
“We are working our way through the “The positive aspect about the So-
final engineer’s report and there is a lit- jitz MoU is that it is the first time we
tle bit of work to do on the environmental have moved specifically into the battery
and social aspects to bring them up to space. We hope to finalise the binding
Equator Principle standards which we agreement by mid-year,” he said.
believe will be a positive outcome for all – Dominic Piper
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 39
AUSTRALIAN GRAPHITE CONFERENCE PREVIEW
Graphite on the Peninsula
in South Korea
Australia, East Africa, products. With the unlike some of our other projects around
Sri Lanka and Swe- lack of work that has the world,” Pyle said.
den are where many of been done in country, “In South Korea all those things [infra-
structure] are available to us by tapping
the ASX’s graphite hope- it is really open to us into current capital items that are already
in place.”
fuls are focused, but not to discover orebod-
In February, Peninsula filed tenement
Peninsula Mines Ltd. ies capable of being applications over the historic Wolmyeong
mine, once the largest graphite mine in
The West Perth-based processed in country South Korea before its closure in 1987.
company has chosen and there is an obvi- Some sampling results from the late
1970s included grades of 79-83% TGC.
South Korea as the pre- Peninsula is currently analysing all ous off-take. The early Unlike Peninsula’s other graphite pros-
ferred destination to data before prioritising drill targets mover advantage is to pects in country, Wolmyeong contains
build its graphite busi- our benefit, I feel.” high-grade amorphous graphite.
ness. Early movers in oth- In addition to Wolmyeong, Peninsula
has applications over the Daewon, Deok-
Peninsula executive director Martin er parts of the world, particularly in devel- seung, Eunha, Yongwon and Yongwon
West prospects in central and northern
Pyle said the country had both graphite oping economies, may have to contend South Korea.
prospectivity and an end-game to tap with a lack of infrastructure around their The Daewon project appears to be one
of the most promising to date, with the
into. projects; an issue which does not con-
“We are aware there are a lot of Ko- cern Peninsula.
rean end-users of graphite and lithium “We have got the benefit that our in-
and South Korea is home to a massive frastructure challenge is a lot lower. We
industry, with all their hi-tech products have wonderful infrastructure in South
requiring batteries,” Pyle said. Korea – roads, rail, power, water – all
“It is a natural demand centre for these within a few kilometres of our projects,
PAGE 40 MARCH 2016 AUSTRALIA’S PAYDIRT
Peninsula has been in South Korea since 2013, but only recently entered the graphite and lithium space
Korea Resources Corporation (KORES) which are likely to be priorities, but there the Tonggo and Ubeong prospects, re-
identifying flake graphite grades ranging are probably some that require a bit more flect Peninsula’s ambitions to explore for
from 6.9-42.4% TGC in 1978. work and could be equally better projects commodities for the 21st century – lithi-
with more work.” um and graphite – which are contributing
Pyle said Peninsula – which West Af- to major improvements in battery power
rican gold-focused Aurora Minerals Ltd Every year KORES – the Government and storage capacity.
has a 38.5% shareholding in – needed to resources agency – invites applications
review all data available. from companies requiring support fund- To drive its lithium and graphite strat-
ing for drilling activities, which Pyle in- egy, Peninsula has appointed Danny
“We picked up all these projects quite tends to seek this year. Noonan as an executive director.
recently, so a lot of the initial work is on
ground truthing, getting out to these pro- Peninsula is no stranger to South Noonan has been chief geologist and
jects, confirming the veracity of old re- Korea, with the Daehwa molybdenum- in-country manager since Peninsula first
ports, then prioritising which ones we’d tungsten and Osu porphyry copper-gold stepped into South Korea in mid-2013
like to do more work on,” he said. projects in its stable before the graphite and he has been instrumental in build-
and lithium prospects were brought to ing the company’s lithium and graphite
“That additional work is likely to in- the table. interests.
clude geophysics and drilling. Some of
them have readymade targets in terms The Dongsugok lithium prospect, adja- – Mark Andrews
of outcrop and historical mining activity cent to the Boam lithium mine, along with
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 41
OPINION
Global graphite market
set for change
Graphite has recently been the search’s estimated 74%. China’s
focus of numerous exploration production has grown rapidly
companies, particularly due to de- since 1998 and overtook the rest
velopments in battery technologies of the world in 2000. India, Brazil,
related to the emerging electric ve- Canada and North Korea prob-
hicle and green energy market. ably account for a further 20-27%
Consequently, the race has been of global production. Sri Lanka is
on to report large tonnage explora- a relatively small producer (about
tion targets and mineral resources, 0.5% of global production), al-
with certain projects being de- though well known for its high
scribed, for example, as “world- quality vein graphite. Brazil is the
class”, “biggest” or “highest grade”, world’s number two producer, con-
with perhaps hundreds of millions tributing about 90,000 tpa of flake
of tonnes containing a certain per- graphite. Indian production num-
centage of graphite. bers have been debated for some
Graphite exploration projects time; output was 170,000t of flake
may be ranked according to factors graphite in 2014 according to the
such as i) deposit size, contained USGS, whereas other estimates
graphite and enterprise value/ Global natural graphite production (% by country) put this number closer to 25,000
tonne of contained graphite (EV/t); estimated for 2014. Source: Industrial Minerals Research; tpa of flake graphite.
ii) location (country risk) and logis-
tics; iii) flake size distribution; iv) United States Geological Survey Global markets
Natural graphite is a very soft
product purity; v) off-take agreements; timated 1.2 mtpa in 2014 at a compound mineral with low density and a metallic
and vi) timeframe to production. annual growth rate (CAGR) of just over lustre and occurs in several forms, de-
Drivers for success include having a 2%. scribed as amorphous, flake and vein.
sufficiently high-grade flake graphite de- While production growth remained Graphite is flexible and has both metal-
posit with low stripping ratio and, in ad- relatively slow until the mid-20th centu- lic and non-metallic properties making
dition, jurisdiction, logistics, timeframe to ry, production increased markedly from it suitable for diverse industrial applica-
production and last but not least, off-take about 1950 to achieve an annual CAGR tions. The non-metallic properties in-
agreements must be taken into consid- of close to 3% by 2014. clude chemical inertness, high thermal
eration. China is the world’s leading supplier of resistance and lubricity, whereas metal-
Global production natural graphite (flake and amorphous) lic properties include thermal and elec-
Global graphite production has ris- with approximately 67% of global pro- trical conductivity. Graphite may also be
en more than tenfold, from a base of duction according to the USGS, some- manufactured synthetically from carbon-
100,000 tpa in the early 1900s to an es- what lower than Industrial Minerals Re- bearing raw materials such as petroleum
coke and tar pitch.
2,000 1,400,000 World natural graphite demand is di-
1,800 World Steel (millions of tonnes) World Graphite (tonnes) rectly linked to industrial applications,
1,600 1,200,000 including refractories, automotive, bat-
teries and lubricants. Refractories for the
1,400 1,000,000 steel industry remain the dominant mar-
ket for natural graphite consumption and
1,200 800,000 graphite production has tended to follow
global steel production, although hi-tech
1,000 applications such as battery anodes are
600,000 driving demand for the mineral.
800 This is potentially one of graphite’s
600 400,000 fastest growing markets due to interest
in electric vehicles, portable electron-
400 ics and large-scale domestic and com-
200,000
mercial energy storage, for example in
200
Tesla’s Powerwall batteries. Another fast
0 0 growing market is predicted to be ex-
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 pandable graphite for foil, insulation and
fire retardant products.
World natural graphite production relative to world steel production. The major primary producing and ex-
Source: USGS and World Steel Association porting countries are China, North Korea
PAGE 42 MARCH 2016 AUSTRALIA’S PAYDIRT
AUSTRALIAN GRAPHITE CONFERENCE PREVIEW
and Brazil. Importing countries include having decreased slightly during 2015. noparticle anodes which are likely to use
the US, China (from Korea), Germany, Coated spherical graphite commands less graphite. If the manufacture of such
Japan and India which accounted for ap- significantly higher prices of around nanoparticles becomes feasible and
proximately 250,000 tpa of global trade $US7,000/t or more. economic, the life time of batteries may
in 2014. China has consistently been be significantly extended which would
the leading global exporter, while the US Graphite consumption per tonne of reduce spherical graphite consumption
has consistently been the leading global steel is projected to decrease, as refrac- and production.
importer, sourcing 50,000-70,000 tpa tory consumption efficiencies improve
over the past 15 years. Sri Lanka has in China and as global steel production Risks
exported about 4,000 tpa of vein graph- slows. Graphite demand linked to growth
ite in recent years at prices in excess of in electric vehicles, domestic and com- Overproduction of flake graphite in Chi-
$US1,600/t according to UN trade data. mercial power storage could be impacted na, in addition to proposed production by
by alternative battery technology such existing producers in other countries and
Flake graphite prices remained rela- as aluminium-titanium “yolk-shell” na- global graphite explorers, poses a risk to
tively steady for many years until 2005, supply-demand balance.
after which they climbed gradually to
2008, declined in 2009 following the Dr Andrew Scogings is a principal con-
GFC and then resumed an upward trend, sultant with CSA Global Pty Ltd. He has
spiking dramatically from 2011 through over 25 years’ experience in industrial
2012. Prices have since returned to 2008 minerals exploration, mining and process-
levels due to excess production versus ing, product development, market applica-
market demand. tions and commercialisation processes.
Andrew is a regular contributor to Indus-
As a rule of thumb, the larger and pur- trial Minerals Magazine and has published
er the graphite flake size, the higher the several papers on the requirements of the
price. Prices range from about $US500/t JORC Code 2012, with specific reference
(cost, insurance and freight) for minus to Clause 49. He has also written articles
75 micron product to approximately ranking global graphite exploration pro-
$US2,000/t for jumbo flakes greater than jects and was recently senior author of the
300 micron diameter and greater than Natural Graphite Report – strategic out-
94% carbon content. Uncoated spheri- look to 2020 published by Industrial Minerals Research (UK). Andrew is a Registered
cal graphite for use in lithium-ion bat- Professional Geoscientist (RP Geo. Industrial Minerals) with the Australian Institute of
teries is currently around $US3,000/t, Geoscientists. Andrew will be a keynote speaker at the Australian Graphite Conference
The CD-Rom of Paydirt’s 2015
Africa Down Under Conference
is available
Perth,Western Australia
CD Rom includes
• Over 60 presentations • Conference media coverage
• Australia’s Paydirt preview and review reports • Conference Sponsors
CD-Rom – $160 (inc.GST)
Phone (+61) 8 9321 0355 or email [email protected]
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 43
AUSTRALIAN GRAPHITE CONFERENCE PREVIEW
Talga finds potential new
anode process
Talga Resources Ltd’s willingness to Talga managing director Mark Thompson with “There is a lot more test work to do,
test the boundaries of its graphite’s a sample of high-grade outcrop from looking at variations and so forth but it is
capabilities took another step last month the company’s Vittangi project very exciting,” Thompson said.
when it announced a potential new path
for battery anode production. veloping brand new battery technology Particularly exciting for Talga is that
breakthroughs.” the test work was done on material it is
Independent test work at the Max currently considers low value in its eco-
Planck Institute of Polymer Research The test work at the Max Planck In- nomic studies. For the past two years,
and Dresden Technical University in stitute saw Talga micrographite used the company has pursued the graphene
Germany found non-purified samples as active material, enabling the battery capabilities of the Vittangi ore rather than
from Talga’s Vittangi project could be to achieve a first charge capacity of the battery market many of its graphite
applied directly as an active anode ma- 375mAh/g, a first discharge capacity of peers have courted.
terial, without the need for micronising, 481mAh/g and an average charge ca-
spheroiding and coating steps used cur- pacity over 100 cycles of 357mAh/g. Graphene is a potentially low volume,
rently by industry. incredibly high-value product, while the
The first charge and discharge capaci- majority of Vittangi’s proposed 40,000
Currently, raw natural graphite is pro- ties exceeded the theoretical maximum tpa graphite production is planned to be
cessed – through either thermal or acid of graphite and the average specific ca- sold into the industrial markets.
means – into spherical graphite which is pacity achieved was comparable to that
then used as the anode in lithium-ion bat- of highly refined spherical graphite. “It has never been part of Talga’s
teries. Operating costs for producing raw long-term goal to target the current bat-
natural graphite are around $US300/t Thompson admitted Talga had faced tery market, just the opposite in fact.
but spherical graphite costs are around scepticism since releasing its findings. We have been quite conservative about
$US3,200/t. the amount of flake graphite we have,”
“There has been a lot of scepticism but Thompson said.
Talga managing director Mark Thomp- I don’t find that surprising, there always is
son told Paydirt the recent test work with technology changes,” he said. “Even “We have been focusing on the large
could represent a step-change for the the scientists we spoke to were strug- volume industrial sector for most of the
battery industry. gling to get their head around it and some graphite but these tests may have signifi-
still can’t believe we are putting raw rock cant advantages for the company and al-
“It is in the very early stages but it into the process, but as you explain to low us to shift some of the material from
shows a potential path towards affect- them and show them, you see the light industrial applications to batteries and
ing the industry in a positive way and we come on. therefore fetch a higher price.
have had a strong response from battery
makers,” Thompson said. “The development path is very differ- “It is not advanced enough yet to put it
ent but the more data we present, the straight into the economic studies, but to
Lithium-ion batteries are currently more industry realises they should take shift some of that 40,000 tpa into a high-
400-800% more expensive than tradi- advantage. These results are not Talga’s er price bracket is a realistic goal.”
tional lead batteries and some of the opinion; we have published indepen-
world’s leading electronics and technolo- dently verified data from one of Europe’s The anode breakthrough is another
gy companies are striving to find cheaper most respected scientific institutions.” example of Talga’s attempts to find new
production paths. markets for its products. The company
Work will continue on the process was the first to report significant break-
US company Tesla Inc is trying to low- throughout 2016. throughs in graphene processing flow-
er costs through economies-of-scale by sheets and it continues to pursue poten-
building its gigafactory in Nevada where tial markets for that material.
it plans to produce 35GWh annually by
2020. Last year, the company began trial
mining at Vittangi – in northern Sweden
Thompson believes Talga’s findings – and is now delivering ore to the pilot
may offer an alternative way to lowering plant it has established in Germany.
costs.
“Last year was a big year with pro-
“All batterymakers are focusing on posed mining and test facility and now we
cost. Tesla is looking at scale but what have actually delivered on both of them,”
if you could change the way the anode Thompson said. “The pilot plant team is
is made? expanding with three full-time scientists/
engineers and three technicians. We
“There are also increasing stipulations continue to produce material that is use-
for targets of price per kWh and this may ful to customers. It is now about working
help that. There have only been incre- with customers on the fastest-to-market
mental benefits in batteries in the last 20 products and applications.
years. Most scientists working on batter-
ies would give their right arm for a 2-3% “The more we explain, the more ex-
increase in power or durability. Lowering cited they get.”
the input costs would be easier than de-
– Dominic Piper
PAGE 44 MARCH 2016 AUSTRALIA’S PAYDIRT
Triton revises strategic plan
New Triton Minerals Ltd man- infrastructure costs you have
aging director Garth Higgo is an efficient and cheap mining
determined to adopt a back-to- method which produces a prod-
basics approach in an effort to uct the market is looking for and
win shareholder support and re- willing to pay a premium for. That
gain momentum for the Mozam- could potentially make a big dif-
bican graphite developer. ference.”
Higgo joined Triton at the start It is also about satisfying cus-
of 2016 and is looking to build tomer requirements.
some consistency after the com- “Graphite is a very technical
pany underwent a rollercoaster product and is market related, in
ride on the market in 2015. Tri- other commodities the market is
ton shares hit 39c in April 2015 easy to find but it is different in
after the company announced graphite,” he said. “You have to
a 20-year, $US2 billion off-take Infrastructure throughout Triton’s Balama project area is develop a project which suits the
agreement with Chinese graph- strong enough to suggest lower opex costs client’s needs.
ite specialist Yichang Xincheng “The flake graphite market is
Graphite Co. Ltd. North. The company has built one of still developing but it is certainly growing.
However, as investor enthusiasm for the world’s largest graphite resources We are not going to be a big, bulk pro-
the graphite space tailed off slightly, Tri- at Nicanda Hill (1.47bt @ 10.7% TGC) ducer. We wouldn’t take Syrah [Resourc-
ton’s share price began to slide and by but Higgo is more interested in poten- es Ltd] on head-to-head. But, we could
the end of the year the company was tial margins than size and that is leading be a high-quality specialist miner and do
struggling to fill its $11.3 million entitle- the company to reconsider the Ancuabe that at the lower end of the cost curve.
ment offer. prospect as the priority. “It is a subtle change to our strategy
While some of the funds raised were to “I find Ancuabe more interesting even but one we think can pay off.”
be used for ongoing development work though it is very early stage,” he said. – Dominic Piper
at the company’s Balama North project “The results have been interesting – it
in northern Mozambique, construction of has around 60%
a graphite manufacturing plant in China jumbo and super
was flagged. jumbo flake distribu-
As with most commodities, graphite’s tion – and the fact it
value increases significantly as it is pro- is only 50km from
cessed and refined but Higgo believes Pemba Port with ac-
Triton’s move to vertical integration may cess to water, grid
have been one ambitious step too many power and good
for some investors. roads makes it even
“The company was looking to build more attractive.
graphite facilities in China and Mozam- “If I put my mining
bique,” Higgo told Paydirt. “I hesitate at hat on, Ancuabe is
that because of the challenge of manag- the one to concen-
ing such a project. It is going out of the trate initial develop-
realms of our core business which is ment on. Graphite is
mining. Shareholders really voted with all about the lowest
their feet and we could only get to 20% infrastructure cost
acceptances for the entitlement offer.” and mining compa-
Higgo is now keen to return Triton to nies forget that too
mining development. often.”
“We want to refocus as a mining com- If Higgo is cor-
pany and produce a high quality graphite rect, development
product,” he said. of Ancuabe could
Higgo believes a refocus on mining will lead to increased
benefit the company and get its develop- margins.
ment plans back on track. “We are look-
“It is about getting the focus back on ing at the basket
the core business; getting the geology price of our pro-
right and getting the mining studies start- duction. Nicanda
ed.” Hill will get around
That refocus could include a switch $US800/t but An-
in project priority. Much of Triton’s early cuabe could fetch
work has been on the Nicanda Hill and up to $US2,000/t.
Nicanda West prospects at Balama If you can reduce
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 45
AUSTRALIAN GRAPHITE CONFERENCE PREVIEW
Mozambi makes size matter
Tanzania is often described as being to graphite what the Pilbara is to iron ore
Mozambi Resources Ltd has the larg- Size and grade at Namangale appears Armstrong said the PFS would prob-
est graphite resource in Tanzania, to have caught the attention of investors ably be ready for release in September/
but what does that really mean? and provided shareholders with some October this year.
confidence that Mozambi is the emerg-
“It comes down to the quality of the ing name in graphite. Mozambi is among a host of ASX jun-
product that you are producing,” Mozam- iors cutting its teeth in the Tanzanian
bi managing director Alan Armstrong told Last month, sophisticated and profes- graphite landscape and a robust PFS
Paydirt. sional investors committed to a place- from Namangale could further enhance
ment of 136,562,121 shares at 3.3c/ the country as the premier graphite juris-
“But, because we have got that size it share to raise more than $4.5 million. diction in the world.
means we can focus on the higher pro-
portion flake size areas and the beauty The placement was oversubscribed by While the general market may need to
of having a large size deposit is that you $1.86 million (original placement was for be convinced of this, there is no doubt
can then pinpoint areas of high priority. $2.64 million) which Mozambi decided to in Armstrong’s mind that Tanzania is the
Obviously, if you have a smaller deposit take to ensure PFS and working capital place to be for graphite players.
then you are pigeonholed into that area. costs were met without having to reach
It gives us flexibility of where to target for out to the market again. “Tanzania is really shaping up as virtu-
our initial pit design.” ally the Pilbara for graphite deposits,” he
“We’re very happy with the support we said.
Earlier this year, Mozambi announced got from the latest placement. It is a re-
a resource of 179mt @ 5.1% TGC from ally tough time in the market and lots of “It is very much through the Mozam-
the Namangale project in south-eastern people were wondering when companies bique mobile belt, northern Mozambique
Tanzania. like ourselves were going to get place- and southern Tanzania are very pro-
ments away,” Armstrong said. spective, so that is why there has been a
The resource was compiled from drill- lot of demand in those parts of the world.
ing at Namangale 1, 2 and 3, with all de- “To get such strong support over and
posits remaining open along strike and at above what we requested from the mar- “The graphite that has been found
depth, while there are also targets still to ket shows there are still people willing to there is unlike what has been found in the
be tested. contribute to a good story. For us, that rest of the world, in terms of the quality of
shows that we still have strong support the deposit and lack of deleterious miner-
All drilling to date has been limited to out there in the market and people will als. Others in the area have been able
a maximum 100m depth, with metallurgi- back the right story at the right time. to prove up to 99% without any chemical
cal test work confirming graphite can be treatment. There are environmental as-
liberated from the host rock easily. “Our decision to take it all was market pects of it that really make it a future hub
driven. We don’t want to have to keep of graphite mining.”
Furthermore, met test work has re- having to go back to the market, espe-
turned a high proportion of super jumbo cially in these uncertain times, so it was – Mark Andrews
(+500 microns) and jumbo (+300 mi- good to get some confidence and clarity
crons) flake sizes to compliment Mozam- for our shareholders.”
bi’s 179mt resource.
PAGE 46 MARCH 2016 AUSTRALIA’S PAYDIRT
AUSTRALIAN GRAPHITE CONFERENCE PREVIEW
Renascor tastes instant success
Positive assay results from the “This project’s a bit different be-
maiden drilling campaign at cause the discovery has basically
Renascor Resources Ltd’s newly already been made,” Christensen
acquired Arno graphite project in said.
South Australia look to have justi- “It’s just a question of quantify-
fied the company’s move into the ing it and seeing if we can build
sector. it up into a competitive space in
Broad intervals of near-surface, graphite.”
high-grade graphite were inter- Renascor is looking to mobilise
sected in the initial 10 holes of a drill rig at Munglinup during the
the 24-hole programme, including second quarter, although the exact
best hits of 23m @ 12.9% TGC timing will depend on the success
from 12m (including 19m @ 14.8% of the current programme at Arno.
TGC from 12m), 36m @ 10.3% The company has already iden-
TGC from 17m (including 27m @ tified a series of prospective con-
13% TGC from 23m) and 12m @ ductive targets at Munglinup, in
10.5% TGC from 29m (including WA’s Albany-Fraser Range prov-
9m @ 11.8% TGC from 18m). Renascor’s maiden drill campaign at Arno has delivered ince, some of which appear simi-
The company was still awaiting a series of positive assay results lar in style to the nearby Halbert’s
some assay results from the com- graphite deposit (1.9mt @ 19.2%
pleted programme at the time of print. tabs on the project given its previous TGC) currently being developed by Gold
Renascor only picked up the project exploration history looking for copper to Terrace Pty Ltd.
in early December after entering into a the north and uranium to the south of the “Munglinup is an earlier stage play
binding agreement to acquire all of the prospective ground package. and first of all we need to see if there
issued capital of unlisted company Eyre “We knew the parties involved and we are sufficient qualities of graphite there,”
Peninsula Minerals Pty Ltd. saw the type of work they had done be- Christensen said. “If we’re able to get in
The acquisition came less than three fore,” Christensen said. there and push that forward, it offers real
months after the company first gained ex- “I think probably in a better market they opportunities to increase shareholder
posure to graphite through its purchase would have gone at it for longer, but the value, the same as for Arno.
of the Munglinup graphite and nickel sul- market was tough and they needed a “Both of these graphite projects seem
phide project in Western Australia. team that had some developmental ex- to be well regarded by the finance com-
Renascor still retains its suite of cop- perience, which is something that our munity and they seem to be the type
per and uranium projects in SA, includ- group has. that if you can meet certain, reasonably
ing the Eastern Eyre IOCG project in the “Obviously we were keen on graphite achievable hurdles, you can push them
south of the renowned Olympic Domain, and we had some cash, so we were able from exploration to development and
although Arno is now recognised as the to cut a deal.” shareholders then get the benefit of the
company’s flagship asset. If the remaining assays from Arno re- increases that come along with that.”
Renascor managing director David turn similarly positive results, Renascor Christensen was confident his compa-
Christensen said both Arno and Mung- expects to be quite busy for at least the ny had enough funds to complete most of
linup had the potential to be developed next six months. the proposed work programmes at Arno
quite quickly, and therefore were perfect Further RC and aircore drilling is and Munglinup despite Renascor report-
additions to his company’s portfolio. planned, with a view towards establish- ing cash reserves of just $869,000 at the
“They seem to fit quite well with the ing a JORC-compliant resource for the end of last year.
group’s skill-set; trying to de-risk projects project. More advanced metallurgical Renascor was able to complete the
and move them from exploration to de- testwork is also in the pipeline. maiden drilling campaign at Arno rela-
velopment,” Christensen told Paydirt.
tively inexpensively, according to
“I think they’re good because there Christensen, and future work may be
is a fast-track towards potential devel- eligible for co-funding grants from the
opment. And obviously the metrics be- respective state governments.
hind graphite are quite positive.” “What we’d like to do is spend a bit
Arno is the most advanced of the of the money we have right now in or-
two projects, as evidenced by Renas- der to get some return on what we’re
cor’s ability to start drilling so soon seeing,” Christensen said.
after acquiring the asset. Christensen “If things look promising, then you
said earlier work on the ground indi- can often get some more money to do
cated a near-flat lying body of graphite some more things. We’re sort of in a
mineralisation at a shallow depth over position where we’re not desperate to
the 600m strike length. go to the market, but at some stage
Christensen admitted the acquisition we’ll have to start thinking about it.”
of Arno was “somewhat opportunistic”, Arno is one of several emerging graphite – Michael Washbourne
but added his company had kept close projects on the Eyre Peninsula
PAGE 48 MARCH 2016 AUSTRALIA’S PAYDIRT
Product focus for Oakdale
Oakdale Resources Ltd is focused on
optimising its potential graphite prod-
uct after a recent scoping study confirmed
the robust nature of its namesake project
on South Australia’s Eyre Peninsula.
The scoping study, released late last
year, found the Oakdale project could
support a proposed mining operation of 2
mtpa and an output of 94,500 tpa, based
on an initial three-year mine life.
Operational costs for both mining and
processing were estimated at $13.25/t,
while the projected cost of production
is $286/t. The project carries a NPV of
$170.2 million and payback within nine
months.
The initial graphite resource, incor- A recent scoping study confirmed the robust nature of the Oakdale graphite project
porating both Oakdale (5.65mt @ 4.7%
TGC) and Oakdale East (670,000t @ The plus-99% graphite concentrate “My knowledge of graphite is about
5.1% TGC), covers a distance of about has a high economic value because it three years old, but so is most of the rest
1,500m and a width of up to 500m. The is used in the production of spherical of the world,” Lynch said.
mineralisation, containing both indicated graphite, one of the core ingredients in “Graphite is not unique, there are
and inferred resources, is about 20m the production of lithium-ion batteries. graphite deposits throughout the world,
thick in the saprolite zone and has a “Purity is going to be the ultimate test and I think projects that can produce
maximum depth of 55m. for graphite deposits, so what we’re do- graphite will have the infrastructure avail-
Oakdale has flagged further drilling at ing is working towards producing that able – we’re basically 100km by sealed
the Oakdale East and Oakdale North de- plus-99% product,” Lynch said. highway to a port – and will be in jurisdic-
posits in a bid to increase the mine life “The first thing I did when we realised tions which are stable, and certainly the
beyond the initial three years, but man- this graphite deposit had some potential Eyre Peninsula is a stable jurisdiction.
aging director John Lynch could not put was metallurgy. I’ve never started drilling “If an end-user is buying graphite, I
a time on when the proposed work pro- a project until I know we can recover the think they would rather be buying it from
grammes would begin. material.” a place like the Australian Eyre Peninsula
“Our main focus is optimising our Oakdale is one of several graphite than some other parts of the world. I think
graphite product,” Lynch told Paydirt. hopefuls based on the Eyre Peninsula that’s one of the positives in our favour.”
“Obviously now we have demonstrated and the company’s ability to complete a Lynch, who founded Pan Australian
that we can mine and introduce graph- scoping study within 13 months of listing Mining Ltd and Weda Bay Minerals Inc,
ite at a low cost we can start talking to on the ASX suggests it is serious about expects to draw on his previous experi-
potential end-users and look to get them developing a mine. ence in marketing of tungsten, scheelite
involved in the project. Lynch, an industry veteran with a ca- and other industrial minerals when his
“My plan has always been to build reer spanning more than three decades, company starts the search for potential
enough resources to justify [building] said the scoping study and initial metal- customers for the Oakdale graphite prod-
a plant. Graphite sales are going to in- lurgy results indicated Oakdale could be uct.
crease over the next few years and I a major player on the emerging Austral- “Graphite is more like scheelite, or
know we won’t have a shortage of graph- ian graphite scene. an industrial mineral, than a metal in
ite. To actually increase graph- the sense that your end-us-
ite resources at this time is not ers have specific grades and
our primary focus.” specific sizes and you have
Metallurgical testwork at to cater to your end-user’s re-
both ALS Burnie and Bureau quests,” Lynch said.
Veritas in Adelaide was ongo- “You’re end-user will tell you
ing at the time of print to deter- what their specs are and you
mine the optimal product com- have to deliver to those specs.
position from Oakdale. But if you deliver outside those
The testwork to date has specs, they’ll penalise you. It
indicated a 95-96% float con- is a specific market, it’s not a
centrate can be achieved with question of getting a graphite
an 85% recovery of the con- concentrate and selling it to
tained graphite. The float con- whoever wants it.”
centrate will be treated by acid The project’s initial graphite resource incorporates both Oakdale – Michael Washbourne
washing to obtain a plus-99%
graphite concentrate. (5.65mt @ 4.7% TGC) and Oakdale East (670,000t @ 5.1% TGC)
AUSTRALIA’S PAYDIRT MARCH 2016 PAGE 49
AUSTRALIAN GRAPHITE CONFERENCE PREVIEW
Metalicity moves on rare minerals
Metalicity Ltd has picked up ject area on the Wodgina green-
the rights to explore more
than 2,500sq km of ground pro- stone belt, is the company’s
spective for graphite and lithium.
highest priority lithium target.
The emerging explorer now
holds dominant tenement posi- Outcropping pegmatites have
tions in the renowned lithium dis-
tricts of Pilgangoora and Green- been identified over a 5km strike
bushes in Western Australia, as
well as access to the Munglinup length as well as a rock chip
graphite region in the Albany-
Fraser Range, following a recent sample of 1.62% lithium oxide.
acquisition spree.
The project is adjacent to
Metalicity’s flagship remains
the undeveloped Admiral Bay Global Advanced Metals Pty
zinc project, but the company
decided to act on the heightened Ltd’s (GAM) lithium-tantalum
interest surrounding lithium and
graphite in a bid to realise more operations and Pilbara Minerals
immediate value for sharehold-
ers. Ltd’s Pilgangoora lithium project.
A scoping study and resource Hannington said very little of
upgrade for Admiral Bay is set
to be unveiled later this month, the prospective ground in the
but the company has already
recognised that a JV partner Pilbara region had been properly
will be required to help fund the
next phase of exploration and tested for lithium.
beyond.
“GAM had no appreciation of
Metalicity exploration manag-
er Michael Hannington said the the fact lithium was there or how
company had sensed an oppor-
tunity to board the graphite and much lithium was there, but we
lithium train.
now know this is a district which
“I think it’s now been three years since
the general press first started talking has lithium, tantalum and nio-
about lithium and graphite, but it’s literally
only in the last few months people with bium in the pegmatites,” he said.
lots of money have said, ‘hey, we can
actually make some money out of this’,” Talison Lithium Pty Ltd’s
Hannington told Paydirt.
Greenbushes deposit is con-
“There is real demand out there. In the
past people have just thought it was all sidered the largest spodumene
being made up. Now people can cali-
brate that there is going to be demand, (hard rock lithium) deposit in the
but what they can’t calibrate is the quan-
tum of that demand. world and Metalicity has now
“Chasing lithium and graphite in Aus- picked up a tenement about
tralia was our best option. All we really
did was go and have a look at lithium 25km to the east.
occurrences and graphite occurrences
in publicly available databases and start Hannington said the company
picking ground up.”
was hoping to find a repeat of the
Metalicity entered into a tenement
sale letter agreement to acquire 146sq Metalicity has picked up a suite of lithium and graphite main Greenbushes deposit.
km of ground in the Munglinup graphite
district. The company’s land package is tenements in Western Australia “Pegmatites get ex-solved off
about 20km north of Gold Terrace Pty
Ltd’s Munglinup deposit, regarded as a certain type of granite, but they
one of the world’s highest-grade graphite
sources. Fellow ASX-listed explorer Renascor haven’t found where the granite is at
Resources Ltd also recently picked up Greenbushes,” he said. “It’s either to one
some prospective ground around Mung- side or straight down. Most people think
linup. it’s straight down, but it’s at least 10km
Previous assaying for graphite on Met- down.
alicity’s tenement intersected 12m @ “What we’re trying to do is go to other
7.4% carbon, including 4m @ 10.33% places in WA where we think those simi-
carbon, from 20m beneath the surface. lar conditions occur, where you’ve got
“Munglinup graphite is very high- a deep buried granite and you’ve got a
grade, jumbo flake, but it’s very small,” major structure that’s tapped into the
Hannington said. granite.”
“There’s a lot of other known graph- Work on Admiral Bay will continue
ite deposits around the place, but what while the company searches for a JV
we’re trying to do is find a much bigger partner for the world’s largest undevel-
graphite deposit. We think being around oped zinc project.
Munglinup is the right kind of place to be.” Hannington expected that search
Exploring in the Fraser Range is noth- would step up from next month once
ing new for Metalicity, with the company some formal project economics are an-
first venturing into the region in 2014 nounced in the upcoming scoping study.
when it acquired the rights to the Rocky “What this project needs is a company
Gully nickel project. that can take a leap of faith and say we
Metalicity has appointed former Lithex believe this system is going to be ginor-
Resources Ltd and Magnis Resources mous and it’s going to be worth the ef-
Ltd exploration manager Brendan Borg fort to drill out what we already know and
to assist with the exploration and devel- then get down there and start exploring
opment plans for Munglinup. from underground,” Hannington said.
Stannum, within the Pilgangoora pro- – Michael Washbourne
PAGE 50 MARCH 2016 AUSTRALIA’S PAYDIRT
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