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THE LEADING RESOURCE SECTOR INVESTMENT MAGAZINE

AUD $12.00 OCTOBER/NOVEMBER 2013 UKÂŁ8.00/CAD$12.90

Incorporating

THE EAGLE HAS LANDED USA returns to top of World Risk Survey

Unconventional Revolution Dynamic shift in our Top 100

Qld mining: Picking itself up from the canvas

Patience please

F ON OL L TW OW IT US TE R

Shale players call for calm


INDEPENDENCE GROUP NL

Creating Value Through Innovation, Discovery and Development

Independence is a vibrant, multi-commodity, ASX 200 company with quality, diversified assets. A strong commitment to exploration and discovery is the cornerstone of our company and integral to our growth. We have a proud history as well as an exciting future in Western Australia, with a range of opportunities across the entire mine cycle, including: Nickel mining at our Long operation in Kambalda Copper, zinc and silver mining at our Jaguar operation, 60km north of Leonora

The world class Tropicana Gold Project JV (30% IGO, 70% AngloGold Ashanti), located in a new gold province 330km east north-east of Kalgoorlie A significant gold exploration project, Karlawinda, located 65km south-east of Newman

Find out more about us: T +61 8 9238 8300 E contact@igo.com.au W www.igo.com.au

Beyond Western Australia, we have the Stockman copperzinc-gold-silver project in eastern Victoria


contents

regular features

Published by: Aspermont Limited (ABN: 66 000 375 048) MANAGING EDITOR: Michael Cairnduff SENIOR EDITOR – MINING: Thomas Smith EDITOR: Anthony Barich SUB-EDITORS: Melanie Jenkins, Maxine Brown JOURNALIST: Ngaire McDiarmid PRODUCTION MANAGER: Mata Henry SENIOR LAYOUT DESIGNER: Matt Leigh LAYOUT DESIGNER: Catherine Hogan GRAPHIC DESIGNER: Sun Moon ADVERTISING SALES DIRECTORS: Australasia – Angela Smith UK/North America – Gareth Hector INTERNATIONAL ADVERTISING SALES: Saithu Nair – saithu.nair@aspermont.com ADVERTISING PRODUCTION: Isaac Burrows – adproduction@aspermont.com SUBSCRIPTIONS: 9 issues per annum: $A108.00 (GST included); Regional (PNG, NZ, SE Asia) $A202.00; International $A212.00 USPS No: 024-682 The 2011 US Institutional subscription price is $A184.00 Airfreight and mailing in the USA by Agent named Air Business, C/O Worldnet Shipping USA Inc., 155-11 146th Street, Jamaica, New York, NY 11434. Periodical postage pending at Jamaica NY 11434. US POSTMASTER: Send address changes to ResouRcestocks, Air Business Ltd C/O Worldnet Shipping USA Inc., 155-11 146th Street, Jamaica, New York, NY 11434. Subscription records are maintained at Aspermont Limited, 613-619 Wellington Street, Perth, Western Australia 6000 CIRCULATION: Approximately 11,500 EXECUTIVES: Colm O’Brien – Chief Executive Officer Trish Seeney – General Manager John Detwiler – Chief Financial Officer HEAD OFFICE: Aspermont Limited 613-619 Wellington Street, Perth, Western Australia 6000 PO Box 78, Leederville, WA 6902 Australia Ph: +61 8 6263 9100 Fax: +61 8 6263 9148 Email: Anthony Barich – anthony.barich@aspermont.com Website: www.resourcestocks.net

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From the Editor’s chair Top 5

38

Copper Update

44

Market Watch

47

Coal Update

49

Gold Update

52

Oil & Gas Stocks

65

Taking Stock

73

Digging Deeper

75

44

contributors

6

47

73

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andrew sparke is managing director of Olive Capital and is a director of several resources companies

gavin Wendt is a research analyst specialising in junior stocks, and founding director of www.minelife. com.au

Peter strachan is an analyst and author of the online newsletter www. stockanalysis. com.au

allan trench is a professor at UWA and Curtin University Business School, and a director of several resource companies

features 40: sunshine state comeback Queensland is picking itself up from the canvas to reclaim its place as a favourable resources development state.

ASPERMONT UK: Albert House, 1 Singer Street, London EC2A 4BQ, United Kingdom Ph: +44 (0) 20 7216 6060 Fax: +44 (0) 20 7216 6050

56: indonesian ice-breaker Serious efforts are being made within Indonesia to rescue its resources investment perception.

COPYRIGHT WARNING: All editorial copy and some advertisements in this magazine are subject to copyright and cannot be reproduced in any form without the written permission of the editor. Offenders will be prosecuted.

DISCLAIMER: Aspermont Ltd (ABN: 66 000 375 048), publisher and owner of ResouRcestocks (‘the publisher’) and each of its directors, officers, employees, advisers and agents and related entities do not make any warranty whatsoever as to the accuracy or reliability of any information, estimates, opinions, conclusions or recommendations contained in this publication and, to the maximum extent permitted by law, the publisher disclaims all liability and responsibility for any direct or indirect loss or damage which may be suffered by any person or entity through relying on anything contained in, or omitted from, this publication whether as a result of negligence on the part of the publisher or not. The publisher does not hold itself out as an investment adviser, nor is it in the business of providing investment advice or any other advice whatsoever. Reliance should not be placed on the contents of this magazine in making a commercial or other decision and all persons are advised to seek independent professional advice in this regard. Some company profiles have been commissioned by the featured company.

16: cover story

The US has been crowned this year’s World Risk Survey winner, thanks largely to the rise of its unconventional oil and gas industry.

65: Patience please Unconventional hydrocarbon hunters and analysts are pleading for market focus as companies work up their resources. 82: oil gas revolution This year’s RESOURCESTOCKS Top 100 represents a dynamic shift in the swing of the capital pendulum.

the indispensable tool for the active resources investor Subscribe today! Visit www.industry-news.net/subscribe, phone +61 8 6263 9100 or email subscriptions@aspermont.com


CONTENTS

COMPANY PROFILES 14: Metals X While simple, special purpose companies may be easier to understand, the diversified nature of Metals X’s resource exposure brings stability and a balance of opportunity. 28: Cap-Ex Iron Ore Canadian junior CEV has an absolute monster of a project on its hands, and just needs a strategic partner with foresight to take it through to production.

10: Phoenix Gold In less than three years, PXG has plenty of cash flow and is on the cusp of developing its flagship project, which has just had a 75% resource boost.

36: Inca Minerals Inca Minerals has transformed from explorer to driller as it moves to define the newly discovered porphyry at its impressive Chanape project in Peru. 53: Alkane Resources Patience is a virtue that will pay big dividends for this multicommodity mining company.

60: Impact Minerals This Perth-based explorer is emerging from a chrysalis as a company poised to spread its wings and establish resources. 68: Cott Oil & Gas In the short time since its ASX listing in January 2013, CMT has honed in on exciting opportunities in the tightly-held PNG oil and gas fields. 76: KGL Resources With a name change and a streamlined focus on its Jervois project, KGL is that rare bird: a cashed-up junior well placed for the market’s turnaround. 80: Consolidated Tin Mines With global tin demand rising and commodity experts calling tin the best performing metal of 2012, CSD’s plan to become Australia’s next tin producer appears perfectly timed. GC_UNBS011 CRICOS Provider Code 00126G

Cott OIl & Gas’s drill crew in PNG.

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30: RMG Limited The more RMG Limited sees of its new Tuina project in Chile, the better it gets. And the company is not standing still.

It has $100M in the bank to get its gold project off the ground and its massive rare metal-rare earth project has an estimated mine life of 80 years.

At the UWA Business School you’ll learn directly from global business leaders. What would you like to achieve?

Dr Michael Chaney AO Chairman, NAB and Woodside Energy

If you’re looking to use the power of a World Top 100 university’s MBA to transform your career, there’s only one which can give you opportunities to connect with and learn from top global resources company leaders in Western Australia. And there’s only one which can provide you with the freedom to complete an intensive MBA (offered from 2015) in just 12 months, or a flexible, full-time or part-time MBA to suit your life.

Dr Richard Goyder AO Managing Director Wesfarmers Ltd

Jimmy Wilson President, BHP Billiton Iron Ore

And all within Australia’s most global energy city, which also has the nation’s largest number of listed companies. To find out more about the UWA Business School’s MBA and its specialist focus areas in resources, leadership and general management, as well as the unique LAUNCH holistic leadership and personal and career development program provided, call +61 8 6488 3980 or visit mba.uwa.edu.au

As part of a privileged cohort of top students you’ll receive unmatched access to boardroom lunches, guest lectures and mentoring opportunities with companies of the calibre of BHP Billiton, ATCO Australia, Woodside and Wesfarmers, among many others.

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OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


MINING LIMITED

High Grade Underground Gold Mt Kare, PNG

Target:

1 Moz @ 10 g/t gold

Planned:

150 - 200,000 oz/yr in 2015

Exploration: Rapid underground drilling - to expand high grade zones Partnership: Mining experts ACM and GR Engineering Fast Track:

High margin gold production - half capex, less time

Corporate

Major Shareholders

ASX:IDC Shares Issued 880 M Market Cap. A$70 M

Baker Steel Genesis Asset Management BlackRock Capital Research

Indochine Mining Limited

www.indochinemining.com

11% 9.9% 6.6% 4.6% ASX:IDC


FROM THE EDITOR’S CHAIR

ANALYSIS

A

FTER MONTHS OF DEVASTATION AND CARNAGE, especially for junior resource stocks, signs of hope are emerging across the mining and oil and gas sectors. With cost concerns and sovereign risk perceptions dogging the local industry, coupled with China’s slowing but still growing economy, there have been only a handful of initial public offerings on the ASX and less elsewhere, even on traditionally strong boards like the TSX-V. Yet as we at RESOURCESTOCKS have said the whole time, China - not to mention India - will continue providing plenty of demand, the mining sector will not disappear and the new federal government has provided hope and promise that life will get better for the resources sector. With offshore oil reserves depleting, Australia’s onshore oil and gas is starting to hit its straps, at least in South Australia, which unsurprisingly has yet again topped Australia’s states in the RESOURCESTOCKS World Risk Survey. Meanwhile, drilling companies are springing up to solve Western Australia’s dilemma of rig shortage to harness the state’s unconventional potential. Asian investors, while more rigorous in their due diligence after a string of horror experiences, are still super-keen on Aussie resource stocks. Olive Capital MD Andrew Sparke details this on page 6 in a special analysis to coincide with Mines and Money Australia, which Melbourne is hosting for the first time. Mines & Money Australia and Hong Kong conference director Siobhan Corry told RESOURCESTOCKS in August that the Melbourne event was tracking ahead in terms of bookings from last year, “which we are delighted about given all the market sentiment we’ve heard is negative”. “Our impression is investors are seeing an opportunity to buy up cheap assets and get in while the stocks are relatively low,” she said. “[Sprott US Holdings chairman] Rick Rule has made his whole career out of buying low and selling high and is a keynote speaker. We’re definitely seeing signs of a recovery in the market and that’s being reflected in the event.” This optimism is reflected in Australia retaining its place in the top 10 of the World Risk Survey, whose results reflect the rise of unconventional oil and gas that has gripped the US, which has won it for the first time sine 2009. This year’s RESOURCESTOCKS Top 100 also reflects the fact that the investment pendulum has swung towards hydrocarbon-chasing stocks, with 21 listed in the Top 100 – one more than gold, the perennial favourite for Aussies. Ernst & Young’s Oceania oil and gas sector leader Russell Curtin told RESOURCESTOCKS that corporates around Australia across the board – not just in the resources sector – are turning their reporting agenda from cost reduction to capital allocation and growth. They believe the time to act on transactions and growth is now, to prepare for the next cycle. “The traditional way these businesses are operated is very challenged, so the stories we’re hearing [from oil and gas juniors] are funding coming from different sources – private equity out of the Middle East, high net worth individuals contributing large capital; convertible notes; and some [Aussie explorers in the] US are talking about more traditional debt-based funding for the development of the reserves discovered,” he said. Anthony Barich Editor RESOURCESTOCKS magazine

THE mega deals of recent years are likely now a thing of the past as write-downs, muted confidence and market uncertainty force companies away from risk-taking mergers and acquisitions activity and into safer plays, such as joint ventures and spin-offs. These are just a few of the observations detailed in PricewaterhouseCoopers latest global mining deals mid-year report, which assesses the level of M&A activity from January to June and predicts what lies ahead in the coming year. Despite the mining industry facing a confidence crisis, PwC said limited deals had been undertaken so far following a surge in acquisitions in the past several years. M&A activity in volume terms fell 31% from the prior year to 649 deals, with total deal values down 70% to about $US22.9 billion ($A25.1 billion). The three largest deals for the first half of the year involved the sale of portions of companies as opposed to complete takeovers – and included the $3.62 billion that two Russian oligarchs paid for a 37.8% stake in Polyus Gold. PwC said there were five deals valued at more than $1 billion in the first half of the year, compared with eight in 2012 and 11 in 2013. The catalyst behind the fewer deals appeared to be lower commodity prices. Yet gold and copper came out on top when it came to what metals were the most attractive for M&As. Gold led the charge and PwC expects this trend for gold and copper transactions to continue as depressed prices create opportunistic buys.

Sound investment advice and indepth market analysis from Peter Strachan (internationally recognised market analyst)

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OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


Australia’s newest high-grade gold producer ASX: DRM Doray Minerals is Western Australia’s newest high-grade gold miner and producer at its Andy Well Gold Project in the northern Murchison region of WA. The Company’s transformation from junior explorer to gold producer in just 3.5 years has been meteoric. There is near-term project upside with the potential for additional deposits and the Company has an excellent track record of meeting milestones on time and under budget. A strategic portfolio of gold properties in the Murchison and South Australia places the Company in an enviable position of future potential upside and returns to shareholders. Led by an experienced team with a track record of discovery, development and production, Doray is now a low-cost gold producer. www.dorayminerals.com.au


analysis

mines & money AustrAliA

The Great Wall of China. Asian investment in Aussie resource stocks continues to grow. 6

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


WORDS BY ANDREW SPARKE

CROUCHING

TIGER, CHANGING

DRAGON Following a recent trip to Asia that included Mines & Money Beijing, Olive Capital MD Andrew Sparke gives RESOURCESTOCKS an exclusive update on Asian investment ahead of Mines & Money Australia. Assessing sentiment from fund managers, state owned enterprises and private investment companies within Asian investment markets, he has noted their changing views towards outbound investment for Australian resources companies.

C

HINA HAS invested approximately $A30 billion into Australian resources projects in recent years. Anecdotal evidence suggests that approximately 70% of these investments are underwater. This fact, coupled with the receding demand for commodities and recent bearish pricing sentiment, has led to a retraction in resources investment. There is a general feeling throughout China and Asia that previous deals were not thoroughly assessed – and more robust due diligence will need to be conducted for future investments. It means future transactions are likely to be slower and more difficult to complete. Over the last 12-18 months we have seen a significant drop in resource

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

transactions and investments out of the Asian region. Importantly, there was a general mood among most delegates at Mines and Money Beijing that those investment flows are starting to move again. So what are they looking for?

COMMODITY FOCUS

In recent years we have seen significant Chinese investment at a time when commodity prices were at the top of the cycle. On the positive side, the Chinese are starting to take a contrarian view to current market conditions and investment cycles. They see value at current pricing levels. I had many discussions with SOEs, fund managers and private investors about what they were looking for. In terms of the favoured commodities, copper and gold were among the most highly sought after.

There was also interest in uranium, base metals, oil and gas and potash. Coal was a commodity that was particularly on the nose due to falling demand, an expected increase in supply coming onstream and an emerging view within China of the need to improve the environment. There also seems to be a rejuvenated interest in investing in infrastructure to support mining operations such as ports, rail and processing plants.

INVESTMENT DESTINATION Geographically, while there was some talk in China of diversifying its large Australian investments to other jurisdictions such as Africa and the Americas, there is a general consensus that Australia remains one of the preferred outbound investment destinations. The reasons for this are discussed later in this article.

7


DEVELOPMENT STAGE

In terms of preferred stage in the development cycle, there is still a reluctance to invest in early stage companies, particularly greenfield exploration. The Chinese are still looking for companies and projects that are in production or as close to cash flow as possible. Aside from the reduced risk profile of more advanced companies and their need to secure supply of resources, the Chinese understand that the transition from explorer to producer is generally where most investment gains are achieved. There is, however, an appetite for early stage companies with high quality projects and management – but this still remains a difficult place to raise funds.

INVESTMENT SIZE

The Great Wall of China. The Chinese are changing the way they structure deals with Australian resources companies.

The Chinese investment market is generally seeking larger investments of greater than $10-20 million. They are less likely to do smaller investments unless resources companies can show a path to production or a strong development pipeline. The Chinese are prepared to invest in a smaller way early if they can see a larger capital raising at some future point in time to meet these production and development milestones. There were also lots of interesting discussions regarding the changing way the Chinese are structuring their investments. In the past the Chinese have largely insisted on taking a

controlling stake (51% or more). This has obvious consequences in terms of incentivising on-ground management and in most cases hands operational accountability to the financier. Due to a number of deals that have not performed, in part due to the structuring of the deal, the Chinese are beginning to soften their stance and move towards a “partnership” model. This provides mining and exploration companies with the flexibility to manage and add value to their projects. It also hands back management of the projects and their operations to the mining company. As mentioned above, for the first time in recent years the Chinese are considering smaller investments at an earlier stage but only for quality project and management teams that can demonstrate a path to production. The justification here is that if they partner and grow with Australian resources companies at the exploration stage they will have a better understanding of the company’s management, structure and projects prior to larger investments. This is a newer methodology and is being cautiously trialled by a select group of Chinese investors.

CHINESE MORATORIUM ON IPOS

The main stock exchange in China, the Shanghai Stock Exchange, has recently extended its moratorium on initial public offerings. Various reports indicate that there

are more than 700 Chinese companies queuing for the opportunity to list. With only 952 companies listed on the exchange this highlights the size of the issue for China. It has led to a flood of Chinese companies seeking alternative stock exchanges and sources of funding. The moratorium was introduced on October 10, 2012 by the China Securities Regulatory Commission. It followed claims by investors that a number of Chinese IPOs had cooked the books or embellished their prospects in their IPO disclosure documents. It led to a lack of confidence in the regulatory system and its ability to adequately control and supervise the market. Further exacerbating the problem, the Chinese market has performed poorly in 2013 when compared to other world exchanges. This, coupled with the fact that many Chinese IPOs are significantly underwater, has added to an acute lack of confidence for Chinese listings. Additional to this – and despite three years of government attempts to cool the property sector – many Chinese investors still see the property market as providing stronger gains over the longer term. Many market commentators are talking up the possibility of a housing bubble and say a lack of confidence in Chinese stock markets is fuelling this threat. The poor performance of the SSE this year is in part due to foreign investment receding from emerging markets, such as China. However, the problem with IPOs in China has more to do with credibility than a drain on market liquidity. The credibility of the exchange is also a function of foreign exchange controls.

EFFECTS ON CHINESE OUTBOUND INVESTMENT

The Australian Securities Exchange is not the only exchange that Chinese companies are targeting. The US, Singapore and Hong Kong exchanges have also seen a large influx of demand from Chinese companies looking to list. However, these exchanges have seen a number of recent Chinese listings perform poorly, thus reducing ongoing investor appetite in these regions. One of the main reasons for the attraction of the ASX is that the cost of listing here is significantly lower than other exchanges. The cost of a listing on the ASX is approximately $500,000 compared to 8

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


Singapore where it’s estimated to be $1 million and Hong Kong where you can expect to pay $5 million. In Singapore and Hong Kong there is also a preference for larger and more established companies. To the contrary, the ASX has a strong history of supporting smaller companies at an earlier stage in their development cycle. Due to this, Australia is often a preferred destination for Chinese listings. Despite a crackdown by Australia’s corporate regulator, the Australian Securities and Investment Commission, there are still record numbers of Asian companies seeking a listing on the ASX. Of the 2162 companies listed on the ASX in August 2013, ASIC has identified that 571 listed companies are from the Asia-Pacific region. The other key driver of Australian listings is the credibility that an ASX listing brings to Chinese businesses on home soil. Because the ASX has stringent admission and continuous and periodic disclosure requirements, the transparency of the market mechanism and the quality of companies listed on it is perceived by many Chinese investors as being superior.

HOW ARE CHINESE IPOS BEING STRUCTURED?

It is interesting how IPO transactions are being structured by Chinese companies. Many Chinese listings on the ASX are what we call compliance listings. This means they are only raising the minimum amount of capital required to meet the ASX listing rules and complete their IPOs. These small capital raisings also allow Chinese companies with large Chinese investor bases to meet the minimum spread requirements. This reinforces the fact that the primary aim of Chinese companies is to use the listing to build credibility in their home market and not to raise funds, which is typically the prime motivation for most IPOs. A good example of this is the recent listing of a small Chinese telco, TTG Mobile Coupon Services. The company recently listed in the ASX with a market capitalisation of approximately $642 million. The compliance listing only raised $2.4 million, just enough to support the cost of the listing. These Chinese listings typically only accept subscriptions for 5-25% of the issue capital with the balance being held by the original owners.

“For the first time in recent years the Chinese are considering smaller investments at an earlier stage.” ANDREW SPARKE OLIVE CAPITAL

This has obvious implications for control. As most people would be aware, under the Corporations Act, Australian companies require 75% of a shareholder vote to pass a special resolution. Thus providing the company complete control over its business affairs. Control, as discussed earlier, is also a common prerequisite for Chinese investment into Australian resources companies.

THE OPPORTUNITY

This bodes well for Australian resources companies and presents a number of opportunities. As well as increasing the number of companies listed on the ASX it will facilitate further investment flows to Australian resources companies over the medium to longer term. It will improve the perception among the Chinese investment community that Australia is a stable and robust jurisdiction for foreign investment. As Chinese wealth increases, the number of emerging companies and entrepreneurs in China will also increase. With more Chinese companies choosing Australian shores, it will continue to bring financial benefits to Australia. Ongoing interaction between Australian and Chinese businesses will also improve Australia’s understanding of this key market and the opportunities it presents. For savvy businesses, it also presents an opportunity to partner with Chinese companies, learn how they do business and build longer term and mutually beneficial relationships. It also points to the fact that the Chinese believe that Australian markets are improving for IPOs. With the ASX at near five-year highs, growing confidence following a decisive federal election and reports showing economic momentum in China, this will continue to support investment in the resources sector. At Olive Capital we have also seen an increased level of interest in investing in Australian resources companies. This is in part due to the strengthening confidence in Australia as a robust investment destination. For example, Olive Capital is

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

assisting a resources company called Cascade Resources, which is in the process of listing on the ASX. Olive Capital has attracted investment from various Asian, Australian and London-based investors and two ASX-listed gold producers. The Asian investors in particular have backed the management and the projects in their quest for significant gold discoveries in Western Australia’s Eastern Goldfields region.

WHY FOCUS ON ASIAN INVESTMENT?

Over a number of years, Olive Capital has focused on securing Asian investment for Australian resources companies for a number of reasons. We know that Asian investment is generally more patient capital if managed correctly. Investments from Asia are generally made for the longer term, which is built into their psyche. But they are also investing strategically to secure supply of raw materials. It is well known that the Asian region has the largest appetite for natural resources and is the largest contributor towards outbound investment to Australian resources companies. China and other Asian nations have labour intensive industries that are largely manufacturing and construction sectors. As natural resources are major inputs to the manufacturing process, the Chinese have a very good understanding of the demand drivers for these products. Chinese investors are more inclined to participate at all stages of the investment cycle and are generally better suited to supporting the medium-term objectives of miners. In the current climate it is even more imperative that small and midcap resource companies understand Asian investment markets. In order to maximise their capital raising prospects, resources companies should engage advisors that have deep-seated relationships and on-ground knowledge within this region. Olive Capital provides a pathway to these investments. 9


company profile

aUSTRalia

phoenix gold

phoenix ensures cash flow before mining In less than three years, Phoenix Gold has plenty of cash flow and is on the cusp of developing its flagship project, which has just had a 75% resource boost. Ngaire McDiarmid reports

P

hoenix Gold has devised a recipe for success – it is focused on delivering ounces at the highest possible margin and rewarding shareholders for their investment. The company has worked hard to consolidate 600sq.km of underexplored tenure in the historically rich Western australian Goldfields and its ever-increasing resource shot up to 2.9 million ounces of gold last month (september). Phoenix has identified Castle hill as a new large-scale, multi-million ounce gold camp – just 50km north of the regional city Kalgoorlie-Boulder – and plans to bring it into production by mid-2015. Phoenix’s finances are in place to develop the exciting project via four avenues: $16 million in the bank, cash

10

being generated by processing historic gold waste dumps, norton Gold Fields starting mining at its Catherwood gold project and Phoenix starting up its own Blue Funnel gold mine. Phoenix managing director Jon Price said 2013 was a defining year for the company as it transitioned into development and production. The definitive feasibility study for the flagship Castle hill project is on track to be completed by december with Price saying Castle hill was emerging as a significant gold development for the region. an independent geological review and resource audit on Castle hill stage 1 produced excellent results last month, boosting resources 75% to 21.8 million tonnes at 1.6 grams per tonne gold for 1.137Moz. The review by Cube Consulting

brings the total Castle hill resource to 30.9Mt at 1.6gpt for 1.6Moz, up 37%. More resource increases could be on the horizon, with further independent reviews of Castle hill stage 2 and Red dam expected around the time of going to press. Price welcomed the huge resource boost and said it added to the many positive attributes at the low-cost, straightforward Castle hill project. “it’s in a safe jurisdiction, with very conventional mining, very conventional milling, the metallurgy is excellent and we have all the people and all the infrastructure we need close by to develop this exciting new gold project for the Wa Goldfields,” he said. “it’s very good news for the region and for our shareholders.” Phoenix’s second focus area is the highly prospective Broads dam gold project, which contains the Blue Funnel gold mine and the Red dam deposit, which will feed into the Castle hill mining operation. at the time of going to press, Broads dam held a resource of 5.81Mt at 2.2gpt gold for 409,000oz. Phoenix embarked on a massive 217,000m drilling program earlier this year to better understand its 22 underexplored tenements. intercepts to date include high grades such as 9m at 22.9gpt gold, 6m at 97.5gpt and 7m at 8.5gpt from 139m. “The ground hasn’t been systematically explored and we were the first company in history to drill below 80m,” Price said. “What we are finding is quite spectacular. We’re quite glad they didn’t drill more back then because it’s all upside for us.” Phoenix has an initial eight to 10-year mine plan using stages 1 and 2 at Castle hill and the nearby Red

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


“Even though we’re an explorer we’ve been generating cash from the outset.” jon price phoenix gold

phoenix gold at a glance $A ASX:PXG

0.30 0.20 0.10

6 months ending September 17, 2013 share price as of sept 17 $0.18 head office 73 Dugan Street Kalgoorlie 6430 Australia Ph: +61 8 9021 2704 Fax: +61 8 9021 3393 Email: info@phoenixgold.com.au Web: www.phoenixgold.com.au

Dam deposit, where an independent resource update is also imminent. “Castle Hill is very large scale, it’s never going to be bonanza grade but it’s going to deliver economic ore at 1.6gpt to 1.7gpt gold for a very long time,” Price said. The Red Dam deposit, 12km from Castle Hill, is Phoenix’s highest priority exploration target. It has a resource of 229,00oz at 2.1gpt and remains open along strike and at depth. “Red Dam is on the famous Zuleika shear and what we’re looking for over there is the 2gpt to 4gpt higher grade open cut followed by the 5gpt to 6gpt underground, which is typical of the region,” Price said. “It has an enriched supergene zone at the surface and then it has the

very high grade shoots that are near vertical and similar to the other gold mines in the area – Bullant, Frog’s Leg and Raleigh. “We’re in the same geological setting as those mines and we haven’t drilled yet.” Phoenix has 17,000m of drilling planned for Red Dam to prove up the strike and the project’s potential. The company has already proven its ability to mine gold by starting up the small-scale Blue Funnel gold mine about 5km south of Red Dam. The existing pit was developed by Phoenix, with a very modest capital cost of $200,000 and a near-term net cash target of $3 million but it is punching above its weight in profit. “It’s delivering $3 million at the $1350 gold price but at the current

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

projects Castle Hill, Broads Dam, CarbineZuleika North, Kunanalling (Catherwood), Ora Banda-Grants Patch Market capitalisation $A46.9 million (at press time) Quoted shares on issue 240.4 million shares at tiMe of float 172 million 52 Week high $0.39 52 Week loW $0.09 Ytd change % -0.12% 11


gold price it’s more like $5 million cash into the business,” Price said. “Blue Funnel is a case to bring in a lot of cash but it also demonstrates we can mine, mill and make gold bars.” Price said Phoenix’s bright outlook was bolstered by its strong financial position. “Even though we’re an explorer we’ve been generating cash from the outset by selling historic stockpiles that are economic ore in the current gold price environment,” he said. “Doing the deal with Norton Gold Fields, giving them the right to mine at our Catherwood project, gives us internal cash generation.” Under the deal, Norton mined stage 1 of the Catherwood mine of about 19,000oz at no cost to Phoenix, which retains ownership and plans 12

world-class gold province offers plenty of scope for organic growth. Price said exploration projects Carbine and Zuleika North were very robust but outside Phoenix’s current development focus. “Once we start producing [at Castle Hill] we don’t really have to look for further major additional portfolio assets, we can grow from within the ground we own,” Price said. “At Ora Banda and Grant’s Patch, the prospects in the area are very high but there hasn’t been a lot of work there in 20 years. “The drilling targets are all there waiting their turn but what we’ve been focused on is to monetise stage 1 and stage 2 of Castle Hill and also Red Dam, to deliver cash from those in the initial eight to 10-year life plan and get some of that cash flow that we generate back into these areas to continue the exploration success we’ve had so far. “We’re in a fantastic, world-class gold producing region.” Price said labour and input costs were coming down and Phoenix could focus on improving its margins. “It’s about keeping it simple,” he said of the company’s strategy for success. “Make as much cash as you can while you’re growing the resource, then focus on developing a good cash margin that can be used to quickly repay debt and start rewarding shareholders. “We’ve got a simple open cut mining strategy, we’ve got a simple milling strategy where we keep our costs really tight and we focus on delivering cash margins back to shareholders then growing organically from within.” to explore the project’s significant Phoenix’s board and management further open pit and underground have a wealth of experience potential. specialising in mining in the Price said Phoenix had a number Goldfields. of development options to choose “We have the technical competence from as it progressed plans for Castle to be moving into development and Hill. production because we are essentially “We can potentially use existing developers and producers through milling capacity within the region our careers and we are now able to and that’ll enable us to generate cash capitalise on our core competencies,” and continue for years to come until Price said. the market environment improves,” “The gold price is in good shape he said. and the fundamentals for the gold “I don’t think it will be a case of business is strong, we just need to ‘if’ the mill goes in to Castle Hill but improve the sentiment in the market, in ‘when’ – and when the market is right, particular in the junior resource space. we’ll act.” “There are a lot of positive All of Phoenix’s projects are in the things happening in the market so I Goldfields, a region Price describes think there’s a wave coming and as fantastic to operate in, while the we’re looking forward to being part projects’ close proximity within a of that.” OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


The Boardroom tHe Firm PXG is an emerging WA gold company with a consolidated tenure in a world-class Asutralian goldproducing region. It has an extensive land holding on the Zuleika and Kunanalling shear zones northwest of Kalgoorlie-Boulder, home to some of Australia’s richest gold deposits. PXG’s resources have grown from 595,000oz to 2.95Moz since 2010, with an initial reserve of 559,000oz. PXG is targeting 4Moz with a development investment decision on

tHe Strategy the Castle Hill gold project expected in the December quarter. The board and management each have more than 20 years’ experience in the mining industry in the region.

tHe SHareHolDerS SHL 7.03% Merrill Lynch (Aus) Nominees 6.39% Citicorp Nominees 6.02% National Nominees 4.35% JP Morgan Nominees Australia 3.03%

PXG aims to significantly grow its JORC-classified resources, complete a DFS on core projects and self-fund aggressive exploration through the development of advanced mining projects to deliver cash flow in the short term. Its 100%-owned Castle Hill gold project is emerging as a flagship asset with the potential to become a multi-million-ounce gold mine with excellent metallurgy and close to all major infrastructure.

tHe DirectorS Stuart Hall NoN-executive Director

JonatHan Price maNagiNg Director

A qualified geologist with over 40 years’ experience in exploration and mining projects in Australia, Africa and Southeast Asia. Has experience in exploration and mine geology, open pit and underground mining operations, resource/reserve estimations, feasibility studies, mine project development and mine management. His experience has covered a wide range of commodities including base metals, gold, iron ore, tantalum and industrial minerals. Runs his own geological consultancy and is a non-executive director for Horseshoe Metals.

A metallurgist with over 20 years’ experience in the resources industry in Australia. He joined Sons of Gwalia Ltd in 1992 and undertook a range of roles at its Leonora, Laverton and Bullfinch gold operations. In the late-1990s, he was responsible for its combined Southern Cross operations treatment facilities at Marvel Loch. During this time, he successfully completed a major upgrade to the plant, increasing

throughput to +2.5Mtpa. He then joined St Ives Gold Mines (part of Goldfields Ltd) in Kambalda and was responsible for development of new heap leach operations of 3Mtpa, and the construction and commissioning of its new 5Mtpa processing facility. He then took on the role of general manager, managing all aspects of the 500,000ozpa operation. He joined Norton Gold in 2007 as GM operations for the Kalgoorlie region, in which he was responsible for its 3Mtpa Paddington facility with numerous producing mines. He has a Bachelor of Engineering (Metallurgy) and a Master of Science (Mineral Economics).

Dale rogerS NoN-executive chairmaN A mining engineer with 30 years’ experience in the resources industry. Has experience developing and operating underground and open cut mining operations in a range of commodities. Previous roles include operations management, project construction and development, corporate management and financing. Has developed and managed operations in Africa, South America and throughout Western Australia. Is chairman of Primary Gold, a director of the corporate consultancy Peregrine Enterprises and was formerly the managing director of Albidon Limited. OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

13


company profile

australia

metals x

diversity, stability in a tough climate While simple, special purpose companies are easier to understand, the diversified nature of Metals X’s resource exposure brings stability and a balance of opportunity.

I Spiral and Wilfley tables in the Renison tin concentrator plant.

14

n a market where companies and institutional investors appear to be pushing for special purpose or single commodity focus, metals X has been bucking the trend with its portfolio of base and precious metal assets. It is no better emphasised than in recent times with an across-the-board malaise of gold companies where large impairments have been taken, in some cases bigger than the market caps of the entities themselves. Further, big gearing has exacerbated this and as banks and

financiers have wound in their risk profiles, hugely dilutive capital raisings have destroyed shareholder interests. there has been none of this at metals X. the company is conservatively run, has no corporate debt and has lots of cash (more than $80 million) in the bank. Despite the carnage, metals X shines like a beacon, booking a profit for the year of $8.7 million. Further, it hasn’t been to the market for four years (since august 2009) and according to chief executive Peter Cook, has no intention or need to do so. the core business of metals X is its base metals interests and in particular its tasmanian tin operations. metals X is the dominant player in the tin industry in australia. Cook is genuinely excited about tin. his spiel is thus: “tin is an essential metal today, it is critical to everyday life. tin is in every electrical product we own, as the key conductor [solder] to make electrical contacts and joins to wires and circuit boards. “there is no replacement, perhaps silver is a better conductor and gold is even better but they are way more expensive and less abundant,” he said. “In recent years the resurgence has been partially driven by lead replacement of tin in the solders the electronics industry. “tin is the new green metal and this current phase has been one of environmentally driven demand. “Lead-free is the buzz term as the conscience and responsibility of the western world moves to replace lead as a known toxin from entering our waterways and landfills through electronic and computer dumping. tin is benign to humans with no known

material impacts on human health or the environment.” For some time now, analysts have universally been calling the tin price higher. there is dwindling sources of supply, limited discoveries and some of the more mature mines are in the wind-down phase and this market will get caught short. many believe a supply crisis is looming and higher prices are just a matter of time. metals X’s 50%-owned renison mine is operated in joint venture with, among others, the world’s largest and most vertically integrated tin producer, Yunnan tin. after investing heavily in exploration, mine development and plant in recent years, the future of the operation is possibly the brightest in its whole 100-plus years history. the total mineral resource inventory has expanded to 11.6 million tonnes at 1.76% tin equivalent to about 16 years of annual plant feed. Production is growing and profits are rising. metals X believes the renison mine is well positioned to benefit strongly from any future uptick in the tin price. metals X is also the 100% owner of the wingellina nickel-cobalt project in the musgrave ranges of central australia. the company acquired the project in 2005 and did substantial work, culminating in a feasibility study in 2008. with a backdrop of a cluster of failed nickel laterite projects in australia, metals X has continually contended that this one is different. “wingellina is a limonite not a laterite and to compare the two is like comparing chalk and cheese,” metals X director warren hallam said. “a limonite is very high iron,

OCTOBER/NOVEMBER 2013 rEsOurCEstOCKs


“Tin is the new green metal.” peter cook metals x

50% Fe2O3 in the case of Wingellina and very low in magnesium oxide, less than 2% MgO in the case of Wingellina. This makes it not only hugely different chemically from the failed laterites of Australia’s eastern goldfields but the very ore type that the HPAL [high pressure acid leach] method of processing was made for.” Coincidentally, the wave of limonite projects using the HPAL process seems to endorse this view, with the newly built Ambitovy project in Madagascar the latest, along with Coral Bay in the Philippines, which appear to have had a relatively seamless technical start-up processes and look to work very well. However, they are high capital cost projects, which Hallam says “is the price you need to pay for a long-life low cost supply of nickel”. Metals X has been actively trying to find partners to help them get the project away. The depressed nickel price has curtailed the urgency but Cook emphasises: “This is a worldclass project, one of the largest undeveloped nickel deposits in the world today. We own it outright. “It is not a matter of if it will be developed but when. The biggest issue we face is the imbalance in the timing of the rewards that will come with the investment timeframes of our shareholders and investors.” Metals X’s gold division contains the Central Murchison gold project at Cue in Western Australia, which has rapidly transformed over the past 12 months into a significant gold asset with a resource base of 5 million ounces and an initial reserve of 1.17Moz. On the back of the large resource increase, a definitive feasibility study was completed in January 2013 that

Ultrafine Falcon Jin considered a 100,000 ounce per in the Renison tin annum production scenario with concentrator plant. estimated cash costs of $A980 an ounce. However, Metals X previously advised it had no plans to rush into a new gold development and believed that consolidation and more efficient use of plant capacity in the region was logical and in everyone’s best interest. This, in hindsight, may be a wise and considered view – with the recent rout in the gold price, the market values and prospects of its peers in the region have been heavily diluted and consolidation appears to be well and truly a key factor in the survival game. “We’re in no rush here but with gold resources now valued at about one-fifth of the average discovery cost and mine infrastructure valued at similar ratios to replacement costs, it’s a buyers’ market,” Cook said. No surprise there, since it was Cook, backed by his chairman Peter (Talkie) Newton, who in a similar market environment in 1996 bought the Hill 50 mine from Western Mining and made their shareholders a small fortune. The gold division also holds the Rover project near Tennant Creek in the Northern Territory. The main project there is the Rover 1 prospect where a virgin iron oxide-copper-gold discovery has been drilled out and which contains approximately 1.2Moz of gold equivalent in a polymetallic copper-gold deposit, with credits also of cobalt and bismuth. Metals X is also planning a high-grade underground mine and processing operation, with an exploration decline being approved and authorised by the NT regulators in April 2013.

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

metals x at a glance

Head Office Level 3, 123 Adelaide Terrace East Perth WA 6004 Australia Ph: +61 8 9220 5700 Fax: +61 8 9220 5757 Email: reception@metalsx.com.au Web: www.metalsx.com.au directOrs Peter Newton, Peter Cook, Warren Hallam, Andrew Ferguson, Simon Heggen, Xie Penggen, Yimin Zhang market capitalisatiOn $A190.1 million (at press time) QuOted sHares On issue 1.65 billion majOr sHareHOlders Apac Resources 24.1% Jinchuan Group 10.7% Board & Management 8.5% Blackrock Investments 4.4% 15


COVER STORY

World risk survey 2013

16

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


Words by AnThOny bARiCh

This year’s World Risk Survey represents a seismic shift in the resources power bases, reflecting where struggling markets are leading investors in terms of both commodities and destinations – and the United States has forced its way to the top, again.

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

17


T

Belo Horizonte, Minas Gerais state, which accounts for more than 70% of Brazil’s iron ore output.

18

he UniTed STaTeS is truly the “land of hope and glory” as far as investor perception goes. Consistently rated in the top 10 in the ReSOURCeSTOCKS World Risk Survey, the progress of its unconventional hydrocarbon industry and something of a comeback in its hard rocks sectors have powered the US into top spot this year. The US last won in 2009, and has been a consistent performer since. indeed, in 2011-12 the US was the third largest gold producer in the world, while on the oil and gas front, the US is transforming from being an importer to an exporter which is expected to have wider ramifications for global markets. The analysis of Sprott US holdings chairman Rick Rule, the keynote speaker for Mines & Money australia in Melbourne in October, vindicated the US’ victory and the continuing dominance of Canada. “We believe, given better than average adherance to the concept of the ‘Rule of Law’ that north american jurisdictions are in some sense absolutely less risky than most jurisdictions,” Rule told RESOURCESTOCKS. “i differ from many observers in that i see our hemisphere as risky too: witness alberta’s action in high gas price times. “i am also of the opinion that the perception of this [northern] hemisphere’s relative safety means that equities are sometimes over

priced relative to other jurisdictions that are absolutely riskier, but much cheaper. The least risky jurisdiction is easily Chile.” Govert van ek, managing director of Perth-based Sun Resources, which has a lease position in the Woodbine tight oil Play in eastern Texas, said the US, and particularly Texas, was a veritable haven for hydrocarbon investment. “in the US, but more specifically Texas, the industry is well regulated, with significant expertise among the state legislators in terms of how to manage and administrate oil and gas operations,” van ek told RESOURCESTOCKS. “infrastructure is easily accessible for smaller players like us partly due to the laws in place supporting that. “There are also a lot of technological experts and companies centred in houston that can help with well completions and frac designs etc. “There is a real can-do mentality in Texas and support in general by mineral rights owners to come and drill on their lands, quite unlike what we currently see in eastern australia. “in Texas, the oil industry is central to state revenues and is well supported.” Canada, another consistent performer in global risk analysis, came second, replicating its 2012 placing. it is emerging as a coal leader, while historically it has also been a large gold and copper producer. Rio Tinto’s subsidiary iron Ore Company of Canada has also

identified the country’s potential for iron ore. it is significant that australia maintained its strong ranking inside the top 10, rising one place from last year to sixth, reflecting the fact that while companies may go elsewhere with australia’s oft-cited uncertain tax environment, many companies still like to call australia home. Better the devil you know, as they say… This, despite Western australia Premier Colin Barnett telling a resources forum in Perth recently that he had alarmingly first heard the words “sovereign risk” applied to australia during a trip to China and Japan mid-year.

POWER SHIFT

it is the developing world that truly shines in this year’s World Risk Survey. With capital at a premium, juniors especially have been flocking to places where costs are minimal, which is why Mexico, Botswana, Chile, Peru, Burkina Faso, Brazil and namibia rounded out the top 10, in that order. While cost is proving a major factor for explorers in north america especially, cost was not a category in the World Risk Survey, where respondents were asked to rank financial, social and sovereign risk, land access, green and red tape, land claims, infrastructure, civil unrest, natural disasters and labour relations out of five – 0 being the best and 5 the worst. Mexico’s rise is nothing short of phenomenal. it rose from 28th in 2011 to 12th last year, and has come into its own since the federal government changed the mining act in 1995 to essentially de-nationalise the industry. The survey results have come at a particularly timely juncture as Brazil votes to relax heavy regulation around entities outsourcing core activities to subcontractors. The other significant factor around Latin america is that as the larger deposits are mined out by the majors, juniors from australia, Canada and further afield are arriving in droves to grab the resources that, while still substantial enough to make junior explorers’ shareholders money, are no longer of interest to the big boys. it is not uncommon for such juniors to surprise themselves and stumble onto something larger as Latin america continues to throw up gems – and closer to surface than miners have to go to find something decent elsewhere.

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


The same thing has been happening in the North Sea offshore UK for a number of years now, with AIM-listed juniors filling the gaps that have opened up as the majors lose interest in the historically considerable hydrocarbons there. Just as investors are tightening the screws on their investments, so too have we at RESOURCESTOCKS regarding our criteria to rate the world’s top investment locations, in a move to produce a truly gutsy World Risk Survey where only the strong survive: that is, those with a substantial number of votes justifying their inclusion have formed our “main list”. It has to be acknowledged, however, that the traditional Scandinavian powers Finland, Sweden and Norway have strong established resources development cultures, and are in fact leaders in R&D in both the mining and oil & gas space, which even Australia’s resources boom has benefiting from. Many of their service providers are world leaders. The UK, while largely mined out, is consistently rated among the likes of the World Economic Forum as one of the best places of doing business

“Governments need to understand, calculate and time their interventions into their resources sector.” ROBERT MILBOURNE NORTON ROSE FULBRIGHT

– and it is no different in regards to resources development (fraccing protests aside). With this in mind, we have still provided readers with a full breakdown of those countries who missed the cut for the main World Risk Survey list but none the less received votes and deserve to be given due visibility. Those three Nordic nations, along with the UK, would have come in the top 10 had the criteria not been tightened. This is not so surprising given the European Commission has drawn up a detailed plan to alleviate its raw materials crisis, while fostering unconventional hydrocarbon exploitation to reduce dependence on old Mother Russia. However London-based Petra Billing, co-chair of the Mining sector

for Europe the Middle East and Africa at global law firm DLA Piper, told RESOURCESTOCKS that Europe may have missed the boat. At the very least, it seems certain to have given away ground to competitors for resources investment. “The difficulty we’ve had in Europe in recent years is that there has been limited investment due to lack of predictability in commodity prices,” Billings said. “The shift in focus really has largely turned away from Europe to the developing minerals jurisdictions like Africa, the Middle East and China where there are funders certainly, a prospect of greater returns due to much lower cost base in terms of labour, and, it’s fair to say, the lack for red tape. “For the funders, it’s a balance

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19


Auger drilling in Burkina Faso, West Africa with Coffey Mining.

between recognising that there are advantages to both.” While there is an element of risk involved in places like Africa, Billing said the difficulty with the minerals market was that, from the point of identifying the resources to getting it out of the ground, there is such a huge time lag. Europe, she said, may have suffered from this due to the financial crisis – where companies had not invested in the technology, research and exploration as much as they might otherwise have done. “There is a risk that, in lacking that investment, they’ve let their competitors elsewhere get to the finishing line quicker,” Billings said. As much as the European Commission’s plans, if brought to fruition, will likely eventually change the geopolitical picture of the region, these developments will take many years to eventuate, while the US is already there. The US oil boom has reportedly been moving Congress closer than it has in decades to ease its ban on exporting crude. Production increased last year by a record 766,000 barrels a day. Meanwhile, the US Energy Information Administration reported in April that higher volumes of shale gas production are central to higher

total production volumes and a transition to net exports. Coal companies may beg to differ with our World Risk Survey respondents’ crowning of the US, with President Barack Obama taking his stance on climate change to the forefront by confirming power plant emissions rules in June that threaten to change the industry fairly quickly.

MISTIMED INTERVENTIONS

The rise of developing countries could account for growing concern about overzealous interventionist policies in places such as Australia, despite it maintaining its strong risk rating. Meanwhile, developing countries themselves who are growing in their awareness of their geological potential, are considering – and in some case implementing – policies to extract more from miners. Robert Milbourne, Brisbanebased partner at global law firm Norton Rose Fulbright, told RESOURCESTOCKS that one of the biggest risks being faced was the approach by some governments as to when and how they should intervene to renegotiate their take of the regulatory opportunities from the resource sector globally. “Some governments are becoming increasingly interventionist on the

“There is a risk that, in lacking that [R&D and exploration] investment, European countries have let their competitors elsewhere get to the finishing line quicker.” PETRA BILLING DLA PIPER 20

basis of record mining sector profits over the last several years, and that approach could threaten the viability or original business cases of some projects,” he said. “When a government commences renegotiating contracts and royalty arrangements, particularly when the market itself is in a downturn, the result can be negative to the industry. “I was really surprised by a conversation with an African country’s minister of mines, who asked what I thought about renegotiating their contracts, or state agreements, with miners – ‘should and how do we do it?’ “My response was that you can only do it within the confines of law, and if you’re going to renegotiate you should think about whether you could end up paying compensation. “What’s really happening to many mining companies is drops in market capitalisation and profitability.” Milbourne believes a deeper understanding of the nature of the resources industry and what is likely to come around the corner is needed, so governments focus on bringing about growth particularly when growth is at risk. “So the biggest risk that I see today is the global nature of the industry and the need for governments to effectively intervene on behalf of their population,” he said. “Australia is a very good example. “The industry was heading into its biggest downturn when certain state and federal legislation changes were made which resulted in companies having to bear increased financial burden. That sent a negative signal to the industry. If the government had put those policies in place before the downturn, it might have been less of a burden on companies. Some argue that these policies created incredible uncertainty for foreign investors considering whether to deal with Australian entities. “Governments need to understand, calculate and time their interventions into their resources sector, to avoid further challenges to the resources cycle that we’re already in.” It is not just in Australia. It is a problem in other countries too. One South American government proposed increasing its iron ore royalty from 2% to 4% at a time when some companies there were probably seeing their worst market conditions in the past decade, Milbourne said. “The government is probably not going to get much more take by increasing their royalties but are

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


causing a really negative stimulus to companies and to an industry which is probably not easily able to absorb that,” he said. “You may now see as a result less investment, less growth, less productivity.”

CROWEATERS CRUISING

South Australia has again won the “battle of the states”, with its reputable mines and petroleum department bending over backwards as always to facilitate investment and its geology still highly regarded. Its oil and gas industry is booming in the Cooper Basin with links to multi-billion dollar LNG projects in Queensland and a guaranteed market in NSW and Victoria. On the mining side the Eyre Peninsula is growing a reputation as “the Pilbara of graphite” – to say nothing of the state’s well established copper, uranium, gold and zinc mining industry, among others. Still, in the breakdown of Australian states and Canadian provinces, South Australia paled in comparison to several Canadian regions – with Saskatchewan, Alberta, Nova Scotia, Quebec, Ontario, Manitoba, New Brunswick, British Columbia and Yukon all rating ahead

“In the US, but more specifically Texas, the industry is well regulated, with significant expertise among the state legislators in terms of how to manage and administrate oil and gas operations.” GOVERT VAN EK SUN RESOURCES of the Croweater state, reflecting the comprehensive strength of the Canadian resources development scene. With all this taken into consideration, this year’s survey shows a dynamic shift in more than one way. It also reveals that the mining industry is definitely not dead, not by a long shot, despite the prognostications by experts in recent editions of RESOURCESTOCKS in an environment where juniors were struggling for their very survival, IPOs were (and are still) minimal and majors were writing projects off and sacking CEOs all over the place. Billing said commodity price fluctuations and global economic uncertainty, combined with concerns about waning demand from China, had made it difficult for mining companies’ futures.

She said this would lead most commentators to notice a significant restructuring due to declining margins and reduced cost base in the next 12-24 months, if it was not already happening. “We’re going to see a spate of ‘rescue M&As’ as companies join forces to maximise joint resources and streamline processes and investment,” Billings said. “The positive out of all of that is that it’s fair to say that the mining industry remains a very safe bet, because demand is expected to increase exponentially. “But we may see a shifting landscape of who the main players of today are. They may not be the main players of tomorrow. They may be overtaken by companies who are brave enough to invest in new markets and new emerging technology.”

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OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

21


WORLD RISK SURVEY WORLD RISK SURVEY 2013 Financial Sovereign Land risk risk access

Green tape

Land claims

Red tape Social risk

Infrastructure C ivil unrest

Natural disasters

Labour relations

Maximum risk rating

3.3

3.4

3.26

3.35

3.12

3.65

3.2

3.15

2.75

2.16

2.76

Minimum risk rating

1.1

1.02

1.02

1.34

0.65

1.46

0.64

0.63

0.55

0.47

0.9

Rank Country

Total

1

United States

1.46

1.25

2.08

2.26

1.74

2.38

1.58

1.06

0.78

0.89

1.23

16.72

2

Canada

1.51

1.53

1.89

2.13

1.79

2.15

1.44

1.56

1

0.97

1.38

17.35

3

Mexico

1.9

1.7

1.79

1.76

1.54

2.1

1.68

1.58

1.44

0.82

1.43

17.73

4

Botswana

2.02

1.62

1.76

1.73

1.72

1.95

1.66

2

1.22

0.91

1.31

17.91

5

Chile

1.69

1.96

2

1.9

1.48

2.27

1.67

1.65

1.07

1.12

1.53

18.35

6

Australia

1.61

1.8

2.26

2.48

2.18

2.67

1.54

1.48

0.76

0.78

1.61

19.17

7

Peru

1.51

1.65

2.04

2.11

1.95

2.4

2.01

2.07

1.34

1.01

1.37

19.45

8

Burkina Faso

2.22

2.35

1.92

1.71

1.89

2.06

1.66

2.12

1.55

0.81

1.64

19.92

9

Brazil

2.11

2.11

1.97

1.79

1.66

2.56

1.92

2.03

1.53

0.94

1.4

20.01

10

Namibia

2.17

2.33

1.85

1.87

1.81

2.35

1.78

1.89

1.22

0.97

1.8

20.03

11

Zambia

2.23

2.3

2.21

2.01

2.03

2.56

1.92

2.05

1.58

1.18

2.03

22.08

12

China

2.38

2.67

2.36

1.91

1.9

3.07

2.15

1.7

1.27

1.16

1.8

22.36

13

Argentina

2.42

2.49

2.22

2.14

2.09

2.66

2.3

1.98

1.57

1.04

1.76

22.68

14

Mozambique

2.64

2.52

2.04

2.01

2.02

2.51

2.13

2.17

1.77

1.2

2

23.02

15

Malawi

2.73

2.53

2.14

2.2

2.04

2.4

2.01

2.07

1.57

1.21

2.14

23.04

16

Tanzania

2.31

2.38

2.41

2.31

2.19

2.59

2.09

2.21

1.65

1.11

1.96

23.21

17

Ghana

2.38

2.52

2.52

2.21

2.02

2.85

2.18

2.08

1.82

1.1

1.93

23.58

18

Colombia

2.46

2.53

2.53

1.77

1.83

2.59

2.56

2.41

2.05

1.11

1.75

23.59

19

Morocco

2.23

2.38

2.38

2.26

2.19

2.65

2.24

2.21

1.79

1.35

2.03

23.7

20

South Africa

2.33

2.72

2.47

1.97

2.19

2.6

2.52

1.77

2.17

1.09

2.33

24.15

21

Indonesia

2.72

2.89

2.47

2.1

2.25

2.97

2.18

2.01

1.65

1.38

2.03

24.63

22

Fiji

2.45

2.62

2.53

2.2

2.6

2.92

2.1

2.43

1.81

1.48

1.8

24.94

23

Cambodia

2.73

2.53

2.43

2.12

2.06

2.92

2.35

2.7

1.83

1.41

1.9

24.98

24

Angola

2.64

2.72

2.47

2.13

2.13

2.85

2.5

2.52

2.2

1.24

2.02

25.42

25

Mongolia

2.9

3.13

2.65

2.21

2.15

2.63

2.24

2.71

1.71

1.27

1.92

25.51

26

Madagascar

2.73

2.82

2.43

2.39

2.04

2.82

2.38

2.43

1.96

1.34

2.23

25.57

27

Ivory Coast

2.55

2.82

2.33

2.2

2.14

2.82

2.56

2.43

2.44

1.21

2.14

25.62

28

Algeria

2.64

2.95

2.31

2.15

2.05

2.76

2.69

2.6

2.31

1.28

2.12

25.86

29

Venezuela

2.75

3.17

2.49

2.12

2.38

3.04

2.56

2.31

2.11

1.18

1.8

25.92

30

Papua New Guinea

2.52

2.78

2.53

2.25

2.6

2.85

2.56

2.75

2.1

1.5

2.02

26.47

31

Kenya

2.86

2.95

2.61

2.57

2.38

2.8

2.45

2.27

2.11

1.49

2.5

26.98

32

The Philippines

2.64

3.01

2.82

2.68

2.6

3.13

2.65

1.98

1.93

1.41

2.23

27.07

33

Pakistan

3.08

3.29

2.72

2.35

2.28

2.68

2.77

2.73

2.57

1.49

1.8

27.74

34

Democratic Republic of Congo

2.92

3.21

2.67

2.11

2.32

2.97

2.88

2.66

2.55

1.44

2.31

28.05

35

Uganda

2.86

2.83

2.83

2.57

2.6

3.16

2.67

2.84

2.2

1.57

2.4

28.53

36

Egypt

2.79

3.17

2.87

2.38

2.38

3.16

3.06

2.45

2.75

1.31

2.27

28.59

37

Guinea

3.02

3.01

2.72

2.68

2.6

3.13

2.65

2.88

2.12

1.54

2.4

28.75

38

Zimbabwe

3.19

3.34

3.23

2.5

2.98

3.32

2.93

2.58

2.38

1.32

2.4

30.18

39

Nigeria

3.15

3.4

2.89

2.68

2.68

3.49

2.92

2.76

2.63

1.65

2.4

30.64

40

Sierra Leone

3.08

3.17

3.06

2.9

2.82

3.29

2.99

2.94

2.48

1.96

2.6

31.28

22

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


WORLD RISK SURVEY 2013 | the also rans Financial Sovereign Land risk risk access

Green tape

Land claims

Red tape Social risk

Infrastructure Civil unrest

Natural disasters

Labour relations

Maximum risk rating

3.3

3.4

3.26

3.35

3.12

3.65

3.2

3.15

2.75

2.16

2.76

Minimum risk rating

1.1

1.02

1.02

1.34

0.65

1.46

0.64

0.63

0.55

0.47

0.9

Rank Country

Total

1

Oman

1.32

1.36

1.36

2.01

0.65

2.19

0.64

0.63

0.55

0.47

1.2

2

Greenland

1.32

1.02

1.02

1.34

1.3

1.46

0.96

1.89

0.83

0.71

0.9

12.38 12.74

3

Finland

1.1

1.13

1.36

1.79

1.08

1.7

1.07

1.26

0.73

0.78

1

13.01

4

United Kingdom

1.49

1.36

2.38

1.84

0.98

2.19

1.28

0.79

0.69

0.82

1.2

15.01

5

Norway

1.32

1.36

2.04

2.01

1.3

2.19

1.28

1.26

1.1

0.94

1.2

16

6

Sweden

1.32

1.02

1.7

2.68

1.3

2.56

1.92

0.95

0.83

0.71

1.2

16.17

7

New Zealand

1.19

1.63

2.18

2.28

1.69

2.19

1.28

1.51

0.77

1.32

1.32

17.35

8

Turkey

1.32

1.81

2.04

2.23

1.52

1.95

1.92

1.47

1.47

1.1

1.6

18.42 19.64

9

Spain

1.98

2.27

2.27

2.01

1.95

2.92

1.71

1.26

1.1

0.78

1.4

10

Ukraine

1.98

2.04

2.04

1.34

2.6

2.92

1.92

0.63

1.65

0.47

2.4

19.99

11

Greece

1.32

2.72

2.04

2.68

0.65

3.65

1.92

1.26

1.1

0.47

2.4

20.21

=12

Turkestan

1.98

2.04

2.04

2.01

1.95

2.19

1.92

1.89

1.65

1.41

1.8

20.88

=12

Uzbekistan

1.98

2.04

2.04

2.01

1.95

2.19

1.92

1.89

1.65

1.41

1.8

20.88

13

Kazakhstan

2.42

2.72

2.04

1.79

1.73

2.43

1.92

1.89

1.28

1.1

1.6

20.92

14

Malaysia

2.11

2.04

2.04

2.28

2.08

2.63

2.43

1.76

1.76

1.22

1.92

22.28

15

New Caledonia

2.11

2.18

2.18

2.41

2.34

2.92

1.92

2.39

1.32

1.03

1.8

22.6

16

Suriname

2.31

2.55

2.21

2.18

2.11

2.74

2.24

2.21

1.65

1.06

1.8

23.05

17

Kyrgyzstan

2.81

3.06

2.21

1.84

1.63

2.74

2.08

2.52

1.51

1.06

1.65

23.1

18

Thailand

2.38

2.58

2.58

2.55

2.47

2.92

2.43

1.89

1.65

1.22

1.68

24.35

19

Vietnam

2.11

2.86

2.45

2.51

2.08

3.07

2.24

2.14

1.65

1.53

1.95

24.58

20

Laos

2.64

2.55

2.55

2.18

2.28

2.74

2.4

2.68

1.79

1.41

2.1

25.31

21

Myanmar

3.3

3.4

2.72

2.01

1.95

2.92

1.92

3.15

2.2

1.41

1.2

26.18

22

Mauritania

2.64

2.72

2.31

2.41

2.34

2.77

2.56

2.9

2.09

1.41

2.28

26.44

23

Iran

2.64

3.17

2.95

2.23

2.38

3.41

2.77

2.31

2.02

1.25

1.8

26.94

24

India

2.77

2.99

2.72

3.35

2.6

3.65

2.72

2.39

2.06

1.65

2.16

29.07

25

Mali

2.9

2.99

2.99

2.41

2.73

2.92

2.82

2.9

2.64

1.6

2.4

29.3

26

Russia

2.97

3.06

3.06

2.68

2.6

3.65

2.88

2.52

2.2

1.65

2.1

29.37

27

Burundi

2.97

3.06

2.89

2.68

2.76

3.1

2.72

2.84

2.48

1.65

2.55

29.69

28

Niger

2.9

3.26

2.99

2.81

2.86

3.07

2.82

2.9

2.42

1.6

2.4

30.03

29

Eritrea

3.08

3.17

2.72

2.9

2.82

3.41

2.99

3.15

2.2

1.41

2.6

30.45

30

Senegal

3.14

3.23

3.06

2.85

2.93

3.29

3.04

2.99

2.34

1.76

2.55

31.17

31

Somalia

3.3

3.4

3.26

3.08

3.12

3.5

3.2

3.15

2.75

2.16

2.76

33.69

WORLD RISK SURVEY 2013 | Canadian provinces and Australian states Province/ Rank state/territory

Total

1

Saskatchewan

1.32

1.36

1.5

1.88

1.43

1.9

1.15

1.64

0.88

0.85

1.08

2

Alberta

1.32

1.13

1.93

2.01

1.73

2.31

1.28

1.26

0.92

0.94

1.3

14.98 16.13

3

Nova Scotia

1.32

1.36

1.87

2.01

1.79

2.01

1.28

1.42

0.96

0.94

1.35

16.31

4

Quebec

1.19

1.5

1.63

2.14

1.69

2.19

1.54

1.39

0.88

0.94

1.68

16.76

5

Ontario

1.32

1.47

1.81

2.12

1.84

2.19

1.49

1.26

0.92

0.94

1.5

16.87

6

Manitoba

1.65

1.53

1.87

1.84

1.79

2.01

1.28

1.58

1.1

0.94

1.35

16.93

7

New Brunswick

1.49

1.36

1.7

2.35

1.95

2.19

1.6

1.58

0.96

0.94

1.2

17.31

8

British Columbia

1.47

1.51

2.13

2.35

1.79

2.46

1.36

1.34

0.83

0.94

1.28

17.44

9

Yukon

1.49

1.53

1.7

2.01

1.79

2.01

1.44

1.89

1.24

1.18

1.35

17.61

10

South Australia

1.53

1.79

2.04

2.37

2.11

2.6

1.48

1.54

0.7

0.71

1.58

18.42

11

Northwest Territories

1.82

1.53

2.21

2.35

1.79

2.19

1.44

1.58

1.1

1.06

1.5

18.55

12

Tasmania

1.41

1.94

2.43

2.68

1.86

2.61

1.28

1.44

0.86

0.6

1.46

18.58

13

Western Australia

1.61

1.75

2.14

2.33

2.23

2.59

1.38

1.66

0.77

0.81

1.51

18.78

14

Newfoundland and Labrador

1.98

1.81

2.04

2.23

1.95

2.19

1.49

1.89

0.92

0.94

1.4

18.85

15

Victoria

1.65

1.79

2.3

2.6

2.28

2.65

1.36

1.18

0.76

0.82

1.65

19.02

16

Queensland

1.62

1.78

2.15

2.32

2.12

2.71

1.51

1.41

0.76

1.06

1.62

19.05

17

Northern Territory

1.62

1.7

2.41

2.3

2.49

2.62

1.76

2

0.78

0.76

1.67

20.1

18

New South Wales

1.81

1.86

2.34

2.78

2.17

2.95

2.01

1.14

0.73

0.7

1.78

20.27

19

Nunavut

1.76

2.27

2.27

2.23

1.95

2.19

1.92

1.89

1.28

1.1

1.6

20.46

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

23


world risk survey

words by AnThOny bARiCh

regional focus

Mount Rushmore in South Dakota, US.

north america: land of hope and glory THE US has returned to the top of the RESOURCESTOCKS World Risk Survey this year, largely on the back of interest in its unconventional oil and gas boom. Mining is another question entirely. Its North American counterpart Canada is the world’s sixth-largest oil producer in a petroleumintensive economy and has long been considered a mining powerhouse, with a stock exchange that raises the most capital for mining in the world. The US Energy Information Administration projects US natural gas production will increase from 23 trillion cubic feet in 2011 to 33.3Tcf by 2040, almost all of which is due to projected growth in shale gas production. However, the EIA acknowledges there is still “considerable uncertainty” about the size and economics of the resource – for a case in point see the Oil & Gas Stocks feature in this edition of RESOURCESTOCKS.

“There has been a lot of interest in metallurgical coal, particularly in British Colombia and there seem to be a lot of Australian companies involved in that.” DENNIS ARNE CsA GlobAl “Many shale formations, particularly the Marcellus, are so large that only a limited portion of the entire formation has been extensively production tested,” the EIA said. While the hype surrounding shale gas from documentaries like GasLand is debatable, the environmental concerns are real and could provide a clear and present danger to commercialisation prospects, despite the Obama government’s determination to replace coal with 24

the cleaner-burning gas for domestic power generation. Environmental concerns around gas are largely around the use of large quantities of water at the expense of other uses, the threat of contamination posed by potential chemical spills, leaks or faulty well construction as part of the hydraulic fracturing process and the treatment and disposal of the contaminated water used in said process. Sun Resources managing director Govert van Ek outlined what his company does in Texas to illustratate a well-oiled system in the US. “At our Seale and Keeling wells water is purchased from the land owner. We access this via a water well that we put into a frac pond and pump it downhole during the frac,” he said. “In our five-stage frac in T.Keeling we pumped in around 30,000 barrels of water. We recover the water from production flowback and it gets trucked off to a recycling centre where they purify the water back to specification for release back into the environment.” While 95% of US gas has been produced domestically anyway, it is the shale oil potential that could change global geopolitics. Behind Russia (75 billion barrels), the US has the second-highest technically recoverable shale oil resources at 58Bbbl. The US has a strong history of minerals extraction and while the retreating gold price earlier this year caused some domestic mine owners to reduce production plans, the US was still the thirdhighest gold producer in the world, more than 75% of it from Nevada. While US states vary wildly in their mining-friendliness, CSA Global’s geochemistry principal consultant Dennis Arne told RESOURCESTOCKS from Vancouver, where most of Canada’s junior miners are based, that there was a strong anti-mining sentiment in some parts of the US due

to environmental concerns across the country. Utah has a well-established copper mining industry, there’s a very big iron ore industry in Minnesota and there are a number of fairly new projects in nickel-copper deposits in MinnesotaWisconsin up in the northeast. While Minnesota is a good mining state, not so much next door in Wisconsin. New Mexico is promining but California is “pretty much a no-go zone”. “In a lot of areas there is environmental resistance to mining, like Montana, which had a bad experience some time ago with a heap leach operation that contaminated groundwater supplies. So that’s really put the local population’s backs up against mining,” Arne said. He said Keystone XL’s proposed oil pipeline from Canada into southern US would be politically “a hard sell”, as “people are not seeing it as providing a whole lot of jobs versus the environmental risks associated with it, in people’s minds”. Canada, meanwhile, is the world’s largest producer of zinc and aluminium and is also a major producer of gold, nickel and lead. Iron ore is strong in the Labrador district, gold and base metals are prominent in Ontario and Quebec. British Colombia is good for copper-gold. There have been a number of gold discoveries in the Yukon Territory. There is a wellestablished uranium mining industry in northern Saskatchewan, which has potash as well. “There has been a lot of interest in metallurgical coal, particularly in British Colombia and there seem to be a lot of Australian companies involved in that,” Arne said. The Quebec government’s “Plan Nord” will see roads built to northern parts of Quebec to provide access to a number of major projects, amid concerns over lack of infrastructure in Canada’s far north.

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


WORLD RISK SURVEY

WORDS bY AnThOny bARiCh

regional focus Machu Picchu, a 15th century Inca site in Peru, at sunrise. Photo courtesy Nick Castle, Darkroom Illusions

latin america – investment boiler room WHILE the Australian government touts the Asian century and China’s growing middle class that’s feeding Australia’s slowing boom, Latin America remains the “boiler room” for world industry and could well remain so over the next century. This year’s World Risk Survey affirms the perennial favourites for foreign investors in Chile (5th), Peru (7th) and Brazil (9th), with Mexico skyrocketing into third spot. “The stars in Latin America are no doubt Mexico, Chile, Brazil, Colombia and Peru, which is one of the real rising stars,” geological, mining and management consultancy CSA Global managing director Jeff Elliott said. “Peru’s is one of the fastest growing economies in Latin America and is a significant producer of gold, silver, copper and a bunch of other things. “In the face of sovereign risk threats, security issues, remoteness and lack of infrastructure, which in many cases seem to be on the increase rather than decreasing, Latin America has lost none of its charm in recent times to investors and explorers.” Elliott told RESOURCESTOCKS that rising costs of entry into the “investment hot spot” of the last five years or so – west Africa – and its geological similarities to northeast South America are luring explorers over to Latino country. Due to this, Guyana, French Guyana, Suriname and the northeastern part of Brazil are starting to tweak the interest of the junior market, not just from the TSX, which has always heavily funded South America’s mining industry, but those from the ASX and AIM boards too. There were more than 50 Australian mining suppliers and about 20 Australian junior miners in Peru. Then there are the strongholds. “In Chile and Brazil, with advanced mining industries, second and third-tier companies

will now be looking for operational improvement services to making mines more efficient to bring them up to international standard – indeed some of them are already operating at or above western standards like Antofagasta in Chile and Vale in Brazil,” Elliott said. He noted that 25% of global exploration dollars were spent on Latin America in the last year prior to Q2 – much of it being spent by exploration companies (juniors). Last year, 491 TSX/TSXV mining companies operated in Latin America, with $C1.9 billion of equity capital raised on TSX/TSXV for Latin American mining projects. There were 29 new TSX/TSXV listings in 2012 with projects in Latin America. Elliott’s consultancy has been active in Latin America for nearly 20 years including in Brazil, Colombia, Chile, French Guiana, Guyana, Guatemala, Mexico, Peru, Suriname and Uruguay. With this depth of experience, his observation is that the Latin exploration boom has increased. However, regulations and the general investment environment is not homogenous across the continent – and Argentina, which was a surprise inclusion in the top 20 at number 13 in this year’s World Risk Survey, is a microcosm of the phenomenon. He said Argentina was a good example of how mining policy varied from one province to another, even at a local level. “In Argentina it is necessary to engage at all levels of bureaucracy from local council to province and federal levels on most projects and to be prepared for inconsistencies and sometimes contradictory requirements,” Elliott said. “This has given the mineral-rich nation a bad reputation next to its more pro-resource industry neighbours such as Chile, Peru and even Uruguay.

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

“This, along with increasingly populist nationalistic policies being brought about at a federal level in relation to mineral assets, not to mention a monetary policy, which makes it almost impossible to expatriate any profit mining companies extract from their investments, create a frustrating mix of complicated red tape and unstable foundations for investment.” Elliott noted that Chile’s minerals industry had been attracting foreign investment for more than three decades. “This proactive approach to foreign investment and involvement in the economy has had a very positive impact on the country’s overall economy and subsequently security and standard of living,” Elliott said.

“Latin America has lost none of its charm in recent times to investors and explorers.” JEFF ELLIOTT CSA GLObAL “Chile now boasts one of the most resilient and stable economies of the region and continues to hold the title of first port of call for the majority of international interests.” While Peru is also a wellestablished mining hub, it has some catching up to do compared to Chile. “Internal difficulties persist between local administrations and indigenous and artisanal miners that have left their mark on the government’s attempts at competing with neighbouring Chile in this market,” Elliott said. Other Latin America countries such as Uruguay, Paraguay and Bolivia also have strong mining industries but due to foreign policy issues and, in the case of the latter two, internal political stability issues, they are still largely overlooked by investors, he said. 25


world risk survey

words by AnThOny bARiCh

regional focus

Wildebeest, or “wild beast”, can be found on the grassy plains and open woodlands of central, southern and eastern Africa.

africa: enticing, but energy challenged AFRICA is the success story of this year’s World Risk Survey. While the Nordic and North American countries have previously dominated the survey, our rigorous due diligence on exactly what constitutes a country’s risk rating has elevated several African nations to positions that reflect where investment has been heading of late. London-based Petra Billing, co-chair of the mining sector for Europe the Middle East and Africa at global law firm DLA Piper, told RESOURCESTOCKS that Africa, along with Latin America, was the beneficiary of commodity fluctuations stemming from global economic uncertainty. While there has historically been a difficulty in attracting talent in Africa, this issue has been put to the side for the sake of financial prudence.

investing in the areas where building schools, doing as much as they could for the local community, were critical. The risk in African countries, aside from more obvious issues of potential political instability, is of some governments being too greedy. But even this is overridden by cost concerns, reflected in the likes of Botswana, Burkina Faso and Namibia making the top 10, while mineralsrich countries such as Zambia, Mozambique, Malawi, Tanzania, Ghana and Morocco placed in the top 20. “Labour costs and the costs of doing business are so low, one could argue that they outweigh those risks,” Billing said. “There has been a confidence crisis in mining over the past few years, but it’s important to recognise that the mining industry remains a very safe bet because demand is going to increase, not decrease.” “If you think this is a feeding While nationalisation concerns abound, investors need to keep in frenzy, you wait and see what mind what one South Africa-born happens when oil is discovered.” Deloitte analyst believes is the single biggest challenge to Africa’s BILL PAGE development. deloiTTe It is not poverty, but energy. “My personal view is that one “While companies have been for the reasons a lot of beneficiation restructuring quite heavily in Europe doesn’t happen in Africa is because in trying to reduce costs in labour, there is no electricity, without which there have been people available you don’t know if you’re going to in the market who perhaps would be able to switch on your smelter not have gone to these very remote tomorrow, because there’s such locations, but have necessarily been volatility and fluctuation in the power forced to do so due to the labour grid,” Jacques Van Rhyn, Deloitte’s markets in Europe,” Billing told Perth-based Australia Africa Services RESOURCESTOCKS. Group national leader, told this “With the success of some projects publication. in Africa, people look at that, along “South Africa 15-20 years ago had with the margins that have been a surplus of energy. gained of those who have gone before “So many smelters were built and been brave enough [to be early because there was some of the movers into Africa].” cheapest energy on the continent. Coupled with this, she said that the “The aluminium smelters built on big global minerals players recognised Richards Bay were built on long-term the socio-political importance of power deals, as were the smelters 26

around the Northern Cape and Witbank. “China is starting to move away from being a low-cost producer and becoming to more high value-add products, so Malaysia, Indonesia and Vietnam are being considered as lowcost producers. “Africa, too, can be a low-cost producer if its gets its act together, but we’ve got to get the infrastructure right.” There were 174 ASX-listed mining companies in Africa last year. Another 173 were from the TSX/ TSX-V and 82 were from LSE/AIM. Much of Africa’s onshore mining prospects are also likely to be helped by the staggering numbers being touted for oil and gas offshore East Africa, with the world’s majors, especially from Europe, pumping millions in for exploration. A handful of Australian-listed juniors have also been early movers, including FAR Limited and more recently, Swala Energy, which has been tipped to potentially be “this year’s [Moroccan explorer] Pura Vida Energy” as IPO of the year. East Africa-focused, AIM-listed Cove Energy was bought out by Thai state oil firm PTTEP for $1.9 billion. “What really gets the geologists working on east Africa salivating is the prospect that there is oil,” Bill Page, Deloitte’s Tanzania-based East Africa energy and resource leader, told RESOURCESTOCKS during a recent trip to Perth. “The oil seeps are there right across the region. It’s just a question of identifying the right well and drilling in the right place. There are clear signs that there are significant liquids, as well. “If you think this is a feeding frenzy [with majors and juniors taking up positions, and discovering offshore gas], you wait and see what happens when oil is discovered, and technology keeps on improving.”

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


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company profile

canada

cap-ex iron ore

iron monster just waiting to be tied up Canadian junior Cap-Ex Iron Ore has an absolute monster of a project on its hands and just needs a strategic partner with the foresight to take it through to production. Anthony Barich reports

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Work on Cap-Ex Iron Ore’s Block 103 project.

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n 2011, the hIstorIc Iron ore producing Quebec was a “closed shop”, with major chinese and Indian steelmakers having invested heavily in massive deposits, one of which is so big china considers it a strategic resource. that was until september that year, when canadian junior cap-ex Iron ore came in and discovered a high-grade magnetite zone of monstrous magnitude on Block 103 in the Labrador trough near the mining town of schefferville. It changed the game for the company, which has spent the past three years and about $c30 million developing the project through acquisition, drilling and engineering. having completed a resource calculation and a prefeasibility study, it will take about another $25 million to take it through bankable feasibility study stage. this will consist of

about $14 million of infill drilling, $6 million for engineering and $5 million for corporate overheads including baseline environmental studies. With two neighbours – Labrador Iron Mines and new Millennium – already in production, the roadmap has been put in place to progress the project. cap-ex has the required expertise to bring Block 103 through to production. cap-ex’s board of directors consists of former consolidated thompson (bought by cliff’s natural resources for $c4.9 billion in 2011) and current Alderon Iron ore personnel who are involved with all levels of local government and negotiations with indigenous landholders while advancing Alderon’s Kami project to production. All that is missing is a potential partner to provide funding. cap-ex’s eastern neighbour,

new Millennium, has formed a joint venture with giant Indian steelmaker tata steel for the LabMag and KeMag magnetite deposits, while major chinese steelmaker Wuhan Iron and steel company has formed a JV with Adriana resources for the Lac otelnuk deposit, which sits roughly 200km north of Block 103. With these kinds of neighbours, there is clearly interest in big iron ore projects. In June, cap-ex entered into three non-exclusive agreements with private canadian firm Intercedent, boutique natural resources advisory Pridolian and King and Bay West (owned by Alderon’s chairman and ceo) to seek a strategic partner/ investor for the Block 103 project. cap-ex chief executive Graham harris said at the time that his company had received more than 60 expressions of interest in Block 103. While the iron ore price has decimated canadian iron ore stocks and a “general malaise” formed following rio tinto’s decision to seek a buyer for its 59% stake of Iron ore company of canada, the latter is also working as a catalyst of hope, with much talk locally about who will buy rio’s stake and help generate excitement in the region. cap-ex’s project is one whose success will also inject much positive flow in the local market, which is arguably going through a much tougher correction than Australia’s iron ore players. harris has many years of experience in Perth, having been involved with AtW Gold, putting the Burnakura gold mine into production and selling the Gullewa gold project to Mutiny Gold. his experience tells him that canada’s iron ore assets are undervalued versus Australia’s.

OCTOBER/NOVEMBER 2013 RESOURcESTOcKS


“Your market is a lot more buoyant than ours,” Harris said, referring to the Australian iron ore market. The numbers in Cap-Ex’s recently completed PFS on Block 103 are staggering. Block 103 contains (NI) 43-101 compliant inferred resources of 7.2 billion tonnes, grading 29.2% total iron and 18.9% magnetic iron. Based on 30 years production from the 2018 first quarter of just 1.9Bt of the mineral resource, the PFS had total capital costs of $5.98 billion for construction of two production lines, including $2.28 billion for the pellet plant which will produce 16.6 million tonnes per annum of superior quality pellets at 67% iron. The costs, however, are not as onerous as they would first appear. Harris pointed out to RESOURCESTOCKS that the first production line would only cost $3.9 billion and cash flow from production would help fund the other $2 billion. “If you want 16Mtpa rolling out the door, $5.979 billion is what it’s going to cost,” he said. “However, you can back that off to $3.9 billion and get 8Mtpa going, that would produce about $800 million net cash flow and use that to start funding your second line. So it’s not as onerous as it seems. It can be adjusted.” The high-quality pellets are a compelling factor. Harris said his company believed pellets were the way of the future. It certainly looks the case as it is understood Formosa Plastics, the largest private conglomerate in Taiwan that recently invested $US1.15 billion in Fortescue Metals Group’s Iron Bridge project in Western Australia’s Pilbara region, has several iron ore plants across Southeast Asia on the drawing board that will need pellet feed, starting with a big one in Vietnam. “This PFS was based on pellet iron. Our project produces the finest pellet on the planet at 67% iron ore with no deleterious minerals and that commands a $30 premium to the spot price. We think that’s the way of the future,” Harris said. The costs don’t look so daunting when considering the total pellet cost free-on-board of $C62.87 a tonne. Harris said the sheer size of the project was a major drawcard for potential strategic partners, which would guarantee an astronomical return on investment – in multiples. “Our northern neighbour Adriana Resources has 11.35Bt of magnetite in Lac Otelnuk – probably the largest or

top two iron ore resource in the world. WISCO tied that up in 2011. They will have a capital expenditure well north of $10 billion as they will need to build 200km of additional rail,” Harris said. “China is on record as stating they consider Lac Otelnuk a strategic asset to China.They believe it’s the future, basically supplying China’s needs for the next 200 years for iron ore. “That’s the kind of outlook a company that would acquire [CapEx’s project] would do it for. If iron ore pricing remains stable, we start to get India ramping up imports and with other emerging countries like Vietnam needing iron ore, then this is a big asset for someone to tie up. “It is also an opportunity for hedge funds, which could sink $30 million in for a 50% project stake, take us through to BFS and it could be worth multiples of $60 million once the market comes back, considering that in the old days the project would’ve been worth $300-500 million. “So if those days come back and you’re only putting in $30 million, you’re making a hell of a return. “The key to this whole thing is the fact that this is the only major iron ore deposit that I know of – including in Australia – that does not yet have a partner. “Most other deposits of this size have some kind of strategic partner.” Infrastructure is always a critical consideration and Quebec, with a strong history of iron ore production, has it in spades. Where it is lacking, the local government is stepping up to the plate to provide $5 billion to upgrade port and rail, among other elements as part of Plan Nord, which PricewaterhouseCoopers says will lead to $US33 billion in mining investment in Quebec. Harris said this plan was targeted right at the iron ore companies in the north and caused a lot of excitement two years ago when the government announced it. The area affected is right in the crosshairs of Cap-Ex’s project and the ripple effects for CapEx will only be positive. Presently, Cap-Ex has access to a shared railway with three legs to it. Cap-Ex would just have to build a 13km spur to the existing rail line. The multi-user port is currently being upgraded and expanded. Labrador and Quebec also provide low-cost hydroelectric power to the region, which is an ideal source of power for commercial production of iron pellets.

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

“This PFS was based on pellet iron. We think that’s the way of the future.” graham harris cap-ex iron ore

cap-ex iron ore at a glance

Head office Suite 2000 1177 West Hastings Street Vancouver BC Canada Ph: +1 604 669 2279 Fax: +1 604 602 1606 Email: info@cap-ex.ca Web: www.cap-ex.ca directors Andrew Bowering, Graham Harris, Brett Matich, François Laurin, Troy Gill, Gary Norris Market capitalisation $C7.8 million (at press time) Quoted sHares on issue 97.8 million Major sHareHolders Goodman & Co Investment Council 10.23% Graham Harris 7.36% Andrew Bowering 5.92% Mandu Resources 4.09% 29


company profile

chile, AustrAliA

rmg limited

shift in focus reaps rewards in chile The more RMG Limited sees of its new Tuina project in Chile, the better it gets. And the company’s not standing still. Anthony Barich reports

H

Extensive copper oxide mineralisation offers opportunity for early cash flow.

30

aving sHifted its focus from its Queensland zinc project to miningfriendly Chile, RMg Limited is moving quickly on its promising copper-silver project in south america. RMg lost traction with its Kamarga zinc-copper project in northwest Queensland due to sustained weakness in the zinc price and so went looking for another copper project in Latin america. the company was introduced to the tuina copper-silver project in Chile by one of its major shareholders and is already reaping the rewards. RMg director and chief geologist Peter Rolley said that having visited the site in January, RMg and the local owners quickly drew up a heads of agreement option agreement and by september 6 had announced outstanding previous drill results

from the san José copper deposit, including 107.7m at 1.2% copper and 10gpt silver from 243m. these results prove that those early views RMg had about the project are truly concrete – perhaps not surprising, considering the tuina Project is 50km from the world’s largest copper open pit at Chuquicamata. “the company has been working in north Queensland for two years on a zinc project that we have reprioritised due to the recent weakness in zinc metal prices. However, it has some strong positives so we believe we can still drive value into this project in the future ” Rolley told RESOURCESTOCKS. “We were looking at copper opportunities and were introduced to the tuina area, which has turned out to be a great project. so the focus of the company has now moved from australia to Chile. We intend to move very quickly to convert part of the project to indicated resource for planning purposes, and then continue to expand that indicated resource position as quickly as we can.” What RMg acquired with this deal was not just prospective granted mining leases. the owner of the permits had been in an agreement from 2004-08 with a small Chilean mining company, which paid for and undertook a lot of drilling. in particular, it did a reasonable amount of diamond drilling on the san José zone, which has since been validated and reported in accordance with australia’s JORC requirements. the historic rock chip results confirm the extensive strike length of the copper-silver mineralisation at the san José, san Martin, algarrobo and dinko deposits. all of them have

been, or continue to be, the subject of existing oxide mining operations. “there are drill cores still in the sheds, rock chip trays still there, etc. so that’s $10 million worth of drilling that we’ve effectively picked up for a $200,000 option fee,” Rolley said. the santa Rosa copper deposit is a walk-up sulphide copper drill target. an estimated 600,000 tonnes of oxide copper mineralisation have been open-pit mined in four zones, which are each up to 15m wide. additionally, wall sampling at santa Rosa has reported 4m at 4.8% copper and 29gpt silver. “We believe the previous drilling results have demonstrated the strong continuity of the wide zones of mantostyle copper-silver mineralisation along the major fault zones and thereby justify the development of an exploration target to be drill tested,” Rolley said. Compilation of the drilling, mapping and surface geochemistry has enabled the company to report an exploration target of 30-50Mt at 0.9 – 1.4% copper, 8-11gpt silver. “We note with excitement that the envisaged copper grade of the project is twice the grade of many struggling large-capital cost porphyry copper projects. this gives us great encouragement that we may be able to rapidly bring the project into production,” Rolley added. about 2000m of confirmatory drilling on the exploration target is planned primarily at the san José deposit by Christmas, which leaves multiple other oxide/sulphide deposits and targets to be drill tested. With an oxide toll-treating plant 30km away and significant tonnage of copper oxides on the permits, Rolley said RMg could potentially have

OCTOBER/NOVEMBER 2013 resOurcestOcKs


“It was obvious to me that we could achieve copper oxide production fairly quickly.” peter rolley rmg limited

these in production within 12 months, if the necessary permitting and approvals occurred as expected. This would generate some handy cash flow – a huge bonus for a junior explorer in such a tight capital market. “It’s not the main aim of the company, but as a junior it’s very helpful to generate cash flow and reduce the dilution of existing shareholders,” Rolley said. “That’s been part of the original attraction when I first visited this project in January. It was obvious to me that we could achieve copper oxide production fairly quickly and at that stage, I wasn’t aware of the recent drilling that reveals this very large potential copper sulphide resource. These systems are 50-80m wide at surface, so for me, the sulphide opportunity is just enormous.” Chile has proven a popular destination for Australian explorers, but there are some aspects to this project, such as its proximity to a major mining centre, that are particularly beneficial to a junior like RMG. “Our experience so far in the area we’re working on is that there are no local towns or communities within the area, which removes a layer of administration for us as a junior,” Rolley said. “There are also no pastoral holdings in the area. It’s the Atacama Desert, so there’s no grass. For a junior explorer, these things are significant for us in managing our costs in undertaking exploration.” RMG’s project is just 45 minutes’ drive from the city of Calama, which Rolley described as a Chilean version of Western Australia’s Kalgoorlie. Calama is a large regional mining centre of 160,000 people that services

significant porphyry copper mines in the area, including Chuquicamata, Spence and El Abra. Calama has assay laboratories, drilling contractors, maintenance and spare parts services, geologists and skilled field assistants, plus accommodation and a modern airport all at RMG’s doorstep. “These factors fit our company very well in trying to best manage our costs in this difficult funding environment,” Rolley added. “We hope to be able to advance quickly. Within two years, if all the permitting goes well, we will have a pre-feasibility study done on a copper sulphide-based project here because of the drilling data set that we’ve already obtained. We could realistically be in production within 2-3 years from there.” RMG made a significant statement indicating the direction of the company in June, by adding industry veteran Michael Griffiths as a nonexecutive director, and farewelling Steven Chadwick and Mark Stevens from the board. Importantly for RMG, Griffiths, a geologist with over 30 years’ experience in the minerals and energy sector in Australia and Africa, has particular skills in copper and in taking new projects through to production. Griffiths, president of TSX-V-listed precious metal explorer Currie Rose Resources, is also non-executive director of ASX-listed copper/ cobalt producer Tiger Resources. He is an alternate director on the board of ASX-listed Zambia-focused copper explorer (among other things) Chrysalis Resources and is a consultant to ASX-listed east Africafocused gold and base metals explorer Chalice Gold Mines.

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

Plan of previous drill results along San José Copper Zone.

rmg limited at a glance

Head Office Suite 1, 245 Churchill Avenue Subiaco WA 6008 Australia Ph: +61 8 9381 1177 Fax: +61 8 9388 2355 Email: info@rmgltd.com.au Web: www.rmgltd.com.au directOrs Robert Kirtlan, Peter Rolley, Michael Griffiths market capitalisatiOn $A9.3 million (at press time) QuOted sHares On issue 3.1 billion majOr sHareHOlders Simpaug Investment Fund 16.2% Peter Rolley 5.4% Robert Kirtlan 4% Mark Stevenson 2.6% Teck Australia 1% 31


FEATURE

PERU FOCUS

CONQUERORS’

LEGACY 32

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


WORDS BY ANTHONY BARICH Spanish conquistador Francisco Pizarro González, conqueror of the Inca Empire and founder of Lima – the modern-day capital of Peru. The Spanish brought industrial mining to the country but modern-day miners are still dealing with the negative legacies.

Paying for the legacy of primitive miners that preceded them in Peru, modern mining companies are on notice that the size of a mine and the amount of proposed investment alone will not guarantee success.

M

INING companies’ activities and payments to local employees can change the whole social structure of local villages in developing countries such as Peru when considering their environmental impact plan. Miners say the highly detailed regulations are a positive for foreign investment, not a hindrance. Peruvian major Buenaventura’s environmental permits unit head Jorge Falla spoke to RESOURCESTOCKS in August during a visit to Perth, with a Peruvian mining delegation consisting of various contractor companies, to address a forum hosted by AusMine. OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

He said good things took a long time to gain but a heartbeat to lose – then regaining them became a lot harder. Buenaventura is Peru’s largest publicly traded precious metals company and a major holder of mining rights in Peru, a country Falla says has reached “a level of maturity” in its mining legislation. However, environmental regulations were only introduced in the 1990s after the Spanish arrived some five centuries prior. The legacy of mining in the intervening period has left a bitter taste in the mouth of locals, who still believe the national government is too lenient on miners despite Peru’s environmental regulation being 33


among the more detailed of the Americas. The Peruvian Ministry for the Environment is also introducing new legislation. Falla believes the bad rap is probably because “bad things easily stick in people’s memories”. “It’s so easy to forget the good things. The word mining may not always be associated with good things, because of the way it was undertaken in previous centuries. Of course, things have changed; but legacies of the past are not easily erased from people’s memories,” he added. Falla is responsible for obtaining environmental and operational permits required by exploration projects (greenfields and brownfields) and operating mines for the Peruvian mining company. Working at the interfaces between environmental and social affairs, he believes the relationship with the local population has a symbiotic nature. “One way or another you have to do things to earn the trust of those living in the areas where you wish to explore or operate. It is not a matter of giving money, people have to see you as responsible and reliable neighbour, genuinely interested in their wellbeing,” Falla said while heading a delegation to Perth put together by the Mining Engineering Chapter of the Peruvian Engineering Federation (Colegio de Ingenieros del Perú). “Your presence can cause environmental concerns, but may also be seen as an opportunity to foster local development, with an economic and social agenda at the forefront. “In turn, the very contents of this agenda are the building blocks for a political agenda. Mining companies don’t engage in party politics, but you can’t turn a blind eye to the interplay between environmental, social and political agendas at the local and national level. “It is the interaction of all these agendas, personal and institutional, that may pave the way or impede either the development of a project, the commissioning of a new mine, or both.”

RED ALERT

Jose Blanco, chairman of the Australia-Latin America Business Council and founding partner of advisory firm Blanco Partners, went further, saying miners were on notice to prove their social and environmental credentials to the local public. “In the case of Peru and elsewhere in Latin America we need to understand that mining does not enjoy the widespread public support that it has in Australia – and to remember that as far back as the Spanish conquest of Latin America there is a history of exploitation of mineral riches, to the detriment of local communities,” Blanco told RESOURCESTOCKS. “Today, mining companies are on notice that the size of a mine and the amount of proposed investment alone will not guarantee success in developing a project. As well as a legal licence to operate, they must also secure and maintain a social licence to operate. “Companies need to commit to gaining a deeper understanding of the unique stakeholder dynamics in Peru and elsewhere in the region and, more importantly, where they are operating, to fostering stronger alliances at all levels so as to address critical social and environmental risks and to act in a manner that delivers benefits for their business and host communities alike. “The commitment required goes beyond just spending money on local communities.” ASX-listed junior Inca Minerals’ managing director Ross Brown said Peruvians were particularly cautious about protecting water resources to ensure clean water. It is particularly the case in the Amazon, where it is believed a third of Peru’s gold production comes from illegal mining that contaminates the Amazon Basin. It is not the case in the Andes, where Inca has its Chanape copper, molybdenum and silver porphyry project. Brown said communities in the “porphyry belt” were much more

“One way or another you have to do things to earn the trust of those living in the areas where you wish to explore or operate.” JORGE FALLA BUENAVENTURA

34

attuned to mining and proactive about being involved in mining as they saw the future of their communities linked to exploration and mining activity. “I would put the environmental and community process in Peru equivalent to the process of acquiring a program of works in Western Australia, where you need consent from the traditional owners and environmental clearances,” Brown told RESOURCESTOCKS. Brown sees the strict environmental regulations not as an inhibition to foreign investment but as a positive, as it “stops the cowboys from exploring and tarnishing the industry” and “legitimises the exploration process”. “In Peru, there is a process whereby you have agreements with communities, which are included in a public registry. The agreements therefore become a lot more robust legally. It’s a very good thing,” he said. “So you need to devote manpower. You need to put an effort into the community programs – not just lip service. In Peru we have a dedicated sociologist who manages our community issues based in Lima who spends most of her time in our communities. She is welcome in the communities openly. “The approach is to go from an array of small social programs to larger, longer-lived programs.” To this end, Inca started off buying school books for children and has progressed to sponsoring improvements in farming techniques. It has involved the community in drilling programs and has started an adult education class in one of the communities. Falla said the impacts of “local assistance” must also weigh heavily on miners’ considerations before even reaching feasibility level, because of the effect the project would have on the local community. “Mining does not occur in isolation,” Falla said. “Local customs, habits and history must be taken into account. You cannot look at a mining undertaking from a narrow techno-economic perspective. You need to factor in all these variables, going beyond what we have learned at college, incorporating the lessons learned by practice [experience].” “When working in locations deep down in the Andean highlands, you may well relate with people who have lived there generation after generation, in absolutely poverty. “At your arrival, their expectations may not go beyond what they know.

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


Life in Las Lomas, northern Peru, where Australian junior Commissioners Gold operates.

“Indeed, they may never have travelled more than 5km away from where they were born. That is the turning point. From then onwards, things change, expectations will inevitably grow aligned with the life cycle of the project. Just by giving employment to the locals the social structure shall not be the same again; they may earn in a month what they used to get in a year. “Inclusion into the economic network created by a mining undertaking is the dividing line: there will always be people who are for and against your presence, even if they benefit from the new circumstances. “Exclusion, real or perceived, is perhaps the most important variable to address; it is precisely at this the point when carefully designed government programs, specifically geared towards social investment in the area of influence of a project, ought to come along. The reach of a mining undertaking is limited in time and space. “So as a rule of thumb you always do your best, keep your eyes open, be prepared to hear things that may not be amenable to you at all.

“From then on, try to understand local feelings, aspirations, resentments and apprehensions, train your own people and adjust your organisation to the local circumstances, bridging the gap between specialised disciplines. “You learn from them, they learn from you, and we need each other, hence the symbiotic nature of the relationship with the local population.”

SLOWING DOWN

There are other considerations for miners. In July, Buenaventura announced it would close three of its six mines (Antapite, Poracoia and Shila-Paula) in a bid to slash costs after second-quarter earnings declined on the back of slumping metals prices. At the time the company, which has been listed on the Lima Stock Exchange since 1971 and the New York Stock Exchange since 1996, said it would focus 80% of exploration spending on brownfield deposits. “Peru is not immune to the slowdown that has affected the global mining sector and many of

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

“The commitment required goes beyond just spending money on local communities.” JOSE BLANCO ALABC the projects in its more than $US50 billion pipeline of mining investments are being reviewed as companies look to reduce costs,” Blanco said. “It is possible that companies may decide to delay development of some of their less profitable projects if metal prices don’t recover.” Despite the difficult international environment, the Peruvian economy has maintained a 6% growth rate in the second quarter of the year. Blanco noted that Peru’s mining sector had been a key driver of the country’s decade-long economic boom, with Peru being a major global producer of copper, gold and other minerals. “Current forecasts are that mining investments in Peru this year will total $7-8 billion, which would be a slight decrease from 2012’s record of $8.6 billion,” he said. 35


company profile

peru

inca minerals

critical phase for inca transformer Inca Minerals has transformed from explorer to driller as it moves to define the newly discovered porphyry at its impressive Chanape project in Peru. Anthony Barich reports

I

The principal access track to Inca Minerals’ Chanape project in the foreground with Cerro Suerococha at 5250m in the background.

36

nca MInerals has set a steady course of drilling for the next two to three years at its chanape project, having evolved from explorer into the next critical phase. having discovered a porphyry at its chanape project, Inca paused from what could quite easily have been an inevitable course of drilling, in order to acquire more data to generate quality drill targets. the carefully designed 2013 diamond drilling campaign commenced mid-august and is expected to continue until the end of the year. While the pause in drilling this year was perhaps an initially unpopular decision, the prize is worth it. World-renowned canadian geological expert Jeffrey

hedenquist, who edited a rio tintosponsored tome on world-class copper deposits for the society of economic Geologists, was one who recommended Inca not to overlook the near-surface gold mineralisation. hedenquist is the principal editor of Geology and Genesis of Major Copper Deposits and Districts of the World: A Tribute to Richard H Sillitoe, issued this year by the seG. among the astonishing facts and figures of the world’s richest copper porphyry deposits, the tome includes an article on BhP Billiton’s giant 13 billion tonne escondida copper mine in neighbouring chile. talking to RESOURCESTOCKS, Inca managing director ross Brown held the tome open on a geological profile of escondida. “see for yourself,” he indicated eagerly. “although it’s early for us, the geological profile at chanape is not dissimilar to the geological profile at escondida.” escondida was discovered in the early 1980s during a small drilling program of nine holes that were targeting alteration and geochemical signatures generated by grid rock chip sampling. today the escondida district contains 123.9 million tonnes of contained copper. “Porphyries tend to follow a certain geological model,” Brown explained to RESOURCESTOCKS. “although there are obvious levels of complexity attributable to individual porphyry mines, when you look at copper porphyries on a broader scale, they tend to share traits; similar geology for example, similar alteration patterns and similar grade. “this ‘sameness’ is useful in guiding exploration and putting into context our own geological results.”

What’s the importance of intersecting multiple porphyries in one drillhole? how many holes make a discovery? Is it important to have found bornite in a breccia pipe? Why is there gold and silver in the grid rock chip samples? the model explains this. “While there are obvious differences between escondida and chanape – escondida is a giant mine and chanape is an exciting developing prospect – they belong to the same class of deposit, they occur in the same regional geological setting and they share similar geology,” Brown said. closing the tome and opening an Inca-commissioned report by hedenquist, Brown added: “Perhaps a closer analogy is the toromocho porphyry, operated by chinalco. hedenquist has drawn similarities between toromocho and chanape and they are significant.” Indeed, there are many similarities in porphyries around the world, giving investors in Inca a growing sense of certainty that they’re onto something special. “We keep working and chanape keeps delivering. no data is inconsistent with a mineralised porphyry being present,” he said. now the waiting is over. the drilling program at chanape has started. the holes drilled in august were shallow, targeting epithermal gold and silver mineralisation near the surface from existing drill platforms under an existing permit. the majority of the other holes have been planned to intersect epithermal and porphyry targets in other areas within the project. “the work we completed leading up to drilling included approximately

OCTOBER/NOVEMBER 2013 reSOurCeSTOCKS


700 grid rock chip samples and approximately 60 line kilometres of geophysics,” Brown said, explaining the results of the surface exploration. “The results confirmed the existence of zoned alteration, discrete geochemical anomalies and the existence of coincident geophysical anomalies.” An important result for the company was the generation of shallow porphyry targets. The mineralised porphyry discovered in CH-DDH001 occurs at a depth of 380m and sits below a 100m intersection of gold-bearing breccia running 2 grams per tonne gold and 40gpt silver. There is evidence that mineralised porphyry may occur a lot closer to the surface. “We could have a situation where the epithermal gold and silver is in close juxtaposition to the porphyry, now possibly occurring much closer to the surface,” Brown said. “It’s a significant development for us. I’m quite excited by our drill targets. One of these anomalies is 1.5km across at its deepest point.” It’s not just the size of these anomalies that impresses Brown, it’s the fact that the anomalies are defined by three data sets, chargeability, resistivity and magnetics. “It pretty compelling really, especially when you add to the mix coincident gold and silver mineralisation at surface and a coincident SP [spontaneous potential] anomaly,” he said. The drill program that was designed and subsequently begun in August was divided into two subprograms: shallow holes to test for epithermal gold-silver and deep holes to test for copper-molybdenum-silvergold porphyry targets. Importantly, the porphyry holes have also been designed to intersect the nearer surface gold and silver targets. “We could generate some quite amazing drillholes,” Brown said. “It is worth remembering that the porphyry that we discovered in our very first hole was actually logged as two different porphyries, separated by two porphyry breccias. There’s a level of complexity at Chanape that starts to remind me again of Escondida or Toromocho – multiple porphyry

intrusions, multiple mineralising events. “Toromocho and other porphyries that are being developed are not drilled overnight. The same may be true for Chanape. We are pretty sure the porphyry at Chanape occurs within the SP anomaly, which is 2.5km by 1km in size. It is a very large target.” Inca’s stock has enjoyed a significant uptick in liquidity and price since the company’s August 20 announcement of the recommencement of drilling at Chanape. The announcement was quickly followed by another that included stunning grid rock chip results including 31.6gpt gold, 788gpt silver and 0.86% copper. These announcements made Inca a stock to watch. Then in early September, DJ Carmichael head of research Paul Adams, who has visited Chanape and knows the project well, put a “speculative buy” tag on Inca, adding fuel to the fire. Brown suggested that the announcement on the recommencement of drilling caused a spark of interest because it reminded investors of the porphyry discovery. “Investors rolled back the time, back to the announcement of porphyry discovery,” he said. “It was as if the intervening period was forgotten. The shares took off in August just as they left off in February-March this year. “Forgotten but not wasted. The intervening period was important to us. We’ve found 73 breccia bodies, another dozen or more sites hosting 5+gpt gold, zoned alteration and discrete geochem anomalies and some stunning geophysics anomalies. We’ve de-risked the drilling as much as possible. “This project is big, mark my words. The drilling of 2013 is really just the beginning of the process. We’ll have another 10,000m of drilling planned for 2014 and we have already commenced the permitting process for that year’s work. “It will be a continuous process of drilling – adding dimensions to the two potential orebodies, the epithermal gold and silver and the porphyry copper, molybdenum, silver and gold.”

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

Inca Minerals’ Chanape project area showing drill access tracks and Cerro Chijcula in the background.

“This project is big, mark my words. The drilling of 2013 is really just the beginning of the process.” ross brown inca minerals

inca minerals at a glance $A 0.06

ASX: ICG

0.04 0.02 6 months ending September 17, 2013 Head Office 1030 Wellington Street West Perth WA 6005 Australia Ph: +61 8 6145 0300 Fax: +61 8 6145 0301 Email: info@incaminerals.com.au Web: www.incaminerals.com.au directOrs Gareth Lloyd, Ross Brown, Justin Walawski market capitalisatiOn $21 million (at press time) QuOted sHares On issue 420.5 million majOr sHareHOlders Ross Brown 5.47% Minotaur Nominees Pty Ltd 3.89% Susan Carr 3.04% Zoric & Co Pty Ltd 2.37% Chihong International Mining Limited 2.31% 37


TOP 5

AUSTRALIA With Mines & Money Australia upon us again, it is a good time to examine the local projects that our experts believe to be good thing, as optimism starts it cautious rebuild after a horror couple of years in the equity market. PETER HAYES INVESTMENT MANAGER Alto Capital

JASON DAVIS PERTH REGIONAL HEAD BBY

Atlas Iron (AGO) Domestic iron ore producers are benefiting from resilient Chinese demand and the weakening $A. BBY anticipates spot prices to remain above $110/t and is bullish on producers such as AGO. Fortescue Metals Group (FMG) BBY has a $4.80/sh price target on FMG. A recent JV deal will add $US350m cash after tax for no spend on FMG’s part, and we expect more deals to follow in the coming six months. Northwest Resources (NWR) NWR boast high grades in a tough gold market, with 328koz of gold at 15gpt. Perceived metallurgical issues may resolve with an offtake agreement for direct concentrate. Windward Resources (WIN) Started a capital raising as part of a deal to acquire a 70% interest in Fraser Range tenements, 2km from Sirius Resources’ Nova deposit. Approval is being sought from shareholders before exploration begins. Buru Energy (BRU) Has cleared up uncertainty regarding funding through completion of a $35m placement to institutional investors. The market will now await news on procurement of a suitable drill rig and finalisation of the Ungani appraisal program.

Unity Mining (UML) Operates the Henty mine in Victoria and is developing the Dargues gold mine in NSW. Has a market cap of $52m with net cash of $25m, giving the company an enterprise value of $25m. Sold $23.3m in gold in the last quarter at $979/oz. Mincor Resources (MCR) Forecast to produce +13m pound of payable nickel during 2014 at a cash cost of $A5.30/lb ($US4.80/lb). The expected weakening of the $A will help improve margins and should see the company return to profit in 2014. Oz Minerals (OZL) A $1.2b market cap with net cash of $430m, which gives it a lower EV value than SFR. Production in the last quarter was 17,379t of copper and 31,018oz of gold. Production should be higher this quarter after remediation of a slip in the open cut. Independence Group (IGO) Will become more of a gold than a nickel producer by the end of calendar 2013 if all goes to plan. Is a 30% shareholder in Tropicana and as such, will attract more interest from gold funds than previously. Western Areas (WSA) Another nickel producer struggling because of the nickel price. Produced 26,000t in financial year 2013, with record sales of 27,819t. Cash at bank was $81m at June 30. If you are bullish on nickel, this is a good portfiolio stock.

FACTS AND FIGURES Australian projects CAPEX data (Studies released 12 months to Jun 2013)

ASX Explorers Stock Performance (12 Months to Jun 2013)

All Feasibilty study results released for new projects. Revenue is calculated using operators production forecast and study consultants forecast price. 3000

12

CAPEX $M

500

2

0

IRON ORE

COPPER

GOLD

SPECIALTY METALS

BASE METALS

0

• Calgary, Canada +1 403 202 8683 • Toronto, Canada +1 416 203 0655 • Vancouver, Canada +1 604 647 0016 38

www.intierraRMG.com

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

DEC

4

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1000

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6

SEP

1500

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8

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2000

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2012 10

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TIM MCCORMACK RESOURCES ANALYST Patersons Securities

DALE RAYNES FINANCIAL ADVISER Morgan Stanley Wealth Management

Caravel Minerals (CVV) Has been given a new lease of life with work being done in Qld and WA. Following a small raising of $1.7m completed at 1.5c, CVV has been drilling at its Wynberg Project. CEO Marcel Hilmer has indicated that the broad zones of primary copper-gold at Wynberg A together with surface copper-gold at Wynberg B could be a game-changer. Intermet Resources (ITT) Acquired the 8 Mile Creek project near the old Charters Towers gold field. Currently in the midst of a placement of $500,000 to fund exploration. Icon Energy (ICN) Focusing on exploration/production of oil and gas in Qld and globally. Has interests in the Nappamerri Trough, a potential world-class advanced shale gas province. Bandanna Energy (BND) Targeting start of production at its underground thermal coal project, Springsure, in H1 2015. Its other major project is South Galliee west of Alpha, covering 2698sq.km. Summit Resources (SMM) Uranium explorer with projects in northwest Qld. Two major projects are the 10% owned, Mt Isa North and the 50%-owned Mt Isa Uranium JV. As well as uranium, these projects are also prospective for copper and base metals.

Millennium Minerals (MOY) The newly commissioned Nullagine gold project is running smoothly. MOY has paid down 20% of its loan facility and demonstrated exciting exploration upside. Mount Gibson Iron (MGX) Strong iron ore prices and falling $A will see the company rapidly grow its already considerable $376m cash balance. Doray Minerals (DRM) First gold pour was a milestone for the Andy Well gold project. With high grades and low costs, DRM remains a mid-cap sector favourite. ABM Resources (ABU) Trial mining at the high-grade Old Pirate deposit in the Northern Territory is underway and should dovetail into lowcost commercial production later in the year. Panoramic Resources (PAN) PAN has significantly reduced the cost base of its nickel operations and has $23 million in cash in the bank. The company also holds several gold and PGM projects that could generate significant cash flow in the right price environment.

IntierraRMG’s solutions offer unique insights into company evaluations, M&A, risk management, due diligence, competitor intelligence and project pipeline evaluation. Crucially, its sector-specific modules provide tailored, dependable, timely information upon which analysis and decisions can be swiftly and confidently made. For a free demonstration, contact demo@intierraRMG.com Active Australian Drill Projects Project areas subject to releases outlining drill results for all types of drilling activity including regional aircore/RAB, resource definition diaming/RC, infill diamond drilling etc 600

2013 Number of Properties

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• Perth, Australia +61 8 9486 1111 • London, UK +44 0 20 7253 4126 • Stockholm, Sweden +46 8 744 0065 OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

ZINC

2010 - 2011 2011 - 2012 2012 - 2013

www.intierraRMG.com 39


feature

queensland focus

queensland

red tape: draGGInG the chaIn? While Queensland coal copped a major regulatory blow 12 months ago that hit the state’s wider resources sector, a number of other reforms are helping its industry pick itself up off the canvas.

40

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


Words by AlEx pAUll

P

remier CamPbell Newman put himself on the radar of many Queensland-based coal companies over the past 12 months, following his decision in the 2012 State budget to place royalties on 12.5% of every tonne of coal sold in order to raise $1.6 billion over four years. However, while a recent decision by the Newman government to limit the approval process was lauded by industry heavyweights, companies continue to pursue opportunities overseas, while others remain in the ‘Sunshine State’ primed for a tough slog. The cutting of green and red tape was the first step in the Newman government’s quest to modernise Queensland’s resources industry, a quest that dates back to the release of a discussion paper in November. The paper outlined the government’s vision of modernising resources tenure legislation by 2016 by replacing the five separate legislative frameworks. The acts to be consolidated as outlined in the paper included the Mineral Resources Act 1989 (Qld), the Petroleum Act 1923 (Qld), the Petroleum and Gas (Production and Safety) Act 2004 (Qld), the Greenhouse Gas Storage Act 2009 (Qld) and the Geothermal Energy Act 2010 (Qld). Global legal firm Norton rose Fulbright believes this is one of the largest legislative reforms in the history of the state’s resources sector. a number of the firm’s clients were briefed on the proposed reform, and brisbane-partner robert milbourne told RESOURCESTOCKS that the feedback he received was mixed. “i think there’s optimism and concern,” milbourne said. “The optimism is the idea that the government is going to have a 20% reduction in the pages of legislation, which theoretically will ultimately be cost-beneficial. “There’s also a view that even A heavy-duty Komatsu wheel loader could minor aspects of the overall resources not slow down one of Australia’s strongest regulations had been proven difficult men, Eben Le Roux, who towed the WA480 an to reform, so reforming an entire amazing 6m along the company’s Wacol branch legislation is a big ask. driveway in Queensland last year. The state’s “and so there is some trepidation mining sector is also dragging itself back into over the time that it would take for the game. this to get through, and absorbed and metabolised by the industry.” While it was too early to fully analyse the possible impact of the proposed reform, milbourne said the government’s target of reforming the legislation was “ambitious”, and the OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

need to modernise the industry was key to the reform. “The government’s view is the importance of the resources sector demands that we have a world-class legislative framework,” milbourne said. “The framework we currently have has really been assembled over 100 years, and it could be modernised, so there are separate administrative challenges for each of the acts at the moment for the department itself. “There’s no reason why one group in the department couldn’t administer common aspects for all aspects of the resources industry, as opposed to creating separate teams with expertise in areas of the legislation that are different.” “So there’s an incentive towards modernisation and reduction of administrative costs in the long run for the government.” milbourne said there was also a view that the industry would benefit from having a streamlined and simplified legislation that represented best practice around the world. “So i think the Newman government is of the view that they will be able to bring about better administration, better government and better industry through modernisation of the legislation,” he said. Patersons Securities analyst matthew Trivett agreed that there was a structural change underway in Queensland, and the reforms surrounding coal royalties compounded the impact that was already being felt in the industry. “For the margin squeeze that was already happening, there was some concern about the resources rent tax, but not a great deal,” he said. “but just the fact that there were some very high-cost mines operating and the prices were falling, it just compounded the effects.” Trivett was adamant that while the reforms did not directly affect the wider industry, it did impact on the influx of new investment, along with the combination of ‘red tape’ and falling commodity prices. “You wouldn’t say the royalties had a wide-reaching effect across the state, because it has not impacted people that are in the exploration phase of development,” Trivett said. “So i don’t think the royalties announcement in itself was a decisive factor on its own. “i think the [effect of] royalties is on top of the huge amount of regulation that had been building from the previous administration, as well 41


However, it may take some time to receive recognition. “It may take a number of years for it to be recognised, particularly in regards to the development and the competition currently in the bauxite market, but I do believe that prices will start rising significantly through to the pre-GFC prices and beyond, so the medium to long-term potential is there for bauxite in eastern Australia to be developed,” he said. While he still maintains that he prefers dealing in Queensland as opposed to 95% of the world, Feldman as the falling gold price; and especially a world-class bauxite province, Trackwork at Red concedes that Australia does not Metals’ Elizabeth for explorers, getting those exploration executive director Sholom Feldman present the same opportunities for Springs copper-gold dollars is increasingly difficult. said the underexplored nature of juniors than those abroad. project in Mt Isa, “So it’s just as difficult in Mozambique was too promising to “Clearly, Queensland has a Queensland. Queensland as it is over in Western pass up. developed mining culture as well,” Australia or down in NSW. “I believe there are huge he said. “I think it’s a combination of opportunities there with large-scale “However, it’s all to do with all these impacts that has reduced projects that are underdeveloped weighing up the opportunities that are investment across the board.” and at this stage of the market in front of you. However, Trivett said the Newman where people haven’t been spending “I believe that in Mozambique government’s plans to reduce money on exploration, I think the we have the opportunities as a junior bureaucratic green and red tape to aid opportunities for potential large finds company with a limited exploration coal and gold juniors was a decisive are significant in underdeveloped budget to be able to significantly have step in the right direction. countries such as Mozambique,” much greater success to locate the “If those plans come to fruition, Feldman told RESOURCESTOCKS. elephants that may be there.” and the burden of work isn’t replicated He said the exodus of some Another commodity that has been or is still at federal level, then that will companies out of Queensland was severely impacted by state reform in help these projects a lot,” Trivett said. more to do with the geological Queensland is uranium. “It’s a great start and if the environment and the developed nature But in October last year Newman Newman government can actually of Australia, rather than the country’s signalled his intentions to lift the ban change, it will be a positive for the investment climate. on uranium mining. industry in Queensland.” “[In regards to] the investment Uranium had not been mined in The Common Resources climate in Australia, notwithstanding Queensland since the closure of the Act is also designed to increase the difficulties [with] the media hype Mary Kathleen mine in the state’s Queensland’s attractiveness as an that has been surrounding it, and the northwest in 1982. investment destination. unfortunate decisions made by the “With the Prime Minister’s It’s part of a bid to allay the governments recently which have statement about uranium exports to trend in Queensland and around the made things a bit more difficult ... it is India, there is no earthly reason why country to test the waters overseas, still a very good place to do business,” Queenslanders should miss out on the with numerous companies seeking he said. economic opportunities and the jobs opportunities elsewhere. “I believe that the opportunities from uranium mining in this state,” Queensland-based companies such we’re looking at in Mozambique Newman said last year. as juniors Queensland Bauxite and are significant, and I believe they Despite the winds of change Baru Resources have explored the will return significant value to our circling the Queensland industry and opportunities abroad. shareholders. explorers plying their trade elsewhere, QBL recently acquired interests in “I don’t know what else is or isn’t Trivett still believes plenty of two coal tenements in Mozambique to available in Queensland, I can only opportunity exists in Queensland. add to its portfolio of seven projects in look at the opportunities that I see in “The volume of exploration is north and south Queensland. Mozambique.” nothing compared to what’s happened While QBL is still adamant that QBL is still exploring in the in [other] places in Australia, and the East Australian Bauxite Province Eastern Australian Bauxite Province, I think there’s a lot of prospective stretching from Queensland to NSW an area which Feldman still believes ground, through new interpretation is still considerably underexplored has potential to become a world-class of geological models and technology, and has the potential to become bauxite province. so there’s scope to go back and re-test it,” he said. “There are still some interesting systems and there are still “You wouldn’t say the royalties had a wide-reaching effect opportunities in Queensland, most definitely.” across the state, because it hasn’t impacted people that are One junior company capitalising in the exploration phase of development.” on the opportunity is Mt Isa-focused base metals junior Red Metal. MATTHEW TRIVETT PATERSONS SECURITIES Its Maronan silver-lead42

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


still sticking out of the ground there,” said. “So the technical “The government’s view is the importance of Rutherford risk is probably less, but the political risk is enormous, so personally we see the resources sector demands that we have a Australia as better opportunity. world-class legislative framework.” “Although it is a bit more technically challenging, you know ROBERT MILBOURNE NORTON ROSE FULBRIGHT you can invest millions or even billions in Australia and get your money back. “So we don’t believe going to zinc project is showing significant Mt Isa copper deposit, all spectacular Africa is necessary at the cost of all promise, with early comparisons to deposits. the good terrains in Queensland and BHP Billiton’s mammoth Cannington “Then they’ve got silver-lead-zinc indeed, Australia.” deposit 90km to the north. deposits like Sentry, Mt Isa, Purple He maintained that Queensland Managing director Rob Rutherford River, Hilton, George Fisher ... and was still a state of opportunity for told RESOURCESTOCKS that the the Cannington deposit is another one explorers determined to uncover giant Mt Isa inlier was one of the most and it’s the biggest silver deposit in discoveries, so long as companies prospective base metals provinces in the world. were prepared for slightly harsher the country, if not the world. “For one area, it’s one of the richest technical risks. “I guess the biggest attraction, base metal terrains in the world. It’s “There are plenty of untested from our point of view, is the mineral a no-brainer if you’re determining targets and opportunities in the belt prospectivity,” Rutherford said. where you want to explore I think.” for sure, and we’ve been working “If you look at the number of Rutherford said companies were there for a while but we certainly world-class Tier 1 deposits in the moving overseas due to the easier haven’t tested everything, so it’s belt, they are numerous; it’s probably technical opportunities available, probably still ripe with opportunity,” the richest silver-lead-zinc deposit but he warned that moving into he said. remaining in the world second to potentially unstable jurisdictions The winds of change are certainly none. could prove to be more of a risk. swirling. but while some companies “There are a number of “There is less technical risk in are reluctant to hold on tight, there is outstanding copper deposits like terms of exploring in Africa and those still plenty of upside for Queensland. Ernest Henry, Osborne and the giant areas, because there is opportunity Watch this space.

INVEST TO REACH THE RIGHT AUDIENCE London 2013 RESOURCESTOCKS is featuring a Mines and Money London Special in its December 2013 issue. official media partner, RESOURCESTOCKS offers exceptional As an official opportunities for mining companies to engage with an additional captive investor audience.

For information on marketing opportunities, call +61 8 6263 9100 or email advertising@aspermont.com Subscribe online to secure your copy! www.industry-news.net/subscribe OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

43


copper UpDATe

good news for red metal stocks Copper will rebound quicker than many analysts expect – and that’s good news for red metal juniors struggling for air.

W

ith World copper mine production growing and demand struggling to keep up, many – possibly most – analysts are saying another bull run is at least four years away. intierrarMG’s base metals director paul dewison begs to differ. copper has enjoyed positive price movements since 2004, in which time supply has traditionally underperformed versus demand. during these good times, copper was one of the more resilient troopers while other commodities suffered wild fluctuations (think iron ore and gold). in these good times, companies – especially the majors – ramped up their planned mine output. the problem is, dewison believes, they’ve planned too much, despite cutbacks necessary in the last few years of global economic uncertainty. “if the projects that we have on the books actually go ahead, we’ll

44

have big surpluses for many years to come, but personally i think a lot of what is there, or what has looked like probable projects, will likely fall by the wayside with lower prices,” dewison said from his base in london. “Quite a lot of what is on the books won’t go ahead. When the price was so good quite a number of projects became planned, but have taken longer to come onstream than was initially expected, so there’s a backlog there since about 2004.” While juniors struggling to find capital to fund their projects may get caught up in this, the real culprits will be the majors. “there’s no point in them investing large amounts of money where the returns aren’t anything like certain,” dewison said. “We’ve certainly seen a huge escalation in capital costs and cash costs, so we’re looking for a lot of the new projects that need an assured price of $US7500/t and if you haven’t

got that assurance, then why invest the money?” As dewison spoke to RESOURCESTOCKS in late August, copper was trading at $US7305/t – well short of the mark. And that figure was a comeback, helped by data showing china’s manufacturing sector was in expansion mode. While others believe the copper oversupply will not turn around until 2017 or later, dewison believes 2015 will be the turning point. “i’m looking at a big response in supply to lower prices and as that happens, we’ll get to a point where you haven’t got enough copper,” he said. Macquarie research said last year that copper’s supply tightness had been driven by china’s poor supply response; and that china could meet only one-third of its copper demand (from concentrate and scrap); while non-chinese production had not responded to price incentives over the past six years.

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


Words by anthony barich

However, Dewison said the news would be good for copper regardless of how the price response went. “If you get lower prices, demand might pick up and the substitution by aluminium might slow down, that’s probably true; also with lower prices, you’ve got less scrap emerging and that, of course, is good for refined metals,” he said. “So even if you haven’t got a price responsiveness for copper overall with lower prices, you tend to get bigger increases in refined demand because scrap demand is lower.” While China’s economic growth figures often dictate commodity fluctuations, Dewison said they were notoriously unreliable. “China’s growth statistics are always a little suspect. There has always been some disconnect between the official figures and reality in the last 2-3 years. Is [China’s economic growth] really 7.5%? Probably not,” he said. The International Copper Study

Group said in May that China accounted for about 40% of world copper demand, but conceded that apparent copper demand for China was based only on reported data and did not take into account changes in unreported stocks, which “may be significant during periods of stocking or de-stocking and which could significantly alter supply-demand balances”. Dewison noted that China had been very copper intensive, and he believed that the power and rail infrastructure drive in demand would continue. However, “the property market is definitely overheated in China, and that’s a huge consumer of copper,” he said. “So you wonder where your growth is going to come from. About half of copper goes into manufactured goods, and the domestic market’s manufactured goods in China is probably looking ok, but how much is it going to export? That’s not for certain,” he added.

OCTOBER/NOVEMBER 2013 rESoUrcEStocKS

A significant amount of global copper supply comes from Chile, Peru and Africa; but a lot of that is replacement. Dewison believes Chile “isn’t really expanding its production that much overall”. “The physical market has looked quite tight. We’re not dealing with huge surpluses,” Dewison said. “This year was in surplus, but only just. The big issue is, investors seemed to have turned a bit negative towards commodities in general, and copper has gone along with that.” Dewison partly puts copper miners’ supply shortfall down to the fact that much of the copper supply comes from big older mines that need revitalising - think Grasberg (Papua Province, Indonesia), Escondida and Collahuasi (Chile), the latter of which has been “underperforming massively”. Macquarie Research said the underperformance of copper mines was due partly to a shortage of water, with high and rising costs of desalination plants in Chile.

OZ Minerals’ Prominent Hill copper mine in South Australia.

45


TUNGSTEN MINING NL

THE DAWNING OF A NEW MODEL IN TUNGSTEN

• Initial focus on profitable high-grade mine at Kilba • Unbinding MOU signed with Chinese private investment group • Opportunity to move quickly into production • Good portfolio of projects • Identified path to organic growth • Easy-to-replicate small mine model

CONTACT INFORMATION Paul Berndt – Managing Director Phone: +61(0) 8 9477 3031 Fax: +61 (0) 8 9475 0847 Email: info@tungstenmining.com Suite 3, 23 Belgravia Street Belmont WA 6104

www.tungstenmining.com


market watch

words by GAVIN WENDT

diamond market a hidden gem

“Diamonds have demonstrated consistent growth in terms of pricing.” Gavin Wendt founding director mineLife direct +61 2 9713 1113 mobiLe 0413 048 602 gavin.wendt@minelife.com.au www.minelife.com.au

Stock research is a tough game, which is why Gavin Wendt does the hard work for readers every edition in Market Watch.

D

iamonD companies typically don’t feature on the radar screens of resource sector investors, because diamonds are a tough business for the inexperienced and unfocused – which is disappointing because diamonds have demonstrated consistent growth in terms of pricing. according to Bain & company’s 2013 sector report, demand for natural diamonds is expected to grow at an average annual rate of 5.9% until 2020, while supply is only expected to grow by an average annual rate of 2.7%. Demand is being driven by the emerging middle classes in china and india, while there is also an absence of major diamond discoveries. Given the positive fundamentals surrounding the diamond industry, i’m pleased to introduce what i consider to be a first-rate diamond investment opportunity – Kimberley Diamonds (KDL). The company successfully transitioned to production status earlier this year as a result of the acquisition of the ellendale diamond operation in Western australia from UK-listed Gem Diamonds. The rationale behind the ellendale purchase was based on a revamp of what has historically been a solid, cashflow producing asset. situated in the west Kimberley region of Wa, the ellendale diamond field is one of only three hard-rock diamond mine locations within australia. as a result of the mine’s solid operational performance, combined with recent acceptance into the Wa Department of mines and petroleum’s mining rehabilitations fund, KDL is entirely debt-free. KDL also holds an 8.4% stake in asX-listed Blina minerals, which maintains exploration ground adjacent to ellendale. ellendale’s key attraction is that it produces around 50% of the world’s supply of rare fancy yellow diamonds,

which are highly sought after for their rarity. in fact, fancy yellow diamonds account for around 80% of the mine’s revenue – and the company has in place an exclusive offtake agreement with Tiffany & co, the world’s premier jeweller, which provides certainty around price. The remaining production is sold by electronic auction via an online retail platform for diamond sales and marketing based in antwerp, Belgium. ellendale’s second key attraction is its inherent resource and exploration upside. The operation extracts and processes ore from just a single diamond-bearing lamproite pipe, known as e9. However there is a second pipe – e4, together with its processing plant – which is under care and maintenance. in addition to pipes e9 and e4, a further 47 lamproite pipes are known to exist within the ellendale mining lease – and around half of these pipes are thought to be diamond-bearing. There has only been limited prior sampling of these pipes, suggesting the potential for the discovery of additional diamond resources. The fresh approach that KDL has brought to ellendale is having an immediate impact on the operation’s efficiency and its overall operating margins. KDL has managed to generate two consecutive quarters of strong operational performance since it acquired the ellendale operation during February, providing us with confidence around the company’s operating capability. During the June 2013 quarter, the company achieved sales revenue of $25.5 million, earnings before interest, tax, depreciation and amortisation of $5.4 million and net cash flow from operating activities of $3 million. The eBiTDa result was ahead of the $4.5 million quarterly guidance provided at the end of april. The average price achieved for the June 2013 quarter was $ Us721 per carat, which is

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

equal to that achieved for the full year 2012. KDL recently entered into an agreement with eDiamond international to acquire a 100% stake in eDiamond Belgium BVBa. The acquisition provides KDL with the ability to immediately conduct future sales through an already established proprietary office in antwerp – providing greater control over its distribution channels and the opportunity to improve pricing structures and maximise gains. strong cash generation should see the company well-placed to pay dividends and to this end KDL intends to announce a distribution in relation to its full-year profit for the year ended June 30, 2013. For guidance purposes only, the board proposes to pay an unfranked dividend of a2c per ordinary share. With respect to valuation, using a 10% discount rate we calculate KDL’s net present value to be $175 million, which translates to just over $2/share. This provides a tremendous investment opportunity, given the company’s current share price around 40c/share. We are also encouraged by the very strong levels of projected cash flows, which help underwrite our confidence in the project and also provide the likelihood of a consistent dividend stream. KDL has quickly established consistent and profitable production from ellendale, while at the same time examining the bigger picture as far as an extension to the overall project life is concerned. a self-sustaining production opportunity with no debt and the capacity to generate profits and pay dividends is what every investor is looking for. 47


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Coal UPDaTE

worDs by anThOny baRiCh

us coal industry still in the game While Australia and Indonesia are becoming the “supply story” of the global thermal coal market, the US should not be counted out just yet.

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Salva Report

he seaborne thermal coal market may be heavily oversupplied with prices continuing to suffer but australian producers are doing their best to capitalise on India’s surging demand. salva report’s thermal market summary for the first half of 2013, issued on august 1, said the rise of australia and the continuing surge of Indonesia’s output was squeezing the Us out of thermal coal markets. after a strong first quarter, where exports grew by 2.1 million tonnes year on year, salva report noted that the Us’ Q2 trade volumes fell by 2.5Mt over april-May. Indonesia increased exports in the first half of 2013 by almost 20Mt to 204Mt and is heading, as the salva report predicted in its Q1 update, to well over 400Mt for 2013. addressing industry professionals in brisbane in June, salva report chief analyst Mark Gresswell said the supply surge from 2012 had continued but was now concentrated in australia and Indonesia. “This new supply is a result of the booming prices of 2008, which resulted in an investment surge in mines and infrastructure that is coming online now,” he said. australia has become so prominent in the global supply picture that “growth in volumes is becoming an India-China story on demand and an Indonesia-australia story on supply”.

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

salva report’s h1 thermal market summary noted that australian producers were “pushing out the tonnes”, with spare rail/port capacity and take-or-pay contracts “helping” the growth, as well as a push to reduce average costs by increasing volumes. “This is making it difficult for the exporters who are more marginal into asia – Colombia, south africa and the Usa, with all three experiencing lower exports year to date,” the report said. “Weaker sales into asia [from the Us] have been exacerbated by stronger competition into european markets by Colombian, south african and russian supply,” salva report said. “Currency depreciation in australia and Indonesia has only made the situation for Us exporters worse, despite significant (>100Mt) supply cuts domestically over the past 18 months.” “While export growth slowed in Q2, australian thermal exports continue to grow as producers look to reduce their dollar per tonne costs through exporting greater volumes. Take-or-pay contracts also have been important in pushing volumes higher.” While both Colombia and south africa recovered in the second quarter from a “disastrous” first quarter, albeit with a minimal year-on-year growth, “the Us has done the opposite as the tyranny of distance and adverse relative currency movements take their toll”, the report added. however, asX-listed junior County Coal Ceo rodney ruston warned punters not to count the Us thermal coal industry out of the asian market just yet. ruston, whose company has 730Mt of resources in the Powder river basin in Wyoming, told RESOURCESTOCKS that while the mines on the east coast of the Us that had exported and would continue to export quality coal to europe, he expected the global oversupply situation to turn around within five years, leaving the door open for the

Us to export into asia. “There are already projects being pulled off the market and my forecast is that within the next two years there will be a number of mines that will close because prices will stay depressed – we’ll go through another cycle and within a three to four-year timeframe the market will improve and prices will go up,” he said. “This is a normal resource cycle. The resource industry has the absolute ability to shoot itself in the foot more than anyone else. “When prices go up, we all rush out and build more mines and flood the market so prices go down again rather than control ourselves and say ‘let’s keep the market slightly undersupplied and we’ll all make a bunch of money’.” ruston said australian coal was getting more expensive because it was going further inland, helping the Us’ competitiveness. “Certainly the asian markets are very keen on diversifying their supply – regardless of what they say – and on sourcing coal off the west coast of north america because of increasing costs in australia,” he said, adding that the carbon tax had also hurt australia’s risk profile. “The bowen basin is in decline so companies are moving into the surat basin and the Galilee basin, which are a lot further inland and will make Us coal much more competitive. “We can produce coal in the Powder river basin for $Us5-10 a tonne. You can’t do that in australia. “There are people who think coal is dead and we’re going to run the world on wind [power] and that is not happening. In fact, the use of coal-fired power generation is still growing. although uranium and renewables are currently the fastest growth, there are still coal-fired power stations being built across China and a number being built in Taiwan. “so growth in global sea-traded coal will continue and some of that will come off the west coast of north america.” 49


Gold Production in Peru Commissioners Gold Limited (ASX: CGU) satellite mining and processing strategy in southern Peru commencing current quarter Central CIL gold processing plant at Mollehuaca in parallel with nearby high grade, low tonnage mining projects at Saulito and Eladium. Commissioners Gold holds 25% equity in the plant, the balance held by two other Australian corporate investors, after completing a $1.6m refurbishment. Production profile includes ore sourced from satellite mines, tailings re-treatment and third party by toll agreement.

Mollehuaca CIL & flotation plant

Saulito Au (Ag-Cu)

Eladium Au (Ag)

ASX: CGU Commissioners Gold Limited

Telephone: +61 2 9410 3445 Email: info@commissionersgold.com.au Web: www.commissionersgold.com.au Suite 605, 1-5 Railway Street, Chatswood NSW 2067


smart investing

Words by AlEx pAUll

time is ripe to get back into resources Investment newcomers need all the help they can get in this volatile climate, but the author of Online Investing On The Australian Sharemarket believes the time is right to invest in the resources sector.

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ogeR KinsKy’s latest guide to the many strategies and tips to making good investment decisions has been written to reflect the latest changes in online investing, including new websites and information on self-managed superannuation. Kinsky, a Masters graduate from the University of sydney, has over 40 years’ experience in trading shares, and he told RESOURCESTOCKS that while current market conditions dictated that the resource stocks were still speculative, opportunity still abounds. “i think that it has bottomed out and i think the resources sector probably offers a lot of opportunity for that reason,” Kinsky said. “That’s the sentiment, that it is bottoming out and it could be a very good time to get into those types of stocks, because i can’t see the sector going much lower. “it is more of a speculative sector,

and for first-timers in the market, i’d be going in smaller chunks rather than buying a great slab of shares.” While the mining sector has taken a hit in recent times, Kinsky was adamant that although there was opportunity in resources, there were a number of other strong sectors out there to invest in. Kinsky is also the best-selling author of three books devoted to helping investors understand the sharemarket. He said the major benefit of online investing and managing your own share portfolio was the lack of fees. “it costs you less money because you’re not paying a financial adviser to manage the investments for you, and i think people are waking up to that and are questioning whether they need someone to do it for them,” Kinsky said. “The benefit is you control your own investments, and after some period of time you could probably end up being better off financially because you’re not paying out the money in fees and you should be able to invest wisely and show good growth on your investments.” There are about 90 tips scattered throughout the book on the trials and tribulations of online investing, and how to avoid pitfalls as well as swing the probabilities in the favour of the investor. “That’s what my book is basically about, swinging the odds in our favour, and if we can do that, even only 60-40, we’re going to make

money,” Kinsky said. “if you can swing the odds in your favour so six times out of ten you’re making some good decisions and you’re going to make money in the long run.” Kinsky believes the key to making strong investment decisions isn’t years of experience and expertise, but merely confidence. “once you understand the basics and get a bit of confidence, the ordinary person can become quite competent at online investing,” he said. “you don’t have to be properly skilled at picking good stocks, as long as you can do it 50% of the time, but if you have solid management strategies and exit strategies, you can still make substantial profits.” What separates Kinsky’s book from other similar Diy investment publications is Kinsky provides his contact details as an extra avenue for readers to gain the edge in investment. “i stand by my book, and if people come to me asking for further tips or to clear things up, i’m more than happy to do so, so in that way readers can be assured that i’m offering somewhat of a back-up service by answering queries and giving feedback.” According to Kinsky, planning and understanding the basics of financial management are integral attributes of a successful investor. Kinsky’s book is the ideal companion for the new investor looking to invest wisely and profitably.

“I think that it has bottomed out, and the resources sector probably offers a lot of opportunity for that reason.” ROGER KINSKY aUtHor

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

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GOLD UPDATE

WORDS BY MININGNEWS.NET DEPUTY EDITOR JUSTIN NIESSNER

GOLDEN EYE: INJECTING HOPE INTO EXPLORATION

Research has given hope to explorers that they can cut what investors are most weary about: risk.

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NEW X-RAY application may be able to save miners hundreds of millions in profits by detecting fine gold particles otherwise unseen and wasted in inefficient processors. The technique – developed by the CSIRO and Canadian technology company Mevec – uses gamma-activation analysis to identify gold in mined rock at a size threshold well below 1 gram per tonne. This process is expected to be faster and more accurate than traditional chemical analysis methods, with CSIRO project leader James Tickner saying GAA is two to three times more accurate than the ‘fire assay’ approach, which requires samples to be heated up to 1200C. Tickner said a gold processing plant might only recover 65-95% of gold in

ore, leaving gold worth hundreds of millions going to waste each year. “Our experience suggests that better process monitoring can help reduce this loss by about a third,” he said. CSIRO noted that even if GAA only led to a modest 5% improvement in recovery, it would be worth $500 million annually to the industry. Tickner said GAA was also easily automated and adaptable for application with other metals. “Fire assay usually involves sending samples off to a central lab and waiting several days for the results,” he said. “Using GAA, we can do the analysis in a matter of minutes, allowing companies to respond more quickly to the data they’re collecting. “A compact GAA facility could even be trucked out to remote sites

for rapid, on-the-spot analysis. While most of the work we’ve done has been based on the gold industry, the technique can be modified for other valuable commodities such as silver, lead, zinc, tin, copper and the platinum group metals.” CSIRO has set a goal of partnering with local and international companies to get a full-scale analysis facility up and running in Australia within two years. The science agency described the GAA process as involving X-rays similar to those used to treat patients in hospitals in order to cause a reaction in gold samples that can be picked up by the system’s sensor. The technique is considered more sustainable than traditional methods as it doesn’t require the use of heavy metals such as lead.

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– Multicommodity, Radisson Blu Hotel, Sydney (9am-1pm) – Multicommodity, The Grace Hotel, Sydney (9am-1pm) – Multicommodity, Radisson Blu Hotel, Sydney (9am-1pm)

To register, visit www.resourcestocks.net/events.asp OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


company profile

AUSTRALIA

ALKANE RESOURCES

hARd yARdS pUt iN fOR A LEgACy-mAKER Patience is a virtue that will pay big dividends for this multi-commodity mining company. It has $100M in the bank to get its gold project off the ground and its massive rare metal-rare earth project has an estimated mine life of 80 years. Ngaire McDiarmid reports

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lkAne ResouRces is not afraid to put time and effort into developing long-term projects that will deliver substantial cash flow and return to shareholders. The multi-commodity miner has invested 14 years into developing its globally strategic Dubbo zirconia project (DZP), a very large in-ground resource of rare metals and earths. The DZP is set to be a legacymaker for Alkane. it has a conservatively estimated nPV of $1.23 billion. The pilot processing plant has established a purity of product that gives it international significance in the growing market for rare metals and earths. However, before the DZP gets underway next year, Alkane has $100 million in the bank to develop its Tomingley gold project, with production slated to begin in February. Managing director ian chalmers said Alkane had a simple strategy for success. “We are a multi-commodity company, but we have a very tight geographic focus in the central West of new south Wales,” he said. “our primary goal is to get the Tomingley gold project into production and generate the cash flow to follow it up with the Dubbo zirconia project in a couple of years’ time. “We’re a company that targets cash flow and profits – not any particular commodity – and essentially a return to shareholders.” construction started earlier this year at Tomingley, 15km north of the company’s successful Peak Hill gold mine, which operated in 1996-2005.

Tomingley has a resource base over 800,000oz of gold with a current mining model to produce 400,000oz initially. chalmers said it took 12 years from discovery to starting construction. The state government approvals process took 22 months. After such a long lead-in, chalmers said Alkane was quickly on the ground and construction was 70% complete, with commissioning on track for January. The three deposits at Tomingley – Wyoming 1, Wyoming 3 and caloma – provide a mine life of 7.5 years, but impressive intersections outside the resource base offer huge potential for the future. Alkane has recorded 9m at 110gpt gold from 194m, and 1m grading 821gpt from 196m at the caloma 2 deposit, to the south of the caloma resource. “it’s spectacular,” chalmers said

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

of the intersections. i can’t say its everywhere in the deposit, but it will certainly add to the resource base and extend the mine life.” Alkane expects to release a resource for caloma 2 this month (october). “We anticipate production starting in February, which means gold out and cash flow in,” chalmers told RESOURCESTOCKS. “This is a big step forward for us.” The gold mine, which is robust by any standards, is really a stepping stone to developing the advanced and globally significant DZP. “Dubbo is a very large resource of the metals zirconium, niobium, yttrium and rare earths,” said chalmers. “And it is something we’ve been working on for a very long time – about 14 years. “it’s a large-scale project and strategically important project in

Commissioning the Tomingley Gold Project is on track for January 2014.

53


“The DZP is a large-scale project and strategically important project.” Ian Chalmers ALKANE RESOURCES

an international sense, because all those metals have a growing demand and growing applications in all sorts of areas.” The DZP hosts one of the highest proportions of heavy rare earths found outside China and Alkane expects it to produce up to 5% of the annual global heavy rare earth supplies, as well as significant quantities of niobium and zirconium. A definitive feasibility study released in April confirmed the DZP had an initial 20-year mine life with a pre-tax NPV of $1.23 billion. Approvals permitting, Alkane plans to start construction in the second half of next year and commission DZP in early 2016. The company will be Australia’s only producer of niobium once production begins in 2016. Alkane signed a joint venture in July with Treibacher Industrie AG to produce and market ferro-niobium. This will generate about $US90 million in revenue, using today’s prices of $US40-45/kg per niobium unit with ferro-niobium. Chalmers said Alkane had operated a pilot project since 2008, making DZP one of the most advanced projects of its kind in the world. “It will certainly have a big impact in the rare metals and rare earths sphere once it gets up and running,” he said. “It has a big project capital cost of nearly $A1 billion, but when you look at the numbers, we’ve based the financials on a 20-year life, but we know the main deposit will support an 80-year open pit life. “We’ve got another deposit nearby that will probably support another 40-50 year life, so it’s not a short-term project. It’s also very sophisticated in 54

terms of the chemical processing. All the work we’ve done on processing and development has paid off because we can produce a number of very high-purity, high-quality products that can go into various end-use applications without further processing.” Despite such major projects on its hands, Alkane continues to explore and acquire other potentially beneficial projects in NSW’s Central West. In September, Alkane picked up two properties – Elsienora and Rockley – which the company believes host McPhillamy’s-style gold mineralisation. Alkane discovered the 3 million ounce McPhillamy’s gold deposit in 2006. Although it later sold out of the project, the company has used its exploration knowledge of the area to look for similar opportunities. “We’ve got a couple of other very good exploration projects we’re working on, as well,” Chalmers said. These include the Bodangora copper-gold project and Cudal goldzinc project, which increase Alkane’s knowledge of the area and provide further opportunities for future development. “There’s a lot of things that we’re doing and it gets back to our strategy: we are a multi-commodity company but very focused geographically,” Chalmers said. “The company is well funded, we’ve got $100 million available to us to develop Tomingley, without putting any debt facilities into place. “But long term, the company is really going to be built around what happens with the Dubbo project, because it is a strategically important project on the world scene.”

The ball mill shell being lifted onto the main CIL (carbon-inleach) processing plant area.

ALKANE RESOURCES At A gLANCE

HEAd OffiCE 65 Burswood Road Burswood WA 6100 Australia Ph: +61 8 9227 5677 Fax: +61 8 9227 8178 Email: mail@alkane.com.au Web: www.alkane.com.au diRECtORS John Dunlop, Di Chalmers, Ian Gandel, Anthony Lethlean MARKEt CApitALiSAtiON $143.5 million (at press time) QUOtEd SHARES ON iSSUE 372.6 million MAjOR SHAREHOLdERS Abbotsleigh Pty Ltd 24.6% JP Morgan Nominees Australia Ltd 12.8% JP Morgan Nominees Australia Ltd – Cash Income 8.8% National Nominees Ltd 5.9% OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


Near term, high grade

Gold-silver-lead-zinc production Evolving high grade copper discovery

2 Corporation Place Orange NSW Australia 2800 Phone: (02) 6361 4700 Fax: (02) 6361 4711 Email: office@ytcresources.com www.ytcresources.com

ASX Code: YTC

YTC advert.indd 1

15/10/12 1:07 PM


FEATURE

INDONESIA FOCUS

INDONESIA:

CLAWING BACK

FROM THE BRINK There is a concerted effort underway in Indonesia to improve the investment climate in its mining industry.

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N

O ONE DOUBTS that Indonesia’s geological prospectivity for natural resources can save the country’s future. It’s not surprising then that the government is lobbying hard for foreign investment. Meanwhile, local miners are hopeful that the next government, due to be elected in April 2014, will help provide some clarity to lure more western foreign investment, while a new wave of eastern investment is making its way into Southeast Asia’s largest economy. There is certainly an effort being made on the ground to improve foreign investor sentiment towards the country. Indonesian Mining Association chairman Martiono

Hadianto and Indonesian Coal Mining Association chairman Bob Kamandanu both signed a cover letter to open PricewaterhouseCooper’s mineIndonesia 2013 report, stating: “The industry is at an important stage of its development with the changes since the passing of the Law on Mineral and Coal Mining in 2009 and the associated challenges it brought. “We hope that all stakeholders in the Indonesian mining industry can work together to meet the challenges faced by the industry and continue to contribute to the growth of Indonesia. “IMA and ICMA continue to work with their members, the government and other parties towards achieving the best regulatory environment to promote further exploration and investment in the mining industry. “We believe that by having this

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


WORDS BY ANTHONY BARICH

cooperation we can consistently improve the investment climate in the Indonesian mining industry.” PwC noted: “Since the issuance of the Law on Mineral and Coal Mining in early 2009, the government has issued various regulations in order to provide clearer guidance to investors in the Indonesian mining industry. “However, concerns around the impact of the new regulations issued during 2011 and 2012 have meant that investors have not yet been willing to increase their exposure to the Indonesian mining sector.” There is hope, however, as PwC’s survey participants generally believe both domestic and global demand for coal – Indonesia’s strength – and mineral products will increase moderately in 2013 and in the short to medium term.

In fact, they believe the price of coal, nickel and gold will continue to increase over the next three years. PwC also cited the Bank of Indonesia’s observation that the mining industry’s contribution to the overall Indonesian economy continued to increase in 2011 and 2012, accounting for about 5-6% of total Indonesian 2011 and 2012 GDP and more than 17% of export revenues. However, PwC said “a significant concern” was the indication that survey participants did not expect great improvements with respect to 17 key issues they were facing that continued to impact the level of investment in the Indonesian mining sector. On the other hand, the report does note that “existing operators appear willing to continue operating in

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

Indonesia and generally do not have an intention to leave Indonesia”. “This may be due to the anticipation that there will be a moderate improvement in the regulatory framework for the mining sector over the medium to long term, an expectation that global commodity prices will return to previous highs, or simply due to the large investments that have already been made,” PwC added. Indeed, investment spending is mainly for replacement plant and equipment to maintain or expand existing operations. Meanwhile, there was minimal investment in greenfields exploration, which PwC called “a significant threat to the longterm success of the industry and may adversely affect the future growth of the Indonesian economy”.

Ancient wall in the Borobudur Buddhist Temple, which dates from the ninth century. There is a concerted effort underway in Indonesia to improve the investment climate for its resources development.

57


ELECTION EXPECTATION

A reservoir engineer analyses Pase data in Triangle Energy’s Jakarta office.

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HYDROCARBON HOPES

The oil and gas space is arguably proving more attractive for juniors at the moment than mining. Australian major Santos validated this further with its acquisition of a 50% interest in the Northwest Natuna production sharing contract offshore Indonesia from AWE Limited. Under the terms of the PSC, an Indonesian national company is able to acquire a 10% undivided interest in the PSC. Santos started exploration in Indonesia in 1997 and today produces natural gas and oil from three operated assets: Maleo in the Madura offshore PSC and Oyong and Wortel in the Sampang PSC. ASX-listed junior Triangle Energy has a 100% working interest and operates the PSC of the Pase block in the Aceh province, North Sumatra, which has established gas infrastructure, proximity to strong domestic and LNG energy demand markets and attractive LNG pricing premiums. Triangle chief financial officer Darren Bromley said there were no concerns about nationalisation in the oil and gas space, unlike the mining side. In fact, one of Triangle’s stated focuses is to renew its Pase PSC. Moreover, he said with the expensive offshore hydrocarbons already gobbled up by the majors, onshore Indonesia was ripe for the picking for juniors. “There were problems with the regulatory body that oversaw the upstream oil and gas – it was dissolved due to a constitutional irregularity,” Bromley told RESOURCESTOCKS.

On the mining side, there is hope the new government following next year’s elections (the current government has served its maximum of two fiveyear terms) will improve Indonesia’s investor risk perception. IMA vice chairman and Intrepid Mines executive general manager and Indonesia head Tony Wenas told RESOURCESTOCKS from Jakarta that he expected the next government to offer more clarity in the mining regulations and more certainty, both for miners and foreign investors. In February last year, Indonesia issued Regulation 24, which increased the divestment requirement to Indonesian interests for foreign investment companies holding an izin usaha pertambangan, or IUP (mining business licence) from 20% to 51%. The divestment requirement “They’ve overcome that by making a new department called SKK Migas, starts after five years of commercial production and gradually increases which has picked up all the duties to 51% by year 10 after production that BPMigas used to carry and in starting. the process fixed their constitutional “If I own a mining company and irregularities. I’m going invest $US1 billion using “All the PSCs continued to the bank’s money and at year 10 after be maintained, all the staff in production I will only own 49%, I the departments were basically don’t want to do that,” Wenas said. transferred to the new one. “Also my bank will not allow “No one’s had a problem with the me to divest 51% because the bank oil and gas regulatory environment has trusted me. So that needs to be [in Indonesia] – some of the world’s biggest operators have been operating reconsidered by the government.” Indonesia also said it would also there for a long time like ExxonMobil, prohibit the export of unprocessed raw Chevron, [Indonesian company] Star materials or ore by IUP holders. Energy and a bunch more. Wenas said he supported the “There is no issue with concept of Indonesia benefiting from nationalisation because in the oil and gas space, with PSCs, basically you’re downstream processing in-country but the government had generalised in partnership with SKK Migas, so too much in the new law, considering you’re the operator. the varying economics of minerals. “You buy the assets on behalf of “The biggest added value is from the government and that’s maintained the mining to concentrating,” Wenas through a cost recovery system.” said. “From concentrating to refining He said the system was equitable. is only limited added value compared Indeed, it would be “uneconomic” to the investment cost. So that has to for the Indonesian government to do be also revisited by the government. otherwise. For nickel and iron ore, it’s “As long as your project stacks up probably good for the company if and your gas price and your share is reasonable, economically it’s going to they build their own smelter for processing domestically. They’ll gain work,” he said. more profit. “We believe it’s very prospective “That’s why I say the government because there are many, many places can’t generalise and needs to look in Indonesia that just haven’t been closely at each mineral, because explored. each mineral has a different way of “A lot of the easy stuff has been processing and different economics.” done offshore but for example, we’re Indonesia is particularly operating in Aceh, which has been prospective for coal, copper, nickel, very protective over the years of its bauxite and gold. province. A month after Regulation 24 was “In 2005 the Helsinki issued, global law firm Norton Rose memorandum of understanding occurred, which resulted in Aceh now Fulbright said Indonesia did not have sufficient smelters to process raw having control over their resources.” OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


“As long as your project stacks up and your gas price and your share is reasonable, economically it’s going to work.”

materials in-country, nor was it likely to have sufficient capacity by 2014. Wenas also noted that the processing law was impractical and would have to be redrawn once January 2014 rolled around and the law was implemented, when companies would be found to be in violation of the law because they wouldn’t have had enough time to build a smelter. FRF fleshed out this concept: “Constructing smelters is timeconsuming and capital-intensive: on average, it takes around seven to eight years from inception to operation and costs can be in the region of $800 million to $1 billion or more. “Mining companies appear reluctant to diverge into processing. Newmont, for example, indicated in February 2011 that its feasibility studies indicated that setting up gold and copper smelters would be uneconomical.” However, the law firm added that the Indonesian government is “lobbying hard” to attract investment for the development of new smelters, having issued a series of statements announcing new smelter projects.

DARREN BROMLEY TRIANGLE ENERGY the critical role of the extraction industry in maintaining Indonesia’s macro stability and feeding the twin domestic growth engines of urbanisation and industrialisation, local analysts said. However, Wenas told RESOURCESTOCKS that a closer inspection of the figures was needed. He said the type of foreign investor was changing. Western investors from established mining countries, such as Australia and those in North America and Europe, were not increasing their investment, while more investment was coming from the likes of China, Korea and India. “The government’s reported increase in foreign investment is mainly the expansion of current investors. For example, Newmont or Freeport may expand their Indonesian operations and the government considers it as more foreign investment,” Wenas said.

“According to the government, 19 metal processing and refining facilities are currently under construction or undergoing feasibility studies as part of the country’s response to the prohibition on ore exports,” NRF said.

INVESTMENT-GRADE UPGRADE

There are legitimate concerns over its protectionist policies and its infrastructure deficit. However, Indonesia’s government still touts that it is still drawing foreign direct investment (FDI) at a record high. Indeed, Indonesia regained investment grade at Moody’s Investors Service last year for the first time in 14 years, with FDI increases of up to 27.2% suggesting that Indonesia was still on the radar for investors. The key to maintaining FDI flow into the country is in focusing on

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59


company profile

AUSTRALIA, BOTSWANA, TURKEY

impact minerals

change in direction makes major impact This Perth-based explorer is emerging from a chrysalis as a company poised to spread its wings and establish resources. Ngaire McDiarmid reports

I View of Impact Minerals’ Mulga Tank project showing extensive sand cover that has inhibited previous exploration.

60

mpact mInerals has undergone a major transformation this year. Disappointing drill results at its large grassroots projects in Botswana and Queensland last year have prompted an exciting change in direction. In the past eight months, Impact has sold off four non-core uranium assets in Botswana, undertaken a friendly merger with its 74%-owned exploration partner Invictus Gold, purchased a private company with world-class exploration assets and as a result Impact is focusing on three highly prospective, drill-ready projects in australia. Impact managing director Dr mike Jones said 2013 has been a transformational year to date and the changes were gaining momentum.

“We’re an exploration and resource development company, committed to looking for world-class deposits,” he said. “We ended last year through Impact and with our 74% stake in Invictus Gold having large grass roots projects in Botswana and Queensland and a small project in turkey. “the results of the drilling that we did late last year and at the start of this year were relatively poor so we made the decision we had to transform ourselves to acquire an advanced project.” Impact hit the jackpot in purchasing private company endeavour minerals which held three promising projects in australia – the mulga tank nickel, copper, platinum group elements joint venture in Western australia, the 100%-owned commonwealth high-grade gold, silver and base metals project in new south Wales and the Broken hill nickel, copper, pGe JV in nsW. “We purchased that private company – between Impact and Invictus – and those three projects have really transformed us to the point where we have fantastic drill-ready projects,” Jones said. “so in the first eight months of this year, we have completely changed the company and its focus and the nature of the projects that we have. “that’s all been extremely exciting.” as this edition of RESOURCESTOCKS went to press, Impact was also finalising its merger with Invictus to strengthen its position as it forges ahead. Jones has a favourite analogy about mining companies needing to maintain their momentum. “I read a quote recently and it

said running a junior exploration company is like riding a bike – if you go too slowly you’re going to fall off,” he said. “so we’ve been very active on a number of fronts and we still are; we’re looking for joint ventures and asset sales on the big grassroots projects and we have a long-term business strategy of developing a business in turkey, so that still remains a major focus for us. “We’re transforming ourselves by moving fast. “We don’t want to fall off our bike and we’re now heading into a fantastic period of drilling our three key projects.” the company will concentrate first on drilling at the mulga tank project in Wa’s Yilgarn craton, where Impact owns 100% of six licences and can earn at least 50% in seven others. the area was previously poorly explored due to extensive sand cover but Impact released exciting results from an electromagnetic survey in september and was planning a drilling program to build on those results at the time of going to press. “the em survey has identified seven really excellent conductors and they’re all coincident with significant soil geochemistry responses, which is a remarkable coincidence,” Jones said. “It is nothing short of extraordinary, I’ve never seen anything quite like it.” he said the results confirmed the area had strong similarities to the perseverance-rocky’s reward-Venus area near leinster in Wa, which hosts more than 1.5 million tonnes of nickel metal. Impact’s second priority is defining a resource at the commonwealth high-grade gold, silver and base

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


“We’re an exploration and resource development company, committed to looking for world-class deposits.” mike jones impact minerals

metals deposit, which it will own outright once the Invictus merger is complete. “There’s been enough work done there to indicate there’s a very high chance of a resource,” Jones said. “It’s an exceptionally high-grade gold and silver deposit and the historic mining and historic estimates of tonnes and grade indicate the ore zone is running up to 7 or 8 grams per tonne gold equivalent, all in the top 50m from surface.” Jones said that despite the project being barely explored, with just 66 drill holes to an average depth of 50m, it offered plenty of promise. “There is tremendous scope at depth and along strike,” he said. “We’re targeting a deposit that contains over 1 million ounces of gold equivalent and following Mulga Tank, we will be rolling through to drilling at Commonwealth in early 2014. “We’re not letting the bike lose momentum.” Impact’s third major project is the Broken Hill nickel, copper and PGE project, which Jones believes is the highest grade platinum project in Australia. Impact is earning an 80% interest at Broken Hill and once again the company will reassess the existing data and build on its potential. “The previous surface samples and drilling have returned results in excess of 20gpt platinum group metals,” Jones said. “The previous work has been fairly piecemeal and one of our specialties is taking old data, putting

it together, understanding the geology and – using our high technical standards at Impact – coming up with new ways of looking at the data and pushing forward with new targets as a result. “I was part of the project generation team at Western Mining, so my background has always been in target generation and exploration and looking for that big find.” Jones said Impact’s focus on its highly prospective Australian assets would not detract from its long-term plans to develop both its mining business in Turkey and its large remaining Botswana uranium project. Impact’s Botswana project comprises about 20,000sq. km of prospecting licences and applications that cover 250km of the strike extensions of rocks that host many significant uranium deposits throughout southern Africa. “The Botswana assets are fantastic but they’re for uranium, which has not been in favour for the last four or five years,” Jones said. “So we’re biding our time really and looking for a joint venture partner until the cycle turns.” He said that despite the difficult times the resources sector had endured this year, Impact’s share price had held up well thanks to its transformation. “Having these great projects and great news flow has insulated us a bit from the negativity that’s been out there – and to date we’ve been very much vindicated by our change in direction,” Jones said.

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

Image of ground electromagnetic data over Impact Minerals’ Mulga Tank dunite showing coincident conductors and soil geochemistry anomalies. The dunite outline is shown in black.

impact minerals at a glance

Head Office 309 Newcastle Street Northbridge WA 6003 Australia Ph: +61 8 6454 6666 Fax: +61 8 6454 6667 Email: info@impactminerals.com.au Web: www.impactminerals.com.au directOrs Peter Unsworth, Mike Jones, Paul Ingram, Markus Elsasser market capitalisatiOn $A16.7 million (at press time) QuOted sHares On issue 371.9 million majOr sHareHOlders Susanne Bunnenberg 42.44% M Elsasser & Cie 5.94% China Growth Minerals 3.18% 61


feature

nickel focus

62

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


Words by miningneWs.net journalist laUREn baRRETT

knuckling

down for a rough ride Australia’s nickel producers are not denying that it is tough out there. With prices down at more than two-year lows and softening demand, they are realistic about the market, but more optimistic than they were this time last year – and that’s saying something.

W

estern Australian nickel producers Panoramic resources, Western Areas and Mincor resources did not deny feeling the pinch of weaker nickel prices during the recent Diggers & Dealers conference in Kalgoorlie. “twelve months ago we thought the floor was $Us7 a pound [and] the exchange has been shocking,” Western Areas managing director Dan Lougher said. Unfortunately, that was not the case – with nickel prices falling even further in the six months prior to Diggers, to hit $6/lb. But Mincor MD and chief executive David Moore, winner of last year’s RESOURCESTOCKS Legends

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

in Mining Award, sees upside to the nickel price in the near term. “I think it’s probably at its bottom now,” Moore said. “It can’t really go much below this.” Bearing in mind, this was after he said at last year’s Diggers forum that: “You’re looking at a company whose share price is at a multi-year low on the back of this dropping share price – the enterprise value is about equal to the financial year 2012 operating surplus, so it really is a beaten down company in terms of share price.” the London Metals exchange nickel price last traded at $Us13,658/t prior to Diggers and had been under $6.50/lb. rFC Ambrian recently predicted 2013 nickel prices would reach $7.03/ lb, with $8.71/lb tipped for next year and $9.75/lb in 2015, on reduced 63


In July, the company flagged it would most likely recognise a non-cash impairment charge of $90 million to $100 million after tax for FY2013. Lougher said the impairment DAN LOUGHER on historical exploration was WESTERN AREAS relatively minor compared to some of those made on operating mines. “We thought it was quite justified output from Indonesia and the growth domestic product was pretty that not all those tenements are going Philippines. good,” he said. to give us enough metal at any price Panoramic MD Peter Harold said the “If you’re like me, I like a to pay back those dollars spent on source of the pain was subdued pricing stainless-steel fridge and dishwasher those tenements; and that’s very combined with the higher Aussie dollar to match … so that hasn’t gone away different to an asset write-down after exchange rate seen for much of the and I don’t understand why people an acquisition,” Lougher said. previous 12 months. think that’s under pressure. Stainless Panoramic recently flagged a Harold labelled the higher local steel is growing at 6% per annum.” non-cash impairment of $10 million currency unexpected. Moore said the intensity of nickel against the carrying value of its “The last time the nickel price got usage increases in China would Lanfranchi nickel operation, leaving to $6/lb, the dollar was about 65c,” he accelerate as individuals there became Harold to wonder whether it might said. wealthier. have to order further salary reductions “That gave you a lot of headroom, “Long term there is a strong following the first round of pay cuts which you just didn’t get this time.” market for nickel, but short term there in November. The recent lower currency, which is an oversupply,” he said. “We may have to look at more of was hovering around the 90c mark According to Lougher, one issue of those types of initiatives down the during Diggers, had given the nickel concern was that Europe had been in track,” Harold said. companies a much-needed reprieve. an economic coma – a problem given “But right now the focus is doing “It’s helping a lot,” Harold said. it was a major market for stainlessthe best we can and making sure “We can get the costs down and the steel. we produce that nickel production Aussie dollar is heading the right way. “You’ve got China sort of slowing, we’re chasing.” “But six months ago it was looking the US picking up and Europe dead,” The nickel miners are optimistic pretty dire.” Lougher said. yet conservative about what lies ahead According to Harold, every 1c drop “Normally, if one of those three in the next six to 12 months. in the Aussie dollar results in up to is not performing, you need the other “We’re not going to get $15/lb, $16/ $A2.25 million in additional revenue. two to be good … and we’ve got good, lb, nickel pig iron has killed that,” Lougher said the falling dollar was average and nothing.” Lougher said. a bonus and he saw potential for it to With subdued demand, a market The market was also beginning to dip further. in surplus and prices struggling, the loosen up in terms of labour, in stark “The exchange rate is helping us, nickel bosses lament that times are contrast to 12 months ago. it’s a huge positive,” he said. tough. “So things are shifting in our “If it goes to 85c we’ll be going, “I think you will find there is no favour, but you’ve got to survive and ‘you beauty!’” laterite operation currently making come out the other side,” he added. Moore was more conservative on money,” Lougher said. “I’m very optimistic going forward.” the subject of the softer dollar, saying “The anecdotal story I’ve got is As is Harold. it was merely mitigating the fall in the that 90% of global nickel producers “You’ve got to fundamentally be nickel price. on a full-cost basis aren’t making any focused on what’s positive in your While the dollar may be helping money. business, but you have to be realistic our nickel miners find some breathing “It’s been tough for us. We didn’t with what you can achieve,” Harold space, oversupply in the market is still make any money last year.” said. an issue. A swag of cost-cutting measures He said the industry needed to “There needs to be some supply are being rolled out by companies learn to adjust to a new paradigm of adjustment,” Harold said. this year. When times are tough, cuts lower commodity prices. He believes that with the surplus to staff, wages and incentives are There is light at the end of the in the market showing no sign of generally the go-to option. tunnel, but according to all three, they abating, producers may benefit with Western Areas, which operates just need to ride out the remainder of some operations shutting up shop. the Flying Fox and Spotted Quoll the year. “I think the best thing for all of us is mines, recently announced its “The rest of this calendar year will for one or two assets to drop out … we executives would forfeit 50% of their be difficult, but I think the currency only need sort of 50,000t to come out short-term incentives, while the will continue to weaken and that will of the market and it’s balanced again.” expansion of the Cosmic Boy mill continue to help us,” Harold said. Harold, Lougher and Moore agreed would be delayed. And Moore believes the nickel that demand had definitely been “Our operations are kicking goals price will bounce back in 2014. softer, but Lougher said concerns across the board, so to penalise them “Worst case, we may need to about China’s slowing growth were because the market is not good isn’t tough out another six to 12 months of overplayed and the consumer market right. So that’s why we went with 50% the current price. But I wouldn’t be was still strong. of the incentives, which we thought surprised if, in the next six months, it “When I was growing up, 7% was fair,” Lougher said. starts to edge up.”

“The exchange rate is helping us, it’s a huge positive. If it goes to 85c we’ll be going, ‘you beauty!’”

64

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


GIVE

US TIME PATIENCE NEEDED FOR

UNCONVENTIONALS America’s unconventional oil and gas bonanza has got Europe and Australia in a frenzy looking for their own slice of the action. While the results will come, the market is starting to wake up to a sobering reality.

Sun Resources’ Nabors drilling Rig #M47 on location in Leon County, Texas.


WORdS by anThOny baRiCh

E

xactly a yEar ago, aussie junior Sun resources’ stock surged from 2c to 8c a share when it started horizontal drilling looking for shale oil in texas, barely 14 months after raising $11 million to buy the leases in august 2011. the market was buzzing with excitement with Sun’s expected success, with much bigger companies like Hong Kong-listed, $US2 billion market cap company Halcon resources registering superb flow rates nearby in the lower Woodbine oil play which covers half a dozen counties around Sun’s tenement. a year on and Sun’s stock is back down to 3-4c with an impatient market unimpressed with the flow rates which, while making the company money on oil sales, do not by any means set the world on fire. Discussing Sun’s five horizontal wells drilled since, a Harlteys analyst report from June said it all: “So far the results have been mixed but all wells have underperformed our expectation.” It is a sobering thought in a US state with a strong oil history, with several hundred rigs going back to old plays looking for shale oil and gas. It is understood that there have been more shale wells drilled in texas alone than the total number of conventional oil and gas wells ever drilled in australia. australia has not reached anywhere near the drilling density of the US, and is hampered by traditional owner and seasonal issues and lack of infrastructure in Western australia’s canning Basin and a shortage of drilling rigs in the infrastructureheavy Perth Basin. australia has an estimated 94 billion barrels of oil equivalent – roughly the equivalent of four years’ global oil and gas demand at current levels, according to Edison. the more cashed-up companies like Santos, Senex, Drillsearch and Beach Energy are more progressed in their shale hunting in the cooper Basin which already has a long

history of oil and gas production servicing not only South australia but the eastern states markets; and now the lNG behemoths in Queensland as well. In both Wa basins, complex geology is also taking its toll. While rigs are not an issue for the likes of Buru Energy with a funding partner like Mitsubishi in the canning, it’s not so easy for others in the Perth Basin. Wa’s Mines and Petroleum department tried in vain to get a drill club up whereby companies banded together to help fund and share a rig, but the deal fell through. all this is compounded by a tough capital market and risk-averse investors which are punishing juniors, not only in australia but is even affecting the efforts of aussie juniors in the US to raise capital. the end-game of all this is that it’s no longer good enough to try the “nearology” play; even farming in a bigger fish to fund your project development may not deliver as big a shot in the arm to one’s stock as was previously the case. “Even one step up from that, a couple of years ago when cove Energy got taken out with a big gas discovery in east africa – even that isn’t enough to get people overly excited,” Hartleys energy analyst Simon andrew told RESOURCESTOCKS. “there has been a bit of a bump in the share price but not nearly the magnitude that you saw 2-3 years ago. “that’s even in an environment where the oil price has been pretty resilient versus other commodities. Oil is staying well above $100 where other commodities have grated.” Sun resources managing director Govert van Ek told RESOURCESTOCKS that he was told by “asian investors of scale” during a visit to texas in august that “it’s a great time to get into gas again because the price downside is much less than for oil, given the current low gas prices and high oil prices”. “Upcoming lNG exports may also ease downward pressure on gas prices. However, we are focussed on

“Cracking the code for the play is the key to get the oil flows you want.” govert van ek SUN RESOURCES

66

oil production in our acreage,” he added. However, more and more these days, investors need more – even in the shale space, where the market is slowly wising up to the fact that it’s not as easy as the hype over the United States’ transformation from a hydrocarbon importer to an exporter would suggest. “the market is growing more aware of the fact that, with some of these shale plays it’s not as easy as they once thought where you put down a vertical (well), put the lateral across, frac it and up comes oil and gas,” andrew said. “Sun resources is a case in point – there’s a degree of frustration at the rate at which it’s been able to drill and get results, and there have been technical issues. “this (unconventional) ground is not as homogenous as people think, it requires a lot more interpretation and the lead time from exploration to production is longer than people expect. So the reality is that for every good story, there are probably 30 that don’t make the mark. “So there is a gap between what happens on the ground and what the capital markets expect. the level of activity is there, but the lead time to people’s expectations of success needs to be dampened down a bit.” Van Ek said the issue was its important Seale and t.Keeling wells were landed slightly above the intended depths due to certain drilling issues, resulting in problematic hole stability. “It’s become clearer to us now, also from discussions with other operators in the area, that the lower Woodbine likely has a well landing point that is important to get right,” van Ek said. “Our technical experts have looked at whether we should use water-based or oil-based drilling mud and other factors to ensure that when we drill further wells in the lower Woodbine we’ll get them landed at the correct depth going forwards.” He added that while the geology in Sun’s acreage is well understood, less well understood is how to complete a well and frac it in such a way as to get the optimal oil flow results possible. “We think that is the key to unlocking the Woodbine play for us going forwards now. We now also have a pretty good idea of how we should complete and frac our next wells,” he said. the Woodbine operators share knowledge, and as in the early Eagle Ford days, van Ek said, “cracking the

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


code” for the play is the key to get the oil flows you want. Production normally improves with time as the understanding of the technical aspects go up. “Our geologists believe it’s a ‘blanket play’ present throughout our acreage, and if confirmed we should be able to replicate the good results already seen by other operators near by, across our own acreage,” he said. “One example is Weber Energy’s (now El Halcon) wells to the southwest that recently came on stream between 400-800 boepd IP rates.” Sun’s partner Amerril Energy has also been on a steep learning curve, together with Sun, in the Woodbine. However, more recently Sun has partnered with a large experienced operator in the north of our Delta project acreage – Petro-Hunt – which will drill a well there in Q4 2013. “We noted the most experienced and best operating teams often tend to prefer to work for the bigger players, perhaps as one could expect,” van Ek said. “We’ve recently brought on a new consultant who’s a completions expert on the operating side, and we expect this to have a positive impact for Sun going forwards.” Having said that, Sun recently secured $13.5 million in a private placement to Hancock Prospecting. Yet that’s not to say Sun – and juniors delving into the unconventional space across the US and Australia – are not still learning about the complicated geology. It does take time. Hartleys’ June analyst report on Sun had the words “still learning” up in lights to highlight the point. As in many cases in the US where unconventional hydrocarbons are now being tapped, the Woodbine play was an old, marginal conventional oil play that is now a very important unconventional (tight) oil producer. Bell Potter has noted that the Woodbine’s growth in production could replicate what happened with the Eagle Ford shale as it was derisked and opened up. “Recent estimates put the total daily Eagle Ford Shale production at about 1Mboe, which is estimated to be more than the daily production from the highly prolific Bakken field in North Dakota,” Bell Potter said. Adding to the issue for juniors is that there is a gap between what the market considers commercial and what kind of flow rate can actually make the company money. This is where Australia is so far behind the

US in shale resources development. For Sun, wells cost closer to $6-7 million – drilled, fracced and completed to tanks. This cost analysis also shows how far advanced the US is – it costs closer to $20 million to drill and frac a shale gas well in Australia. Where infrastructure is strong, it’s a big plus for investors, even in a riskaverse environment. Empire Oil & Gas is funding its tight gas exploration in the Perth Basin from condensate sales to the BP Kwinana refinery from its Red Gully gas and condensate processing facility, which itself was funded from a $25 million forward-sales contract to Alcoa. Empire managing director Craig Marshall confirmed that having secured off-take contracts and being so close to infrastructure is a big positive for investors. For these condensate sales to the BP refinery, Empire is producing about 650bpd, that’s $65,000 a day. “A lot of sunk costs means you won’t be paying tax on that for a while until you can recoup all your sunk costs,” Marshall said. “So yes, people would have some comfort in the fact that the gas is contracted, and not in the vagaries of liquid hydrocarbons on world parity pricing.” Marshall is also scathing of the hype around shale plays that also sometimes involves astronomical estimates that may prove seductive to the market but are counter-productive when the companies don’t come up with the goods. “A lot of technical people in the industry thought what has been said [regarding estimates of oil and/or gas in place at any given location] could in some cases technically have lots of holes in it,” Marshall said.

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“I would personally cringe to make a statement like that over an area you don’t really know and that doesn’t even have any holes drilled in it yet. “In our case, for the tight [unconventional] gas, we might well be the first company to produce tight gas to the market from the Gin Gin wells that we’ll drill next year.” However, Marshall stressed that Empire’s business model is built on chasing the conventional play – like Santos did. Having made its money on conventional prospects, Santos is now developing unconventional prospects. Marshall also acknowledged the comparison to the US where “they know the shale, they know they can produce gas from it, they can monitor the fracs, they drill closely spaced wells,” he said. “Here [in WA], you’ve seen the number of fracs that haven’t worked – they’ve fracced into aquifers, into faults and produced lots of water. “The learning curve is going to take some time compared to the US, where they’re drilling almost on an 80 acre spacing in some parts. “We don’t have that density here so we don’t have the geological information. “We’ll be drilling the structural closures for the conventional and tight gas, and will probably flow at economic rates without stimulation. Our upcoming program, drilling vertical wells or deviated wells, will be around $9-10 million – drilled, completed and production tested. “In the Perth Basin, if you can say categorically to reduce the risk that you’re going to be drilling a structure, a closure, the chance of hydrocarbons is very high, especially with 3D seismic. We’ll have more discoveries,” he said. “We won’t necessarily drill the biggest, but those with the lowest risk.”

A directional driller, drilling one of Sun Resources’ laterals in the Woodbine, Texas.

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company profile

papua new guinea

cott oil & gas

substantial foothold to create value in Png In the short time since its ASX listing in January, CMT has honed in on exciting opportunities in the tightly-held PNG oil and gas fields. Ngaire McDiarmid reports

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PPL 435, 436 location map in PNG.

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ott oil & Gas is poised to create value after securing a substantial foothold in the promising oil and gas fields of Papua New Guinea. Managing director andrew Dimsey said Cott was confident of the potential in the three petroleum production licenses (PPl) it holds with joint venture partner Kina Petroleum in Western Province. Cott’s three PPls are surrounded by proven oil and gas fields. the company has its eye on the big

discoveries that have led to the establishment of major developments, such as the massive $Us19 billion PNG lNG project, which is being driven by ExxonMobil and oil search. this project is already 90% complete and is on track to start production in the second half of 2014. PNG has two other export projects being developed, including the Gulf lNG project led by Canada’s interoil Corporation, based on its 8 trillion cubic feet Elk and antelope fields in the Gulf province.

the third project involves the wet gas discoveries in the Western Province. this is being driven by Horizon oil and its strategic partner, osaka Gas, together with talisman Energy. Condensate will initially be stripped from wet gas production at the stanley field in PRl 4, but the partners plan to aggregate gas from a series of discoveries to create sufficient volumes to establish a midscale lNG plant at Daru. Cott’s most prospective licence, PPl 437, is in the heart of wet gas

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country lying immediately east of the Stanley wet gas field in PRL 4 and north of PRL 21, which hosts the Elevala and Ketu discoveries. The PRL21 discoveries contain probable contingent resources of 0.9Tcf of gas and approximately 40Mbbl (million barrels) of condensate. The Australian explorer is using its experience, knowledge and contacts to identify large oil and gas targets and says its three PNG holdings are in a very prospective area. “We’re not looking for a million barrels of oil, we’re looking for hundreds of millions of barrels of oil,” Dimsey told RESOURCESTOCKS. “We’re looking for big targets, big opportunities in areas that have been under-explored or overlooked.” He said the region was underexplored on a world scale, but had a rapidly developing infrastructure and was close to growing Asian markets. It is also the focus of considerable corporate activity, with Mitsubishi, Osaka Gas, Exxon Mobil and Santos all farming in or attempting to acquire larger interests in the Western Province licenses in the past 18 months. Cott is reviewing all technical data in the Western Province and is acquiring new aeromag/gravity data that will provide an infill survey of its licence areas in PNG. Cott is looking forward to knitting the data together and pinpointing the prospectivity from the active hydrocarbon system. Cott is initially focusing on its most northerly and promising licence, PPL 437, which covers 1104sq.km. “PPL 437 is surrounded by major wet gas fields including P’nyang (2+Tcf), Juha (2Tcf) and Ketu/Elevala (1Tcf), and it looks like we’ve got

three or four very strong leads,” Dimsey said. “It’s very exciting because these prospects are down dip of Ketu/ Elevala and go back towards the ‘kitchen’ – in theory, the gas and liquids have come through our permit first and wet gas is likely to have accumulated in the leads we have identified. Given the existing leads within the permit, we are hopeful of generating material prospects in a reasonably short time frame.” Cott intends to acquire additional seismic over the most prospective leads and this is already included in the current financial year’s budget. The company’s two other PPLs, 435 and 436, are in the Foreland of the Papuan Basin and hold exciting potential. “We’re of the view that the further south you go, the more likelihood there is of finding oil, whereas up north, wet gas is more likely,” he said. A key benefit of PPLs 435 and 436 is that the Fly River, which runs through the heart of the licenses, provides easy access and the opportunity for lower-cost drilling from barge-transported rigs. Drilling in PNG is costly and Dimsey said there are a number of smaller rigs in use in Australia that can be taken in to drill shallower targets in the south of the licenses. The northern boundary of Cott’s PPL 435 is 45km southwest and up-dip from PRL 21, which hosts the Elevala and Ketu gas fields. Dimsey said the focus would be oil and wet gas. “The 435 area has created quite a bit of interest because there’s also been a gas discovery at the adjacent area, Lake Murray-1, which suggests that gas has migrated as far as PPL 435,” Dimsey said.

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Map including Cott Oil & Gas’s PPL 437 license showing major discoveries in the region.

“It’s all first-principles type exploration at the moment, getting back to basic geology and almost getting dirt under the fingernails.” andrew dimsey cott oil & gas

cott oil & gas at a glance

share price as of sept 12 $0.13 head office 945 Wellington Street West Perth WA 6005 Australia Ph: +61 8 9322 7600 Fax: +61 8 9322 7602 Email: alistair.jobling@cottoilandgas.com.au Web: www.cottoilandgas.com.au projects PPL 435 (PNG), PPL 436 (PNG), PPL 437 (PNG), 460-P (WA), 261-P (WA), EP 325 (WA) Market capitalisation $A9 million (at press time) Quoted shares on issue 66.6 million shares at tiMe of float 45.4 million 52-Week high $0.21 52-Week loW $0.10 69


Cott Oil & Gas rigging up in PNG.

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Japanese LNG importer Osaka Gas is one of several companies that have struck deals to source gas from PNG projects. Dimsey expects more interest from major companies. “We expect further deals to be done in this area based around the fact there are some very large gas fields that are not in production with significant upside potential in exploration,” Dimsey said. “The parties first in will be in a good position to control the development and marketing of gas discoveries in the Western Province.” Dimsey said Cott was already holding talks with interested parties about potential farm-out opportunities. “We believe that ‘the kitchen’ (the mature upper Jurassic where the oil and gas is generated) has generated large gas fields, such as Juha and P’nyang, and that multi-Tcf and multi-million barrel fields, such as Ketu/Elevala, have been created by migration from the same source,” he said. “The aeromag/gravity we’re getting is helping determine where these potential kitchens are further down in the Foreland area, and we have the view there are a number of other kitchens in these areas which are potentially generating oil and gas. “It’s all first-principles type exploration at the moment, getting back to basic geology and almost getting dirt under the fingernails.” Cott has a 25% interest in the South East Papua Study, which has gathered and evaluated data on the oil and gas prospectivity of South East Papua on the Indonesian side of the PNG border. By combining the data from this study with its PNG technical database, Dimsey said Cott was well-placed to explore further opportunities. “We now have aero-mag and gravity data over the whole area of

South East Papua, as well as down the whole western flank of PNG, so we can actually see the structural trends throughout this area,” Dimsey said. “We feel that’s going to develop into quite an exciting exploration play, being able to see a detailed technical side on the eastern side of the border in PNG and being able to reference that across the border.” Dimsey expects the oil and gas market to strengthen and the next round of oil and gas pricing to increase as US, Asian and European economies slowly improve. “I think PNG is the perfect place to explore as there’s no doubt that there are substantial quantities of undiscovered hydrocarbons there, it is underexplored and there are a number of new world-class projects moving to production,” he said. “Exploration costs are expensive, but at the end of the day sizeable discoveries are a good-value business.” “I believe it’s the area the major oil and gas companies are going to head to, and I expect that demand from this part of the world, Japan, and other Asian countries, is going to continue quite strongly both in liquids and gas hydrocarbons.” “The next significant growth pick-

up in world markets is probably going to have quite a significant impact on pricing.” Dimsey attributes his enthusiasm for the sector to sharing an office in his first job at Beach Petroleum with the “godfather of the Australian oil industry”, Reg Sprigg. “He was enthusiastic about educating people about the industry and finding oil and gas and I’ve been involved in the industry ever since,” Dimsey said. “It’s a good industry – it’s got a level of excitement, it’s certainly got its level of difficulties but it’s one of the building blocks of our world. “There’d be a lot less happening if we didn’t have oil and gas.” Cott is in the perfect position to extract the most of its opportunities through its knowledgeable team, which has a combined 100-plus years of experience in oil and gas. “We’re passionate explorers and we’re doing the exploration and identifying opportunities in a very cost-effective manner,” Dimsey said. “We will upgrade the value of those opportunities either by participating in the exploration or on-selling the opportunities, that’s the value proposition.”

Cott OIl & Gas’s drill crew in PNG.

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The Boardroom the Firm Cott Oil & Gas is an early-stage exploration company. It was incorporated in 2012 as a petroleum exploration company seeking acreage in Papua New Guinea, Indonesia and the Westralian Superbasin. It is comprised of professionals with years of major oil company experience in Australasia. The company is seeking to define commercial quantities of hydrocarbons (oil and/or gas) through exploration programs in highly

the Strategy prospective acreage that is accessible to markets and infrastructure.

the ShareholDerS Fitel Nominees Ltd 8.86% WMO Welcome PL 7.94% National Nominees Ltd 6.01% Longshot Oil & Gas PL 5.82% Andjen PL 5.77%

To take large acreage positions in proven or emerging oil and gas basins, where the company can utilise its regional expertise and database to build value. Intends to build a quality portfolio of exploration opportunities and deliver multi-Tcf & multi-MMbbl drilling opportunities. Will focus on acquiring undiscovered, underdeveloped resources, and developing JVs with industry partners through its technical expertise and high-level industry contacts.

the DirectorS DaviD BraDley NoN-ExEcutivE DirEctor

anDrew DimSey maNagiNg DirEctor

David Bradley is an energy industry commercial specialist with 30 years of business development experience. This includes senior management roles with El Paso Corporation, Epic Energy, and senior managing consulting roles with Wood McKenzie. Has also privately advised a broad range of upstream, midstream and downstream energy players in developing and executing commercialisation strategies and business development initiatives. His experience includes significant M&A coordination roles realising over $2 billion in closed transactions.

Has 30 years of finance/commercial upstream experience in senior executive positions for ASXlisted oil and gas companies. These include Beach Petroleum, Alliance Oil Development, Claremont Petroleum, Elders Resources Discovery Petroleum, ARC Energy and Origin Energy. He has expertise in oil and gas strategy, structuring and a strong background in the management of projects.

He has managed and arranged funding for oil and gas projects including Jackson-Moonie Pipeline, Drillship Energysearcher, drilling of the first Australian Coal Seam Gas wells at Moranbah in Queensland, Drillsupport as founder and managing director - a subsea robotics installation company, pipelines, gas and oil plant construction in the Perth Basin and major gas sales contracts from Carnarvon Basin to Perth customers. He has been involved in the establishment of successful Australian companies in oil and gas exploration, as well as production, investment and service industries.

Stephen DenniS NoN-ExEcutivE chairmaN Has extensive experience in the resources industry, covering commercial, financial and operational management roles. In 1982-1996, he held various senior management positions at MIM Holdings, including at the Mt Isa operations. From 19972005 he was at Minara Resources, where he held the position of group general manager and then chief financial officer. In 2006, he moved to Brambles Australia, where he was regional director of its minerals transport operations in Western Australia. He is also a non-executive director of Heron Resources and is the CEO and managing director of CBH Resources. OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

Map showing hydrocarbon discoveries in PNG. 71


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taking stock

Words by PETER STRACHAN

unholy mess ripe for conspiracy theorists

“Consumers may find that they are able to source metal more cheaply from the LME’s stockpiles.” peter strachan independent analyst and author of www.stockanalysis.com.au

Taking Stock looks at the macro forces behind market movements as well as global trends that impact the resources industry.

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ommodity markets are being pulled in all directions at once. Prices for bulks, such as iron ore and coal, have jumped, with the australian dollar iron ore price for high grade delivered into China back over $a150 per tonne. metals have also bounced off unsustainably low levels where, with the exception of copper and tin, all other metal prices are well below the marginal cost of production. the gold price has jumped $a250 per ounce to over $a1550/oz, at which all but the most marginal local projects are viable. recently, the West texas intermediary crude price jumped 25% to trade at close to its march 2012 highs. While Us oil inventories remain relatively high, they have fallen over the past month (prior to september), which may represent an element of “fuelling up” by the Us military in advance of possible action over syria. this price rise comes in response to rising tensions in the middle east, despite a 1.1 million barrel per day lift in Us oil production over the past year to about 7.6mmbbpd. although Us oil imports are down 0.5mmbpd over the past year, they still run at 8mmbpd, showing how vulnerable the Us economy remains to imported energy resources. Concerns about a slowdown in growth in the developing world, particularly in China and india, have hit the indian currency and stock

market, vindicating those indians who bought gold as a hedge. this action led to severe commodity price weakness from February until July. But recovery in the Baltic dry index for shipping freight is also pointing to renewed strength in the sector. China is going through a political change. as the country’s new leaders put former high flier Bo Xilai on trial, more high-profile cases of corruption, and worse, are likely to filter through its system over the coming year, which may be a cause for some market volatility. in the Us, retail sales and the housing market are leading the economy out of recession, while in the eurozone, core economies are at last recovering, even though the Greek economy remains in a 4.5year recession. But some real interest now turns to metal markets. a couple of years ago, the London metal exchange was bought by Chinese interests. this move is more than symbolic as Chinese resource consumption now dominates almost every commodity you can name. the plot thickens, however, since over recent years, Lme warehouses have been owned by Us-based merchant banks. the Us commodities watchdog CFtC has subpoenaed some to appear as it investigates alleged rigging of the market. Without deep knowledge of the case, StockAnalysis is reminded of the eNroN case. at one time, eNroN was both a major power generator and power contract trader in California. eNroN could

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

control the power market and so it would take bets on a rising price for electrical power in the future and then simply shut down plants on some lame excuse, forcing the price up so that it’s trading division could clean up. the Usa’s CFtC is now ramping up its probe into the metals warehousing industry. this comes as the Us Federal reserve is due to rule on whether the banks should be allowed to continue owning physical commodity assets, based on the fact that they run a huge trading ‘book’ on metals as well. Goldman sachs has sought to defuse the tension surrounding its warehousing business by offering to provide immediate delivery of aluminium to any consumer waiting in a queue, while JP morgan has announced plans to exit physical commodities trading altogether. the story goes that large aluminium consumers, such as can makers, were unable to secure timely delivery of metal from the Lme warehouses, thus keeping prices above fair market value or at least providing the middle men with a premium over official Lme settings. it is uncertain how unwinding this unholy situation will play out on metal market prices. there may be no impact, but consumers may find they are able to source metal more cheaply from Lme stockpiles. StockAnalysis can only imagine that the new Chinese owners of the Lme will be learning on the job and are unlikely to be highly impressed. 73


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digging deeper

WordS By allan TREnCh

dos and don’ts of cap raisings Digging Deeper’s list of “dos and don’ts of capital raisings” has something for company managers and investors.

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unior resources companies are typically led by highly competent technical people as managing directors – often being geologists for earlystage explorers and then engineers for project developers and small-scale producers. This relationship holds true across the oil and gas and metals/mining sectors, although many exceptions do exist. These are appropriate choices in managing a resources company. The straightforward thinking is that an MD from a commercial background may struggle to know the technical differences at the exploration stage between “hot” and other properties with far less upside resource potential. Likewise, as most first-time projects for emerging resources companies are typically a “bet the company” value proposition, it makes perfect sense to have an engineer at the helm at that stage of a company’s growth plans. Why? in order to solve first-hand the myriad of operational challenges that will accompany the successful transition to profitable production. Where such a leadership bias towards technical skills can create problems is in the critical area of capital raisings. An MD with a strong technical background needs strong in-house commercial support alongside, so as not to trip up when overcoming the various financing hurdles along the growth path to production. With that in mind, here are some “Dos and Don’ts” picked up over the years that characterise the way more successful companies handle equityside capital raisings.

“Remember that quarter-end cash balances do not report the monthly accounts payable.” allan trench is a professor at the University of WA (Centre for exploration Targeting) and at the graduate School of Business, Curtin University of Technology. He is a director of several resource companies. allan.trench@crugroup.com

Hopefully, company managers and investors alike can take lessons from what typically works well and, just as importantly, what does not. DO • utilise the support of existing strategic shareholders already on the company register, to both underpin and provide a firm price to equity capital raisings; • Give all shareholders the opportunity to participate should a discount equity raising be a necessity – such as through a share purchase plan (sPP, which can be issued at up to a maximum 20% discount) or else through a top-up rights issue offering; • Take steps to ensure that a broker to a placement knows the company story very well – including the detailed use of funds – so that the capital-raising story is communicated correctly; • Get on with it. Many companies have a habit of putting off difficult decisions around capital raisings. indecision and internal discussions can stretch for months. if a capital raising is continually mentioned but not actioned across successive board papers, then there is a problem; • Watch the cash balance very carefully – both as managers and investors. remember that quarterend cash balances do not report the monthly accounts payable. so to guestimate the real cash balance, first look at the reported expenditure for the previous quarter, then take two-thirds of that number off the reported cash balance at the quarter’s end to estimate the approximate cash still in the company when the quarterly is released. For clarity,

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

that is a one-month cash burn to estimate unpaid accounts prior to the cash flow statement reporting date – then a second month for the additional running costs of the company for a further month after the reporting date to the time the quarterly is released. DON’T • Be tempted to shop around a potential capital raising across a large a number of stockbrokers looking for support. Word tends to get out that the company is actively seeking new capital. The share price then mysteriously falls; • Let brokers send out blanket emails that either directly or indirectly ask “are you interested” to a large number of sophisticated investors with little or no direct relationship to the company; • Haggle excessively on the cost of an equity placement (typical equity raisings come in at about a benchmark 5% cost of the funds raised). As long as the cost does not depart excessively from the benchmark, the aim is to “just do it”; • As managers, do not let the available cash balance drop too low. Playing ‘chicken’ with the market is a dangerous game. As investors, it is a case of “buyer beware” when choosing companies with less than $1 million cash to play with. expect a letter from the company soon – with a subscription form attached to it. Watch that space. 75


company profile

aUSTRalia, KyRgyz REpUbliC

kgl resources

strategy breathes new life into market With a name change and a streamlined focus on its Jervois project, KGL is that rare bird: a cashed-up junior well-placed for the market turnaround. Anthony Barich reports

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Copper crystalisation plant at Jervois.

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GL ResouRces is breathing new life and confidence into a market that has punished junior resource stocks across the board. Like many of its ilk, Kentor Gold endured a tough run these past 18 months. it has emerged as KGL Resources, with more than enough cash for its immediate growth plans, which includes a massive drilling program on its flagship Jervois project in the Northern Territory – something not many juniors in the same space could claim. its strong cash position of about $11 million in the bank distinguishes KGL from its peers, and its 20,000m diamond and Rc drilling program to

be completed by Q1 next year will help ensure that when the market turns, it will be in the box seat. its strong cash position is due to a selling off of its Andash gold-copper project in the Kyrgyz Republic to Robust Resources for $15 million. KGL sold Andash as shareholders were getting impatient with the delays caused by local community issues. Thus, the name change: Kentor is a Kyrgyz word and copper, rather than gold, is now the company’s prime focus at Jervois. Then KGL farmed out its Bashkol copper-gold project in the Kyrgyz Republic to Robust Resources. Robust can spend $7 million to earn 70%, thus removing KGL’s

funding obligations. KGL owns 80% of Bashkol while the Kyrgyz government owns 20%, and both will dilute. A 2000m diamond drilling program started at Bashkol in september. All this enables KGL to concentrate on Jervois, which currently has an impressive resource of 13.7 million tonnes at 1.3% copper and 26.3gpt silver, which the company aims to lift substantially with the current drilling program. This program, which is part of a pre-feasibility study, will have two phases. Phase one is pure testing out of exploration targets. Phase two is infilling and extending the existing known ore bodies in order

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


“Once I’m armed with the PFS we will then start talking to smelters and offtakers.” simon milroy kgl resources

to increase the size of the resource. KGL managing director Simon Milroy, who ushered the company through the strategy change, said previous exploration data from induced polarisation (IP) surveys about 14 years ago by Mt Isa Mines Exploration had been reprocessed. The results have been astounding. The IP survey has shown some good correlation between known ore bodies and chargeability highs. The survey has generated six additional chargeability anomalies that have never been tested by drilling, so that will be where KGL starts the drilling program. “It’s really pure exploration drilling, and we’ll have most of that completed in the first month of the drilling program. Once the results from this come in, we will then reassess and decide whether to move on to infill drilling or continue exploring some of the exploration targets,” Milroy said. “This is all part of a pre-feasibility study. If we have a big hit with the exploration drilling, we would probably change the focus in order to test it out and see how big it actually is.” Jervois certainly has the potential to be very large because it has copper ore bodies spread over a 12km strike length. There are four known ore bodies, all of which are open along strike and down dip. Milroy said the long-term growth strategy was 100% focused and committed to Jervois, and he was confident the company did have an economic project on its hands. “We’ve already completed a scoping study last year, which shows that it floats well through to a highgrade copper concentrate,” he said.

Bellbird ore body “The only complicating factor with historic mining. on the metallurgy is the presence of bismuth, a penalty element in copper, in some of the ore. When you process the ore from those areas, the bismuth tends to float with the copper. “However, in the metallurgical test work we’ve recently completed we’ve leached the copper concentrate to remove the bismuth – so we’ve successfully proved that we can remove the bismuth and will be able to sell a clean copper concentrate.” The next stage of the test work is to see if the bismuth can be recovered into a saleable product. “One of the interesting aspects of Jervois is that even though the scoping study rates it as an 18,000-28,000tpa copper mine with a nice silver credit, there are a lot of other metals in it. There are plenty of potential byproduct credits including gold, lead, zinc, tungsten, cobalt and magnetite,” Milroy said. “The test work we’re doing is focusing on recovering those by-products.” Jervois is well-served, with access to existing rail and road infrastructure. KGL wants to be ready to start scouting for an off-take partner at the end of the PFS. “Once I’m armed with that document, we will then start talking to smelters and off-takers,” Milroy said. On this note, KGL is pursuing two different strategies. One is to separate the metals at the site to produce a number of products; the other is to simply float a bulk concentrate and sell it to a smelter, probably in China, and effectively do the downstream processing there. The advantage of the second option is that the labour and power and

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

kgl resources at a glance

share price as of sept 16 $0.12 head office Level 9, 40 Creek Street Brisbane Qld 4000 Australia Ph: +61 7 3071 9003 Fax: +61 7 3071 9008 Email: info@kglresources.com.au Web: www.kglresources.com.au projects Jervois, Bashkol Market capitalisation $A16.1 million (at press time) Quoted shares on issue 140 million shares at tiMe of float 100.1 million 52-Week high $0.64 52-Week loW $0.05 Ytd change % -0.27% 77


Historic head frame at Jervois.

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complexity would be moved to China where all these factors were much cheaper than trying to do it at site. KGL had a look at plant sizes ranging from 1.5-2.5Mtpa and found that the economics improved vastly with a larger plant, hence the push to increase the size of the known resource to justify a larger plant. All this hard work is testament to the company’s determination to not just survive, but thrive, even in tough times for junior resource stocks. “We’ve certainly been questioned by shareholders saying, ‘what’s the point of drilling holes? The market won’t care; your share price won’t react’,” Milroy recalled. “However, that’s not why we’re doing it. This is a great time to be doing work because it’s much, much cheaper than it normally is. “The market will turn at some point and when it does turn, we want to be in the box seat with a large copper project well advanced. “Rather than just waste a year or two sitting on our hands, then reemerge with the rest of the pack, we want to be leading the pack when the market does turn. “The drilling costs are much cheaper than previously. The geologists are cheaper, the assay laboratories are cheaper – the turnaround has dropped from two months to two weeks for laboratory assays. “So it’s just a good time to be doing business – you get more bang for your buck, and we’d be mad not to take advantage of it.” All this means KGL won’t be needing to go to the capital market

any time soon, which is another big plus in a tight market. “Our longer-term strategy is not to go to the market,” Milroy said. “To finance this project, at some stage we would potentially sell a portion of the project hopefully to a concentrate off-take partner, which would provide what would normally be the equity component of the funding with the rest being debt finance, to take us through to production.” It is important to remember that the company had three months in suspension and the share price has been decimated, like every other junior stock. KGL re-listed in August, opening at 5c, and has been climbing steadily ever since. It was trading at 12c when Milroy spoke to RESOURCESTOCKS in mid-

September. KGL has also overcome issues surrounding its high-grade Murchison gold project in Western Australia. Earlier this year, Murchison was on track to achieve its production target of 2000oz/month, having first poured gold in August last year. However, it took longer than planned to ramp-up to full production, partly due to a non-performing contractor. The plan was to mine the hard, low-grade Lewis pit, put it on a stockpile and move onto the Alliance pit, where the ore was higher grade and much softer. Knowing it was going to run out of cash before it reached a cash-positive position, Kentor arranged a bank debt facility in January, but the gold price dropped $200/oz in April and the bank changed its mind. Kentor took the decision to call in administrators. By Q1 it should have been milling Alliance pit ore, combined with the underground ore, but instead was still having to mill the hard, lower-grade Lewis ore. The costs were where they should be, but the gold output was still down on target at the time. Today, the project is on care and maintenance, and will be sold in due course when the gold price rises sufficiently. It remains a solid investment and has a defined resource of 725,000oz of gold. So the Murchison project, which KGL has taken back from administrators, is sound, the resource is there and the plant works. At the end of the day, the sale of Murchison will be a handy booster for the company’s coffers and will help the company focus on the high-grade, high-quality project that is Jervois.

Portable XRF and GPS at Jervois. OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


The Boardroom The Firm KGL Resources is an Australian mineral exploration company focused on increasing the high-grade resource at the Jervois copper-silver-gold project in the Northern Territory, then developing it into a multi-metal mine. Jervois has indicated and inferred resources of 13.5Mt at 1.3% copper and 25.8gpt silver, for a total of 170,415t copper and 11.6Moz silver at a 0.5% copper cut-off, together with 69,000oz

The sTraTegy gold, 26,000t lead and 22,000t zinc.

The shareholders KMP Investments 27.32% JP Morgan Nominees Australia (cash income A/C) 9.54% JP Morgan Nominees Australia 5.38% HSBC Custody Nominees (Aus) 4.5%

KGL Resources’ strategy is to build the resource at Jervois as part of a pre-feasibility study. The strategy at Jervois is to use flotation to produce a copper concentrate that will be trucked to the railway line and then railed to Darwin for export.

National Nominees 3.94%

The direcTors chrisTopher Bain Director Has over 35 years’ experience in the resource sector having worked in mining, exploration, investment research, corporate advisory and funds management roles. Graduated as a geologist in 1977 from RMIT and initially worked as an underground mine geologist at Mt Isa, Queensland and then in Tasmania before moving to an exploration role at Broken Hill, NSW. Joining the finance sector in late 1986 he has held senior positions in mining research for funds management and stockbroking companies. Between 1998 and 2008 Chris was a director of Investor Resources, a Melbournebased company that provided financial advisory services to the resources industry globally. From 2008 to 2013 with Phillip Capital he was the founder and CIO of the Phillip Resources Fund, a specialist mid-cap Australian resource investment fund.

simon milroy maNagiNg Director A mining engineer who previously spent nearly four years as general manager – project development and manager technical services for Pan Australian Resources in Laos. In those roles he was responsible for scoping and feasibility studies, evaluations of projects and companies, ore reserves and technical support of the company’s operations. During that period, his key achievements were managing the feasibility studies and environmental and social impact assessments for the Phu Bia gold mine and the Phu Kham copper-gold mine.

John Taylor NoN-executive Director Has held senior positions in business and has had 40 years of experience in the Australian and international engineering and construction industries. These were primarily in the resources sector. Previously, Taylor was the managing director of Outotec (Australasia) Pty Ltd (retired 2010) and has held directorships in several ASX-listed companies. These include Ticor Limited and privately held companies such as Lurgi (Australia) and Metallgesellschaft of Australia. RC Drilling at Jervois.

andrew daley NoN-executive chairmaN Commenced his mining career in 1970 with Anglo American on the Zambian copper belt and later worked with Rio Tinto and Conoco Minerals also in Africa. He moved to Australia with the engineering group Fluor Australia in 1981 working on new project evaluation. In 1983 he moved into resource project finance with National Australia Bank, Chase Manhattan and from 1999 as a director of the mining team at Barclays Capital in London. From his return to Australia in 2003 until retiring from full-time work in mid 2009 he was director of Investor Resources Finance, a company based in Melbourne which provided financial advisory services to the resources industry globally. He is a member of the Audit and Compliance Committee and chairman of the Remuneration Committee. OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

79


company profile

aUSTRalia

consolidated tin mines

an emerging aussie tin producer With global tin demand rising and commodity experts calling it the best-performing metal of 2012, CSD’s plan to become Australia’s next producer appears perfectly timed.

A

Drilling at the Mt Garnet tin project.

80

SX-liSted Consolidated tin Mines (ASX:CSd) is nearing completion of the prefeasibility study on its Mt Garnet tin project near Cairns in North Queensland. Having been due for completion by the end of September, the PFS was expected to confirm the project’s robust economics. CSd hopes to produce its first tin concentrate in H2 2014. Backing up these lofty ambitions is a suite of complementary assets assembled by CSd’s managing

director Ralph de lacey and his management team in conjunction with the company’s major shareholder, Snow Peak international investments. A key component of this was the acquisition of Kagara’s Central Region assets by Snow Peak Mining, a company established and majority owned by Snow Peak international investments, in January this year. “We now have a JORC resource of more than 10 million tonnes of tin, which has always been our target, to support a major new tin mining operation in the Mt Garnet region,” de lacey said. “When the Kagara opportunity appeared, we and our partners realised the other piece of the puzzle was there if we were bold enough to take it.” that other piece is the 1Mtpa Mt Garnet ore concentrator, acquired as part of the Kagara Central Region project. the deal also delivered a host of highly prospective copper and base metal assets, including the Baal Gammon and Balcooma/Surveyor mines. the acquisition of the Kagara assets cost SPM $40 million – including $10.7 million in environmental bonds. Consolidated tin has a 10% free-carried interest in SPM, and will manage and operate the Kagara project assets on a reimbursable basis. However, this is only the beginning. When the PFS confirms the company’s view that reconfiguring the concentrator to process tin ore from Mt Garnet is viable, then CSd will be well-placed to be the nation’s next tin producer. this is no idle boast. the concentrator’s processing streams are

set up to treat copper and polymetallic ore. Modifying the concentrator to handle tin ore from Mt Garnet would cost a fraction of the cost for Consolidated tin to build its own plant from scratch. the Kagara deal has radically altered the economics in CSd’s favour. Subject to a positive PFS, a joint venture company will be formed. CSd will tip in the JORC resourcebacked Mt Garnet tin project, while SPM would contribute the ex-Kagara assets, including the ore concentrator. each joint venture partner would be responsible for a pro-rata share of the cash necessary to modify and upgrade the concentrator to treat tin ore, with the aim to create a fully fledged producer generating up to 5000tpa of tin in concentrate. the company recently reported an updated resource estimate for the Mt Garnet project. the result was a major increase in the total JORC resource, to 13.12Mt at 0.39% tin (0.56% tin equivalent including iron and fluorine by-products), and an increase in total contained metal to 51,560t. Given that the company’s target resource goal to support a large-scale open pit mining operation at Mt Garnet is 8-10Mt, this latest upgrade only strengthens the case for mining. “this updated independent resource estimate is a significant achievement for the company and clearly indicates that there is sufficient feedstock to establish a major hard rock tin mining operation at Mt Garnet,” de lacey said. “this provides the basis for us to move into the next phase of project development and, eventually, production.” the updated resource estimate was delivered from drilling programs at

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


the three core deposits within the Mt Garnet project area: Gillian, Pinnacles and Windermere. Independent consultants have been engaged to develop the mine component of the PFS. Open pit design and optimisations to process 1Mtpa are near completion. Work has also been carried out on plans for roads, water and waste rock management and mine infrastructure, which is also included in the PFS. Extensive metallurgy and mineral recovery testwork has been undertaken to develop and refine the final process flow sheet. Work is also being undertaken to validate the flow sheet and progress the processing study phases. Detailed designs for plant modification and equipment requirements, including operating and capital-cost estimates, will also be completed. For CSD shareholders, the other positive in all of this is that the company’s progress is taking place in parallel with a growing awareness among global commodities analysts that, unlike many other metals, tin’s price is not tanking. Ironically, environmental awareness is partly responsible. In 2006, the European Union moved to eliminate toxic lead from solder, a fundamental material in electronic circuitry. Under new Euro laws, tin is the preferred replacement. The developing world is expected to implement similar prohibitions and demand for tin is likely to surge as electronics manufacturers comply. Tin’s role as a lead substitute in solder is not the only factor forecast to fuel demand. In a report released in February, industry research specialists RNCOS were unashamedly bullish about where the market for consumer electronics was headed. RNCOS said: “With increasing household income levels, local manufacturing, launch of innovative technological products and rising

awareness, the global consumer electronics market is expected to grow at a compound annual growth rate of over 10% during 2012-2015.” More consumer electronics products mean more circuitry, more lead-free solder and more demand for tin. It also means more batteries and tin is playing a central role in work being done on battery technology in the US, where a new type of lithium battery, whose anodes are made from tin instead of graphite, is being developed. It is claimed these batteries last three-times as long, recharge faster and are cheaper. With the bullish outlook for tin in mind, it appears CSD has timed its run perfectly. However, a favourable demand profile is not all that is aligning perfectly for the aspiring tin producer. The world’s major tin suppliers are in trouble, and are struggling to cope with diminishing supply inventories and rising costs. Last year, the Indonesian government ordered half of its 28 state-owned tin smelters to close due to unacceptable smelting margins. Indonesia is the world’s largest exporter of direct shipping ore tin. Similar circumstances are also impacting on tin miners in China. In addition, the world’s largest tin mine, Minsur’s San Rafael operation in mine, in Peru, which accounts for about 10% of global supply, is scheduled to close in 2017. For CSD, it could scarcely be a more opportune time to be on the cusp of production. “We’re well aware that there is a window of opportunity opening for us and we’re doing everything we can to capitalise on it,” De Lacey said. “Tin prices have touched almost $US35,000/t in recent years. Our estimated operating costs sit at around $US14,000/t, and with the demand for tin set to remain strong in to the future, the long-term outlook for Consolidated Tin and the Mt Garnet tin province is exceptionally favourable.”

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

The plant that came with the acquisition of the Kagara Central Region project.

“We’re well aware that there is a window of opportunity opening for us and we’re doing everything we can to capitalise on it.” ralph de lacey consolidated tin mines

consolidated tin mines at a glance

Head office 395 Lake Street Cairns Qld 4870 Australia Ph: +61 7 4032 3319 Fax: +61 7 4027 9429 Email: admin@csdtin.com.au Web: www.csdtin.com.au directors Ralph De Lacey, Andrew Kerry, Darryl Harris, Si He Tong market capitalisation $A12.8 million (at press time) Quoted sHares on issue 208.2 million major sHareHolders Snow Peak International Investments 16.69% Ralph De Lacey Super Fund 7.57% Beacon Minerals 7.08% Geocrystal Ltd 4.66% John Sainsbury 3.33% 81


feature

resourcestocks top 100

the dawn of an

oil & gas revolution 82

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


Words by AnThOny bARiCh

The rise of unconventional oil and gas and the withering of the mining sector has seen a significant uptick in the number of oil and gas companies in this year’s Top 100, but gold remains an important part of both Australian culture and economics.

W

hen the government of Western Australia, the state long seen as the gold prospector’s paradise, passed legislation in June allowing the development of the Canning Basin’s vast unconventional gas resources in a deal with Buru energy, it typified a level of excitement in oil and gas that the top 100 has now confirmed. In a very short space of time, the state has become the dominant force

in Australian oil production – even if it is now declining – and is on its way to another revolution in gas, though a number of obstacles still stand in the way (see Oil & Gas Stocks section, page 65). South Australia’s Cooper Basin is far more advanced, as producers such as Santos, Beach energy, Drillsearch and Senex continue to grow and the juniors are able to get a piece of the action. there is also a significant number of Australian-listed companies heading to the US, where the unconventional hype started.

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

however, gold still retains is lustre. Despite falling prices, the group of gold companies remains the equal largest commodity sector in the top 100 this year – and for good reason. Mining economist John Sykes, who compiled this year’s top 100 with University of WA and Curtin University mining and business professor Allan trench, said the strong presence of gold companies reflected the fact that there were still many of them on the ASX. this means more choice and thus, hopefully, better options

AWE’s Tui oil project, New Zealand’s first stand-alone oil development. The company is one of 21 oil & gas stocks in this year’s Top 100.

83


“Finding a suite of 100 companies with stellar recent share price performance would have been a fruitless search.” ALLAN TRENCH CRU GROUP

Core sample from Orinoco Gold’s Curral de Pedra project.

84

to pick from. The number of oil and gas companies – 21 – equalled the number of gold stocks in this year’s Top 100, reflecting both the rise in the hydrocarbon market and steadfastness of gold. “The fact remains also that for the junior industry, the gold sector remains the most attractive as it has low entry costs, high returns and rapid development opportunities,” Sykes said. “The gold sector has been an important part of Australian culture, history and economics and seems likely to remain so.” Trench said that despite lower gold prices, lots of companies were included in the gold space as many have inventories of in-ground gold resources where replacement and discovery costs, if starting over, would sit well above prevailing company valuations on the market.

He said that overall, in compiling the Top 100, he and Sykes were wary of companies with low cash reserves in making choices for inclusion. “But inevitably, many companies will still need to return to the markets for new equity when the opportunity arises. The junior resources sector is dominated by explorers and developers so that has not changed,” Trench said. However, the shift in investor sentiment to oil and gas from the struggling mining sector, whose commodity prices have fluctuated much more than the oil prices over the past two years, cannot be ignored – and the Top 100 results reflect this. Resources companies are highly leveraged to future commodity prices, so those commodities viewed to have good fundamentals will naturally have more selections in the Top 100. As a result, oil and gas, gold and base metals (not just copper, but also lead and zinc) make up the majority of selections this year. Among the minor commodities are a number of selections in tin, mineral sands and tungsten. “We made a deliberate decision to include more oil and gas companies, particularly from the unconventional sector, reflecting both increasing interest in this area (following well-known success in the US) and a particularly tough time for the minerals sector,” Sykes said. The higher number of oil and gas companies also seems to have affected the global distribution of the selections in this year’s Top 100, with more companies operating in politically stable North America and Europe at the expense of riskier countries in Africa and Asia. “The oil and gas industry has undergone a number of revolutions over the last 30 years that have reinvigorated oil industries in supposedly ‘mature’ countries in North America and Europe,” said Sykes, who was based in the UK until last year when he moved to Perth as a researcher at the Centre for Exploration Targeting and Curtin Graduate School of Business.

“Deepwater drilling, tar sands, the entry of junior explorers into the North Sea region and most recently, the shale gas boom, have all helped these industries. “This gives oil and gas companies a real choice of either employing new technology in mature, stable regions and taking on technical risk, or entering new, politically risky regions that may still have large undiscovered conventional, onshore resources. “Both strategies are viable and have their risks. You’ll see selections following both strategies among the Top 100.” This choice is less clear in the mining industry, which has seen fewer technological revolutions, so there is a greater push abroad to seek highquality mineral deposits, Sykes noted. However, this may be changing as technologies for exploring under soil cover and for large-scale underground mining potentially open up previously “mature” regions in Australia, Europe and North America. “Expect to see more new discoveries in these regions, particularly Australia, which seems to be developing a strong discovery track record,” Sykes said. “AngloGold Ashanti’s Tropicana, Iluka’s Jacinth-Ambrosia, OZ Minerals’ Prominent Hill, Sandfire Resources’ Degrussa, Sirius Resources’ Nova and most recently, Sheffield Resources’ Thunderbird, are just some of the notable minerals discoveries in the last 10-15 years. “It would appear that the gravitation towards safer political locations in Europe and North America, as well as the continuing strong representation of Australia, reflect the requirement for lower political risk when the capital markets are tough, as noted in last year’s Top 100 analysis.” The oil and gas companies have been selected largely at the expense of other “energy minerals”. The number of coal companies is down significantly this year and the number of uranium companies remains, as ever, small. “This perhaps reflects the uncertain future of energy supply in general. Energy demand globally is clearly going to increase, though exactly what the energy source will be is still not clear. It does look as though unconventional gas will have a larger role to play,” Sykes said. Another notable change in this year’s Top 100 is the large fall in the number of companies in development stage (scoping through to

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


construction) being replaced by more companies in operation and some at the exploration stage. Sykes believes that this likely partly reflects the natural evolution of companies that have been driven by a commodities boom now nearly a decade old – more projects have progressed from exploration to production. However, this probably also reflects the challenges of companies at the development stage. “The larger expenditures required for feasibility studies and the ultimate capital cost of construction is harder to raise in today’s equity markets, meaning many companies are struggling at this stage,” Sykes said. “It’s safer to be in production, with cash flow, but if this isn’t an option, in some ways the next best thing is to be in exploration, where running costs are fairly low and expenditure is more flexible. It’s easier to cancel an equity-funded drill program than debt-funded construction of a mine.” With the rise in oil and gas companies due to the increasing excitement over unconventional gas accompanied by the relative stability of the oil price of late, Sykes stressed that mining and exploration companies were not just “exchange traded funds” following commodity prices up and down. “In times of uncertain commodity prices, getting the technical side of the business right is critical, as there is little flexibility for mistakes,” Sykes said.

“As such, there are still a number of selections from poorly performing commodity markets such as nickel, uranium, rare earths, magnetite and coal. A few companies with good assets, managed well, will still succeed.” Trench said that many companies had made progress, but at an overall slower pace than each would have liked – due to a combination of difficult equity markets constraining exploration spend and general wariness among companies to let cash reserves run down. “So perhaps even more so than in past years, the selections have been made on future potential rather than recent share price performance,” said Trench, a former Woodside employee who is also on the board of several mining and oil and gas companies. “Finding a suite of 100 companies with stellar recent share price performance would have been a fruitless search: few companies

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

have fully survived the downturn in markets. “That said, it is at times such as these that gaining an insight into company activity is all the more critical. “As previously, the Top 100 is not intended as a blanket ‘buy’ signal – merely as an invitation for readers to look more closely at the companies to spot the potential for future growth through more detailed research.” Trench sees a key upside to the current state of the equity market: “If there are no bargains to be found now then there never will be. “In compiling the Top 100 we cannot of course guarantee these companies will be successful; but we can guarantee that if management are able to deliver upon each company’s resources asset potential then there is every chance of share price gain. “Sirius Resources’ first inclusion in the Top 100 two years ago – prior to the Nova-Bollinger discovery – is the obvious case study.”

Dacian Gold’s Jupiter prospect in the Mt Morgans prospect in WA, looking over the subcrop area of the Ganymede zone where thin lake sediments cover the syenite and basalt host rocks.

“We made a deliberate decision to include more oil and gas companies, particularly from the unconventional sector, reflecting both increasing interest in this area and a particularly tough time for the minerals sector.” JOHN SYKES GREENFIELDS RESEARCH

85


OIL & GAS

pura vIDa energy

ASX: pvd

Share price triggerS: Farm-out and exploration oF 7bbl magazan oil Field

Listed on ASX in Feb 2012, raising $A4m for exploration of its potentially large Magazan offshore oil project in Morocco. At listing, Magazan hosted 875MMbl of prospective resources (mean), with Toubkal seen as the key target, prospective for 790MMbl. Resources were significantly upgraded in September 2012 to 7000MMbl in total with Toubkal alone hosting 1500MMbl of mean resource potential. Chances of success were also upgraded, ranging from 19-34%. PVD is now in the process of farming out operatorship and 52% of Magazan prospect to Freeport McMoran Oil & Gas, for $US15m in cash up front and a commitment to a further $200m of exploration. The initial exploration program will complete two drill holes, one targeting the Toubkal part of the prospect and another at an exploration target to be mutually agreed, as well as potential follow-up work. In January, PVD was also awarded an 80% interest in the Nkembe block, Gabon, in an already producing basin. PVD has since confirmed a 20MMbo contingent resource on the Loba M1 part of the block and a 815MMbo overall. The block has potential for tie-back production with nearby fields, allowing for earlier cash flow.

Key StrengthS

• Two key exploration areas • Mazagan has the potential to be a major discovery • Farm-out agreement with Freeport McMoran at Mazagan • Nkembe fairly advanced, in a producing basin

Key riSKS

• • • •

Political risk in both Morocco and Gabon Offshore, deepsea drilling risk Early-stage exploration risk No longer has operating control of Magazan

HeaD OFFICe Level 3, 89 St Georges Terrace Perth WA 6000 Australia Web: www.puravidaenergy.com.au DIreCtOrs Bevan Tarratt (chair), Damon Neaves (MD), David Ormerod (TD)

Share price ($A)

$0.68

12-month high

$0.95

12-month low

$0.37

Market capitalisation

$70.8m

Key investments

com

location

Status

% own

description

Mazagan Offshore

Oil

Morocco

Exploration

75%

JV with ONHYM. 100km W off the coast. Prospective resource of 7bbl.

Key Countries

Morocco, Gabon

Nkembe Offshore

Oil

Gabon

Exploration

80%

JV with Gabon state. 30km off coast. 20MMbo contingent resource.

Commodities

Oil, gas

OIL & GAS

antares energy

ASX: Azz

Share price triggerS: highly valued weSt texaS production aSSetS

E&P company focused on the Permian Basin, West Texas, with a land position of 30,000 acres. Has three principal projects at Southern Star, Big Star and Northern Star in the Wolfberry Trend of the Permian Basin. At Southern Star, AZZ holds over 3000 acres with more than 30 active wells producing 1000bbls oil equivalent per day. At Big Star, AZZ’s acreage comprises over 14,000 acres with four active wells. At Northern Star, AZZ holdings cover 12,400 acres with two active wells. Additionally, at Oyster Creek, located in the Frio oil and gas-producing trend within central Brazoria County, AZZ holds 225 acres with two active wells producing 160bbl oilequivalent per day. 2P reserves sit at 51.6 MMboe. 2013 activities are focused on further drilling and de-risking of additional development potential at Southern Star and Northern Star (Cozart discovery). Production enhancement typically involves multi-stage fracture stimulation of the reservoir. June quarter receipts from sales totalled $6.3m. A letter of intent to sell the West Texas assets for $300m has been signed which may, subject to closure, result in a highly profitable sale for AZZ.

Key StrengthS • • • •

Directors hold large share positions Multi-well onshore production Potential sale of Texas assets Exploration upside

Key riSKS • • • •

Debt servicing Oil/gas price risk Exploration risk Closure risk on potential sale transaction

Key investments

com

location

Status

% own

description

Southern Star

Oil/ Gas

US

Producing

76%

Production about 30,000boe per month: 100% AZZ equity in some wells.

Big Star

US

Producing

75%

Dawson County: fracture stimulation to enhance production.

Northern Star

US

Producing

100%

Dawson County: 2P reserves 15MMboe.

86

HeaD OFFICe Ground Floor, 20 Kings Park Road West Perth WA 6005 Australia Web: www.antaresenergy.com DIreCtOrs James Andrew Cruickshank (chair), Vicky McAppion, Kelli Roach, Gregory Shoemaker, Mark Clohessy Share price ($A)

$0.50

12-month high

$0.60

12-month low

$0.27

Market capitalisation

$127.5m

Key Countries

US

Commodities

Gas, Oil

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


OIL & GAS

AuStin ExpLORAtiOn

ASX: AKK

Share price triggerS: eagle ford Shale expoSure

Focused on oil & gas opportunities in the US. Has targeted its efforts on proven hydrocarbon basins, making encouraging discoveries that act to de-risk the future full development of properties. Is seeking to farm down its equity position to fund expansion rather than seek additional equity from the capital markets. Mid-2013 daily production is about 500boe. The 2 principal properties being farmed out are the Texas Birch prospect, covering 5000 acres within the Eagle Ford shale, and the Pathfinder Niobrara project in Colorado, which covers 11,500 acres. The Texas Birch project encompasses the Eagle Ford shale (oil & gas) targets & also Taylor (gas), Austin Chalk (oil), Buda (gas) & Georgetown (gas) formations. AKK estimates future economic benefits from farm-down to be $76m using an $85/barrel assumption (and subject to closure of farm-down agreements). In Australia, AKK is exploring in the Cooper Basin targeting the Tirrawarra (oil) & Patchawarra (gas & oil) formations.

Key StrengthS • • • •

Key riSKS

Low-risk jurisdiction in US Onshore proven basins focus Low-cost onshore drilling Access to infrastructure

• • • •

Technical development risk Exploration risk Oil/gas price risk Acquisition of new properties

HEAd OFFiCE 7985 West 16th Ave. Lakewood, CO 80214 USA Web: www.austinexploration.com diRECtORS Richard Cottee (chair), Dr William Mark Hart (CEO), Guy Goudy, Nigel Hartley, Dominic Pellicano

Share price ($A)

$0.01

Primary objective is the Niobrara shale: farming out.

12-month high

$0.03

94%

270ft-thick section of the Eagle Ford shale: farming out.

12-month low

$0.01

Producing

24%

Producing formation is the Austin Chalk.

Market capitalisation

$21.1m

Producing

38%

Producing formation is the Wilcox formation.

Key Countries

US

Exploration

50%

60km north of Moomba.

Commodities

Oil, gas

Key investments

Status

location

Status

% own

description

Pathfinder Niobrara

Gas

US

Appraisal

85%

Texas Birch Eagle Ford Shale

Gas

US

Appraisal

Yolanda

Oil

US

Mississippi (Armstrong, Bourke)

Gas/ Oil

US

Cooper Basin (PEL105)

Gas/ Oil

SA

OIL & GAS

AWE LimitEd

ASX: AWE

Share price triggerS: Strong production growth potential

Has producing assets in Australia, New Zealand and the US. In Australia, AWE holds production assets in the prime areas of the Bass Strait, Otway Basin and Perth Basin. All offer exploration upside – with the tight gas and shale gas targets of the Perth Basin an exciting frontier. Following an intensive enhancement program in 2012-13, the Bass Strait assets will no longer require major near-term capital investment. In NZ, AWE holds equity in the Tui field within the Taranaki Basin. In the US, the Sugarloaf project now comprises 81 producing wells. AWE offers one of the stronger potential medium to long-term production growth stories of the emerging E&P stocks – with the company also having increased an equity stake in producing assets in recent years. AWE should continue to provide significant production growth and market return as long as capital expenditure is carefully managed. Exploration upside overseas is offered by the Indonesian assets – including the promising Ande Ande Lumut project.

Key StrengthS

• Successful track record of increasing equity in projects • Diversifed production portfolio • Exciting exploration potential (Indonesia) • Strong financial position

Key riSKS

• Capex control a key risk over the next few years • Project delay risk • Price risk

HEAd OFFiCE Level 16, 40 Mount Street North Sydney NSW 2060 Australia Web: www.awexplore.com diRECtORS Bruce Phillips (chair), Bruce Clement (MD), Raymond Betros, Dr Vijoleta Braach-Maksvytis, Andy Hogendijk, David Ian McEvoy, Ken Williams

Key investments

com

location

Status

% own

description

Bass Gas

Gas

Tas

Producing

46%

Operated by Origin Energy.

Share price ($A)

$1.28

Cliff Head, Perth Basin

Oil

WA

Producing

57%

ROC Oil operator.

12-month high

$1.47

Casino (Otway Basin)

Gas

VIC

Producing

25%

Santos operator.

12-month low

$1.11

Tui Area (Taranaki Basin)

Oil

NZ

Producing

43%

AWE is operator; Mitsui 35%.

Market capitalisation

$670.9m

Java

Oil/ Gas

Indonesia

Exploration

40-100%

Several offshore exploration plays.

Key Countries

AU, NZ, US

Sugarloaf

Oil/ Gas

US

Producing

10%

Texas Eagle Ford Shale.

Commodities

Oil, Gas

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

87


OIL & GAS

beACH energy

ASX: BpT

Share price triggerS: unconventional targetS in cooper baSin

An active ASX 100 mid-tier oil and gas producer with domestic and overseas assets. Annual production is 8MMboe. 2P reserves underpin at least 10 years of production, with a bias towards gas and significant further upside in resources. Principal production is from the onshore Cooper and Eromanga basins, selling gas into eastern states markets and producing oil from the Western Flank. BPT enjoys a healthy balance sheet cash position with a multi-option financing facility of $150m also available to it. BPT continues to actively manage its exploration and production portfolio, maintaining interests in more than 300 exploration and production tenements in Australia, USA, Egypt, Tanzania, Romania and New Zealand. Exploration upside for unconventional gas reserves in the Cooper Basin has attracted the attention of energy major Chevron as a strategic partner. In Tanzania, BPT sees potential for 200MMboe discoveries following seismic acquisition. In Egypt, BPT is in joint venture with BP targeting oil production at North Shadwan, and with Kuwait Energy at Abu Sennan.

Key StrengthS

• Established production assets (oil and gas) • Both operated and non-operated (managed) assets • Geographic diversification of assets • Cash reserves and undrawn debt facility

Key riSKS • • • •

Trading assets business model unpredictable Investing to increase production volumes Exploration risk Jurisdictional risk (Tanzania, Egypt)

Key investments

com

location

Status

% own

Description

Cooper – Eromanga Cooper – Eromanga Otway Basin Gippsland Basin Bonaparte Basin

Oil, Gas Oil, Gas Gas Gas Gas

SA Qld SA Qld Vic Vic NT

Production Production Exploration Exploration Exploration

40-70% 20-40% Various Earning Earning

Abu Sennan Mesaha Lake Tanganyika South

Oil, Gas Oil, Gas Oil

Egypt Egypt Tanzania

Exploration Exploration Exploration

22% 15% 100%

BPT-operated fields. Santos and Senex-operated fields. Seismic profiling to locate drill targets. Fracture stimulation testing. Conventional and unconventional targets; seismic acquisition. Oil discovery at El-Salmiya – Aug 2013. 1st exploration well Q4 2012. 1800km seismic survey.

HeAD OFFICe 25 Conyngham Street Glenside SA 5065 Australia Web: www.beachenergy.com.au DIreCTOrS Glenn Davis (chair), Reg Nelson (MD), Fiona Bennett, John Butler, Belinda Robinson, Franco Moretti, Dr Douglas Schwebel Share price ($A)

$1.34

12-month high

$1.56

12-month low

$1.09

Market capitalisation

$1.7b

Key Countries

Aus, Egypt, USA, NZ, Tanzania, Romania

Commodities

Gas, oil

OIL & GAS

buru energy

ASX: BRU

Share price triggerS: canning baSin oil/gaS expoSure

S&P 200 oil & gas company with a dominant ground position in the Canning “Superbasin”. It is described by the company as the largest sedimentary basin in Western Australia, covering 530,000sq.km. The Canning Basin is one of the few remaining areas in onshore Australia that is under-explored for petroleum and with geological similarities to highly productive Palaeozoicaged basins worldwide. The Canning Basin comprises four sub-basins, namely the Fitzroy/ Gregory Basin, the Kidson Basin, the Broome Platform and the Willara Basin. BRU acreage totals 64,000sq.km. Mitsubishi has joined BRU as a strategic partner, lending weight to the future exploration effort in the region. The Ungani conventional reservoir oil development is being progressed, with BRU having secured a state agreement for the regional development of the Canning Basin to create a major gas hub for WA. Beyond the Ungani trend, the focus for exploration is the tight gas potential of the Laurel formation and the Goldwyer/Acacia shale oil and wet gas potential.

Key StrengthS • • • •

Key riSKS

2011 Ungani oil discovery Dominant regional position WA gas market Multiple plays

• • • •

HeAD OFFICe Level 2, 88 William Street Perth WA 6000 Australia Web: www.buruenergy.com DIreCTOrS Graham Riley (chair), Kieran Wulff (MD), Eric Streitberg, Hon Peter V Jones, Austin Miller

Development capital Exploration risk Seasonal storms can impact activities Technical development risk

Share price ($A)

$1.73

12-month high

$3.29

12-month low

$1.18

Key investments

com

location

Status

% own

Description

Market capitalisation

$516.2m

Ungani

Oil

WA

Development

50%

Conventional oil reservoir; 5000bopd from 2014.

Key Countries

Australia

Laurel

Gas

WA

Exploration

50%

Regional gas targets: systematic appraisal planned.

Commodities

Gas, oil

88

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


OIL & GAS

coopER EnERgy

ASX: COE

Share price triggerS: fully funDeD exploration expoSure

Has an international portfolio of oil & gas assets with exposure to Australia, Indonesia & Tunisia. COE’s core asset base is as a non-operating partner in production at Cooper Basin, South Australia. Oil production guidance is for 460,000-500,000 barrels per annum. Oil production from the COE Cooper Basin assets is being maintained with up to 11 wells planned & 3D seismic acquisition. COE is seeking unconventional hydrocarbon targets in the Casterton formation of the Otway Basin. In the Gippsland Basin, COE has exposure through a 19.9% holding in Bass Strait Oil (BAS), where gas discoveries close to existing infrastructure bode well for development. Overseas, COE holds assets in Tunisia and Indonesia (South Sumatra Basin). In Tunisia, active offshore drilling continues with appraisal to follow. In Indonesia, drilling & seismic is planned for late this year.

Key StrengthS

• • • •

Production base onshore Cooper Basin Strong Cash and Liquid Assets - $72 million Active exploration program International exploration exposure

Key riSKS

• Technical risk partly mitigated by multiple operating fields • Exploration risk • Flooding can impact Cooper Basin production • Oil/gas price risk

HEaD oFFicE Level 10, 60 Waymouth Street Adelaide SA 5000 Australia Web: www.cooperenergy.com.au DiREctoRs John Conde (chair), David Maxwell (MD), Hector Gordon, Jeffrey Schneider, Laurie Shervington

Key investments

com

location

Status

% own

Description

Share price ($A)

$0.41

Cooper Basin

Oil

SA

Operating

20-30%

Cornerstone asset base in established onshore basin.

12-month high

$0.64

Sukananti, Sumbagsel

Oil

Indonesia

Operating

55-100%

Onshore targets including shallow oil and deep gas.

12-month low

$0.36

Bargou, Nabeul, Hammamet

Oil

Tunisia

Exploration

30-85%

Active drill program continuing in JV with Jacka Resources.

Market capitalisation

$134.9m

Otway Basin

Oil/ Gas

SA, Vic

Exploration

20-65%

Seeking to grow production after 2012 Somerton Energy acquisition.

Key Countries

Gippsland

Gas

Vic

Exploration

Various

Tight gas potential.

Australia, Tunisia, Indonesia

Bass Strait Oil

Oil/ Gas

Vic

Exploration

20%

Equity in listed Australian explorer.

Commodities

Oil

OIL & GAS

cott oil & gas

ASX: CmT

Share price triggerS: encouraging exploration portfolio

One of the the newest oil & gas exploration/development companies on the ASX after listing earlier this year. Cott’s short-term aim is to deliver multi TCF and multi-MMbbl drilling opportunities to provide upside value leverage to exploration outcomes. To this end, CMT is focused on Australia & PNG. In Australia, permit EP 325 is in the Exmouth Gulf area, with the western portion of the licence extending onshore onto the mainland around the eastern side of Northwest Cape. This region contains the Rivoli gas field in about 20m of water. Permit WA 261-P lies in the Dampier Sub Basin area of the greater Carnarvon Basin. This permit covers the Chamois oil field & several moderate-low risk leads of similar size to the Chamois field. Commercialisation of the Chamois field will likely require additional exploration success on the adjacent leads. In PNG, PPL 435 is 45km southwest & up dip from PRL 21, which hosts the Elevala & Ketu gas fields.

Key StrengthS • • • •

Fully funded work program NW Shelf exploration exposure Infrastructure for gas resources in WA Early-stage, high-impact exploration in PNG

Key riSKS • • • •

No operating revenues Early-stage portfolio Exploration risk May farm-down to avoid capital structure dilution

HEaD oFFicE 945 Wellington Street West Perth WA 6005 Australia Web: www.cottoilandgas.com.au DiREctoRs Stephen Dennis (chair), Andrew Dimsey, David Bradley

Share price ($A)

$0.13

12-month high

$0.21

Chamois oil field, Dampier sub-Basin; Carnarvon Basin.

12-month low

$0.10

11%

Rivoli gas field ~1200sq.km acreage.

Market capitalisation

$9m

Exploration

Earning

Earning 50% interest. Aerogravity and magnetics.

Key Countries

PNG, Aus

Exploration

50%

Aerogravity, magnetics and seismic reprocessing.

Commodities

Gas, oil

Key investments

com

location

Status

% own

Description

WA 460-P

Gas

WA

Exploration

33%

Palta project JV including Strike Energy.

WA 261-P

Oil/ Gas

WA

Exploration

12%

EP325

Oil/ Gas

WA

Exploration

APPL 435

Oil/ Gas

PNG

APPL 436

Oil/ Gas

PNG

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

89


OIL & GAS

empIre OIl & gAS

ASX: EgO

Share priCe triggerS: perth baSin expLOratiOn pOtentiaL

Western Australia-focused oil & gas exploration, development & production company. EGO holds acreage in the Perth and Carnarvon basins. EGO is the largest permit holder in the 1300km-long Perth Basin, which extends from Geraldton down to Augusta. The main source rocks for oil in the Perth Basin are the marine Lower Triassic basal Kockatea shale, with reservoirs in Lower Traissic and Permian sandstones. The main source for gas in the Perth Basin is the Permian Irwin River coal measures, with reservoirs in the Upper Permian and Jurassic strata. EGO is in the process of completing the Red Gully gas and condensate-processing facility to manage its production from the Gingin gas field. Ramp-up to full production is anticipated during H2 2013, with the cash flow from gas/condensate set to make EGO a self-funded explorer from 2014. This year’s 3D seismic acquisition over the Gingin gas field should reveal additional targets for drill-testing. In the Carnarvon Basin, EGO holds permits predominantly in the Exmouth and Onslow areas.

Key StrengthS

• • • •

Largest acreage position in Perth Basin Red Gully plant nearing completion Proximity to gas pipeline Kockatea shale gas potential

Key riSKS

• • • •

Large portfolio requires careful management Exploration risk Gas price risk Large number of early-stage plays

HeAD OFFICe 229 Stirling Highway Claremont WA 6010 Australia Web: www.empireoil.com.au DIreCtOrS Craig Marshall (MD), Martin Bennett, Jeffrey MacDonald, Dr Bevan Warris, Neil K Joyce Share price ($A)

$0.01

12-month high

$0.02

12-month low

$0.01

Market capitalisation

$81.8m

Key investments

Com

Location

Status

% Own

Description

Perth Basin

Gas

WA

Construction

76%

Gingin-located gas & condensate processing plant.

Key Countries

Australia

Carnarvon

Oil

WA

Exploration

53%

Exmouth sub-basin: Rough Range oil field area.

Commodities

Oil, Gas

OIL & GAS

entek energy

ASX: ETE

Share priCe triggerS: OnShOre & OffShOre uS pOrtfOLiO

Has assembled a strong oil and gas portfolio in the United States. ETE’s onshore projects are in the proven Green River Basin while offshore, it holds acreage in the shallow waters of the Gulf of Mexico. In the Green River Basin, ETE’s interest covers 115,000 acres of leasehold with the principal activity the appraisal of the Niobrara oil resource play in the Sandwash Basin. At the Batte Mountain AMI, ETE has attracted East, a US private exploration & development company, as a strategic partner. East will free-carry ETE’s interest. ETE acreage within the Gulf of Mexico is focused on shallow-water developments. Here, ETE has adopted a strategy of acquiring small working interest or royalty interests in high-potential, liquid-rich assets, aiming to grow value from drilling success and cash flows with minimal capital spend exposure. ETE’s Gulf of Mexico assets include Galverston (GA 212,213, A133), West Cameron, North Padre, Vermillion (341,342), Garden Banks, Main Pass and Viosca Knoll. ETE has sufficient funds to conduct 201314 forward exploration and appraisal activities without need for additional capital raising.

Key StrengthS

• Low-risk portfolio • Infrastructure available for commercialisation • Low-cost onshore & shallow-water drilling • Prolific Niobrara shale target

Key riSKS • • • •

Future development funding Exploration risk Gas price risk Environmental permitting and management (Niobrara)

Key investments

Com

Location

Status

% Own

Description

Niobrara

Oil

USA

Appraisal

25-100%

Shale oil acreage in proven basin.

Battle Mountain AMI

Oil

USA

Exploration

20%

Adjoining acreage to ETE Niobrara leases: seismic in 2013.

Focus Ranch

Oil

USA

Exploration

55%

Awaiting approval of land access route.

Gulf of Mexico

Gas, Oil

USA

Production

25-100%

Multiple oil and gas plays in shallow depths.

90

HeAD OFFICe 338 Hay Street Subiaco WA 6008 Australia Web: www.entekenergy.com.au DIreCtOrS Graham Riley (chair), Trent Spry (CEO), Alexander Forcke, Andrew Padman Share price ($A)

$0.03

12-month high

$0.10

12-month low

$0.02

Market capitalisation

$16.9m

Key Countries

US

Commodities

Oil, gas

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


OIL & GAS

jacka resources

ASX: jkA

Share price triggerS: high-impact african exploration aSSetS

Africa-focused oil & gas exploration company active in Tunisia, Nigeria, Tanzania & Somaliland, with additional domestic acreage in Western Australia. The core new venture focus areas for JKA lie within the North African, West African Transform Margin & East Africa rift basins. In Tunisia, JKA holds 15% equity in the Bargou Block in the Gulf of Hammamet. Drilling by the JV this year has been technically challenging, but oil shows & open fractures are such that production testing is planned on the Hammamet-West 3 well. In Nigeria, JKA holds a 5% net revenue interest in the Aje field, which contains more than 200MMbbl of 2C-contingent resources & has been declared commercial by the JV. Development options are being assessed. In Tanzania, JKA is in negotiations with the government to secure rights to explore the Ruhuhu Basin region in the SW of the country. In Australia, JKA holds 15% equity in the WA 399-P Permit, located on the Northern Offshore Carnarvon Basin, operated by Apache Energy.

Key StrengthS

• Exciting African exploration portfolio • Active exploration program includes free-carries • Broker/institution support • Management track record in Africa

Key riSKS

• • • •

Exploration risk Future funding risk Technical risk could drive drill cost overrun Africa emerging economy risks

HeaD oFFIce Level 1, 22 Railway Road Subiaco WA 6008 Australia Web: www.jackaresources.com.au DIrecTors Scott Spencer (chair), Richard Aden, Justyn Wood, Stephen Brockhurst, Brett Smith Share price ($A)

$0.12

12-month high

$0.23

Key investments

com

location

Status

% own

Description

12-month low

$0.06

Bargou

Gas, Oil

Tunisia

Exploration

15%

Copper Energy (COE) operator.

Market capitalisation

Aje

Gas, Oil

Nigeria

Feasibility

5%

Net revenue interest in gas/oil field.

Ruhuhu

Gas, Oil

Tanzania

Exploration

100%

Awaiting ministerial approval.

Odewayne

Gas, Oil

Somaliland

Exploration

30%

Same basin system as Yemen producing areas.

WA399-P

Gas

WA

Exploration

15%

Apache 60% (operator), Exmouth sub-basin.

$42m Tunisia, Tanzania, Nigeria, Somaliland, Australia Gas, oil

Key Countries

Commodities

OIL & GAS

karoon gas ausTralIa

ASX: kAr

Share price triggerS: oil growth in Brazil, gaS growth in wa

Has made two oil discoveries in Brazil and has significant equity in the gas resources of WA’s Browse Basin. KAR is a potential takeover target for larger E&P companies. Drilling in Brazil continues, as does exploration of the company’s other South American assets offshore Peru. KAR’s Browse Basin assets comprise Poseidon field, with drilling growing the resource base in partnership with ConocoPhillips. Poseidon lies on trend with the Torosa/Brecknock/ Calliance gas fields that comprise the Woodside-managed Browse LNG development, which has been deferred for development during 2013 but looks likely to eventually reach final investment decision. In Brazil, the KAR permits lie in the Santos Basin with discoveries at Bilby and Kangaroo. Oil shows have been detected at Emu-1. At Bilby, oil is contained within an interbedded sand and shale interval of Maastrichtian age and has been confirmed over a 200m gross section. Material upside exists from planned 2013-14 drilling.

Key StrengthS

• Browse Basin discovery emerging as world scale • Brazil oil discoveries • Potential growth of gas resources in WA • Early-stage, high-impact exploration in Peru

Key riSKS

• • • •

No operating revenues Long lead time to Browse development Exploration risk Future LNG and oil price risk

DIrecTors Robert Hosking (chair), Mark Smith, Clark Davey, Geoff Atkins, Stephen Power, Jose Coutinho Barbosa Share price ($A)

$5.24

12-month high

$7.37

12-month low

$3.87

Market capitalisation

$1.31b

Anticipated drilling in 2014; farm-out planned.

Key Countries

Australia, Brazil, Peru

Seismic survey planned, then farm-out.

Commodities

Gas, oil

Key investments

com

location

Status

% own

Description

Offshore Browse Basin

Gas

WA

Exploration

40-90%

Reducing to 30% of total project: significant gas discovery.

North Carnarvon Basin

Oil/ Gas

WA

Exploration

Earning

Farm in from Liberty Petroleum; seismic planned.

Santos Basin

Oil/ Gas

Brazil

Exploration

65%

Six blocks held by KAR; oil discovery follow-up in progess.

Tumbes Basin

Oil/ Gas

Peru

Exploration

75%

Maranon

Oil/ Gas

Peru

Exploration

100%

OCTOBER/NOVEMBER 2013 rESOUrCESTOCkS

HeaD oFFIce Office 7A, 34-38 Lochiel Avenue Mt Martha Vic 3934 Australia Web: www.karoongas.com.au

91


OIL & GAS

new zeAlAnD oIl & gAs

ASX: nzO

Share price triggerS: SoliD proDuction platform for growth

Independent E&P company, listed on the New Zealand & Australian stock exchanges. NZO’s production assets are focused in NZ, where it has been active since 1981. Major assets include the Tui oil field & Kupe gas-condensate field. These cash-generating projects provide strong platform for growth through funding of exploration programs to prove-up further reserves. Cash reserves exceed $NZ150m with no debt. Exploration activity is ongoing in NZ and internationally. In 2011, NZO acquired 90% of a company with an interest in the Kisaran exploration permit in Central Sumatra, effectively giving NZO a 22.5% share of the permit. Exploration to date has been encouraging, with flow-testing carried out at Kisaran. In Indonesia, the strategy is to target proven basins, generally onshore and therefore, low cost, that are close to existing infrastructure & more likely to be oil than gas. In NZ, NZO will participate in up to seven wells in the Kupe & Tui regions in 2013-14.

Key StrengthS

• Excellent commodity diversification for a small cap • Cash -enerating projects • Good position in NZ energy market • NZ fiscal terms relatively favourable

Key riSKS

• Geographical diversification • Cost-control required to maintain project economics • Exploration risk • Oil/gas price risk

Key investments

com

location

Status

% own

Description

Kupe

Oil/Gas

NZ

Producing

15%

NZ's second-largest gas field.

Tui Area

Oil

NZ

Producing

13%

NZ's first standalone offshore oil development.

Kisaran

Oil

Indonesia

Appraisal

22%

Onshore Sumatra.

Takapou

Oil

NZ

Exploration

50%

NZO operator: north of Tui field.

Matuku

Oil

NZ

Exploration

13%

Option to increase equity by 5%: drilling in 2013.

Diodore

Oil/Gas

Tunisia

Exploration

100%

Seismic interpretation.

Pan Pacific Petroleum

Oil/Gas

Various

Producing

15%

Equity in listed oil/gas company, ASX code PPP.

HeAD oFFICe Level 20, 125 The Terrace PO Box 10725 Wellington, New Zealand Web: www.nzog.com DIreCtors Peter Griffiths (chair), Andrew Knight (MD), Tony Radford, Rodger Finlay, Paul Foley, David Scoffham, Mark Tume Share price ($A)

$0.70

12-month high

$0.79

12-month low

$0.63

Market capitalisation

$287.3m

Key Countries

NZ, Indonesia, Tunisia

Commodities

Oil, gas

OIL & GAS

norwest energy

ASX: nwE

Share price triggerS: weStern auStralian Shale gaS potential

Focused on the potential shale gas resources of the Northern Perth Basin to supply future domestic & possibly overseas gas demand. The Northern Perth Basin offers a suitable location to test for shale gas, with conventional production in the area dating back to 1971. The Arrowsmith Field is in focus as an oil & shale gas play, with drilling of Arrowsmith 1 & 2 revealing multiple gas horizons including shale gas & oil. Fracture stimulation is being undertaken, with the ability to recover the gas to surface being critical. Evaluation & design for a gas production center is advancing with drill & flow testing. Arrowsmith forms part of Norwest’s 500,000-acre land position in the basin. Arrowsmith 2 is the first shale gas well to be drilled in WA. The hole was drilled to 3400m in 2011, with fracture stimulation last year and gas flow from multiple horizons plus oil flow from the uppermost Kockatea shale horizon. Flow testing & completion are being undertaken this year. The Northern Perth Basin hosts multi-Tcf gas potential.

Key StrengthS • • • •

Location in Northern Perth Basin Infrastructure access to gas pipelines Multiple prospective horizons Kockatea shale gas potential

Key riSKS • • • •

Flow rates Exploration risk Gas price risk Development funding

HeAD oFFICe Ground Floor, 288 Stirling Street Perth WA 6000 Australia Web: www.norwestenergy.com.au DIreCtors Michael Fry (chair), Peter Munachen (CEO), Henry Kennedy Share price ($A)

$0.03

12-month high

$0.09

Key investments

com

location

Status

% own

Description

TP 15

Gas

WA

Exploration

50%

Dongara to Port Denison: Norwest farming down: near Cliff Head oil field.

12-month low

$0.02

EP 413

Oil/ Gas

WA

Appraisal

28%

Onshore shale gas potential at Arrowsmith.

Market capitalisation

$29.8m

L14

Oil/ Gas

WA

Producing

6%

Small production base onshore at Jingemia oil field: Origin Energy operator.

Key Countries

Australia

EP 368 & 426

Oil/ Gas

WA

Exploration

20%

JV with Empire Oil & Gas operator.

Commodities

Oil, gas

92

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


OIL & GAS

octanex

ASX: OXX

Share prICe trIggerS: gaS DISCOvery at wInCheSter

Exploring for oil & gas offshore Australia (North West Shelf and Browse Basin), New Zealand (Taranaki Basin) & also within the onshore Canning Basin of Western Australia. On the North West Shelf OXX (25%) is in JV with Santos (75%), having successfully targeted the Winchester prospect, resulting in this year’s gas/condensate discovery. The Winchester discovery is favourably located near existing infrastructure and likely future infrastructure extensions, enabling gas supply for both domestic demand and the proposed Wheatstone and/or Pluto LNG developments. Wireline logging of the discovery section included a 107m gross interval, containing approximately 40m of confirmed net gas pay. The hydrocarbons were encountered in stacked sands of the Late Jurassic Angel & Late Triassic Mungaroo formations. Elsewhere, OXX awaits entry to the onshore Canning Basin & has a high-impact drilling program due in 2013 in the Taranaki Basin. In the Browse Basin, OXX owns a share of the Cornea field, a long-term potential development.

Key StrengthS • • • •

Prime NW Shelf acreage Exposure to Canning Basin onshore WA Active exploration program in NZ Significant equity in Winchester gas discovery

Key rISKS

• Technical and exploration risk • No operating cashflows • Flooding can impact Cooper Basin production • Oil/gas price risk

Key Investments

Com

Location

Status

% Own

Description

Winchester

Gas

WA

Exploration

25%

Santos-operated 2013 gas discovery.

Exmouth Plateau

Gas

WA

Exploration

33%

Deepwater Carnarvon Basin; JV with ENI.

Browse Basin

Oil/ Gas

WA

Exploration

18%

Gas and oil accumulation at Cornea.

Bonaparte Basin

Oil/ Gas

WA

Exploration

100%

Seismic interpretation.

Taranaki

Oil/ Gas

NZ

Exploration

22-50%

Drilling in 2013.

Derby Block

Gas

WA

Exploration

25%

Canning Basin farm-in.

HeaD oFFIce Level 21, 500 Collins Street Melbourne Vic 3000 Australia Web: www.octanex.com.au DIRectoRS E Geoffrey Albers (chair), David Coombes, Graeme Menzies, James Willis Share price ($A)

$0.22

12-month high

$0.43

12-month low

$0.13

Market capitalisation

$42.6m

Key Countries

Aus, NZ

Commodities

Oil, gas

OIL & GAS

oIl baSInS lImIteD

ASX: Obl

Share prICe trIggerS: CannIng baSIn pOtentIaL

Focus on oil & gas exploration in the offshore Gippsland Basin waters of southeast Australia, the onshore Canning Basin of Western Australia and the offshore Carnarvon Basin waters of WA. The choice of these areas follows the company’s strategy to work within proven hydrocarbon basins close to existing or future development infrastructure. In the onshore Canning Basin, OBL has moved to 100% ownership and operator status for the Backreef Area project. This project comprises a shallow Laurel formation oil play (950m) & also a tight oil/ unconventional shale oil play within the deeper (3000m) Virgin Hills Sandstone/Gogo shale within the Kimberley Downs embayment. Additionally, OBL is targeting EP5/07-8, the Derby Block, in the onshore Canning Basin, where it has delineated significant conventional oil and gas, coal seam gas & unconventional shale gas and oil prospectivity. In the offshore Carnarvon Basin, OBL holds 100% of the undeveloped Cyrano Oil discovery.

Key StrengthS • • • •

Key rISKS

Proven basins Australian focus Canning Basin exposure Gippsland Basin exposure

• • • •

Financing of exploration programs Exploration risk Development risk No operating revenues

HeaD oFFIce Level 4, 100 Albert Road South Melbourne Vic 3205 Australia Web: www.oilbasins.com.au DIRectoRS Kim McGrath (chair), Neil Doyle, Nigel Harvey

Share price ($A)

$0.02

Onshore Canning Basin: shale plays in Virgin Hills & Gogos.

12-month high

$0.05

50%

Canning Basin: subject to Native Title clearance and grant.

12-month low

$0.01

Exploration

100%

Offshore Carnarvon Basin retention lease: 2MMBOE.

Market capitalisation

$12.6m

Vic

Exploration

17%

Offshore Gippsland Basin: lower priority than VicP41.

Key Countries

Australia

Vic

Exploration

18%

Offshore Gippsland Basin: east of GummyBasker gas fields.

Commodities

Oil, gas

Key Investments

Com

Location

Status

% Own

Description

Back Reef

Gas/ Oil

WA

Exploration

100%

Derby

Gas/ Oil

WA

Exploration

Cyrano

Oil

WA

VicP66

Gas/ Oil

VicP41

Gas/ Oil

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

93


OIL & GAS

pO valley energy

ASX: pvE

Share price triggerS: onShore to offShore gaS proDuction

Independent Italian oil and gas company listed in Australia. Holds gas permits in the Po Valley between the Alps and the Appennines, which is the main production zone in Italy. All of Po Valley’s fields are onshore as well as close to the pipeline grid and major consumers in the North of Italy. Production started in 2010. Current gas off-take partners include Shell Italia. The company’s strategy is to redevelop shallow, onshore proven or low-risk gas fields, such as previous producers or those with established gas in place. Production is set to increase (2012 production was 0.85Bcf), with the announced completion of the development of condensate separation facilities at Sillaro in July. To assist current and future development, PVE has secured a 20m euro financing package with Nedbank of South Africa – reduces the risk of a significantly dilutive equity raising. PVE manages a balanced portfolio, including 12 gas exploration prospects with combined unrisked resources of about 200Bcf.

Key StrengthS

• Exposure to high-price, low-cost Italian gas market • Multiple cash-generating projects • Focused strategy in proven hydrocarbon province • Operating cashflow

Key riSKS

• Limited geographical diversification • Cost control required to maintain project economics • Offshore gas development risk • Gas price risk

HeaD OFFICe Level 28, 140 St Georges Terrace Perth WA 6000 Australia Web: www.povalley.com DIreCtOrs Graham Bradley (chair), Michael Masterman (deputy chair), Kevin Eley, Byron Pirola, Greg Short

Key investments

com

location

Status

% own

Description

Sillaro

Gas

Italy

Producing

100%

Production to rise in 2013-14.

Castello

Gas

Italy

Producing

100%

Water inflow limited production in Q2 2013.

S.Alberto

Gas

Italy

Development

100%

Awaiting approval.

Bezzeca (Pandino)

Gas

Italy

Development

100%

Awaiting approval.

Carola, Irma

Gas

Italy

Development

100%

Offhsore gas discoveries drilled and tested by ENI.

Share price ($A)

$0.16

12-month high

$0.18

12-month low

$0.09

Market capitalisation

$19.6m

Key Countries

Italy

Commodities

Gas

OIL & GAS

strata-x energy

ASX: SXA

Share price triggerS: onShore uS & weStern auStralia playS

Dual Canadian & Australian-listed exploration and development company. Listed on the ASX this year with a diversified onshore portfolio of properties predominantly in the US, but also with Canning Basin acreage exposure in WA. The Canning Basin target is the Laurel shale, a formation that has significant unconventional petroleum potential. Along-strike discoveries by other companies to the SXA tenure have included Valhalla and Yulleroo (gas), and Ungani (oil). Native Title agreements are being advanced ahead of potential future drilling of targets. In the US, SXA has a number of exciting projects with material equity positions in each as operator. The Maverick Basin project will target the prolific Eagle Ford shale trend, with the project well serviced by existing infrastructure to develop a discovery. The Vail oil project targets low-risk unconventional oil accumulations, where SXA will deploy the latest frac technology to enhance oil recovery.

Key StrengthS

• Onshore low-cost drilling • Operator • Unconventional and conventional hydrocarbon targets • High-impact Canning Basin project

Key riSKS

• Exploration risk • Future development funding dependent on drill success • US gas price risk • Native Title agreement over Canning Basin tenure

HeaD OFFICe 10812 Bearspaw Drive East Edmonton, AB T6J 5G1 Canada Web: www.strata-x.com DIreCtOrs Ron Prefontaine (chair), Tim Hoops (president), Tim Bradley, Don Romaniuk, Don Schurman

Key investments

com

location

Status

% own

Description

Share price ($A)

$0.38

Maverick

Gas, Oil

US

Exploration

75-100%

Targeting Eagle Ford shale, South Texas.

12-month high

$0.44

Vail

Gas, Oil

US

Exploration

100%

Illinois Basin dolomitic reservoir targets.

12-month low

$0.20

Sleeping Giant

Gas

US

Exploration

100%

North Dakota structural gas targets.

Eagle

Oil

US

Exploration

20%

Oil target, California. 1 well to be drilled in 2013.

Market capitalisation

$46.5m

Vallecitos

Oil

US

Exploration

22%

Historic oil field California.

Key Countries

US, Aus

Canning Basin

Gas, Oil

WA

Exploration

100%

Targeting the Laurel formation.

Commodities

Gas, oil

94

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


OIL & GAS

sTrIke energy

ASX: STX

Share price triggerS: hot SpotS in uS anD auStralia

Has a portfolio of gas assets in stable jurisdictions with access to nearby infrastructure in the US and Australia. In the Cooper Basin, STX is targeting gas-saturated coals for delivery into eastern states markets. An appraisal program is being fast-tracked in 2013-14. STX potential from this unconventional target is 6.3-16.4Tcf, a level of potential that dwarfs the past production history of the basin. STX holds 66% equity in PEL 96 & acts as project operator. In July, STX signed a binding term sheet with foundation customer Orica for 20-year supply. To secure offtake, Orica can make up to $52.5m in pre-payments as STX achieves development milestones. In the US, STX holds acreage in Lavaca and Fayette counties, Texas, covering Eagle Ford shale targets. STX acreage is prospective for oil and gas condensate. Two wells are planned in the second half of 2013 to evaluate commercial flow rates. In the Carnarvon Basin, STX holds five permits, with a working interest of 44%. The Palta prospect is prospective for gas accumulations to 2.5Tcf within STX tenure (WA 46-P).

Key StrengthS • • • •

Key riSKS

Low-risk jurisdictions Proven basins Low-cost onshore drilling Access to infrastructure

• • • •

Cooper Basin appraisal Exploration risk Gas price risk Development funding

Key investments

com

location

Status

% own

Description

Southern Cooper Basin

Gas

SA

Appraisal

66%

PEL, 94, 95, 96: Orica off-take deal signed in 2013.

Eagle Ford Shale

Gas

US

Production

28%

300bopd production: 40-50boe potential from Lower Eagle Ford shale.

Carnarvon Basin

Gas

WA

Exploration

44%

800Bcf gas potential; STX operator.

HeaD OFFICe Ground Floor, 10 Ord Street West Perth WA 6005 Australia Web: www.strikeenergy.com.au DIreCTOrs Mark Carnegie (chair), David Wrench (MD), David Baker, Tim Clifton, Simon Ashton, Timothy Goyder Share price ($A)

$0.10

12-month high

$0.25

12-month low

$0.06

Market capitalisation

$70.7m

Key Countries

Aus, US

Commodities

Oil, gas

OIL & GAS

swala energy

ASX: Swe

Share price triggerS: eaSt african rift oil/gaS proSpectS

Targeting one of the oil & gas industry’s global hot spots, the East African rift system, where a number of significant discoveries have emerged in recent years. In aggregate, recent discoveries in the region exceed 2Bbbls of oil equivalent. SWE is among the companies with early mover advantage, having secured signifcant equity in major “land banks” across Kenya and Tanzania. Listed on the ASX this year, raising $11m. Exploration activity to date has focused on a regional understanding of the basin architecture in each of SWE’s three main project areas: Block 12B in Kenya, and the Pangani and Kilosa-Kilobero projects in Tanzania. Aerial imagery/gravity and magnetic data have provided encouragement to progress to a phase of 2D seismic acquisition to be completed in 2013-14. SWE continues to monitor licence bidding opportunities in the region and may add to its exploration portfolio if bids in Zambia lodged in 2013 prove successful.

Key StrengthS • • • •

Large-scale permit positions Material equity shares in principal projects Emerging hydrocarbon potential Active 2013 seismic program

Key riSKS

• Exploration risk as early-stage • Likely to sell down equity over time • Funding risk for future drill-stage exploration • Africa emerging economy risks

HeaD OFFICe 70C Kishorn Road Mt Pleasant WA 6153 Australia Web: www.swala-energy.com DIreCTOrs Ken Russell (chair), Dr David Mestres Ridge (CEO), Neil Taylor, Peter Grant, Ernest Massawe Share price ($A)

$0.23

12-month high

$0.27

12-month low

$0.11

Market capitalisation

$30.2m

Key investments

com

location

Status

% own

Description

Kenya Block 12B

Gas, Oil

Kenya

Exploration

50%

Tullow Oil operator; 4000sq.km project area.

Pangani

Gas, Oil

Tanzania

Exploration

33%

Swala operator; 5500sq.km project area.

Key Countries

Kenya, Tanzania

Kilosa-Kilombero

Gas, Oil

Tanzania

Exploration

33%

Swala operator; 5700sq.km project area.

Commodities

Gas, oil

OCTOBER/NOVEMBER 2013 ReSOURCeSTOCKS

95


OIl & Gas

tap oil

ASX: TAp

Share price triggerS: manora (thailand) oil production in 2014

Manages an active portfolio of oil & gas assets with substantial exploration exposure. Holds gas & oil assets in the WA Carnarvon Basin, in Thailand (Manora oil project) & has an oil-focused wildcat exploration progam in Ghana. TAP is well-funded and benefits from about $30m pa in free cash flow from a historical gas contract in WA, whereby TAP on-sells gas (secured at 2005 prices) to third parties. Contracted volumes under this agreement continue through to 2016. In Thailand, the offshore Manora oil development is progressing towards production for a 2014 production start-up. Development is via a platform and floating, storage and offload unit, with field life anticipated at 11 years. The project is fully funded through to production, with TAP’s project debt anticipated to be repaid within 24 months. TAP’s cash reserves allow the continuation of significant drilling activity both in the offshore Carnarvon Basin area of the NW Shelf region off WA and also overseas.

Key StrengthS

• • • •

Over $80m cash reserve and no debt First oil production from Thailand in 2014 Gas contract on-sale revenue of $30m/pa NW Shelf gas discoveries

Key riSKS • • • •

Exploration risk, particularly Ghana Oil price risk Portfolio effect lessens specific asset risk Capital costs may overrun at Manora

DiRECtoRS Doug Bailey (chair), Troy Hayden (MD), Mike Sandy, Douglas Schwebel

Key investments

com

location

Status

% own

description

Accra Block

Oil

Ghana

Exploration

17%

Results of Starfish-1 well (2013) returned water-bearing sand column; follow-up under consideration.

Manora

Oil/gas

Thailand

Exploration

30%

First production anticipated 2014: 6.1MMbbls 2P reserves (TAP equity share).

Onshore WA (SPA 18 & 21)

Oil/ Gas

WA

Exploration

20%

Shale gas and oil targets near DampierBunbury gas pipeline.

Carnarvon Basin (Zola)

Oil

WA

Operating

10-45%

Gas discovery at Zola (TAP 10%) south of Gorgon held under retention lease.

HEaD oFFiCE Level 1, 47 Colin Street West Perth, WA 6005 Australia Web: www.tapoil.com.au

Share price ($A)

$0.53

12-month high

$0.82

12-month low

$0.43

Market capitalisation

$125m

Key Countries

Australia, Ghana, Thailand

Commodities

Oil, gas

Base Metals

altona mining

ASX: Aoh

Share price triggerS: Steady-State production from Kylyahti & potential expanSion

Has become a base and precious metals producer, with the Kylylahti mine in Finland (part of the Outokumpu project) entering commercial production in July 2012. Production is now ramping up towards the capacity of 7500-8000tpa of copper and 7500-8000oz/pa of gold. The first zinc concentrates were shipped in September 2012 & production guidance upgrades came in January & April. This resulted in a maiden half-year profit in March. Exploration upside still exists at the project, with 4 other historic mines and 4 deposits in the area. AOH is evaluating the expansion of the Luikonlahti mill at Outokumpu to 800,000tpa from 550,000tpa for about $A7.5m. Elsewhere in Finland, AOH is exploring the Kuhmo nickel-copper-cobalt-PGM project, which covers 5 deposits containing 33,200t of nickel, 6800t of copper, 1000t of cobalt, 31,300oz of platinum & 74,350oz of palladium. In Australia, AOH is considering financing options for its strategically located Roseby copper-gold project in the Mt Isa region. The project surrounds MMG’s Dugald River nickel project & is within trucking distance of GlencoreXstrata’s Mount Isa & Ernest Henry mines.

Key StrengthS

Key riSKS

• Operating Kylylahti mine, producing cash flow • Development opportunities in Finland & Australia • Finland seen as a world-class mining jurisdiction • Natural diversification of commodities

• Kylylahti mine is modest size with limited mine life • Financing required for expansions and other developments • Xstrata was not interested in Roseby project • Co-product mines have complex economics & operating characteristics

Key investments

com

location

Status

% own

description

Outokumpu

Cu, Au, Ag, Zn

Finland

Operating

100%

Kylylahti Cu-Au-Zn mine operating 40km from Luikonlahti mill. Multiple mines & deposits in region.

Kuhmo

Ni, Cu, Co, PGM

Finland

Exploration

95%

JV with Polar Mining Oy. Five deposits containing 33,200t of sulphide nickel.

Roseby

Cu, Au, Ag, Zn, Pb, Mo, U, REE

Qld

Financing

100%

95km NE of Mt Isa. Little Eva Cu-Au project plus satelite Cu deposits.

96

HEaD oFFiCE Ground Floor, 1 Altona Street West Perth WA 6005 Australia Web: www.altonamining.com DiRECtoRS Kevin Maloney (chair), Alistair Cowden (MD), Peter Ingram, Steve Scudamore, Paul Hallam Share price ($A) 12-month high 12-month low Market capitalisation Key Countries

Commodities

$0.15 $0.31 $0.12 $82.5m Finland, Australia Cu, Au, Ag, Zn, Ni, Pb, Co, Pt, Pd, Mo, U, Rare Earths

OCTOBER/NOVEMBER 2013 RESoURCESToCKS


Base Metals

antipa minerals

ASX: Azy

Share price triggerS: copper-gold hitS near telfer, wa

Copper-gold explorer in the Telfer region of Western Australia. Listed in 2011 with a $10m IPO and has taken a drill-intensive approach to testing its projects. AZY considers the Paterson Province of WA to have excellent exploration potential for multiple large mineral deposits, believing the Telfer copper-gold deposit being mined by Newcrest (NCM) to be representative of the region’s potential. The drill-intensive approach has paid off, with this year’s discovery of the Calibre Cu-Au mineralisation by AZY. Calibre has yielded thick, low-grade copper & gold intersections on repeated drill sections, such that definition of a resource is likely. Intersections up to 450m in thickness have been delineated from 80m depth – suggesting bulk mining potential. Beyond Calibre, AZY also contines to explore the Magnum prospect, where a resource of 28Mt at 0.5gpt gold and 0.3% copper has been defined thus far, for contained metal of 415,000oz gold and 77,000t copper. The polymetallic potential of the region is highlighted by the Corker prospect, where zinc and lead mineralisation is present.

Key StrengthS

• • • •

Copper discovery at Calibre in 2013 Strong prospectivity near Telfer Drill-ready exploration targets Geographic focus on WA

Key riSKS

• • • •

Exploration risk Funding risk Project economics not yet clear Remote project location

Key investments

com

location

Status

% own

description

Citadel Project

Cu, Au

WA

Exploration

100%

Includes Magnum, Calibre and Corker prospects.

North Telfer Project

Cu, Au

WA

Exploration

100%

Shallow cover rocks north of Telfer mine site.

HeaD OFFiCe Level 1, 44 Ord Street West Perth WA 6005 Australia Web: www.antipaminerals.com.au DireCtOrs Stephen Power (chair), Roger Mason (MD), Peter Buck, Gary Johnson, Mark Rodda Share price ($A)

$0.04

12-month high

$0.26

12-month low

$0.03

Market capitalisation

$7.4m

Key Countries

Australia

Commodities

Cu, Au, Ag, W, Pb, Zn

Base Metals

ClassiC minerals

ASX: Clz

Share price triggerS: drilling program on fraSer range project

One of just 3 companies to have raised money for exploration through an IPO on the ASX in 2013. Listing on May 22 and raising $3.5m, CLZ is initially focusing on its Fraser Range project, 38km southwest of Sirius Resources’ Nova nickel-copper project. CLZ followed up historic nickel, copper & zinc soil anomalies with an airborne electromagnetic survey that identified a number of conductors, with the potential to host massive nickel sulphides. A 5000m reverse circulation drill program is planned over the 18 targets, subject to approval of the work program by the DMP. CLZ has a portfolio of exploration assets across WA. This includes the Doherty’s gold project in the Barrambie greenstone belt in the East Murchison. The project hosts 3 historic underground gold mines & a small high-grade gold deposit, which could be converted into a JORC-compliant resource with further drilling. A 2005 resource study confirmed a 20,500oz resource grading 23.8gpt gold, while historic mine production was 27,400oz grading 24.8gpt. The Mount Maitland project in the Murchison is prospective for calcrete-hosted uranium and Cowarna Rocks hosts detrital iron ore 75km east of Kalgoorlie.

Key StrengthS

• Exploration in the exciting Fraser-Albany Belt • High-rade gold prospect in historic gold mining area • One of few companies to complete an IPO in 2013 • Diverse range of WA-focused exploration projects

Key riSKS

• “Nearology” not a guarantee of exploration success. • Doherty gold project likely to be small. • Further funds required to significantly advance projects. • High level of exploration risk.

Key investments

com

location

Status

% own

description

Fraser Range

WA

Exploration

100%

Dohertys

Cu, Ni, Zn Au

WA

Exploration

100%

Mount Maitland

U

WA

Exploration

100%

Cowarna Rocks

Fe

WA

Exploration

100%

Copper mineralisation at surface. 11 aeromagnetic targets. Historic UG Au mine & deposit in Barrambie greenstone belt. Calcrete-hosted U target in the Murchison mineral field. Detrital haematite prospect 75km E of Kalgoorlie.

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

HeaD OFFiCe Unit 7, 30 Hasler Road Osborne Park WA 6017 Australia Web: www.classicminerals.com.au DireCtOrs Justin Doutch (ED), Paul Lambrecht, Jeffrey Nurse, Stanislaw Procak Share price ($A)

$0.14

12-month high

$0.21

12-month low

$0.08

Market capitalisation

$27.8m

Key Countries

Australia

Commodities

Cu, Ni, U, Au, Iron Ore 97


Base Metals

HoT CHili

ASX: HCH

Share price trigger: productora copper KeepS growing

Exercised the $7m option over its flagship copper project at Productora during 2012-13 to cement its position as the leading ASX copper explorer in Chile. Has continued to receive strong funding support, most recently from major Chile strategic partner CAP S.A., a company that controls significant iron ore production assets near Productora. Feasibility work continues, with a view to a 50,000-60,000tpa major copper operation, with gold, iron & potentially molybdenum credits. While Productora is predominantly sulphide ore, an oxide processing opportunity for the surficial tonnes is being evaluated, with ore to be sent to a Chilean government (ENAMI) processing facility at Vallenar. A further resource upgrade is expected late this year at Productora from the current 165Mt resource. Beyond Productora, the Frontera project 70km south of Productora is emerging as a major porphyry copper system – with an initial resource also anticipated in 2013.

Key StrengthS

• Productora emerging as a major project • Resources still growing • Copper at Productora augmented by Au & Fe credits • Frontera copper discovery

Key riSKS

• Resource growth at Productora carries exploration risk • Environmental permitting underway • Potential capital cost escalation • Future project funding required

HeaD oFFiCe First Floor, 768 Canning Highway, Applecross, WA 6153 Australia Web: www.hotchili.net.au DireCTorS Murray Black (chair), Christian Easterday (MD), Allan Trench, Michael Anderson, Roberto de Andraca

Key investments

com

location

Status

% own

description

Productora

Cu, Au, Fe, Mo

Chile

Feasibility

100%

Resource upgrade due late 2013; Resource target of 300Mt @ 0.6% Cu, 0.1 gpt Au.

Frontera

Cu, Au

Chile

Exploration

Option

Porphyry drill-hits of 0.4% Cu & 0.3 gpt gold.

Banderas

Cu, Au

Chile

Exploration

Option

High-grade new copper-gold drill target within Productora region.

Los Mantos

Cu, Au

Chile

Exploration

Option

High-grade copper lodes requiring follow-up drilling.

Share price ($A)

$0.43

12-month high

$0.81

12-month low

$0.39

Market capitalisation

$139.9m

Key Countries

Chile

Commodities

Cu, Au, Fe, Mo

Base Metals

marengo mining

ASX: MMC

Share price triggerS: reSolution of technical challengeS during feaSibility

After re-domiciling to Canada (but remaining listed on the ASX) in order to draw from North America’s larger capital markets, MMC is now refocusing on developing its giant Yandera copper-gold-molybdenum project in PNG. The project hosts 2.35Mt of copper, 63,500t of molybdenum & 1.1Moz of gold. Yandera is undergoing a feasibility study, which envisages a 30Mtpa mine producing 90,000tpa of copper, plus molybdenum and gold by-products, over 20 years. The capital cost is estimated at $US1.7-1.85b. MMC has entered into a letter of intent with China Nonferrous Metals Industry’s Foreign Engineering & Construction (NFC), which will undertake EPC and provide 70% of the project debt through a Chinese state bank in exchange for off-take. MMC also has an investment agreement with the PNG government, which will fund & earn 30% of the project. MMC also has the support of 22% cornerstone investor Sentient Group (a US private equity firm). Following the failure of a third-party agreement for power supply, further work is required in the feasibility study reviewing power options, throughput optimisation & tailings management. Substantial progress has been made with metallurgical recoveries and a highly marketable high-grade concentrate will be produced. It is not clear how this affects MMC’s production start-up forecast of 2016.

Key StrengthS

• Substantial copper, molybdenum and gold project • Capital financing agreements with Chinese bank & PNG government • Letter of intent for EPC contract secured with NFC • Sentient Group as 22% cornerstone shareholder

Key riSKS

• Feasibility study has been repeatedly delayed • Single asset risk • Sovereign risk problems in Papua New Guinea • PNG government earning 30% of the project

HeaD oFFiCe Suite 2, Level 2, Ela Beach Tower Bramell Street Port Moresby 121, PNG Web: www.marengomining.com DireCTorS John Hick (chair), Leslie Emery (pres/CEO), Sir Rabbie Namaliu, Elizabeth Martin, Richard William (Keith) Morrison, Vincent (Ian) Masterton-(Hume), Samuel Akoitai Share price ($A)

$0.02

12-month high

$0.18

12-month low

$0.02

Market capitalisation

$28.4m

Key investments

com

location

Status

% own

description

Key Countries

PNG

Yandera

Cu, Mo, Au

PNG

Feasibility

100%

2.35Mt Cu, 63.5Kt Mo & 1.1Moz Au resource. PNG government earning 30%.

Commodities

Cu, Mo, Au

98

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


Base Metals

OZ minerals

ASX: ozl

Share price triggerS: return to normal operationS at prominent hill

Had a tough few months, delaying the exploration decline at its Carrapateena project in May and subsequently lowering gold production guidance and announcing an impairment due to lower commodity prices at Prominent Hill in July. But the fundamental quality of OZL’s assets and investments remains. OZL operates the Prominent Hill copper-gold mine in South Australia. Production guidance for 2013 is lower at 82,000-88,000t of copper & 120,000-130,000oz of gold, in line with the mine plan due to higher waste removal. The Ankata underground part of Prominent Hill was brought on stream last year. A resource upgrade at Ankata of 25% in January extends life of mine to 2019.

Key StrengthS

• Low-cost copper mine at Prominent Hill • Second substantial copper project at Carrapateena • Cash balance of $659m • Interesting portfolio of investments

Key riSKS

• Still only one operating asset • Cost inflation a problem at Prominent Hill & Carrapateena • Carrapateena on hold and long way from production • Technical risk with block caving at Carrapateena

Key investments

com

location

Status

% own

description

Prominent Hill

Cu, Au

SA

Operating

100%

Carrapateena

Cu, Au

SA

Prefeasibility

100%

Toro Energy Sandfire Resources IMX Resources

U Cu, Au Fe, Cu

WA WA SA

Investment Investment Investment

39% 19% 8%

Renaissance Minerals Minotaur Exploration Beadell Resources EMED Mining

Au

Cambodia

Investment

16%

Kaolin

SA

Investment

8%

Au Cu, Au

Brazil Spain

Investment Investment

2% 2%

2013 production target of 82,000-88,000t Cu & 120,000-130,000oz Au. Potential UG block cave mine. Resource of 3.8Mt of Cu (1.29%), 4.5Moz Au, 50.7Moz Ag & 605Kt U. Building WA's first U mine at Wiluna. Operating the Degrussa Cu-Au project in WA. Developing the Mt Woods magnetite project near Prominent Hill. Some JVs with OZL. Multiple Au prospects in Cambodia, some formerly held by OZL. Exploring the Poochera Kaolin project in South Australia. Operating the Tucano Au mine in Brazil. Re-starting the old Rio Tinto mine in Spain.

HeaD OFFiCe Level 10, 31 Queen Street Melbourne Vic 3000 Australia Web: www.ozminerals.com DireCTOrs Neil Hamilton (chair), Terry Burgess (MD/CEO), Paul Dowd, Brian Jamieson, Charles Lenegan, Rebecca McGrath, Dean Pritchard Share price ($A)

$4.53

12-month high

$8.66

12-month low

$3.82

Market capitalisation

$1.31b Australia, Cambodia, Brazil, Spain Cu, Au, U, kaolin, iron ore

Key Countries Commodities

Base Metals

panausT

ASX: pnA

Share price triggerS: further SucceSSeS in development & exploration pipeline

PNA is rapidly building into a mid-tier base and precious metals miner. It has two mining operations – Phu Kham and Ban Houayxai. A successful capacity expansion in 2012 means the Phu Kham mine is forecast to produce 70,000tpa of copper and 65,000ozpa of gold for a further 10 years, based on reserves of 880,000t of copper (grading 0.5%), 1.3Moz of gold (grading 0.23gpt) and 10.75Moz of silver (grading 1.9gpt). Following commissioning in 2012, Ban Houayxai can produce in excess of 100,000ozpa of gold and 700,000ozpa of silver for another 10 years, based on reserves of 1.07Moz of gold (grading 0.81gpt) and 10.4Moz of silver (grading 7.9gpt). PNA has a number of development options in the Phu Kham district including the Phonsavan copper-gold project, for which a prefeasibility study is underway.

Key StrengthS

Key riSKS

• Two producing base and precious metal mines • • Controlling position in an exciting Laos • mineral district • Development options in Chile undergoing • feasibility • Dividend payer •

Still carrying $US137 million of debt Cost control at copper and gold mines a global industry challenge Discoveries in Phu Kham district progressively smaller Previous Inca de Oro feasibility study failed

Key investments

com

location

Status

% own

description

Phu Kham

Cu, Au, Ag

Laos

Operating

90%

Ban Houayxai

Au, Ag

Laos

Operating

90%

Phonsavan (KTL & Phu Noum) Long Chieng Track (LCT) Phu Kham District

Cu, Au, Ag

Laos

Prefeasibility

90%

Cu, Au, Ag

Laos

Scoping

90%

Cu, Au

Laos

Exploration

90%

Inca de Oro

Cu, Au

Chile

Feasibility

60%

Carmen

Cu

Chile

Feasibility

100%

Puthep

Cu

Thailand

Exploration

49%

2012 production of 63,285t Cu, 59,516oz Au & 469,945oz Ag. CIL operation producing around 100,000ozpa Au & 700,000ozpa Ag. Potential 20-25,000tpa Cu in concentrate mine. Au-Ag and Cu-Au mining options, 6km from Phu Kham. Nam Ve, Nam San & Haul Road prospects and regional exploration. Feasibility re-evaluation to add oxide resources to production plan. Possible synergies with Inca de Oro that would improve economics of that project. JV with a Thai company, Padaeng Industry. Project for sale.

OCTOBER/NOVEMBER 2013 RESoURCESToCKS

HeaD OFFiCe Level 1, 15 James Street Fortitude Valley, Brisbane Qld 4006 Australia Web: www.panaust.com.au DireCTOrs Garry Hounsell (Chair), Gary Stafford (MD), Nerolie Withnall, Geoffrey Handley, Geoffrey Billard, Zezhong Li, John Crofts, Ken Pickering, Annabelle Chaplain Share price ($A)

$2.19

12-month high

$3.53

12-month low

$1.73

Market capitalisation

$1.36b

Key Countries

Laos, Chile, Thailand

Commodities

Cu, Au, Ag 99


Base Metals

rex minerals

ASX: RXm

Share priCe triggerS: COmpLetiOn Of feaSibiLity & beginning Of COnStruCtiOn at hiLLSiDe

Discovered Hillside in 2008 and has since built it into Australia’s largest undeveloped open pit copper project. The reserve hosts 936,000t of copper (grading 0.52%), plus 752,327oz of gold & 25.7Mt of magnetite iron ore. Over the past year, RXM has made substantial progress in advancing the project, with the completion of a PFS in October and signing of an MoU with a Chinese party for EPC and off-take financing in June. The PFS envisages 75,000tpa of copper, 60,000ozpa of gold & 1.2Mtpa of magnetite iron ore production for 12 years. Operating costs are estimated at $US2645/t when factoring the by-products and the capital cost is forecast to be $US900m. Under the terms of the EPC & financing MoU signed with China Nonferrous Metal Industry’s Foreign Engineering and Construction (NFC) & Arccon, NFC will provide a fixed-cost EPC contract and source $US550m of debt funding from a Chinese bank. RXM is considering copper & iron ore off-take deals to finance the rest of the project. Subject to permits and financing, RXM hopes to begin construction in 2014 and be operating in 2015. A BFS is currently underway, due for completion this year.

Key StrengthS

• Hillside one of Australia’s largest undeveloped copper resources • EPC and financing MOU signed with Chinese party • Natural hedge with mutliple by-product stream • Further regional exploration upside, targeting Hillside type projects

Key riSKS

• Hillside project low grade and reliant on by-products to improve economics • Capital costs substantial and will be challenging to finance. • Development timeline subject to delays. • Single asset risk, as other exploration very early stage

Head office 209 Dana Street Ballarat Vic 3350 Australia Web: www.rexminerals.com.au direcTors Paul Chapman (chair), Mark Parry (MD), Steven Olsen (ED), Richard Laufmann, Alistair Maitland Share price ($A)

$0.57

12-month high

$0.98

12-month low

$0.24

Key investments

Com

Location

Status

% Own

Description

Market capitalisation

$107.7m

Hillside

Cu, Au, Fe

SA

Feasibility

100%

Planned 75Ktpa open pit Cu mine hosting 936Kt of Cu reserves.

Pine Point Regional

Cu, Au, Fe

SA

Exploration

100%

Multiple geophysics & drilling targets for Hillside-style mineralisation across Yorke Peninsula.

Key Countries

Australia

Commodities

Cu, Au, Fe

Base Metals

sandfire resources

ASX: SFR

Share priCe triggerS: SteaDy-State prODuCtiOn & CaShfLOw frOm DOOLgunna

The high-grade nature of part of the DeGrussa copper-gold deposit in the wider Doolgunna project meant it could be extracted as a direct-ship option. SFR began mining this in February 2012 & completed mining of 144,887t (grading 23.6% copper & 3.3gpt gold) of DSO at the start of 2013. During this time, SFR has also focused on the development of its underground mine at Doolgunna, which encompasses the Degrussa deposit & Conductors 1, 4 & 5. The current mine plan hosts 512,000t of copper grading 4.9% and 597,000oz of gold grading 1.8gpt, based on the ore reserve, plus inferred mineral resources at Conductors 4 and 5 extending from the current reserve. This upgrade means the mine will now operate beyond 2020.

Key StrengthS

• Cash balance improved by direct-ship copper ore • Development & ramp-up work at Doolgunna now complete • High grades & low operating costs at Doolgunna mine • Australia-wide base metals exploration portfolio

Head office Level 1, 31 Ventnor Avenue West Perth, WA 6005 Australia Web: www.sandfire.com.au

Key riSKS

• $285m of debt still to be paid down • Single asset risk. Doolgunna the only operating mine • Exposure to volatility in the copper price • High exploration risk among the rest of the portfolio

direcTors Derek La Ferla (chair), Karl Simich (MD), W John Evans, Soocheol Shin, Robert Scott

Key investments

Com

Location

Status

% Own

Description

Share price ($A)

$6.42

DeGrussa DSO

Cu, Au

WA

Closed

100%

12-month high

$9.09

Doolgunna

Cu, Au, Zn

WA

Operating

100%

Borroloola

Zn, Pb, Mn, Fe, U Zn, Pb, Ag, Cu, Au Zn, Pb, Ag, Cu, Au Cu, Au

NT

Exploration

100%

12-month low

$4.92

QLD

Exploration

Earning

Market capitalisation

$999.2m

QLD

Exploration

80-100%

Key Countries

Australia

NSW

Exploration

80-100%

Cu, Ag, Co, Au

SA

Exploration

100%

High-grade, direct-ship Cu reserve. Now all mined and sold. 70,000-80,000tpa Cu & 36,000ozpa Au targeted from underground mining. Regional SEDEX exploration of 10,000sq.km of tenements near McArthur River. Earning upto 80% from Breakaway Resources targeting Cannington & IOCG type deposits. 5 tenements near Cloncurry targeting Broken Hill & IOCG-type mineralisation. 3 tenements targeting Cu-Au porphyries similar to Northparkes, Cadia & Cowal. 477sq.km exploration licence targeting copper, near Rex Minerals’ Hillside project.

Commodities

Cu, Au, Zn, Pb, Ag, Mn, Fe, U, Co

Altia Kennedy Highway Bland Creek Alford

100

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


Base Metals

tiger resources

ASX: TGS

Share PriCe triggerS: Start-uP Of KiPOi SXeW OPeratiOn

Aggressively becoming an Africa-based mid-tier copper producer. Having started up the Kipoi project in the DRC in 2011, using a low-capital cost, heavy-media separation (HMS) operation, TGS is moving towards development of a larger SXEW-based operation at the mine. The HMS operation is forecast to produce 37,000t of copper in 2013 at a cost of just $US1060/t & 21,000t of copper in 2014 at $660/t, after which the operation will close. TGS is developing the Stage 2 SXEW operation at Kipoi, which will produce 25,000tpa of copper for nine years, at an operating cost of $2490/t and a capital investment of $176m. TGS is aiming to have the SXEW operation in production by 2014. Further expansion options exist to bring the capacity to 50,000tpa for $125m by 2015 & potentially a further tank leach operation to come onstream in 2016. Elsewhere in the DRC, TGS is undertaking a feasibility study on the Lupoto project, which hosts 200,000t of copper grading 1.4% copper. In August 2012, TGS also entered into a strategic alliance with Chrysalis Resources (CYS), by taking a 19.9% stake in the company. CYS is developing the Zambia copper project, just over the border from TGS’s Kipoi mine.

Key StrengthS

Key riSKS

• Very low-cost copper operation at Kipoi HMS • • Low-cost SXEW mine under development • Stockpiles of copper ore worth $100s • of millions • • Chrysalis investment diversifying asset • portfolio

Sovereign risk in the DRC, particularly around the Mining Code Single asset risk Commissioning challenges at Kipoi SXEW Fairly limited exploration portfolio

HeAD oFFice 1st Floor, 1152 Hay Street West Perth WA 6005 Australia Web: www.tigerresources.com.au Directors Neal Fearis (chair), Bradley Marwood (MD), Stephen Hills (FD), David Constable, Michael Griffiths Share price ($A)

$0.29

12-month high

$0.38

Key investments

Com

Location

Status

% Own

Description

Kipoi (Stage 1)

Cu

DRC

Operating

60%

Production target of 37,000t of copper-inconcentrate for 2013.

12-month low

$0.16

Kipoi (Stage 2)

Cu

DRC

Construction

60%

Planned SXEW operation with 308Kt of Cu reserves & 137Kt of Cu stockpiles.

Market capitalisation

$197.4m

Lupoto

Cu

DRC

Feasibility

100%

200Kt Cu resource, 10km S of Kipoi.

La Patience

Cu, Zn

DRC

Exploration

100%

Exploration licence acquired in Jan 2013, 10km SE of Kipoi.

Key Countries

DRC

Chrysalis Resources

Au, Cu, Fe, Ni

Zambia, WA

Investment

20%

CYS owns the 'Zambia Copper Project' and is exploring near SFR's DeGrusssa mine.

Commodities

Cu, Zn, Au, Fe, Ni

Base Metals

voyAger resources

ASX: vOR

Share PriCe triggerS: eXPLOratiOn POtentiaL in MOngOLia anD BraziL

Political problems surrounding Mongolia’s flagship Oyu Tolgoi project has reduced investor interest in the country but it is still undoubtedly a prospective region, particularly for base and precious metals. Some of the best exploration results to come out of Mongolia since Oyu Tolgoi have been at VOR’s Khul Morit (KM) project, where 116m at 2.4% copper and 7.2gpt silver and 34m at 3.4% copper and 14.7gpt silver demonstrate the project’s potential. The exploration licence at Khul Morit was recently extended by three years, ensuring VOR has the time to properly follow up the opportunities at the prospect. VOR also retains two other projects in Mongolia, which present further exploration options when required. These include the Khongor copper-gold project and the Daltiin Ovor gold-silver-copper project. Following a successful capital raising earlier in the year, VOR has used the funds to begin a diversification program, earning into some exciting exploration ground in Brazil. A strategic alliance with Avanco Resources and FFA Legal will earn full rights for the Eastern Block prospects from Xstrata Copper.

Key StrengthS

Key riSKS

• Khul Morit retains high exploration potential • • Exploration licence at Khul Morit extended • for three years • Further exploration upside in Mongolia at • other projects • New prospects in exciting part of Brazil •

Investor interest in Mongolia is waning Mongolian exploration program yet to produce any outstanding results Further cash raisings required to substantially advance any projects Xstrata earns back 60% of any big discovery in Brazil

HeAD oFFice Level 1, 330 Churchill Avenue Subiaco WA 6008 Australia Web: www.voyagerresources.net Directors Matthew Wood (chair), Joe Burke (CEO), George Lkhagvadorj Tumur (OD), Nicholas Lindsay, Tim Flavel Share price ($A)

$0.01

12-month high

$0.03

Key investments

Com

Location

Status

% Own

Description

12-month low

$0.01

Khul Morit (KM)

Cu, Ag, Mo

Mongolia

Exploration

80%

Potential Cu porphyry system in Erdene Island Arc terrain. 55,000m of drilling to date.

Market capitalisation

$10.5m

Khongor

Cu, Au

Mongolia

Exploration

100%

Another potential Cu porphyry system in the Erdene Island Arc.

Key countries

Daltiin Ovor

Au, Ag, Cu

Mongolia

Exploration

80%

High-grade Au, Ag and Cu mineralisation in the Bayankhongor Gold Belt, south central Mongolia.

Mongolia, Brazil

Eastern Block

Cu, Au

Brazil

Exploration

Earning

Strategic alliance with Avanco Resources and FFA Legal, earning from Xstrata.

Commodities

Cu, Au, Ag, Mo

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

101


DIVERSIFIED

crusADer resources

ASX: CAS

Share priCe triggerS: pOSSe CaSh fLOw funDing BOrBOrema DeveLOpment

Progressed from explorer to producer this year by taking the Posse iron ore mine in Brazil on stream. The mine has permits to produce 300Ktpa of iron ore for the domestic market and should reach steady production early in H2 2013. An expansion to 1Mtpa is under review, while the required permits are under application. A temporary licence suspension was quickly overturned earlier this year. Posse hosts a resource of 36Mt of 43.5% iron ore, so can operate for many years at this capacity. CAS’s producer position will be further consolidated by the Borborema gold project’s development, due for start-up mid-2015. A maiden ore reserve of 1.61Moz of gold grading 1.18gpt was announced in November 2012, building on the 2.43Moz (grading 1.06gpt) resource. A feasibility study is underway envisaging a 4Mtpa operation producing 150,000ozpa. CAS has arranged a $A20m financing facility with Macquarie to help fund Posse expansion, development at Borborema and general working capital. CAS retains exploration upside at Serido (surrounding Borborema), tungsten at Tarantula, tin and indium at Ouro Belo.

Key StrengthS

• Cash flow from Posse iron ore imminent • Expansion potential at Posse • Substantial Borborema Au project under development • Further exploration upside within Brazil

Key riSKS

• Bureaucractic permitting challenges in Brazil • Project development debt increases corporate risk • Borborema Au project is low grade (1.18gpt) • Exposed to slowing Brazilian economy and stalling iron ore consumption

Key investments

Com

Location

Status

% Own

Description

Posse

Fe

Brazil

Development

100%

Borborema

Au

Brazil

Feasibility

100%

Seridó Tarantula

Au W

Brazil Brazil

Exploration Exploration

100% 100%

Ouro Belo

Sn, In

Brazil

Exploration

100%

300Ktpa haematite iron ore mine targeting domestic market. Expansion potential. 1.61Moz Au reserve. 150ozpa OP operation under evaluation. Regional exploration surrounding Borborema. Licenses covering several former tungsten mines and many artisanal workings. BBX Holdings earning up to 75% of project following $650,000 of exploration.

HeAD oFFIce Suite 1, Level 1, 35 Havelock Street West Perth 6005 Australia Web: www.crusaderresources.com DIrectors Stephen Copulos (chair), Robert Smakman (MD), Paul Stephen, David Netherway, Mauricio Ferreira, John Evans Share price ($A)

$0.24

12-month high

$0.56

12-month low

$0.18

Market capitalisation

$30.4m

Key Countries

Brazil

Commodities

Fe, Au, tungsten, Sn, In

DIVERSIFIED

encounter resources

ASX: EnR

Share priCe triggerS: the next SanDfire?

A copper exploration success story waiting to happen. The Yeneena copper project comprises a large ground position (1400sq.km) in an endowed copper region, the Paterson Province of Western Australia – between the Nifty copper mine and the Telfer gold/copper mine. Exploration to date has returned copper (and cobalt) mineralisation present beneath shallow cover rocks both as oxide and sulphide. A number of key targets are set to be further drill-tested in 2013, including BM1, BM2 BM6 and BM7. A new target at BM8 will also be tested – where coincident electromagnetic & magentic anomalies have yet to be drilled. The search for new copper sulphide targets also continues – with airborne electromagnetics flown in June 2013 covering unexplored areas to the north of ENR discoveries made to date. The world-scale copper potential at Yeneena has attracted interest from Chilean major Antofagasta Plc, which is funding a $20m farm-in JV to the two principal ENR tenements at Yeneena to earn 51% interest. ENR maintains 100% ownership of the remainder of the project area.

Key StrengthS

• • • •

Support of Antofagasta Emerging copper discovery at Yeneena World-scale exploration upside 2013 drilling fully funded

Key riSKS

• Exploration risk • Projects are remotely located; infrastructure poor

HeAD oFFIce Level 7, 600 Murray Street West Perth WA 6005 Australia Web: www.enrl.com.au DIrectors Paul Chapman (chair), Will Robinson (MD), Peter Bewick, Jon Hronsky Share price ($A)

$0.22

Key investments

Com

Location

Status

% Own

Description

12-month high

$0.28

Yeneena

Cu, Co, Mn

WA

Exploration

100%

Greenfields copper discovery in the Paterson Province, WA.

12-month low

$0.14

Yeneena – Antofagasta

Cu, Co, Mn

WA

Exploration

100%

ENR has farmed out two tenements at Yeneena to Antofagasta.

Market capitalisation

$29.2m

Tchintaby Well

Zn

WA

Exploration

100%

Low-grade Zn-Cu mineralisation.

Staten

U, Zn

WA

Exploration

100%

Polymetallic surface anomalism and radiometric anomaly.

Key Countries

Australia

Yilgarn Uranium

U

WA

Exploration

80-100%

Multiple calcrete-hosted uranium occurrences.

Commodities

Cu, Co, U, Zn, Mn

102

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


DIVERSIFIED

enTerprIse meTAls

ASX: EnT

Share PriCe triggerS: COPPer & niCKeL DriLL targetS

A Western Australia-focused diversified mineral explorer. Targeting copper and nickel close to the exciting discoveries made by Sandfire Resources (SFR) at DeGrussa and Sirius Resources (SIR) at Nova. ENT has the backing of a Chinese major shareholder (33%) in SinoTech Hong Kong. At the Plato prospect, 40km southwest of the Nova discovery, ENT has identified coincident nickel-copper and electromagnetic anomalies, with follow-up planned in 2013. Near De Grussa, ENT has identified some high-grade shallow gold hits and anomalous copper levels in reconnaissance drilling - with follow-up to a number of electromagnetic anomalies planned in 2013. Elsewhere, ENT’s gold projects include Darlot, in the Yandal Belt region (near Barrick’s Darlot gold mine) with the ground also considered prospective for volcanic massive sulphide (copper-zinc-silver) mineralisation. Late in 2012, ENT spun out its uranium exploration portfolio into the $6m IPO of Enterprise Uranium (ENU).

Key StrengthS

• Proximity to SFR’s De Grussa Cu mine • Proximity to SIR’s Nova-Bollinger nickel deposit • Strong support from Chinese cornerstone investors • Proven exploration skills

Key riSKS • • • •

Successive rounds of future funding required Exploration assets predominantly early-stage Exploration risk Earaheedy Fe project is remote, requiring infrastructure development

heAD oFFIce 640 Murray Street West Perth WA 6005 Australia Web: www.enterprisemetals.com.au DIrecTors Dr Jingbin Wang (chair), Dermot Ryan (MD), Anna Mao, Paul Hallam, Allan Trench Share price ($A)

$0.08

12-month high

$0.26

Key investments

Com

Location

Status

% Own

Description

Doolgunna

Cu, Au

WA

Exploration

100%

Large ground position SW of SFR.

12-month low

$0.04

Fraser Range

Ni, Cu

WA

Exploration

100%

ENT leases SW of SIR's' Nova Ni-Cu discovery.

Market capitalisation

$16m

Darlot

Au, Cu, Zn

WA

Exploration

100%

Southern Yandal Belt with Au & VMS (Cu, Zn) drill targets.

Key Countries

Australia

Earaheedy

Fe

WA

Exploration

100%

Channel Fe target in Nabberu Basin.

Enterprise Uranium

U

WA

Exploration

19%

Equity in listed U explorer.

Commodities

Cu, Ni, Fe, Au

DIVERSIFIED

heron resources

ASX: hRR

Share PriCe triggerS: DuaL exPLOratiOn & aCquiSitiOn aPPrOaCh

Has a significant cash war chest of about $40m and seeking advanced mineral projects to add to its extensive early-stage mineral assets. HRR also owns the Kalgoorlie nickel laterite project (KNP), which contains over 700Mt of laterite nickel resources. The fall in the nickel price, coupled with a multi-billion dollar capital development cost has led to the KNP being essentially placed on hold in recent years. As a result, HRR’s attention has shifted to its exploration portfolio – and also to seeking out a suitable advanced-stage mineral project. HRR has gradually built a significant regional land position in WA, Queensland and NSW with land typically acquired when dropped by competitor companies. Highlights for 2013-14 exploration activities include the likely drill-testing of the Bedonia target in the Fraser Range region of WA, considered analogous to Sirius Resources’ Nova-Bollinger nickel-copper sulphide discovery. Elsewhere, Heron is seeking large-scale copper-gold systems in NSW & Queensland.

Key StrengthS

• Strong cash balance, about $40m • World-scale nickel laterite project at Kalgoorlie • Australia-wide exploration portfolio • Seeking advanced mineral projects

Key riSKS

• Over-paying for an advanced project acquisition • Lack of material progress at nickel development • Exploration risk

Key investments

Com

Location

Status

% Own

Description

Kalgoorlie Ni Project

Ni

WA

Feasibility

100%

727Mt @ 0.72% Ni & 0.04% Co in laterites.

Bulong

Au

WA

Exploration

20%

JV Au project with Southern Gold (SAU).

Bedonia

Ni, Cu

WA

Exploration

100%

Soil geochemistry & geophysical target for Nova-style Ni-Cu sulphides.

Mt Zephyr

Cu, Zn

WA

Exploration

100%

Seeking JV partner for Cu-Zn VMS targets.

Siberia South

Au

WA

Exploration

100

Gold-in-soil anomalies to be drill-tested.

NW Queensland

Cu-Au

Qld

Exploration

100%

1700sq.km regional leaseholdings in the Mt Isa Inlier.

Gundagai

Au

NSW

Exploration

100%

Regional Au project with historic gold workings.

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

heAD oFFIce Level 1, 37 Ord Street West Perth WA 6005 Australia Web: www.heronresources.com.au DIrecTors Craig Readhead (chair), Ian Buchhorn (MD), Stephen Dennis

Share price ($A)

$0.15

12-month high

$0.24

12-month low

$0.12

Market capitalisation

$36.7m

Key Countries

Australia

Commodities

Ni, Cu, Au 103


DIVERSIFIED

InDepenDence group

ASX: igO

Share PriCe triggerS: trOPiCana 2013 Start-uP

Has emerged as the premier mid-tier diverisifed miner on the ASX courtesy of cornerstone nickel production from the Long mine at Kambalda, copper-zinc production from the JaguarBentley mines near Leonora and forthcoming gold production from Tropicana. The Long nickel mine has celebrated 10 years of production under IGO ownership – and continues to deliver lowcost, high-grade nickel mine output. IGO has an enviable project development and exploration portfolio – including the Stockman base metals project in Victoria and the Karlawinda gold project in WA. Start-up of Tropicana, scheduled for late this year, will further transform IGO, which anticipates that its 30% equity share will equate to 145,000ozpa produced at a cost of $A590-630/oz. IGO’s share of total resources at Tropicana is now 2.4Moz, with its share of reserves at 1.2 Moz.

Key StrengthS

• • • •

Key riSKS

Operating cash flows Tropicana Au to start late 2013 Advanced base metals project at Stockman Multi-commodity exploration upside

• • • •

Nickel price risk Mining technical risks Exploration risk Capital and development cost of project portfolio

HeaD oFFIce Suite 4, Level 5, South Shore Centre 85 South Perth Esplanade South Perth WA 6151 Australia Web: www.igo.com.au DIrectors Peter Bilbe (chair), Christopher Bonwick (MD), Rod Marston, Kelly Ross, Geoffrey Clifford

Key investments

Com

Location

Status

% Own

Long

Ni

WA

Operating

100%

Description UG mine. 41,000t contained Ni in reserves.

Jaguar/Bentley

Cu, Zn, Ag

WA

Operating

100%

UG mine. Annual production ~25,000t Zn, 6000t Cu.

Tropicana JV

Au

WA

Construction

30%

JV with AngloGold Ashanti. 6.4Moz resource total. ~480,000oz pa production.

Stockman

Cu, Zn, Ag, Au

Vic

Feasibility

100%

266.5Kt of Cu, 558.4Kt of Zn & 15.9Moz of Ag.

Karlawinda

Au

WA

Scoping

100%

674,000oz Au resource.

Duketon JV

Ni

WA

Exploration

Earning

JV with South Boulder Mines, IGO earning 70% of Ni rights.

Mid-West JV

Fe

WA

Exploration

100%

Trafford Resources earning 80% of Fe rights at Twin Peaks.

Share price ($A) 12-month high 12-month low Market capitalisation Key Countries Commodities

$4.15 $5.05 $2.18 $907.6m Australia, Sweden, Argentina, Chile Ni, Cu, Zn, Au, Ag, PGMs

DIVERSIFIED

matsa resources

ASX: mAT

Share PriCe triggerS: DiSCOverieS in the FraSer range

Having secured cash from a farm-in deal with Panoramic Resources (ASX:PAN) for its Mt Henry gold project in WA, MAT has the funds available to invest heavily in exploration. These include a number of gold projects near Mt Henry that could act as satellite deposits, nickelcopper targets in the Fraser Range near SIR’s Nova project, the Dundas magnetite project and 4450sq.km of further exploration ground across WA under evaluation for new targets. MAT also holds a substantial amount of exploration ground in Thailand prospective for gold, copper and iron ore. MAT also recently purchased 18.3% of Bulletin Resources (ASX:BNR).

Key StrengthS

• Interest in undeveloped Mt Henry OP project in WA • Ground position in the exciting Fraser Range • Exploration opportunities in prospective area of Thailand • Well funded and seeking M&A opportunities

Key riSKS

• Grade at Mt Henry fairly modest (1.7gpt) • Nearology no guarantee of success in the Fraser Range • Exploration risk across the portfolio • Thai projects moving slowly due to bureaucracy

HeaD oFFIce Suite 11, 139 Newcastle Street Perth WA 6000 Australia Web: www.matsa.com.au

Key investments

Com

Location

Status

% Own

Description

Mt Henry Killaloe

Au Au, Ni

WA WA

Exploration Exploration

30% 80%

Dunnsville Symons Hill

Au Ni, Cu

WA WA

Exploration Exploration

100% 100%

Fraser Range North Dundas

Ni, Cu Fe

WA WA

Exploration Exploration

90% 100%

WA Exploration

Au, Ni

WA

Exploration

100%

Paisali Siam KT

Fe Cu Au

Thailand Thailand Thailand

Exploration Exploration Exploration

100% 100% 100%

Bulletin Resources

Au

WA

Investment

18%

1.47Moz @ 1.7gpt. JV with PAN. JV with Cullen Resources. Potential satellite to Mt Henry. Early-stage Au prospect 50km NW of Coolgardie. Fraser Range Ni-Cu prospect 6km from SIR's Nova project. Early-stage Ni-Cu prospect 20km NW of Nova. 250-700Mt magnetite exploration target. Seeking JV partner. 4450sq.km of tenements under evaluation for new projects. 789sq.km project with 14 magnetite skarn targets. 732sq.km project with four major Cu soil anomalies. Early-stage Au prospect 20km from Kingsgate Consolidated's Chatree mine. ASX:BNR is developing the Lamboo project in the Kimberley.

104

DIrectors Paul Poli (exec. chair), Frank Sibbel (ED), Andrew Chapman, Ratha Kheowkhamsaeng (Thailand) Share price ($A)

$0.32

12-month high

$0.55

12-month low

$0.26

Market capitalisation

$43.1m

Key Countries

Australia, Thailand

Commodities

Au, Ni, Cu, Fe

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


DIVERSIFIED

meTAlS x

ASX: mlX

Share PriCe triggerS: imPrOvementS at reniSOn & Stream OF DeveLOPment PrOjeCtS

Australia’s only significant tin producer, operating the Renison underground mine in Tasmania.

Key StrengthS

• Australia’s only significant Sn miner • Cash flow from Renison to help fund development • Further tin development upside with Rentails project • Two gold and one nickel laterite development project

Key riSKS

• Continuous battle with operating costs at Renison • Technical processing challenges still facing Rentails project • Funding required for CMGP development and further economic studies at Rover • Nickel project in remote part of Australia and currently on hold

Key investments

Com

Location

Status

% Own

Description

Renison

Sn, Cu

TAS

Operating

50%

Rentails

Sn, Cu

TAS

Development

50%

JV with Yunnan Tin. Target capacity of 7000-8000tpa Sn. JV with Yunnan Tin. 86.6Kt Sn & 40.4Kt Cu in tailings. JV with Yunnan Tin. Old open pit mine near Renison, closed in 2011. Old tin mine closed in 2008 due to technical problems. 100Kozpa open pit and underground project with 4.95Moz Au resource. Wingellina, Claude Hills & Mt Davies deposits containing 214Kt Ni & 17Kt Co. 1.22Moz Au eq resource in Tennant Creek goldfields. MMG earning upto 80% in stages through exploration. Earning up to 80% from a third party. Lake Lefroy Ni & Maitland Au. Exploration on hold. Private Australian company exploring for Au & bauxite. ASX:MUB has Au exploration & development projects. ASX:RDR is operating the Meekatharra Au mine & exploring for strategic metals.

Mt Bischoff

Sn

TAS

Closed

50%

Collingwood

Sn

QLD

Closed

100%

Central Murchison (CMGP) Central Musgrave (CMP) Rover

Au

WA

Development

100%

Ni

WA/NT/SA

Feasibility

100%

Au, Ag, Cu, Bi, Co Pb, Zn, Cu

NT

Exploration

100%

McArthur JV

NT

Exploration

100%

Warumpi JV WA Exploration

Au Ni, Au

NT WA

Exploration Exploration

0% 100%

Aziana Limited

Au, Al

Madagascar

Interest

25%

Au

Mongolia, WA WA

Interest

15%

Interest

5%

Mongolian Resource Corp. Reed Resources

Au, Li, Ta, V

HeAD OFFiCe Level 3, 123 Adelaide Tce East Perth WA 6004 Australia Web: www.metalsx.com.au DiReCTORS Peter Cook (CEO), Warren Hallam (ED), Peter Newton (chair), Andrew Ferguson, Simon Heggen, Xie Penggen, Yimin Zhang (alternate) Share price ($A) 12-month high 12-month low Market capitalisation Key Countries Commodities

$0.12 $0.18 $0.08 $202.4m Australia, Madagascar, Mongolia Sn, Au, Ag, Cu, Ni, Pb, Zn, Co, Bi, Li, Ta, V, Al

DIVERSIFIED

peel mining

ASX: pEX

Share PriCe triggerS: Further CObar-StyLe DiSCOverieS in nSW

One of the best ASX minerals performers over the past year, based on its high-grade Cobarstyle Mallee Bull discovery in NSW. Taking a new approach to the mature Cobar region, PEX targeted deep polymetallic base metal deposits below a historic gold field and discovered Mallee Bull in 2011. The discovery hole confirms 55m of mineralisation grading 0.74% copper, 24gpt silver, 0.21gpt gold, 0.48% lead & 0.49% zinc. PEX then secured an $A8.33m earn-in deal with CBH Resources, which will earn 50% of the project funding three drill programs. PEX has also secured a wider land package around Mallee Bull, which it 100% owns and has dubbed the “Cobar Superbasin project”. The most exciting prospect so far is the Mundoe target. PEX also owns a wide portfolio of polymetallic opportunities across NSW and a gold project in NZ.

Key StrengthS

• High-grade discovery at Mallee Bull • Further potential at the Cobar Superbasin project • Wide range of commodity exposure • Low running costs, efficient exploration

Key riSKS

• Ownership of Mallee Bull reducing • Mallee Bull too small to be economic • Polymetallic projects can have complex metallurgy and economics • Small-scale undergound mining can be expensive

Key investments

Com

Location

Status

% Own

Description

Gilgunnia (May Day & Mallee Bull) Cobar Superbasin Project (CSP) Ruby

NSW

Exploration

70%

Yerranderie

Cu, Ag, Au, Pb, Zn, Co Zn, Pb, Cu, Ag, Au Ag, Au, Sb, As W, Mo, Cu, Au Ag, Pb, Au

Apollo Hill Rise & Shine

Hosts high-grade Mallee Bull Cobar-style prospect. CBH Resources earning upto 50%. Surrounding the Mallee Bull project. Hosts the Mundoe Cobar-style discovery. Historic production of 400,000oz Ag. Also former arsenic mine. 1.29Mt @ 0.63% WO3 & 0.05% Mo. Also Cu prospect & Kensington Au prospect. Old tailings dumps contains high-grade Ag, Pb & Zn. Appolo Hill & Black Zone, 50km SE Leonora. 505Koz Au grading 0.9g/t. Multiple historic workings that have produced 180,000oz Au. Central Otago.

Attunga

NSW

Exploration

100%

NSW

Exploration

100%

NSW

Exploration

100%

NSW

Exploration

100%

Au

WA

Exploration

100%

Au

New Zealand

Exploration

100%

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

HeAD OFFiCe Unit 1, 34 Kings Park Road West Perth WA 6005 Australia Web: www.peelmining.com.au DiReCTORS Rob Tyson (MD), Simon Hadfield (chair), Graham Hardie Share price ($A)

$0.35

12-month high

$0.74

12-month low

$0.22

Market capitalisation

$45.6m

Key Countries

Aus, NZ

Commodities

Cu, Au, Ag, Pb, Zn, Co, Sb, As, Mo, Tungsten 105


DIVERSIFIED

pIOneer resOurces

ASX: piO

Share PriCe triggerS: Wa gOLD & niCKeL DriLLing in 2013

Owner of gold and nickel assets around Kalgoorlie, in Western Australia. Its 2013 exploration focus is on the Acra gold project and the Blair nickel mine, both near Kalgoorlie, and on the Fairwater nickel-gold project in the Fraser Range region. PIO is well-funded from the proceeds of the 2012 sale of its Mt Jewell gold assets to advance – and has attracted support from the state exploration incentive scheme to target electromagnetic anomalies near Blair and at Fairwater for nickel sulphides. PIO now owns 100% of the Blair nickel mine, and of the gold rights to the Acra project – and 75% of Fairwater. The Blair mine contains high-tenor nickel sulphides and is open down plunge to historical mining activity originally conducted by WMC. At Acra, high-grade gold has been intersected in drilling – with follow-up planned. PIO also holds a number of JV properties, where other companies are earning interests by managing and funding exploration activities.

Key StrengthS

• Advanced Au & Ni properties • Exposure to the exciting Fraser Range Ni province • 100% of the Blair Ni mine • Free-carried interests in JV portfolio

Key riSKS

• Resources yet to be defined at Au properties • Ni exploration at Blair requires significant spend • Joint venture properties are early stage • Cash includes asset sale receivables

heaD OFFIce 21 Ord Street West Perth WA 6005 Australia Web: www.pioresources.com.au DIrectOrs Craig McGown (chair), David Crook (MD), Wayne Spilsbury, Allan Trench Share price ($A)

$0.01

12-month high

$0.05

12-month low

$0.01

Market capitalisation

$7.3m

Key investments

Com

Location

Status

% Own

Description

Juglah Dome

Au

WA

Exploration

100%

Shalllow Au hits in drilling.

Golden Ridge (Blair)

Ni, Au

WA

Exploration

100%

EM targets to be drilled; resource estimation @ Blair Ni mine.

Acra

Au

WA

Exploration

100%

High-grade Au @ several locations.

Fairwater

Ni, Au

WA

Exploration

75%

EM & geochemistry targets require follow-up.

Key Countries

Australia

Joint Venture Portfolio

Various

WA, Tas

Exploration

20%

Free-carried & royalty interests including Pioneer Dome (JV with PAN).

Commodities

Au, Ni

DIVERSIFIED

platsearch

ASX: pTS

Share PriCe triggerS: exPLOratiOn SuCCeSS baSeD On brOaD POrtfOLiO

Listed in 1987, has a strong track record of discovering then vending out minerals projects. In line with this record, PTS maintains five JVs in the Curnamona Craton (NSW & SA) targeting Broken Hill-style lead-zinc-silver mineralisation, with a further two JVs in the Lachlan Orogen (NSW) targeting Cobar style lead-zinc-silver-copper-gold deposits. PTS further leverages its exploration exposure by maintaining an investment portfolio of ASX junior explorers. These include Eastern Iron (iron ore and vanadium projects in NSW and Qld), Thomson Resources (Cobar-style deposits in NSW), Silver City Minerals (Broken Hill-style targets in NSW), WPG Resources (iron ore, coal and port assets in SA) and Aguia Resources (potash and phosphate projects in Brazil).

Key StrengthS

• Track record of exploration success • New focus on becoming a developer & producer • Diverse commodity exposure • Broad range of exploration equity investments

Key riSKS

• Considerable exploration risk • Portfolio and investment expensive to maintain • Further funds required to significantly advance any projects • Minority or indirect holder of most projects

Key investments

Com

Location

Status

% Own

Description

Tennie PER

Cu, Au, Pb, Zn, Ag Pb, Zn, Ag, Cu, Au, U Ag, Pb, Zn

France

Exploration

100%

Early-stage Cu-Au & Pb-Zn-Ag SEDEX targets.

NSW, SA NSW

Exploration

Various

Exploration

100%

Fe, V

VIC, QLD

Investment

49%

Zn, Cu, Au, Sn, W Pb, Zn, Cu

NSW

Investment

26%

NSW

Investment

15%

Fe, Coal Phosphate, Potash

SA Brazil

Investment Investment

4% 1%

JVs with multiple companies (including Teck) targeting several commodities. Ghost Rider & Achilles JVs with ASX:TMZ, which is earning up to 80%. ASX:EFE has Nowa Nowa iron project at BFS stage in Vic. ASX:TMZ has early mover advantage in the Cobarstyle Thomson Fold Belt, NSW. ASX:SCI has a major ground position in the Broken Hill region. ASX:WPG has coal, iron ore and port assets in SA. ASX:AGR has the Três Estradas phosphate project at scoping stage.

Curnamona Craton Projects Lachlan Orogen Projects Eastern Iron Thomson Resources Silver City Minerals WPG Resources Aguia Resources

106

heaD OFFIce Suite 3, Level 1, 80 Chandos Street, St Leonards NSW 2065 Australia Web: www.platsearch.com.au DIrectOrs Patrick Elliott (chair), Greg Jones (MD), Kwan Chee Seng, Dr Foo Fatt Kah, Alan Breen Share price ($A) 12-month high 12-month low Market capitalisation Key Countries

Commodities

$0.06 $0.10 $0.04 $9.6m Australia, France, Brazil Pb, Zn, Ag, Cu, Au, U, Fe V, Sn, tungsten, coal, potash, phosphate

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


DIVERSIFIED

royAlco resources

ASX: RCO

Share PriCe triggerS: rOyaLtieS, DiviDenDS & StrOng CaSh BaCKing

Continues to advance its royalty business model, remaining unique as a royalties-focused resources sector company on the ASX. RCO moved this year to acquire a 1% share in a 2.5% production royalty over oil/gas assets operated by Exxon Mobil and BHP Billiton in the Bass Strait (the Weeks royalty). This adds energy commodity diversity to other RCO royalties. These include precious metals royalties over projects owned by Oceanagold (OGC), Kingsgate Consolidated (KCN) and MOD Resources (MOD). Reefton gold (Oceanagold) is the principal driver of royalty receipts – with RCO exposed to the ups and downs of the gold price. Kingsgate’s Bowden silver project is progressing through feasibility and may become a production royalty from 2015 onwards. Early-stage properties in the Philippines (copper-gold) and Uganda (gold) are among assets being advanced as exploration plays with a view to being on-sold to other explorers in order to generate potential future royalties for RCO.

Key StrengthS

• • • •

Key riSKS

Low-cost business model Energy and metals royalty revenues Energing exploration portfolio Strong cash backing

• Au price (eg Reefton royalty) • Future revenue streams subject to delay (if projects are delayed) • Gas price risk (Weeks royalty) • Exploration risk eg Uganda, Philippines

heAd office Level 1, 394-396 Little Bourke Street Melbourne VIC 3000 Australia Web: www.royalco.com.au direcTors Peter Topham (chair, MD), David Ogg, Bruce Pertzel, Piers Reynolds

Key investments

Com

Location

Status

% Own

Description

Share price ($A)

$0.34

Reefton

Au

NZ

Operating

Royalty

Oceanagold development of the Reefton area, South Island.

12-month high

$0.57

Weeks (Bass Starit)

Oil

Vic

Operating

Royalty

Interest in a Bass Strait royalty over Exxon/ Mobil & BHP Billiton-operated gas production.

12-month low

$0.30

Bowdens

Au, Ag

NSW

Feasibility

Royalty

Kingsgate-owned 182Moz Ag project undergoing feasibility studies.

Market capitalisation

$17.9m

Sams Creek

Au

NZ

Exploration

Royalty

MOD Resources gold project; Resource of 1Moz.

Key Countries

Australia, NZ, Uganda, Philippines

Commodities

Au

Mount Garnet

Cu, Zn

QLD

Exploration

Royalty

Pao

Cu, Au

Philippines

Exploration

100%

3% royalty interest; no current production. Diamond drilling planned in 2013.

Nyanzian

Au

Uganda

Exploration

100%

Geochemistry underway.

DIVERSIFIED

sheffield resources

ASX: SfX

Share PriCe triggerS: PrOgreSS tOwarDS mineraL SanDS PrODuCtiOn

SFX was voted this year’s best emerging company at Diggers & Dealers, on the back of exploration success in mineral sands in WA. Has three centres for mineral sands in WA. Dampier project contains the Thunderbird deposit, discovered in September, which is probably the most significant global mineral sands discovery since Iluka’s Jacinth-Ambrosia discovery in 2004. The resource contains 1.37Bt grading 6.1% heavy mineral sands (HMS) totalling 5.7Mt of zircon, 1.3Mt of rutile, 3.6Mt of leucoxene & 24Mt of ilmenite. A scoping study is underway and SFX hopes to have the mine in production by 2016. Elsewhere, SFX has another mineral sands project in the Mid West at Eneabba, and near Perth at McCalls. Eneabba consists of six deposits with a total resource of 250.2Mt at 2.2% HMS, which could be mined sequentially using a mobile plant. McCalls is a large chloride ilmenite project hosting 4.4Mt at 1.2% HMS. SFX has a broad portfolio of exploration projects across WA, supporting its mineral sands assets.

Key StrengthS

• World-class Thunderbird mineral sands deposit • Further substantial mineral sands interests in WA • Exciting Fraser Range Ni-Cu propect at Red Bull • Broad range of other opportunities across WA

Key riSKS

• Lack of investor knowledge of mineral sands, potash and talc • Some mineral sands projects appear low grade • Long time until mine operations could start up • Large exploration position expensive to maintain

heAd office 14 Prowse Street West Perth WA 6005 Australia Web: www.sheffieldresources.com.au direcTors Will Burbury (chair), Bruce McQuitty (MD), David Archer (TD) Share price ($A)

$0.52

Key investments

Com

Location

Status

% Own

Description

12-month high

$0.78

Dampier (Thunderbird) Eneabba

Min. Sands

WA

Exploration

100%

1.374Bt @ 6.1% HMS in Canning Basin.

12-month low

$0.25

Min. Sands

WA

Exploration

100%

Market capitalisation

$61.5m

McCalls Red Bull

Min. Sands Ni, Cu

WA WA

Exploration Exploration

100% 100%

Key Countries

Australia

Oxley

Potash

WA

Exploration

100%

Moora (Fowlers)

Talc

WA

Exploration

100%

Commodities

Pilbara

Iron Ore

WA

Exploration

100%

250.2Mt @ 2.2% HMS across six projects in the Mid West. 4.4Bt @ 1.2% HMS 110km N of Perth. Early-stage prospect 20km from SIR's Nova project in the Fraser Range. Unconventional, hard-rock potash project in the Mid West region. Over 20 potential high-grade direct-ship talk prospects, including Fowlers. 7 prospects in North Pilbara & Hamersley areas.

Mineral sands, Ni, Cu, Potash, Talc, Fe

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

107


DIVERSIFIED

talIsman mInIng

ASX: Tlm

SPt: exPLOratiOn SuCCeSS in Bryah BaSin Or MurChiSOn

One of the few well-funded explorers with a wide-ranging, early-stage portfolio. TLM has a number of assets in the Bryah Basin targetting copper-gold VMS mineralisation. The region has hosted a number of Australia’s recent exciting mineral discoveries, including SFR’s DeGrussa mine and VRX’s Thaduna-Green Dragon project. TLM is focusing on the Springfield project, where this year it has undertaken a number of geophysical surveys and drilling programs. A recent technical review also suggested the area might be prospective for other types of mineralisation, including structurally controlled and replacement-style mineralisation. In the same area, TLM is targetting VMS-type mineralisation at Halloween and Halloween West. Elsewhere, TLM is targetting magmatic nickel-copper-PGM mineralisation at the Kerba and Homestead prospects, gold mineralisation at Muddawerrie, and iron-oxide copper gold or ultramafic nickel-copper-PGM mineralisation at Milgun and Shelby, all in the Murchison region.

Key StrengthS

• New potential for multiple types of Cu mineralisation at Springfield • Wide range of exploration projects across WA • Seeking Cu-Au M&A opportunities • Cash balance of $A19.5m to fund exploration

Key riSKS

• Substantial exploration risk across portfolio • Proximity to Sandfire’s DeGrussa project no guarantee of success • No outstanding successes in exploration portfolio yet • No projects near production

Key investments

Com

Location

Status

% Own

Description

Springfield

Cu, Au

WA

Exploration

100%

Halloween Halloween West

Au, Ag, Cu Cu, Au

WA WA

Exploration Exploration

100% 60%

Shelby

Cu, Au, Ni, PGM Cu, Au

WA

Exploration

100%

WA

Exploration

100%

Au, Ni, Cu, PGM Au

WA

Exploration

80%

WA

Exploration

80%

VMS, structural & replacement-type targets E of SFR's Degrussa Cu-Au project. Au & VMS target 11.5km from Degrussa. JV with Chrysalis Resources (ASX:CYS) along strike from Halloween. IOCG & Ni-Cu-PGM targets in the northern Bryah Basin. IOCG & Ni-Cu-PGM targets in the northern Bryah Basin. JV with Murchison Resources. Exploration for standalone Au deposits. JV with Murchison Resources. Archean greenstone Au targets.

Milgun Livingstone Muddawerrie

Head offIce 6 Centro Avenue Subiaco WA 6008 Australia Web: www.talismanmining.com.au dIrectors Alan Senior (chair), Gary Lethridge (MD), Graeme Cameron (TD), Brian Dawes, Karen Gadsby Share price ($A)

$0.14

12-month high

$0.31

12-month low

$0.08

Market capitalisation

$17.8m

Key Countries

Australia

Commodities

Cu, Au, Ag, Ni, PGMs

DIVERSIFIED

trafford resources

ASX: TRf

Share PriCe triggerS: DriLL-hit Driven Share PriCe

Holds equity in E&D projects for iron, copper, gold and tin. Additionally, TRF holds significant equity in Brazil-focused gold-silver explorer Orinoco Gold (OGX). Flagship investment is a JV and equity interest in South Australian iron ore company Ironclad Mining (IFE). Ironclad’s Wilcherry Hill iron project, in which TRF holds a 20% JV interest, is reaching financing stage for direct shipping operations of magnetite ore. TRF also holds a strong ground position in the Gawler Craton region of SA, including the area surronding the Challenger gold mine held by Kingsate Consolidated. Recent drill hits in the Gawler include silver, tin, gold and copper. High-grade tin at the Zealous prospect is the subject of high-priority follow-up. In WA, TRF is targeting hematite iron ore in JV with established miner Independence Group (IGO). In Brazil, TRF has supported the development of Orinoco Gold (OGX) and is OGX’s largest shareholder.

Key StrengthS • • • •

Diversified investment/exploration assets Gawler Craton polymetallic drill hits Investment in Ironclad (IFE) Investment in Orinoco Gold (OGX)

Key riSKS

• • • •

No operating cash flows Wilcherry Hill development risk Many exploration projects early-stage Ability to source exploration funding

Head offIce Level 2, 679 Murray Street, West Perth, WA 6005 Australia Web: www.traffordresources.com dIrectors Ian Finch (chair), Neil McKay, Mark Le Grange, Allan Trench Share price ($A)

$0.14

12-month high

$0.22

Key investments

Com

Location

Status

% Own

Description

12-month low

$0.09

Wilcherry Hill (Iron)

Fe

SA

Feasibility

20%

JV interest with IFE; Direct-shipping iron ore.

Market capitalisation

$15.3m

Wilcherry Hill (Manganese)

Mn

SA

Exploration

100%

Manganese discovered over several kilometres.

Zealous

Sn

SA

Exploration

100%

High-grade tin in drilling to over 3%.

Key Countries

Australia, Brazil

Black Hill

Ag, Au

SA

Exploration

100%

Drill hits near to Investigator Resources Paris silver discovery.

Twin Peaks

Fe

WA

Exploration

Earning 80%

Hematite drill hits over 60% Fe in Mid-West region.

Commodities

Fe, Cu, Au, Mn, Sn, Zn, Pb, Ag

108

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


DIVERSIFIED

venture minerals

ASX: vmS

Share PriCe triggerS: riLey DSO irOn Ore Due tO Start-uP

Is about to move from developer to producer by taking the Riley and Livingstone direct-ship haematite iron ore projects on stream. Confirmed a reserve of 4Mt of ore in July 2012, received Mining Rights for Riley deposit in December, appointed mining contractor, Shaw, in March 2013, secured a $15m debt facility in April and gained environmental approval in May. VMS is awaiting approvals from the Commonwealth & West Coast Council, finalising details of contracts, ordering long lead-time items and negotiating with off-take partners. VMS will also need to construct a rail siding as part of the project. Will use the cash flow from the DSO projects to develop its flagship Mt Lindsay tin-tungsten-magnetite deposit. Following successful metallurgical testwork results in August 2012, a DFS was published in November, which considered average tin production of 3335t of tin and 1775t of tungsten oxide, along with potential magnetite and copper by-products. The capital cost was estimated at $198m. A high-grade tin discovery at Big Wilson, 6km from Mt Lindsay in August 2012 suggest further exploration upside could exist.

Key StrengthS

• Direct ship iron ore projects due to start-up • Major advanced tin and tungsten project at Mt Lindsay • Historic tin district in Tasmania • Excellent infrastructure in Tasmania

Key riSKS

• Corporate risk increased as debt required to fund Riley project • Iron ore market less buoyant • Mt Lindsay will require substantial financing package • Co-product mines have technical & economic complexity

Key investments

Com

Location

Status

% Own

Description

Riley & Livingstone Mt Lindsay

Fe

TAS

Development

100%

Sn, W, Fe

TAS

Financing

100%

Big Wilson

Sn

TAS

Exploration

100%

Maitland Channel Paulsens South

U, Ni, PGM

WA

Exploration

100%

Au, Ag, Cu, Mn, Ni, Co, Zn

WA

Exploration

100%

4Mt of direct ship haematite iron ore grading 57%. 30,000t of Sn at 0.2%, 16,000t of WO3 at 0.1% reserve, plus magnetite iron ore & Cu. High-grade Sn discovery 6km from Mt Lindsay, inc. 17.4m at 2% Sn. Calcrete hosted U & Ni-PGM sulphide targets in the greenstone belt. Rumble Resources earning 51% of the project, 4km from the Paulsens mine in the Ashburton field.

HeaD OFFiCe Freemasons Hall, 181 Roberts Road, Subiaco WA 6008 Australia Web: www.ventureminerals.com.au DireCtOrs Mel Ashton (chair), Hamish Halliday (MD), Andrew Radonjic, Bruce McFadzean, John Jetter Share price ($A)

$0.22

12-month high

$0.35

12-month low

$0.09

Market capitalisation

$63.2m

Key Countries

Australia

Commodities

Sn, Tungsten, Fe, U, Au

DIVERSIFIED

western Desert resOurCes

ASX: wdR

Share PriCe triggerS: Bringing rOPer Bar irOn Ore intO PrODuCtiOn

After a failed takeover by Meijin Energy in Sept-Oct 2012, which valued WDR at $A435m, WDR is focusing on developing its NT Roper Bar iron ore project itself. Under construction, the project will initially aim to produce 1.5Mtpa of DSO iron ore held within 47.4Mt of resources. Beyond this, Roper Bar hosts 600Mt of BSO with an exploration target of 2-2.5Bt of iron ore. WDR has farmed out most of its other NT projects and is beginning to see the benefits. JV partner Thor Mining is aiming to take Spring Hill gold project into production within the next year.

Key StrengthS

• Roper DSO iron ore project under construction • Substantial BFO resource at Roper Bar • NT one of Australia’s best states for mine development • Broad range of commodity exposure

Key riSKS

• Debt finance still not in place and will increase corporate risk • Exposed to weakening iron ore market • Some projects very remote • Substantial exploration risk across portfolio

Key investments

Com

Location

Status

% Own

Description

Roper Bar

Fe

NT

Construction

100%

Mountain Creek

NT

Exploration

100%

Larrimah East

Fe, Pb, Zn, Cu Fe, Pb, Zn

NT

Exploration

100%

Chambers Bay

Fe

NT

Exploration

100%

Roper Bar Geothermal Tennant Creek Prospects Spring Hill

Geothermal

NT

Exploration

100%

Au

NT

Exploration

100%

Au

NT

Development

49%

Musgraves

Cu, Au, Ni, PGM, REE Cu, Au, U

NT

Exploration

Earning

NT

Exploration

Earning

Rover

Cu, Au, P, Fe

NT

Exploration

Earning

1.5Mtpa DSO project hosting 47.4Mt of DSO resources. More Sherwin Ironstone adjacent to Roper Bar. Also base metals potential. Unexplored prospect targeting iron ore palaeochannels and base metal sulphides. 1408sq.km of exploration licences prospective for iron ore. Early-stage geothermal project based on high heatflow from basement rosks. Hopeful Star, Golden Mile, Mystery and M29 prospects near Tennant Creek mine. Thor Mining earning up to 80%. Historic Au mine containing 274Koz Au @ 2.34gpt. Earning up to 80% from TNG Ltd. Prospective for Au, base metals, Ni & rare earths. Earning upto 80% from TNG Ltd. Targetting IOCG-U type mineralisation. Earning up to 80% from TNG Ltd. Cu-Au project with 1.2Moz eq.

Cloughs Dam

REE, U

NT

Exploration

100%

Tanami East

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

JV with Crossland Uranium (ASX:CUX) who are earning up to 60%. Early-stage U-REE target.

HeaD OFFiCe 26 Greenhill Road Wayville SA 5034 Australia www.westerndesertresources.com.au DireCtOrs Rick Allert (chair), Norm Gardner (MD), Graham Bubner (ED), Scott Perrin, Michael Ashton, Phil Lockyer Share price ($A) 12-month high 12-month low Market capitalisation Key Countries

Commodities

$0.75 $1.00 $0.58 $292.4m Australia Fe, Au, U, Geothermal, Pb, Zn, Cu, Ni, Platinum, Rare Earths, Phosphate 109


DIVERSIFIED

Zeta resOurCes

ASX: zER

Share PriCe triggerS: BrOaD exPLOratiOn, DeveLOPment POrtfOLiO DeLiverS returnS

For readers unsure of whether the petroleum or minerals sector offers the best opportunities, ZER may provide the perfect solution. ZER is a newly listed global minerals and petroleum investment holding company, with wholly owned exploration assets in WA. ZER joined the ASX by taking over Kumarina Resources, which owns the Murrin Murrin copper-gold project and Ilgarari copper project, both in WA. Drilling was recently completed at Murrin Murrin, with results now under review, while drilling is planned for Ilgarari in 2014. ZER also has an investment portfolio of minority interests in listed and private companies, including Centamin, which operates the Sukari gold mine in Egypt, and Resolute Mining, which has a gold mine in Mali, Qld and Tasmania. ZER has exposure to petroleum through New Zealand Oil & Gas and Pan Pacific Petroleum, both with interests in the producing Tui field in NZ. NGO also has an interest in the Kupe field in NZ, and growth opportunities in Tunisia and Indonesia.

Key StrengthS

• Wholly owned Kumarina exploration projects • Broad geographic and commodity portfolio • Investments in several producing companies • Combination of petroleum, minerals assets

Key riSKS

• Minority interest = little operational control • Limited income stream from minority interests suggests more cash may be required • Exploration risk at Kumarina and portfolio growth projects • Exposure to weakening Au price

Key investments

Com

Location

Status

% Own

Description

Kumarina

Cu, Au

WA

Exploration

100%

Centamin PLC New Zealand Oil & Gas

Au Gas/Oil

Investment Investment

1% 7%

Recent takeover. Exploring the Ilgarari & Murrin Murrin projects. LSE:CEY is operating the Sukari Au mine. ASX:NGO producing from Tui & Kupe fields in NZ. Pursuing growth in Tunisia and Indonesia.

Pan Pacific Petroleum Seacrest LP

Gas/Oil

Egypt NZ, Indonesia, Tunisia NZ, Vietnam, Timor-Leste Norway

Investment

1%

Investment

n/a

Resolute Mining

Au

Mali, Qld, Tas

Investment

1%

Gas/Oil

ASX:PPP has 10% interest in the Tui field. Growth opportunities in Vietnam, Timor-Leste. Private partnership developing opportunities from Petroleum Geo-Services database. ASX:RSG operating Syama in Mali, Ravenswood in Qld and Golden Pride in TAS.

HeaD OFFiCe Suite 8, 7 The Esplanade Mt Pleasant WA 6153 Australia Web: www.zetaresources.co DireCtOrs Peter Sullivan (chair), Marthinus Botha, Xi Xi Share price ($A) 12-month high 12-month low Market capitalisation

Key Countries

Commodities

$0.52 $1.00 $0.38 $26.3m Aus, NZ, Egypt, Mali, Tunisia, Indonesia, Vietnam, Timor-Leste, Norway Cu, Au, Gas, Oil

OTHER METALS / MINERALS

australian bauxite

ASX: Abz

Share PriCe triggerS: Pathway tO Bauxite exPOrtS

Moving from bauxite explorer to developer. Has built a resource base that now exceeds 100Mt of bauxite and is firmly on the path to project development, initially from Tasmania. China still heads the list of targeted export destinations – with Australia’s largest competitor for the Chinese bauxite import market, Indonesia, looking to curtail exports in favour of refining and smelting in-country from 2014. The Indonesian move helps the ABZ business model to directly export bauxite from Australia. China continues to require upwards of 4Mt of bauxite imports per month. ABZ holds ground prospective for bauxite deposits across NSW, Queensland and Tasmania. Exploration targets total 200Mt in resource. Tasmania looks like the first development for modest capital cost of about $10m (production targeted in 2014) followed by Goulburn South in NSW at a capital cost of $20m.

Key StrengthS

• 115.6Mt bauxite resource base • Export-grade bauxite • Capacity availability at custom alumina refineries • Favourable bauxite chemistry (low silica)

Key riSKS

• Infrastructure development required (Qld, NSW) • Mining will be environmentally sensitive • Potential delays from permitting • Funding risk

Key investments

Com

Location

Status

% Own

Description

Binjour

Bauxite

Qld

Exploration

100%

High-grade bauxite; 24.5Mt resource.

Inverell

Bauxite

Qld

Exploration

100%

38Mt in resources.

Taralga

Bauxite

NSW

Exploration

100%

37.9Mt in resources.

Tasmania

Bauxite

Tas

Exploration

100%

5.7Mt resource.

110

HeaD OFFiCe Level 2, 131 Macquarie Street Sydney NSW 2000 Australia Web: www.australianbauxite.com.au DireCtOrs John Dawkins (chair), Ian Levy (MD), Peter Meers, Rado Rebek, Ken Boundy, Wei Huang Share price ($A)

$0.17

12-month high

$0.36

12-month low

$0.15

Market capitalisation

$19.3m

Key Countries

Australia

Commodities

Al

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


OTHER METALS / MINERALS

base resourCes

ASX: bSE

Share PriCe triggerS: KWaLe PrOjeCt ramP-uP in 2013-14

Advancing the development of its 100%-owned Kwale mineral sands project in Kenya. Project construction and development of Kwale is now 70% complete, with commissioning and first cargo expected during Q3 & Q4 2013. The project construction plan has split the overall development of Kwale into six key modules – with specific contracting companies responsible for delivery of each. Mining-focused investment fund Pacific Road is the largest shareholder in BSE, with specialist resources investor Taurus Fund also on the BSE register. Initial mine life at Kwale is estimated at 13 years, with ilmenite as the predominant mineral sands product. The company advises an NPV at 10% discount approaching $US500m and post-tax IRR of 36%. Expected capital payback is 28 months, with project cash flow generation approaching $1b using price forecasts for mineral sands products from industry specialist consultants TZMI.

Key StrengthS

Key riSKS

• Near-term production start • Strong mid-term outlook for mineral sands products • Singular company focus on Kwale • Project delivery on track

• • • •

Single asset risk Kenya country risk Mineral sands price risk Near-term mineral sands markets flat

Key investments

Com

Location

Status

% Own

Description

Kwale

Min Sand

Kenya

Construction

100%

On-track for 2013 first production.

Head oFFiCe Level 1, 50 Kings Park Road West Perth WA 6005 Australia Web: www.baseresources.com.au direCtors Andrew King (chair), Tim Carstens (MD), Michael Anderson, Trevor Schultz, Colin Bwye, Winton Willesee, Sam Willis Share price ($A)

$0.40

12-month high

$0.54

12-month low

$0.22

Market capitalisation

$224.7m

Key Countries

Kenya

Commodities

Mineral sands

OTHER METALS / MINERALS

Cobar Consolidated resourCes

ASX: ccu

Share PriCe triggerS: FuLL CaPaCity, PrObLem-Free PrODuCtiOn at WOnaWinta SiLver mine

CCU brought Australia’s largest primary silver mine, Wonawinta, onstream in July last year. Since then the going has not being easy. Wonawinta has suffered problems with grade control, processing and metallurgy. CCU has diligently worked through each of the problems, seeking independent consultants to confirm the robustness of the ore reserve and resolving processing bottleneck issues by installing a disintegrator in March 2013 and a ball mill in July. Work is underway to improve metallurgical recoveries including investigations into liberation, reagent, residence time and mineralogy issues. CCU is on track to begin moving towards full capacity production of 2.5Mozpa of silver, based on the 25.9Moz reserve grading 80gpt and a 52.8Moz resource grading 63gpt. Over the past 6 months CCU has produced 60,000-100,000oz per month, about 30-50% of capacity. CCU recently raised a further $A12.2 million, underwritten by cornerstone investor Magna, as well as a restructure of the hedge book to raise $A5.1m & deferred loan payments until the end of the year so it can focus on exploration and development activities. Resource expansion drilling at Wonawinta was completed earlier in the year.

Key StrengthS

• One of few pure silver plays on the ASX • Wonawinta is Australia’s largest primary silver mine • Part of resurgent Cobar mineral district • Support of 19.2% cornerstone investor Magna

Key riSKS

• • • •

Previous grade control problems at the mine Processing problems during commissioning Exposed to failling silver price Limited early stage exploration portfolio

Key investments

Com

Location

Status

% Own

Description

Wonawinta

Ag

NSW

Operating

100%

Mississippi Valley-type Ag deposit. 53Moz Ag resource. Ramping up to 2.5Mozpa. Stratiform deposit. 2.7Moz Ag resource, grading 47.1gpt.

Gundaroo (De Nardi, Ridge and Central) Winduck Super

NSW

Exploration

100%

NSW

Exploration

100%

McKinnons

Ag, Cu, Zn, Pb, As, Sb Ag, Zn, Pb Au

NSW

Closed

100%

Goldwing

Au

NSW

Exploration

100%

OCTOBER/NOVEMBER 2013 RESOuRcESTOcKS

Conceptual project envisiging multiple Ag deposits, combined with Wonawinta and Gundaroo. Old Au mine, with some precious and base metal exploration potential. Small project northeast of Wonawinta. 4300oz resource.

Head oFFiCe Level 10, 420 St Kilda Road Melbourne Vic 3004 Australia Web: www.ccrlimited.com.au direCtors John Dreyer (chair), Richard Mazzucchelli, Gary Armor, George Lefroy Share price ($A)

$0.16

12-month high

$0.67

12-month low

$0.08

Market capitalisation

$52.8m

Key countries

Australia

Commodities

Ag, Cu, Zn, Pb, Au, As, Sb 111


OTHER METALS / MINERALS

consolIDaTeD TIn mInes

ASX: CSd

Share PriCe triggerS: CaSh fLOw anD Pre-feaSibiity StuDy imminent

The past year has been transformational for CSD as the company begins to move from explorer to producer. CSD’s aims are to develop a 1Mtpa plant, producing 5000tpa of tin at Mt Garnet in the historic Herbert tin district of Queensland. CSD took a major step towards this when 19.9% strategic investor Snow Peak Investments (based in Hong Kong) acquired the former Kagara plant at Mt Garnet for $A40m in December 2012. Snow Peak Investments acquired the 1Mtpa plant and mining rights to several polymetallic base metal projects (Baal Gammon, Mt Garnetand Surveyor) off the in-administration Kagara, through its 78% subsidiary Snow Peak Mining. CSD holds a 10% free-carried interest in Snow Peak Mining and manages the company. Snow Peak aims to re-start base metals production at the Mt Garnet plant later this year, sourcing ore from the Baal Gammon project, while slowly adding tin processing facilities. CSD is advancing a PFS on the Mt Garnet tin project, aiming to feed the Snow Peak Mt Garnet mill from 2014. This work included a resource upgrade to 51,160Kt of tin (at 0.39%), which should extend the mine life beyond 10 years. The two allied companies will then combine their assets in a JV.

Key StrengthS

• Near-term cash flow through Snow Peak Mining • Mt Garnet project in a historic tin mining region • JV partner will fund Mt Garnet PFS • Synergies with former Kagara assets in the region

Key riSKS

heaD oFFIce 395 Lake Street Cairns North, Qld 4870 Australia Web: www.consolidatedtinmines.com.au DIrecTors Ralph De Lacey (chair/MD), Andrew Kerr, Darryl Harris, Si He Tong

• Low cash balance • Viability of former Kagara assets remain in question • JV partner to acquire 50% of Mt Garnet tin project • Mt Garnet economics and metallurgy undetermined

Key investments

Com

Location

Status

% Own

Description

Mt Garnet

Sn, Fe, F

QLD

Pre-Feasibility

100%

51,160Kt of open pittable tin across various hard rock and alluvial deposits.

Jeannie River

Sn

QLD

Exploration

100%

13,440t of Sn in a project with exploration upside 250km N of Cairns.

Snow Peak Mining Pty Ltd

Sn

QLD

Investment

10%

Free carried interest and manager of company that owns former Kagara assets in QLD.

Share price ($A)

$0.06

12-month high

$0.12

12-month low

$0.05

Market capitalisation

$12.7m

Key Countries

Australia

Commodities

Sn, Fe, Fluorite

OTHER METALS / MINERALS

kasbah resources

ASX: KAS

Share PriCe triggerS: reSOurCe uPgraDe & feaSibiLity StuDy Due Late 2013

Has made further progress towards production at its Achmmach tin project in Morocco. A PFS was completed in March 2012, with a DFS due late this year. KAS envisages 6000-7000tpa of tin in concentrate production, over 10 years, from 2015. In March 2012, Toyota Tsusho was brought in as a strategic investor, earning 20% of Achmmach in exchange for funding the project through the DFS. More recently, Nittetsu purchased the rights for 5% of the project for $A7.5m. Finally, a drill program over the past year culminated in a resource upgrade to 130.1Kt of tin at 0.85%. A further upgrade is imminent. Beyond Achmmach, KAS has exploration upside, with drill programs completed on the Eastern Shallow Zone, Sidi Addi Trend, and the Bou El Jaj-Ain Karma tin project all near Achmmach. KAS has built a high-quality base of strategic investors at a corporate level. These include two financial institutions: International Finance Corporation of the World Bank (15.8%) and African Lion Group (15.1%), two tin traders: Transamine (3.3%) & Traxys (3.3%), and a tin smelter: Thaisarco (2.0%).

Key StrengthS

• DFS due by end of 2013 • Strategic Japanese investors earning into Achmmach • One of few advanced Sn-only companies on the ASX • Brownfields and greenfields exploration upside near Achmmach

Key riSKS

• Achmmach economics not yet proven • Raising capital for construction still likely to be challenging • Vulnerable to fluctuations in the tin price • Essentially still a single asset company, as all projects in same region

heaD oFFIce Unit 3, 77 Mill Point Road South Perth WA 6151 Australia Web: www.kasbahresources.com DIrecTors Wayne Bramwell (MD), Rodney Marston (chair), Robert Weinberg, Gary Davison, Ian McCubbing Share price ($A)

$0.17

12-month high

$0.23

12-month low

$0.09

Key investments

Com

Location

Status

% Own

Description

Achmmach

Sn

Morocco

Feasibility

100%

Targeting 6000-7000 tpa tin in concentrate. Exploration upside at the ESZ and SAT.

Market capitalisation

$65.3m

Bou El Jaj

Sn

Morocco

Exploration

100%

Early-stage project 8km from Achmaach, including the Ain Karma prospect.

Key Countries

Morocco

Tamlalt

Au

Morocco

Exploration

100%

Grassroots project. Currently not the focus of the company.

Commodities

Sn, Au

112

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


OTHER METALS / MINERALS

lynas cOrpOratiOn

ASX: lyC

Share priCe triggerS: CaSh fLOw frOm Lamp OperatiOn

The start-up of Lynas’s world-class Mt Weld rare earths project was in doubt last year due to a dispute with local communities at its Malaysian downstream facilities (LAMP). The picture has changed the year, with the award of a 2-year temporary operating licence in September 2012. The licence will, however, need upgrading to permanent in two years, subject to various environmental, health and safety standards. Although the legal cases have continued in Malaysia over the past year, Lynas has been successful on all counts so far. Lynas has also dropped its defamation suit against Save Malaysia, Stop Lynas in a sign of improving relations in the country. On the technical front, the LAMP Stage 1 facilities were completed in August 2012, with first feed to the kiln in November 2012 and first products generated for customers in February. The nameplate capacity of 11,000tpa of separated rare earth oxides was subsequently reached in June. The Mt Weld deposit remains a world-class, high-grade RE deposit hosting 1.1Mt of reserves grading 11.7%. Lynas retains further options for development including a Stage 2 at LAMP, which would double capacity and the mining of the Duncan deposit, which contains a high proportion of more valuable heavy RE.

Key StrengthS

• World-class Mt Weld RE in WA • Integrated downstream facilities in Malaysia improve market security • Successful legal cases and improving relations in Malaysia • Development options with LAMP Stage 2 and Duncan deposit

Key riSKS

• Temporary operating licence only applies until September 2014 • Relationship with local communities and pressure groups in Malaysia still delicate • Low rare earths price may put pressure on margins • Future of Chinese-controlled rare earth market still unclear

Key investments

Com

Location

Status

% Own

Description

Mt Weld (CLD)

REE

WA

Operating

100%

Stage 1 production target of 11,000tpa of REO. 1.5Mt of REO resources @ 9.8% grade.

Mt Weld (Duncan)

REE

WA

Scoping

100%

Resource of 9Mt @ 4.8% RE, with ~10% heavy RE.

Kuantan (LAMP)

REE

Malaysia

Operating

100%

Integrated downstream seperation plant for Mt Weld. Stage 1 capacity of 11,000tpa of REO.

Kangankunde

REE

Malawi

Exploration

100%

Resource of 2.53Mt at 4.24% RE.

HeaD OFFice Level 7, 56 Pitt Street Sydney NSW 2000 Australia Web: www.lynascorp.com DirectOrs Nicholas Curtis (chair), William Forde (dep. chair), Eric Noyrez (CEO & MD), David Davidson, Jacob Klein, Ziggy Switkowski, Kathleen Conlon Share price ($A)

$0.42

12-month high

$0.90

12-month low

$0.36

Market capitalisation

$823.5m

Key Countries

Australia, Malaysia, Malawi

Commodities

Rare earths

OTHER METALS / MINERALS

Metallica Minerals

ASX: mlm

Share priCe triggerS: prOgreSS tOwarDS SCanDium prODuCtiOn at SCOni

To a chemist, scandium is a rare earth element (REE), but for a mineral economist it shares neither supply nor demand characteristics. Scandium does not occur with the other REs in “REE” deposits, but in this case with nickel laterites. On the demand side scandium is primarily used as an aluminium alloy, which can improve performance for metals required by the aerospace & automotive industries. Scandium also has demand potential in its use in Solid Oxide Fuel Cells, which could be a future energy solution, providing distributed energy supply. Like most esoteric metals understanding “modifying factors” such as marketing and processing technology is as important as the deposit geology. As such MLM has secured offtake agreements with Affilips Master Alloys & Bloom Energy, both involved in the scandiumaluminium alloy industry. MLM has also developed proprietary technology which can produce marketable 99.9% scandium oxide. This, in a market thought to be just 10tpa.

Key StrengthS

• Exposure to startegic scandium market • Proprietary technology has successfully produced scandium oxide • Off-take agreements in place with major scandium consumers • Support of 19.1% strategic Chinese investor Jilin Nickel

Key riSKS

• Scandium not well understood by investors • Forecast scandium production is larger than current global market • Opaque scandium market will be tricky to understand and enter • High technical risk at SCONI

HeaD OFFice Cnr Lytton Road & Stafford Street East Brisbane Qld 4169 Australia Web: www.metallicaminerals.com.au DirectOrs David Barwick (Chair), Andrew Gillies (MD), John Haley, Barry Casson, Shu Wu, Tao Li (Alternate) Share price ($A)

$0.08

12-month high

$0.28

Key investments

Com

Location

Status

% Own

Description

12-month low

$0.07

SCONI

Sc, Ni, Co

Qld

Feasibility

100%

Market capitalisation

$14m

Weipa

Qld

Permitting

100%

Key Countries

Australia

Phoenix Lime Pty Ltd Lucky Break

Min. Sands Limestone

Qld

Feasibility

100%

Ni

Qld

Exploration

50%

Commodities

MetroCoal Cape Alumina

Coal Al

Qld Qld

Investment Investment

31% 17%

Rare lateritic scandium and Ni-Co deposits, utilising proprietary technology. Fully owned subsidiary, Oresome, developing Cape York mineral sands project. Fully owned subsidiary, with limstone projects to supply SCONI project processing facilities. Metals Finance (ASX:MFC) could earn 100% of proposed 700Ktpa nickel mine. ASX:MTE is developing coal assets in Qld. ASX:CBX is developing bauxite projects in Qld.

Scandium, Ni, Co, Mineral Sands, Coal, Bauxite

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

113


OTHER METALS / MINERALS

MGT reSOurceS

ASX: mgS

Share PriCe triggerS: CaSh fLOw & exPanSiOn OPPOrtunitieS at mt garnet

Since moving from the National Stock Exchange and making an IPO on the ASX in January, MGS has moved rapidly to take its 86.48% owned Mt Garnet project into production. First production was in February, and although small, MGS is aiming to refurbish the 70,000tpa Mount Veteran mill and then expand it to 250,000tpa. Capital costs are likely to be low, as substantial infrastructure is in place. MGS estimates costs are likely to be about $A1.5-2m. MGS secured $6m in convertible notes (at a coupon of 8%) in July to fund this project and in particular, define a JORC resource at the Summer Hills prospect. The project hosts 6190t of tin grading 0.78% tin. MGS is also exploring a number of gold prospects in Queensland, including the Pyramid project, where intersections of 18m at 1.73gpt and 20m at 1.42gpt where made in January. The current JORC resource inventory is in excess of 300Koz of gold.

Key StrengthS

• Cash flow from Mt Garnet Sn project. • Low-cost refurbishment and ramp-up options at Mt Garnet. • Exposure to relatively dynamic tin market. • Further gold exploration targets in Qld.

Key riSKS

• Economics of Mt Garnet not yet proven despite re-start. • Small, weakly capitalised company vulnerable to operational fluctuations. • Single project and single commodity risk. • Substantial exploration risk within the gold portfolio.

HeAD OFFIce 2.05B/68 York Street Sydney NSW 2000 Australia Web: www.mgt.net.au DIrecTOrS Jonathan Back (exec/chair/MD), Gary Kuo (ED), Robert Vagnoni, Li Hai Jun Share price ($A)

$0.07

Mt Veteran mill, Summer Hills & Nymbool projects.

12-month high

$0.15

86%

Contains the epithermal Au, quartz-hosted Gettysberg prospect.

12-month low

$0.06

Exploration

86%

Porphyry-style Au prospect within trucking distance of Mt Steadman.

Market capitalisation

$19.9m

Qld

Exploration

86%

Porphyry style Au & Mo potentially ameanable to heap leaching.

Key Countries

Australia

Qld

Exploration

86%

Porphyry style Au & Mo prospect requiring further drilling.

Commodities

Sn, Au, Mo

Key investments

Com

Location

Status

% Own

Description

Mount Garnet

Sn

Qld

Operating

86%

Pyramid

Au

Qld

Exploration

Yarrol

Au

Qld

Mount Steadman

Au, Mo

Gooroolba

Au, Mo

OTHER METALS / MINERALS

OrecObre

ASX: ORE

Share PriCe triggerS: COmPLetiOn Of COnStruCtiOn at SaLar De OLarOz Lithium

Rapidly becoming a dual operating asset industrial minerals company. Construction began at flagship Salar de Olaroz in November 2012, currently on time and within budget, due to start-up in Q2 2014. The Stage 1 project is due to produce 17,500tpa of battery grade lithium carbonate for 40 years or more. The project has the support of strategic investment partner, Toyota Tsusho, which now owns 25% of the project. Complementing this, the purchase of Borax Argentina off Rio Tinto in August 2012 brought 2 operating borate mines (Tincalayu & Sijes), an unused mine (Porvenir), a refinery (Campo Quijano) and two development projects (Diablillos & Ratones) into ORE’s portfolio. Borax Argentina generated $US23m in revenues from 35,000t of boron-based products in 2011, with a profit after tax of $US800,000.

Key StrengthS

• Salar de Olaroz in construction, production due in 2014 • Cash flow from Borox Argentina operations • Support of Toyato Tsusho as strategic investor • Wide portfolio of assets, inlcuding options held by Borax Argentina

Key riSKS

• High level of corporate risk during construction due to project debt • Borax Argentina operations marginal & require improvement • Sovereign risk high in Argentina, especially repatriation of funds • Future supply-demand balance of lithium industry unclear

Key investments

Com

Location

Status

% Own

Description

Salar de Olaroz

Li, Potash, B B

Argentina

Construction

67%

Argentina

Operation

100%

Li, Potash, B Li, Potash, B Potash, Li

Argentina

Exploration

85%

Argentina

Exploration

85%

Argentina

Exploration

85%

Li, Potash

Argentina

Exploration

100%

Construction underway. 25% owned by Toyota Tsusho & 8.5% owned by state entity. Operating mines & refinery. Produced 35,000t of boron products in 2011. Synergies with Olaroz. 470Kt Li carbonate, 1.6Mt potash & 122Kt boron resource. Synergies with Olaroz. 240Kt Li carbonate, 1Mt potash & 12Kt boron resource. Potash discovery, with some lithium. Awaiting drilling. Rights to 10 other Li projects in Salta, Jujuy & Catamarca provinces

Borox Argentina Cauchari Salinas Grandes/ Cangrejillos Guayatoyoc Future project pipeline

114

HeAD OFFIce Level 1, 349 Coronation Drive Brisbane Qld 4064 Australia Web: www.orocobre.com.au DIrecTOrS James D Calaway (Exec. Chair), Richard P Seville (MD), John W Gibson, Federico Nicholson, Fernando Oris de Roa, Courtney Pratt, Robert Hubbard Share price ($A)

$2.08

12-month high

$2.42

12-month low

$1.00

Market capitalisation

$244.9m

Key Countries

Argentina

Commodities

Li, Potash, Borate

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


OTHER METALS / MINERALS

peak resources

ASX: pEK

Share PriCe triggerS: SeCuring StrategiC inveStOr tO aDvanCe nguaLLa

In an industry where most of the equity raised during the 2010-11 boom went into re-evaluating old mine projects rather than new greenfields exploration, PEK stands out with its rare earths discovery at Ngualla in Tanzania. Unsurprisingly, being the first to enter this new exploration search space means Ngualla is one of the largest and highest-grade undeveloped rare earths projects in the world. A revised resource focused on delivering a higher grade, rather than larger size, stands at 982,000t of rare earth oxides grading 4.24%. The rare earth oxide ratio is predominately less valuable rare earths, but it still contains significant amounts of “critical” neodymium, praseodymium & europium. In a capital-constrained part of a capital-constrained junior mining industry, low costs are key, so a revised scoping study for Ngualla, which forecast slightly lower capital & operating costs and significantly reduced sulphuric acid comsumption, will be welcomed. Ngualla now has the lowest capital costs of the emerging rare earth producers, where estimates are now typically around $US1b. In the rare earths industry, processing technology & product marketability are probably more important than geology. PEK has made progress in both these areas with a substantial metallurgical test work program, producing trial, high-value final REOs in May & July that seem likely to be marketable. Recent negotiations with a potential strategic cornerstone investor broke down, so securing a new strategic investor is a critical next step. Negotiations are ongoing.

Key StrengthS

• Relatively high-grade, large undeveloped RE project • Revised scoping study reduced projected costs • Trial-separated REO products have been produced • Other exploration opportunities in Tanzania

Key riSKS

• Ngualla grades are still well below Lynas and Molycorp RE mines • Resource contains a low ratio of critical and heavy RE elements • High technical risk and costs at RE projects • Lacks a strategic cornerstone investor

Key investments

Com

Location

Status

% Own

Description

Ngualla

REE, Nb, Ta, P

Tanzania

Pre-Feasibility

100%

982Kt REO resource grading 4.54%. Potential 10Ktpa mine.

Lake Victoria Gold Fields

Au

Tanzania

Exploration

Earning

Option to earn 100% of a number of earlystage Au prospects.

HeaD oFFIce Level 2, 46 Ord Street West Perth WA 6005 Australia Web: www.peakresources.com.au DIrectors Alastair Hunter (executive chair), Dave Hammond (TD), Jonathan Murray Share price ($A)

$0.11

12-month high

$0.23

12-month low

$0.11

Market capitalisation

$28.9m

Key Countries

Tanzania

Commodities

Rare earth metals, phosphate, Nb, Ta, Au

OTHER METALS / MINERALS

stellar resources

ASX: SRz

Share PriCe triggerS: BuiLDing On reCent PfS fOr heemSKirK tin

After securing 100% ownership of the Heemskirk tin project in Tasmania last year, SRZ has recently published a PFS on it, which envisages production of 4327tpa of tin over a 7-year mine life. Following a resource upgrade in February, which increased contained tin 49% to 71,500t and further drill programs it may be possible to extend the mine life further. The PFS estimated a capital cost of $US114m and operating cash costs of $US12,286/t. Heemskirk remains one of the highest grade undeveloped tin deposits in the world.

Key StrengthS

• Relatively high grade tin resource when compared globally. • One of few JORC compliant and advanced tin projects on the ASX. • Key cornerstone investors holding 35% of the company. • Wide ranging exploration portfolio.

Key riSKS

• Project economics and metallurgy not yet at feasibility level. • Further financing to advance Heemskirk is required. • Vulnerable to volatility in the tin price. • Exploration portfolio expensive to maintain without further funding.

Key investments

Com

Location

Status

% Own

Description

Heemskirk

Sn

TAS

Feasibility

100%

Heemskirk, Gourlays Creek & Ramsey River Huskisson, Rayne & Heazlewood Hill Whyte River Tarcoola

Sn, Cu, Pb, Zn Ni

TAS

Exploration

100%

TAS

Exploration

100%

Cu, Au Fe, U, Cu, Au U

TAS SA

Exploration Exploration

Earning 100%

SA

Exploration

100%

Coober Pedy

Cu, Au, Coal

SA

Exploration

100%

Panama Hat Goldfinger

Cu, Au Pb, Zn

NSW NSW

Exploration Exploration

100% 80%

71.5Kt of Sn grading 1.14% with potential for a 3,900tpa Sn production. Further base metals prospectivity in western Tasmania. Nickel sulphide targets. MMG farming into 80% of Rayne project over 4 years. Earning 75% from Bass Metals over 3 years. Magnetite mineralisation. UraniumSA earning 70% of any U. UraniumSA earning 29.2% of any U in northern tenements and Renaissance Uranium earning 75% of southern tenements. IOCG potential. AngloGold Ashanti earning 75%. Coal potential. SRZ maintains $0.60/t royalty on any coal or iron ore mined. Au in quartz veining near Broken Hill. JV with CBH Limited & AngloGold Ashanti targeting Broken Hill style mineralisation.

Pirie Basin & Warrior

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

HeaD oFFIce Level 17, 530 Collins Street Melbourne VIC 3000 Australia Web: www.stellarresources.com.au DIrectors Phillip G Harman (Chair), Peter G Blight (CEO), Thomas J Burrowes, David J Isles, Thomas H Whiting, Markus Elsasser Share price ($A)

$0.05

12-month high

$0.11

12-month low

$0.04

Market capitalisation

$11.6m

Key Countries

Australia

Commodities

Sn, Fe, U, Ni, Cu, Au, Pb, Zn, Coal 115


OTHER METALS / MINERALS

syraH resourCes

ASX: SyR

Share Price triggerS: Further deveLoPmentS at baLama

Fast-tracking exploration at its Balama graphite project in Mozambique. Balama is the largest graphite resource in the world, containing 564Mt at 9.8% total graphitic carbon (TGC) in the west of the deposit and 579Mt at 10.6% TGC & 0.26% V2O5 in the east. Test work completed in September 2012 confirmed the graphite could be upgraded to a 97% concentrate, with the potential to produce a 99%+ concentrate. The large flake nature is likely to be more attractive to the market, as this type of graphite is used in rechargeable batteries. The natural graphite market is dominated by China, as such graphite has been compared to other strategic metals such as rare earths and tungsten.

Key StrengthS

• Balama if the largest graphite project in the world, while maintining high grades • Scoping study on Balama due • Exposure to the strategic, noc-Chinese graphite market • Wide portfolio of industrial mineral exploration projects

Key riSKS

• Economic and technical characteristics of Balama still unclear • Substantial funds will be required to advance Balama into production • Future of the graphite market highly uncertain • Most projects still very early stage & retain high exploration uncertainty

Key investments

com

Location

Status

% own

description

Balama

Graphite, V U, Cu, Ni

Mozambique

Exploration

100%

Mozambique

Exploration

100%

Tanzania

Exploration

100%

Tanzania

Exploration

100%

Tanzania

Exploration

100%

Shikula Lunga Sasare North

Graphite, V Min. Sands U, Diamonds Coal, U Cu, U U

Tanzania Zambia Zambia

Exploration Exploration Exploration

100% 100% 100%

Ngamiland

U

Botswana

Exploration

100%

109sq.km licence hosting coarse flake graphite & V deposit. 208sq.km licence – known U mineralisation & base metal, Au & REE targets. 235sq.km licence hosting a flake graphite & V deposit. 8 licences of coastal mineral sands with high zircon content. 459sq.km licence targeting calcrete hosted U & diamonds. 197sq.km licence targeting coal & U. 344sq.km licence prospcetive for IOCG Cu-U. 573sq.km licence targeting U in the Lungwavalley. 2881sq.km licence targeting calcrete style U target in the NW.

Mavuzi Nachingwea Tanzania HMS Wembere

HeaD offiCe Level 9, 356 Collins Street Melbourne VIC 3000 Australia Web: www.syrahresources.com.au DireCTors Tom Eadie (chair), Paul Kehoe (MD), Mike Chester Share price ($A) 12-month high 12-month low Market capitalisation Key Countries

Commodities

$2.40 $3.49 $1.45 $354.9m Botswana, Mozambique, Tanzania, Zambia Graphite, V, mineral sands, coal, U, Cu, Ni, diamonds

OTHER METALS / MINERALS

wolf minerals

ASX: wlf

Share Price triggerS: conStruction beginS at hemerdon tungSten Project

Due to start construction of its Hemerdon tungsten-tin project in the UK, which will produce 3450tpa of tungsten oxide and 460tpa of tin over a nine-year period from 2015. A link road was completed and environmental permits received last year. An EPC contract was awarded in June and a mining service contract in July. Detailed design and procurement is now underway. The project will cost GB£104m to build and WLF has raised $A212m (approx. GB£127.2m) to fund this. This includes $US82m of debt and royalty funding from Resource Capital Funds and £GB75m of project debt from ING, Unicredit and CAT Financial. Off-take agreements are in place with Global Tungsten & Powders and Wolfram Bergbau & Hutten. Hemerdon currently contains 50,370t of tungsten oxide and 8010t of tin in the reserves. WLF will seek to extend the mine life by securing permits for production beyond 2021 and mining some of the 522,200t of tungsten oxide and 80,280t of tin in the resources. WLF has strong cornerstone investors in Resource Capital Funds (36.4%), Todd Corporation (19.9%) and Traxys (9.3%). Tungsten is seen as a strategic metal by the US, EU and Chinese governments, whilst production from the DR Congo is currently restricted due to an embargo on conflict minerals.

Key StrengthS

• Project finance secured • Substantial resources could support longer mine life • UK a stable political and mining jurisdiction • Tungsten fundamentals supported by strategic and conflict status

Key riSKS

• High level of corporate risk due to project debt and no production yet • Single asset risk • Mining permits for beyond 2021 not secured. • Tungsten market volatile and hard to predict

Key investments

com

Location

Status

% own

description

Hemerdon

W, Sn

UK

Construction

100%

Open pit project due to produce 3450tpa of tungsten oxide and 460tpa of Sn.

116

HeaD offiCe Level 3, Suite 25, 22 Railway Road Subiaco WA 6008 Australia Web: www.wolfminerals.com.au DireCTors John Hopkins (chair), Humphrey Hale (MD), Jim Williams, Don Newport, Chris Corbett, Michael Wolley Share price ($A)

$0.34

12-month high

$0.42

12-month low

$0.21

Market capitalisation

$67.3m

Key Countries

UK

Commodities

Tungsten, Sn

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


Coal

atrum coal

ASX: Atu

Share PriCe triggerS: grOunDhOg Day

Targeting high-quality anthracite coal, with a primary focus on open pit development of the Groundhog project in British Columbia, Canada, for export into Asian markets. ATU is unique in that management controls over 50% of its shares, aligning their interests closely with other shareholders. ATU listed on the ASX last year and has been one of the few success stories in what has been a challenging global market for new coal developments. ATU points to the quality of Groundhog coal – but also to the well-developed rail and port infrastructure, access to deepsea ports, competitive shipping distance to Asia and a government that is supportive of mining developments. At the Groundhog project, exploration in 2012-13 has resulted in strong organic resource growth to over 550Mt in the measured and indicated resource status. Ten individual seams are identified with significant coal accumulation at shallow depths, allowing for a low strip ratio upon development. Initial commercial development is anticipated in 2015 with project ramp-up into 2016.

Key StrengthS

• • • •

Key riSKS

Groundhog is a world-scale asset High-quality coal (anthracite) Low strip ratio Infrastructure and port access

• • • •

Met coal price risk Project development permitting Future funding risk Project timeline may slip

HEaD oFFIcE 510 Hay Street Subiaco WA 6008 Australia Web: www.atrumcoal.com DIrEctorS James Chisholm (chair), Gino D’Anna, Russell Moran, Dr Eric Lilford Share price ($A)

$1.93

12-month high

$2.00

12-month low

$0.15

Market capitalisation

$214.9m

Key investments

Com

Location

Status

% Own

Description

Groundhog

Coal

Canada

Exploration

100%

1.5Bt in total resources.

Naskeena

Coal

Canada

Exploration

100%

Potential open cut anthracite potential.

Peace River

Coal

Canada

Exploration

100%

Exploration licence targeting coal-bearing stratigraphy.

Key Countries

Canada

Bowron River

Coal

Canada

Exploration

100%

Targeting Bowron River coal measures beneath cover rocks.

Commodities

Coal

Coal

county coal

ASX: ccj

Share PriCe triggerS: exPOrt LOgiStiCS fOr uS thermaL COaL

Has delineated two thermal coal resources in the Powder River Basin region of the US. The Shell Creek and Miller projects host coal of export quality where CCJ is targeting export trade into Asia. CCJ is targeting development of a low-stripping ratio, open cut operation at Shell Creek (420Mt JORC resources) and a further operation at Miller (310Mt). Miller is amenable to both deep open pit or shallow underground seam development. CCJ notes the capital and operating cost advantages of operating in the US versus Australia. CCJ’s 2013-14 focus has shifted from resource delineation of coal seams towards infrastructure solutions. Deepwater conceptual port developments are being investigated in British Colombia (20Mt annual capacity) and the US (10Mt annual capacity) to host Capesize and Panamax vessels respectively. Preliminary analyses suggest that the proposed port and logistics solutions are technically and commercially feasible.

Key StrengthS

• • • •

High-quality thermal coal projects Critical scale Rail capacity available for coal transport Low-cost production potential

Key riSKS

• • • •

Project development funding Transport solution not yet defined Timeline to first production not yet definitive Thermal coal price risk

Key investments

Com

Location

Status

% Own

Description

Shell Creek

Coal

USA

Exploration

100%

344Mt in measured resources.

Miller

Coal

USA

Exploration

100%

310Mt in measured resources.

OCTOBER/NOVEMBER 2013 RESOuRcEStOcKS

HEaD oFFIcE Level 2, 27 Macquarie Place Sydney NSW 2000 Australia Web: www.countycoal.com DIrEctorS Robert Cameron AO (chair), Rodney John Ruston (MD), Marcus Boland, David Miller Share price ($A)

$0.07

12-month high

$0.20

12-month low

$0.05

Market capitalisation

$6.3m

Key Countries

USA

Commodities

Coal 117


Gold

abm resources

ASX: Abu

Share PriCe triggerS: twin BOnanza mine COmeS OnStream

Has bet heavily on what it describes as the Australian gold industry’s final frontier – the central desert of the NT, where it holds in excess of 15,000sq.km of exploration ground. ABU has had substantial success already, confirming a resource at its Buccaneer deposit (part of the larger Tanami project) in March 2011, which was updated in April 2012 alongside a maiden resource on the nearby Old Pirate deposit. A further resource upgrade came in February this year & trial mining is underway at Old Pirate. The project hosts a very high-grade resource of 723,800oz at 11.96gpt, which is likely to have a high recovery (lab tests indicate 97.3%) using cheap and simple gravity processing. The trial mining will essentially act as a feasibility study, with the aim of better understanding the “nugget” nature of the deposit. Following a successful trial mining program, ABU will aim to ramp up production next year, producing 100,00oz pa from a 10.0gpt head grade. Potential will also exist to integrate the project with the nearby Buccaneer gold porphyry project, which hosts 2.67Moz gold grading 0.65gpt. ABU would also seek to use the cash flow from this mining to fund exploration across another 30 or so prospects in the Tanami project & the large Lake Mackay and North Arunta projects.

Key StrengthS

• Trial mining underway on Twin Bonanza project • High-grade Au at Old Pirate (11.96gpt) • 3.6Moz gold resource across company portfolio • Vast, unexplored exploration ground in NT

Key riSKS

• Capital investment will be required for substantial further development • Buccaneer is very low grade (0.65gpt) • High exploration risk across most of portfolio • Projects in a very remote area

HeaD oFFIce Level 1, 141 Broadway Nedlands WA 6009 Australia Web: www.abmresources.com.au DIrecTors Mike Etheridge (chair), Darren Holden (MD), Imants Kins, Graeme Sloan, Andrew Ferguson Share price ($A)

$0.03

12-month high

$0.07

12-month low

$0.02

Key investments

Com

Location

Status

% Own

Description

Twin Bonanza

Au

NT

Exploration

100%

Buccaneer and Old Pirate deposits. Currently undergoing trial mining.

Tanami

Au

NT

Exploration

100%

Wider exploration area that includes Twin Bonanza deposits.

Market capitalisation

$111.6m

Lake Mackay

Au

NT

Exploration

100%

8000sq.km exploration project 460km NW of Alice Springs.

Key Countries

Australia

North Arunta

Au

NT

Exploration

100%

6000sq.km exploration project covering the Trans-Tanami fault zone.

Commodities

Au

Gold

anova meTals

ASX: Awv

Share PriCe triggerS: Pathway tO US gOLD PrODUCtiOn

Focused on the development of the Big Springs gold project in Nevada, USA. The Big Springs project hosts Carlin-type gold deposits and is in an established gold mining region, 80km north of the mining town of Elko. Big Springs was mined by Freeport McMoRan between 1987 & 1993, producing 386,000oz of gold from several open pits. Mining at the project ceased in 1993 due to low gold prices. AWV has interpreted that gold mineralisation is open along strike & at depth, with a series of high-grade shoots extending well below the base of the previously mined open pits. AWV reports a total resource of 14.8Mt at 2gpt gold at Big Springs for 968,000oz. Increasing the cut-off grade to 2.5gpt gold results in a high-grade core to the deposits of 2.9Mt of 4.2 gpt gold for 388,000oz. Likely development is via the Jerritt Canyon gold processing facility 20km from Big Springs. Mine planning and feasibility studies are advancing this year along with the negotiations for an ore sale & tolling agreement as precursors to a development decision.

Key StrengthS

• High-grade ounces at Big Springs • Open pit and underground Au targets • Mining-friendly jurisdiction, labour availability • Low-cost start-up

Key riSKS • • • •

Roaster offtake terms at Jerritt Canyon mill Au price risk & development funding Principal asset risk Exploration & environmental management risk

HeaD oFFIce Level 1, 8 Colin Street, West Perth WA 6005 Australia Web: www.anovametals.com.au DIrecTors Jon Parker (chair), Bill Fry (ED), Malcolm James, Alasdair Cooke

Share price ($A)

$0.03

12-month high

$0.08

12-month low

$0.02

Market capitalisation

$4.4m

Key investments

Com

Location

Status

% Own

Description

Key Countries

USA

Big Springs

Au

US

Feasibility

100%

Open pit & underground development planned.

Commodities

Au

118

OCTOBER/NOVEMBER 2013 RESOuRCESTOCKS


Gold

breaker resources

ASX: brb

Share PriCe triggerS: FOLLOw uP DriLLing On Dexter, KurrajOng & Mt giLL gOLD PrOSPeCtS

Hoping to exploit what it believes to be a new “exploration search space” in the far Eastern Goldfields of WA. A combination of new data from the Geological Survey, along with a decade of academic research rewriting the structural and metamorphic history of the terrane & new exploration tools for exploring under transported cover have opened up the Yamarna & Burtville terranes for gold exploration. There have been a number of successes in the area already with the discovery of Moolart Well, Tropicana, Central Bore & Garden Well over the last decade. BRB has built up the largest tenement holding in the Eastern Goldfields, covering 5500sq.km & 8 different projects. Since listing through an IPO in mid-2012, BRB has already had a number of successes including outlining a large project at Dexter.

Key StrengthS

• Success at Dexter, Mt Gill & Kurrajong • Early mover advantage in Yamarna & Burtville Terranes • Largest tenement holder in the Eastern Goldfields • True greenfields exploration program

Key riSKS

• Substantial exploration risk • Cost of maintaining large tenement position • Further funding required to advance projects sigificantly • Remote location a challenge for mining

Key investments

Com

Location

Status

% Own

Description

Dexter

Au, Ag

WA

Exploration

100%

Mt Gill

Au, Ag

WA

Exploration

100%

Attila West

Au, Ag

WA

Exploration

100%

Kurrajong

Au, Ag

WA

Exploration

100%

Kingston

Au

WA

Exploration

100%

Mt Sefton Duketon North

Au Au

WA WA

Exploration Exploration

100% 100%

De La Poer

Au

WA

Exploration

100%

Large Au system on Yamarna Terrane – 8500m RC drill program underway. Multiple km long Au anomalies on the Yamarna Terrane. Large structural target in the Yamarna Terrane near the 1Moz Attila project. 12km long anomaly at Kurrajong South on the Yamarna Terrane. 35km long undrilled greenstone belt in the Yamarna Terrane. Undrilled greenstone belt in the Burtville Terrane. Multiple Au anomalies in the Burtville Terrane along strike from Regis gold camp. New greenstone belt in the Burtville Terrane, with limited exploration.

HeaD oFFIce 12 Walker Avenue West Perth WA 6005 Australia Web: www.breakerresources.com.au DIrecTors Tom Sanders (Exec Chair), Mark Edwards, Michael Kitney

Share price ($A)

$0.20

12-month high

$0.41

12-month low

$0.17

Market capitalisation

$11m

Key Countries

Australia

Commodities

Au, Ag

Gold

DacIan golD

ASX: dcn

Share PriCe triggerS: weStraLia high-graDe gOLD

WA-focused gold company, listing late last year with a $20m IPO. Acquired the historical Mt Morgans gold assets between Leonora and Laverton in the NE Goldfields region. The project has a reserve of 136,000oz at 6.2gpt gold. DCN has set a corporate target of lifting the reserve position to 500,000oz prior to making an investment decision on the construction of a milling facility for the project. The goal is then to establish Dacian as a 100,000oz/pa low-cost gold producer. Multiple near-mine targets show upside potential that will assist in reaching the reserve goal. These include the Westralia deposit, Transvaal, Ramornie and Craic. Beyond near-mine targets, the project has regional exploration potential and lies near the Laverton Tectonic Zone, which has yielded several multi-million ounce deposits. The Jupiter prospect displays similarities to the large Wallaby deposit, both in structure and host rock, and is a focus for regional exploration.

Key StrengthS • • • •

Key riSKS

High-grade ounces in reserve Extensional Au targets Regional Au targets Clear corporate targets (500,000oz reserve)

• • • •

Underground lode continuity Future funding Capital cost of mill development Exploration risk

HeaD oFFIce Ground Floor, 26 Clive Street West Perth WA 6005 Australia Web: www.daciangold.com.au DIrecTors Rohan Williams (chair), Paul Payne (MD), Barry Paterson, Rob Reynolds Share price ($A)

$0.30

Key investments

Com

Location

Status

% Own

Description

12-month high

$0.75

Westralia

Au

WA

Exploration

100%

Depth extensions to high-grade pit: 4500oz/ vertical metre.

12-month low

$0.15

Transvaal

Au

WA

Exploration

100%

327,000oz in resource near underground workings.

Market capitalisation

$28.8m

Ramornie

Au

WA

Exploration

100%

46,000oz mineral resource.

Craic

Au

WA

Exploration

100%

Visible Au in lodes; underground mine development.

Key Countries

Australia

Jupiter

Au

WA

Exploration

100%

Targeting Wallaby-style Au mineralisation.

Commodities

Au

OCTOBER/NOVEMBER 2013 rESOUrcESTOcKS

119


Gold

doray minerals

ASX: drm

Share PriCe triggerS: high-graDe gOLD PrODuCtiOn frOm anDy WeLL

Moved to 100% ownership of its flagship high-grade gold asset at Andy Well, in the Murchison district of WA, in 2012-13. The project is expecting first gold production in the September quarter after a rapid construction and commissioning phase is complete. Ore will initially be sourced from the high-grade Wilber lode – with mine plans then aiming to extend production to the Judy lode. Doray has received project financing for Andy Well from the Commonwealth Bank of Australia. The capital cost of the project is just $55m. Initial mine life is 3.7 years (Wilbur lode only) but excellent additional underground reserve potential is present. The Wilbur lode reserve grade is 11.7gpt gold for about 250,000oz. Gold mineralisation is hosted within a high-grade quartz reef typically of 1-2m thickness. 45,000oz of production is hedged at $A1620/oz.

Key StrengthS

• High-quality ounces at Andy Well • Extension Au targets at Judy Zone (also Andy Well) • In-house underground mining expertise • Rapid project payback anticipated

Key riSKS

• • • •

Underground mining productivity Au price risk (after hedged ounces) Short initial mine life Exploration risk

Head oFFiCe Level 3, 41-43 Ord Street West Perth WA 6005 Australia Web: www.dorayminerals.com.au direCTors Peter Alexander (chair), Allan Kelly (MD), Heath Hellewell, Jay Stephenson, Leigh Junk Share price ($A)

$0.59

12-month high

$1.00

12-month low

$0.35

Key investments

Com

Location

Status

% Own

Description

Market capitalisation

$83.7m

Andy Well

Au

WA

Commissioning

100%

Site production costs estimated at under $600/oz.

Key Countries

Australia

Murchison

Au

WA

Exploration

100%

Regional Au targets undergoing drill-tests.

Gawler

Au

SA

Exploration

100%

Targeting iron-oxide-Cu-Au mineralisation.

Commodities

Au

Gold

emmerson resourCes

ASX: erm

Share PriCe triggerS: targeting high-graDe gOLD at tennant CreeK

Focused on the historical Tennant Creek mineral field in the Northern Territory. Has consolidated over 3000sq.km of ground to allow a systematic exploration program to advance. The Tennant Creek region is one of Australia’s highest grade goldfields, with ERM holding title to a number of mines with residual gold (& copper) resources. Past production grades have sat between 1520gpt gold and 2-4% copper. These grades concur with ERM exploration drill hits, which have included 12m at 16.9gpt gold & 2% copper and 24m at 4% copper. ERM is deploying new highpower airborne electromagnetic technology (HeliTem) in order to highlight previously unseen conductivity zones hosting copper-gold mineralisation. ERM controls the majority of ground on a 100% basis – but also has a regional JV at Tennant Creek with Inova (previously Ivanhoe Australia), where the latter is earning equity through funding exploration programs proposed by ERM. A gold processing facility owned by ERM, currently on care and maintenance, may allow for rapid transition from explorer to producer.

Key StrengthS

• High-grade Au discoveries undergoing delineation drilling • Major landholding in Tennant Creek region • Use of latest technnologies in exploration • 100% ownership of historical resources

Key riSKS

• Resource delineation still carries exploration risk • Au price risk on development • Initial resources modest in scale • Development economics not yet known

direCTors Andrew McIlwain (chair), Rob Bills (MD), Tim Kestell, Simon Andrew

Key investments

Com

Location

Status

% Own

Description

Monitor

Au, Cu

NT

Exploration

100%

High-grade Au hits (to 17gpt gold) in diamond drilling.

Goanna

Au, Cu

NT

Exploration

100%

Airborne EM aided new Cu-Au discovery (gold hits to 1oz/t).

Gecko

Au, Cu

NT

Exploration

100%

Historic high-grade Au-Cu mine.

Inova JV

Au, Cu

NT

Exploration

80%

Inova funding ERM-managed JV activities targeting large-scale Cu-Au.

120

Head oFFiCe 3 Kimberley Street West Leederville WA 6007 Australia Web: www.emmersonresources.com.au

Share price ($A)

$0.05

12-month high

$0.14

12-month low

$0.03

Market capitalisation

$12.3m

Key Countries

Australia

Commodities

Au

OCTOBER/NOVEMBER 2013 reSOUrCeSTOCKS


Gold

evolution mining

ASX: evn

Share PriCe triggerS: Further COmPany gOLD PrODuCtiOn reCOrDS

Through the merger of Catalpa Resources and Conquest Mining in 2011, Evolution Mining has become one of Australia’s newest mid-tier gold miners. EVN now has a strong base of five producing mines across Queensland and WA, following the start-up of their fifth mine, Mt Carlton, in late 2012. The FY2014 production forecast is 400,000-450,000oz of gold equivalent production, building on the FY2013 production of 392,920oz of gold and 307,726oz of silver. The group cash cost was $A790/oz in FY2013, but the total cost was $1290/oz, with costs rising in recent quarters. This suggests EVN will have to focus on cost-control over the next year and will benefit from a weaker Australian dollar. EVN is forecasting cash costs of $A770-820/oz in FY2014 with $160-185m of capital expenditure (about $355-463/oz). EVN is also committed to $20m of exploration expenditure around its five mines, most of which have mine lives of 5-12 years.

Key StrengthS

• • • •

Five operating gold mines Record levels of gold production Group cash costs around $790/oz Strong commitment to brownfields exploration

Key riSKS

• Full costs ($1290/oz) very near current gold spot price • Rising costs a problem across Australian gold industry • Weakening gold price • Limited greenfields exploration program

HeAD oFFiCe Level 28, 175 Liverpool Street Sydney, NSW 2000 Australia Web: www.evolutionmining.com.au DiReCtoRS Jake Klein (exec. chair), Jim Askew, Lawrie Conway, Graham Freestone, Paul Marks, John Rowe, Peter Smith Share price ($A)

$0.90

83-90,000ozpa eq. UG mine, plus Coronation, Ferneyside & South targets.

12-month high

$2.14

100%

95-110,000ozpa eq. OP mine, with regional exploration upside.

12-month low

$0.53

Operating

100%

73-80,000ozpa eq. OP & UG mine, plus Starlight, Moonlight & Aviary targets.

Market capitalisation

$570.5m

Qld

Operating

100%

65-75,000oz pa eq. OP mine, plus the Capsize Trend target.

Key Countries

Australia

WA

Operating

100%

85-95,000ozpa eq. OP mine, with UG & Greenfinch projects in PFS and the Hollerton target.

Commodities

Au, Ag, Cu

Key investments

Com

Location

Status

% Own

Description

Cracow

Au, Ag

Qld

Operating

100%

Mt Rawdon

Au

Qld

Operating

Pajingo

Au, Ag

Qld

Mt Carlton

Au, Ag, Cu

Edna May

Au

Gold

inDoCHine mining

ASX: idc

Share PriCe triggerS: mOvement FOrwarD in LOw-COSt Start-uP OPtiOnS at mt Kare

Focusing on developing the Mt Kare project, which it believes to be one of PNG’s next big gold mines. IDC draws many comparisons with Barrick’s Porgera mine, a 28Moz gold mine 15km from Mt Kare. A PFS completed in October 2012 planned a 100,000-160,000ozpa gold and 700,000-1,100,000ozpa silver open pit mine for 8.5 years, for a capital cost of $US218 million. This was followed by a resource upgrade in July, which increased the contained gold by 300,000oz to 2.1Moz of gold grading 1.5gpt, plus 18Moz of silver. Importantly, 380,000oz of near-surface oxidised gold may provide a low capital start-up option. Drill results in the first half of 2013 then highlighted two high-grade zones (generally between 5-20gpt) at the project that would be amenable to low-cost underground mining. Aiming to advance the project rapidly, IDC appointed Australian Contract Mining (ACM) and GR Engineering Services in July for project management, feasibility study, development, engineering, construction and underground mining services at Mt Kare. IDC was further bolstered by the renewal of its mining licence at Mt Kare in July. IDC also has exploration projects in Cambodia, though these are not the current focus of the company.

Key StrengthS

• Large 2Moz+ gold-silver project at Mt Kare • Potential low-cost, high-grade underground start-up option • Option of a low capital oxide gold start-up • Contractors appointed to rapidly develop Mt Kare project

Key riSKS

• • • •

High sovereign risk in Papua New Guinea Finance required to rapidly develop Mt Kare Overall resource relatively low grade (1.5gpt) Single asset risk as Cambodia projects very early stage

Key investments

Com

Location

Status

% Own

Description

Mt Kare

Au, Ag

PNG

Feasibility

100%

2.1Moz Au @ 1.5gpt. Low-cost UG and surface oxide start-up options.

Ratanakiri

Au

Cambodia

Exploration

100%

Historic alluvial mining region. Multiple Au soil and stream sampling targets.

Kratie

Au

Cambodia

Exploration

100%

Historic alluvial mining. Auger drilling intercepted thin, patchy veins.

OCTOBER/NOVEMBER 2013 ReSOURceSTOcKS

HeAD oFFiCe Suite 1, Level 3, 275 George Street Sydney NSW 2000 Australia Web: www.indochinemining.com DiReCtoRS Ian W Ross (chair), Stephen Promnitz (CEO), Gavan Farley, Dr Michael Leggo Share price ($A)

$0.08

12-month high

$0.19

12-month low

$0.04

Market capitalisation

$66m

Key Countries

PNG, Laos, Cambodia

Commodities

Au, Ag, Cu 121


Gold

medusa mining

ASX: mml

Share PriCe triggerS: CO-O gOLD mine exPanSiOn COming OnStream

MML had a tough year dealing with a typhoon, narrower veins than expected resulting in lower production and mill expansion contractors going into administration. But underlying the issues is a high-grade underground mine, Co-O, in the Philippines, which has extremely low cash operating costs of around $US220-230/oz and the potential to produce 200,000ozpa. Prior to its difficulties Co-O was a very profitable mine and the company had begun paying dividends. MML will be looking to return the mine to a profitable status, at a greater rate of production, though production guidance for 2014 has not yet been released. MML also has a number of development and exploration opportunities in the Mindanao region of the Philippines.

Key StrengthS

• High grade, very low cost Co-O gold mine • Expansion to 200,000ozpa underway • Broad gold-copper exploration portfolio in the Philippines • Former dividend payer

Head OFFiCe Unit 7/11 Preston Street Como WA 6152 Australia Web: www.medusamining.com.au

Key riSKS

• Company vulnerable while expansion problems are resolved • High sovereign risk in Mindanao part of Philippines • Technically difficult narrow vein mining at Co-O • Falling gold price would reduce profits

Key investments

Com

Location

Status

% Own

Description

Co-O

Au

Philippines

Operating

100%

Bananghilig

Au

Philippines

Feasibility

100%

Saugon

Au

Philippines

Exploration

100%

Trento

Au

Philippines

Exploration

n/a

Barobo gold corridor Lingig (Das-Agan) Kamarangan Usa

Au Cu Cu Cu

Philippines Philippines Philippines Philippines

Exploration Exploration Exploration Exploration

100% 100% 100% 100%

Other copper exploration

Cu

Philippines

Exploration

100%

High grade underground mine. 2.195Moz at 9.9gpt Au. Ramping up to 200,000ozpa. 1.136Moz Au at 1.44gpt. Potential 200,000ozpa open pit. Small Au deposit 25km south of Co-O. 15,700oz Au @ 5.97gpt. Application for a tenement over a potential quartz Au zone. Numerous Au targets along the Barobo fault. Cu porphyry target in eastern Mindanao. Cu porphyry target on the Barobo fault corridor. JV with Corplex Resources, which has 30% buy-back rights. Cu porphyry target. Early stage Gamuton and Lasang Cu porphyry targets.

diReCTORs Geoffrey Davis (chair), Peter Hepburn-Brown (MD), Raul Villanueva (ED), Ciceron “Jun” Angeles, Gary Powell, Andrew Boon San Teo, Robert Weinberg Share price ($A)

$2.43

12-month high

$6.70

12-month low

$1.27

Market capitalisation

$394.8m

Key countries

Philippines

Commodities

Au, Ag, Cu

Gold

millenium mineRals

ASX: mOY

Share PriCe triggerS: turning PrODuCtiOn intO returnS anD DiviDenDS

MOY has joined the ranks of Australia’s mid-tier gold producers by bringing onstream the Nullagine gold mine in the east Pilbara region. The mine started up in September 2012, with commercial production declared in February 2013 and a subsequent maiden half-year profit of $A34.2m in June 2013. Nullagine hosts a resource of 1.36Moz grading 1.19gpt across six deposits. The 1.5Mtpa carbon-in-leach plant has the capacity to produce 78,000ozpa for 8 years. Despite low grades the mine operates with cash costs of around $800/oz and sustaining costs of around $965/oz and with 50% of production hedged during last year’s higher gold prices ($1614/ oz) margins are around $800/oz. The hedge book is “in the money” & worth around $20m, while corporate debt stands at $36m, with 20% of the original project debt already paid down. Looking further ahead, MOY aims to increase the Nullagine reserves to around 1Moz (from 741,000oz currently) within 18 months, which will help extend mine life. A total of 17 deposits across the Nullagine project will provide further brownfields exploration potential. MOY intends to focus on organic growth & ultimately to pay dividends.

Key StrengthS

• 78,000ozpa Nullagine Au mine is operating • Eight-year mine life plus brownfield exploration potential • Cash costs low for Western Australia at $794/oz • 50% of gold production hedged “in the money” at $1614/oz

Key riSKS

• Single asset risk • Mineral resource is low grade (1.19gpt) • Multiple deposits can be awkward and expensive to mine • Limited exploration and development portfolio

Head OFFiCe Ground floor, 10 Kings Park Road West Perth WA 6005 Australia Web: www.millenniumminerals.com.au diReCTORs Peter Rowe (chair), Brain Rear (MD), Richard Procter, Ross Gillon, John Morton Share price ($A)

$0.34

12-month high

$0.78

12-month low

$0.24

Market capitalisation

$72.9m

Key investments

Com

Location

Status

% Own

Description

Key countries

Australia

Nullagine

Au

WA

Operating

100%

1.3Moz @ 1.19gpt Au across deposits in east Pilbara.

Commodities

Au

122

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS


Gold

northern star resources

ASX: nSt

Share PriCe triggerS: high Margin OunCeS frOM PauLSenS gOLD Mine

One of the success stories to emerge from the Australian gold boom courtesy of the Paulsens underground mine, purchased for $40m in 2010. NST has achieved low-cost producer status through operational improvements, increased underground productivity and discovery of highgrade ounces at the mine, which operates to a depth of 600m. Current prodction has been from the Voyager 1 lode – but is transitioning to a contribution from both Voyager 1 extension and the NST-discovery of a Voyager 2 high-grade lode. NST is also re-evaluating production from the upper levels at Paulsens, where previous owners were forced to high-grade the mineralisation due to hedging commitments. NST is also considering development options for a second mine at its Ashburton project, which has the potential to produce a further 100,000ozpa. Exploration activity has been increased with a joint venture to explore for gold on ground in the Paulsens region held by Fortescue Metals.

Key StrengthS • • • •

Low-cost, high-grade Paulsens mine Depth potential at Paulsens Exploration JV with Fortescue Metals Dividends from strong cash flows

Key investments

Com

Location

Status

Paulsens

Au

WA

Ashburton

Au

WA

FMG JV

Au

Venturex Resources

Cu-Zn

Key riSKS • • • •

Single asset risk Gold price risk Ashburton economics not yet clear Exploration risk

heaD oFFIce Level 1, 1 Puccini Court Stirling WA 6021 Australia Web: www.nsrltd.com DIrectors Christopher Rowe (chair), Bill Beament (MD), Michael Fotios, John Fitzgerald, Peter O’Connor Share price ($A)

$0.80

12-month high

$1.59

12-month low

$0.53

% Own

Description

Operating

100%

Flagship asset acquired for $40m in 2010.

Market capitalisation

$339.4m

Exploration

100%

1Moz Au resource grading 2.7gpt. Potential second 100,000ozpa operation.

Key Countries

Australia

WA

Exploration

Earning

7000sq.km of prospective exploration ground.

WA

Feasibility

15%

Equity stake in Pilbara Cu-Zn developer.

Commodities

Au

Gold

orInoco golD

ASX: ogX

Share PriCe triggerS: high-graDe gOLD & SiLver DriLL hitS

One of the new breed of exciting precious metal companies on the ASX – having listed in 2011. Focused in Brazil, where it has farmed into a high-grade gold and silver project at Cascavel. The gold-bearing structure at the Cascavel prospect has now been identified over an area of 1600m x 620m. It remains open along strike and down dip with three identified mineralised zones ranging in width from 4-25m. Gold is hosted in structurally controlled quartz carbonate vein units. A separate, later stage, high-grade silver structure has been identified in drilling that is also the subject of drill follow-up. Artisanal mining undertaken by the previous landowner extracted approximately 3000t of ore at an estimated grade of +20gpt gold from near-surface workings at Cascavel between 2005 and 2011. OGX has conducted channel sampling and extracted a bulk sample of 1t that averaged 22gpt gold from the payable lodes. Exploration to extend the gold and silver lodes continues.

Key StrengthS

• • • •

High-grade Au lodes Exploration potential for Au & Ag Strong in-country management in Brazil Old workings allow access to Au lodes

Key riSKS

• Nugget effect (Au) hinders accurate grade estimation • Several rounds of funding required • Brazil mining legislation has been in flux • Principal asset risk

Key investments

Com

Location

Status

% Own

Description

Cascavel

Au, Ag

Brazil

Exploration

Earning

High-grade lodes in old workings look extensive.

Eliseo

Au, Ag

Brazil

Exploration

Earning

Targeting open pit Au resources.

OCTOBER/NOVEMBER 2013 RESoURCEStoCKS

heaD oFFIce Suite 9, 5 Centro Ave Subiaco WA 6008 Australia Web: www.orinocogold.com DIrectors John Hannaford (chair) Mark Papendiek (MD), Ian Finch, Bryan Thomas Share price ($A)

$0.13

12-month high

$0.47

12-month low

$0.10

Market capitalisation

$9.6m

Key Countries

Brazil

Commodities

Au, Ag 123


Gold

papillon resources

ASX: pir

Share PriCe triggerS: WOrLD CLaSS FeKOLa gOLD PrOjeCt

Gold company focused on developing the Fekola deposit in southwest Mali, West Africa. Completed prefeasibility work on the project, which indicates that a nine-year, 300,000oz/pa gold development looks economically robust. Capital cost looks manageable at under $US300m. Life-of-mine strip ratio is 3:1. PIR estimates cash costs of below $US600/oz and all-in sustaining costs of $US725/oz over the life of mine. Based on a flat $US1300/oz gold price assumption, PIR estimates pre-tax cashflows from Fekola of $US190m/pa with total mineable ounces at 2.8 million over life of mine. The current mineral resource estimate at Fekola stands at 54.97Mt grading 2.38 gpt gold at a lower cut-off grade of 1gpt gold for contained gold of 4.2Moz. Gold recoveries are stimated at 89% to 93%.

Key StrengthS • • • •

Robust flagship asset Strong management track record Material project scale (300,000oz/pa) Exploration upside at Fekola

Key riSKS

• • • •

Mali mineral policy and taxation changes Gold price risk on development Project delivery; principal asset risk Cost containment

HeaD oFFice Level 11, BGC Centre 28 The Esplanade Perth WA 6000 Australia Web: www.papillonresources.com DirecTors Ian Middlemas (chair), Mark Connelly (MD), Guy de Grandpre, Rob Behets, Alec Pismiris, Peter Woodman Share price ($A)

$1.00

12-month high

$2.02

12-month low

$0.56

Market capitalisation

$336.3m

Key investments

Com

Location

Status

% Own

Description

Key Countries

Mali

Fekola

Au

Mali

Feasibility

100%

Initial 9-year mine life; low-cost, high-margin asset.

Commodities

Au

Gold

perseus Mining

ASX: pru

Share PriCe triggerS: OPeratiOnaL StabiLity anD COSt imPrOvement at eDiKan gOLD mine

With the start-up of the Edikan gold mine in Ghana early last year it looked as though PER was set for a good year, however, continuous problems with the processing facilities and a falling gold price have dampened matters. In recent months though PER has made improvements to its mill and revised the mine plan in light of the lower gold price environment and looks set to once again produce profitably and begin building cash reserves. Edikan is a large, long-life gold mine with the potential to produce 200,000ozpa for in excess of 15 years, making it a company builder. However, its low grades mean operating costs have to be managed carefully and the plant problems this year mean all-in costs have averaged $US1256/oz for the year and hit $1405/oz in the last quarter, due to some exceptional charges. Fortunately, this has been helped by the hedging of most of the last year’s production at $1408/oz, meaning the hedge book is currently $29.5 million “in the money”. Revised production guidance and costs are for equivalent annual production of 187,000-209,000ozpa and $1000-1200/oz for the next 18 months. Beyond Edikan, PER also has an interesting development opportunity at Sissingue in Cote d’Ivoire. The project is suspended while the company normalises its operations at Edikan.

Key StrengthS

• Large 200,000ozpa gold mine at Edikan, Ghana • Operational improvements underway at Edikan • Long mine life at Edikan of 15-plus years • Development projects in Ghana and Cote D’Ivoire

Key riSKS

• Production and cost problems over the last year • High operating costs in the $1255/oz area • High sovereign risk in Ghana and Cote d’Ivoire • Sissingue development suspended due to financial instability

Key investments

Com

Location

Status

% Own

Description

Edikan

Au

Ghana

Operating

100%

Grumesa Sissingue

Au Au

Ghana Ivory Coast

Exploration Suspended

100% 100%

7.2Moz resource grading 1.1gpt Au. Potential capacity of 200,000ozpa. 718,000oz resource grading 0.6gpt Au. 1.2Moz resource grading 1.4gpt. Suspended pending corporate stabilisation.

124

HeaD oFFice Level 2, 437 Roberts Road Subiaco WA 6008 Australia Web: www.perseusmining.com DirecTors Reginald Gillard (chair), Jeff Quartermaine (MD), Colin Carson (ED), Rhett Brans (ED), Neil Fearis, Sean Harvey, Michael Bohm Share price ($A)

$0.55

12-month high

$3.00

12-month low

$0.43

Market capitalisation

$251.9m

Key countries

Ghana, Ivory Coast

Commodities

Au

OCTOBER/NOVEMBER 2013 rESOurCESTOCKS


Gold

phoenix gold

ASX: pXg

Share PriCe triggerS: SeLf-funDeD reSOurCe grOwth tO 3mOz

Has grown its resource base in the Kalgoorlie region of WA’s Eastern Goldfields to 2.5Moz and has also started toll treatment of small ore parcels in order to self-fund exploration towards a larger-scale future gold development. Has set a resource growth exploration target at 4Moz. Key resource centres lie at Castle Hill and at Broads Dam, located 15km apart – both of which host potential for further upside as drilling programs advance. A future standalone development is most likely to be sited at Castle Hill – where drilling continues to provide evidence of strong depth continuity to gold lodes. Total Castle Hill resources located at Stage 1 and Stage 2 areas are now approaching 1.2Moz. PXG has continued its excellent discovery track record, with the addition of the Red Dam deposit into resources (229,000oz at 2.1gpt gold). Numerous drill targets remain to be progressively tested along the Zuleika and Kunanulling shear systems.

Key StrengthS • • • •

Track record of resource growth Local high grades (eg Zuleika North) Exploration focus north of Kalgoorlie Small dedicated team experienced in pit development

Key riSKS

• • • •

Resource to reserve conversion Toll contract terms at local milling facilities Exploration risk Capital cost of a future Castle Hill development

Key investments

Com

Location

Status

% Own

Description

Catherwood/Blue Funell

Au

WA

Operating

100%

Toll treatment of PXG ore parcels.

Kunanalling

Au

WA

Exploration

100%

245,000oz resource inventory.

Castle Hill (Stage 1)

Au

WA

Exploration

100%

647,000oz resource inventory @ 1.6gpt Au.

Castle Hill (Stage 2)

Au

WA

Exploration

100%

404,000 oz resource inventory @ 1.5gpt Au.

Zuleika

Au

WA

Exploration

100%

Includes Zuleika North (2.5gpt Au) resource for 63,000oz.

Grant's Patch-Ora Banda

Au

WA

Exploration

100%

Resources approaching 400,000oz.

Carbine

Au

WA

Exploration

100%

78,000oz resource inventory.

heAd oFFiCe 73 Dugan Street Kalgoorlie 6430 Australia Web: www.phoenixgold.com.au diReCToRS Dale Rogers (chair), Jonathan Price (MD), Stuart Hall

Share price ($A)

$0.17

12-month high

$0.40

12-month low

$0.10

Market capitalisation

$40.9m

Key Countries

Australia

Commodities

Au

Gold

pRimeRo mining

ASX: ppm

Share PriCe triggerS: inCreaSeD gOLD anD SiLver PrODuCtiOn anD reSOurCeS

Canadian and US-listed Primero Mining took over Australia-listed Cerro Mining in May this year, listing on the ASX in the process and providing investors with exposure to a mid-tier Mexicofocused gold-silver miner. PPM was already operating the San Dimas gold-silver mine it acquired from Goldcorp in 2010 and it produces around 85,000ozpa of gold and 4.8Mozpa of silver for a gold equivalent cash cost of $US640/oz. In just a few years, the company has already built up a cash balance of $US141 million to invest in development and acquisitions. PPM is already expanding the capacity at San Dimas to 2500tpd, with a further potential expansion to 3000tpd also an option. Gold equivalent production is forecast to be 130,000ozpa in 2013 and 165,000ozpa in 2014. The acquisition of Cerro Mining adds the Cerro del Gallo project to the development pipeline. The project is at feasibility stage and may produce 94,600ozpa of gold equivalent (factoring in the silver and copper by-products) for seven years using heap leach processing. Operating costs would be in the $650-700/oz gold equivalent range and capital costs about $165 million. PPM aims for the mine to be in production by 2015. PPM owns 69.2% of Cerro del Gallo, with Goldcorp owning the balance. Goldcorp is also a 27% cornerstone investor in PPM.

Key StrengthS

• Operating high-grade, low cost Au mine with 10-year mine life • Further development projects at Cerro del Gallo and Ventanas • Cash balance of $141 million • Goldcorp as 27% cornerstone investor

Key riSKS

• Sovereign risk in Mexico • 50% of silver production pre-sold at $4/oz • Au and Ag price falls will reduce profits • Limited greenfields exploration portfolio

Key investments

Com

Location

Status

% Own

Description

San Dimas

Au, Ag

Mexico

Operating

100%

120,000-130,000ozpa Au and Ag mine, with 1.54Moz Au resource grading 4.9gpt.

Cerro del Gallo

Au, Ag, Cu

Mexico

Feasibility

69%

920,000oz Au (0.6gpt), 20.55Moz Ag (13.3gpt) and 46,900t Cu (grading 0.1%) resource.

Ventanas

Ag, Au

Mexico

Exploration

100%

3.2Moz Ag (350gpt) & 29,000oz Au (2.4gpt) resource south of San Dimas.

OCTOBER/NOVEMBER 2013 RESOURCESTOCKS

$A 8.00 6.00 4.00 2.00

4 months ending September 17, 2013 heAd oFFiCe Suite 2301, 20 Queen Street West Toronto, Ontario M5H 3R3 Canada Web: www.primeromining.com diReCToRS Wade Nesmith (chair), Joseph Conway (president & CEO), David Demers, Grant Edey, Rohan Hazelton, Timo Jauristo, Eduardo Luna, Brad Marchant, Robert Quartermain, Michael Riley Share price ($A)

$5.50

12-month high

$6.60

12-month low

$4.30

Market capitalisation

$634.9m

Key countries

Mexico

Commodities

Au, Ag, Cu 125


Gold

regis resources

ASX: rrl

Share PriCe triggerS: Due tO beCOme a DiviDenD-Paying miD-tier gOLD COmPany On its way to becoming an established dividend paying mid-tier gold miner. Brought its second mine onstream this year at Garden Well and plans on paying a 15¢ dividend for FY2013. A third gold mine is under construction and a fourth project undergoing feasibility. All based on exploration and development success in the Duketon region of the Burtville Terrane, in the Eastern Goldfields. RRL’s first mine is at Moolart Well, which has produced 105,753oz at a cash cost of $A563/oz over the past year. The second mine is at Garden Well, which produced 163,260oz at a cash cost of $562/oz. At full capacity, the mine will produce 200,000-220,000oz/ pa. A third mine is under construction at Rosemont, due to start up later this year and produce 80,000oz/pa, feeding the processing plant at Garden Well.

Key StrengthS

• • • •

Two operating gold mines Third gold mine under construction Low cash costs in the $A600/oz region Due to become a dividend payer

Key riSKS

• Exposed to the gold price – no commodity diversification • Rising costs a challenge in the industry • McPhillamys development will be expensive • McPhillamys is fairly low grade (1.36gpt)

Key investments

Com

Location

Status

% Own

Description

Moolart Well (Duketon) Garden Well (Duketon) Rosemont (Duketon) Erlistoun (Duketon)

Au

WA

Operating

100%

Au

WA

Operating

100%

Au

WA

Construction

100%

Au

WA

Development

100%

2.7Moz resource. 100-110,000oz pa production OP mine. 3.0Moz resource. 200-220,000ozpa forecast from OP mining. 1.73Moz resource ~10km NW of Garden Well. 80,000ozpa potential. 322Koz resource ~8km S of Garden Well. 65,000ozpa potential. 87Koz Dogbolter resource and 42Koz Petra resource. 72Koz King John, 55Koz Russells Find, 43Koz Banyego & 17Koz Reichelts Find resources. Sulphide target in northern Duketon tenements – 5.8m at 3.0% Ni, 2% Cu & 5.3gpt PGM. 2.5Moz resource (1.36gpt) acquiring from Alkane & Newmont in 2012.

Moolart Well Satellites (Duketon) Garden Well Satellites (Duketon) Collurabbie McPhillamys (Alkane/Newmont)

Au

WA

Exploration

100%

Au

WA

Exploration

100%

Ni, Cu, PGM Au

WA

Exploration

100%

NSW

Feasibility

100%

HeAD oFFice Level 1, 1 Alvan Street Subiaco WA 6008 Australia Web: www.regisresources.com.au DirecTors Mark Clark (MD), Nick Giorgetta (chair), Morgan Hart (ED), Ross Kestel, Mark Okeby Share price ($A)

$3.80

12-month high

$5.87

12-month low

$2.88

Market capitalisation

$1.89b

Key Countries

Australia

Commodities

Au, Ni, Cu, PGMs

Gold

silver lAke resources

ASX: Slr

Share PriCe triggerS: OPtimiSatiOn Of mt mOnger DeLivering inCreaSeD PrODuCtiOn

Following its merger with Integra Mining last year, SLR is now established as a mid-tier Australian gold miner. SLR has two production centres at Mt Monger and Murchison. Following the merger, SLR is conducting optimisation studies to integrate the 15 open pit and underground deposits, and increase production to 270,000ozpa from the current rate of about 190,000ozpa. The optimisation study results are due. The Murchison project has just finished commissioning. It consists of 14 open pit deposits and four underground deposits that could produce up to 100,000ozpa of gold for about a decade. Beyond these operations, SLR has a number of development options. A third potential production centre exists at Great Southern, hosting 950,000oz of resources, which SLR believes could be in production by 2016-17.

Key StrengthS

• Two producing gold mines • Optimisation study should deliver further production • Further development options at Great Southern & Hollandaire • Targeting dividend in 2014

Key riSKS

• Multiple small deposits, rather than few big mines • Variable geology, difficult to predict grade • Cost control a problem in the Australian gold industry • Lack of major long-term development options

Key investments

Com

Location

Status

% Own

Description

Mt Monger

Au

WA

Operating

100%

Murchison

Au, Ag, Cu

WA

Operating

100%

3.8Moz of resources in Kalgoorlie region. Targeting 270Kozpa Au production. 1.9Moz of resources N of Mt Magnet. Targeting 100Kozpa Au production. 950Koz of resources west of Esperance. Potential 3rd production centre. High grade Cu discovery. 45.1Kt Cu grading 4.7%. Early-stage exploration 520km SE of Port Hedland. 84Koz Au, 13km E of Randalls processing facility. 500Koz Au, 16km E of Randalls processing facility. JV with Newcrest 500m NW of Majestic. Another Randalls satellite. JV with Newcrest 22km N of Randalls processing facility.

Great Southern

Au, Ag, Cu

WA

Feasibility

100%

Eelya-Hollandaire Copper Lakes

Au, Cu, Co Au, Cu, Co

WA WA

Exploration Exploration

100% 100%

Cock-eyed Bob Santa Imperial

Au Au Au, Cu

WA WA WA

Closed Feasibility Feasibility

100% 100% 85%

Majestic

Au, Cu

WA

Feasibility

85%

126

HeAD oFFice Suite 4, Level 3, South Shore Centre 85 South Perth Esplanade South Perth WA 6151 Web: www.silverlakeresources.com.au DirecTors Paul Chapman (chair), Les Davis (MD), Chris Banasik (ED), Peter Johnston, Brian Kennedy, David Griffiths Share price ($A)

$0.85

12-month high

$3.96

12-month low

$0.51

Market capitalisation

$336m

Key Countries

Australia

Commodities

Au, Ag, Cu, Co

OCTOBER/NOVEMBER 2013 rESOUrCESTOCKS


Gold

santana minerals Share PriCe triggerS: earLy-Stage gOLD exPLOratiOn reSuLtS at eSPiritu SantO

ASX: Smi $A

SMI was spun out of Cerro Resources, which had just merged with Canadian-listed, Mexicanfocused Primero Mining in May, raising $A4m from Primero Mining in the process and securing it as a cornerstone investor. SMI consists of the non-Cerro del Gallo projects of the former Cerro Resources, including the Namiquipa silver-lead-zinc and Espiritu Santo gold-silver projects in Mexico, and Kalman molybdenum-copper-gold-rhenium and Mt Philip iron ore projects in Queensland. SMI’s focus is on the Espiritu Santo project in Jalisco state. An ongoing rockchip and geochemical sampling program has highlighted a number of drill targets and permit applications have been lodged with the local Mexican authorities. At Namiquipa in Chihuahua, SMI is preparing for an induced polarisation (IP) geophysical survey. The project hosts a small but relatively high-grade silver resource with by-product lead and zinc credits. The inferred resource currently holds 15Moz of silver (103gpt), 41,000t of lead and 76,000t of zinc. The project also covers the historic La Venturosa silver mine, which has produced 14.37Moz of silver, 32,550t of lead and 43,530t of zinc over the last century.

0.15

Key StrengthS

DireCtOrs Norman Seckold (chair), Joseph Conway, Richard Keevers

• Multiple occurrences of mineralisation at Espiritu Santo ready for drilling • High-grade silver resource at Namiquipa • Recently raised $A4m in a spin-out IPO from Primero Mining • Support of 19.9% shareholder, Primero Mining

Key riSKS

• High security and political risk in Mexico • More funds required to advance projects substantially • Exploration risk high as projects still early stage • Limited portfolio range if Qld projects sold

Key investments

Com

Location

Status

% Own

Description

Namiquipa

Ag, Pb, Zn Au, Ag

Mexico

Exploration

100%

Mexico

Exploration

100%

Qld

Exploration

75%

Qld

Exploration

100%

15Moz Ag equivalent resource, grading 103gpt Ag in Chihuahua State. In the Mascota-Navidad Mining district in Jalisco State. Challenging terrain. Approxmately half of the resource is on a tenement co-owned by Syndicated Minerals (49%). 30Mt of haematite iron ore that can be upgraded to a 68% product.

Espiritu Santo Kalman Mount Philp

Mo, Cu, Au, Re Fe

0.10 0.05

4 months ending September 17, 2013 HeaD OFFiCe Ground Floor, 139 Coronation Drive Milton Qld 4064 Australia Web: www.santanaminerals.com

Share price ($A)

$0.12

12-month high

$0.15

12-month low

$0.05

Market capitalisation

$11.7m

Key Countries

Mexico, Australia

Commodities

Ag, Au, Pb, Zn, Mo, Cu, Re, Fe

Gold

sumatra COpper & GOlD

ASX: Sum

Share PriCe triggerS: gOLD PrODuCtiOn at tembang in 2014

Near-term gold-silver mining company focused in the South Sumatra area of Indonesia. Flagship asset is the Tembang gold-silver development, scheduled to start production in 2014. Tembang has proven reserves of 2.4Mt at 2.5gpt gold and 38.7gpt silver for a total of 0.2Moz gold and 3Moz silver, and probable reserves of 3.1Mt at 2.1gpt gold and 25.6 gpt silver for 0.2Moz gold and 2.5Moz silver. Mining will be by open pit and underground, scheduled over a 7.5-year mine life. Stage 1 processing will involve a carbon-in-leach (CIL) circuit operating at 400,000tpa for production of 30,000oz gold and 200,000ozpa silver. Stage 2 sees a planned expansion of activity to reach annual production of 50,000oz gold and 500,000oz of silver. Targeted recoveries are 90% for gold and 80% for silver. SUM has longer-term exploration potential at the Tandai and Sontang projects.

Key StrengthS

• Established reserve position at Tembang • Indonesian cornerstone investors • Modest project capital requirements ($US40 million) • Significant exploration upside

Key riSKS

• 2014 production timeline may slip (Tembang) • Modest-scale project (400koz Au reserve) • Project commissioning risk; underground mining risk • Indonesian country risk

Key investments

Com

Location

Status

Tembang

Au

Sumatra

Feasibility

100%

Start-up of Au-Ag production in 2014.

Tandai

Au

Sumatra

Exploration

30%

JV with Newcrest Mining (NCM).

Sontang

Au

Sumatra

Exploration

100%

High-grade Au, Ag & Zn targets.

OCTOBER/NOVEMBER 2013 RESOuRCESTOCKS

% Own

Description

HeaD OFFiCe Level 1, 5 Ord Street West Perth WA 6005 Australia Web: www.sumatracoppergold.com DireCtOrs Warwick Morris (chair), Julian Ford (MD), Adi Adriansyah Sjoekri, Jocelyn Severyn de Warrane Waller, Steve Robinson Share price ($A)

$0.12

12-month high

$0.23

12-month low

$0.11

Market capitalisation

$49.7m

Key Countries

Indonesia

Commodities

Au, Ag, Cu 127


Gold

Troy resources

ASX: try

Share PriCe triggerS: FaSt-traCKing OF WeSt Omai FOLLOWing azimuth taKeOver

Has a consistent track record of building and operating mines and paying dividends. Over the last 15 years TRY has acquired four gold projects and developed them into mines: Sandstone in Western Australia, Sertao and Andorinhos in Brazil and Casposo in Argentina. The latter two are still operating. Based on a solid gold production record, TRY has paid 13 dividends in 13 years. Casposo transitioned from open pit to underground mining and produced 69,314oz of gold & 1.36Moz of silver at a gold equivalent cost of $A804/oz in FY2013. Andorinhos is a complex highgrade underground mine, which uses handheld shrinkage stoping but produced 33,688oz at a cost of $799/oz in FY2013. The mine is, however, due to close in 2015. With both the Andorinhos and Casposo mines ageing, TRY has been searching for further gold project acquisitions that have the potential to produce 100,000ozpa of gold for 10 years. In mid-2013, TRY successfully acquired Azimuth Resources, bringing the West Omai gold project in Guyana into its portfolio, which meets these criteria. The project hosts 1.65Moz gold grading 3.1gpt, which would be mineable via open pit techniques. TRY has fast-tracked the project, aiming to complete a PFS by March 2014.

Key StrengthS

• Two active, low cost Au mines in South America • Development opportunity in Guyana following Azimuth takeover • Seeking mergers and acquistions • Track record of 13 dividends in 13 years

DIrecTors David Dix (chair), Paul Benson (CEO and MD), Ken Nilsson (ED), Gordon Chambers, Fred Grimwade, John Jones, Robin Parish

Key riSKS

• Sovereign risk in Argentina • Andorinhas mine closes in 2015 • Poor environmental history at Omai Au mine may be a flash point • Exposed to falling Au and Ag prices

Key investments

Com

Location

Status

% Own

Description

Casposo

Au, Ag

Argentina

Operating

100%

Andorinhas

Au

Brazil

Operating

100%

West Omai

Au

Guyana

Prefeasibility

100%

East Omai

Au

Guyana

Exploration

100%

Former OP mine, now UG. 69,314oz Au + 1.36Moz Ag in FY2013. Complex UG mine. 33,688oz in FY2013. Iron ore royalty also due. 1.6Moz at 3.1g/t Au resource, near IAMGOLD's Omai mine. Early stage exploration project, east of Omai mine.

HeAD oFFIce Unit12, 1st Floor, 11 Ventnor Avenue West Perth WA 6005 Australia Web: www.troyres.com.au

Share price ($A)

$1.64

12-month high

$5.02

12-month low

$1.22

Market capitalisation

$251.5m

Key countries

Argentina, Brazil, Guyana

Commodities

Au, Ag

Iron ore

ATlAs Iron

ASX: Ago

Share PriCe triggerS: aggreSSive exPanSiOn OF irOn Ore PrODuCtiOn

Has a track record of smart development and deal-making in the Pilbara region, building up a mid-tier direct ship iron ore company. Now has three operating iron ore mines (Pardoo, Wodgina and Mt Dove), with a fourth at Abydos currently commissioning and a fifth at Mt Webber receiving environmental permits. Aiming to build up 15Mtpa of production filling its allotment at Utah Point, Pt Hedland. On track to reach 10Mtpa by the end of this year and 15Mtpa by 2015. Beyond this, AGO’s Horizon 2 plans involve expanding capacity a further 30Mtpa.

Key StrengthS

• • • •

Three producing iron ore mines Further iron ore capacity under construction Range of development opportunities Strategic infrastructure investments

Key investments

Com

Location

% Own

AGO's 1st mine 1Mtpa DSO iron ore mine 75km from Port Hedland. 5Mtpa DSO iron ore mine at Global Advanced Metals Wodgina mothballed Ta mine. 100% 3rd producing DSO iron ore mine. Part of the Horizon 1 expansion. Various Port access at Utah Point & South West Creek and rail alliances. 70-100% Targeting 15Mtpa production, with development of Abydos, Mt Webber & Corunna Downs mines & port. 100% Development of McPhee Creek, Davidson Creek Hub, McCameys North & Western Creek projects. Various Mid-West iron ore projects and steel raw material related equity investments. 100% 2Bt magnetite iron ore project within the Pardoo project area. 53% ASX:SRR is developing the Otjozondu manganese project in Namibia. 20% ASX:CTM is developing iron ore projects in Brazil focused on the domestic market. Various Equity stakes in ASX:ZNC (10.8%), ASX:LSN (6.3%), ASX:GCY (3.2%) & ASX:LLO (2.8%).

Pardoo

Fe

WA

Operating

Fe

WA

Operating

Mt Dove

Fe

WA

Operating

Infrastructure

n/a

WA

Operating

Horizon 1 Expansion Horizon 2 Development Horizon 3 Diversification Ridley

Fe

WA

Construction

Fe

WA

Feasibility

Strategic investments

128

• Vulnerable to iron ore prices falls • Aggressive expansions will drain cash • Expanded port and rail infrastructure deals not yet worked out • Horizon 3 options looking limited

Status

Wodgina

Shaw River Resources Centaurus Metals

Key riSKS

Fe

WA

Exploration

Fe

WA

Feasibility

Mn Fe, Mn

WA, Ghana, Investment Namibia Brazil Investment

Various

Various

Investments

100%

100%

Description

HeAD oFFIce Level 18, Raine Square, 300 Murray St Perth WA 6000 Australia Web: www.atlasiron.com.au DIrecTors David Flanagan (chair), Ken Brinsden (MD), Mark Hancock (ED), David Smith, David Hannon, Tai Sook Yee, Jeff Dowling, Kerry Sanderson, Geoff Simpson Share price ($A) 12-month high 12-month low Market capitalisation Key Countries

Commodities

$0.87 $1.94 $0.69 $791.5m Australia, Namibia, Ghana, Fiji, Argentina Fe, Mn, Zn, Pb, Cu, Au, Ag, U

OCTOBER/NOVEMBER 2013 rESoUrCEStoCKS


Iron ore

bc iron

ASX: bci

Share PriCe triggerS: nuLLagine irOn Ore PrOfit engine

Has established itself as a mid-tier iron ore producer, achieving a record 5Mt production from its Nullagine operations in the 2012-13 financial year (BCI share now 75%). Production guidance for 2013-14 is for 5.8-6.2Mt. Nullagine is operated by BCI with the project’s equity now split 75% BCI, 25% FMG following BCI’s purchase of an additional 25% interest in Nullagine. Pisolitic iron ore from Nullagine is marketed as Bonnie Fines to China, with the ore low in key impurities (phosphorus and silica). Nullagine ore is mined at surface and then trucked to the FMG rail head for transportation and export from Port Hedland. BCI estimates 2014 operating costs in the region of $A46-50/t. Current mine life at Nullagine is 7 years with the company assessing life-of-mine extension opportunities. The Nullagine mine comprises 4 separate deposits, with the Outcamp and Warrigal deposits currently being mined. Future mining will see Bonnie East (2015) and Coongan (2017) developed.

Key StrengthS • • • •

Project delivery track record Operation shows potential for 6Mtpa Low impurities, notably phosphorus Strong operating cash margin

Key riSKS • • • •

Single asset risk Iron ore price risk Potential disruption in Jan-March wet season Outbound logistics risk (rail, shipping)

Key investments

Com

Location

Status

% Own

Description

Nullagine (Outcamp Well)

Fe

WA

Operating

75%

5Mtpa iron ore JV with FMG.

Bungaroo

Fe

WA

Exploration

100%

Channel Fe deposit exploration target .

Minas Girais

Fe

Brazil

Exploration

Earning

Early-stage greenfields exploration projects.

HEAD oFFicE Level 1, 15 Rheola Street West Perth WA 6005 Australia Web: www.bciron.com.au DirEcTorS Tony Kiernan (chair), Morgan Ball (MD), Mike Young, Terry Ransted, Malcolm McComas, Andrew Haslam Share price ($A)

$4.26

12-month high

$4.54

12-month low

$2.52

Market capitalisation

$526.7m

Key Countries

Australia

Commodities

Fe

Iron ore

cEnTAuruS METAlS

ASX: ctm

Share PriCe triggerS: MOveMent tOwarDS COnStruCtiOn at JaMbreirO irOn Ore

Aims to supply Brazil’s increased demand for iron and steel as its builds infrastructure for the 2014 Football World Cup and 2016 Olympic Games. CTM hopes to build a number of modestsized itabirite iron ore and manganese mines in the country to supply the increased domestic market, then use this cash flow to build a larger export-focused iron ore mine. CTM is beginning to complete these goals, with financing of the Jambreiro iron ore project now underway following permitting earlier this year and a successful BFS in November 2011. The permits allow a 3Mtpa operation, though start-up capacity will be 2Mtpa. Life-of-mine offtake negotiations are underway with domestic steel mills, with debt discussions due to start with international finance houses. CTM is aiming for Jambriero to start operation in mid-2014. In May, CTM also announced a maiden ore resource at the Canavial project of 27.6Mt grading 30.5%.

Key StrengthS

• Brazil is a major iron & steel consumer and producer • Jambreiro project at financing stage. • Multiple domestic iron ore development options • Support of 19.85% cornerstone investor, Atlas Iron

Key riSKS • • • •

Brazilian economy slowing considerably Bureaucracy and permitting slow in Brazil Domestic iron ore projects are low grade International iron ore market weaker

Key investments

Com

Location

Status

% Own

Description

Jambreiro

Fe

Brazil

Financing

100%

Canavial

Fe

Brazil

Exploration

100%

Candonga

Fe

Brazil

Exploration

100%

Itambe Passabem Serra da Lontra

Fe Fe Fe

Brazil Brazil Brazil

Pre-Feasibility Scoping Exploration

100% 100% 100%

Ponte de Pedra

Mn

Brazil

Exploration

100%

125.2Mt of 26.7% iron ore for domestic market produced at 2Mtpa. Jambreiro satellite. Maiden mineral resource of 27.6Mt of 30.5% iron ore. Jambreiro satellite. RC drill campaign underway. Maiden resource estimate due. 10Mt of 36.6% iron ore for Brazilian domestic market. 39Mt of 31% iron ore for Brazilian domestic market. Unsuccessful exploration. Negotiations underway to return project to vendor. Exploration for manganese in Minas Gerais Fe & steel province.

OCTOBER/NOVEMBER 2013 RESOURcEStOcKS

HEAD oFFicE Level 1, 16 Ord Street West Perth WA 6005 Australia Web: www.centaurus.com.au DirEcTorS Didier Murcia (chair), Darren Gordon (MD), Peter Freund (OD), Richard Hill, Mark Hancock Share price ($A)

$0.15

12-month high

$0.39

12-month low

$0.11

Market capitalisation

$29.4m

Key Countries

Brazil

Commodities

Fe, Mn 129


Iron ore

centrex metals

ASX: cXm

Share PriCe triggerS: Further internatiOnaL buLK COmmODity DeveLOPment DeaLS

At a time most mining companies are trying to conserve cash, CTM took the unusual step of paying a special cash dividend in February after determining it had more cash than the short and medium-term developments required. This is testament to the way CTM is building a substantial iron ore and infrastructure centre in the Eyre Peninsula, South Australia. CTM has JV’d most of its capital-intensive projects with large Chinese partners, who have made cash payments for interest as well as funding development. As a result, the 894Mt Eyre and 338Mt Bungalow joint venture magnetite projects are at feasibility stage, along with the Port Spencer infrastructure project. Pt Spencer also has support from the SA government, awarded major project status in late 2012. The Eyre JV with major magnetite end-user Wuhan Iron & Steel could produce 5Mtpa, utilising national grid power, and desalination and shipping facilities at Pt Spencer.

Key StrengthS • • • •

Several substantial magnetite iron projects. $A46.5 million cash for development. Strategic Chinese development partners. Key port infrastructure project on the Eyre Peninsula.

Key riSKS

• Falling investor interest in magnetite. • High capital costs associated with magnetite projects. • Port infrastructure also has to be constructed. • A number of projects stalled at feasibility stage.

Key investments

Com

Location

Status

% Own

Description

Wilgerup

Fe

SA

Feasibility

100%

Eyre Iron JV

Fe

SA

Feasibility

40%

Bungalow JV

Fe

SA

Pre-Feasibility

70%

Kimba Gap Port Spencer

Fe n/a

SA SA

Exploration Feasibility

100% 50%

Gundaroo

Cu, Pb, Zn, Au Cu, Pb, Zn

NSW

Exploration

100%

NSW

Exploration

65%

DSO haematite iron ore project with 13.3Mt grading 57.7% on the Eyre Peninsula. JV with Wuhan Iron & Steel. 894Mt magnetite iron ore resource. Baotou Iron & Steel has rights to 50%. 338Mt magnetite iron ore resource. 275-420Mt exploration target on the Eyre Peninsula. 20Mtpa multi-user deepwater port project on the Eyre Peninsula. Early-stage base metal & Fe target in the Laclan fold belt. Shandong 5th Geo-Mineral Prospecting Institute earning upto 80%. Early-stage base metals.

Goulburn JV

HeaD OFFIce Unit 1102, 147 Pirie Street Adelaide SA 5000 Australia Web: www. centrexmetals.com.au DIrectOrs David Klingberg (chair), Jim White (ED), Kiat Poh, Graham Chrisp, Jim Hazel, John den Dryver, Bingqiang Lu Share price ($A)

$0.14

12-month high

$0.22

12-month low

$0.12

Market capitalisation

$43.9m

Key Countries

Australia

Commodities

Fe, Cu, Pb, Zn, Au

Iron ore

equatOrIal resOurces

ASX: eqX

Share PriCe triggerS: tOwarDS weSt aFriCan irOn Ore exPOrtS

Seeking to develop large -cale iron ore resources in the Republic of Congo, West Africa. EQX is advancing the Mayoko-Moussondji iron project to prefeasibility stage, having released an initial scoping study in July. Project economics look attractive for the initial development of a modest-scale Stage 1 (500,000tpa) hematite operation using existing rail and port infrastructure. Outbound logistics from Mayoko are a key advantage for the project, with transport of ore planned via an existing heavy-haulage rail line and then iron ore exports to international markets via the deep port of Pointe Noire. To this end, EQX has put in place a rail access agreement and also completed a prefeasibility study on the port access, expansion and development. Initial capital cost for the project is estimated at $US114M to initial production and $231M encompassing mine, rail and port upgrades. Life-of-mine average cash costs are estimated at $US41/t FOB. A 64% Mayoko Premium Fines product is planned at 2Mtpa steady state production.

Key StrengthS

• Mayoko project well-located to existing infrastructure • Pro-development mining jurisdiction • Government project equity capped at 10% • Initial DSO hematite operation planned

Key riSKS • • • •

DIrectOrs Ian Middlemas (chair), John Welborn (MD), Mark Pearce, Peter Woodman

Iron ore price risk Grade and exploration risk Capital requirements may escalate Completion of environmental approvals

Key investments

Com

Location

Status

% Own

Description

MayokoMoussondji

Fe

Republic of Congo

Feasibility

100%

3-staged iron ore (hematite and magnetite) export project.

Badondo

Fe

Republic of Congo

Feasibility

90%

Regional long-term iron ore province potential.

130

HeaD OFFIce Level 2, BGC Centre, 28 The Esplanade Perth WA 6000 Australia Web: www.equatorialresources.com.au

Share price ($A)

$0.66

12-month high

$2.03

12-month low

$0.43

Market capitalisation

$80.4m

Key Countries

Republic of Congo

Commodities

Fe

OCTOBER/NOVEMBER 2013 ReSOURceSTOcKS


Iron ore

Ironclad MInIng

ASX: ife

Share PriCe triggerS: WiLCherry hiLL irOn Ore PrODuCtiOn

Focused upon developing the Wilcherry Hill direct-shipping magnetite project in South Australia, approximately 30km north of the township of Kimba. IFE holds 80% equity in the project, with the balance held by Trafford Resources (TRF). Project development capital is modest – and estmated by IFE at just $15m in project capital, combined with $6m in working capital on the assumption of amended development approval for the Lucky Bay common user port facility. Production is anticipated in 2014. Stage 1 development of Wilcherry Hill (targeting up to 2Mtpa) is to direct-ship, high-grade magnetite ore – followed by later Stage 2 development to expand into concentrate export (targeting 5-6Mtpa). Direct-shipping ore is near surface and enjoys the benefit of low stripping ratios. Ore will be transported by double road trains to a stockpile location 1.2km from the Lucky Bay facility, then loaded into containers for transshipment. A barge-mounted crane will perform the loading operation. Environmental and final permitting approvals are well advanced, with financing discussions being progressed.

Key StrengthS

• • • •

Key riSKS

Tight project focus High-grade, direct-shipping ore Modest capital requirements Expansion potential

• • • •

Project delivery may be delayed Iron ore price risk Stage 2 development capital Capital and operating cost management

HEad oFFIcE Level 2, 679 Murray Street West Perth WA 6005 Australia Web: www.ironcladmining.com dIrEcTorS Ian Finch (chair), Robert Mencel (MD), Neil McKay, Peter Rowe Share price ($A)

$0.16

12-month high

$0.36

12-month low

$0.07

Market capitalisation

$17.3m

Key investments

Com

Location

Status

% Own

Description

Key Countries

Australia

Wilcherry Hill (Iron)

Fe

SA

Feasibility

80%

JV interest with TRF; Direct-Shipping Iron Ore.

Commodities

Fe

Iron ore

MounT gIbSon Iron

ASX: mgX

Share PriCe triggerS: entering high PrODuCtiOn PhaSe

Established itself is a mid-tier iron ore miner, with operations focused in WA’s Mid West and the northern Kimberley. Tallering Peak in the Mid West was MGX’s first mine, which should produce a final 2.5Mt of direct-ship haematite iron ore before closing in 2014. MGX has taken the Extension Hill mine on stream in the Mt Gibson ranges to replace this production at a rate of 3Mtpa. The mine life is limited at 5 years, but further development options exist in the area, including Extension Hill South, Iron Hill, Gibson Hill and low-grade stockpiles. MGX has also expanded its port facilities in Geraldton to 6Mtpa, so there is the capacity to market any new mine capacity. Koolan Island is a former BHP Billiton operation off the northern coast of the Kimberley. The mine is expanding to a 4Mtpa capacity, due for completion in 2014. Ore is shipped from the mine at its own port. While all three mines are operating, MGX will go through a high production phase, producing 7-8Mtpa of iron ore over the next 4 years, compared to the rate of 5-6Mtpa seen over the past 5. Beyond this, MGX hopes to use its cash reserves to expand resources at its own operations and to make acquisitions that complement its current assets and strategic Geraldton port facility. Up to 200 different leaseholders are thought to exist in the Midwest region.

Key StrengthS • • • •

Three operating iron ore mines Strategic Geralton port facility $A280m cash reserve and no debt Asian cornerstone investors – APAC Resources (26%) & Shougang Fushan (15%)

Key riSKS

• Vulnerable to further falls in the iron ore price • Mid West capacity capped at 6Mtpa by port facilities • Tallering Peak mine closing • Short mine life (5 years) at Extension Hill

HEad oFFIcE Level 1, 2 Kings Park Rd West Perth WA 6005 Australia Web: www.mtgibsoniron.com.au dIrEcTorS Geoffrey Hill (chair), Lee Seng Hui (deputy), Jim Beyer (CEO), Alan Jones, Li Shaofeng, Chen Zhouping, Russell Barwick, Prof. Paul Dougas, Simon Bird Share price ($A)

$0.79

12-month high

$0.94

Key investments

Com

Location

Status

% Own

Description

Tallering Peak

Fe

WA

Operating

100%

2.5Mtpa haematite Fe mine, due for closure this year.

12-month low

$0.41

Extension Hill, Mt Gibson

Fe

WA

Operating

100%

3Mtpa DSO haematite Fe mine in the Mt Gibson Ranges, 260km SE of Geraldton.

Market capitalisation

$856.1m

Koolan Island

Fe

WA

Operating

100%

Former BHP Billiton 3Mtpa high-grade haematite Fe mine off the northern Kimberley coast.

Key Countries

Australia

Geraldton Port

n/a

WA

Operating

100%

6Mtpa of capacity at the port, strategically positioned in the Mid West.

Commodities

Fe

OCTOBER/NOVEMBER 2013 ReSOURCeSTOCKS

131


iron ore

royAl resources

ASX: rOy

Share priCe triggerS: DeLivering LOwer COSt iDeaS at razOrbaCK magnetite prOjeCt

Magnetite projects have become unpopular with Australian investors, with high capital costs proving insurmountable for a number of developers. But ROY is determined to prove it’s the exception by delivering a premium product from a low-grade magnetite deposit at low capital and operating costs. ROY’s Razorback project hosts 1.8Bt of 21.0% magnetite iron ore, as well as a further 1.1Bt grading 23.2% in the nearby Ironback Hill project. A recent PFS saw ROY considering a number of innovative options to pursue lower operating and capital costs at the proposed 8Mtpa operation. Operating costs are forecast to be $A63/t with capital costs of $2.2b. ROY is planning a continuous surface mining operation with no pre-stripping, then utilising a conventional flow sheet for processing to keep costs low. By transporting the ore to the coast via a slurry pipeline, not only are costs likely to be lower than building a railway line, but the environmental impact is likely to be lower.

Key StrengthS • • • •

Key riSKS

Substantial magnetite resource at Razorback Corporate focus on reducing capital costs Innovative options to reduce operating costs South Australia is a pro-mining jurisidiction

• Lack of investor interest in magnetite projects • Substantial capital costs for magnetite projects • Strategic investor may be required to advance the project • Limited portfolio – other projects very early stage.

Key investments

Com

Location

Status

% Own

Description

Razorback

Fe

SA

Feasibility

100%

Razorback (Ironback Hill) West Gawler Craton Aldershot Resources JV NT uranium exploration Water Tank

Fe

SA

Exploration

100%

Fe, Ni, Cu, Au, Potash U, Au

SA

Exploration

100%

NT

Exploration

60%

U

NT

Exploration

100%

Au

WA

Exploration

100%

1.8Bt of 21.0% magnetite iron ore. Potential 8Mtpa mine. 1.1Bt of 23.2% magnetite iron ore. Part of larger Razorback project complex. Early-stage multi-commodity prospects – Cooper Hill & Ooldea. JV with TSX:ALZ exploring Ngalia, George, Waterhouse West & ABC U3O8 & Au prospects. Yatjula, Gum Creek, Naburula & Djambdimba prospects. High-grade but isolated Au prospect near Norseman.

HeAD oFFice Level 1, Unit 4, 28 Kintail Road Applecross WA 6153 Australia Web: www.royalresources.com.au DirecTors Philip Crabb (chair), Marcus Flis (MD), Frank Demarte, Malcolm Randall Share price ($A)

$0.04

12-month high

$0.11

12-month low

$0.03

Market capitalisation

$13.9m

Key Countries

Australia

Commodities

Fe, U, Au, Ni, Cu, potash

nickel

mincor resources

ASX: mcr

Share priCe triggerS: pOSitiOning fOr a piCK-up in niCKeL priCeS

The nickel market is very challenging, however those producers able to weather the storm and continue investing will be well placed for the next part of the cycle. MCR believes itself to be one of these, by virtue of its strong balance sheet, no debt, mines still operating profitably and nearterm exploration opportunities. MCR is on track to meet its FY2013 production and cost targets of 9000t of nickel for $A12,125/t at its Kambalda operations.

Key StrengthS

• Historically strong cash flow from Ni operations • Regular dividend payer since 2003 • Cost control to beat falling Ni prices underway • Ambitious exploration-driven growth and diversification plan Key investments

Com

Location

Status

Key riSKS

• Vulnerable to further falls in Ni price. • Struggling to replace ore reserves at Kambalda • Exploration projects in PNG and Australia very early stage • Substantial political risk in PNG % Own

Description 4 operating mines with a potential to produce 8Ktpa Ni. Closed in 2008. Further resources remain below previous levels. 17.1Kt Ni at 3.1% Ni. PFS confirmed viability. Further work underway. 19.4Kt Ni at 5.1% NI. Further exploration to increase resources underway. High grade Cu-Au VMS project in Lachland Fold Belt. 86Kt Cu @ 1.2%. Early-stage Zn-Pb project in Canning Basin. Early-stage project near Kununurra. JOGMEC earning 40%. Early-stage U target. Not a priority. 4 tenements prospective for Cu, Au & Fe in the Gawler Craton. Earning 72% from Niuminco. Cu-Au porphyry target near Ok Tedi. Earning 72% from Niuminco. Cu-Au porphyry target near Frieda River.

Kambalda mines

Ni

WA

Operating

100%

Wannaway

Ni

WA

Closed

100%

Stockwell

Ni

WA

Feasibility

100%

Durkin North

Ni

WA

Pre-Feasibility

100%

Tottenham

Cu, Au

NSW

Exploration

100%

Bohemia Bonaparte

Zn, Pb Zn, Pb, Cu U Zn, Pb

WA WA

Exploration Exploration

100% 100%

WA SA

Exploration Exploration

100% 100%

Cu, Au

PNG

Exploration

Earning

Cu, Au

PNG

Exploration

Earning

Gascoyne South Australian Prospects Bolopip May River

132

HeAD oFFice Level 1, 56 Ord Street West Perth WA 6005 Australia Web: www.mincor.com.au DirecTors David Humann (chair), David Moore (MD), John ‘Jack’ Gardner, Ian Burston Share price ($A)

$0.61

12-month high

$1.24

12-month low

$0.45

Market capitalisation

$114.8m

Key Countries

Aus, PNG

Commodities

Ni, Cu, Au, Pb, Zn, U

OCTOBER/NOVEMBER 2013 rESOUrcESTOcKS


nickel

Panoramic resources

ASX: pAn

Share PriCe triggerS: 20,000 tOnne niCKeL PrODUCtiOn

Has been punished in 2012-13 for buying resource assets rather than hoarding cash during a weak point in the market over the past two years – with the company expanding its nickel asset portfolio into gold and platinum. The market reaction appears harsh – especially as PAN has continued to pay a dividend and maintained good nickel production. Production guidance for 2013-14 has been raised to 19,000-20,000t contained nickel from its flagship mines at Lanfranchi and Savannah in WA. Project development for the gold (WA) and platinum (Canada, WA) is likely to take a backseat for the next 12 months as markets recover. Significant new nickel resources continue to be delineated at both operations via near-mine exploration, with the Lanfranchi complex in particular looking to have a lengthy future. In the gold division, the Gidgee project near Wiluna continues as an advanced exploration project, as does the Mt Henry gold project near Norseman. Longer term, the Thunder Bay North platinum-palladium project (Canada) & Panton (East Kimberley) platinum projects also hold diversification potential for PAN.

Key StrengthS

Key riSKS

• Ni mine cash flows • Strong Ni exploration potential around Lanfranchi mine • Au and platinum development assets • Dividend stream

• • • •

Development capital for project pipeline Cost control Exploration risk Ni (& precious metals) price risk

HeaD oFFice Level 9, 553 Hay Street Perth WA 6000 Australia Web: www.panoramicresources.com DirecTors Brian Phillips (chair), Peter Harold (MD), Chris Langdon, John Rowe Share price ($A)

$0.28

12-month high

$0.68

Key investments

Com

Location

Status

% Own

Description

Lanfranchi Mine Complex Savannah Panton Copernicus Gidgee Mt Henry

Ni

WA

Operating

100%

Reserves of 36,000t nickel.

12-month low

$0.20

Ni Pt Ni Au Au

WA WA WA WA WA

Operating Feasibility Feasibility Feasibility Exploration

100% 100% 79% 100% 70%

Market capitalisation

$73m

Key Countries

Australia, Canada, Sweden

Pt, Pd

Canada

Feasibility

100%

Reserves 46,000t Ni & 23,000 Cu. 1Moz platinum & 1.1Moz palladium resource. Satellite Ni ore source for Savannah processing plant. 1.05Moz in Au resources. 1Moz PAN equity interest in Au resources (acquired from Matsa Resources). Acquisition upon takeover of Magma Metals (790,000oz PGE-eq resources).

Commodities

Ni, Pt, Au

nickel

sirius resources

ASX: Sir

Share PriCe triggerS: On traCK tOwarD DeveLOPment

Has been the standout performer among emerging resources companies in 2012-13, with the Nova-Bollinger dual nickel-copper sulphide discovery in the Fraser Range the principal value driver. That said, its share price has halved in recent months from its peak of touching $5/share – despite material progress being made towards eventual project development. Significant upside remains in terms of exploration discovery, project economics and commodity prices – with nickel in particular experiencing a downturn in pricing. July 2013 resource estimates for NovaBollinger returned a combined 325,000t contained nickel metal, 134,000t contained copper and 11,000t contained cobalt. Development looks assured given that a typical nickel sulphide orebody in WA is a mere 1Mt at 2.5-3% nickel (without tangible copper credits). Further exploration by SIR in the district continues alongside several other junior ASX hopefuls, including Enterprise Metals, Ausquest, Pioneer Resources, Buxton Resources, Classic Minerals and Matsa Resources.

Key StrengthS

• World-class Ni sulphide discovery • Ni sulphide discovery points to new Ni province • Ability to raise capital as required • Quality exploration portfolio and management

Key riSKS

• • • •

Ni discovery economics still early-stage Capital cost escalation Potential project delays Ni price risk

Key investments

Com

Location

Status

% Own

Description

Nova

WA

Exploration

70%

10.2Mt @ 2.4% Ni, 1% Cu & 0.08% Co.

WA

Exploration

70%

4.4Mt at 1.8% Ni, 0.9% Cu & 0.07% Co.

WA Canada WA

Exploration Exploration Exploration

100% Earning 100% 100%

Fraser Range

Ni, Cu, Co Ni, Cu, Co Ni, Au Cu Ni, Cu, Pt Ni, Au

WA

Exploration

70%

Youanmi

Ni

WA

Exploration

70%

Ni sulphides to 2% Ni in shallow fresh rock. Mo & Cu soil anomalies. Ni sulphide targets in greenstone beneath cover rocks. Regional JV (including Nova) with prospector Mark Creasy. Archaean mafic Ni targets.

Bollinger Polar Bear Canyon Creek Collarabbie

OCTOBER/NOVEMBER 2013 rESOUrCESTOCKS

HeaD oFFice 5/5 Mumford Place Balcatta WA 6021 Australia Web: www.siriusresources.com.au DirecTors Jeff Dowling (chair), Mark Bennett (MD), Jeff Foster, Terry Grammer, Stephen Lowe, Anna Neuling Share price ($A)

$2.81

12-month high

$5.00

12-month low

$1.56

Market capitalisation

$637.9m

Key Countries

Australia

Commodities

Ni, Cu, Co, Au 133


nickel

wEstErn arEas

ASX: wSA

Share PriCe triggerS: high-graDe niCKeL PrODUCtiOn tO COntinUe

WSA has two strong-performing nickel mines in WA in the Forrestania region south of Southern Cross. Despite a fall in the nickel price, the Flying Fox and Spotted Quoll operations continue to generate strong cash flows and maintain access to high-grade ore. Ore is processed to concentrate stage at the Cosmic Boy concentrator and sold on to China’s Jinchuan Group and to BHP Billiton for downstream processing. WSA has become regular dividend payer and an intensive explorer, both in the Forrestania area, which retains excellent potential and further afield in Australia and overseas. The acquisition of the Lounge Lizard nickel property adjoining Flying Fox has streamlined underground mine production and provided a platform to explore close to existing mine infrastructure and development. High-grade intersections at the New Morning prospect bode well for future discovery.

Key StrengthS

• • • •

Solid operational track record: low costs Dividends High grades set to continue Near-mine exploration potential

Key riSKS

• Single commodity focus incurs price risk • Controlling costs as mines go deeper • Lower grade Forrestania projects need higher Ni prices to be developed • Exploration and mining technical risks

DirECtOrs Terence Streeter (chair), Dan Lougher (MD), Julian Hanna, Ian Macliver, Richard Yeates, Robin Dunbar, David Southam

Key investments

Com

Location

Status

% Own

Description

Flying Fox (Forrestania) Spotted Quoll (Forrestania) Cosmic Boy (Forrestania) Forrestania exploration

Ni

WA

Operating

100%

Ni

WA

Operating

100%

Ni

WA

Operating

100%

Ni

WA

Exploration

Various

Musgrave FinnAust Mining

Ni Ni, Cu, Zn, Co N/A

WA Finland

Exploration Exploration

Earning 84%

N/A

Technology

100%

High grade underground Ni sulphide mine producing ~12-15,000tpa Ni. High grade underground Ni sulphide mine producing ~10,000tpa Ni. Location of concentrator plant for Forrestania, with exploration potential. Multiple brownfield Ni targets – Diggers South, Sunrise, New Morning, Mt Gobb, Kawana and Hatters Hill (some joint ventures). Earning 70% equity from Traka Resources. Equity in private company exploring for base metals in Finland. BioHeap leaching technology for processing low-grade Ni ores.

Bioheap

HEaD OFFiCE Level 2, 2 Kings Park Road West Perth WA 6005 Australia Web: www.westernareas.com.au

Share price ($A)

$2.95

12-month high

$4.82

12-month low

$2.19

Market capitalisation

$580.7m

Key Countries

Australia, Finland

Commodities

Ni, Cu

uranium

EntErprisE UraniUm

ASX: enu

Share PriCe triggerS: teSting Large-SCaLe Wa UraniUm targetS

Targeting Tier 1-scale uranium deposits in WA, having assembled a portfolio of 100%-owned prospects. ENU has used a combined geophysical (airborne EM, radiometrics) and geomorphology (historical drainage analysis) approach to select prospective areas. Projects are large scale, each typically covering in excess of 1000sq.km. ENU’s project portfolio comprises the Byro, Ponton, Pernabye, Harris Lake and Yalgoo regional uranium targets. All projects remain early stage; however each shows promising signs for discovery. For example, ENU’s Ponton project sits within a known uranium province east of Kalgoorlie. That is, immediately NE of ENU’s Ponton Project lies Manhattan Corporation’s (MHC) Double 8 uranium deposit (17.2Mlb U3O8 at a 200ppm cutoff), and further to the northeast lies Energy and Minerals Australia’s Mulga Rock uranium deposit (54.04 Mlb U3O8 at a 200ppm cutoff). The WA government, through its Exploration Incentive Scheme, has made a number of grants to ENU in order to co-fund drill testing of its uranium targets in 2013-14.

Key StrengthS

• Multiple projects targeting U & other metals • Calcrete-hosted U discoveries in the Yilgarn • Untested, large-scale U-bearing drainage systems • State co-funding to test drill targets

Key riSKS

• • • •

Many targets remain at the conceptual stage U mineralisation sub-scale thus far Exploration risk U projects typically have long lead times post-discovery

DirECtOrs Anna Mao (chair), Dermot Ryan (CEO), Michael Atkins, Dr Zhen Huang Share price ($A)

$0.04

12-month high

$0.19

12-month low

$0.03

Deep palaeochannels revealed by Airborne EM 200km East of Kalgoorlie.

Market capitalisation

$2.5m

100%

Calcrete & palaeochannel U targets in the West Murchison area.

Key Countries

Australia

100%

Airborne EM defined deep sand channels draining granites near Perenjori.

Commodities

U

Key investments

Com

Location

Status

% Own

Description

Byro

U

WA

Exploration

100%

Calcrete & sandstone-hosted U targets in the Murchison drainage system.

Ponton

U

WA

Exploration

100%

U targets close to Manhattan Corporation.

Harris Lake

U

WA

Exploration

100%

Yalgoo

U

WA

Exploration

Peranbye

U

WA

Exploration

134

HEaD OFFiCE 640 Murray Street West Perth WA 6005 Australia Web: www. enterpriseuranium.com.au

OCTOBER/NOVEMBER 2013 ReSOuRCeSTOCKS


uranium

energy & MInerAlS AuStrAlIA

ASX: emA

Share PriCe triggerS: muLga rOCKS PrOjeCt eCOnOmiCS

Advancing the Mulga Rocks uranium project in Eastern Goldfields region of WA, 250km east of Kalgoorlie. Resources at the project total 28,300t of U3O8 at a grade of 500ppm. This year saw a change of executive team at EMA, with the addition of Mike Young (chair) and Julian Tapp (CEO), both with significant project delivery experience. Mulga Rocks comprises 3 separate uranium-bearing, polymetallic mineral deposits named Ambassador, Emperor and Shogun. Uranium at Mulga Rocks was discovered in 1979 by the Japanese government-owned corporation, PNC Exploration Australia. Mulga Rocks contains lignite-hosted and sandstonehosted U3O8, with the ore horizon containing elevated nickel, cobalt, vanadium and rare earth metals. A recent scoping study estimates a positive NPV of $330m on the assumption of a $US70/lb contract price, a 1400t U3O8 pa production rate (for an initial 15-year mine life) and a $A40/lb operating cost.

Key StrengthS

• Material U deposit • Exploration upside and high-grade U3O8 zones (>1000 ppm) • WA government support for U developments • Sandstone-hosted uranium amenable to in-situ recovery

Key riSKS • • • •

Environmental permitting Metallurgical recoveries Project funding & off-take Single project risk

HeAD oFFICe Ground Floor, 25 Richardson Street West Perth WA 6005 Australia Web: www.eama.com.au DIreCtorS Mike Young (chair), Julian Tapp (CEO), David Cornell

Share price ($A)

$0.04

12-month high

$0.08

12-month low

$0.02

Market capitalisation

$16.9m

Key investments

Com

Location

Status

% Own

Description

Key Countries

Australia

Mulga Rocks

U

WA

Feasibility

100%

Assessment of in-situ leaching of sandstone-hosted resources.

Commodities

U

uranium

toro energy

ASX: toe

Share PriCe triggerS: FinanCing agreementS FOr WiLuna uranium PrOjeCt

Has been one of the few solid performers among the ASX minerals companies this year, with huge strides made towards developing Wiluna into WA’s first uranium mine. WA’s environment minister approved the project in October, followed by federal approval in April 2013. The appeal period lapsed in June, bringing the 3.5-year permitting period to an end. TOE is now focusing on financing and off-take agreements, with negotiations taking place with a variety of Asian groups. Concurrently, TOE is working on a DFS due for completion in 2014. Project economics were updated in November, based on an earlier PFS and recent engineering work for the DFS. The plan envisages a 780tpa U3O8 mine operating for 10-14 years and constructed at a cost of $A269m. The operating costs are forecast to be about $41/lb, close to the current spot price for U3O8, so the project is contingent on an improvement in the uranium market and a weaker $A. Elsewhere, TOE is advancing another significant uranium project in the NT, with a maiden resource announced in January hosting 3100t of U3O8. TOE is a substantial uranium tenement holder across WA & the NT.

Key StrengthS

• Fully permited Wiluna project set to become WA’s first U mine • Substantial maiden resource at Theseus U project • Huge U tenement holding across WA & NT • Support of OZ Minerals as 39% cornerstone investor

Key riSKS

• Forecast operating costs close to current weak U spot price • Financing and definitive feasibility work for Wiluna not yet complete • Production from Wiluna still several years away – 2016 forecast • U industry always fraught with uncertainty and protests

Key investments

Com

Location

Status

% Own

Description

Wiluna

U

WA

Financing

100%

Theseus (Lake Mackay) NT Exploration

U

WA

Exploration

100%

U

NT

Exploration

100%

Namibia Exploration

U

Namibia

Exploration

100%

Set to become WA's first U mine. Permiting complete, financing underway. 2009 discovery on NT border. 10-10Kt U3O8 exploration target. Substantial land holdings targeting uranium across the NT. 3 tenement positions. Not currently a priority.

OCTOBER/NOVEMBER 2013 ReSoURCeStoCKS

HeAD oFFICe 3 Boskenna Avenue Norwood SA 5067 Australia Web: www.toroenergy.com.au DIreCtorS Dr Erica Smyth (chair), Dr Vanessa Guthrie (MD), Greg Hall, Peter Lester, Andrew Coles Share price ($A)

$0.09

12-month high

$0.15

12-month low

$0.06

Market capitalisation

$91.7m

Key Countries

Australia, Namibia

Commodities

U 135


A pint with ...

words by Anthony bArich

ben bucknell

Swimming with sharks while pearl diving in his teens proved an apt pedigree for Ben Bucknell taking an ASX tool onstream that may transform investor confidence at a critical time.

S

On-Market BookBuilds CEO Ben Bucknell.

136

ince before he could remember, ASX on-Market bookbuilds founding ceo ben bucknell’s father bought him bhP stocks for his birthday, so he imbibed his passion for the stock market from his first mentor. having grown up on a farm in northwest nSW, bucknell had never been out to sea, so diving for pearls for Paspaley in his first year out of high school on the coburg Peninsula, off the coast of darwin, from 5am10pm was as far out of the ordinary as he could get. he invested the money earned “turning” pearls – essentially looking after the shells that had been inseminated – back into his stock portfolio, which by his early 20s had diversified into a more speculative portfolio of mining stocks. however, he lost most of that in the 1997-98 Asian financial crisis and had to earn it all back. So after graduating in lawcommerce from the university of Sydney, bucknell studied at beijing language and culture university, learning Mandarin, funded by investing well in T1, the first Telstra float.

returning to Australia, bucknell worked as a mergers and acquisitions lawyer at Allens, then went to the buy-side for Washington h Soul Pattinson group of companies’ investment banking division. from there he went to Macquarie’s equity capital markets division. “As a lawyer you can see how the law says capital raisings can be done; on the buy-side you see how they should be done; and as an investment banker you see how they are done; from all those different perspectives i thought we could design a better system,” bucknell told RESOURCESTOCKS. by 2008-09, bucknell noticed there were a lot of companies raising capital, yet he was frustrated that he couldn’t participate. “it seemed crazy that i could buy shares in the secondary market, yet when companies were issuing new capital, i wanted to give them my money, they wanted my money, but there was no way for them to access my demand or for me to get those shares – and these were lots of blue chip companies that any sophisticated investor would have as part of their portfolio,” he said.

Around 2009, there was a huge amount of concern generated in the media on a fortnightly cycle with the level of dilution in non-pro rata issues. People were raising capital very quickly and boards made decisions around the theory that doing a nonpro rata issue was necessary given the wholesale markets had effectively locked up. but it was impossible to know if the costs of dilution were too high, which triggered an idea in bucknell’s head that led to the genesis of ASX bookbuilds. “i thought, perhaps there’s a way to ensure that boards can stand up and say that dilution is a fair level because it’s the best the market would offer. So this [ASX bookbuilds] is really about giving boards the ability to say ‘yes, we raised capital, but we raised it at the right price’,” he said. “Any sort of capital raising is an impost on the company’s cash flow. neither raising debt nor issuing equity is objectionable, it’s just a question of getting the best possible price for your shares in light of the demand that’s out there. There is a huge amount of capital needed for companies that have greater plans for their business. “it is capital intensive to take an exploration company from prospective stage through to production. for them it’s essential they can raise capital from as broad a range of investors and the widest possible pool.” Providing a tool that creates more transparency on how shares are priced and allocated in placements, which also benefits the new issue market, could scarcely have come at a better time. “if investors know that they’re operating in a market where they’re treated fairly, they can bid with greater confidence; and if they’re doing that they can bid prices that are more reflective of the risks attached to the company as opposed to the risks attached to the nature of the capital raising process that’s being used,” bucknell said. The ASX bookbuilds facility launches on october 8.

OCTOBER/NOVEMBER 2013 rESoUrcEStocKS


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Profile for Aspermont-Aust

Resourcestocks magazine oct nov 2013  

World Risk Survey, Top 100 ASX Resource companies, Queensland gas, Indonesia mining, Hydrocarbon

Resourcestocks magazine oct nov 2013  

World Risk Survey, Top 100 ASX Resource companies, Queensland gas, Indonesia mining, Hydrocarbon

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