October 2017 VOLUME 1. ISSUE 254 $11.95
front and back cover
Nickel makes its
• Africa Down Under review ISSN 1445-3436
• Australian Nickel Conference preview 09
9 771445 343007
PAYDIRT (ISSN 1445-3436) 5 NEWS 10
Published by M&A activity is heating up in the West 18
Paydirt Media Pty Ltd. Australian gold space with Ramelius 26
A.C.N. 063 985 133 Resources Ltd the latest junior to make its
move. The company announced in mid-
Head Office: September that it would pay $90 million
Suite 9, 1297 Hay St, West Perth to take on Evolution Mining Ltd’s Edna
Western Australia 6005 May mine. Michael Washbourne spoke to
P.O. Box 1589, West Perth Ramelius managing director Mark Zeptner
Western Australia 6872 about the deal
Phone: (+61 8) 9321 0355
Facsimile: (+61 8) 9321 0426 10 CHINAAt 6 million people, Dalian may be small by
www.paydirt.com.au Chinese standards but the city in Liaoning
Province is punching above its weight in
heavy machinery manufacturing thanks to
the success of Dalian Huarui Heavy Indus-
Editorial: try Group Co. Ltd (DHHI). Mark Andrews
Editor: Dominic Piper travelled to China to find out DHHI’s plans
Deputy editor: Mark Andrews for global expansion following the success
Journalists: Michael Washbourne, of its first forays into Australia
Photography: Picture This 18 COVER
Art director: Marian Noonan Lithium, cobalt and graphite have gathered
Contributors: most of the market enthusiasm for the
Keith Goode (Sydney), Brendan Ryan electric vehicle revolution but with each
(Johannesburg), Ross Louthean Chevy Bolt battery containing 22kg of
nickel, Australian producers of the stain-
Advertising: less steel additive are also beginning to
Advertising manager: Richa Fuller talk up their EV credentials. Paydirt speaks
Subscriptions: Mitchelle Matambo with Australia’s nickel leaders about the
Phone: (+61 8) 9321 0355 potential for the industry
Facsimile: (+61 8) 9321 0426
26 AFRICA DOWN UNDER
Pre-press and printing: The 15th edition of the largest African
Vanguard Press 26 John St, resources event outside the continent was
Northbridge WA 6003 held at the Pan Pacific Perth in September.
Member of: Among the 1,000 delegates were ministe-
rial representatives from 20 African nations
Paydirt Media as well as Australian Minister for Foreign
Executive chairman: Bill Repard Affairs Julie Bishop and WA Premier Mark
Finance manager: Giovanny Jefferson McGowan. Paydirt presents extensive
Accounts/administration: coverage of the three-day forum over 65
Heather Melling pages of this edition
Conferences: Melita Fogarty,
82 NICKEL CONFERENCE
With enthusiasm levels at their highest
point in a number of years, this month’s
Australian Nickel Conference is certain
to draw a sizeable crowd. Ahead of the
Cover image: BHP Nickel West asset conference, we look at the stories likely
president Eduard Haegel
to feature most prominently from estab-
lished players such as Western Areas Ltd,
Registered by Australia Post PP 643938/0071.
No pages or articles in this publication may be Independence Group Ltd and BHP Nickel
reproduced in any form without the consent of
the publisher. This includes photographs either West to ambitious explorers like St George
taken by Paydirt Media staff or provided by other
parties Mining Ltd and Cassini Resources Ltd
How big a slice do you want?
The actions of the last few months both in Perseus Mining Ltd managing director Jeff Quartermaine is
Australia and Africa have set me wonder- never short on opinions when it comes to West African gov-
ing about why mining is always caught up in ernment policies but he was earnest in his praise of the Cote
populist government policies? d’Ivoire Government’s royalty scheme.
Whenever a resource-rich jurisdiction “I think Western Australia could probably learn quite a lot from
needs to balance the books, the re- the African countries here,” Quartermaine said on the open-
sources sector is the first target, ing morning of Africa Down Under. “The fiscal regime in Cote
regardless of the situation it finds d’Ivoire is absolutely first class. The royalty regime has been
itself in. Even when the Rudd well structured on a sliding scale; when prices are low the royal-
Government introduced the origi- ties are lower, when they are higher and we can afford to pay a
nal RSPT, it was only one of 70- little more, the royalties are higher.”
odd tax reforms recommended by Tanzania used to have a similar reputation but the recent ac-
the Henry Tax Review. Why did it pick only one to implement? tions of President John Magufuli have left the East African coun-
West Australian Premier Mark McGowan mentioned the state try’s investment reputation in tatters.
agreements the State Government has with BHP Ltd, Rio Tin- The situation in Tanzania is an example of the problems gov-
to Ltd and Fortescue Metals Group Ltd three times during his ernments and investors face in developing economies.
opening address to Africa Down Under, urging his African coun- African Development Bank advisor Kevin Urama spoke both
terparts in the audience to take heed and ensure stability within on the main stage and during the Australia Africa Research Fo-
their investment regimes. Throughout his speech, I couldn’t help rum on the topic of policy stability. His words would have been
but think the Premier was simply setting the scene for a gold roy- encouraging to miners but he also cautioned them not to take
alty hike; a feeling confirmed in the following day’s State Budget. situations for granted.
I was left asking the question as to why McGowan was so “Countries at different stages of development and particularly
vociferous in defending the state agreements with the iron ore natural resources development need radically different policies,”
majors but was then happy to place the burden only on the gold he said. “It is not right to just give a blueprint and use it because
mining sector (leaving aside the payroll tax hike for now). it depends on what is exactly needed in that economy at that
There is no doubt the State’s finances are in a woeful mess particular time.”
but the decision suggests the ALP is still terrified of the mining “That is why you are able to go into a country today and they
“lobby after the response to the MRRT and they perhaps don’t give you concessions to allow you to start mining because they
have the stomach for a fight with the need resources in order to deal with
iron ore majors at this moment. Governments, both the emergency policy issues. When the
The gold sector doesn’t have quite the economy starts growing, you need to
same clout but has already mobilised its in Australia and start evolving.”
forces, with a 1,000 strong crowd turn- This has been a problem for Tanza-
Africa, should focus on
ing out in Kalgoorlie to protest the roy- ways of increasing the nia, DRC, Zambia and Ghana. In mak-
alty increase. ing themselves attractive to investors,
they have kick-started their economies
Senior members of the WA opposi-
tion were there but the Liberal Party pie, not necessarily just but as their economies develop, the
can’t really afford to be high and mighty the slice they are taking. demands of the general population
on the topic, for it would surely have had change.
the same approach to the budget if it With their economies no longer in
had held onto power. Indeed, McGowan need of the kick-start, governments
himself even took part in publicity opposing a mooted Liberal need to find ways to work with investors to ensure the original
move to increase the gold royalty just a few years ago. conventions and agreements bring more equitable returns. Poli-
Even the WA Nationals should probably keep quiet at the mo- ticians, so desperate to capture public support, assuage having
ment given the party lost its leader on the back of his picking a complex discussions about inclusive growth and find it much
fight with BHP and Rio Tinto. easier and politically expedient to target the miners with harsh,
I was intrigued by the reaction of the visiting African delega- populist policies.
tions to the gold royalty announcement. The continent has been The problem is, if you tax investors too much, future invest-
subject to any number of populist policies aimed at the mining ment dries up and the chances of the industry ultimately paying
sector over the last five decades and the situation continues to the taxes which will deliver further inclusive growth shrinks.
repeat itself each generation. Governments, both in Australia and Africa, should focus on
I asked a number of delegations about their attitude to foreign ways of increasing the pie, not necessarily just the slice they
investment and almost all were in agreement; capital is mobile are taking.
and to ensure economic development, fiscal conditions must be
attractive to foreign investors.
Unfortunately, those countries where the populist policies
are taking hold; Tanzania and to a lesser extent Ghana, did not
have a ministerial presence at the conference.
There are plenty of others, however, who have taken a pro-
gressive approach to the tax and royalty regimes and are begin-
ning to reap the benefits. [email protected] @DominicPiper
PAGE 4 OCTOBER 2017 AUSTRALIA’S PAYDIRT
Ramelius backs Edna May
Ramelius Resources Ltd managing Ramelius has acquired Edna May from Evolution for a total consideration of $90 million
director Mark Zeptner has dismissed
suggestions his company acquired a one and change the whole way things Ramelius has also signed two JV
troubled asset in Edna May. are done there. Over time we’ll be apply- agreements over exploration ground in
ing our culture in terms of making sure Nevada, USA, in the past two months,
The West Australian-focused gold pro- we’re maximising returns on our invest- including a lucrative farm-in deal with
ducer became the latest member of the ment.” Newmont Mining Corp to acquire up to
200,000 ozpa club last month when it 80% of the South Monitor gold project by
struck a deal to acquire Edna May from With a strong cash position of almost spending $US8 million over eight years.
Evolution Mining Ltd for a total consid- $90 million, Ramelius has been on the
eration of up to $90 million. hunt for new assets for the past year In late July, the company entered into
and Zeptner said Edna May was a wel- a JV with TSXV-listed Renaissance Gold
Evolution received a $40 million cash come addition to the company’s portfolio Inc to earn up to 75% of the Jupiter gold
payment upfront and will be entitled to up alongside the Murchison-based Mt Mag- project from a $US3 million spend over a
to $50 million of “contingent considera- net and Vivien gold mines. three-year period.
tion” in the form of royalties, cash and/or
Ramelius shares. “With a Perth head office, any WA op- “It’s fair to say our exploration team
eration makes sense and the fact it in- really like Nevada, they rank it second
Edna May, 350km east of Perth, will lift creases our production by the best part behind Australasia in terms of attractive-
Ramelius’ annualised group production of 50% and gets us to 200,000 ozpa we ness for what we would call more green-
to 195,000-205,000oz at $1,120-1,220/ thought was pretty compelling,” Zeptner fields-based exploration,” Zeptner said.
oz AISC. said.
“We’ve got our toe in the water there.
Evolution had been looking to offload “It lowers our cost per ounce out of our Our commitment this year is only
Edna May for some time, having wit- Perth office and also diversifies us so $500,000 over the two projects, but obvi-
nessed it contribute just 8% of group pro- that we are effectively no longer a one- ously if something comes up from the ini-
duction in the past two years, with only operation company.” tial phases of drilling then we could look
four years of mine life ahead. to commit more. It’s a pretty small com-
Mark Zeptner mitment over our total exploration ex-
However, Zeptner said investors penditure, which is close to $10 million.
should not read too much into Evolution’s
decision to part with one of its founding “We’ve had JVs there before, but we
assets. haven’t been able to produce a mine
there yet so we’ve headed back in there
“A 70,000-10,000 ozpa producer in WA with these two JVs to see what we can
isn’t at the top of the list for a $3 billion do.”
company like they are, but that doesn’t
mean it’s not significant for a $200 million Despite having one new asset locked
company like us,” Zeptner told Paydirt. away and a handful of JVs struck, Zept-
ner refused to rule out further M&A
“Just because it’s no longer significant moves.
for Evolution doesn’t mean it’s a terrible
asset. They’ve gone through a process “We’re obliged to be looking at things,”
of upgrading the quality of their portfo- he said. “We’ll keep talking about being
lio, which they’ve been quoted as saying in an acquisition mode where possible
many times. and where it makes sense.”
“There would have been a time when – Michael Washbourne
they were smaller that Edna May was a
key part of their portfolio, but it’s not core
for them anymore.”
Ramelius is expected to receive the
keys to Edna May on October 3, with
the company also acquiring the existing
Zeptner said his company would be
doing its best to ensure a smooth transi-
tion of ownership.
“The operations they see from day one
won’t be hugely different to what they
saw from Evolution,” he said.
“Some people have been there for six
or seven years now, so that’s obviously
helpful to us because we’re buying a go-
ing concern. You want be producing cash
flow from day one, so it helps to have the
same people rolling straight into a new
company and a new owner.”
“We’re not going to go in there on day
AUSTRALIA’S PAYDIRT OCTOBER 2017 PAGE 5
McGowan on the nose
More than 1,000 people in the Goldfield’s mining community banded together at the Goldfields Art Centre to
demonstrate their disapproval of the WA Government’s decision raise gold royalty rates by 50%
There were mixed Government and the City of Kalgoorlie
feelings on the means the iconic event will remain in
doorsteps of the Australia’s gold capital for the foresee-
Goldfields Arts Cen- able future.
tre in Kalgoorlie last
month. The Government’s support for the
Goldfields Art Centre did little to quell
Shortly after West the ill-feelings felt by players in WA’s gold
Australian Premier sector as a result of the royalty hike.
Government deliv- More than 1,000 people connected to
ered a blow to gold the gold industry descended upon the
miners across the Art Centre to make clear their feelings on
State by lifting the the Government’s royalty rate increase
royalty rate from announced in the September Budget.
2.5% to 3.75%, ef-
fective January 1 “This decision could result in reduced
2018, the Govern- exploration, job losses and increased
ment announced a sovereign risk in WA. Some reports indi-
long-term funding cate that over 3,000 jobs could be lost,”
and management Association of Mining and Exploration
deal with City of Companies (AMEC) acting chief execu-
Kalgoorlie-Boulder tive Graham Short said.
ensuring the future
viability of the Gold- Short said the Government’s decision
fields Art Centre un- was a “short-sighted cash grab”.
“The economically senseless deci-
The Goldfields sion to increase the gold royalty rate by a
Art Centre is the massive 50% is a decision that beggars
centrepiece of Aus- belief, and not from one of the world’s
tralia’s largest min- leading mining jurisdictions,” he said.
ing show – Diggers
& Dealers – and “The proposed gold royalty increase
the arrangement has made a mockery of Labor’s ‘Plan for
between the WA Jobs’. The unintended consequences of
this cash grab will be jobs in the drilling
and gold mining industry, and the broad-
er services sector.”
PAGE 6 OCTOBER 2017 AUSTRALIA’S PAYDIRT
Platinum edges closer
The long-awaited shake-out in South no, fine” – as a well-known South African closures have to be weighed against the
Africa’s embattled platinum mining saying goes. damage that will be done to the asset by
sector is finally happening as the stage that closure as well as the costs of re-
has been reached where producers are The sale of Maseve follows close on the opening it again.”
bowing to economic reality and shutting heels of the decision by another Canadi-
down production they had kept going at a an-listed junior – Atlatsa Resources Inc But Dunne reckons the stage has now
loss while hoping for a turnaround in the – to put its Bokoni mine onto care-and- been reached where the platinum com-
price. maintenance. That action was forced on panies have no option but to cut back on
Atlatsa by Anglo American Platinum plc production and suspend operations “to
Latest development is the forced sale (Amplats) which had been bankrolling protect their balance sheets as well as
of Platinum Group Metals Ltd’s (PTM) the loss-making mine for years so as to the interests of their shareholders”.
Maseve mine to neighbouring Royal Ba- meet BEE (black economic empower-
fokeng Platinum plc (RB Plat). Not only is ment) commitments. Asked about the possible impact of
PTM selling Maseve for a fraction of the a political backlash to such measures,
investment it has pumped into develop- Amplats finally acted on Atlatsa after Dunne commented: “Where the market
ing the mine over the past decade but the selling its loss-making Rustenburg divi- is at the moment, economic considera-
decision to get out represents a humili- sion to Sibanye Gold Ltd and its loss- tions outweigh most other considera-
ating admission of defeat by PTM chief making Union Section to Siyanda Re- tions.”
executive R. Michael Jones. sources plc.
Yet Dunne – like every other platinum
In an industry where optimism is “hard- In mid-September, Impala Platinum company chief executive – remains op-
wired” into the DNA of any chief execu- Ltd (Implats) announced a strategic re- timistic over the future of the business
tive, Jones defined the breed with his view/restructuring of its operations which which is currently going through what he
perpetual upbeat assessments of the will see production cuts over the next five acknowledges to be the worst downturn
platinum business in general and PTM’s years, although the action taken by new- in his career.
future in particular. ly-appointed chief executive Nico Muller
was nowhere near as drastic as some He bases his upbeat view on his belief
Asked some 10 years ago by this cor- analysts had anticipated. that the application of platinum in vehicle
respondent during an interview at the auto-catalysts is going to grow – not de-
Cape Town Mining Indaba about how he The $64,000 question over the past cline – and adds: “Combine that with a
would cope with the various things that five years – as the platinum price col- declining primary production from South
could go wrong with a junior platinum lapsed and showed no sign of recovery Africa which accounts for 80% of the
mining venture, Jones replied: “Adver- – has been why the platinum companies source of this metal and we see an op-
sity? Bring it on!” did not chop production sooner given portunity because of the widening gap
that estimates were around 50% of the between demand and supply. That is
So it looks like that well-known Chi- platinum produced in the country was why Northam continues to invest.
nese curse “be careful what you wish for done so at a loss.
because you just might get it” seems to “It is our considered opinion that plati-
have struck again. One suggested reason has been politi- num production from South Africa will
cal pressure from the South African Gov- be below 4 moz this year. We peaked in
Maseve has survived on a hand-to- ernment, aimed at saving jobs because 2006 at around 5.3 moz so that’s a sig-
mouth basis for the past 18 months since the platinum sector is now the major em- nificant decline in primary supply.”
mining operations started up and imme- ployer in the mining industry.
diately ran into trouble resulting in lower- I hope he’s right. Otherwise we could
than-forecast production. That caused Initial restructuring announcements well see a special association along the
a cash crunch which PTM has survived from Amplats a few years back resulted lines of Alcoholics Anonymous set up in
– until now – through a series of fundrais- in full-on political onslaught by govern- South Africa for mining company execu-
ing calls. ment on both the company as well as tives.
personal attacks on chief executive Chris
Jones finally threw in the towel early Griffith which resulted in Amplats water- “Hi, my name is Brendan and I’m an op-
in September, selling Maseve for $US74 ing-down its restructuring proposals. timistic platinum miner”… “Hi Brendan”.
million of which $US12 million will be
payable in RB Plat shares. He remains, But there’s more to it than that accord- Brendan Ryan is a Johannesburg-based
as ever, optimistic commenting: “Look- ing to Northam Platinum Ltd chief execu-
ing forward, the company plans to focus tive Paul Dunne who used to run Implats’ mining writer
on its large-scale Waterberg project, a underground mining operations before
palladium-dominant development asset shifting to the top job at Northam.
where the majority of the company’s min-
eral reserves and resources are located.” According to Dunne, the barriers to exit
from the platinum business in South Af-
In a nutshell, Jones reckons PTM’s rica “are just as high as the barriers to
Waterberg project is in the same league entry”.
as Robert Friedland’s much-touted Ivan-
plats project in the same region. “Ja, well, “We have many long-serving employ-
ees so the costs of retrenchment will be
no small thing while the costs of shaft
PAGE 8 OCTOBER 2017 AUSTRALIA’S PAYDIRT
Pure move on manganese
Pure Minerals Ltd has secured a pro- Pure will define a resource at the Battery Hub manganese project over the coming months
ject prospective for the battery min-
eral “no one is really thinking about”. as well, is some concerns of too much nesses, it outcrops at surface, there
concentration in South Africa. And pro- seems to be some high grades at the
Formerly known as Eagle Nickel, Pure duction in South Africa is quite high cost, surface and we’ve got the opportunity
was last month granted the first of two given they’ve got huge rail haul costs. to develop a series of pits at hopefully a
key exploration licences which comprise very low strip ratio.
the Battery Hub manganese project in “Increased demand coming for man-
Western Australia’s Pilbara region. ganese dioxide and battery manganese “So we’ve got the potential for scale.
is where we’re seeing the largest price We don’t have a resource yet, but that’s
The second tenement is expected to increases in those categories.” the first thing we’re going to do; try and
be granted sometime this month. get to the point where we can produce
Pure will begin drilling at Battery Hub a JORC resource. That will involve con-
Pure is now set to become one of the as soon as the final permits are received, firming the previous drilling, but also ex-
first movers on a wave of fresh manga- with the company looking to define a re- panding on it and filling in the holes.”
nese plays following a steady price rise source over the 724sq km ground pack-
for the metal over the past year. age by the end of the year. Battery Hub was one of five explora-
tion projects vended into the Eagle Nick-
Manganese is a major and crucial in- More than 40 manganese prospects
gredient in steel production, however, have been identified along the entire el shell to allow the company to resume
what has spruiked the market’s interest 30km of strike, with many surface sam- trading, along with a $4.5 million capital
is its application in the emerging battery ples exceeding 50% manganese. His- raising to keep the business afloat.
technology revolution. torical drilling results of plus-40% man-
ganese have also been reported. Pure’s portfolio includes Morrissey Hill,
“No one has been thinking about man- which is adjacent to Segue Resources
ganese for the last five years,” Pure ex- “With manganese, you do need size. Ltd’s Gascoyne lithium project where
ecutive director Sean Keenan told Pay- Critical mass is important,” Keenan said. recent sampling returned hits of up to
dirt. 3.77% lithium oxide.
“We’ve got 50km of strike [including
“We’ve seen brokers drop coverage of the second tenement yet to be granted], “It’s one of these districts which hasn’t
various companies out there because it’s we’ve got some reasonably good thick- really been tested too much for lithium
just not been sexy enough. Almost all in-
vestors we’ve spoken to say they need to despite all these pegmatites being
get up to speed on manganese. present,” Keenan said.
“It is the battery metal no one is really “Our plan is to find that pegmatite
thinking about.” which is high in lithium, preferably
spodumene. We should have our
Manganese is a highly concentrated own surface sample results soon.”
industry and in need of disruption, with
more than 70% of the world resources Another project, Mt Boggola,
hosted in South Africa. hosts a gossan outcrop which re-
turned historical surface sampling
About 97% of electrolytic manganese, grades north of 20% copper and is
otherwise known as the battery manga- proximal to ground previously ex-
nese, is produced out of China. plored by Sandfire Resources NL
and Newcrest Mining Ltd.
A recent report from USGS estimated
the world produced 8.6% less manga- – Michael Washbourne
nese last year than in 2015, with infra-
structure and policy constraints on South Interest in manganese has surged on the back
African supply growth having a huge im- of the battery minerals revolution
pact on price.
Manganese was trading at $US2.06/
kg at the time of print, up more than
25% on the same time last year.
The surging manganese price
has already prompted Chinese-
backed Consolidated Minerals Ltd
to resurrect the Woodie Woodie
mine, which is in the same geologi-
cal region as Battery Hub.
“My understanding is there are
reduced manganese inventories,
especially in China, and there has
been a few supply constraints here
and there which are the short-term
drivers driving the price right now,”
“The long-term driver, which is
probably driving the equity markets
AUSTRALIA’S PAYDIRT OCTOBER 2017 PAGE 9
Chinese heavy to
boost global reach
In the world of Chinese heavy machinery stably come up to 20% of total business meet requirements down under.
manufacturing, Dalian Huarui Heavy In- revenue,” DHHI chairman Cong Hong In 2011, DHHI was awarded the con-
dustry Group Co. Ltd (DHHI) is a stand- said. tract to supply Hancock Prospecting Pty
out. Expanding its international presence Ltd’s $US7.2 billion Roy Hill mine with
Establishing innovations and patents was on show during the media visit, with critical bulk handling materials, including
relevant to the resources industry, DHHI a 2,000 tph grab ship unloader set for heavy duty mine reclaimers, port stack-
is highly regarded in the Chinese market delivery to Croatia – the first time DHHI ers, fixed stacker, mine stackers, a dou-
and its diversified product range is sold has exported such a large piece of kit to ble car dumper unloading system and a
into some 84 countries. 12,700 tph ship loader.
Current annual earnings from exports Meanwhile, Paydirt was also privi- The contract award was a significant
are over $US400 million, with a par- leged to witness the signing of a $US29 step forward for DHHI in Australia and
ticular focus to develop seven business million deal between DHHI and an arm of serves as a platform from which to build.
streams; manufacturing services, me- Japan’s Nippon Steel.
“As a renowned heavy duty equipment
chanical transmissions, electrical con- Alongside Japan and the EU, Australia manufacturer in China, DHHI provides
trol, marine core equipments, circular is a key market for DHHI and over time various kinds of bulk material handling
economy and manufacturing, new en- the company has adapted standards to machinery, port machinery and cranes
ergy and capital operation. for more than 40 countries
On a recent visit to Dalian, across the world,” DHHI
Paydirt was among a select chief engineer Zou Sheng
group of Australian media said.
given a rare insight into DH- “In Australia, we have pro-
HI’s operations and afforded vided more than 30 units or
up close and personal inter- sets of bulk material han-
actions with board members dling machinery with excel-
who outlaid their vision for lent performance to compa-
the company’s future. nies like BHP Billiton [Ltd],
“DHHI aims to develop the Roy Hill, Rio Tinto [Ltd] at
company into an internation- Weipa and AMAX, etc...
al service-oriented manu- ranging from ship loaders,
facturing enterprise group ship unloaders, stackers to
with core values of high-end reclaimers and car dump-
heavy equipment, both in ers.
research and fabrication. “During this process, we
In five years, international got a better understanding
business income will stably Ship crankshafts by DHHI cover half built up crankshafts above MAN about rules and regulations,
come up to 40% of business Series 50 and Wartsila Series 52 for low-speed diesel engines. Annual as well as equipment stand-
revenue. EPC business will output by DHHI is about 150 large crankshafts ards in Australia.”
PAGE 10 OCTOBER 2017 AUSTRALIA’S PAYDIRT
Sheng said Australia had the “most The 2,000 tph grab ship unloader set for delivery to Croatia – the first time DHHI
comprehensive and strict equipment has exported such a large piece of kit to the EU
standards in the world” regards personal
and environmental safety; major factors Paydirt witnessed an official signing ceremony between DHHI chairman Cong Hong
considered by DHHI in its manufacturing DHHI and Japan’s Nippon Steel in Dalian
Therefore, when arranging design held by the equipment designers, port
“Through years of practice, DHHI has materials for bulk material handling ma- planning personnel as well as the client’s
got a better understanding about the chinery, complying with Australian rules operators and maintenance personnel, to
equipment standard in Australia. [In that and regulations are considered priority assess various risks in relation to equip-
time] our design philosophy has also for DHHI. ment usage and maintenance. And, then
changed,” Sheng said. corresponding measures are taken to
“Regulation which is more important minimise all sorts of potential risks.”
By recently joining the Green Manu- takes precedence in the design process,”
facturing Association of China (GMAC), Sheng said. – Mark Andrews
DHHI has done its international reputa-
tion no harm, particularly with the global “Secondly, we perform a risk assess-
community monitoring the pollution situ- ment for the design. A special meeting is
ation in country.
The Beijing-based GMAC was estab-
lished to aid delivery of the country’s
Plan for Green Development of Indus-
try (2016-2020) and in the Guideline for
Implementation of Green Manufacturing
The initiatives will be led by China’s
Ministry of Industry and Information
Technology, as the promotion of green
transformation and upgrading of China’s
manufacturing industry ramps up.
DHHI was China’s only heavy machine
enterprise invited to join the GMAC.
“In terms of environmental protection,
[we aim for] no oil leakage, enclosed
transmission of bulk material, water
spray de-dusting and noise control,”
“As for efficiency of the machinery, re-
liability and availability of the equipment
are valued, so as to ensure trouble-free
operation of the machinery.”
While eager to follow new protocols
in China to protect the environment and
improve product efficiencies, safety will
never be comprised, Sheng said.
“By prioritising personal safety, equip-
ment standards in Australia make it clear
that serious personal accident should not
happen in any circumstances.”
DHHI also specialises in high-end castings and forgings for water and wind turbines, and main pumps for nuclear power plants
AUSTRALIA’S PAYDIRT OCTOBER 2017 PAGE 11
DHHI’s global approach
Despite hosting some 6 million people, Dalian, north-east China, is considered one of the country’s smaller cities
Dalian Huarui Heavy Industry Group Iran were “unexpected countries” in cranes ranging from 240t to 350t for a
Co. Ltd’s (DHHI) “all out” effort to which to do business. metallurgic plant.
expand into the global market place has
proven fruitful in recent times. Breaking into both markets took pa- Meanwhile, four sets of 800 tph bridge-
tience and careful work, particularly in type grab ship unloaders for an ultra
Following its first sizable package de- Iran, where sanctions against the coun- supercritical power plant for the Pajala
livered into Europe, through delivery of try have been relieved. project phase will be exported to Bang-
a grab ship unloader into Croatia, DHHI ladesh.
landed contracts in Bangladesh and Iran. DHHI has signed a cooperation con-
tract to supply heavy-duty cranes for an While the contracts in Iran and Bang-
According to DHHI, Bangladesh and Iranian steel plant, including 10 large ladesh are small compared to the ones
with Hancock Prospecting Pty Ltd at
Red River Group, China Desk managing director Robert Williamson in Dalian Roy Hill and the stackers and reclaimers
developed and manufactured for Vale
S.A.’s S11D Carajas iron ore project in
Brazil, tapping into new markets is just
as crucial for the company.
It is also a demonstration of DHHI’s
ability to deal with companies and coun-
tries from varying backgrounds, which
has been fully endorsed by some Aus-
“I think they are going to be one of our
best partners. We are helping them to
the extent that we can. As we deal with
steel makers in the Middle East who
need ship unloaders and stuff like that,
we pass that on. They are very much a
partner in the relationship. We talk about
being family and they are serious about
it, it is a very deeply engrained concept
in China,” Magnetite Mines Ltd executive
PAGE 12 OCTOBER 2017 AUSTRALIA’S PAYDIRT
chairman Gordon Toll said. DHHI is the biggest company specialised in design and manufacture
Framework is in place for Magnetite of hoisting machinery in China
Mines to merge with Lodestone Equities be far more efficient and be the steel- Dalian, north-east China, recently.
Ltd of which Toll is the major owner and maker of the world,” Toll said. “China has restructured its steel indus-
Therefore, having access to the best try significantly with large new steel mills
Through subsidiaries – Fe Mines Ltd raw material will be vital and Robert Wil- next to some very big ports to receive
and Olary Magnetite Ltd – Lodestone liamson, managing director of Red River seaborne, high-grade iron ore and most
owns an area of ground totalling 200km Group, China Desk, is bullish on the of the seaborne ore is high-grade [mag-
of Braemar Iron Formation in South Aus- prominent role magnetite will have in the netite] concentrate.”
tralia. future of steelmaking.
– Mark Andrews
Lodestone also owns Braemar Infra- “Magnetite is going to have its day,” Wil-
structure Pty Ltd (BIPL). liamson said in light of hosting Paydirt in
The 2.7bt Mawson magnetite project
is the focus for Magnetite Mines and the
South Australian Magnetite Consortium,
currently comprised of Magnetite Mines
There is a firm belief within the consor-
tium that “magnetite will have its day” and
subject to funding, Mawson could be in
production by 2020.
“Financing any project isn’t easy and
it doesn’t matter about time; financing
Fortescue [Metals Group Ltd] in the first
instance wasn’t easy,” Toll, who was for-
mer chairman at Fortescue, said.
Given 2020 is fast approaching, the
consortium and its selected engineering
group Calibre G&S, have engaged DHHI
to promote the South Australian magnet-
ite floating wharf and mine project.
Calibre G&S, which flies under parent
company Calibre Group, the consortium
and DHHI have discussed opportunities
to expand the Australian magnetite mar-
The ease and abundance of hematite
to dig and ship in Australia, has magnet-
ite players facing a wave of scepticism
from investors and market observers,
however, Toll believes times will change.
“I think we need to do more education
work [on magnetite in Australia],” Toll
“Firstly, magnetite is a good steelmak-
ing material, but you have to have the
right rock and you have to have the right
The consortium has signed a LOI with
Kuwait Steel United Steel Industrial Co.
(K.S.C.C or Kuwait Steel), over the sale
and purchase of up to 4 mtpa of ultra
high-grade pellet feed.
A LOI with Qingdao Iron & Steel Group
for the purchase of 1 mtpa iron ore con-
centrate signed late last year is among a
number of other agreements in place for
product from Mawsons.
“If we were in production now, we’d sell
everything we produce,” Toll said.
“One of the best LOIs we have is with
Shagang – the largest private steelmaker
in China – and they make 40 mtpa of hot
“I don’t think it is China’s intention to
reduce steel output, their intention is to
AUSTRALIA’S PAYDIRT OCTOBER 2017 PAGE 13
Atlas Iron back in black
Atlas Iron posted a profit of $48 million for FY2017
Aresurgent iron ore price has helped loan reduced by $79 million in FY2017. and capacity to add low-cost production
Atlas Iron Ltd return to profit. We are focused on continued debt re- capacity as required,” he said.
Atlas posted a net profit after tax of duction and balance sheet improvement.
$48 million for FY2017 after recording a “As part of this approach, we are con-
loss of $159 million in the previous finan- Atlas has guided 9-10mt for FY2018, tinuing to advance the Corunna Downs
cial year. down on the 14.4mt produced in FY2017, project by progressing the approvals and
with C1 cash costs of $37-39/wmt FOB optimisation processes. This is consist-
At the time, many thought Atlas – once and full cash costs of $54-58/wmt CFR ent with our strategy of expanding our
the darling of a booming junior iron ore China, both above the $34.8/wmt and production flexibility and options, which
market – was destined for the scrapheap, $53/wmt achieved last year. in turn maximises our ability to tailor our
particularly with founding managing di- operations to prevailing market condi-
rector David Flanagan heading out the The company cited the conclusion of tions.”
door. collaboration agreements with key con-
tractors as the reason for the higher C1 Atlas announced in June it was defer-
However, a vastly improved iron ore cash costs, with the trade-off being Atlas ring a development decision on the $53
price – which peaked at $US93/t in is now relieved of having to pay margins million Corunna Downs project despite
March – proved to be the lifeline Atlas and premiums during periods of higher its Wodgina mine coming to the end of its
needed to generate revenue of $871 mil- iron ore pricing. life earlier this year.
lion, up 11% on the previous year, from
its suite of Pilbara-based mines. Longer road haulage distances, higher The company has retained at least 10
sea freight and reduced export volumes years of contracted processing capacity
Atlas achieved an average realised were attributed for the higher expected of up to 13 mtpa at Utah Point.
price of $61/wmt CFR (excluding finan- full cash costs.
cial instruments) for FY2017, compared Lawrenson said his company also re-
to $55/wmt in FY2016. Lawrenson, who was at the helm of mained on the lookout for opportunities
FerrAus when it successfully merged in other commodities, having already
Debt was also reduced from $182 mil- with Atlas in 2011, said his company signed a MoU with lithium developer Pil-
lion to $103 million, with the company re- would continue to explore opportunities bara Minerals Ltd earlier this year.
taining $81 million cash on hand plus an- to lower its cost base.
other $20 million in its reserve account. Pilbara, which is led by former Atlas
“The decision to recommission the Mt managing director Ken Brinsden, is farm-
No dividend was announced for share- Dove crushing plant reflects our flexibility ing into one of Atlas’s tenements, named
holders. Cisco, which is said to be prospective for
Cliff Lawrenson lithium.
Atlas managing director Cliff Lawren-
son, who only joined the company in “This agreement gives Atlas the oppor-
February, marvelled at the miner’s rapid tunity to realise the value of Cisco using
turnaround to profitability. Pilbara’s lithium expertise and invest-
ment and a farm-in model which frees
“This result highlights the remarkable Atlas of any expense until a decision to
progress Atlas has made on all levels mine,” Lawrenson said.
over the past year,” Lawrenson said.
“At the same time, we can generate ad-
“Atlas, once again, has the capacity ditional revenue by providing a logistics
to generate strong cash flow and profit service to Pilbara which leverages our
despite iron ore price volatility. The key existing operations and skills, developed
to this is maintaining our agile business over a decade of work in the Pilbara re-
model, with a focus on tight cost disci- gion.”
pline and a prudent level of hedging.
– Michael Washbourne
“The company’s underlying financial
position has been transformed, with our
PAGE 14 OCTOBER 2017 AUSTRALIA’S PAYDIRT
Nickel joins base metals party
Copper hit a three-year high of Even so, open interest on the Shanghai hard-hitting campaign against small, ille-
$US6,970/t on the LME early last Futures Exchange’s aluminium contract is gal operators, “zombie” plants and even
month. Aluminium is faring even better, now above 1 million contracts for the first large producers operating in targeted
trading above $US2,100/t for the first time ever. environmental clean-up zones around
time since 2013. Beijing.
Such collective exuberance has ana-
Zinc eclipses both. At a current lysts almost united in their view that It has since spread to just about every
$US3,200/t it is traversing chart levels things have got a bit out of hand and that industrial supply chain, with metals at-
last seen during the great bull run of 2007- some sort of corrective reaction is fast ap- tracting particularly close scrutiny.
One week it’s tin smelters in Yunnan
The whole base metals complex seems Even though verging on the irrational at province being closed for inspections.
to be on an upwards charge. The LME in- times, this exuberance is built on a ration- The next week it’s wire and cable manu-
dex of metals has jumped by 20% over al rewrite of the market narrative. facturers in Hebei.
the last three months.
The first half of this year saw periods The forced closure of massive amounts
A previous pattern of price divergence of wide divergence between individual of aluminium capacity has transformed
between individual metals is dissolving. LME-traded metals as the market priced that market’s persistent narrative of struc-
Among the major base metals traded on according to supply dynamics. tural oversupply, even if no one’s quite
the LME, only tin is declining to join the sure how much actual production will be
bull party. Zinc is challenging those historic affected.
peaks because of a tight raw materials
Simple market mechanics, the forced supply chain and falling stocks of metal And that’s the problem.
covering of short positions on both fu- in exchange warehouses. China, it’s often overlooked, is a sig-
tures and options, explain some of the nificant producer as well as consumer
ferocity of the recent moves. Nickel was a chronic underperformer of metals, albeit one that operates in a
after two cogs of the ore supply chain, black hole of reliable statistics.
A weaker dollar is acting as an accel- Indonesia and the Philippines, turned And its internal supply chains are be-
erant to the bull flames, although its im- bearish. ing overhauled in an unprecedented way
pact should not be overstated. Looking at with implications that are still nigh impos-
copper specifically, analysts at Goldman But nickel has now caught up. At sible to predict.
Sachs argue that the dollar effect can ac- $US12,180/t, LME three-month metal is Take steel, for example.
count for only “a fraction” of the recent up almost 23% on the start of the year, China has been making good on its
rally. hot on the heels of copper, up 26%. commitment to tackle excess capacity in
its huge steel sector. It closed 42mt in the
Speculative money is definitely in Nothing has changed on the nickel first half of this year, equal to 84% of its
the mix, fund positioning flexing higher supply side. Visible stocks are still high target this year.
across the spectrum. and there is no evidence of raw materials Yet actual steel production is not only
constraints on China. rising, it hit a record in July.
But, this largely unexpected metals There’s some statistical sleight of hand
rally is also pointing to a shift in market What has changed is a collective reas- in those figures, since much of the illegal
narrative from the specific to the general sessment of the demand picture for in- capacity that is being closed was never
in terms of demand and supply. dustrial metals. counted in the first place.
But, China’s steel mills are seeing prof-
Rallies such as these acquire their own Global manufacturing appears to be itability soar thanks to less competition
momentum as waves of short-covering enjoying one of those rare coordinated and buoyant demand from the core con-
trigger ever more buy signals for the host growth moments, judging by the slew of struction and infrastructure drivers.
of automated trading systems. It’s a vir- positive purchasing manager indices out It seems a counterintuitive outcome of
tuous or vicious cycle depending which at the start of September. capacity closures. But, Beijing is creat-
side you’re on. ing its own virtuous circle of eliminating
Factory activity in China, Europe and “illegal” operators, which boosts prices,
Fund net long positioning on the CME’s the US is expanding and fund money which in turn boost the financing stand-
copper contract has, quite literally, gone seems to be entering the industrial met- ing of state favourites such as aluminium
off the charts to unprecedented levels. als space to capitalise on that. producer Chalco.
This all-encompassing supply shock is
In London, the collective speculative Nickel’s ever-changing raw materials still evolving. A whole new set of capac-
long position on the LME copper contract supply chain is now overshadowed by ity curbs in the provinces around Beijing
was over 50% at the end of August, ac- the prospects for stronger-than-expected is due to kick in at the start of the winter
cording to LME broker Marex Spectron. demand growth from the stainless steel heating season in November.
Such bull length, it added, hadn’t been sector. Also still evolving is the new narrative
seen since 2004. for base metals, one in which micro for-
It’s been lifted by a rising macroeco- tunes are being enveloped by a combi-
And, Chinese commodity exchanges nomic tide. nation of macro demand optimism and
are fending off one of those increasingly macro supply uncertainty.
common “flash” money surges from a re- It’s not that individual supply differen-
tail crowd that acts collectively like a gi- – Andy Home, Reuters
ant momentum-chasing black box trading tials have gone away. They are still there,
programme. but they are also being subsumed in a
much bigger supply-side shock.
From iron ore to steel to esoteric met-
als such as ferro-silicon, mainland ex- One which is fanning out in waves from
changes have been raising fees and Beijing in the form of inspection teams
margins to brake runaway prices. tasked with inspecting whole industries
for illegal and environmentally unsafe
This started in the steel sector with a
AUSTRALIA’S PAYDIRT OCTOBER 2017 PAGE 15
Moose River Sanbrado
(Canada) (Burkina Faso)
(Chile) (Côte d’Ivoire)
Jointly organised by:
Keith Yates & Associates Pty Ltd
Pan Pacific Perth 7
Nyanzaga Dead Bullock
Mel Fogarty (+61) 8 9321 0355 [email protected]
Nickel’s bolt from
The electric vehicle revolution was meant to offer Western Australia 40% increase, depending on the cathode
opportunities in new commodities such as graphite and lithium but mix used.
as the uprising gathers pace, one of the State’s most traditional metal
products appears also set to benefit. Morgan Stanley reached similar con-
clusions from its research into the EV
It has taken a while but WA nickel min- previously thought, bringing consumer market and went further to suggest the
ers have slowly opened up to the possi- cost parity with combustion engine cars move towards more nickel-rich cathodes
bilities the EV market holds for them. to 2018, widely regarded as a likely in- in batteries would lead to even greater
flection point for demand. nickel demand than previously projected.
When UBS analysts pulled apart a
Chevy Bolt at the beginning of the year, As a result of the analysis, UBS raised Morgan Stanley estimated 14,000t of
the potential impact of EVs on their sec- its EV sales projection to 14.2 million nickel was consumed by the EV market
tor began to dawn on Australian nickel units by 2025. With each Chevy Bolt bat- for use in the typical nickel-manganese-
miners. tery containing 22kg of nickel, that would cobalt (NMC) vehicle battery which re-
create between 300,000 and 900,000 quires 391g/kWh of nickel in 2016 (less
UBS analysts found the EV powertrain tpa of additional demand for nickel, a 10- than 1% of global demand). However,
to be $US4,600 cheaper to produce than as the trend towards higher nickel/lower
cobalt NMC batteries (as much as 730g/
PAGE 18 OCTOBER 2017 AUSTRALIA’S PAYDIRT
The Kalgoorlie nickel smelter. Nickel West’s new nickel sulphate strategy is breathing life back into mature assets
kWh) continues and as Tesla Motors ply, as well as an expansion of conver- the nickel sector since the GFC and
Inc’s preferred nickel-cobalt-aluminium sion capacity to produce the nickel sul- the rise of China’s nickel pig iron (NPI)
battery uses 939g/kWh, it is forecast phate required for batteries industry put the skids on nickel’s 2000s
nickel’s use in EVs will increase rapidly in “Our long-term nickel incentive price boom. Even better for WA’s high-grade
the next decade. is $US7.12/lb – presenting significant nickel concentrate producers, the nickel
“We estimate that nickel’s use in EVs upside from our forecast for 2017 of sulphate product demanded by battery-
could reach 86,000t by 2020; rising to as $US4.51/lb.” makers cannot be produced via the NPI
“much as 340,000t by 2025 based on cur- It is emerging as the best news to hit or ferronickel processes.
rent projections,” Morgan It has taken some time for
Stanley said in its report. We estimate that nickel’s use the nickel sector to make
“Such rapid growth would sense of the opportunity. It
likely put significant up- in EVs could reach 86,000t by was flagged at the Austral-
ward pressure on the nickel 2020; rising to as much as 340,000t by ian Nickel Conference as
price, which would need to far back as 2009 when then
rise to a level sufficient to 2025 based on current projections. Nickel Institute chief execu-
incentivise new mine sup- tive Steve Barnett said: “One
AUSTRALIA’S PAYDIRT OCTOBER 2017 PAGE 19
of the biggest emerging uses is in carbon Eduard Haegel cells “should be called nickel-graphite,
constraint technologies. If you look at because primarily the cathode is nickel
Toyota’s new battery for its hybrid cars, other. There are great opportunities for and the anode side is graphite with sili-
each one runs around with 15kg of nickel the metal in all those applications.” con oxide… [there’s] a little bit of lithium
in it. Toyota is targeting 2 million vehi- in there, but it’s like the salt on the salad”,
cles a year so you soon get fairly large As the stocks of lithium, graphite and that Australia’s nickel miners began to
numbers. The same applies if you are cobalt companies started to rise, every make serious inquiries.
looking at fuel cells or wind turbines; all miner and explorer could be forgiven for
of them require nickel in one form or the wondering about the content of their fa- “I watched a YouTube video of Elon
voured commodity in lithium-ion batter- Musk’s quote that it should really be
ies. However, it was only following Tesla called a nickel-graphite battery. I have a
founder Elon Musk’s quote that the fuel huge amount of respect for the business
acumen and intellect of Musk so, I men-
tioned to the team that I would be pursu-
ing this because it looked like an excit-
ing opportunity but we didn’t really know
anything about it. We engaged interna-
tional experts, did a lot of research our-
selves and initiated internal work through
the analytical team in Singapore to help
build a picture,” BHP Nickel West asset
president Eduard Haegel tells Paydirt.
It is the rate of EV expansion which has
caught the nickel market by surprise.
“The picture is evolving all the time
and the pace of conversation that is tak-
ing place is remarkable,” Haegel says.
“Eighteen months on from the start of our
investigations, there are almost daily an-
nouncements from major car manufac-
turers or analysts or investment banks
about the dramatic shift in the energy
equation of the world.”
Western Areas Ltd managing director
Dan Lougher is equally enthused by the
arrival of a new demand for a commod-
ity which today is largely tied to stainless
“On the upper scale it can be a disrupt-
er,” Lougher says. “The nickel market is
currently a 2 mtpa market but if the im-
pact of EVs is as predicted, non-stainless
steel use of nickel could go from 300,000
tpa to 700,000 tpa by 2025. We have
PAGE 20 OCTOBER 2017 AUSTRALIA’S PAYDIRT
“We are going to live through
a transformation every bit as
dramatic as the transformation from
horse and cart to cars in the 1920s.
There are kids being born today who
may never need a driving licence
because the roads will be full of
seen closures recently [at Ravensthor- ing extending the life Peter Bradford
pe in particular] with potentially more to of operations.
come so supply is shrinking even without really powerful in creating a new mind-
the impact of EVs. Where is that produc- “It is all well and set in the business because when you
tion going to come from?” good to solve a path- are dealing with a much longer life busi-
way to creating value ness the attractiveness of going into the
Independence Group Ltd managing di- or reducing costs but battery market through initially nickel
rector Peter Bradford is also becoming a that doesn’t extend sulphate, is viable, very practical and
convert to the EV revolution. the life of the busi- very sensible,” Haegel says.
ness,” Haegel says.
“We are going to live through a trans- “We needed to find “It may be that we are at the beginning
formation every bit as dramatic as the how to do that.” of a pretty substantial wave of invest-
transformation from horse and cart to ment into this EV market and we are very
cars in the 1920s,” Bradford tells Pay- Work on the fur- pleased to be there, relatively close to
dirt. “There are kids being born today nace at the Kalgoor-
who may never need a driving licence lie smelter provided
because the roads will be full of driver- the first indication
less EVs.” of the opportunity
on offer and its op-
The impact of the EV revolution on the erational life was
nickel market could not have come at a extended by four years to 2023. This led
better time for Haegel. On arriving at the directly to more exploration and mine de-
publicly-declared non-core division in velopment work and by the end of 2016
2015, the Nickel West chief was tasked the company was considering ways it
with defining the company’s sunset could find enough reserves to push op-
years; tired assets in Kalgoorlie and Kwi- erations out to 2032 and beyond.
nana and shrinking reserves at its mines
making closure look inevitable. Nickel West is now targeting exten-
sions out to 2050 and the emergence of
Haegel’s first priority was to return the battery market has provided added
the loss-making division to profitabil- impetus.
ity and once value improvements were
achieved, the company began consider- “That generation of life extension is
AUSTRALIA’S PAYDIRT OCTOBER 2017 PAGE 21
Nickel West’s Kwinana refinery will become the world’s largest nickel sulphate producer
the beginning of it.” at $US43.2 million and subsequent ex- tially you need a smelter and refinery.
For Haegel, the numbers surrounding pansion to 200,000 tpa capacity would “That takes out half of the world’s nick-
EVs and lithium-ion batteries are com- make Kwinana the largest nickel sul- el supply from the conversation. Of the
pelling. phate production facility in the world. remaining half, 60% is nickel cathode
“The EV market looks like it is going to Numerous companies are now looking and so it is really a nickel cathode versus
grow very quickly over the next decade at their own ability to produce nickel sul- the rest competition for lowest cost.”
compared to any other industry,” he says. phate but for once the Australian nickel Western Areas has also identified nick-
“Lithium-ion batteries will dominate the producers appear to have a cost advan- el sulphate as the catalyst for new techni-
EV market for the next decade at least tage over the NPI and ferronickel sec- cal developments.
“because any other technology would tors. The company put its mill recovery en-
need at least 10 years to reach commer- “Not all nickel was born equal and the hancement project (MREP) on hold last
cial reality and would have to be year due to capital constraints
transformational to displace lithi- It may be that we are at but the project has been reig-
um-ion technology. And, there is the beginning of a pretty nited with the nickel sulphate
also very clearly a trend towards market particularly in mind.
nickel-heavier chemistries in the substantial wave of investment Using the patented BioHeap
cathodes in the batteries be- leaching technology, Western
into this EV market and we are
cause they have better energy very pleased to be there, relatively Areas can improve life-of-
density and nickel is cheaper mine nickel recovery by 3-5%
than cobalt.” by processing tailings from its
Such is the confidence inside close to the beginning of it. Forrestania operation through
Nickel West, the division has al- the MREP but the company
ready received approval for the is now looking at how it could
development of a nickel sulphate project closer to high quality refined nickel you use the process to meet nickel sulphate
at its Kwinana refinery. are, the cheaper it is to go the extra step market demands.
The project will see the refinery pro- to make it even more pure to support the “As we learnt more about the EV mar-
duce 100,000 tpa of nickel sulphate hex- battery market,” Haegel says. “We think ket and the nickel sulphate required for
ahydrate by dissolving nickel powder in we have a good product but it is a 99.8% that market, we began looking at wheth-
sulphuric acid produced at the Kalgoorlie nickel product as a briquette, we are talk- er the MREP could provide a solution,”
smelter. ing about 99.99% for batteries. To go Lougher says.
Capex for the first phase is estimated from NPI and ferronickel to that, essen- With so much focus on bringing its
PAGE 22 OCTOBER 2017 AUSTRALIA’S PAYDIRT
Nova nickel mine into production, Brad- with potential customers. Dan Lougher
ford admits his company has more work “We are keen to develop contracts
to do on the nickel sulphate market. to get the specifications right before
soon-ish but everyone will be very eager chasing the nickel sulphate market.
“Our strategy is to understand whether to see the first product come out of the
there is some downstream processing plant. So, there will be a little bit of time “We have to understand the specifica-
we can do and do that work within the but I’m expecting it to be months, not tions because you are making a chemi-
current offtake agreement [with Nickel years.” cal; you have to get what the customer
West],” Bradford says. “The offtake con- wants,” he says. “I have worked within
tracts give us certainty for the first three Bradford is also conscious of the need that framework before during my time
years of production and still have another in both mineral sands mining and down-
two years to run. It allows us to do the
preliminary work to understand the path-
ways; both the preferred technical op-
tions and marketing options, before arriv-
ing at a decision on which way to proceed
within our existing offtake structure.”
Haegel believes Nickel West’s advan-
tages of existing infrastructure will allow
it to become a low-cost producer of the
“We think our product will be cheaper
to produce than those from cathode.”
Haegel can speak with such confi-
dence because of 12 solid months of
technical and market investigations.
“We began hunting down the answers
in July and began test work soon after,”
he says. “The best part of a year later,
we’ve gone from hunting down whether
nickel sulphate was both technically and
commercially viable to placing orders for
“We have full clarity on the flow sheet
for nickel sulphate today; that’s what has
given us confidence to make the invest-
ment. We are quite advanced in design
work and we’ve been able to place or-
ders for long-lead time items, the crystal-
liser being the most advanced of those.”
Lithium and graphite developers have
found the specifications of industrial min-
erals and chemical products are much
tighter than for traditional metals. Hae-
gel is aware of the challenges which lay
ahead as Nickel West closes in on com-
mercial contracts for its nickel sulphate
“There is a mind shift we have to un-
dertake to understand the step change in
quality expectations and requirements,”
he says. “In a metal world, the bounda-
ries are much wider than they are as a
chemical. We are on very tight specs and
to ensure you deliver that you have to
have different processes, expectations
and planning because you can contami-
nate quite easily.
“The product is a commodity and as
long as we meet the specs the flowsheet
is designed to do, it will be a very high
quality chemical which will certainly meet
the needs and expectations of cathode
Nickel West expects to start pilot scale
sampling before the end of the year as it
begins to enter commercial negotiations
AUSTRALIA’S PAYDIRT OCTOBER 2017 PAGE 23
stream mineral sands [titanium pigment] and commissioned during the March “The plan now is to produce the blend-
processing. It is a different way of doing 2018 quarter to produce the higher grade ed product first until we can get the qual-
business to what miners are used to. It is material for inclusion with its run-of-mine ity of the bagged product right. There is
all about quality of what you are making.” concentrate. At the same time, it will con- no offtake contract for the MREP mate-
Although further behind the nickel sul- tinue test and marketing work on both rial, so we have started to send samples
phate development curve than Nickel the separate product and nickel sulphate to potential buyers, including non-Chi-
“West and Western Areas, IGO plans to flowsheets. nese global companies who are well-en-
build its understanding up in trenched in the EV market.
consultation with potential We are seeing all sorts of “Nickel sulphate is not
offtake customers. that rare and the current
“There is no way you can inquiries from people looking for market is supplied by re-
have a ‘build it and they will new sources of nickel sulphide. And, fineries, some of which are
come’ mentality with a prod- better suited than others; it
uct like this,” Bradford says. we have seen it already in lithium and comes back to the cost of
Western Areas’ initial plan production.”
graphite; end-users wanting supply
is to deliver a 40-50% nickel certainty through direct offtake. Bradford sees more than
grade product back into the just increased demand as
existing concentrate but the an attraction of the battery
company is also working on market.
ways of bagging the 1,400 “At the moment we are
tpa nickel produced from the MREP as a “It has become more and more obvious giving away $1.5 billion in lost payabili-
separate product or using it to produce a that the battery manufacturers see the ties,” Bradford says. “There are huge op-
nickel sulphate product. MREP product as a good product which portunities in the battery market where
“The problem is the MREP sulphate is they could modify themselves to pro- payabilities are potentially much higher.
crude and can’t be applied directly to the duce nickel sulphate. We have had trad- “We are seeing all sorts of inquiries
EV market; there is a lot of work required ers who want to provide material to the from people looking for new sources of
to take it to the correct purification. In the large battery makers but more recently nickel sulphide. And, we have seen it al-
lab, we used ion exchange and proved we have had inquiries from the larger ready in lithium and graphite; end-users
we could do it but that would require battery producers in China. They have a wanting supply certainty through direct
changes at the back end and further view that they could process more raw offtake.”
capital being sunk into the MREP.” material prior to the battery product. That Bradford believes that may result in
For now, Western Areas is focused on is interesting to us because the product selling an intermediate product directly to
getting the first stage of the MREP built doesn’t have to go through a smelter. battery makers.
PAGE 24 OCTOBER 2017 AUSTRALIA’S PAYDIRT
Both IGO (at Nova, above) and Western Areas (at Forrestania, inset) are assessing flowsheet options in order to
access the nickel sulphate market
“There may be more opportunity to ers being usurped in some cases. mand which didn’t even exist a decade
extract more value in nickel without the “There are a whole range of groups in- ago, it is the kind of thing nickel execu-
need for extra capital. Customers in nick- tives wouldn’t have dared dream about
el average about 70% payability so it is terested. If Glencore or Trafigura bought during the prolonged downturn. Now,
about defining how we can get a higher the product we wouldn’t know where it however, they must work out the reali-
payability with offtake to get similar value went,” Lougher says. “Our preference is ties of a future nickel market potentially
as if we spent the capital ourselves.” for it to go straight into the battery market turned upside down.
because the payability is higher – way
Lougher shares Bradford’s sentiment into the 80s.” – Dominic Piper
and even sees the traditional nickel trad-
Greater payability from a sector of de-
AUSTRALIA’S PAYDIRT OCTOBER 2017 PAGE 25
AFRICA DOWN UNDER REVIEW
Africa Down Under celebrated its 15th year last month with 1,000 delegates joining 60 presenters, 65
exhibitors and 20 African delegations in Perth for the event. Keynote speakers, West Australian Pre-
mier Mark McGowan and Australian Minister for Foreign Affairs, Julie Bishop, welcomed the visiting
delegations to Australia’s mining capital and both urged greater collaboration between Australia and
the continent. Paydirt brings you 65 pages of coverage from this year’s conference.
Africa bounce boast of improved performance over the
back confirmed past 12 months but a new generation of
explorers from across the continent were
Australia’s African resources interests Geopolitical challenges in established also eager to tell the stories. And, for the
have enjoyed a strong rebound this mining jurisdictions such as Ghana, first time in several years, private compa-
year and the change in sentiment was South Africa and Tanzania as well as nies and project vendors were conspicu-
palpable at last month’s Africa Down Un- security issues in Burkina Faso and Mali ous, offering up the next generation of
der. have added to the complicated outlook African projects and new listings.
for African mining but the sense at Africa
It has been a depressing four years for Down Under was of an industry heading If delegates needed any concrete evi-
ASX-listed companies in Africa with the into an upcycle. dence of the new-found momentum in
heat coming out of the West African gold the sector, they need only have visited
exploration sector and the fall in other Not only were established miners such the booth of Australia’s most prominent
commodity prices stalling development as Perseus Mining Ltd, Resolute Min- African-focused mining services com-
elsewhere on the continent. ing Ltd, and Base Resources Ltd able to pany, Ausdrill Ltd.
The long-time Africa Down Under sup-
porter has redoubled its commitment to
the continent following a successful $100
million capital raising in August.
Ausdrill went to market to raise $100
million through a placement to sophis-
ticated and institutional investors. The
company eventually received more
than $200 million in subscriptions for
PAGE 26 OCTOBER 2017 AUSTRALIA’S PAYDIRT
Australian Minister for Foreign Affairs Julie Bishop chats with Les Day of Ausdrill
the placement, an indication of the con- revenue so what you win the more equip- Resources Ltd, Cardinal Resources Ltd,
fidence the market is showing in both ment you need.” Golden Rim Resources Ltd, Predictive
Ausdrill and African resources projects, Discovery Ltd, Vital Metals Ltd and West
according to the company’s managing Among the new contracts won is a African Resources Ltd.
director Ron Sayers. $US280 million underground mining
contract at Newmont Mining Corp’s Subi- Australian explorers, miners and con-
“The capital raising is a case of the in- ka mine in Ghana. The five-year contract tractors have etched a reputation among
terest returning to West Africa, mainly on will be operated by African Underground West African governments and commu-
the back of the gold price,” Sayers told Mining Services, Ausdrill’s 50/50 JV with nities as partners of choice. Sayers put
Paydirt. “We were very clear that expan- Barminco Holdings Ltd. his own company’s standing down to a
sion in Africa was the reason for the rais- respect for the cultures and communities
ing and it has clearly been supported.” Other West African contract awards Ausdrill has worked with.
and renewals include open pit mining
The capital raising followed a strong at Yanfolila in Mali (Hummingbird Re- “The main reason we’ve been suc-
reporting season for the mining services sources plc), Boungou in Burkina Faso cessful there is because we’ve been
contractor. The company was able to (SEMAFO), Mako in Senegal (Toro Gold there for 27 years and we have devel-
post a 53.3% increase in after-tax profit Ltd) and Edikan in Ghana (Perseus). oped working relationships with clients,
to $31.4 million for FY2017 off the back governments and communities,” he said.
of a 4.5% increase in revenue to $776.3 Sayers said Ausdrill’s West African “People appreciate and understand us.
million. book was the healthiest in its history. We have trained more than 21,000 peo-
ple in West Africa and have generated
Ausdrill has cash reserves of $126 “The pipeline of work we have at the more than $6.2 billion in revenue during
million and has also refinanced and in- moment is the greatest it’s ever been,” our time there.
creased its debt facility to $200 million he said. Historically, about 70% of our
however with $1.6 billion of new work and business came out of Australia and 30% “We respect the African nations in the
contract renewals recently secured, the from Africa. These days, we are heading way they should be respected and they
company needs to deploy further cash. towards 70% from Africa.” respect us accordingly.”
“We’ve got that work coming up; we’ve He said the slowdown in Australia There was much debate at Africa
just spent $70 million on one job com- was largely due to a lack of exploration. Down Under about Tanzania’s recent
ing up,” Sayers explained. “A good rule However, the variety of West African move to tighten restrictions on foreign
of thumb in the mining contractor space gold projects reaching the development miners. The gold countries of West Af-
is for every $1 of capex you get a $1 of stage said much about the activity in the rica, particularly Ghana, have had simi-
region. lar discussions at times during the past
decade but Sayers believes they are on
“Although exploration is only 20% of the right path.
our business, it is the forerunner to min-
ing,” Sayers said. “They are on an upward trajectory,” he
said. “After what’s happened in Tanzania
The West African development pipe- I’m sure the West African governments
line is currently well-stocked with pro- won’t go the same way because if Tan-
jects first found by Australian explorers zania keeps going the way it is it will end
and the Africa Down Under programme up like Zimbabwe.”
reiterated the opportunity ASX-listed
companies have to continue filling it. – Dominic Piper
Among the 40 presenting companies
were gold explorers such as Azumah
AUSTRALIA’S PAYDIRT OCTOBER 2017 PAGE 27
AFRICA DOWN UNDER REVIEW
Gloves come off (then back on
again) in South African fight
It may have been the warm spring air “The 2017 Mining Charter is law, and all right-
or the sharing of an unexpected rugby holders in South Africa are expected to
result in common enemy territory; what- implement it. – Mosebenzi Zwane
ever the reasons, Mosebenzi Zwane and long-running battle between Zwane and the sector. It is extremely difficult to get
Roger Baxter returned from their visit to Baxter over the Mining Charter and the any company investment committee to
Australia and immediately put a tempo- MPRDA Amendment Act. approve any new greenfields project in
rary pause on hostilities. South Africa today,” Baxter said.
Among the more contentious parts of
The news will come as a surprise to the Charter are a minimum 50%-plus- “The economic opportunity cost of the
delegates of Africa Down Under who one BEE shareholding on all new pros- failure to get the policy, legislative, ad-
witnessed the verbal slanging match the pecting rights, a 30% BEE shareholding ministrative and operating environment
South African Minister for Mineral Re- on new mining rights and a requirement right to promote investment, growth,
sources and the chief executive of the for rights holders to retain empowerment transformation and job creation in South
South African Chamber of Mines partici- deals throughout their existence; if a BEE African mining is material.”
pated in during the event. partner sells its holding to a non-BEE
group, the mining company must re-em- The Chamber has also accused the
Zwane said during his address to the power itself. Government of failing to adequately en-
conference the new Mining Charter – gage with industry on the terms of the
gazetted in June – was now active and The Charter will now be heard by a full Charter. However, Zwane told the con-
would have to be implemented by indus- panel of judges at the High Court on De- ference investors were happy to imple-
try. cember 13-14. ment it.
“The 2017 Mining Charter is law, and Baxter said the uncertainty created by “In 2016, we assured investors we re-
all right-holders in South Africa are ex- the Charter and MPRDA Bill was hav- main committed to a policy of stability,”
pected to implement it,” he said. ing a debilitating effect on South Africa’s Zwane said. “We have taken time to ana-
mining sector. lyse the reaction of the market – the rand
Chamber of Mines chief executive and share prices – and were pleasantly
Roger Baxter railed at the suggestion “We have had two and a half years surprised that some share prices made
during his address the following day. of doubt about the legislation and it is gains.
nearly five years since the MPRDA was
“The Mining Charter is not law; it has first published. Policy and regulatory un- “We have met with several major
been suspended by agreement,” Baxter certainty have frozen new investment in investors to unpack the details of the
said, referring to the Chamber’s interdict
which was due to be heard in court on
However, following the return of both
men to South Africa, the Chamber an-
nounced it had reached agreement with
Zwane, via his legal counsel, to drop the
“The Minister of Mineral Resources
has given a written undertaking that the
Reviewed Mining Charter will not be
implemented until judgment has been
handed down in respect of the Cham-
ber’s review application, which has ren-
dered the granting of an interdict by the
court not necessary at this stage,” the
“The Minister has also undertaken that
if he makes any reference in public to the
Reviewed Mining Charter, he will simul-
taneously make reference to his written
undertaking and that the Chamber has
brought review proceedings to set aside
The agreement also includes a writ-
ten undertaking to provide clarity about
Zwane’s move to suspend implementa-
tion “whenever he discusses the Char-
ter in the public domain”.
The ceasefire is the latest incident in a
PAGE 28 OCTOBER 2017 AUSTRALIA’S PAYDIRT
Charter and out of these section 49 rights moratori-
discussions I can confident- um, the non-resolution of the
ly report the willingness of charter ownership issues,
investors to adopt the Char- imposition of inappropriate
ter.” section 54 safety stoppages,
Zwane said the mining for example, have created
industry was the bedrock a major crisis for the sector.
on which the South African The industry is of the firm
economy was built and that view that the DMR’s Charter
his Government would re- is designed to benefit a se-
tain “prudent policies and lect few at the expense of
respect for the rule of law”. the whole country.”
“As regulator, we have Baxter said industry stake-
the unenviable task of bal- holders had shown resilience
ancing the needs of inves- in the past to collectively pull
tors, community, entrepre- back from “a precipice” and
neurs and the people and could do so again.
we will provide the highest “The Mining Charter is not law; “To encourage investment
it has been suspended by into mining, policies need
order of protection for inves- agreement. – Roger Baxter
to recognise the charac-
tors.” teristics of mining and
help reduce the risks of
Baxter dismissed investment in long-term
projects. The Chamber re-
Zwane’s comments, say- mains committed to finding
ing the industry had lost
confidence in both the
Minister and the DMR.
“Significant corruption workable solutions in the
allegations against the Minister and the not believe that the approach adopted national interest,” he said. “This will re-
DMR have not been cleared and the by the DMR is serving the national in- quire ethical leadership and a focus on
proposed judicial commission of enquiry terest of the country and the negative the national interest by all parties.”
into state capture has not been estab-
lished,” Baxter said. “The industry does impacts of the unilaterally imposed Re- – Dominic Piper
viewed Mining Charter, the proposed
AUSTRALIA’S PAYDIRT OCTOBER 2017 PAGE 29
AFRICA DOWN UNDER REVIEW
Orion’s smart strategy
Consolidation could be available so there pendence [Group Ltd] has now got the
the key to unlocking majority of the belt and can apply the sci-
a mature South African is opportunity to ence and the systematic approach need-
mineral belt’s latent po- ed to make the next discovery.”
tential. fast-track that with
Orion aims to do the same at Prieska
South Africa’s mineral deeper sulphide ore and will apply a range of modern explo-
endowment is well known ration techniques to test the potential.
but the lack of large-scale from underground Major shareholder Tembo Capital has
exploration investment backed the company to push the explo-
over the last three dec- coming on later.” ration story and Smart is preparing for a
ades has meant projects busy end to 2017.
like the Prieska base DRA is under-
metals mine in the North- “With 14 rigs on site, this is the biggest
ern Cape have seen little taking a BFS for exploration project in Southern Africa at
new work in a generation. the moment,” Smart said.
Orion with results
Orion Minerals NL is intent on chang- He also sees Prieska as a trendsetter
ing that trend, at Prieska at least. The expected to be re- in a South African mining sector which is
ASX-listed company had set itself the crying out for ambitious junior explorers
task of finding a suitable base metals leased in Q4 2018. and developers.
asset somewhere in the world and even
managing director Errol Smart was sur- Before then, Orion “There is a huge opportunity for junior
prised when it turned out there was one explorers in South Africa. We would like
close to home. Errol Smart will have to bring to work with the DMR [South African De-
existing resources partment of Mineral Resources] to unlock
“I’d scoured the globe looking for a the value,” he said.
world-class zinc project and eventually to modern compli-
found it in my backyard,” former South Foreign investment in the South Af-
African Smart said. ance standards. rican mining sector is currently a vexed
issue with Jacob Zuma’s Government
Prieska – 300km north of Cape Town “We have all the information but it is intent on lifting the participation of previ-
– produced 430,000t copper and more ously disadvantaged groups.
than 1mt zinc between 1971 and 1991 not JORC-compliant but with some lim-
and with infrastructure still in place, Smart said Orion intended to align it-
Smart believes the mine can be quickly ited drilling we can get it to JORC stand- self with black economic empowerment
restarted again. partners.
ard,” Smart said.
“The services, the infrastructure, the “To expand the opportunity we have in
knowledge of the orebody and the met- However, the exploration opportunity South Africa, we will go for a JSE listing,”
allurgy; Prieska already has all of that,” he said. “That will allow South Africans to
he said. “There is a big open pit area extends far beyond the conversion of invest at the holding company level.”
resources. Orion controls 1,790sq km of – Dominic Piper
land along a belt which contains 22 other
No serious exploration activity has oc-
curred in the last 20 years and Smart
believes the area is ripe for a major ex-
ploration push now the ground has been
“This is the first time this highly pro-
spective belt has been consolidated
since the 1980s,” he said. “We saw it on
the Fraser Range here in Western Aus-
tralia. More than 20 companies entered
that belt following the discovery of Nova
but there was nothing else found. Inde-
B4D cottons on to farm life
Business for Development’s (B4D) regularly operating in are isolated areas. “We effectively created a situation
director of African operations John Certainly, in the context of Africa many of where the challenges facing the farms
Cook gave one of the more dramatic those areas would have farmers. They will were systematically removed.”
introductions at Africa Down Under this be very poor and they will not have ac-
year, showing an image of a group of dis- cess to revenues nor the infrastructure to The company also secured an offtake
gruntled farmers with guns. effectively deliver strong agricultural out- agreement between farmers and the
comes.” Australian clothes company Cotton On.
“Clearly something has gone wrong
here,” he said as he pointed at the screen. Cook said B4D helped create opportu- Cook said this initiative gave Base a
nities for the farming community around licence to operate, not just from govern-
African mining operations regularly Base Resource Ltd’s Kwale mineral ments, but the community.
come into conflict with existing landhold- sands project to re-enter the internation-
ers who see project development as a al market for fine cotton. “[A license to operate] is when every-
threat to their livelihoods. thing is in balance and the community,
“We created a team in conjunction with shareholders, businesses and govern-
While agriculture is not readily associ- the Kenyan [national] and Kwale [coun- ments are all happily working towards a
ated with mining operations, Cook said ty] governments, people from Base, the common outcome,” he said.
there was an opportunity for the sector community, technical agencies in Kenya,
to play an important role in community international agencies and donor agen- – Jon Daly
engagement and investment. cies,” Cook said.
“The circumstances that miners are
PAGE 30 OCTOBER 2017 AUSTRALIA’S PAYDIRT
Australian solution for African
policy conundrum: Bishop
African nations looking to “Three of our top five exports come Julie Bishop
grow their economies from mineral and energy production. We
should look no further than Aus- are indeed a minerals and energy super- impact among this audience and more
tralia for inspiration, according power.” widely.”
to Australian Foreign Affairs
Minister Julie Bishop. Bishop cited Base Resources Ltd suc- Bishop met with Australia’s heads of
cessful development of Kwale mineral mission to the various African jurisdic-
During her keynote address sands project – Kenya’s first commercial tions as well as the visiting African min-
on the final morning of Africa mining operation – and the Australian isterial delegations during her appear-
Down Under, Bishop also urged High Commission’s work to help combat ance at Africa Down Under and said she
visiting African governments to illegal miners in Ghana as examples of would leave confident both established
take a leaf out of the book of the positive contribution Australia was and blossoming relationships between
Australia’s successful mining having in Africa. Australia and Africa would continue to
and extractives industry on how develop.
to implement effective foreign “Australian companies work not only in
policy. Africa, but with Africa,” Bishop said. “Our emphasis today is on opportu-
nity,” she said.
“The Australian Government “We are, I believe, at the beginning
encourages the people of Africa of an upswing in relations between our “African leaders in government and
to see us as an open-cut mine countries, led by our partnerships in re- business are opening their economies to
for lessons learned, for skills, sources, as the majority of Australia’s the world, having assessed that doing so
for innovation and, I would like projects are in the exploration stage, or is in Africa’s interest, with new foreign di-
to think, for inspiration,” Bishop pre-exploration stage. rect investment in Africa expected to total
said. almost $US60 billion this year.
“There’s enormous potential for Aus-
“For every policy conundrum, tralian investment to increase steeply as “Many countries in Africa have made
there is an Australian solution.” projects move through to the operating great strides towards a better future, with
stage. Our collective challenge, however, a young, increasingly educated and con-
Bishop was quick to point out is to ensure that we circulate best prac- nected rising generation willing and able
that Australia – the world’s 13th tice in business, in relations with govern- to build 21st century economies and sup-
largest economy – had enjoyed ment and in social and environmental porting vibrant societies.”
26 years of uninterrupted eco-
nomic growth despite sitting – Michael Washbourne
behind 52 other countries in
“We know that to compete in an inter-
national economy, we have had to open
up to the world and this has made us a
richer place in every sense,” she said.
“Australia champions economic inte-
gration and we certainly champion the
international norms and frameworks that
directly support Africa’s priorities and its
Bishop drew comparisons between
Australia and many emerging African
economies, claiming they had much in
common and could leverage off each
other’s respective skills and opportuni-
ties in the resources sector.
“We have ample resources and we
have long been dependent on our ability
to attract capital from overseas, and, as
we know, capital is agile and nimble and
will go to where it finds its most attractive
home,” Bishop said.
“We grew beef and we created other
significant farm industries with foreign
investment, just as we developed our
manufacturing and mining sectors with
foreign direct investment.
AUSTRALIA’S PAYDIRT OCTOBER 2017 PAGE 31
AFRICA DOWN UNDER REVIEW
McGowan to Africa:
‘You need certainty’
It was a case of “do as I say, not as I WA Premier Mark McGowan with Paydirt and Africa Down Under chairman Bill Repard
do” when West Australian Premier Mark
McGowan gave visiting African delega- ties that bind mineral development in Af- and education as other sectors in which
tions advice on royalties and taxes follow- rica with the fortunes of WA’s junior min- Australia and Africa had a natural affinity.
ing his opening address to Africa Down ing sector.
Under. “There is, for example, the opportunity
“Our business community is heavily for collaboration between Africa and WA
Asked by Resolute Mining Ltd manag- engaged in Africa; if West Perth is buzz- in environmental management where
ing director John Welborn for his advice ing, that means Africa is buzzing,” he WA has acknowledged world-class ex-
to the 20 visiting African ministers about said. “WA is a trading state and our future pertise.”
mineral royalty structures, McGowan prosperity relies on remaining a trading
said governments should provide cer- state.” More than 3,000 students from 30 Afri-
tainty to investors. A little more than 24 can countries started courses at WA uni-
hours later, the McGowan Government He said mining offered the best op- versities this year and McGowan said his
included a 50% increase in gold royalties portunity for collaboration and growth Government would continue to encour-
as part of its first State Budget. between Australia and Africa, pointing to age those ties.
the fact the continent is the largest over-
“We want to see mining prosper but we seas market for WA METs companies. “Education has political, economic,
also want to balance the budget. Our aim The WA Government is also active on diplomatic and cultural benefits which
is to make sure the burden of repairing the continent and held a number of semi- span many generations. That is why I am
the budget is shared across the WA com- nars during Africa Down Under designed focused on ensuring WA’s intake of Afri-
munity,” McGowan said. to assist their African counterparts with can students continues to grow.”
mining regulation and approvals.
The State Budget laid out an increase He pointed to Africa Down Under itself
in gold royalties from 2.75% to 3.5%, start- “We offer assistance through capac- as evidence of the already extensive in-
ing on January 1, 2018. Industry groups ity building and expertise in regulatory teraction between the two regions.
such as the Association of Mining and Ex- framework,” McGowan said.
ploration Companies and the Chamber of “This conference is vital in that en-
Minerals & Energy WA criticised the deci- “Mining offers an unparalleled opportu- gagement,” McGowan said. “It plays a
sion as a “cash grab” which would drive nity to stimulate activity and alleviate pov- key role in facilitating people-to-people
away jobs and investment from the State. erty. If well-managed the sector can drive contact and business-to-government
innovation, generate revenue to fund so- connections as well as diplomatic ties.”
McGowan warned African guests that cial services as well as critical infrastruc-
changing tax and royalty regimes could ture and create jobs and opportunities.” – Dominic Piper
have just that effect.
McGowan also raised agribusiness
“You want companies to have that op-
portunity and that activity and you don’t
want to lose the jobs and investment they
provide by charging too much in the fees
and charges you impose,” he said. “Capi-
tal is flexible and if your [jurisdiction] is not
profitable, investors will go elsewhere so
you need that certainty and that flexibility
should the circumstances change.”
McGowan repeatedly pointed to his
Government’s commitment to upholding
the state agreements in place with WA’s
major iron ore miners as an example of
responsible government attitudes to min-
“What you need is certainty if some-
one invests,” he said. “We are going to
set the responsible example in terms of
state agreements. To progress activity,
development and approvals people need
to be heard. We are absolutely commit-
ted to not ripping up state agreements.
We will not do it; that level of certainty is
there for the mining industry.”
McGowan used his opening remarks
to remind conference delegates of the
PAGE 32 OCTOBER 2017 AUSTRALIA’S PAYDIRT
AFRICA DOWN UNDER REVIEW
MOD doubles its drilling spend
MOD Resources Ltd has in- land earlier this year, allowing it to
creased its Botswanan copper
exploration budget to $10 million expand its horizons.
as it chases district-scale targets to
complement its T3 discovery. “While MOD’s first major discov-
MOD controls more than ery, T3, has substantial upside and
11,700sq km of the central Kalahari
copper belt in Botswana but has will remain our primary focus to
spent the last 18 months largely fo-
cused on building confidence in the bring into production, it may be just
T3 prospect, where it has defined a
resource of 36mt @ 1.14% copper the beginning of a much larger story.
and 12.8 g/t silver.
Numerous other targets hold excel-
The company plans to complete
a PFS on T3’s open pit potential by lent potential, particularly along the
the end of 2017 but the latest explo-
ration budget increase is designed same structural corridor which hosts
to stock the company’s target
pipeline in a district which remains T3 and other substantial resources
already defined within the eastern
MOD completed an airborne EM
survey in July, identifying 19 potential Kalahari copper belt,” MOD manag-
drilling targets along the 50km-long T3
Dome structure surrounding the T3 de- ing director Julian Hanna said.
posit. It is also keen to test targets on the
60km-long T20 Dome structure, 100km At the T20 Dome, the company
west of T3.
plans to follow up on copper soil
Drilling has already started at T3 to
test for resource extensions, high-grade anomalies with both drilling and fur-
underground veins and the deeper Zone
3 mineralised contact but the extended ther airborne EM surveys.
budget will now allow MOD and JV part-
ner Metal Tiger plc to also begin testing Two additional prospecting li-
the regional targets.
Julian Hanna cences were recently granted to the
JV vehicle, Tshukudu Metals Bot-
The revised exploration programme is swana, to cover further areas of the large
expected to include more than 160 dia- T20 Dome.
mond and 40 RC holes with the majority “We expect the doubling of the ex-
to focus upon targets along the T3 Dome ploration budget will help us unlock and
and T20 Dome. realise the potential of this completely
MOD has always viewed its massive under-explored copper belt,” Hanna
landholding as a potential district play said. “The number of drill holes planned
but the surprising early success at T3 on regional targets is more than double
meant its priorities had been realigned. what we have drilled at T3 to date which
The company is now cashed up, having reflects our confidence in the potential of
raised $12 million on the market in late the wider region.”
2016 and $3.5 million through the sale of – Dominic Piper
its Sams Creek gold project in New Zea-
Australia leads Kimberley Process review
Members of the Kim- no conflict diamonds with diamonds,” Owen-Jones said. “Peo-
berley Process are in the world but it has ple also said: ‘Let’s find ways we can keep
civil society engaged and have LDC coun-
considering expanding been tremendously tries participate in the Process’.
the protocol’s reach be- successful but we “The idea was also raised that we
should do more than just look at conflict
yond the elimination of need to keep going diamonds; that maybe we should look at
covering other areas. Some of the things
conflict diamonds. with this success.” countries were concerned about were
synthetic diamonds and smuggling and
Australia is cur- The first of Aus- some asked how we could use the Kim-
berley Process to improve things such as
rently chair of the in- tralia’s two meetings human rights.”
ternational diamond as Kimberley Pro- Owen-Jones said the issues would be
discussed at the next Kimberley Process
certification authority cess chair was held meeting, in Brisbane on December 9-14.
– Kimberley Process in Perth in May. While “We will see if we can improve the Pro-
cess and I will take the results back to
– and chairman Robert Robert Owen-Jones the meeting had its the UN General Assembly from there,”
Owen-Jones said dur- controversial mo- he said.
ing Africa Down Under, ments – the Chinese – Dominic Piper
a United Nations-mandated review had delegation objected vociferously to an
thrown up a number of possible new ini- invitation for Taiwan to participate – it did
tiatives. raise a number of areas of potential influ-
“After 13 years, the UN General As- ence.
sembly told us it was time to review how “There were plenty of ideas such as
the Kimberley Process is going,” Owen- having a permanent secretariat and ex-
Jones said. “I’m reluctant to say there are perts who can go and check problems
PAGE 34 OCTOBER 2017 AUSTRALIA’S PAYDIRT
Woodside spies African
opportunity as capital takes flight
Woodside Energy Ltd continues to world-class source rocks and even now Phil Loader
see substantial oil and gas explo-
ration opportunities in Africa, despite the we are discovering new source rocks more than ever; capital goes where it is
industry’s current predilection for US un- welcomed.”
conventional gas plays. which are opening up new areas not
– Dominic Piper
Speaking during the opening session least of which in the
of Africa Down Under, Woodside’s head
of global exploration Phil Loader said Senegal region,”
Woodside remained active on the con-
tinent despite many peers turning away Loader said.
from Africa and towards the US’s bur-
geoning unconventional gas sector. Senegal is the
“There hasn’t been an exploration major focus of
well drilled in East Africa for two years,”
Loader said. Woodside’s African
Woodside has taken advantage of exploration but the
the trend, expanding its acreage across
Africa, including in Senegal where it ac- company is also
quired ground from US-based Conoco-
Phillips. planning drilling
Loader said Woodside’s African port- and exploration on
folio fitted its strategy of entering under-
explored basins. its offshore Moroc-
“Africa is still a fit because it has many can acreage and off
under-explored areas where technology
has prevented [exploration] or the risks the coast of Gabon.
are deemed too onerous,” Loader said.
“But the vast majority of the continental With international
shelf remains underexplored or com-
pletely unexplored and much future suc- oil and gas explora-
cess will be driven by technology, com-
modity price and fiscal regime.” tion continuing to
Some 105 bboe of hydrocarbons have slow, Loader urged
been discovered in Africa since 1995
but Woodside believes similar volumes African govern-
ments to ensure
“In many areas, it is blessed with
their fiscal and
were robust enough
to entice invest-
“The price down-
turn has seen capi-
tal exit the region
change in the in-
scape,” he said.
need to compete for
AUSTRALIA’S PAYDIRT OCTOBER 2017 PAGE 35
AFRICA DOWN UNDER REVIEW
Parallels in people and politics
Parallels exist between the in un- Tanzania, that this was too generous.
folding situation in Tanzania and
moments in Australia’s past but the There has been a view that Tanzania
solution remains the same, according
to Gilbert & Tobin energy and resourc- is not getting its fair share,” he said.
es partner Phil Edmands.
Without commenting on the veracity
“My proposition is that relationships
with people are one of the key ways to of the situation, Edmands said it was
respond to these changes,” he said.
“There is a view that you need protec- interesting to look at the commonality
tions, but you need more than techni-
cal protections. You need advocates.” of why these things happened.
Edmands said one could look at “They happen in relation to local
the recent policy shift in Tanzania and
dismiss it as “one of the risks of oper- issues and in response to local pres-
ating in Africa”, but similar issues do
come up in other parts of the world, sure. There was always a strong
counterfactual [argument], but it was
He drew reference to the MMRT and
increases to the iron ore lease payments hard to get that out and make that
– a prominent topic in the recent West
Australian State election. case,” he said.
The MRRT occurred during the re- “The main type of advocacy you
source boom, when companies were
paying considerable royalties, but there see is megaphone threats of no more
was a perception that miners were still
not paying enough. Phil Edmands investments, which is not very effec-
“For the iron ore lease payments, it tive. What you need to do is cut di-
was in the context of a cash-strapped
WA,” Edmands said. turned up the heat on mining investors, rectly through to the people. The inten-
But both occurred after a groundswell passing new laws to increase mining tion is that they will advocate for you and
of public pressure.
taxes, force companies to renegotiation that would be the most effective way of
The situation is similar in Tanzania
where President John Magufuli has their contracts and allow the State to protecting your investment.
own up to 50% of shares in mining com- “In terms of cutting through, I think it is
panies. about the relationships you can call on.
After its failed experiment with social- In a modern world those relationships
ism in the 1970s and 1980s, Tanzania are social and they are online.”
had to attract foreign investment and in Edmands said it was difficult to foster
conjunction with the World Bank, created good relationships without understand-
a framework that was favourable to for- ing.
eign investors. The result was a wave of “From a very early stage, in an African
new investment in its gold mining sector context, you need to make sure you un-
from the late 1990s, the impact of which derstand the culture, language and reli-
is still being felt today. gious issues in that country,” he said.
“There has been a view since then, as – Jon Daly
the mineral industry has developed for
Gallagher insures for a ‘G-Zero world’
We are in a G-Zero world, one in are here in Perth in force this week, col- “Political risk insurers very much see
which no country or block can lectively representing over $600 million themselves in a partnership with mining
shape or direct global events. The era of of private risk insurance capacity, which companies.”
the cacophony is upon us,” Rupert Mor- corresponds to 20% of global supply,” he
gan said in his address to Africa Down said. But, Morgan said, in-country experi-
Under. ence was not a pre-requisite and political
Morgan said the private sector provid- insurers had a proven record of support-
In the midst of increasing geopolitical ed a more responsive and flexible ser- ing new projects in new territories.
tensions, it was a stark but salient intro- vice, whereas the public sector offered
duction from the executive director of inter-governmental clout. Private risk insurers had paid out $US3
Arthur J Gallagher – Australia’s largest billion in claims since 1997, according to
insurance broker – who was quoting po- “I’ll leave it to you to decide which is the Morgan.
litical scientist Ian Bremmer. more powerful risk deterrent, the Austral-
ian Government or the World Bank,” he “Perhaps surprisingly, less than 10%
“Political insurance can be seen to be said. made a claim in Sub-Saharan Africa.
a prudent risk management tool. It can [But] some might argue the events that
be bought to protect both debt and equity Morgan said there was no “one size fits have occurred may not have been cov-
and even for the most difficult countries, all” in the risk insurance business. ered by political risk insurance policies,”
cover can be found for the right project,” he said.
Morgan said. “We can literally take two comparable
projects in the same territory and under- “I would argue that is not the case and
Morgan said the market could be split writers may not provide the same pric- it is just that the risk is not quite as bad as
into two sectors: private and commercial. ing for each because it is all about who it is perceived to be in certain quarters.”
they are partnering with in the country,”
“Private market political risk insurers he said. – Jon Daly
PAGE 36 OCTOBER 2017 AUSTRALIA’S PAYDIRT
AFRICA DOWN UNDER REVIEW
Australia and Africa to
Paydirt editor Dominic Piper convened the traditional closing panel discussion at Africa Down Under 2017. Bannerman managing
director Brandon Munro, Hogan Lovells partner and head of mining Warren Beech, Acting First Secretary, Middle East and Africa
Desk, DFAT, Matthew Neuhaus, Senator for Western Australia Hon Linda Reynolds, ASPI head of international programme Lisa
Sharland and PwC director Olivier Marion shared their thoughts
Despite a full diary, Senator for West- Reynolds admitted to being a little “em- The importance of Australian engage-
ern Australia Hon Linda Reynolds barrassed” about how little she knew and ment in Africa has been recognised by
made a special trip back to Perth from how much there is to learn about engag- the diplomatic corps, with Australian Min-
Canberra to attend Africa Down Under. ing with Africa, which is spurring her ef- ister for Foreign Affairs Hon Julie Bishop
forts to ensure no stone is left unturned returning to Africa Down Under once
Inspired by a first time visit to Mining in the ever deepening relationship with again and Federal Member for Perth Tim
Indaba, Cape Town, earlier this year, Australia. Hammond also in attendance.
ignoring such an event as Africa Down
Under on home soil was not an option for “There are just so many opportunities It is Africa’s growth – globally one
Reynolds. and there is such a great crossover with in four people in 2050 will be African
some of the other things that I am work- – which has ignited such intrigue and
“After going to Indaba this year, I have ing on as a senator; the engagement and opportunity for Australia, according to
to say how could I not?” replied Reynolds social licence, I see all of those,” Reyn- Acting First Secretary, Middle East and
to a question about why attending Africa olds said. Africa Desk, DFAT, Matthew Neuhaus.
Down Under was so important.
“We have so many opportunities and “That can be a great demographic divi-
“I was so energised and excited by sometimes it is about thinking a little dif- dend or it could be a disaster. I think Aus-
what I saw and what I learnt [at Indaba] ferently.” tralia wants that to be a dividend and we
and I came back and wrote a 15-page are seeing more Africans living in Aus-
briefing for the Federal Government on Africa Down Under has turned into tralia and we see so many Australians in
all of the things I thought we could and the backbone of “Africa Week” in Perth, Africa,” Neuhaus said.
should be doing, which are things many which includes significant meetings
of you here in this room would have been around education and women empower- “It is good to see Australians and Afri-
talking about for years.” ment in Africa. cans engaging much more, but we need
PAGE 38 OCTOBER 2017 AUSTRALIA’S PAYDIRT
an Africa which is educated and we have “It is not a uniquely South African is- lose investment. Our mining policies at
a role to play in that. It is going to be an sue, but it is certainly something that we the moment are just so murky which will
Africa that is industrialised which offers face quite often; illegal mining is a reality have an impact on investment,” Beech
opportunities for those with services, etc and it is not going way,” Beech said. said.
but above all it has to be an Africa which “Until South Africa acknowledges ille- Illegal mining is widespread across
uses its own resources.” gal mining and acknowledges how big it Africa and profits are relied upon by mil-
Neuhaus said entrepreneurs both in- is and creates a policy formalisation, we lions for their livelihood.
side and outside Africa could help shape will continue having a number of difficul- The degrees of criminality attached to
“the continent’s future under the right gov- ties.” illegal mining extend to being “drivers for
ernment policy settings. extremism and conflict in
“We will be encourag- We will be encouraging the right the right conditions”, ac-
policy settings. We want to see an
ing the right policy set- cording to ASPI head of
tings. We want to see an international programme
open world; we want to Lisa Sharland.
see globalisation benefits open world; we want to see globalisation Sharland said it was
that go around the world. benefits that go around the world. imperative governments
Julie Bishop’s speech implemented structures
showed that is going and reform which consid-
to be one of the major ered the livelihood of peo-
themes of [Australia’s Foreign Policy] The illegal mining sector in South Af- ple being affected.
White Paper and I think it is important for rica is growing by the day, which is cause “There could actually be a factor that
all policymakers both here and in Africa for concern considering 20,000-30,000 exacerbates some of the grievances in
to take note of that,” Neuhaus said. direct and 100,000 indirect industry jobs the community, some of their attitudes
Warren Beech, partner and head of will be lost by the end of the year in South towards what is the illegal mining sec-
mining at law firm Hogan Lovells, said Africa. tor and from our purposes those types
policy uncertainty in mining was one of “These are highly qualified educated of grievances can be a driver of conflict,
the biggest challenges facing Africa. people who don’t have formalised jobs a driver for extremism in the right condi-
Beech said where policy was incon- and in parallel there is a very vibrant arti- tions,” Sharland said.
sistent or not communicated very well sanal, small-scale or illegal mining back- – Mark Andrews
issues were created, particularly regards ground. So, until we deal with policies in
illegal mining. illegal mining we are going to continue to
AUSTRALIA’S PAYDIRT OCTOBER 2017 PAGE 39
AFRICA DOWN UNDER REVIEW
Cardinal scopes out Namdini
It’s one thing to have a large deposit; it’s Archie Koimtsidis pect be drilled, Koimtsidis said.
another to take it to the next level and “It has 4km of contiguous 300m-wide
understand the economics around it.” are trying to achieve and put forward as
Those were the words of Cardinal Re- we try to make economic sense of it all,” anomalies and another patch down the
sources Ltd managing director Archie Koimtsidis said. bottom which is about 800m long and
Koimtsidis as he outlined the company’s about 250m wide,” he said.
plans to do exactly that with its Namidini As part of higher level studies, metal-
gold project. lurgical test work is also continuing in or- “You can’t ignore that it is nearly 5km
der to improve on phase two work which of soil anomalies up on the surface. We
Cardinal has risen to prominence on delivered 86% gold recoveries designed have been working the drill rigs 24 hours
the ASX and is making its way on the on a conventional crush-grind-float- a day, some are located on the Namdini
TSX on the back of the 4.3 moz @ 1.1 g/t regrind-CIL circuit. resource, some doing grade control/geo-
Namdini gold deposit in Ghana’s north. technical drilling, sterilisation and there’s
Meanwhile, a reconnaissance diamond a few out there drilling at Kungongo.
Leading Perth stockbroker Hartley’s drill programme has been launched to There are also a couple of others at prop-
believes there is potential for Namdini get underneath promising soil anomalies erties we have that we are drilling.”
to grow beyond 6 moz gold and it will be at the Kungongo prospect to gauge the
through no lack of effort on Cardinal’s be- orientation. The company is also waiting for drill
half if that isn’t achieved. results from other regional properties,
Results from a soil programme over which will be carefully assessed.
The company has drill rigs targeting the top of Kungongo demanded the pros-
several potential projects across the rest Cardinal has pored over its patch of
of its 900sq km land package operating ground in Ghana for the past 20 years
24/7, while it is also applying the finishing and knows patience is required to be
touches to a scoping study on Namdini. successful.
“We aim to have a scoping study out in “It is such a large district, these things
Q4 of this year followed by a PFS which take time, but we need to get it right,” Ko-
should be completed by Q2 next year. imtsidis said.
They are important milestones that we
– Mark Andrews
PAGE 40 OCTOBER 2017 AUSTRALIA’S PAYDIRT
Resolute the right fit for Bibiani
Resolute Mining Ltd managing director eye on producing at least become the third operat-
John Welborn has hit back at those 100,000 ozpa gold over
questioning his company’s ownership of an initial five-year mine ing asset in Resolute’s
the mothballed Bibiani gold mine in Gha- life, based on a mining
na. rate of 1.2 mtpa. existing portfolio, along-
“We are the right owner of this very Initial feasibility work side Syama in Mali and
large gold mine,” Welborn told Africa has flagged a $US72
Down Under. million pre-production Ravenswood in Queens-
capex to restart the mine,
“We have completed one of the only – with operating costs of land, and the fourth mine
if not the only – scheme-of-companies $US858/oz.
arrangement with the full co-operation the company has man-
of the Ghanaian Government because “This asset has every-
they recognise what we as a manage- thing we need. It’s got a aged in Africa since first
ment team recognise; that we are the 3 mtpa processing plant,
right owner of this asset which wasn’t run it’s got underground infrastructure and setting foot on the conti-
profitability by its last two owners. there’s lots of potential,” Welborn said.
nent in 1996.
“Many of my friends in the indus- “Obviously for the benefit of our share-
try have questioned our ownership of holders, we’re going to be responsible Over the past 21 years,
this asset. To those people, I say: ‘Stay with the capital that we invest in it, but we
tuned’.” also have an obligation to the Ghanaian John Welborn Resolute has produced
Government in terms of their support for more than 4.3 moz gold
An investment decision on Bibiani’s our ownership of this asset. We want to
restart is likely to be made before year’s develop this asset in a genuine partner- from Syama and its for-
end, with Resolute applying the finishing ship with the Ghanaian Government, so
touches to a revised feasibility study. stay tuned for that story.” mer Golden Pride (Tanzania) and Obot-
Resolute acquired Bibiani from Noble If successfully restarted, Bibiani will an (Ghana) operations, generating about
Mineral Resources in mid-2014 with an
$US1.5 billion for those local economies.
Resolute is expected to remain at Sy-
ama for at least another 12 years as op-
erations move underground.
“It’s an incredibly exciting technical
project and one we believe is going to
continue to elevate itself as one of the
great African gold mines,” Welborn said.
– Michael Washbourne
AUSTRALIA’S PAYDIRT OCTOBER 2017 PAGE 41
AFRICA DOWN UNDER REVIEW
Kenya sees reward for
Buoyed by the success in Kenya’s mining sector. agenda with further data acquisition pro-
of the Kwale mineral “We developed an ambi- grammes planned to help create clarity
around the geological potential of the
sands mine, the Kenyan tious five-point agenda and country.
Government is eager to have achieved its goals,” He said related policies will also assist
resources investors with further institu-
further the development Mohamed said. The agenda tional strengthening expected to improve
the ease of doing business in the coun-
of its nascent mining sec- included enacting a progres- try.
tor. sive mining law and policy to ASX-listed Base Resources Ltd oper-
ates the Kwale mine and the company’s
Kwale was brought into enhance stability, conducting managing director Tim Carstens ex-
pressed his support for the country dur-
production in 2014, be- a countrywide airborne geo- ing his own presentation at the confer-
coming the East African physical survey to increase
“We have had an extremely strong
country’s first commer- the availability of geodata, positive experience in Kenya,” Carstens
said. “Its Vision 2030 shows a sophisti-
cial-scale mine in the improving access to such cated approach to where the Govern-
ment is taking the economy and the vi-
process. The mine is now Ibrahim Mohamed data, introducing an online sion is politically bipartisan.”
a flagship project within cadastre system and estab-
– Dominic Piper
Kenya’s Vision 2030 with lishing a stable and predict-
mining identified as a future economic able fiscal regime.
driver for the country. The results have been almost immedi-
Principal Secretary at the Ministry of ate with mining and exploration becom-
Mining, Dr Ibrahim Mohamed told Africa ing the fastest growing sector in Kenya
Down Under the government of recently in 2016.
re-elected President Uhuru Kenyatta Mohamed said the Government would
would continue to incentivise investment continue to work on each aspect of the
PAGE 42 OCTOBER 2017 AUSTRALIA’S PAYDIRT
Security the focus for AAMEG
Australia’s interest in Africa is undeni- across the 54 nations of ing as much insight as
able with 170 Australian resources the continent.
companies – one in 20 ASX-listed compa- possible on the securi-
nies – invested in more than 400 projects Personal security is
across 35 countries on the continent. currently at the forefront ty situations across the
of AAMEG’s endeav-
“Africa hosts about 48% of Australia’s ours. continent would enable
resource projects in developing coun-
tries; it’s the largest by some way,” Aus- “When AAMEG was AAMEG and its mem-
tralia-Africa Minerals and Energy Group established in 2010
(AAMEG) interim chief executive Doug there was a very strong bers to better operate
Horak said. theme around corporate
social responsibility and in the region.
“We also have this incredible capabil- that continues through
ity from a leadership perspective in the the organisation some One way of doing
mining space, where a number of TSX years later,” Horak said.
and UK-listed companies are headed so, and something
and managed by Australians across the “The Dodd-Frank and the UK Bribery
continent. An estimated $40 billion in Act created another theme for us and AAMEG is fully sup-
exploration, extraction, processing and that continues to drive behaviour and
potential investment is on its way...from give guidance on how we operate in portive of, is utilising
a forward looking perspective, the future Africa. Globally, we are seeing security
in the African mining industry is an ex- change dramatically and we are seeing Doug Horak the D-Risk security in-
tremely positive one.” the impact of that and Africa has not telligence service.
been unaffected. We have established
While Australia invests heavily in Af- the AAMEG Security Group and through D-Risk was devel-
rica, volatility – whether political, geopo- that we believe security will be a key fo-
litical or security-focused – is a recurring cus for us.” oped by Sahara Mining Services in stra-
theme at different times and locations
Horak said staying informed and gain- tegic partnership with MS Risk.
AAMEG members had direct input into
the mobile app, which provides live secu-
rity alerts to smartphones and computers
as they occur.
D-Risk enables companies and travel-
lers to accurately assess the risks and
dangers with their businesses, invest-
ments and travel plans in parts of West
– Mark Andrews
AUSTRALIA’S PAYDIRT OCTOBER 2017 PAGE 43
AFRICA DOWN UNDER REVIEW
Base finding its feet
From agonising over its immedi- including its facility with Taurus Funds Tim Carstens
ate future just 12 months ago, Base Management and the continued strength
Resources Ltd managing director Tim The company has already introduced
Carstens is now revelling in the opportu- of ilmenite and rutile hydro-mining units to replace the doz-
nity to start thinking about the company’s prices has Carstens er trap method used up until now and
next stage of growth. primed to look at Carstens expects the operation’s 65%
growth rather than operating margin to be maintained or
Base endured a torrid time in its first mere survival. even improved on over coming years.
three years of operation due largely to
woeful mineral sands prices and a taut- “The price im- “Some 50% of those costs are fixed,”
ened debt structure. However, a rebound provement is not he said.
in the ilmenite and rutile markets has al- a blip,” he said.
lowed the Kenyan-focused miner to re- “Global supply is With mine life shortened, pressure is
pay debt and draw cash from its Kwale maturing and there now on the exploration team to add to
operations, opening up options for future is a need for new existing reserves. The company has re-
growth. deposits.” cently expanded its exploration footprint
around Kwale and is in the middle of a
“Twelve months ago we were set to fail Base has already drilling programme it hopes will deliver
but thanks to the ilmenite price, we are adjusted its plans resource upgrades.
now substantially cash generative and to reflect the new
able to take a huge bite out of our debt,” reality. In May, the “We are currently focused on mine life
Carstens said. company’s board extensions,” Carstens said. “We have
approved its Kwale just completed some drilling and will in-
The market has responded positively Stage 2 strategy corporate those results into a resource
to Base’s turnaround, sending stocks in which will see mine update. Next year, we will get into the
the mineral sands miner from lows of life shortened but north-east area of the ground which ex-
2.6c in January 2016 to as high as 36c in production levels cites us most.”
April this year. maintained at the
project, south of Base has dabbled in M&A previous-
The company has cleared more than Mombasa in south- ly without ever making the big catch.
half of its $US200 million debt burden, ern Kenya. Carstens said the company continued to
keep close tabs on all the world’s mineral
“The plan short- sands projects.
ens the mine life
and we will process “We think we know what sequence the
everything in two world’s mineral sands projects should
years less than pre- be developed in but we won’t push what
viously planned so doesn’t make sense,” he said.
we now have a five-
year mine life.” – Dominic Piper
PAGE 44 OCTOBER 2017 AUSTRALIA’S PAYDIRT
AFRICA DOWN UNDER REVIEW
FQM powering the community
Unrestricted power is now Kansanshi was the largest copper pro- Mike Christie
being provided to First ducer in Africa last year, while Sentinel
Quantum Minerals Ltd’s opera- maximising.”
tions in Zambia. is part of the single Speaking at Africa Down Under, Chris-
biggest capital in-
First Quantum last month vestment in Zam- tie outlined the role of mining as a “pillar
agreed to a tariff increase of bia since the Ka- of growth” for developing countries such
$US0.09/kWh, provided its riba Dam in the late as Zambia.
Kansanshi and Sentinel mines 1950s.
can import a portion of their First Quantum is credited with im-
total power requirements from “Our capital in- plementing and maintaining numerous
alternative suppliers. vestment in the health, education and environmental pro-
country so far is grammes in the country.
The tariff will be backdated something in the
to January, with a portion of order of $US5.7 bil- “Mining companies should not ever at-
the arrears to be applied to im- lion, much of that tempt to replace government, but in this
proving the stability of power actually in the last part of Zambia where the infrastructure
supplies for Kansanshi and five years,” First was so poor, certainly it was our respon-
Sentinel, in north-west Zam- Quantum global sibility to make sure they received a great
bia. exploration director deal of the benefits,” Christie said.
Mike Christie said.
State-owned power com- “We take our responsibility to the de-
pany ZESCO and the Zambian “Our operational velopment and wellbeing of communities
Government both signed off on spend in Zambia in very seriously and I think it demonstrates
the agreement and have com- the last five years how a healthy mining industry can be an
mitted to providing continuous is something in the enormous catalyst for good, especially in
unrestricted power supply to order $US7.8 billion; a developing country.”
both operations and to facili- that’s 88% of our to-
tate the importation of power from alter- tal spend. It means First Quantum employs almost 9,000
native suppliers. that a very, very locals at its Trident complex, which hosts
large proportion of the Sentinel mine, having also invested
what we’re spend- $US22 million into airport and road infra-
ing in the country structure and a further $US47 million into
actually ends up various education, resettlement and en-
going into Zambian vironmental training programmes.
business, which I
think is something – Michael Washbourne
we should certainly
be moving towards
PAGE 46 OCTOBER 2017 AUSTRALIA’S PAYDIRT
Mine financing’s new game
The slowing in global lending flows takes a long time and now private debt path, as it
since the GFC has seen the gap close lenders have a reasonably often does not provide a
between bank project finance and private jaundiced view.” total solution.
Greater interest from en- Martin said it was
Northcott Capital Ltd managing direc- dowment funds – such as important to take into
tor Nick Martin said the echoes of the pension funds in the US account that hedging
GFC were still reverberating around the and Europe – which are couldn’t be provided
banking community, which has had a looking for new products even though companies
noticeable impact on the mining finance outside of their traditional may want that part of the
sector as well. low yielding, volatile asset funding make-up, bond-
base is also making private ing and working capital
“A lot of lending institutions and banks debt increasingly attractive. Nick Martin facilities didn’t fit into the
have retreated back to their home turf; private debt mix, while re-
African banks have become less global “That has been an im- financing options required some thought.
and the global banks have either retreat- pact of the GFC, so now they are looking “It is a viable product suite and worth
ed from the market altogether or if they for different products and diversification investigating if you are putting together
are actually in Africa they might go to an and private debt is one of the areas they project finance. What you need to en-
office or branch present [nearby],” Martin can achieve that,” Martin said. sure, as when you are buying any prod-
said. uct, is that you understand what the true
Flexible terms, no mandatory hedg- cost is. Make sure you understand those
“The capital restrictions and regula- ing and early cash distributions are fea- tangible and intangible benefits and
tions which are now being enforced and tures of private debt which are appealing, make sure you are running a competitive
have to be adhered to are also having an however, Martin said it was not a “silver process so you don’t end up in a situation
impact on how they [lending institutions] bullet” for mining companies looking to where you over pay for your flexibility.”
construct their portfolios. More recently, finance a project.
we have seen the commodity downturn, – Mark Andrews
so that has impacted their portfolios and As with all funding products, in-depth
stressed debt. Working through that analysis and due diligence must be car-
ried out by companies considering the
AUSTRALIA’S PAYDIRT OCTOBER 2017 PAGE 47
AFRICA DOWN UNDER REVIEW
Perseus riding high again
The imminent release of a in February 2016 as part of its
DFS into its Yaoure gold pro-
ject could be the clearest sign merger with AIM-listed Am-
yet Perseus Mining Ltd is back
on a growth trajectory. ara Mining, Yaoure’s 3.4 moz
The company emerged bat- gold reserve/5.2 moz resource
tered and bruised but still stand-
ing from the West African gold makes it one of the largest un-
collapse of the previous five
years and with performances developed gold projects in West
improving at its Edikan gold
mine (Ghana) and production Africa.
about to start on its Sissingue
gold mine (Cote d’Ivoire), man- “We will complete a DFS on
aging director Jeff Quarter-
maine believes Perseus is about Yaoure later this year and it will
to embark on a new era.
be the cornerstone for us for
“The attrition rate of West Afri-
can gold companies is very high years to come,” Quartermaine
and there are few companies in
our peer group left standing,” said of the company’s second
Quartermaine said. “We have
learnt our lessons to great ex- Ivorian project.
pense but have survived and
laid the platform for growth.” Quartermaine said that de-
Perseus has produced more spite sovereign risk perceptions
than 1 moz gold from Edikan
since operations began in 2012 making it difficult to access
but the mine has been blighted
by performance issues through- capital for project development
out its life. However, thanks to a
raft of changes, it has enjoyed in the country, Cote d’Ivoire was
successive quarterly improve-
ments and produced 100,218oz a premier jurisdiction in West
for the half-year to June 30,
a 27% increase on the previ- Africa.
ous half, with all-in site costs at
$US1,112/oz for the June quarter. “The fiscal regime is first-
Quartermaine said Edikan had “turned class and designed to make
the corner” and was also confident first
gold would be poured at the 80,000 ozpa the environment conducive to
Sissingue mine early next year but ad-
mitted the company’s growth profile still investment,” he said. “Royalties
are well structured on a sliding
scale; it is quite enlightened.”
Not only has Perseus found
a government willing to do busi-
ness in Cote d’Ivoire, it has also
built strong social licence cre-
“It is essential a strong rela-
tionship is developed,” Quarter-
maine said of the social licence
to operate. “The best relation-
Jeff Quartermaine ships are built on trust and de-
livering on promises; it is in our
“We need to improve productivity, en- own interest to build good local support.
sure we unlock the value in our growth Local support is a proven buffer against
assets, deploy capital in a sensible and security threats and there is a distinct
prudent manner and leverage the skills link between operational productivity and
of board and management,” he said. community welfare.”
Yaoure could hold the key to Per- – Dominic Piper
seus achieving its ambitions. Acquired
Perth,Western Australia The CD-Rom for the 2017
Africa Down Under Conference
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PAGE 48 OCTOBER 2017 AUSTRALIA’S PAYDIRT
Zambia’s 2030 vision
for minerals sector
Mining is earmarked to Christopher Yaluma
play a key role in Zam-
bia’s “Vision 2030” initiative. a very small scale.
“In addition, in-
In the wake of Zambia’s
GDP growth rate slip- dustrial minerals
ping from 5.6% in 2014 to such as phosphate,
3.6% in 2015 due to falling limestone and gran-
metal and energy prices, ite will be important
the country’s Government for the growth of the
established a set of vision- agricultural sector.
ary protocols aimed at The Government
transforming Zambia into a is implementing
“prosperous middle-income programmes that
nation” by 2030. promote the ex-
ploitation of these
Mining, agriculture and minerals, which are
tourism are the main eco- often referred to as
nomic drivers of Zambia’s development miner-
economy, with the former als.”
contributing about 10% to
GDP. Yaluma said the
Zambia’s GDP growth is undertake a review
expected to increase to 4% of the Mining Act in
by the end of this year un- a bid to improve op-
der the Vision 2030 planning and 4.8% portunities for for-
by the start of 2019. eign private invest-
“Despite Zambia having been a mining
country for a long time, private invest- – Michael Wash-
ment in the industry is still very, very low,” bourne
Zambia’s Minister of Mines, Energy and
Water Development Christopher Yaluma
“The vision of the Government for the
mining sector is for a vibrant mining in-
dustry contributing to the achievement of
the Vision 2030.”
Few ASX-listed companies are cur-
rently active in Zambia, with Perth-
headquartered, TSX-listed First Quan-
tum Minerals Ltd one of the best-known
mining companies still operating in the
southern African nation.
Yaluma said mining was an important
industry for Zambia because it contrib-
uted an unrivalled level of funding to-
wards other aspects of social economic
development in the country.
“Given the vast mineral wealth that
Zambia has, the Government is promot-
ing exploration for the development of
both large and small-scale mining opera-
tions which are able to increase employ-
ment and generate new business oppor-
tunities,” he said.
“Zambia has a vast amount of metallic
and industrial minerals and gemstones.
Apart from copper and emeralds, most of
the other minerals are being exploited on
AUSTRALIA’S PAYDIRT OCTOBER 2017 PAGE 49
AFRICA DOWN UNDER REVIEW
Swirling winds in Africa
Australia’s Heads of Mission in Africa discussed the various issues taking place in their respective jurisdictions: L-R: High Commis-
sioner to Mauritius Jenny Dee, High Commissioner to Ghana Andrew Barnes, High Commissioner to Tanzania John Feakes, Ambassa-
dor to Ethiopia Mark Sawers, Ambassador to Morocco Berenice Owen-Jones, Ambassador to Egypt Neil Hawkins, High Commissioner
to Nigeria Paul Lehman, Ambassador to Zimbabwe Suzanne McCourt and High Commissioner to South Africa Adam McCarthy
Australia’s High Commissioner to Tan- ments as a way to claw back some of that ence of the ANC in December, which
zania, John Feakes, said the Tanza- space,” Feakes said. will be followed by election campaigning
nian Government’s hard-line approach ahead of the May 2019 national vote.
to miners in the country had generated “Also, I think what is driving this, is a
massive uncertainty for investors inter- fundamental misunderstanding or lack High Commissioner to South Africa
ested in the sector. of understanding on his part of how the Adam McCarthy said there didn’t appear
mining sector works and an unreasona- to be any quick-fix solutions on the hori-
In July, Tanzanian President John ble expectation of what the mining sector zon for mining companies wanting clarity
Magufuli enforced new legislation which can deliver for a country. As a destina- on the proposed MPRDA Act and Mining
effectively increased government owner- tion for investment in the mining sector, Charter.
ship in operations, increased taxes on no-one will be comfortable investing in
gold and uranium output and requires all there.” “The Chamber of Mines has taken a
companies to list 30% of their equity on number of court challenges on various
the local stock exchange. Prior to this year’s amendments to aspects. There is a lot of water to go
mining legislation, Tanzania was highly under that bridge before we come to a
The move shocked the global resourc- regarded as an investment destination in final version of what the MPRDA and the
es sector, with one of the country’s big- Africa. Mining Charter will look like, so hold your
gest revenue generators and employ- breath for the next little while,” McCarthy
ers, Acacia Mining plc, slapped with a The impact of Magufuli’s new-look said.
$US190 billion tax bill. conditions for mining in Tanzania remain
to be seen, however, the East African na- Investors can be expected to take a
Magufuli has taken aim at the mining tion is far from the only country facing the wait-and-see approach on investment
sector as part of a countrywide crack- glare of the mining community. decisions pertaining to South Africa’s
down on corruption and tax avoidance. mining sector, but if it’s any consolation
Unlike Tanzania, South Africa has to Proteas, the flight of potential capital is
Feakes said Magufuli had been driven grappled with myriad problems in its min- unlikely to end up in Zimbabwe’s mining
to make the decisions by agreements ing sector and the latest bout of proposed sector.
made by his predecessors, which were acts and charters remain lingering issues
deemed overly generous towards mining for miners and government to deal with. Ambassador to Zimbabwe Suzanne
companies. McCourt said there had been intentions
Added to the woes between industry to improve mining governance through
“Magufuli sees the recent amend- and government is the elective confer-
PAGE 50 OCTOBER 2017 AUSTRALIA’S PAYDIRT