ACI Num 4 2019

VOLUME 13 NUMBER 4 | 2019

Australian Resources & Investment COPPER’S CHALLENGING PROGNOSIS

MINING’S NEXT BIG SHAKE-UP

BRIGHT OUTLOOK FOR MINERAL SANDS

LITHIUM SHINES AMID EV BOOM

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CONTENTS

I N T H I S I S SU E

4

4

22

T H E F E AT H E R S T O N E REPORT

T R A N S P O R T, E Q U I P M E N T & M AC H I N E R Y

hallenging prognosis for copper, C

by Tony Featherstone

6

–2–

22

24 The next big shake-up for Australia’s mining sector, by Sherif Andrawes, BDO, and Chris Davis, Mining Industry Consultant

28

F E AT U R E D

6

Analysis with Regina Meani

10

eightened interest follows H Castlemaine discovery

11

ining: what story are we telling?

M

by Nicki Ivory, Deloitte WA

13

hy are battery companies investing W in mines? by Philip Wheeler, L.E.K. Consulting’s Industrials practice

15

ranium demand and prices U expected to recover

16

inim Martap providing the M goods for Canyon Resources,

by Barry FitzGerald

17

uilding an Empire, B

by Professor John Warburton, Empire Energy Group

21

ergers putting Jervois Mining in M strong position, by Barry FitzGerald

Equipping you with what’s Elite

MINE DE VELOPMENT

28 Meeting the mining industry

challenges of tomorrow, by Simon Hanrahan, SRK Consulting

30 Sumitomo driving innovation

32 32

MINE SITE CLOSURE & R E H A B I L I TAT I O N

ost-mining landscapes that P continue to benefit communities

34 ENVIRONMENT

34 Real-time groundwater monitoring,

by David Simpson

36 VEGA sensor products have the

measure of critical infrastructure

38 GOLD

40 Dart Mining’s return to gold 42 Gold still strong, by Barry FitzGerald 44 Topping the mining charts 46 Ardiden eyes Pickle Lake gold potential 48 The long-awaited gold price

breakout, by Gavin Wendt, MineLife Pty Ltd

50 Cardinal Resources strikes gold 52

hallenger Exploration kicks off C drilling program

54

B A S E M E TA L S

54 Peel capitalising on big discoveries

AUSTRALIAN RESOURCES & INVESTMENT

FOCUS

GOLD The yellow metal remains strong.

56 COPPER

56 Doctor Copper catches cold,

by Steve Freeth

64 GRAPHITE

64 New dual focus to Hexagon’s strategy, by Barry FitzGerald

58 PolarX drillhole ends in

66

mineralisation

60 MINERAL SANDS

60 Precious sands,

by Anthony Fensom

62 Image aiming to back up stellar start

74 NICKEL

74 S t George Mining exploring deeper 76 Blackstone Minerals is set for the EV revolution

78 Opportunity knocks for nickel,

content provided by the Nickel Institute

LITHIUM

66 Lithium shines amid EV boom,

by Anthony Fensom

70 World-class potential at Manono 72

Tackling Argentina’s Lithium Triangle

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T H E F E AT H E R S T O N E R E P O R T

THE

Featherstone REPORT

CHALLENGING PROGNOSIS FOR COPPER

BY TONY FEATHER STONE

Metal’s price is an indication of which way the global economy is heading.

T

he term ‘Doctor Copper’ is market lingo for the base metal’s perceived ability to predict turning points in the economy. If copper’s forecasting powers hold true, the global economy has sickening medium-term prospects as manufacturing activity wanes.

Market observers believe that copper has an almost PhD-like ability to predict economic activity because it is used in everything from electrical equipment, to industrial applications and transportation vehicles.

This makes copper a useful leading indicator of global economic cycles. A rising copper price implies that demand for the metal is increasing because industrial activity is healthy. A falling copper price suggests orders are being delayed or cancelled as industry activity contracts.

In December 2014, Dutch investment bank ABN AMRO found a relationship between copper prices and economic activity. ‘Our analysis shows… the copper price has a strong correlation with numerous indicators that are relevant for tracking the world economy. So, there is some truth in the contention that the copper price can help identify macro-economic trends.’

Like all market concepts, Doctor Copper is imperfect. As ABN AMRO and other forecasters note, the correlation between copper and global activity is far from clear-cut. As with all metals, the copper price reacts to changes in supply, and the short-term price – affected by macro-economic data – reflects market forecasts about future copper demand.

Geopolitical issues, such as the US– China trade dispute and Britain’s messy proposed exit from the European Union (Brexit), can create short-term price volatility, as can trader speculation on copper’s direction. These price fluctuations may not represent copper’s true direction or what it says about future economic activity.

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Historically, caveats aside, the long-term copper price has useful clues about the world economy – a reason market participants watch it. The metal is a particularly useful gauge of economic activity in China and other developing nations, given their rising demand for it.

FA L L I N G P R I C E I M P L I E S F U R T H E R BAD NEWS The copper price hit a two-year low in early September 2019, after news of an unexpected contraction in US factory activity. A run of poor global economic data in the third quarter of 2019 has driven copper 20 per cent lower from its June 2018 highs.

The copper price soared to almost US$10,000 per tonne earlier this decade as China’s economy took off. As world economic growth slowed after the global financial crisis, copper slumped below US$5000 per tonne in 2015. A price recovery of sorts followed, as copper briefly rose above US$7000 per tonne in 2018, in hopes of quickening US economic growth.

Copper fell sharply this year as the US–China trade dispute weighed on global activity, and central banks worldwide were forced to cut interest rates to prop up economies. A copper price of US$5713 per tonne in late September 2019 started to test multi-year price support levels.

Some analysts have downgraded their copper forecast from US$6500 per tonne to US$6000 per tonne, and forecasts on average are being revised lower, according to consensus estimates. With the Institute for Supply Management (ISM) Manufacturing Purchasing Managers’ Index (PMI) – a key barometer of US economic activity – reporting in August 2019 its lowest reading in three years, and with the US– China trade dispute no closer to resolution, further downgrades for copper seem inevitable.

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The bond market is worrisome for economic growth and thus for copper. More than A$22 trillion of sovereign bonds worldwide have a negative yield, and the figure is rising. Simply, investors are paying governments for years or decades to hold their money, such is the uncertainty.

This demand for safe-haven assets has seen the gold price soar from around US$1280 per ounce in January 2019, to about US$1500 per ounce – and gold equities rally. Expectations of further US interest rate cuts and a lower US dollar have sparked a gold rally that could go further.

The ratio of the copper to gold price has tumbled in the past few years. Copper is the cheapest relative to gold since 2016. For now, gold clearly has the upper hand.

Calculated by dividing the market price of copper by the market price of gold, the ratio has historically been a useful signal. Copper rises on expectations of rising economy activity; gold rises as investors become fearful of an economic crisis or market shock and buy the metal for protection. The former is bullish and the latter bearish, as they relate to future economic activity.

A declining copper–gold ratio implies a weakening global economy, and vice versa. As with most market trends, the key is assessing the trend’s future direction rather than relying on the current ratio, which is already factored into market expectations.

T U R N I N G P O I N T A P P R OAC H I N G ?

Copper bulls believe the multi-year low in the copper–gold ratio is a ‘buy’ signal, and their optimism is partly based on copper’s supply side. So-called ‘treatment charges’ paid in China by miners to copper smelters have fallen to a seven-year low, potentially spurring more production cuts in a market already facing shortages.

In July, the International Copper Study Group said that copper demand exceeded supply by 155,000 tonnes in the first four months of 2019, from a 64,000-tonne shortfall in the same period a year earlier, according to industry reports. US investment bank Goldman Sachs wrote that the market had not yet priced this tightening supply story into the copper price.

A falling copper price has led to a contracted project pipeline and possibly the weakest supply growth in a decade (on a three-year rolling basis), argues Goldman. The market, however, judging by the price decline of copper this year, seems more focused on demand than supply.

Market researcher Wood Mackenzie says the downgraded global economic outlook ‘points to a finely balanced copper market for 2019’. Although Wood Mackenzie expects a return to positive copper

mine supply in 2020, production will be more than offset by rising demand. ‘From a fundamental perspective, this should be positive for (copper prices),’ it wrote.

Wood Mackenzie forecasts that copper mine supply growth will overwhelm expected increases in demand from 2021–23, implying ongoing price weakness and high volatility. ‘It will only be once stocks start to decline and deficits emerge from 2024 that we expect (copper) prices to begin to trend higher to reach our forecast long-term incentive price by 2029.’

Copper has good long-term prospects given the coming boom in electric vehicles (EVs). EVs are thought to use about four times as much of the metal as gasoline-powered vehicles. EV charging stations and related infrastructure are also heavy copper consumers and a potential medium-term tailwind for the base metal.

The International Copper Association Australia (ICAA) in July 2019 said copper demand will double within the next two decades to more than 26 million tonnes by 2040. But falling levels of copper ore – much of which comes from mines more than 75 years old – could limit the demand opportunity from EVs and the industrialisation of developing economies.

New technologies are needed to help copper mines get more from less ore, dig deeper than ever, mine riskier areas and re-evaluate how they commercialise resources. Declining ore levels in Chile, a copper powerhouse, highlight the challenges facing copper producers.

Taken together, these and other market analyses of copper suggest that limited short-term price relief is likely as the copper–gold ratio hits a multi-year low and as the market becomes too bearish. Copper was trending higher before the US–China trade dispute erupted, and copper bulls believe it will do the same again when the dispute is finally resolved.

Medium term, a period of price stabilisation and ongoing volatility seems likely, as copper supply catches up to, and overtakes, demand.

Longer term, if Wood Mackenzie is right, a sustained copper recovery might start in earnest from 2024. Granted, that is an eternity for traders and other market participants. But few metals have as much to benefit from EVs – potentially among the greatest booms of them all – as copper. The challenge is getting through an ailing period for Doctor Copper.

Tony Featherstone is a former managing editor of BRW, Shares and Personal Investor magazines. The information in this article should not be considered personal advice. It has been prepared without considering your objectives, financial situation or needs.

Before acting on information in this article, consider its appropriateness and accuracy regarding your objectives, financial situation and needs. Do further research of your own and/or seek personal financial advice from a licensed adviser before making any financial or investment decisions based on this article. All prices and analysis as at time of print.

–5–

F E AT U R E D

— ANALYSIS — WITH REGINA MEANI The gold–copper love affair.

OFTEN OCCURRING IN the same ore bodies, gold and copper are used in very different ways, but their combination has a special appeal to the investor in these uncertain political times.

Gold, specifically, has this special appeal because in times when economies around the world become more fragile, it provides a safeguard through its role as both a commodity and a currency.

Copper, on the other hand, plays the other side, as it provides benefits when times improve.

OZ Minerals is a company rich in both copper and gold. It calls itself a ‘modern mining company that adapts to the ever-changing environment’. It is Australia’s third-largest copper producer, and its assets include the Prominent Hill copper–gold mine in South Australia, the Antas copper–gold mine in Brazil’s Pará, the Carrapateena copper–gold project in South Australia, and the West Musgrave copper–nickel project in Western Australia.

Growth through exploration is an essential part of the company’s strategy, and it has multiple earn-in agreements with highly regarded explorers both within Australia and across the world.

The prices for gold and copper have a strong relationship, and most times run in tandem. Since 2014, this has been the case with two exceptions: in 2016 and in 2019. The price for gold bottomed in late November 2015 and rose quickly, gaining some 30 per cent before halting in July 2016. Copper, after declining through 2014 and 2015 in a similar fashion to gold, didn’t find its turning point until January 2016, and then only rose between 15 per cent and

–6–

18 per cent after hitting a barrier in March/April. The price was set back and didn’t join in with the gold price rise until November; in fact, it led the next gold–copper charge higher.

In the second and current instance of divergence, the gold price again found its first turning point in August 2018, to be followed a few weeks later by copper. Both rose for several months to halt in unison in February 2019 and, after a brief pull back, the gold price resumed its upswing, gaining around 30 per cent to August where another downturn was set in motion. Copper did not resume the upward path, continuing its decline through to August.

If events occur in a similar way to 2016, then the copper price may consolidate its position before breaking away and leading the next major move higher.

If we look at OZ Minerals over the same time frame, we find that the price consolidated sideways in 2014–15, before breaking higher in early 2016, pausing with the gold price in July 2016, then pushing higher to halt in early 2017. The price retreated to find a bouncing point in mid 2017, spurring an advance into 2018 where it encountered a long-term barrier in the $10–11 range. In the same way it did in the 2014–15 period, the price has set up a sideways consolidation range, which bodes well as the preparation for the next advance. This action may develop in the $9–10 area, with a break up suggesting a rise to $10.50 and then the final barrier to higher prices around $11. A drop beneath $8 could jeopardise the above scenario.

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F E AT U R E D

Heightened interest follows Castlemaine discovery Excitement is building around Kalamazoo Resources’ maiden exploration program at the historic Castlemaine goldfield in central Victoria.

K

icked off in November, Kalamazoo’s 10,000-metre program will involve 25 diamond holes with an average depth of 400 metres.

Kalamazoo secured control of the goldfield last year and has since increased its coverage to the entire field – the thirdbiggest in Victoria behind Bendigo and Ballarat, with a production history of 5.6 million ounces.

Kalamazoo Chairman and CEO Luke Reinehr says it’s ‘not often you can pick up an entire goldfield that produced 5.6 million ounces, plus a massive data base from previous explorers, and a complete diamond core farm.

‘If this was in the Western Australian goldfields, it would have had thousands of holes plugged into it by now.’

Kalamazoo has resisted the temptation to rush into an exploration program in response to the heightened investor interest in Victoria’s high-grade goldfields.

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This heightened interest is a response to elevated gold prices and the multimillion-ounce Swan Zone discovery at depth by Canada’s Kirkland Lake Gold at Fosterville, near Bendigo, 40 kilometres from Castlemaine.

‘Everyone has been waiting for us to go drilling. But we wanted to ensure that we would be doing it in a smarter and different way to previous explorers to give us the best chance of success,’ Reinehr says.

The latest in exploration science and technology is a feature of Kalamazoo’s maiden drilling program.

‘In the past three months, we completed very extensive induced polarisation (IP) and ground magnetics surveys over 18 prime target areas, and now we are going to be drilling a couple of them,’ Reinehr says.

‘The IP and ground magnetics have come up really well. The only other IP survey work at Castlemaine was back in the 1960s by the government.

‘The view then was that it was highly prospective and that it should be followed up. It never has been up until now, and we’re talking 60 years later.

‘We think that a lot of the “bonanza” gold that occurred previously had just missed the IP anomalies that we have identified. It has given us an enormous amount of encouragement. We are seeing structures all through there,’ Reinehr says.

Kalamazoo is fully funded for the maiden drilling program, thanks to the $7-million sale late last year of its Snake Well gold project in Western Australia, of which $5 million is to be paid over the next 12 months. It also raised $1.2 million from a small capital raising in June.

The company’s Victorian footprint has expanded beyond the Castlemaine goldfield to include a big ground position to the south of the Maldon gold mine, about 20 kilometres from Castlemaine.

AUSTRALIAN RESOURCES & INVESTMENT

MINING: WHAT STORY ARE WE TELLING?

BY NICKI IVORY, FINANCIAL ADVISORY LEADER, DELOITTE WA

Mining and brand identity are increasingly part of the same conversation – a conversation that intersects in an age of disruption, shareholder activism and a breakdown in corporate trust.

T

he mining industry needs to tangibly demonstrate value to a diverse set of stakeholders: employees, communities, government, shareholders, environmental bodies and regulators. This coincides with rising focus from investors and financiers on environment, social and governance issues that increasingly impact the ability of mining companies to attract investors and raise capital.

It is imperative for the mining sector to retake control and write its own narrative. Put simply, it’s about the need for mining professionals to think about what story we are telling and what conversations we are having around the barbecue.

Deloitte’s ‘Mining: what story are we telling?’ report was launched at this year’s Diggers & Dealers conference. It serves as a prompt for miners to change the conversation that is being held around the barbecue because mining is vital, and

this fact won’t change any time soon. Mining is the backbone of Australia’s economic and social landscape; yet in the past decade, its image and reputation have been in decline.

There are important questions that the industry needs to ask and answer.

W H AT H A S B E E N D O N E T O SHIF T THE MINING BRAND? Shifting the mining brand and getting the image right is more important than ever. BHP’s ‘Think big’ brand campaign in 2017 was designed to communicate the role BHP plays in the local community, the Australian economy and, more broadly, in global economic development. Rio Tinto has also used its brand to shift the conversation, drawing on its pioneering progress to reframe the focus on the image of mining through emphasising the fact that they produce materials essential to human progress.

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F E AT U R E D

W H AT R O L E D O LEADERSHIP AND C U LT U R E P L AY ?

Australia’s former Chief of Army, Lieutenant General David Morrison AO, accompanied us to Diggers & Dealers, where he shared his view: if the Army can change its image, mining can, too. Leadership and culture are key to driving change and improving the image of mining.

Morrison provided some key takeaways for the industry to think about in light of his experience spearheading a gender equality, diversity and inclusion initiative, which resulted in a two per cent increase in the number of female recruits in the Army. They included: It’s time to pause: Leaders and organisations benefit from continually pausing to examine their professional world in the context of what is happening in the broader community.

Change is the only constant: Drawing on his experience from the Army in its bid to attract the best workforce of the future, Morrison said militaries are similar to mining organisations with transformation, the increasing use of technology, and reliance on small and often geographically dispersed teams major features of forward planning.

Creating the right culture: Culture is defined as the stories we tell ourselves about ourselves. Mining leaders need to ensure that they are not the captive of a prevailing culture but rather its custodian.

Choosing the right words: Actions speak more loudly than words, but finding the right language is the essential first step. To appeal to people outside your sector, you have to convince longerterm members of the profession that there is a need for change.

On the conference sidelines, Morrison told our National Energy, Resources and Industrials Leader Ian Sanders, ‘We had a great Army with great soldiers who were doing extraordinary things all over the world, but they were overwhelmingly men.

‘We just needed to change our whole construct; we needed to think differently. We needed to make the idea of military service, especially Army service, something that talented Australian women wanted to be a part of.

‘It wasn’t altruism, [and] it wasn’t this idea of a fair go. It was “let’s make the Army a more capable military, and let’s do it by opening up the Army to all of this talent that we are making poor use of”.’

So, there are many transferable messages from not just the Australian Defence Force, but also other organisations that mining can look to for inspiration.

W H AT C A N W E P R AC T I C A L LY D O N E X T ?

It’s time for us, as an industry, to lead the change within mining organisations to attract and retain a diverse workforce. Making a personal pledge to advocate for the mining industry and proactively leading conversations with your children, their friends, your

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co-workers and partners is a simple way to steer the conversation in the right direction. Just talking about the significant role mining plays across our daily lives is a small step. Collaboration across the industry through organisations and networks helps to amplify powerful and inspiring messages about mining.

Corporate and personal storytelling that demonstrates the positive impact the sector is having across the local and global landscape is necessary, as it’s taking an active role in creating a dialogue to build a forward-thinking, innovative and game-changing culture. Being a leader through your words will inspire your teams and colleagues in shaping the image of mining. It’s sage to remember that a picture is worth a thousand words, and it’s time to change the images we use across the industry to highlight the diversity that already exists, and to further inspire conversation, collaboration and pride.

Deloitte posed two questions to more than 250 attendees at Diggers & Dealers: ‘What story can you tell about mining?’ and, ‘What topic of conversation does your story fit into?’ The responses varied from personal experiences and stories, to passionate statements made about the industry.

‘There are a lot more women in mining nowadays compared to five years ago,’ one delegate said.

‘There are so many different opportunities for students. Mining is more than what everyone thinks it is,’ said another.

‘Caring for the environment has become a normal part of doing business, no matter the size of the company,’ came another response.

Delegates were asked to place a ‘shrimp on the barbie’ to indicate where their story fits into one of four key topics of conversation or key pillars of social licence. Almost 40 per cent of stories related to mining’s value to society. Of the remaining responses, 21 per cent said work, worker and workplace were the best fit for their story, while 27 per cent said communities were, and eight per cent said caring for the environment was the best fit.

We all have stories to tell, so the challenge for miners is to start that conversation if you haven’t already, or to simply continue it if you have.

AUSTRALIAN RESOURCES & INVESTMENT

Why are battery companies investing in mines?

BY PHILIP WHEELER, PARTNER, L.E.K. CONSULTING’S INDUSTR IALS PR ACTICE

A

s batteries for the electric and autonomous vehicle market develop, the downstream players that traditionally participate in chemical and battery fabrication have shown a propensity for investment in upstream mineral extraction and processing.

This was evidenced in September, when the news emerged that Chinese battery-maker Contemporary Amperex Technology (CATL) had become a major shareholder in Australian lithium producer Pilbara Minerals.

The CATL news is not an outlier; it’s one of the many deals being seen across the globe. But why are battery companies taking these steps to vertically integrate into the extraction process?

First, it’s worth considering why companies of any type would consider vertical integration in mining, and there are four major reasons.

1. Reduce volatility in a downstream position. Mineral pricing is inherently volatile, and insulation from this volatility is one of the main reasons for vertical integration, particularly when the ability to pass price volatility on to the next customer is diminished.

2. Take advantage of improved margins in an adjacent value chain segment. The capital-intensive nature of mineral extraction and conversion activities limits the potential for new entrants, and can create attractive market dynamics that drive higher relative margins, rather than for less-capitalintensive activities.

3. Improve channels to market. All businesses need a link to their customers, and the relative strength of that relationship is a factor in driving the returns available to each participant.

4. Generate incremental demand. Demand growth provides a larger absolute market for sales, but also ensures that the supply– demand balance remains in check against any overinvestment in extraction assets.

With these rationales in mind, and with the increased interest in electric and autonomous vehicles, it’s little wonder that chemical and battery companies are looking at their strategic options. And the dynamics of the market for lithium-bearing minerals has provided the impetus for vertical integration.

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F E AT U R E D

In 2000, demand for lithium-based batteries contributed about five per cent of lithium demand – but that number has increased exponentially in recent times. By 2013, it had grown to about 30 per cent of demand, and in five years’ time, we expect this to be in the 80 per cent range. Further, the primary share of that end-use demand source has shifted from traditional, small-scale, lithium-ion batteries for electronics and smartphones, into the much larger and rapidly growing sector of electric vehicles (EVs).

This growth has pushed lithium back into an ‘immature’ market dynamic, and this has proven to be troublesome at times for lithium-ion battery chemical and cell fabricators. While they look to build capacity to satisfy the rapidly increasing customer and enduser demand for batteries and precursor chemicals, the (real and perceived) volatility in lithium supply and prices has remained a threat. Prices for lithium carbonate hit levels of more than US$20,000 per tonne in 2018, but have dropped substantially to less than US$10,000 per tonne in 2019.

Should prices continue to see this extreme level of volatility, it will challenge companies’ ability to approve and find finance for future capital investments, and to manage operational cash flow.

Vertical integration is a valid and obvious strategy for managing this volatility, and both direct and indirect investments provide some level of support and insulation against market volatility.

Interestingly, this framework for vertical integration also encourages existing and emerging upstream players to vertically integrate downstream, and this may explain why so many deals have been achieved in the past few years.

For instance, the manufacturing of spodumene is of relatively low complexity, and producers therefore receive relatively low pricing and margins for the product as a concentrate (approximately US$600 per tonne of spodumene or US$4000 per tonne of lithium carbonate equivalent). Investment in a lithium refinery that converts spodumene into lithium carbonate (or lithium hydroxide) unlocks pricing of more than US$10,000 per tonne. In doing so, the spodumene producers have moved into an adjacent value chain segment, which appears to have improved returns even after considering the capital investment.

For both upstream and downstream participants, a vertical integration strategy is not without risks, and a number of factors must be considered before investments are made.

For one, while vertical integration upstream can reduce earnings volatility at the macro level, a large number of new variations are introduced into the enlarged business. At the mining level, these can include mineral grade variations, differential rock formations and blast outcomes, processing throughput and recoveries, and machine utilisation variation. And in the broader market, demand and price volatility are typically higher than for fabricators, with the balance sheets of extraction companies brought under stress during periods of low pricing.

Further, the investment in a new business segment could significantly distract management from the existing core business,

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Vertical integration is a valid and obvious strategy for managing this volatility, and both direct and indirect investments provide some level of support and insulation against market volatility increase internal management challenges with maintaining production balance between operating sites, create new challenges in transfer pricing and performance management, increase sovereign risk when investments are made in countries where beneficiation policies are being considered, and even create perceptions of channel conflict with external customers.

It’s critical that investors think carefully about their operating models and investment horizons to ensure that the strategic value in vertical integration is captured, and that returns on investment exceed the standalone net present value. A clear set of guidelines for integration should be developed – one that considers the options to acquire any new capabilities – providing a basis for decision-making on the degree of managerial integration, system and process choices, and internal price/risk sharing. In addition, strategic benefits should be identified as part of due diligence and a process put in place to secure them as part of the post-merger integration process.

In summary, while the rationale for investment differs between upstream and downstream participants, the two stories coalesce in the current period of market immaturity for lithium-bearing minerals.

The CATL investment in Pilbara Minerals is just one example among many of a battery company determining that it should take a ‘pit to product’ approach to battery development, and while current valuation perceptions are proving difficult to match, we expect more transactions as the shift to electric and autonomous vehicles continues to gather pace globally.

Philip Wheeler is a Partner at L.E.K. Consulting’s Industrials practice. Based in Melbourne, Wheeler has nearly 20 years’ experience working across the natural resources value chain, and in industrial products and distribution, industrial services, and logistics.

AUSTRALIAN RESOURCES & INVESTMENT

F E AT U R E D

Uranium demand and prices expected to recover Paladin Energy has positioned itself for a rapid restart of its Langer Heinrich uranium mine in Namibia in response to an expected recovery in uranium demand and prices.

T

he brewing recovery is itself a response to the growing acceptance that nuclear power has a key role to play in combating global carbon emissions.

Paladin’s rapid restart strategy began to take shape in October with the release of the first stage of a two-stage pre-feasibility study (PFS) on Langer Heinrich, which was placed on care and maintenance in August 2018 in response to weak prices.

This first stage of the PFS focused on the quickest sustainable path back into production once an acceptable uranium incentive price has been reached.

The estimated capital cost of a rapid restart at a historical annual production rate of 5.2 million pounds of uranium was US$80 million.

Unlike new uranium development projects proposed by others, Langer Heinrich’s restart will have the benefit of more than 10 years of production and marketing history, during which the mine produced and sold 43.3 million pounds.

Paladin estimates that it would take 12 months after contracts and funding are

–X–

secured to restart the mine in an improved uranium market.

Significantly, the study also detailed an opportunity to increase annual production capacity to 6.5 million pounds at an incremental capital cost of US$30 million, with the high return on the additional production expected to assist in offtake and financing discussions.

The PFS indicated that the average life of mine all-in sustaining costs (AISC) of US$30 per pound was achievable, with the potential to reduce future ASIC

by US$4.50 per pound by investing in more significant process changes after the restart – the subject of the secondstage PFS. The potential for vanadium production at Langer Heinrich is now part of Paladin’s future considerations, after a maiden resource estimate of 38.8 million pounds for the steel and battery material was established.

Chief Executive Officer Scott Sullivan says the study ‘confirms Paladin’s key position as a first mover back into production in a recovering uranium market’.

He emphasised that Langer Heinrich would only be restarted if ‘forecasted cash flows from uranium sales provide an appropriate return on investment’. Uranium incentive prices of US$45–50 per pound are likely to be required to incentivise a restart decision.

A significant part of the world’s uranium supply is uneconomic as prices are below US$60 per pound, with analysts saying that prices will have to rise to encourage new production.

The spot uranium price is currently about US$25 per pound – it reached as high as US$135 per pound in 2007 – while the long-term price, which is more representative of industry dynamics, is US$31 per pound.

Sullivan says the growing acceptance of nuclear power’s role in the carbon emissions battle was reflected in the deferrals of plant closures in various countries, including France, Britain, the United States and India.

Paladin owns 75 per cent of Langer Heinrich, and CNNC Overseas Uranium Holdings owns the remaining 25 per cent.

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F E AT U R E D

Minim Martap providing the goods for Canyon Resources Canyon Resources’ Minim Martap bauxite project in Cameroon has been confirmed as a global tier-one bauxite asset after the resource estimate for the strategic deposit was increased to nearly 900 million tonnes.

BY BAR RY FITZGER ALD

A

ccording to Canyon Managing Director Phillip Gallagher, the high-grade and low-silica bauxite deposit has become a ‘beast of a resource’, putting the company in a stronger position as it advances development planning.

A pre-feasibility is due for completion early next year, with Minim Martap’s development potential taking on increasing strategic appeal to end-user alumina/aluminium producers seeking diversification of seaborne supplies.

More than half of the world’s seaborne bauxite supply is currently sourced from Guinea, with China by far the biggest customer.

‘Some of the major and mid-tier alumina/ aluminium producers are now starting to talk to us because they see that there is a risk around China controlling much of the supply from Guinea, as well as there being risks around one country dominating seaborne supplies,’ Gallagher says.

‘Now we have this enormous Guinea-style deposit (high-grade, lowcontaminant) that’s not in Guinea.

‘We were granted the permit in August 2018 and the first thing we had to prove to ourselves was that it was as good as we believed it was,’ Gallagher says.

‘It is actually better. The resource is deeper, the grade is more consistent and it’s a high-grade bauxite resource across all of the plateaus.

‘We are now in a stronger position to negotiate offtake deals and commence discussions with major companies to advance the development of the project,’ Gallagher says.

Minim Martap’s location in Cameroon’s remote Adamawa Region means that the rail and port infrastructure solution for its development stands as its biggest challenge.

But while it is remote, the project has a major advantage in being located 10 kilometres from an 800-kilometre rail line, operated by Camrail, that connects with a port in Douala.

– 16 X ––

Bauxite drilling

‘It is a shallow port, which means we can investigate the potential for a smalltonnage, fast start-up using the existing rail line,’ Gallagher says.

But the main event for Minim Martap will be accessing the deepwater port built in recent years at Kribi. This will require the construction of a 130-kilometre rail link, connecting the new port to the existing Minim Martap–Doula line.

‘Because it will be a multi-user rail, there is no expectation that Canyon will build and operate it. In fact, the government has been very clear that we cannot own it. We will be a customer, with our bauxite to be the catalyst for being built,’ Gallagher says.

‘So, we are in very active discussions with the government around the rail and port infrastructure requirements.’

AUSTRALIAN RESOURCES & INVESTMENT

Professor John Warburton

BUILDING AN EMPIRE

Empire Energy Group has been making waves recently, with its stock jumping to new highs on the back of its vast Northern Territory holdings over a new commodity – tight shales – and its oil and gas potential. This issue, Empire Energy’s Director, Professor John Warburton, shares the journey of this ASX-listed US oil and gas producer, and how it came to be a leader in the new Beetaloo/McArthur basin’s energy frontier – which could see Australian domestic gas supplies open up, and the tight shales finally deliver the national Holy Grail: liquid fuels self-sufficiency.

The revolution is coming. This is how it started.

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F E AT U R E D

M

y career had been entirely focused on conventional, international big-field oil and gas until I met Bruce McLeod, an industry veteran with a mathematics and economics Cutting from Amoco’s original report turned up

by John Warburton in Darwin background. In 1993, I was part of the exploration team that led BP into the northern Caspian Sea, both in Azerbaijan and Kazakhstan. Eventually, Amoco’s GRNT-09 flaring the massive Kashagan oil field was discovered with recoverable reserves of about 13 billion barrels of oil – the world’s biggest oil By 2010, shale gas had been spoken about in Australia for at discovery since the 1970s. least a year, and I’d assumed that all the prospective acreage would McLeod’s knowledge of shale geology was cursory, but he knew already have been snapped up, but this was not so.

Empire Energy’s oil and gas fields in the US overlay prospective Utica We wanted large contiguous areas at 100 per cent equity to Shale sequences in Pennsylvania and New York State. allow ourselves to be unfettered by others. On 24 March 2010, I From about 2008 onwards, horizontal drilling with multistage planted myself in the information centre of the Northern Territory fracking provided the breakthrough in the United States to enable Geological Survey (NTGS). One particular report described the commercial oil and gas production from tight shale rock, and results from a mineral well named GRNT-09. It had been drilled McLeod, having seen the dramatic impact of shale gas on the US

by Amoco Minerals in the Glyde sub-basin back in 1979, during economy, simply queried why that couldn’t happen elsewhere. exploration for lead and zinc mineralisation, which was in the The first thing McLeod asked me during our first lunch meeting in vicinity of what is now Glencore’s zinc–lead McArthur River Mine in 2010 was, ‘What do you know about shale?’ That threw me a bit, and the McArthur Basin.

I said, ‘Well, to be honest Bruce, I’ve spent my life in conventional oil These metals were hosted in ancient black shale formations laid and gas, so I know pretty much nothing about shale other than that it down in a relatively deepwater sedimentary basin an astonishing is a conventional petroleum source rock’. To my surprise, rather than 1.64 billion years ago during the Paleoproterozoic era. If I may, I’ll tell this being the end of the conversation, McLeod said, ‘So, when can you a bit about how these extraordinary rocks formed. you start?’

They were of enormous interest to me as a petroleum man. The We agreed that I would spend six months finding a shale play atmosphere of the early Earth from about 3.5–2.5 billion years ago somewhere else in the world, which Empire Energy could acquire had only a small fraction of the present-day oxygen level. That was and monetise. because all the oxygen created by photosynthetic blue-green algae In the previous four years, I’d completed a major business – some of the earliest life forms on Earth – was captured by iron in development review of South-East Asia for a multinational petroleum the oceans to form the thick-banded, iron ore formations. After the company. My mission had been to identify big conventional gas free iron available in the early oceans was exhausted, oxygen levels exploration opportunities that were geologically simple and easily increased modestly until about two billion years ago, and yet the developed, with a low entry cost, substantial acreage footprint oceans remained relatively anoxic. and low fiscal risk, and where there was a high chance of finding a Those conditions allowed for the preservation of organic carbon supergiant gas field. It was a relatively quick task to screen the entire and the deposition of black carbonaceous, sulphide-rich black region once again, essentially applying the same screening metrics shales. The best analogue today is around the deep-sea ‘black but this time with a view to shale plays. smoker’ hydrothermal vents where life thrives in the form of bacterial colonies, shrimps and crabs.

In the Proterozoic era, the dominant life form on Earth was P R O J E C T B AC KG R O U N D prolific cyanophyte, or blue-green algal blooms. These rained in First drilling started last month, with Origin Energy vast numbers onto the seabed, forming layers of concentrated successfully commencing drilling at the Kyalla 117 well. carbon in what became shale rock. The sulphide layers were Empire has completed seismic data acquisition in its interbedded with layers of black shale that was also raining down adjoining lease and is preparing to drill in 2020. Meanwhile, from the oceanic water column. And it still amazes me that worldMinister for Resources and Northern Australia Senator the class, zinc–lead deposits can be interspersed with layers of organic, Hon. Matt Canavan has used a visit to the Permian Basin in world-class petroleum-prone black shale.

Texas to call for America’s shale gas revolution to be brought But the real lightbulb moment came as I ploughed through the to Australia, arguing that there is an opportunity to deliver a completion report for the 1979 Amoco 534-metre-deep GRNT-09 manufacturing boom for Darwin and northern Australia. mineral well. The rig had struck a layer containing natural gas and caught fire! It was a mineral well so it didn’t have sophisticated

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AUSTRALIAN RESOURCES & INVESTMENT

A map with the Empire tenements in yellow

blowout preventers that are requisite on petroleum wells. A grainy photo of the flaming gas (see opposite page) showed that it blew six metres into the air and had a yellow smoky appearance, indicating that the gas contained condensate liquid or light oil.

The well burned into the wet season until the hole had filled with water and the escaped gas was reduced to bubbles. Somebody in Amoco had the presence of mind to sample the gas, which comprised about 75 per cent methane plus heavier components of C2 to C8 and with very little carbon dioxide contaminant. It had intersected a viable petroleum source in the Barney Creek Formation, which had been historically mined for lead and zinc. I then simply used the NTGS maps to track the geographic distribution of that rock formation.

I phoned McLeod and said, ‘Look, we are potentially onto a winner here; this is a shale play that fits all our screening metrics’.

As far as I was aware at the time, nobody else had spotted it. This was what we’d been looking for. An aerially extensive, proven gas- and liquids-rich petroleum system in our own ‘backyard’, not overseas.

The Barney Creek Formation was estimated by the survey geologists to be up to 900 metres thick in places, almost an order of magnitude greater than many of the US shale fields. The area that contained the Barney Creek Formation was mostly flat, sparsely vegetated stony land with little agricultural potential so – subject to the approval of its traditional owners – the play could be accessed, exploited and remediated quite easily. On 26 March 2010, I applied for seven licence areas occupying 59,000 square kilometres, or about five per cent of the entire onshore Northern Territory – an area about the size of Croatia.

Unknown to us, at the time that I was submitting Empire’s licence applications, a competitor, Armour Energy, was also active. Armour’s presence became evident when two of the areas I had submitted applications for were refused by the Northern Territory petroleum licensing department. Evidently, just days before, Armour had also submitted applications for the same two licences to the south of Empire’s acreage.

Armour Energy has since drilled a number of successful exploration wells, including one with a horizontal leg. Despite being 1.64 billion years old, those wells have confirmed that the Barney Creek Formation shales are a prolific and potentially commercially

‘Tight shale’ in the pit at McArthur open-cut mine where oil and gas have largely been vented to the atmosphere over time

viable petroleum system. Being exceedingly old (almost one-third of the age of the Earth itself), such ancient rocks like these have typically been deeply buried, or may have suffered recrystallisation or melting, depriving them of any petroleum.

The rocks of McArthur and Beetaloo basins have never been buried so deep as to ruin their petroleum prospectivity. It is very clear that during their history, they experienced just the right pressures and temperatures for petroleum generation and preservation – almost like a petroleum ‘Goldilocks zone’.

W H AT A R E T H E C H A N C E S T H AT T H E M C A R T H U R A N D B E E TA L O O B A S I N S C A N M A K E AU S T R A L I A SELF -SUFFICIENT IN LIQUID FUELS? I genuinely believe that there is a very high chance that shale petroleum will play an enormous part in Australia’s energy selfsufficiency – and ultimately exports. The numbers quoted by most operators for the volumes of hydrocarbons, albeit currently at ‘prospective resource’ status, are enormous. They dwarf Australia’s proven present-day conventional oil and gas volumes.

The NTGS estimates that in excess of 500 trillion cubic feet of gas in place is present just within the Middle Velkerri shale in the Beetaloo Basin. Empire’s independent expert certification is that the P50 – or ‘most likely’ – resource in Empire’s acreage is to be about two billion barrels of oil equivalent – or 13 trillion cubic feet of gas – but is up five billion barrels of oil equivalent at P10. This is a substantial prospective petroleum volume, yet is conservative when compared with the NTGS’s estimate. NTGS has also assumed that up to 75 per cent of the shale formation is not petroleum-bearing. And we have the McArthur Basin potential on top of that.

The part of the McArthur Basin within Empire Energy’s acreage occupies a similar area to the United States’ Fayetteville Basin. After many years of drilling, the United States Department of Energy has estimated that the Fayetteville Basin contains about 42 trillion cubic feet of gas.

H O W D O YO U K N O W W H E R E T O S TA R T E X P L O R AT O R Y D R I L L I N G I N S U C H A N E N O R M O U S A R E A? I S N ’ T I T L I K E T R Y I N G T O F I N D A N E E D L E I N A H AY S TAC K? The United States has been developing shale petroleum for a number of years now, and geologists have a good knowledge of

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F E AT U R E D

where the richest shales, or ‘sweet spots’, are located. The rule of thumb from the United States, from hindsight, is that about 10 per cent of the area of a shale play is a real sweet spot. Furthermore, it’s suggested that the sweet spot contains about 45 per cent of the total economic value of the basin. So clearly, that’s where you want to start drilling.

Early sweet-spot development enhances the project economics; achieving good early production rates means the initial investment will be paid back quicker. Lower-quality shales can be exploited later.

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HOW DO THE GEOLOGISTS GO ABOUT PREDICTING S H A L E P E T R O L E U M S W E E T S P O T S I N A B A S I N? You look for the relationships between the colour, hardness and composition of the various layers of rock, and identify which layers have the high organic carbon content. You also look at the fine sedimentary structures that describe the conditions in which the sediment was originally laid down. Those details will tell you a lot about how the rock was deposited, whether sand was being introduced into the basin (diluting the shales), and whether the environment was anoxic, so the carbon content is preserved.

And then you correlate the rock layers between many wells and mineral cores, and see if they are continuous over great distances or fragmented.

This approach will allow you to draw contour maps and determine things such as the total thickness of black shale layers with high organic carbon, the depths at which the rocks are buried, and if they are deep enough to generate oil and gas. The areas with thick shale, little sandstone dilution, a large number of layers with organic carbon, at the right palaeo-temperature and at optimum depth to drill, will be the sweet spots. Seismic data helps to establish the horizontal continuity across the basin and to identify local geological complexities to stay away from.

Analysing the shapes in the rock layers on seismic tells us about the relative sea level under which successive rock layers were originally deposited, and the likely overall chemistry of the rocks at different depths. You can say, ‘Right, we see a particular shape in the seismic data; that’s a particular place of interest’.

I’m really looking forward to seeing firsthand the seismic data we are acquiring across EP187 right now.

As a frontrunner, Empire Energy acquired not just a sizeable portion of the Beetaloo Basin, but also a major segment of the older McArthur Basin. Along with Empire, only Armour Energy has substantial claim over the McArthur, which may have an even greater potential than the Beetaloo.

Empire Energy plans to start commercial gas production as early as possible, initially with customers from the local mining and fertiliser industries looking to replace diesel with cleaner and cheaper gas. The McArthur River Mine has a gas pipeline that passes right through Empire Energy’s licence EP187. Longer term, if there really is 29 trillion cubic feet of gas – which external assessments currently attribute to Empire Energy’s McArthur Basin acreage – this will lead us to the possibility of liquefied natural gas (LNG) exports and examining Australia’s strategic security of supplies, as well as in liquid fuels.

Empire’s prospective shale acreage extends 600 kilometres, south to north, up to the very top of East Arnhem Land. Near the site of Pacific Aluminium’s now-closed Gove Refinery, there is a functioning deepwater port at Nhulunbuy in East Arnhem Land, just 80 kilometres to the east of Empire Energy’s northernmost exploration area. Furthermore, a right of way for a 600-kilometre spur pipeline from Katherine to Nhulunbuy has been surveyed and passes right through Empire Energy’s EPA 180 and EPA 181 tenements.

The town of Nhulunbuy is in one of Australia’s most northerly locations and faces the South-East Asia LNG markets. We are extremely well positioned to be a substantial player in the emerging shale petroleum export story.

My personal view is that the industry must embrace the conversation about this new frontier, about energy security, and about the huge potential for the exportation of liquefied natural shale gas. It created a massive change in the United States, with daily shale gas production increasing dramatically from about two billion cubic feet in 2007 to 50 billion cubic feet in 2015 – with a 10 per cent decrease in national annual carbon emissions. There will be intense market pull, both domestic (from gas usage and prices) and international (for LNG) if the shale resource is realised.

HOW WILL EMPIRE COMMERCIALISE ITS GAS? The supply–demand conversations and possibilities between the Northern Territory and Queensland are real. In 2018, Jemena constructed the North East Gas Interconnector between Tennant Creek and the eastern pipeline network connecting the systems at Mount Isa. Such investment proves that there is already growing, Australia-wide recognition of the energy potential of the Northern Territory shale basins.

Professor John Warburton is a Non-Executive Director of Empire Energy Group. Previously, he spent 14 years with BP Exploration, where he held senior technical and management positions, then moved to senior positions with substantial oil and gas companies, including LASMO plc, Eni Pakistan Ltd and Oil Search Limited.

Warburton is an Independent Non-Executive Director of Senex Energy Limited and visiting professor in the School of Earth and Environment at the University of Leeds, United Kingdom.

Empire Energy Managing Director Alex Underwood examines a slither of partly weathered shale

AUSTRALIAN RESOURCES & INVESTMENT

F E AT U R E D

Mergers putting Jervois Mining in strong position Melbourne-based Jervois Mining has emerged as one of the biggest listed cobalt companies globally through the recent completion of separate mergers with Canadian companies eCobalt Solutions and M2 Cobalt.

BY BAR RY FITZGER ALD

T

he mergers have added leading cobalt positions in the United States and Uganda to Jervois’s existing exposure to battery raw materials through its Nico Young nickel-cobalt project in New South Wales.

Secured at a time of short-term weakness in the cobalt market, the mergers represented an important consolidation of the industry.

The consolidation comes as end users of battery raw materials are calling for new supply sources outside of the current supply dominance of the Democratic Republic of the Congo.

As the Jervois consolidation strategy demonstrates, the company is convinced that overall cobalt demand is set to surge, notwithstanding the current price weakness, caused in part by the thrifting of cobalt in battery chemistries.

Jervois Chief Executive Officer Bryce Crocker says that the electrification of global transportation is real.

‘It is happening now, and the chemistry that underlies that transition is largely locked in. While there will be a transition to lower cobalt chemistries, the number of electric vehicles (EVs) is increasing exponentially.

‘This means that overall demand for cobalt will rise significantly. So, our view is that low-cobalt battery chemistries are fundamentally positive for cobalt, because the largest handbrake on electrification is actually going to be raw material supply,’ Crocker says.

The merger with eCobalt has positioned Jervois to become a producer of cobalt in the near term, from a partially built project on the Idaho Cobalt Belt near Salmon in Lemhi County in the United States.

The project – now called Idaho Cobalt Operations (ICO) – has had US$100 million spent on it in various stages, and is permitted to produce 2000 tonnes of cobalt-in-concentrates from what is the biggest compliant cobalt resource estimate in the United States.

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The resource estimate stands at 3.87 million tonnes grading 0.59 per cent cobalt and 0.85 per cent copper in the measured and indicated categories, with an additional 1.82 million tonnes in the inferred category. A feasibility study is underway and is due at the end of the first quarter in 2020.

‘We are actively drilling in Idaho to improve the level of confidence around the resource ahead of finalising the feasibility study,’ Crocker says.

‘And we have the team in place to deliver the first domestic US cobalt mine.

While that is obviously important for Jervois, it is also important for the United States in terms of geopolitical security of critical raw materials.’

He says that while Idaho was clearly at the front of the development queue, Jervois also intends to become a cobalt supplier from Uganda in its strategy to become a globally relevant battery materials producer.

Back at Nico Young, a technical study has been completed, and negotiations with potential investment and offtake partners are being advanced.

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T R A N S P O R T, E QEUAIRPTMHE M N TO V &I NMGA C HU I NI P EM R YE N T T & EQ

Equipping you with what’s Elite Elite Industrial Equipment was established in 2010 as a major supplier of mining equipment and consumables for the surface and underground mining industry.

A

t Elite, we work closely with original equipment manufacturers (OEMs), suppliers and customers to provide the highest-quality products at extremely competitive prices. We pride ourselves on our relationships and we will do everything within our power to ensure that we exceed our customers’ expectations.

Elite currently operates out of our warehouse and workshop facility, located in Weston, New South Wales, about 45 minutes north-west of Newcastle.

Our capabilities include: • supplying consumables • project management and planning • hydraulic supply, repair and testing • instrumentation supply, repair and testing • pump supply, repair and testing • welding/cutting machines and consumables • quick detach system (QDS) mining attachments • wear product supply and installation • ventilation systems and supplies for mining and tunnelling.

At Elite Industrial Equipment, we are committed to continuous improvement, employing integrated inventory software along with our quality management system to ensure that we supply the highestquality product on time, every time.

At Elite, we have more than 100 years of combined mining experience, ensuring our products are fit for purpose and meet our customers’ expectations.

As our business continues to grow, we are constantly revising our product range and we look forward to providing samples for your consideration.

Due to our buying power, we can also source many products that are not listed in our catalogue – ask our team how we can help you find solutions and alternative products for your site.

OV E RV I E W

‘WHS best practices require drivers to operate the truck with optimal vision and minimal discomfort.’

The centre of some mirrors can sit close to a metre away from the walkway.

Mirrors on wide-bodied trucks sit even further away. Having the fitters lean over the safety rail to manually adjust mirrors is not a safe practice. The safest method of adjustment requires the use of an elevated work platform (EWP), adding equipment cost and downtime to the process.

OUR M IR ROR S

Computer engineered

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Elite Industrial Equipment electric mirrors remove the hazards and downtime associated with adjusting mirrors. The

operator can easily adjust the mirror in both vertical and horizontal planes using a hardwired controller inside the cab.

Recent trials have resulted in positive feedback with all operators indicating that they used the Elite Mirror at the start of every shift to suit their individual preferences and maximise the field of view.

Features and benefits include: • increased productivity as operators adjust their mirror • 31 per cent decrease in driver blind spots • 12-month replacement warranty • maximum onsite test reading ± 2G forces • in-cab push button controller • IP66 dust, weather and temperature certified • quick and easy installation • massive WHS benefits for operators and fitters • extensive two-year tests on mines in Western Australia and Queensland • Australian invention with international patents.

AUSTRALIAN RESOURCES & INVESTMENT

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out of position and stretch/lean to try to see properly.

Of the operators using the LHT Electric Mirror, 100 per cent say they use it at the start of every shift.

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SAFETY There are aso myriad WHS benefits Approximate Approximate Savings Savings Per Per Truck Truck

When reversing, 31 per cent of your (rear on-side) blind spot becomes easily visible by simply adjusting your LHT Electric Mirror outward while sitting in the comfort of your operators seat. The reduction in the blind spot will reduce the possibility of light vehicle/haul truck collisions, especially around the workshop.

for fitters, as they no longer have to lean through safety rails or kneel on grates to manually adjust the mirror.

Operators also no longer have to move awkwardly in their seats, causing possible aches and strains, just to get proper vision – 65 per cent of operators surveyed said that they just put up with their mirror being

Elite Industrial Equipment, an Australian company, has been dedicated to developing an electric mirror for large earthmoving equipment. Invented in Australia, we have trialled various prototypes in the lead up to the final product, which has been successfully tested in rugged conditions at a mine site in southern Western Australia.

The system has been designed with simplicity in mind. Two electric linear actuators provide smooth movement for pan and tilt functions. The weight of the components is carried throughout the frame, posing little impact on the moving parts. All components have been designed to withstand harsh mining environments.

Smooth control of the unit is equally important. The electric controller has been designed to be compact, but tough.

C O S T T O B U S I N E S S F O R M I R R O R A DJ U S T M E N T S C O N S I D E R AT I O N

VA L U E

Average truck shifts per week

14.0

Incremental cost/tonne load and haul

$1.80

Average haul cycle (minutes)

20

Carrying capacity of truck (tonnes)

180

Number of times mirror adjusted per week

1.0

Average time to adjust mirrors (minutes)

30

Cost to business per truck per year

COMMENTS

Incremental cost of load and haul due to shortfall created by truck delays Total truck cycle time

Consider if the truck has to be relocated to workshop for adjustment

$25,272 S P O T T I M E S AV I N G S T O B U S I N E S S

C O N S I D E R AT I O N

VA L U E

Seconds reduced per spot time

3.5

Average loads per shift (12 hour shift)

675

Seconds saved per shift

2363

Percentage of seconds worked per shift

6.10%

P&H shovel moves approximately Coal cost (per tonne) Total price of material moved by shovel Sum of material moved multiplied by seconds saved

29000000.00 $0.40

Indicative of CAT 797 & 830

10.6 hours takes into account pre start/ breaks Material tonnes $40 per tonne (worldwide average)

$11,600,000.00 $707,600.00

Cost to business per truck per year

$70,760

Combined spot time and mirror adjustments calculations

$96,032

Combined payback period

COMMENTS

65

Per year fleet saving (fleet of 10 trucks)

Payback period (days)

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T R A N S P O R T, E Q U I P M E N T & M A C H I N E R Y

The next big shake-up for Australia’s mining sector

BY SHER IF ANDR AWES, HEAD OF GLOBAL NATUR AL R ESOURCES, BDO; AND CHR IS DAVIS, MINING INDUSTRY CONSULTANT

– 24 –

AUSTRALIAN RESOURCES & INVESTMENT

T

here are major changes predicted to shake-up Australia’s mining sector by 2023, including diesel machinery not being used in new underground mines, and existing underground mines in the process of phasing them out. BDO predicts that by 2023, Australian miners will have made significant headway towards electric underground mines.

T H E I S S U E W I T H H O W T H I N G S C U R R E N T LY A R E Mining companies focus on how to build and operate a mine as efficiently and safely as possible. Occasionally, there is a sudden shock to the system, such as a mine collapse or a tailings dam failure. Fortunately, these are few and far between; but when they do happen, there is a swift review and much navel-gazing across the industry. Unfortunately, a safety issue that has a much longer and less-dramatic gestation period has the potential to be a major risk for mining companies in the near future. That is, the chronic health issues associated with the presence of nano diesel particulate matter (nDPM) in underground mines.

BDO predicts that by 2023, Australian miners will have made significant headway towards electric underground mines W H Y A R E D I E S E L PA R T I C U L AT E S A N I S S U E ? nDPM has the potential to be a ticking time bomb akin to asbestos for the industry. Diesel became prevalent in underground mines in Australia around 40–50 years ago, and while there may be no immediate health effects on underground mine workers, the longterm impact may be seen in the coming few years.

There has been much written on why nDPM is so dangerous (lung cancer, bladder cancer and DNA damage are a few examples), so we will not repeat it here. Suffice to say that nDPM is unbelievably small – 160 times smaller than a red blood cell and around 40 times smaller than bacteria. As they accumulate in your body, these particulates can build to a level that is very bad for your health.

The health effects to underground miners where diesel-powered equipment predominates have many contributing factors, such as the proximity of workers to the source of the diesel engine exhaust fumes; the level, duration and variability of exposure; the type,

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T R A N S P O R T, E Q U I P M E N T & M A C H I N E R Y

condition and age of the diesel engines; the quality of the ventilation system; and so on. Reducing the amount of nDPM in the air is key to reducing health risks to miners.

W H AT A R E T H E O P T I O N S ?

The ultimate option is to close the mine down, but let’s take that option off the table. In reality, the other three alternatives are to: 1. move to electrical sources, in total or in part 2. improve ventilation 3. introduce filtration.

The solution adopted will depend on the size, design, economics and life of the mine, but will often include elements of all three.

Going electric is all the rage aboveground and there are numerous studies predicting that the number of electric passenger vehicles will mushroom. Underground, it is a lot harder to move to electric, especially for existing mines. We are starting to see the first allelectric mines coming on stream in Canada; however, while electric machinery can have reduced downtime and operating costs, the capital costs at present tend to make going electric prohibitive in most cases. With improvements in technology and reduced costs, however, it is very likely that it will be commonplace to see new mines being fully electric in Australia in the future.

Ventilation can be an integral part of the solution. Underground mines commonly use the decline for primary fresh air ventilation, which is the same decline used by the diesel vehicles, thereby increasing the issue. Ventilation cannot solve the issue by itself.

In the short term, filtration is the key solution. Some of the newest diesel engines that will be coming to the market soon, coupled with an effective diesel particulate filter (DPF), can reduce the level of nDPM to acceptably low numbers.

For heavy machinery in existing mines, the solution is likely to buy and install effective DPFs. If this equipment is due to be replaced, then it should be replaced with new Stage V equipment fitted with a DPF. We have already seen trials of light electric vehicles (LEVs) in some underground mines in Australia. Effective DPFs can be

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the immediate solution for LEVs, too, but given the advances in passenger electric vehicle technologies that we will see, it is likely that LEVs will become commonplace underground more quickly than heavy equipment.

W I L L W E S E E F U L LY E L E C T R I C M I N E S I N AU S T R A L I A? The short answer is yes. When we will see them is a more difficult question to answer. It is likely that by 2035, electric mines will be the norm and there will be queries as to why diesel is being used.

W H AT E L S E N E E D S T O B E C O N S I D E R E D ?

We expect guidance to come from state governments on the lowering of acceptable nDPM levels, with the Western Australian state government taking the lead. To encourage this transition, federal and state governments should be providing incentives – such as grants and subsidies – to encourage mining companies to address the issue.

The training and retraining of future diesel mechanics are interesting points to consider. There is no doubt that there will be plenty of work for diesel mechanics for the foreseeable future, but their skill sets will need to transition to include electric equipment in the medium to long term. This needs to be in the sights of those looking to join the industry and those who train them.

While this is a lurking and significant issue for mining companies, the fear is that some may only sit up and pay attention when their significant investors insist that they do (as in the case of the Church of England Pensions Board and its Investor Mining and Tailings Safety Initiative), or when they are on the receiving end of class actions (similar to asbestos cases). At that point, the question of whether to face the costs of this will be taken from the remit of mine managers and be placed into the boardroom of mining companies where it belongs. Change needs to happen before it gets to that point.

For more predictions, and to read the full report, visit www.bdo.com.au.

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MINE DE VELOPMENT

Meeting the mining industry challenges of tomorrow

BY SIMON HANR AHAN, SR K CONSULTING

The ‘easy stuff’ is long gone, but what does that mean for the resource industry’s future?

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o get a sense of the answer, we need to look closely at the challenges and complexities facing new and ongoing mining projects and operations in a changing industry landscape.

TECHNICAL CHALLENGES Several large-scale surface mines are at, or nearing, the end of their economic life, and with mineralisation often continuing at depth, it is sometimes viable to transition to a large-scale underground operation. But the typical transition lead time of up to 20 years is often underestimated and poorly planned for, with some mines discovering this to their detriment. As a result, value is eroded by open pits having to continue yet another cutback simply to provide production continuity.

An increasing number of new larger-scale deposits will be mined by underground – rather than surface – mining methods, which presents numerous challenges.

It takes considerable effort and cost to acquire the required knowledge for an ore body at depth. Without this ore body knowledge, the underground projects may carry elevated risk.

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Long access development lead times, elevated in situ stress, seismicity and higher virgin rock temperatures are just some of the challenges faced by miners as an increasing number of projects look to mine via the use of underground methods.

Similarly, existing open pits are marching ever deeper, and require a very good understanding of the geotechnical and hydrogeological parameters to ensure long-term slope stability.

Slope failure examples demonstrate that not fully understanding these conditions can generate unexpected and significant production interruptions.

These and other technical challenges are expected to become more prevalent across the industry. It is already not uncommon to see projects experience multiple materially challenging areas that require resolution prior to demonstrating a project’s viability.

SOCIOPOLITICAL CHALLENGES On a macro level, profound sociopolitical change continues to shift the markers as project owners negotiate approval paths.

An increasing number of jurisdictions are now modifying their tax regimes. The tendency to target resource-related projects, seen

AUSTRALIAN RESOURCES & INVESTMENT

as ‘low-hanging fruit’, results in a selective curtailing of investment and potentially restraining commodity supply, along with eroding relationship capital between industry and governments.

The industry’s social licence to operate is also under pressure from many angles in parts of the world. In particular, water resources are under increasing pressure, and miners can no longer rely on water rights that will detrimentally impact the local community water supply.

Poor past behaviours and outcomes in the resources sector have decreased social licence support from those outside the industry. The reality is that even the best operators are judged by the lowest common denominator.

This has created an increasing need to address the extent to which modern lifestyles are reliant on commodities, particularly the required rate of ongoing extraction to meet demand, while at the same time mining sustainably and in line with community expectations.

The industry needs to foster a greater collaboration to continue the drive towards technology and innovation, as well as doing more to encourage the younger generation to stick with the industry and use the original thinking that they will bring.

WHERE IS THIS ALL LEADING? During the recent downturn, the supply–demand balance was negatively impacted. While demand generally continued unabated, the supply chain, particularly exploration, has lagged in some commodities.

Poor past behaviours and outcomes in the resources sector have decreased social licence support from those outside the industry.

The reality is that even the best operators are judged by the lowest common denominator

The latest downturn has been particularly challenging, and as an industry, we have experienced a loss of personnel across the ranks. This is exacerbated by the significant drop in new students entering resource-related tertiary subjects – which is, in part, a reflection of the recent challenging market conditions.

While it is commonly recognised that more needs to be done to attract and retain new entrants into the industry, the messaging and execution are often conflicting.

Many companies espouse mentoring programs, for example, but these have been seen to unravel on site, where line management may not share the vision or have the required skills to implement the corporate aspiration. The net result is the loss of aspirant scientists and engineers.

As mining activity continues unabated, mining companies still require significant numbers of tertiary graduates, while the number of students graduating has materially dropped. What does that mean for the industry?

T O WA R D S A S O L U T I O N Looking beyond the challenges, the industry needs to foster a greater collaboration between companies and industry bodies to continue the drive towards technology and innovation; and to inspire the incoming generation to stick with the industry and harness the original thinking they will bring.

The drive for collaboration and engagement with technological innovation are tools that can help in attraction and retention across the board, but particularly for the valuable new entrants into the industry that we need to prosper and survive. Observations on some mine sites indicate that younger engineers are often in personal holding patterns, looking to move into city-based roles in a compressed period and leaving companies short of a direct production workforce.

With many projects still to be fully evaluated or even discovered, exploration processes need to continue to innovate for deposits that are under cover. This then needs to be followed by downstream studies that are more robustly evaluated to ensure that the viability of those projects can be demonstrated, and funding can be secured.

This is particularly relevant to projects outside of the major mining companies where the supply of capital is more constrained.

The international underground caving community is a shining light in how collaboration promotes thinking differently about complex issues. There is a high degree of connectivity and networking that benefits all caving operations and projects through a willingness to share lessons and experience in what is arguably the most technically challenging mining method.

Nurturing ‘knowledge communities’ to share ideas, resources and promote innovative thinking should be the way forward.

With the pace of change increasing, contending with growing complexity in all types of mining projects and operations will require a collective commitment to communication, collaboration and empowerment across the mining value chain.

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MINE DE VELOPMENT

Sumitomo driving innovation Sumitomo Drive Technologies is quickly closing in on 25 years in Australia in 2020.

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or many years, Sumitomo Drive Technologies (SDT) covered the Australian market via distribution, a method that still continues in New Zealand, via Bay Engineers Pty Ltd. SDT started in Australia with a single office in the western Sydney suburb of Parramatta. Since then, SDT has outgrown facilities in Wetherill Park and Arndell Park, and currently resides in a purpose-built factory in Glendenning, New South Wales.

Expansion over the years has seen offices established in Melbourne, Brisbane, Perth and the Central Coast in New South Wales, and only last year saw the opening of a 2500-square-metre dedicated service facility in Mackay, Queensland, complete with a 520-kilowatt load test cell.

SDT is well known throughout industry for its highly regarded Cyclo drive reducers and gear motors. They are the only units on the market with a 500 per cent instantaneous shock-load capability, and are compact, torque-dense and tough.

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Cyclo has assisted in many demanding installations where normalgeared drives would be quickly destroyed.

Once considered a unit to be used in only the toughest of applications, Cyclo drive now competes with all regulargeared units on the market. Competitively priced, they can be used in most applications where a geared drive is needed. Available with maximum torque ratings of 68,200 newton metres, could this be the drive to solve one of your installed drive problems?

In addition to the Cyclo drive, SDT’s complete range includes right-angle bevel Buddybox, Helical inline Buddybox, Helical shaft-mounted units, and the Hyponic and right-angle range (using hypoid gearing). There is also a range of low- and zero-backlash units available where a high degree of accuracy is required.

For larger applications, such as overland conveyors, cooling towers,

port terminals, mill drives and the like, SDT’s large range includes the Paramax – available in both inline and right angle to 552 kilonewton metres. SDT’s acquisition of Hansen in 2011 added the P4 range, catering for torques up to 1100 kilonewton metres. Sumitomo Heavy Industries Gearbox Company (formerly Seisa) can design and manufacture units with up to 10,000-kilowatt capacity and manufactures SDT’s Seisa range of gear couplings. The name change incidentally coincided with the celebration of its 100year anniversary.

SDT has manufacturing plants throughout the world, with three in Japan, and two in China, Germany, Belgium, Vietnam, the United States and Brazil. All of these are backed by our sales offices and service centres around the globe.

For more information on any of SDT’s sales or service centres in Australia, call 13000DRIVE.

SUMITOMO DRIVES, BUILT TOUGH, BUILT TO LAST Free call 1300 0 DRIVE (1300 037 483) to speak to our team SYDNEY

MELBOURNE

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D IETVEEC LO PS MUERNET & R E H A B I L I TAT I O N MINE S LO

Post-mining landscapes that continue to benefit communities Australian mining companies understand that land rehabilitation is fundamental to responsible mining.

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he mining industry recognises its responsibility as a temporary custodian of land to contribute to sustainable land-use outcomes.

Mining rehabilitation is critical to the ongoing community acceptance of mining.

That’s why the Minerals Council of Australia (MCA) is featuring a great story on rehabilitation, mining and farming working together in the industry campaign, ‘There’s more to Australian mining’.

The campaign was filmed at New Hope’s New Acland mine in Queensland’s Darling Downs, where industry-leading environmental credentials were formally ratified through Queensland Government certification of 349 hectares of progressively rehabilitated mined land.

New Hope has been progressively rehabilitating New Acland Mine since operations began in 2002, with rehabilitation commencing immediately behind mining operations.

Five years of scientific cattle grazing trials conducted on the rehabilitated land indicate that cattle on mined land perform as well or better than cattle on unmined land.

New Acland benefits from one of Australia’s most ambitious and practical land management programs, led by the Acland Pastoral Company (APC).

Established by New Hope in 2006, APC provides a progressive rehabilitation program to return mined land to agricultural and conservation uses while contributing to the region’s agribusiness industry.

To date, about 400 hectares of land has been rehabilitated. Innovative cattle grazing trials and a local tree species planting program are also in progress.

Newmont took ownership of the decommissioned Woodcutters lead-zinc mine in the Northern Territory as part of its 2002 acquisition of Normandy. The company has continued decommissioning, and rehabilitation and monitoring activities at the site in partnership with the area’s traditional owners, the Kungarakan and Warai people.

Work is guided by the Woodcutters Agreement, which details local employment, training and stakeholder

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commitments. Newmont’s aim is to return the land to traditional owners when agreed closure criteria and objectives are met.

Peabody has progressed rehabilitation of its Wilkie Creek site in Queensland’s Surat Basin following the completion of coal mining in 2013 with most rehabilitation now complete. This includes backfilling of open-cut voids, reshaping of dumps and undergoing demolition and

associated works. Included within the final landform planning process are paddocks and cattle watering systems to support the end land use of grazing.

Extensive community engagement continues to inform the planning for postmine land use with grazing trials, including more than 50 cattle on a rehabilitated backfilled pit, delivering positive results for neighbouring graziers.

AUSTRALIAN RESOURCES & INVESTMENT

At Anglo American’s Dawson Mine, the company pioneered the use of blasting techniques to successfully reshape void highwall into final landform position in 2013.

Pre- and post-blast surveying was undertaken to provide accurate estimates of how much reshaping and material was required for final landform.

The area is currently being monitored for plant growth and species richness.

Monitoring will continue every three years for progression to a stable state, and the area is expected to be ready for grazing activities in around four to five years. At the time, very few trials had been conducted using this sophisticated and innovative technique.

Across the Australian minerals sector, planning for rehabilitation takes place long before mining commences, and rehabilitation is undertaken progressively during the life of a mine wherever practical.

The industry’s approach to land rehabilitation has improved significantly over past decades – an evolution driven by sustained investment in land rehabilitation techniques, evolving corporate values, community expectations and government regulation.

While much progress has been made, the industry is continuing its efforts to improve rehabilitation methods to ensure mining’s compatibility with current and future land uses.

During development and operation, mines bring significant benefits to regional areas through economic development, capacity building and infrastructure.

Mining operations, however, are finite in nature and mining is only one of many alternative land uses over time.

The industry aims for previously mined land to be made available for farming and other future economic activity, conservation or community use.

Rehabilitation methods and leading practice techniques have been driven by sustained and substantial company investment in research to strengthen the science underpinning rehabilitation methods.

Australian mining companies have significant in-house expertise in rehabilitation and closure planning.

Where necessary, nationally and internationally recognised specialists are also engaged to review and provide input into rehabilitation and closure programs.

These efforts ensure that the community benefits extend beyond taxes, royalties, jobs and investment during operation to include a post-mining landscape that has ongoing social, economic or conservation values.

Costs also include financial assurance (security bonds), which provide a monetary safeguard to protect government from

incurring unfunded liabilities should a company be unable to meet its rehabilitation obligations.

The provision of a security bond does not remove a company’s obligation to rehabilitate land.

Mine rehabilitation is highly regulated, better implemented and more accountable than ever before.

Most abandoned mine sites were developed long before modern mining regulation. This does not reduce the importance of addressing the abandoned mine issue.

Government efforts should be pragmatic and focus on those sites that present the highest risks to community health and safety, and the environment.

The minerals industry has been an active contributor on the issue of addressing abandoned mines, and in recent years, the MCA has also sponsored and participated in forums on abandoned mines.

The minerals industry wants to continue working cooperatively with governments and the community to manage or minimise the environmental, social and economic impacts of abandoned mines.

The MCA is proud to highlight examples of successful mine rehabilitation on its website at minerals.org.au/minerehabilitation-case-studies.

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ENVIRONMENT

REAL-TIME GROUNDWATER MONITORING World-first trials of CSIRO’s automated sensor system, SENSEI, are providing promising, real-time results to better monitor and manage groundwater impacts in mining operations. David Simpson reports.

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AUSTRALIAN RESOURCES & INVESTMENT

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SIRO’s new automated groundwater monitoring system is a year into its world-first trial at Heathgate Resources’ Four Mile West uranium mine, some 550 kilometres north of Adelaide in South Australia.

Heathgate’s commitment to developing and operating Four Mile West as a world’s best practice in situ recovery (ISR) mine provided an ideal opportunity to trial SENSEI technology in a challenging environment.

ISR mining involves injecting alkaline or acidic fluids with an oxidant within a permeable geological formation, typically an aquifer. During this process, it is essential that the mining fluids are contained within the mining zone, as they are not only resource-rich, but they also have the potential to adversely affect adjacent areas, particularly aquifers.

Groundwater monitoring is an essential part of regulatory compliance. Conventionally, as is the case at the Beverley, Beverley North and Four Mile mining operations, this is done by manually pumping groundwater samples from each series of wells on the perimeter, and overlying and underlying the mining area. The samples are then analysed to ensure that no mining fluid has drifted outside the immediate mining zone, laterally or vertically, and that it has been safely contained in the mining aquifer.

The manual sampling process at the mine typically takes two operators a month to complete, with analysis adding another time lag, so it can be two to eight weeks before the results are known. If anomalies are detected, the time between incident and action risks complicating the remediation process.

The value and benefits of SENSEI are evident. The SENSEI solid-state sensors inserted into the wells can provide real-time, continuous data on pH, redox potential, conductivity, temperature and water level.

Results from the SENSEI system, which comprises the sensors and associated software, can be monitored on site or remotely via the cloud.

With support from National Energy Resources Australia (NERA) and Boss Resources, SENSEI trials at the Four Mile West mine began in November 2018 and, according to CSIRO Project Manager Daniella Caruso, things are progressing well.

‘At the moment, we’re in the middle of phase one of the trial, in which 10 sensors were deployed in the inner region of the lateral environmental monitoring wells,’ Caruso says.

‘By collecting data and matching it with the manually derived results, we’ve learnt that most of the SENSEI architecture is working well after 10 months in the field.

‘A major benefit of the field trials is that we’ve learnt which components are working well and identified others that need optimising for underground water monitoring conditions.

The trial is proving that SENSEI will result in miners increasing their operational efficiency with autonomous, real-time access to accurate data ‘All the aboveground infrastructure is performing well in conditions ranging from sub-zero nights to near 50-degree daytime maximum temperatures.

‘While our revolutionary sensor materials are performing well, we’re continuing to improve some components through the trial to optimise their performance under field conditions and to give them a longer life span.

‘The results so far indicate excellent progress towards validation of the materials and construction of the SENSEI system for this application.’

According to Caruso, achieving 12 months in the field is a big step forward, particularly because the underground components are exposed to 15–18 bars of pressure as the monitoring well depths range from 150–180 metres. The trial is proving that SENSEI will result in miners increasing their operational efficiency with autonomous, realtime access to accurate data.

Next steps for the trial involve optimising components and continuing to check results against the manual testing.

Before SENSEI can fully replace manual testing, the users and the government regulators must be satisfied that it meets rigorous groundwater monitoring requirements. Only then can the benefits of lower-cost, real-time monitoring and remote access be realised.

For CSIRO’s SENSEI team, this will be the first step in the journey that will potentially involve applications in other areas of the mining, water and allied industries.

‘We’re thankful to Heathgate Resources, NERA and Boss Resources for their sponsorship and support in providing the opportunity to field test SENSEI technology,’ Caruso says.

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FE UO RN EM AE RN T ITC L E E NAT VIR

VEGA sensor products have the measure of critical infrastructure Global leader in instrumentation technology, helping organisations prepare for the Internet of Things (IoT).

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EGA Australia Managing Director John Leadbetter has a timely view on the benefits of sourcing highquality infrastructure equipment. ‘The cost of owning equipment over many years is always more important than the initial purchase price,’ he says. ‘Invest in quality and you get precision that lasts a long time.’

Quality and precision are hallmarks of VEGA Grieshaber KG, a world leader in level, switching and pressure instrumentation. The German company operates in more than 80 countries, and its sensors are used extensively across Australian industry.

Councils, for example, use VEGA technology in their water plants to measure drinking supplies and in wastewater treatment plants to monitor sewage flows. Its sensors also measure the quality of cement and other raw materials used in infrastructure.

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VEGA also helps clients leverage the benefits of the IoT through state-of-the-art sensors. ‘VEGA is a pioneer of connected sensor technology,’ says Leadbetter. ‘Our equipment has been compatible with bluetooth apps since 2002 and continues to evolve.’

Although sensors have a critical role in infrastructure construction and maintenance, operators sometimes choose cheaper, inferior products, says Leadbetter. ‘They mistakenly think sensors are a commodity, so they choose the cheapest option. An $80 pressure transmitter might measure airflow okay, but it won’t work in a mining slurry with abrasive materials.’

Poor product support too often accompanies cheap sensors. ‘The customer realises that there is limited capability to tailor a sensor to an infrastructure project, or not enough support if something goes wrong,’ says

Leadbetter. ‘Or they realise that their supplier is not keeping up with latest sensor technologies because they underinvest in R&D.’ Organisations that cut corners with sensor technology can pay a heavy price. ‘Sensors are integral to infrastructure performance,’ says Leadbetter. ‘The data they capture tells a council how an asset is performing, whether there is enough bitumen being laid in a new road, or if the council is meeting its environmental obligations with wastewater outflows. Infrastructure assets last for decades, so it pays to invest in the best sensor technology.’

F O C U S O N I N N OVAT I O N

VEGA’s mission to develop innovative, trendsetting sensor technology has underpinned its approach over more than 60 years. Its longstanding goal is developing sensors that are easy to install

AUSTRALIAN RESOURCES & INVESTMENT

and operate, and offer maximum reliability and safety.

VEGA employs 1480 staff worldwide, half of which work at its headquarters in Schiltach, in Germany. ‘Australian customers get the best of both worlds,’ says Leadbetter. ‘VEGA’s global network and extensive R&D capability puts it at the forefront of sensor technology. But we also have a very localised Australian approach.’

VEGA Australia has operated since 1987, selling most of its products directly to customers. The company works with local and state governments, water authorities, infrastructure developers and operators, and a wide range of infrastructure service providers.

This approach has four main advantages. First, a deep understanding of Australian infrastructure requirements helps VEGA tailor its sensor technology.

‘We spend time understanding what our clients are trying to achieve and then create the best product solution for them,’ says Leadbetter. ‘Through VEGA’s R&D capability in Germany, we have enormous capacity for innovation and an ability to create bespoke solutions for clients.’

Second, VEGA Australia carries local inventory. ‘We have sensors ready to go and can bring in products from Germany if needed. That minimises the risk of an operation being held up because a supplier relies on imported sensors and cannot get them quickly.’

Local staff are the third advantage.

‘VEGA has an excellent team that knows our clients, and provides ongoing technical support and training,’ says Leadbetter.

‘Everything we do is about building longterm relationships and long-term solutions.

There are no quick fixes.’

The fourth advantage is the breadth and depth of VEGA’s work in Australia.

‘Our sensors have been used for decades by government and across industries, and are found in many of Australia’s largest infrastructure assets,’ says Leadbetter.

‘This experience provides valuable insights on how to maximise benefits from sensor technology.’

INTER NET OF THINGS

Leadbetter is proud of VEGA Australia’s history and excited about its future. He believes that the IoT is transforming infrastructure maintenance and elevating the importance of high-quality sensors that capture data to inform software algorithms.

‘More than ever, infrastructure operators want to address problems before they occur,’ he says. ‘They want

connected devices online that provide information to inform decisions, help operators take a more proactive approach and minimise costs.’

Council workers, for example, can monitor pressure at a water plant using an app that connects to a VEGA sensor. ‘They can investigate a potential pressure issue through an app on their smartphone or tablet and upload that data to the cloud,’ says Leadbetter. ‘They don’t have to carry expensive specialist equipment or waste time trying to access sensor information.’

Leadbetter says that connected devices are a key focus of VEGA’s R&D operations. ‘We’re doing continuous work on how sensor technologies can harness the power of the IoT and help clients make timelier, better decisions with their infrastructure.’

Sensor technology is about more than operational efficiencies, says Leadbetter.

‘VEGA products help communities.

Our sensors measure everything from a river’s tidal flows, to sea levels, to a dam’s water levels and drinking water quality. Our technology is used in tsunami warnings, and helps reduce the risks of major sewage spills and other environmental disasters.

‘I doubt the community realises how integral VEGA sensors are to our everyday way of life, and how important it is that governments and infrastructure companies invest in quality sensor technology from leading providers. Information is power, and sensors provide it.’

To learn more about VEGA Australia, visit www.vega.com.

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GOLD

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AUSTRALIAN RESOURCES & INVESTMENT

GOLD IN FOCUS:

The yellow metal remains strong, despite pressure from the US–China trade war.

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GOLD

Dart Mining’s return to gold Dart Mining has swung its exploration focus in north-eastern Victoria to gold in response to the surge in Australian-dollar prices for the yellow metal to more than $2000 per ounce.

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hardy explorer that joined the stock exchange lists in 2007, Dart started out its listed life as gold explorer in the region, and later notched up exploration success in both molybdenum (the Unicorn porphyry discovery) and, more recently, lithium (3000 pegmatites in the Mitta Mitta Valley).

But with the sharp fall in molybdenum and lithium prices while gold takes off, Dart is returning to the region’s gold prospectivity.

Managing Director James Chirnside says that Dart’s long-established tenement position of 3500 square kilometres, covering nine historic goldfields (including a project at Rushworth in central Victoria), means the company is spoilt for choice in pursuing the gold strategy.

He says that despite parking up Dart’s lithium exploration, he remained a longterm bull on the lithium market.

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‘But we have a plethora of gold opportunities, and that is what we are focusing on,’ he says.

While Victoria’s north-east region has a history of hard-rock and alluvial gold production, it has been overshadowed in recent times by major exploration success in the central Victorian goldfields, most notably at Fosterville, near Bendigo.

Dart is out to change that, and Chirnside suspects that others are also looking to Victoria’s north-east for new exploration opportunities, spurred on in part by the imminent release of data from a government-funded regional seismic survey.

The Buckland gold project in the Buckland Valley to the south-west of Bright is Dart’s initial priority, with a drilling campaign expected to kick off in December. It is an area known for historical gold dredging operations in the Ovens and Buckland rivers, as well as high-grade shear-hosted gold mines.

Recent work by Dart has outlined the 8.5-kilometre-long Fairleys Shear Zone, which is considered to be the controlling structure for the regional gold mineralisation.

The shear zone consists of multiple parallel mineralised zones stacked over a width of about 400 metres.

‘We think it has the potential to deliver a large deposit, and we’re all over it. It is what we eat, live and breathe every day,’ Chirnside says.

‘We plan to do some drilling at Buckland in December and, depending on the fire season, we could continue into January.’

Dart will also be looking to advance its portfolio of porphyry prospects in the north-east to the point where potential partners with deeper pockets can come in and pick up the running.

Apart from the big Unicorn discovery, Dart has five other porphyry targets on the southern end of the prolific Lachlan Fold Belt in New South Wales, which is home to the giant Cadia gold/copper porphyry.

DART MINING NL ASX: DTM

NUMBERS MATTER 3,500 square kilometres tenement footprint in North East Victoria 14 Exploration and Mining Licences 9 Historic Gold Fields 6 Porphyries 2,500 Li Cs Ta (LCT) Pegmatites

3 significant mineral discoveries Mo, Li, Au

Visit www.dartmining.com.au Enquiries: jchirnside@dartmining.com.au

GOLD

GOLD STILL STRONG

BY BAR RY FITZGER ALD

Commodity price weakness brought on by the US–China trade war and general concerns about global economic growth has been a key theme for the Australian mining industry in the past 12 months. But not for the gold sector.

– 42 –

AUSTRALIAN RESOURCES & INVESTMENT

T

he gold sector has just posted a record year of production on the back of record Australian gold prices, which, ironically enough, was a result of the very same factors dogging the broader industry.

It was at the Diggers & Dealers Gala Dinner in early August when the host for the night – who obviously knew his audience – broke into the schedule to announce the local gold price had cracked A$2200 per ounce for the first time.

A cheer worthy of an AFL Grand Final went up beneath the giant marquee, filled by 1200 mining types – most of whom had a connection to the gold industry of one type or another.

Record gold prices means more work for suppliers, drillers and mining contractors, the geologists and mining engineers, as well as the company promoters and the capital market players.

For the owners of good mines, the fat margins they enjoyed in 2017 (when gold averaged A$1692 per ounce) and 2018 (A$1633) had just got a lot fatter. And for the owners of more challenged operations, there was relief that they would be staying in business a while yet.

Sure, there have been some notable mine failures in the past 12 months.

But with gold prices holding at more than A$2200 per ounce, even some of those will be revived, such is the potential for record prices to float all boats.

US dollar gold actually plodded along in the first six months of 2019, with prices falling from an average of US$1318 per ounce in the previous corresponding period to US$1306 per ounce. But thanks to the fall in the US exchange rate from 77 cents to 70 cents, the local gold price put on a handy A$154 per ounce to average A$1865 per ounce.

With much of the industry producing its gold in an A$1000–1400 bracket, things were already looking great. But from early June, the US dollar gold price took off, peaking at US$1551 per ounce early in September ahead of a retreat by late October to US$1500 per ounce.

The local price also weakened, but the late-October price of A$2180 per ounce remained fabulous.

Due to particular weakness in the exchange rate in August, the all-time record price for the local gold price currently stands at $2291 per ounce, which was reached on 29 August when the US price was US$1540 per ounce and the exchange rate was 67.22 cents.

As suggested earlier, prices in the years leading up to the August record were pretty good anyway, prompting the development of new mines and the reopening of old mines, as well as fuelling a step up in exploration.

That all came together in June in terms of gold production.

According to Melbourne-based gold mining consultant Surbiton, Australian gold production hit an all-time record of 321 tonnes (10.3 million ounces) in 2018/19, worth about A$23 billion, and cementing gold as the fifth-biggest commodity export, behind iron ore, liquefied natural gas (LNG), coking coal and thermal coal.

The June year output compared with 310 tonnes in the previous corresponding period and 317 tonnes in calendar 2018, firmly anchoring Australia as the world’s second-biggest producer behind China.

Surbiton Managing Director Sandra Close jokes that ‘reporting yet another record gold production is good but becoming rather repetitive’.

‘The outlook for Australian gold production seems positive,’ Close says. ‘However, many things can happen. I can’t predict the future and am very conscious of the many factors and uncertainties that affect gold prices, exchange rates and production.’

Macquarie’s commodities research team says that the gold price ‘clearly remains in a relatively sweet spot of weak (but not yet recessionary) global growth, declining policy rates, heightened geopolitical tension and challenged risk asset performance’.

But it warned that gold could quickly slip back to US$1400 per ounce given that its recent performance has been driven by significant speculative inflows, creating the risk of a correction.

While acknowledging that risk, it has to be said that a US$1400-per-ounce-gold price would be unlikely to make much of a dent in production from existing mines, or the greater effort that is going into exploration, assuming the exchange rate remains at lower levels.

Based on federal government figures, gold exploration expenditure rose by 19 per cent in the last year, to $964 million.

Western Australia continues to account for the lion’s share, with exploration in and around high-grade historical gold mines a feature of the past 12 months.

High-grade successes by Bellevue Gold and Spectrum Metals were responsible for the step up in the broader exploration effort to ‘find’ the next old mine that could yield yet more high-grade gold.

Kirkland Lake’s success at Fosterville, near Bendigo in Victoria, has seen the high-grade mania spread to the east coast.

The Stawell gold mine was reopened, and explorers big and small scrambled to take up tenement positions over old goldfields, notwithstanding plans by the Andrews Government to impose a gold royalty for the first time.

Kalamazoo Resources is one of the companies to have moved into Victoria on the strength of the Fosterville success and the strong gold price.

It is kicking off an exploration program at the historic Castlemaine goldfield, the third biggest in Victoria behind Bendigo and Ballarat, with a production history of 5.6 million ounces.

And like many juniors that had success in lithium exploration before the bottom fell out of the market, Dart Mining has swung its exploration focus in north-eastern Victoria to gold in response to the surge in Australian dollar prices.

Back in Western Australia, Kairos Minerals is gearing up for a new exploration program aimed at increasing the already substantial gold resource at its Pilbara project.

The current gold resource at the Pilbara project – 14.4 million tonnes at 1.39 grams per tonne of gold for 643,000 ounces – is already one of the biggest held by an ASX-listed junior.

The company said the incentive to get cracking on a new drilling program was the substantial increase in the Australian dollar gold price since the existing resource estimate was published.

It is a story being repeated across the sector thanks to A$2200-perounce gold.

– 43 –

GOLD

Topping the mining charts Kairos Minerals is gearing up for a new exploration program – aimed at increasing its already substantial gold resource – at its Pilbara project in Western Australia.

Brian Naylor using a hydro-drone, a small remote-controlled boat fitted with a GPS and sounder (very cool toy, it came out of the oil and gas industry), to map the pit floor to determine actual mining levels, this demonstrated that the final cut was not done, leaving approximately 20,000 ounces of gold unmined

S

purred by the surge in gold prices to more than $2100 per ounce, Kairos was putting the finishing touches on capital raising to fund the new campaign in late October.

The current gold resource at the Pilbara project – 14.4 million tonnes at 1.39 grams per tonne gold for 643,000 ounces – is already one of the biggest held by an ASXlisted junior.

The resource was announced in May last year, and was drawn from a reevaluation of known resources from the historical Lynas Find gold project, which produced more than 125,000 ounces of gold between 1994 and 1998, as well as from drilling by Kairos.

Kairos Executive Chairman Terry Topping says the existing resource was the company’s core value proposition.

‘Following a detailed re-evaluation of the existing resource completed in recent months, the company has established some exciting new exploration targets – particularly at the higher-grade Iron Stirrup deposit,’ Topping says.

– 44 X ––

‘We believe that there is an opportunity to extend the mineralisation at Iron Stirrup beneath, and strike from the existing open pit, which was mined historically in the 1990s.

‘We also plan to undertake a review of the overall existing resource and start mining studies,’ Topping says.

The key deposit in the Pilbara gold project’s current resource estimate – Mount York – sits immediately adjacent to the newly established Pilgangoora lithium mining centre of Pilbara Minerals and Altura Mining.

The location means that a future development by Kairos would not encounter the infrastructure support issues facing other gold groups operating in the Pilbara.

Topping says the incentive to get cracking on a new drilling program was the substantial increase in the gold price, since the existing resource estimate was published.

‘The funds raised will also allow us to undertake further exploration of the very large, coherent and high-tenor gold-in-soil

anomaly identified recently at the Croydon project,’ says Topping.

Kairos believes that the Croydon anomaly is a very large conventional gold-exploration target hosted within the Hardey Formation.

‘Recent mapping, rock chip and soil sampling has not only expanded the size of the gold-in-soils anomaly announced in August to over eight kilometres, but also returned significant results from gold pathfinder element analysis.’

Topping says work was underway to secure approvals for an exploration program aimed at finding conventional, structurally hosted gold mineralisation in the Pilbara, alongside the existing resource base at Mount York.

The broader Croydon area is also prospective for a gold-bearing conglomerate, which was discovered by Novo Resources at its Purdy’s Reward project, near Karratha, in the Pilbara.

Kairos has found numerous associated gold nugget patches, including one where the gold was hosted directly in the conglomerate sequence.

Advanced gold exploration and resource development in WA’s premier mining districts A committed explorer – aiming to make company-changing discoveries

Pilbara Gold Project • Historical production of 125,000oz – previously mined in 1990s • Current 643,000oz Mineral Resource (14.4Mt at 1.39g/t) – review underway based on strong A$ gold price • New phase of exploration and resource extension drilling commencing November 2019 – initial focus on the highergrade Iron Stirrup deposit •

• Mining studies to commence early 2020 • Outstanding exploration and development opportunity • Located immediately adjacent to the newly-established Pilgangoora lithium mining centre & Tantalum)

kairosminerals.com.au

GOLD

Ardiden eyes Pickle Lake gold potential Exploring in a region that has historically produced more than three million ounces of gold, Ardiden Limited (ASX: ADV) may have only scratched the surface when it delivered a maiden resource at its Pickle Lake project in Ontario, Canada.

A

rdiden is preparing for a busy few months at Pickle Lake as it aims to build on the 110,000 ounces at 4.3 grams per tonne gold inferred resource at the Kasagimminis deposit.

Drilling at the South Limb prospect is the first job on the list for Ardiden’s new CEO, Rob Longley, who compares Ontario’s Pickle Lake/Red Lake region to Western Australia’s north-eastern Goldfields, home to the gold-endowed areas around Kalgoorlie, Leinster and Laverton.

The Pickle Lake region hosts four underground mines; Pickle Crow (1.44 million ounces at 17.8 grams per tonne of gold), Central Patricia (621,806 ounces at 12.5 grams per tonne of gold), Golden Patricia (619,796 ounces at 15.2 grams per tonne of gold) and Dona Lake (246,500 ounces at 6.6 grams per tonne of gold), with Golden Patricia bearing similarities to Western Australia’s Bellevue Gold Mine. Bellevue produced 600,000 ounces at 15 grams per tonne of gold between 1988–1997, and is now garnering new attention.

Ardiden was attracted to Pickle Lake’s regional setting and historical production, and it secured 100 per cent of Pickle Lake

– 46 X ––

Frozen Pickle Lake

in July, exercising its option to acquire Murchison Minerals’ 51 per cent interest after strong due diligence drilling results.

With existing gold operations in the region mined to depths of more than 1200 metres, Ardiden sees the potential to build on the Kasagimminis resource with deeper drilling.

‘The Pickle Lake greenstone area has been overlooked and underloved since the 1980s, but now there is renewed interest from mining and exploration companies in the dormant underground mines and adjacent extensions of mineralised areas,’ Longley says.

‘A higher gold price and improved exploration techniques have made this gold camp ripe for re-evaluation. Kasagimminis is only a small part of Pickle Lake.’

Kasagimminis remains open at depth and along strike, with Ardiden planning to return to the area with a drill rig in early 2020. It will also undertake a geophysical survey at West Pickle, and review historical data and resource estimates for the Dorothy-Dobie deposit.

With activity increasing, Ardiden is investigating potential synergies with companies near Pickle Lake, and will use

its well-funded position of A$2.91 million cash at bank (at 30 September 2019) to progress exploration.

‘There is excellent infrastructure in this mining province, and a strong desire to work together to the mutual benefit of all stakeholders,’ Longley says.

Ardiden has only recently switched its focus to gold, having previously explored for lithium in Ontario. The company announced a 400 per cent increase in mineral resources to 4.8 million tonnes at 1.25 per cent lithium oxide (JORC 2012), and an exploration target of 4.5– 7.2 million tonnes at 0.8–2.4 per cent lithium oxide for its Seymour Lake lithium project in March.

It recently announced a memorandum of understanding (MOU) with lithium developer Rock Tech Lithium Inc (TSX-V: RCK). Ardiden and Rock Tech agreed to work towards developing a lithium project to combine the hard rock spodumene resources at Ardiden’s Seymour Lake and Rock Tech’s Georgia Lake lithium projects.

Ardiden believes teaming up with Rock Tech will provide strategic advantages to developing Seymour Lake, as well as its other Ontario lithium holdings.

Ideally positioned in the Canadian tier-one gold region Ardiden Limited (ASX: ADV) is exploring for high-grade gold deposits in the tier-one region of Ontario, Canada.

The Pickle Lake region has produced more than 3 million ounces of gold and hosts four historic underground deposits developed to depths of over 1km – Pickle Crow, Central Patricia, Golden Patricia and Dona Lake.

Ardiden acquired 100% of the Pickle Lake Gold Project in July and declared a high-grade gold resource of 110,000oz at 4.3g/t for the Kasagimminis deposit in September.

Now Ardiden is preparing for more exploration to build on that resource, with drilling and geophysical survey activities planned for Kasagimminis as well as the nearby South Limb, Dorothy-Dobie and West Pickle prospects during the upcoming winter.

Ontario is Canada’s largest gold producer, with 17 mines in operation.

In 2018, Ontario contributed 2.5Moz of Canada’s overall 6.0Moz of gold production with Newmont-Goldcorp and Kirkland Lake being the major producers in the Province.

Ardiden also has significant hard rock spodumene lithium interests in Ontario and is seeking to create value from these through alliances with other developers.

WWW.ARDIDEN.COM.AU CONTACT Rob Longley CEO, ARDIDEN LTD TEL: +61 (0) 8 6245 2050 info@ardiden.com.au

GOLD

The long-awaited gold price breakout

BY GAVIN WENDT, MINELIFE PT Y LTD

We’ve witnessed an extraordinary breakout with respect to the price of gold over recent months.

T

he yellow metal broke out above its critical level of technical resistance during the month of June, rising above the high of $1380 per ounce reached during July 2016. Importantly, it has also managed to remain well above that level.

Gold’s robust recent performance has been driven by a confluence of factors – all positive – including falling interest rates, fears about economic growth, political instability, and uncertainty surrounding the ongoing trade war between the United States and China. There have been other factors, too, such as geopolitical concerns, including unrest in Hong Kong, as well as the recent attack on Saudi Arabia’s oil facilities.

After reaching the $1550-per-ounce mark during early September, the gold price has consolidated somewhat, which is entirely rational, but it has remained firmly above the $1450-per-ounce level.

The bottom line is that investors and traders have moved strongly towards gold, reinforcing its traditional role as a safe haven during times of political and economic uncertainty.

It can be argued that the bull market in gold began at the start of this century. Ironically, following the Bank of England’s decision to liquidate half of its gold reserves at prices as low as $250 per ounce, gold’s recovery began. A far cry from the days of the Bank of England and the Reserve Bank of Australia selling vast volumes of gold reserves, central banks around the world these days are net buyers of the metal, at price levels six times higher than where the Bank of England sold.

– 48 –

Central bank accumulation of bullion has emerged as an increasingly important trend in the global market, offering additional support for prices that have rallied to the highest level since 2013 on rising demand. Authorities have been adding to reserves as growth slows, trade and geopolitical tensions rise, and some nations seek to diversify away from the dollar. Official purchases now account for about 10 per cent of worldwide consumption.

The People’s Bank of China added a further six tons to its gold reserves during the month of September. This represents the 10th consecutive month of gold purchases, with the nation’s gold reserves now standing at 1948 tons at the end of September. So far in 2019, China has added 95.8 tons of gold to its reserves.

Meanwhile, the total assets under management (AUM) of Chinese gold exchange-traded funds (ETFs) reached ¥17 billion, or US$2.4 billion, as at the end of September, a new all-time record. As of 30 September, holdings of China’s four gold-backed ETFs totalled 50 tons, a monthly rise of 3.5 tons. Chinese gold ETF investors tend to be more sophisticated and longer-term-oriented, thus treating any dip in the gold price as an opportunity to expand their gold allocations.

In all, the world’s central banks added 374.1 tons to their holding during the first six months of 2019, helping to push total bullion demand to a three-year high. The trend is expected to continue, with a recent survey of central banks showing that 54 per cent of respondents expect global holdings to climb in the next 12 months.

AUSTRALIAN RESOURCES & INVESTMENT

Figure 1. The People’s Bank of China’s gold reserves continue to grow. Source: The People’s Bank of China

Gold’s best friends remain the world’s debt-addicted central banks. What started out as a temporary post–global financial crisis (GFC) measure to try and avoid international economic catastrophe has now morphed into a dangerous addiction While the central banks of emerging nations have provided goldprice support through their purchases, many of the central banks from the world’s biggest nations have provided gold-price support through their policy actions – specifically debt.

Gold’s best friends remain the world’s debt-addicted central banks. What started out as a temporary post–global financial crisis (GFC) measure to try and avoid international economic catastrophe has now morphed into a dangerous addiction. It has now become a seemingly permanent means of keeping the international economic wheels turning on a day-to-day basis.

Keeping rates low for several quarters is a very different situation from keeping them there for years. What has transpired is that the

low-rates scenario has unintentionally punished savers and distorted market prices, in turn, encouraging enormous and destabilising financial speculation.

Furthermore, central bank policies of inducing negative real rates to effectively ‘incentivise’ borrowing has expanded the money supply and devalued currencies – in turn, forcing investors to chase riskier assets in order to generate returns. It is little wonder that investors are increasingly seeking refuge in gold.

Base interest rates in industrialised nations have remained low since the financial crisis of 2008. Frequently throughout this period, the rate of inflation has been higher than this, implying a loss in spending power over time for each unit or currency. In the United States, the August 2019 inflation reading showed that ‘core’ consumer prices (excluding volatile food and energy prices) rose to an 11-year high of 2.4 per cent yearly growth. Not since September 2008 have prices expanded so fast, and this doesn’t include the effects of the 15 tariffs on $112 billion in Chinese goods that the United States imposed on 1 September.

Gold’s robust recent performance has been driven by a confluence of factors – all positive. Right now, gold markets are in a consolidation phase following its strong run from below $1300 in June, to a high of $1550.

One of the persistent arguments against owning gold is that it ‘does nothing’. Unlike cash that earns interest, gold is a non-yielding asset; however, in today’s world of close-to-zero and negative interest rates, the old-fashioned notion that favours holding cash over gold is increasingly defunct.

Encouragingly, gold’s ascent has also taken place against a background of US strength (typically a negative for the gold price).

Gold is likely to continue to trade between $1450 and $1550 in the near term.

Disclaimer: Gavin Wendt, who is a director of Mine Life Pty Ltd ACN 140 028 799, compiled this document. It does not constitute investment advice. I wrote this article myself, it expresses my own opinions and I am not receiving compensation for it. In preparing this article, no account was taken of the investment objectives, financial situation and particular needs of any particular person. Investors need to consider, with or without the assistance of a securities adviser, whether the information is appropriate in light of the particular investment needs, objectives and financial circumstances of the investor. Although the information contained in this publication has been obtained from sources considered and believed to be both reliable and accurate, no responsibility is accepted for any opinion expressed or for any error or omission in that information. I have no positions in the stock mentioned and no plans to initiate any positions within the next 72 hours.

– 49 –

GOLD

Cardinal drill rig drilling at Namdini, Ghana

Cardinal Resources strikes gold Cardinal Resources is headed towards becoming a major gold producer from its Namdini project in Ghana, after a feasibility study into its development confirmed a ‘compelling and robust’ development opportunity.

T

he study – released in late October – found that a US$390-million development (including a $42-million contingency) would produce more than one million ounces of gold in the first three years alone, with average annual production over a 15-year mine life of 287,000 ounces.

Cardinal Managing Director Archie Koimtsidis says the study confirms that Namdini – discovered in 2015 in a region of Ghana not previously known for big deposits – ranks among the world’s biggest known, most financially robust, undeveloped gold projects.

‘On a social level, Namdini is poised to become the first large-scale operating mine in the Upper East Region of Ghana, delivering sustainable prosperity and opportunities to all stakeholders,’ Koimtsidis says.

Namdini is expected to be only the start of the story for Cardinal in the region, as the group’s regional land package is highly prospective for the discovery of satellite deposits in close proximity to the initial development.

– 50 X ––

To that end, recent results from drilling at the Ndongo project, 24 kilometres north of Namdini, has returned encouraging results.

The study was based on a 5.1-millionounce ore reserve (Proved and Probable Ore Reserve of 138.6 million tonnes at 1.13 grams per tonne of gold), one of the biggest – if not the biggest – held by a junior mining company on the ASX. ‘Economic and technical optimisation confirms a large, single open pit utilising a conventional process plant with a throughput of 9.5 million tonnes per annum, and a very attractive 21‐month debt payback,’ Koimtsidis says.

He notes that, subject to additional drilling results, the current mine life plan of 15 years could be extended and might eventually include planning for underground operations.

The study indicates that, subject to financing being completed in the first half of 2020, Namdini could pour its first gold in the second half of 2022.

The study finds that Namdini is projected to generate US$1.46 billion

in undiscounted, pre‐tax-free cash flow over 15 years, including US$324 million in undiscounted, pre‐tax-free cash flow during its first full year of production (assuming a US$1350-anounce gold price).

‘Unlike whole-of-ore gold processing plants, we have the benefit of being able to produce a concentrate for gold extraction on site, which means that we have a much smaller back half of the plant providing a huge positive impact on capital costs,’ Koimtsidis says.

He says that Cardinal has started front-end engineering design work, as well as enhancement work on Namdini’s project execution plan. The early work is comfortably funded by Cardinal’s strong cash position of about $27 million.

Cardinal has appointed Dave Anthony as Chief Operating Officer for the Namdini project. Anthony, a mining engineer, has been involved in the design and construction of 12 mines, including four in Africa.

GHANA - WEST AFRICA

5.1 Moz

ORE RESERVE Developer ASX - TSX : CDV

cardinalresources.com.au

GOLD

Challenger Exploration kicks off drilling program Challenger Exploration has set out to test the big-time potential of its newly acquired gold and copper projects in South America.

T

he South American push, through the acquisition of the high-grade Hualilan gold project in Argentina and the El Guayabo copper-gold project in Ecuador earlier this year, is now very much the focus of ASX-listed explorer Challenger Exploration.

The company still has its strategic shale gas play in South Africa’s Karoo Basin in its portfolio, but further activity there remains dependent on the country, allowing the industry – including the company’s neighbours Shell and Chevron – to develop a shale gas industry.

The Hualilan project is located 120 kilometres north-west of San Juan City, in north-west Argentina.

It has been the subject of intermittent production dating back to the 1500s; but most recently, it was the subject of a 2003 resource estimate by La Mancha Resources of 627,000 ounces of gold at 13.7 grams per tonne.

Challenger has just kicked off a 2000metre drilling program at the gold-zinc skarn deposit, with its Managing Director, Kris Knauer, saying that it is expected to lead to an updated and JORC-compliant resource estimate being announced early next year.

‘Then we will be in a position to do a scoping study, with production hopefully following 2–3 years from there,’ Knauer says.

Knauer says that as the resource is open along strike, laterally and at depth, the 2000-metre drilling program, and probably the programs to follow, will tell us ‘whether it can be a lot bigger’.

Knauer says that the drilling program has gotten off to a great start, with the first hole completed and preliminary logging reporting mineralisation including brecciation, veining and sulphides over two zones in line with the company’s predrilling prognosis.

The initial 2000-metre drilling program will be split into two campaigns separated by 4–6 weeks in order to allow evaluation and follow-up of results from the first campaign.

The El Guayabo project is 36-kilometres south-east of Machala in southern

– 52 X ––

Ecuador’s El Oro province. It is a region known for large-scale gold-copper porphyry discoveries, as well as gold, silver and molybdenum deposits.

‘We have finished a 16-square-kilometre geophysical survey and are getting all of the geophysical data reinverted at the moment. That will drive the future program,’ Knauer says.

Most of the previous exploration, including that by US gold heavyweight

Newmont, was focused on gold in vertical breccia pipes.

‘To build a big resource based on the breccia pipes, they need to be stacked together like they are at the Cangrejos project (a porphyry copper-gold deposit), which is only eight kilometres away,’ Knauer says.

‘We think that’s the case for us as we have identified a bunch more pipes in the field with the geophysics.’

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挀漀猀琀 唀匀␀㄀㈀䴀 ጠ ㈀㔀 Ⰰ ⠀琀瀀愀

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䄀匀堀㨀 䌀䔀䰀 挀栀愀氀氀攀渀最攀爀攀砀⸀挀漀洀 ⌀㄀ 㨀 琀漀 攀渀猀甀爀攀 挀漀洀瀀氀椀愀渀挀攀 眀椀琀栀 䰀刀 㔀⸀㄀㈀ 瀀氀攀愀猀攀 爀攀昀攀爀 琀漀 琀栀攀 䌀漀洀瀀愀渀礀✀猀 䄀匀堀 刀攀氀攀愀猀攀 搀愀琀攀搀 ㈀㔀 䘀攀戀爀甀愀爀礀 ㈀ ㄀㤀⸀ 吀栀攀猀攀 攀猀渀洀愀琀攀猀 愀爀攀 昀漀爀攀椀最渀 攀猀渀洀愀琀攀猀 愀渀搀 渀漀琀 爀攀瀀漀爀琀攀搀 椀渀 愀挀挀漀爀搀愀渀挀攀 眀椀琀栀 琀栀攀 䨀伀刀䌀 䌀漀搀攀⸀ 䄀 挀漀洀瀀攀琀攀渀琀 瀀攀爀猀漀渀 栀愀猀 渀漀琀 搀漀渀攀 猀甀ϻ挀椀攀渀琀 眀漀爀欀 琀漀 挀氀愀爀椀昀礀 琀栀攀 昀漀爀攀椀最渀 攀猀渀洀愀琀攀猀 愀猀 愀 洀椀渀攀爀愀氀 爀攀猀漀甀爀挀攀 椀渀 愀挀挀漀爀搀愀渀挀攀 眀椀琀栀 琀栀攀 䨀伀刀䌀 䌀漀搀攀⸀ 䤀琀 椀猀 甀渀挀攀爀琀愀椀渀 琀栀愀琀 昀漀氀氀漀眀椀渀最 攀瘀愀氀甀愀渀漀渀 愀渀搀⼀漀爀 昀甀爀琀栀攀爀 攀砀瀀氀漀爀愀渀漀渀 眀漀爀欀 琀栀愀琀 琀栀攀 昀漀爀攀椀最渀 攀猀渀洀愀琀攀 眀椀氀氀 戀攀 愀戀氀攀 琀漀 戀攀 爀攀瀀漀爀琀攀搀 愀猀 愀 洀椀渀攀爀愀氀 爀攀猀漀甀爀挀攀⸀ 吀栀攀 挀漀洀瀀愀渀礀 椀猀 渀漀琀 椀渀 瀀漀猀猀攀猀猀椀漀渀 漀昀 愀渀礀 渀攀眀 椀渀昀漀爀洀愀渀漀渀 漀爀 搀愀琀愀 爀攀氀愀渀渀最 琀漀 琀栀攀 昀漀爀攀椀最渀 攀猀渀洀愀琀攀猀 琀栀愀琀 洀愀琀攀爀椀愀氀氀礀 椀洀瀀愀挀琀 漀渀 琀栀攀 爀攀氀椀愀戀椀氀椀琀礀 漀昀 琀栀攀 攀猀渀洀愀琀攀猀 琀栀愀琀 洀愀琀攀爀椀愀氀氀礀 椀洀瀀愀挀琀猀 漀渀 琀栀攀 爀攀氀椀愀戀椀氀椀琀礀 漀昀 琀栀攀 攀猀渀洀愀琀攀猀 漀爀 䌀䔀䰀✀猀 愀戀椀氀椀琀礀 琀漀 瘀攀爀椀昀礀 琀栀攀 昀漀爀攀椀最渀 攀猀渀洀愀琀攀猀 攀猀渀洀愀琀攀 愀猀 洀椀渀椀洀愀氀 爀攀猀漀甀爀挀攀猀 椀渀 愀挀挀漀爀搀愀渀挀攀 眀椀琀栀 椀渀 䄀瀀瀀攀渀搀椀砀 㔀䄀 ⠀䨀伀刀䌀 䌀漀搀攀⤀⸀ 吀栀攀 挀漀洀瀀愀渀礀 挀漀渀ǻ爀洀猀 琀栀愀琀 琀栀攀 猀甀瀀瀀漀爀渀渀最 椀渀昀漀爀洀愀渀漀渀 瀀爀漀瘀椀搀攀搀 椀渀 琀栀攀 椀渀椀渀愀氀 洀愀爀欀攀琀 愀渀渀漀甀渀挀攀洀攀渀琀 漀渀 䘀攀戀爀甀愀爀礀 ㈀㔀 ㈀ ㄀㤀 挀漀渀渀渀甀攀猀 琀漀 愀瀀瀀氀礀 愀渀搀 椀猀 渀漀琀 洀愀琀攀爀椀愀氀氀礀 挀栀愀渀最攀搀⸀

B A S E M E TA L S

Peel capitalising on big discoveries Peel Mining is out to convert its polymetallic exploration success in the Cobar Basin in New South Wales into asset production, with its zinc-rich Wagga Tank/Southern Nights (WT-SN) deposit to lead the way.

W

T-SN’s lead role follows the release in July of a maiden resource estimate of 3.8 million tonnes grading 9.2 per cent zinc equivalent (348,000 tonnes of contained zinc equivalent).

The resource estimate includes a 290,000-tonne, high-grade pod at the 2017 Southern Nights discovery – one kilometre from the mid-1970s Wagga Tank discovery – grading a spectacular 32.9 per cent zinc equivalent.

Peel Managing Director Rob Tyson says WT-SN was at the ‘top of the agenda’ in

– 54 X ––

the company’s planning to develop the next mine in the Cobar Basin, a region that has notched up 150 years and $50 billion of production and discovery history.

‘The main reason for being in the Cobar Basin is that the geology is fantastic. It’s a wonder of Mother Nature, and it is a privilege to be exploring there.’

As it is, Peel has made three major Cobar Basin discoveries across joint ventures (Mallee Bull and Wirlong), and at the wholly owned WT-SN, taking its equity share of high-grade mineralisation to more than seven million tonnes.

He says drilling was continuing at WT-SN to upgrade the resource in preparation for the completion of a scoping study into a development next year, with feasibility studies to follow.

‘Obviously, the high-grade pod at Southern Nights gives us the opportunity for a rapid payback in a mining scenario,’ Tyson says, adding that the maiden WT-SN resource was likely to be very much the start of the story.

To that end, drilling in the ‘corridor zone’ between Wagga Tank and Southern Nights recently returned intersections of significant zinc-lead mineralisation at depths of more than 500 metres in two holes.

Multiple zones of mineralisation were returned from both drillholes, including 13.1 metres at 11.1 per cent zinc and 5.7 per cent lead from 553.9 metres.

‘This is a very exciting development, offering potential to infill the zone between Wagga Tank and Southern Nights, and further enhancing the development prospects of the project,’ Tyson says.

‘VMS and Cobar-style mineral systems are renowned for clustering and stacking, and we see every chance that this will be the case here – we look forward to completing follow-up drilling in due course.’

Peel’s joint venture projects are also advancing.

‘We have formed partnerships along the way, with CBH a 50 per cent owner of our Mallee Bull discovery after spending $8.3 million, and Japan’s national metals exploration company Japan Oil, Gas and Metals National Corporation (JOGMEC) a 50 per cent partner in Wirlong after spending $7 million.

‘We’ve been seeking regulatory permits for an exploration decline at Mallee Bull to advance the project,’ Tyson says.

Drilling at the open Wirlong deposit will be aimed at confirming the geological model so partners can move into the resource estimation phase.

ASX:PEX

Cobar

DOMINATING THE COBAR BASIN

SOUTHERN NIGHTS / WAGGA TANK Near Surface, High-Grade Zn-Pb-Ag-Au-Cu

PEEL 100%

- 18.2m @ 40.3% Zn, 15.7% Pb, 0.97% Cu, 356 g/t Ag & 2.77 g/t Au from 182m - 26m @ 25.4% Zn, 9.9% Pb, 215 g/t Ag, 1.19 g/t Au from 190m - 53m @ 7.43% Zn, 3.46% Pb, 1.48% Cu, 114 g/t Ag, 1.47 g/t Au from 218m - 40m @ 10.2% Zn, 2.83 % Pb, 0.61% Cu, 49 g/t Ag, 1.04 g/t Au from 365m - 27m @ 10% Zn, 6.4% Pb, 89 g/t Ag, 0.4 g/t Au, 0.2% Cu from 204m

MALLEE BULL

PEEL 50%, CBH 50%

High-Grade Copper Resource Closing in on Development - 53m

@ 4.08% Cu, 42 g/t Ag, 0.22 g/t Au from 470m - 69m @ 3.48% Cu, 34 g/t Ag, 0.14 g/t Au from 533m - 84m @ 4.42% Cu, 38 g/t Ag, 0.14 g/t Au from 575m - 32m @ 3.62% Cu, 46 g/t Ag, 0.21 g/t Au from 634m

WIRLONG

PEEL 50%, JOGMEC 50%

Hallmarks of High-Grade “Cobar Style” Copper Discovery - 27m @ 5.3% Cu, 23 g/t Ag from 286m - 31m @ 3.19% Cu, 11 g/t Ag from 299m - 9m @ 8.0% Cu, 17 g/t Ag, 0.21 g/t Au from 616m - 17m @ 4.59% Cu, 8 g/t Ag from 738m

www.peelmining.com.au |

COPPER

DOCTOR COPPER CATCHES COLD The world’s woes seem to be weighing on copper’s prospects, driven by the ongoing uncertainty over US–China trade. Steve Freeth reports.

– 56 –

AUSTRALIAN RESOURCES & INVESTMENT

I

t was a picture recently underlined by the International Copper Study Group (ICSG), which predicted red for both supply and demand. Its latest report predicts that global copper consumption will be just 0.3 per cent this year – it was two per cent in its May report – while next year’s expected deficit of 250,000 tonnes has suddenly morphed into a surplus of 281,000 tonnes.

The ICSG did add a qualifier, however, saying that it recognises that ‘actual market balance outcomes have on recent occasions deviated from ICSG market balance forecasts’.

In other words, even the market’s soothsayers are confused about where copper is going in the short term (and even long term). And the big reason is the drawn-out resolution of the proposed US–China trade deal.

T R A D E D E A L? US President Donald Trump announced that a trade deal would be signed by the planned Asia-Pacific Economic Cooperation (APEC) summit in Chile on 16 November – until it got cancelled. His initial enthusiasm for signing a ‘Phase 1’ agreement covering intellectual property, financial services and a pledge by China to buy up to $50 billion in American agricultural products was always a little in doubt.

‘And maybe it’ll be then, or maybe it’ll be sometime around then,’ he was quoted as saying. The ‘agreement in principle’ also doesn’t roll back the hundreds of billions of dollars of tariffs that China and America have placed on each other’s products.

If a deal does happen, it can’t come too soon. The dispute has already put a dent in world growth, and that has meant a big hit to copper’s outlook, with prices at a near two-year low of $5635 per tonne in early October.

The International Monetary Fund has warned that America’s trade war with China could cost the global economy around $700 billion by 2020, downgrading its projections for global growth in 2019 and 2020.

Others have followed suit, with the World Trade Organization cutting its forecast in half for growth in the global trade of goods to only 1.2 per cent this year, the weakest since 2009.

Stock markets – and copper’s price – have seesawed on hopes of a deal, but some experts are warning that the damage from the US– China tariffs could have now altered world trade and growth more permanently, dimming hopes for a copper rebound in the process.

The American economy is showing signs of cooling despite record employment, with the Federal Reserve cutting interest rates for the third time this year. The latest manufacturing reports show that activity in the United States slumped to a 10-year low in September, while in Europe – which also faces US tariff threats – activity has declined the most in nearly seven years.

But it’s the numbers from China – the world’s second-biggest economy, taking almost half the world’s copper – that analysts and markets are watching most closely.

So far, the news hasn’t been encouraging. China’s economic report for the July to September period showed that growth is now six per cent – the lowest since Beijing began publishing them in

1992 – and a big fall from 6.4 per cent at the start of the year (despite government initiatives like major tax and rate cuts) loosened bank lending and massive infrastructure projects.

Manufacturing and exports, which employ roughly 180 million people, are the major problems. Manufacturing dropped from 6.1 per cent in this year’s first quarter to 5.2 per cent in the third, though it has slightly risen recently, while exports have continued to decline.

The recent ICSG report sees China as the sticking point. It found China’s ‘real’ demand copper growth running at around 1.5 per cent in 2019, but saw apparent consumption based on China’s production and net trade at a historically low-level increase of just one per cent this year.

The news from inside the country, however, seems brighter. The China Nonferrous Metals Industry Association says copper remains essential to the country’s economic growth, predicting that it is likely to reach 13.5 million tonnes in 2020 and hit 14.5 million tonnes by 2030.

NEW WORLD ORDER Most scenarios put copper in deficit long term, but just when this will happen is the big issue. According to the ICSG, world production is falling; it is predicted that output will slump by 0.5 per cent as mine disruptions grow, particularly out of Chile, but also from Indonesia and Africa. The ICSG forecasts a return to two per cent global mine production growth next year, but acknowledges that this may be optimistic.

But optimism about copper’s long-term prospects still holds sway, with commodity research firm CRU most recently seeing an eightmillion-tonne deficit by 2030. At the recent International Mining and Resources Conference in Melbourne, analysts prompted investors to put copper at the top of their ‘wish lists’, with one telling the media ‘everyone is chasing good copper’.

But even if a deal is signed, anti-China sentiment in the United States looks likely to linger and may continue to hamper China’s – and copper’s – growth. Anti-China hawks have already proposed measures designed to ratchet up the rivalry, including stopping the United States’ $600-billion Thrift Savings Plan for all federal government employees from investing in China, or moves to re-examine China’s presence in the stock portfolios of American investors.

The smouldering technology cold war between the two superpowers could also inflict more pain. The United States has been adding Chinese tech companies to the Entity List to review or stall their economic activity in the States, including big names like Huawei and ZTE, but also a host of others, like Hikvision Digital Technology, Dahua Technology, SenseTime, Megvii, YITU and iFlyTek. The most recent data shows that the trade war is inflicting damage to both sides. US imports from China have fallen $53 billion this year, a drop of 13.5 per cent, while US exports to China are down $14.5 billion (a fall of 15.5 per cent), making American losses look more severe. And that could be the trigger to getting the trade deal done this time.

– 57 –

COPPER

PolarX drillhole ends in mineralisation Perth-based PolarX’s hunt for big porphyry copper systems at its Alaska Range project, in a lightly explored section of a known porphyry belt to the north-east of Anchorage, is off to a flying start.

E

xcitement levels at PolarX were running high in late October, when the first drillhole in its maiden drilling campaign at the Mars prospect hit more than 400 metres of mineralised porphyry-style veins, with the hole ending in mineralisation.

‘To get the first hole in to a prospect return of what visually looks like it could be close to ore-grade mineralisation is tremendously exciting,’ PolarX Managing Director Frazer Tabeart says.

‘It opens up that whole area for a major exploration campaign over the next 2–3 years,’ Tabeart says.

The first hole at Mars ended in mineralisation at a downhole at a depth of 417 metres, and the intensity of copper mineralisation increased with depth, particularly in the last 100 metres. Visual estimates of 0.5 per cent to two per cent chalcopyrite (a copper mineral) were made.

The drillhole intersected multiple stages of porphyry-style veins containing visible iron, copper and molybdenum sulphides as the hole deepened.

While cautioning that the full significance of the mineralised hole would be dependent on assay results, Tabeart says Mars was looking extremely promising.

‘The 400-metre-plus downhole thickness of mineralisation, and the large size of the copper-gold-molybdenum surface geochemical and geophysical anomalies, support our view that a very large mineralised system may be present,’ he says.

The surface anomaly at Mars extends over an area of 1500 metres by 800 metres.

After drilling to 417 metres, increasingly heavy snowfalls forced a decision to terminate the hole while it was still in mineralisation in heavily broken ground.

The Mars prospect is part of the joint venture with the big Canadian mining company, Lundin Mining, and lies six kilometres from a known small but high-grade skarn deposit called Zackly, which is 100 per cent owned by PolarX. Zackly is a potential development candidate in its own right.

– 58 X ––

PolarX drilling at Saturn

The strategic partnership with Lundin Mining, covering the major porphyry potential of the Alaska Range project, was struck in June and initially involved Lundin Mining becoming PolarX’s biggest shareholder, taking up a $4.3-million placement in the company.

That gave Lundin Mining an option to earn up to 51 per cent of the porphyry joint venture by making cash payments to PolarX and committing exploration dollars to the hunt, with a decision on exercising the

option due by 31 December. All up, Lundin Mining could commit US$44 million to earn the 51 per cent interest.

Tabeart says that the agreement had huge implications for PolarX. ‘That’s because we are effectively funded with minimal dilution to our shareholders.

What’s more, we’ve got the backing of a major mining house with some smarts about them, and we get to control our own destiny on two smaller high-grade deposits (Zackly and Caribou Dome).’

MINERAL SANDS

PRECIOUS SANDS

BY ANTHONY FENSOM

A looming supply shortage has Australia’s mineral sands miners painting a brighter outlook. And with new mines coming onstream, the local industry is set to maintain its high market share for some time yet.

I

n its September 2019 quarterly report, market leader Iluka Resources reported a 17 per cent quarterly rise in production of zircon, rutile and synthetic rutile, aided by the commencement of its Cataby ilmenite mine in Western Australia and increased output from its Sierra Leone operations.

However, the Perth-based miner reported softer conditions in the key zircon market due to ‘global economic uncertainties’, noting ‘subdued’ business sentiment in key markets on the back of the US– China trade war.

Nevertheless, Iluka reported a weighted average received price for zircon of US$1505 per tonne, up 11 per cent on the US$1351 price for the full year of 2018, and well above its US$800 level of just three years ago.

Rutile prices averaged US$1123 in the September quarter, up nearly 18 per cent on the US$952 average for calendar 2018.

Together with Sierra Leone, Iluka also flagged expansion plans in Australia. A pre-feasibility study for its Wimmera project, in Victoria, is due for completion in the first half of 2020, while the company is examining the potential of a satellite deposit, Atacama, to add to its existing operation at the Jacinth-Ambrosia mine in South Australia.

Diatreme’s Cyclone zircon project in Western Australia’s Eucla Basin

– 60 –

Elsewhere, Image Resources upgraded its calendar 2019 guidance in October after enjoying a positive start to operations at its Boonanarring mine, near Perth, which commenced production in January.

From its previous estimates of annual heavy mineral concentrate production of 240–260 kilotons, the company now expects output to range from 260–280 kilotons.

‘The delivery of the Boonanarring mineral sands project has been nothing short of exceptional,’ Image Resources Managing Director Patrick Mutz says.

‘It is pleasing to be delivering a high-quality, heavy-mineral concentrate product to our offtake partners and generating strong operational cash flow this early into our journey from “Australia’s newest mineral sands miner” to “rapidly growing mid-tier prospect”.’

N E W P R OJ E C T S Another Perth-based miner, Sheffield Resources, also flagged progress towards the launch of its Thunderbird mineral sands project in Western Australia’s Canning Basin.

In its September quarterly report, the company said that the billiondollar project could operate for 37 years, with binding ‘take or pay’ offtake agreements already signed for the first stage of production.

Strandline Resources is also advancing its ‘development ready’ Coburn project in Western Australia and its Fungoni project in Tanzania.

A definitive feasibility study for Coburn showed a pre-tax net present value of $551 million, with an estimated 22.5-year mine life and the potential for further expansion.

In Western Australia’s zircon-rich Eucla Basin, Brisbane-based Diatreme Resources is targeting development of its ‘shovel ready’ Cyclone zircon project amid growing overseas interest.

In August 2019, the Brisbane-based company signed agreements with private Chinese groups for offtake and the provision of engineering, procurement and construction services, together with assistance in sourcing project finance.

The agreements follow Diatreme’s appointment of independent advisers Blackbird Partners to advance development of the project, which a 2018 study estimated a net present value of $113 million.

‘Diatreme has been delighted by the strong level of interest in Cyclone, which is one of a handful of major zircon-rich discoveries of the past decade,’ Diatreme CEO Neil McIntyre says.

AUSTRALIAN RESOURCES & INVESTMENT

Diatreme’s Cyclone zircon project in Western Australia’s Eucla Basin

‘We look forward to advancing talks into binding agreements and assembling the final commercial mix of parties to facilitate Cyclone’s development, bringing new jobs and investment to Western Australia, and wealth for shareholders.’

Looking overseas, Perth-based Base Resources plans to complete a definitive feasibility study for its Toliara mineral sands project in Madagascar in December 2019, adding to its existing operations in Kenya.

The company pointed to bans on private mining of mineral sands in India and export restrictions in Vietnam as helping to create an ilmenite supply deficit, with similar supply constraints for rutile.

S U P P LY S H O R TAG E Despite softer conditions in 2019, miners have pointed to the need for new zircon projects due to supply concerns.

In an October 2019 presentation, Sheffield Resources noted that around half of current global zircon production is sourced from three mature operations, comprising Jacinth-Ambrosia in Australia (10-plus years), and Richards Bay and Namakwa/Fairbreeze in South Africa (40-plus and 30-plus years, respectively).

‘Declining grade and ore reserves at these three operations will exacerbate the supply deficit,’ the miner says, noting the ‘additional jurisdictional and geopolitical risk’ of having two such operations based in South Africa.

Australia’s zircon production is expected to decline to around 200 kilotons per annum by 2026, as part of a 2.9 per cent annual supply decline forecast through to 2023.

The ‘zircon supply deficit [will] increase from 2022 as demand outpaces supply growth (even with the onset of new projects),’ the company says, suggesting that thrifting and substitution have ‘reached [their] logical limits’.

Sheffield Resources also pointed to a substantial supply gap emerging in the titanium market, with an annual supply decline of 10.5 per cent expected through to 2023, mainly due to the depletion of existing resources.

‘Without new supply, the annual deficit position is predicted to be 1.2 million [titanium dioxide] units by 2023,’ the company says.

In its latest report, Geoscience Australia estimated that Australia contains nearly half the world’s rutile, of which it is the largest producer, together with being the second-largest producer of zircon, where it holds two-thirds of the world’s resource.

Capitalising on the nation’s leading position in mineral sands, however, will require additional exploration expenditure and new projects, such as Thunderbird and Cyclone.

Meanwhile, demand for zircon could be bolstered by new applications, such as chemicals and digitally printed tiles, which use more zircon.

For the industry, it is a healthy position to be in despite shortterm volatility.

‘The outlook for mineral sands, such as zircon, remains bright given Asia’s continued industrialisation and a lack of suitable new supply,’ Diatreme’s McIntyre says.

‘New projects, such as Cyclone, will be crucial in satisfying growing demand, and Australia is perfectly placed to benefit.’

– 61 –

MINERAL SANDS

Boonanarring Mine

Image aiming to back up stellar start Image Resources Managing Director Patrick Mutz believes the company has reset the bar for mineral sands developments.

T

his follows the stellar start to production at Image’s zirconrich Boonanarring project in Western Australia.

Built and commissioned last year within eight months, the $52-million onbudget project was ramped-up to full-scale production in only two months and has since gone on to exceed all key expectations.

The stellar start was in contrast to the norm for new developments in the industry.

Typically, projects have been dogged by cost overruns, delays to first production, and operational issues during and after their commissioning phases.

Mutz says Image would be resetting the bar higher, with a reserve update expected in November looming as a gamechanging event, as it has the potential to positively impact Boonanarring’s future earnings profile.

The reserve update will capture the benefit of the substantially higher-than-

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expected heavy mineral grades since mining started, along with the impact of a very high-grade core in the eastern strand, and the higher zircon content of the heavy mineral.

‘We have finished all of the drilling and virtually all of the assaying we need to do to firstly recalculate the mineral resource,’ Mutz says.

‘That will be followed shortly after by an upgrade of the ore reserve. It is the ore reserve that everyone in the market is probably waiting for with bated breath.’

A grade increase in the new reserve estimate from what was already a highgrade estimate for the ore body would have positive impacts for future revenue and profit expectations.

‘The announcement on the ore reserve will be in November, and it will be followed shortly after by the recalculation of the overall financial model, which means reforecasting the financials for the next four years,’ Mutz says.

He says the new earnings forecasts could establish Image as a mid-tier mineral sands producer from the one project.

‘The important story about Image is that we’ve got five other projects in our portfolio, any one of which could continue to grow the overall cash generation capability of the company.’

The Bidaminna dredge-mining prospect (Boonanarring is dry mining) is shaping up as Image’s next project in the north Perth Basin.

‘Bidaminna is the frontrunner to operate in parallel to Boonanarring,’ Mutz says.

He says more will be said about Bidaminna in the first half of 2020.

Bidaminna has a lower grade than Boonanarring, but dredging operations can deliver much lower operating costs and economies of scale.

Mutz says he was not concerned by signs of zircon demand weakness reported by a premium product producer (as distinct from Image’s standard grade). ‘It is not softening for us.’

ASX: IMA

Australia’s Newest Mineral Sands Miner Boonanarring Mineral Sands Project Ø 80km north of Perth, WA in infrastructure-rich North Perth Basin Ø Exceptional deposit · Very high ore grade; 7.2% heavy minerals (HM) · Zircon-rich; 22.7% of HM · Coarse grained minerals; D50 ~180 microns · High metallurgical recoveries; 98% for zircon; 92% for TiO2 · Market-ready products · 100%-owned Ø Simple business model · Straight forward open-cut mining · Standard gravity separation of HM using spiral technology · Product is heavy mineral concentrate (HMC) · 100% off-take for life-of-mine · Each shipment secured by letter of credit prior to loading · No mineral separation plant · No marketing Ø Stellar Project Delivery · Project constructed on-time & on-budget · Rapid build; 8 months construction and commissioning · Very low capital costs; $52M · Ramp up to full HMC production in 2nd month of operation · Profitable Q1; Cashflow Positive in Q2 2019 · Performance Exceeded Expectations 1H 2019 o HMC production 138% of budget o Operating costs 76% of budget o Operating margin 125% of budget o EBITDA 127% of budget (actual $29.5M) o Provisional NPAT 157% of budget Ø In response to 143% higher ore grade than budgeted for 1H 2019, Ore Reserves and forecast financial performance for 2020-2024 being reassessed in Q4 2019 Image Resources NL www.imageres.com.au

GRAPHITE

New dual focus to Hexagon’s strategy Hexagon Resources is playing a lead role in reducing China’s grip on the global supply of rare earth elements.

BY BAR RY FITZGER ALD

H

exagon has secured a 49 per cent interest in RapidSX, an advanced downstream rare earth elements (REE) separation technology developed by Innovation Metals Corp (IMC).

RapidSX is a solvent-extraction technology that is ready to be commercialised, with the U.S. Department of Defense having contributed US$1.8 million to its development.

Hexagon Managing Director Mike Rosenstreich says the move into the strategically important REE industry – at a time of heightened trade tensions between the United States and China – meshes with Hexagon’s downstream graphite strategy outlined earlier this year.

The downstream push – as distinct from the upstream business of mining – gives a dual focus to Hexagon’s over-arching strategy to become a downstream supplier of critical energy materials to industry, including the electric vehicle revolution.

‘Our focus now is to quickly commercialise the energy materials business with its REE and graphite arms,’ Rosenstreich says.

‘The REE opportunity is at the right point of the supply chain. It’s where we think we can have high margins and strong cash flows, and not be exposed to all of the issues that the upstream rare earth producers suffer from.’

The REE technology involves Hexagon investing US$2 million into the construction of a commercial demonstration plant and paying US$4

REEs (first line) and graphite (second line); overlapping end-use demand

million to IMC as a deferred consideration, payable from Hexagon’s share of future cash flows.

The demonstration plant has a planned production capacity of 60,000 to 80,000 kilograms of rare earth oxides annually.

It will take about six months to build and three months to commission, with operations expected to start in the third quarter of next year.

Success with the demonstration plant could lead to the construction of a full-scale separation plant in the United States.

Our focus now is to quickly commercialise the energy materials business with its REE and graphite arms

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Rosenstreich says that while potential threats to REE supplies have become topical against the backdrop of the US– China trade war, it is important to note that there is a more fundamental long-term issue of constrained Chinese supply and processing of REEs. ‘The lack of US-based downstream REE separation capacity represents a serious vulnerability to US national security and the security of its allies, as REEs are critical for defence technologies and US economic growth plans,’ Rosenstreich says.

Hexagon outlined its downstream graphite strategy in September.

Rosenstreich says it was obvious there was no global shortage of graphite supply.

‘We are pulling back all upstream expenditure (exploration and work to become a graphite concentrate producer) to really focus on the downstream, taking the raw concentrates and transforming them into value-add products used by battery manufacturers or traditional end users.’

RapidSXTM technology is now ready for commercialisation Hexagon Energy Materials Limited (ASX: HXG) is creating a next-generation energy materials business, serving the EV’s renewable energy and energy storage sectors with graphite and rare-earths.

Hexagon has gained an expertise in graphite transformation to battery materials is based on work undertaken on its McIntosh (Australia) and Ceylon Projects (USA).

It is developing downstream businesses to: 9 produce a variety of high-value graphite products aimed at the EV battery material sector; and 9 separate rare-earth element (REE) mixed chemical concentrates into rare-earth oxides primarily as inputs into rare-earth permanent magnets used in electric motors, new generation wind turbines and defence applications These initiatives can enable the development of the respective supply chains outside of China, addressing a key supply risks of market concentration and sustainable production as China dominates production of these materials.

Contact: Mike Rosenstreich Managing Director Info@hexagonresources.com +61 (08) 6244 0349

In addition, Hexagon is investing in RapidSXTM technology, an exciting business positioned in the ‘mid-stream’ of the REE supply chain; providing a fast-track to cash with a proven REE separation process and a unique insight into upstream REE opportunities.

Hexagon’s focus on the US market has evolved through its technical and commercial partnerships over the past two years. It is the “right place at the right time”, given the critical nature of REE in particular.

Hexagon, via its subsidiary Energy Metals of America LLC, is identifying and developing near-term downstream opportunities to create shareholder value and fast-track profitability through delivery of premium "Made in the USA" products.

www.hexagonresources.com

LITHIUM

– 66 –

AUSTRALIAN RESOURCES & INVESTMENT

Lithium shines amid EV boom

BY ANTHONY FENSOM

Australia’s lithium miners are eyeing a brighter outlook amid projections of a looming supply deficit and continued escalation of demand from the electric vehicle revolution. And with government support for downstream processing and manufacturing, the industry appears set for further growth despite recent volatility.

M

iners’ quiet confidence comes after recent production cuts in response to sagging prices, following a ramp-up in supply.

In October, Galaxy Resources joined the list of producers scaling back production, flagging a 40 per cent cut in output at its Western Australian lithium mine in 2020. The move followed Pilbara Minerals’ announced plans to slash output at its Pilgangoora lithium mine, including job cuts.

Pilbara blamed weakened demand from China, the world’s biggest lithium consumer, due to changes in its subsidies supporting Chinese electric vehicle (EV) production.

Others such as Altura Mining, however, have expressed confidence in the outlook, based on their ability to meet customer specifications.

‘Demand for our product continues to remain firm, reflecting the excellent quality of our concentrate, which is low in impurities and meets the preferred specifications sought after by lithium converters and battery manufacturers,’ Altura’s Managing Director, James Brown, said while announcing the company’s October shipments from its Pilgangoora mine.

‘The long-term outlook for lithium is robust and we continue to focus on generating positive operating cash flows,’ he added.

The industry’s confidence has also been backed by government.

In October, the Western Australian Government announced plans to introduce a royalty arrangement seeking to encourage downstream processing and manufacturing in the state.

Under the plan, lithium hydroxide and carbonate will face a five per cent feedstock royalty rate, where the feedstock is spodumene concentrate. The government said the new rate would ensure that all producers are treated equally.

‘Updating the royalty arrangements provides a fairer system for all lithium producers, and will enable Western Australia to move up the battery value chain beyond mining and processing,’ Western Australian Minister for Mines and Petroleum; Energy; Industrial Relations the Hon. Bill Johnston says.

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LITHIUM

Drilling at Lake Resources’ Cauchari mine

While Western Australia has quickly become Australia’s lithium hotspot, other states are also keen for a share of the action.

In the Northern Territory, Core Lithium plans to develop its Finniss project to become ‘Australia’s first lithium resource outside of Western Australia’.

In Queensland, Lithium Australia is eyeing projects in the Cape York region, spanning an area of almost 5000 square kilometres, while private explorer Strategic Metals Australia has claimed the discovery of a new lithium province in Georgetown.

Australia’s government forecaster, the Office of the Chief Economist, sees Australian lithium production expanding from an estimated 288,000 tonnes in fiscal 2019 to around 358,000 tonnes by fiscal 2021.

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This follows production starting at the Altura and Pilbara mines, together with Alliance Mineral Assets’ Bald Hill operation, and with expanded output from Talison Lithium’s Greenbushes mine.

Q U E B E C B AT T E R I E S Australian lithium companies are also eyeing opportunities abroad.

In Canada, Quebec Premier François Legault has buoyed industry confidence by touting plans for ‘100 per cent Quebec batteries’ to be produced in the province.

Among those operating in Quebec, Brisbane-based Sayona Mining is seeking to apply Australian know-how combined with local knowledge, as seen with former Glencore Australia boss Michael O’Keefe’s success at Bloom Lake.

AUSTRALIAN RESOURCES & INVESTMENT

Steve Promnitz, Managing Director, Lake Resources

Brett Lynch, Managing Director, Sayona Mining

Sayona’s Managing Director, Brett Lynch, is targeting a successful turnaround at the former North American Lithium (NAL) operation, which halted production in February 2019.

In October 2019, Sayona announced it had assembled a worldclass team to support its bid for NAL, including Western Australian lithium miner Altura Mining, engineering companies BBA and Hatch, financial adviser Jett Capital Advisors, and PwC. While the bid progresses, Sayona is also advancing its nearby Authier project through the regulatory process, targeting 2020 for official approval.

‘Quebec has all the right ingredients for a successful lithium industry, with strong support from the government, worldclass infrastructure and labour, access to economical hydroelectric power, and proximity to North American battery markets,’ Lynch says.

‘The United States is becoming increasingly focused on securing supplies of critical battery minerals, and Quebec is right on its doorstep.’

ARGENTINA: POLITICAL BOOST Elsewhere, Argentina remains the focus for Australian lithium miners, including Orocobre and Lake Resources.

While October’s presidential election victory for opposition candidate Alberto Fernández surprised some observers, Fernández’s public support for the mining industry has provided reassurance.

During the election campaign, Fernández met with representatives from the lithium and energy industries, telling them he considered these sectors ‘an opportunity’ and flagging a 10-year growth plan for mining, led by lithium.

The reality of what is happening with EVs and battery growth is very clear compared to general market perceptions, and investors who switch onto this opportunity will be rewarded Lake’s Managing Director, Steve Promnitz, says a combination of provincial backing together with presidential support should boost confidence among investors to support new lithium projects.

‘Argentina is part of the “lithium triangle”, home to the world’s lowest-cost lithium output, which is the right place to be in the current market,’ he says.

Lake Resources is eyeing development of a direct extraction exchange process at its Kachi project, with a pilot plant to be built on site.

‘This process is potentially disruptive for the lithium brine industry, offering the potential to produce a premium, lowimpurity lithium product within a matter of hours, compared to the traditional 9–24-month waiting period for standard evaporation processes,’ he says.

S U P P LY D E F I C I T Are better times ahead for lithium miners? The Australian Government forecaster says lithium consumption volumes should ‘catch up’ with production volumes ‘as soon as 2021’, based on an acceleration in EV sales.

In the first half of 2019, EV sales were 50 per cent higher than the same period in 2018, with the growth rate continuing to increase.

Other analysts, including Benchmark Mineral Intelligence and Wood Mackenzie, have also flagged a supply deficit emerging early next decade.

‘Global confidence in the industry has been affected by recent lithium price falls but remains intact, as analysts continue to upgrade their demand projections for essential battery minerals, including lithium,’ Promnitz says.

‘The reality of what is happening with EVs and battery growth is very clear compared to general market perceptions, and investors who switch onto this opportunity will be rewarded.’

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LITHIUM

World-class potential at Manono AVZ Minerals is approaching a pivotal stage in its fast-tracked plan to become a world leader in the global lithium market through the development of its worldscale Manono lithium and tin deposit.

A

definitive feasibility study (DFS) into a project development – owned 60 per cent by AVZ, increasing to 65 per cent, and with a process in place for AVZ to secure additional equity – is due for completion around the first quarter of next year.

AVZ Managing Director Nigel Ferguson says the release of the DFS will enable the company to step up discussions with potential offtakers and strategic investors in support of financing negotiations.

The DFS will also include enhancements and optimisations of the key development parameters outlined in Manono’s scoping study, which was released in May. The five-million-tonnes-per-annum scoping study pointed to the world-class potential of Manono, with its mix of highgrade and low-containment lithium, and the potential for by-product tin as a sweetener.

The study also envisaged annual production of 1.1 million tonnes per annum of 5.8 per cent lithium concentrate, from a five-million-tonnes-per-annum mining and processing operation, with operating costs after transport to the export port estimated at US$323 per tonne.

The implied high returns on capital expenditure of US$380–400 million (including US$78 million contingency) did not include the potential for tin by-product revenue, with tin the historic focus of mining in the area.

Ferguson says that limited drilling to date for tin had indicated a large low-grade tin resource but with a high-grade zone in the footwall, which AVZ will be looking to tap into as it builds a case for by-product tin production.

Manono is located in the Tanganyika Province of the Democratic Republic of the Congo (DRC), and under AVZ’s control, it has quickly grown to become the biggest hard-rock lithium deposit in the world.

AVZ released its stock-compliant maiden mineral resource estimate for the project in August 2018 from drilling at the Roche Dure pegmatite – one of six large pegmatites in the broader Manono project area.

The project’s resource estimate has since been increased to 400 million tonnes,

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Aerial photo of Manono

grading 1.65 per cent lithium oxide, 715 parts per million tin and 34 parts per million tantalum.

That’s why China’s Ministry of Land and Resources has referred to Manono as the ‘Escondida of lithium’, a reference to the world’s biggest copper mine in Chile’s Atacama Desert, owned by BHP and Rio Tinto, among others.

For comparison purposes, the Roche Dure estimate is more than twice the 189-million-tonne resource estimate

for the undeveloped Mount Holland lithium deposit near Southern Cross in Western Australia, in which Wesfarmers recently acquired a 50 per cent stake for $776 million.

Manono’s location in the south of the DRC means that transport logistics is a major development consideration, and the single biggest operating cost.

AVZ is considering various truck–rail solutions, including exporting from Dar es Salaam in Tanzania.

Developing one of the largest and highest grade hard rock lithium projects globally

(ASZ: AVZ)

JORC Compliant Mineral Resource 400Mt @ 1.65% lithium (spodumene) including 351 metre intercept grading 1.75% lithium

Multiple intersections >200m thick

Level 2, 8 Colin Street, West Perth, WA 6005 Australia www.avzminerals.com.au

LITHIUM

Tackling Argentina’s Lithium Triangle Lake Resources’ ambition to become a low-cost lithium producer using an innovative brine processing technique is fast taking shape.

S

ydney-based Lake Resources expects to produce sample product early in 2020 from a pilot plant now under construction for the all-important battery customer qualification purposes.

The pilot plant will employ a groundbreaking direct extraction ion exchange process developed by Silicon Valley– backed Lilac Solutions, which, at the laboratory level, has demonstrated numerous advantages over the traditional evaporation pond route.

Lake’s Managing Director Steve Promnitz says the ion exchange process – common in water treatment but novel in the lithium brines industry – was a potentially disruptive event for the lithium supply chain.

‘We looked at a number of direct extraction methods as distinct from the lengthy evaporative process used at existing brine operations,’ Promnitz says.

Benefits from the process include much higher recovery of low-impurity lithium from the brine solutions, and a faster rate of a few hours compared

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Drilling at Lake Resources’ Kachi project, 2018

with the many months required in the evaporation method.

The nameplate capacity of the pilot is 10 tonnes annually. ‘That will enable us to get into the qualification process as it will provide enough samples to send to 3–6 downstream users,’ Promnitz says.

Data from the laboratory testing of the processing technique is being incorporated into a pre-feasibility study due for completion before the end of the year into a development at Kachi.

Kachi is one of three lithium brine projects wholly owned by Lake in the Argentinian section of South America’s famed Lithium Triangle.

The project has almost complete coverage over a salt lake where Lake has confirmed a maiden indicated and inferred resource of 4.4 million tonnes of lithium carbonate equivalent, ranking it among the world’s biggest.

Lake’s Olaroz-Cauchari and Paso brine projects are in Argentina’s Jujuy Province, with the former project demonstrating high-grade lithium flow rates immediately across the lease boundary from the

Ganfeng/Lithium Americas Cauchari development project.

There have been a number of multibillion-dollar corporate transactions involving groups other than Lake in the Olaroz-Cauchari area, and other lithium brine areas in the Lithium Triangle.

Taken collectively, the transactions imply an acquisition cost of US$55–$110 million per one million tonnes of lithium carbonate equivalent in resources.

To maintain momentum at the Kachi project, and to minimise dilution to shareholders, Lake recently appointed the emerging markets specialist, Londonbased SD Capital Advisory, to secure debt funding of up to US$25 million.

‘Lake’s project development plans are now rapidly advancing, and sourcing the necessary project funding is a major valueadding step as we look to complete initial production modules after the pilot plant results become known. We are confident these results will prove successful,’ Promnitz says. For Lake, 2020 is gearing up to be a milestone year, not only for the company, but potentially for the whole sector.

LOCATION, LOCATION, LOCATION.

Lake Resources is developing projects in the Lithium Triangle, which produces around half of the world’s lithium at the lowest cost.

The pre-production of high purity lithium via our development of a disruptive and efficient ion exchange direct extraction method will provide greater value for shareholders.

THE LITHIUM TRIANGLE

OLAROZ Orocobre CAUCHARI, OLAROZ & PASO

CAUCHARI-OLAROZ Ganfeng, Lithium, Americas

CAUCHARI JV Advantage Lithium, Orocobre

SAL DE VIDA Galaxy, POSCO

KACHI

HOMBRE MUERTO FMC/Livent

To find out more visit

LAKERESOURCES.COM.AU ASX:LKE

NICKEL

St George Mining exploring deeper The growing scale of the Cathedrals nickel-copper belt at St George Mining’s Mount Alexander project, near Leonora in Western Australia, has triggered a decision to initiate early work on studies into a potential mine development.

T

he move follows St George notching up another shallow and high-grade nickel-copper sulphide discovery at the Radar prospect, which sits within the previously unexplored eastern extension of the mineralised Cathedrals Belt.

The first drillhole at Radar returned a six-metre intersection grading 2.14 per cent nickel and 0.74 per cent copper (plus platinum group metals) from

St George Mining drillers

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46 metres, including a 2.5-metre grading of 4.29 per cent nickel and 1.46 per cent copper from 49.05 metres.

High-grade mineralisation has now been encountered at four prospects (Investigators, Stricklands, Cathedrals and Radar) along a 5.5-kilometre strike length of the Cathedrals Belt, with more than 10.5 kilometres of the Belt remaining to be tested.

‘Now that high-grade mineralisation has been established over a 5.5-kilometre strike of the east-west Cathedrals Belt, we are increasingly confident of developing a potential mining operation at the project,’ says John Prineas, Executive Chairman, St George Mining.

‘The mineralisation is not continuous along 16 kilometres of the Belt, but we continue to find these massive sulphide lenses with very good economic mineralisation. It is a matter of drilling out those areas and chasing them downdip to confirm the continuity,’ Prineas says.

He says that drilling in the current program would test ‘strong’ new targets at the Fish Hook and West End prospects, which, if successful, could add substantial volumes of mineralisation to a potential resource at Mount Alexander.

Field surveys are now underway to support the preparation of an environmental impact assessment, and the company is in discussions with several consultants to assist with the preparation of a scoping study.

‘We have started our preliminary scoping study, and we are attracting attention from our peers who can see the potential,’ Prineas says.

The interest from other nickel groups at Mount Alexander comes as no surprise, as the discovery of a significant nickel-copper sulphide belt is a rare event.

Nickel’s strong price gain in 2019 – up 32 per cent on last year’s average – in response to low stockpiles and a lack of new developments, at a time of rising demand from the battery sector, has also heightened interest in Mount Alexander.

Apart from finding more high-grade and shallow discoveries along the Belt, St George has also set out to test the big-time at-depth potential.

Under the Belt’s intrusive model, the mafic-ultramafic intrusions that host the nickel-copper sulphides have come from the Earth’s mantle through major east-west orientated faults located in the northern section.

‘Under that model, the bigger accumulations of mineralisation will be at depth. So it is pretty exciting to be embarking on the deeper exploration drilling,’ Prineas says.

ST GEORGE MINING

is making WA’s next big nickel discoveries

Mt Alexander Project: High Grade Nickel Copper Sulphide Discovery High grade nickel-copper-cobalt-PGE sulphide mineralisation commences 30m from surface

High impact drilling campaign underway Quality exploration team with track record of success in discovery of gold and massive nickel sulphide deposits Strong investor backing supports St George’s exploration model ST GEORGE MINING LIMITED | ACN 139 308 973

stgm.com.au

NICKEL

Blackstone Minerals is set for the EV revolution Blackstone Minerals has set out to become a battery materials supplier to the electric vehicle and renewable energy storage revolutions from its Ta Khoa nickel project in northern Vietnam.

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he company secured a two-year option over acquiring a 90 per cent interest in the project in May, and has hit the ground running.

Blackstone it is pursuing a strategy of advancing a bulk mining open-cut operation based on previously ignored disseminated nickel sulphide (DSS) mineralisation, as well as resuming the production of nickel sulphide from the project’s higher-grade massive sulphide vein (MSV) ore type.

Ta Khoa is located 160 kilometres west of Hanoi, and includes the Ban Phuc MSV mine and associated infrastructure, which operated as an underground operation from 2013 to 2016 when nickel prices were in the doldrums.

Nickel – whose primary use remains as an ingredient in stainless steel – has since made a strong comeback in response to the expected growth in demand from the lithium-ion battery sector to power the electric vehicle (EV) and renewable energy storage revolutions.

Indonesia’s ban on exports of unprocessed laterite ores has also helped to fuel the recovery in nickel prices from an average of US$4.72 per pound in 2017 to $5.95 per pound in 2018, with the metal trading higher still at $7.43 per pound in November.

Blackstone Managing Director Scott Williamson says the previous owners of Ban Phuc focused on MSV mineralisation.

‘There are 25 advanced MSV targets we can start drilling tomorrow. But they are not going to give us the 10- to 20-year mine life that we need to attract the battery end users,’ Williamson says.

Drilling by the previous owners – and by the government back in the 1960s – indicated the presence of lower-grade DSS mineralisation.

‘That drilling showed that there were some good nickel numbers, but it didn’t assay for copper, cobalt, platinum, palladium and gold. The surprise for us is that some of these credits, particularly the platinum, could cover a lot of the

X –– – 76

operating costs in an open pit mining scenario,’ Williamson says.

‘Our intention is to show that we will have the base load feed coming from the Ban Phuc DSS, and that we can throw in the high-grade MSV material to really get the metal count up.’

A recent $4.5-million capital raising is to be used over the next six months to deliver a maiden DSS resource estimate and a scoping study into a potential development, as well as drilling some of the 25 MSV targets.

Williamson says each of the MSV targets was potentially associated with another DSS ultramafic intrusion.

Previous owners invested US$136 million in capital and generated US$213 million in revenue during the period that Ban Phuc was in production from MSV ore.

Remaining infrastructure associated with the project includes a 450,000-tonneper-annum processing plant, which draws its power from the local hydro-electricity grid, a fully permitted tailings facility, and a 250-person camp.

Ta Khoa Project - Nickel, Copper, Cobalt & PGE Exploring Southeast Asia’s Premier Nickel Sulfide District •

Located 160km west of Hanoi in Vietnam, existing modern nickel mine built to Australian Standards, under care and maintenance;

•

Exclusive 150km2 land package with over 25 advanced stage massive sulfide vein (MSV) targets and a number of large bulk-tonnage disseminated sulfide (DSS) targets;

•

Internationally-designed 450ktpa processing plant connected to local hydro grid power with a fullypermitted tailings facility and a modern 250 person camp;

•

Operated as a modern mechanised underground nickel mine from 2013 to 2016 and mined 975kt @ 2.4% Ni & 1.0% Cu for 20.7kt Ni & 10.1kt Cu;

•

Blackstone is investigating the potential for downstream processing to produce a nickel and cobalt product for the Lithium Ion battery industry.

www.blackstoneminerals.com.au @blackstone_BSX

@blackstoneminerals

Blackstone Minerals

NICKEL

Opportunity knocks for nickel CONTENT PROVIDED BY THE NICKEL INSTITUTE

Nickel’s role in enabling technologies is not always common knowledge. Yet, its versatile properties present great opportunity to the producers of this metal.

– 78 –

AUSTRALIAN RESOURCES & INVESTMENT

A

ustralia’s nickel industry is situated in a very highopportunity environment for the metal. Addressing the recent Paydirt 2019 Australian Nickel Conference in Perth, the Nickel Institute’s Brisbane-based global Director of Market Development, Richard Matheson, said, ‘There is a real opportunity here to grow and protect market share both for existing nickel applications and emerging applications, such as new-era electric vehicle (EV) batteries, energy storage, and even food and water applications’.

O P P O R T U N I T I E S … A N D T H R E AT S This opportunity is being driven by mega trends associated with population growth and the need for ‘more of everything’. With rapid urbanisation and massive migrations of people, particularly in Asia, the demand is rising for more housing, energy, transport, food and clean water – all of which have to be delivered in sustainable ways.

‘Nickel’s properties are excellent for assisting with these needs, so the market for nickel can best be described as fantastic,’ says Matheson.

But the nickel sector also faces headwinds in reaching its true potential. ‘The threats to nickel are very clear,’ he explains. ‘The environment in which specification occurs is evolving and, like all topics, even discussions on social media play a role. Nickel also faces competition and substitution from other materials, as well as barriers to entry in the development of standards and approvals, and the need for developing supply chains in some cases.’

E D U C AT I N G F U T U R E E N G I N E E R S So, how does the industry tackle perceptions of high cost and a lack of knowledge about the metal even though it is used everywhere?

Targeting up-and-coming engineers who are unaware of nickel’s potential is one way.

‘The Nickel Institute is particularly focused on marketing and education in China, India and South-East Asia in an effort to change perceptions and elevate nickel in the headspace of those designing and manufacturing new applications,’ says Matheson.

Among a range of delivery mechanisms with several partners, face-to-face training is still preferred by many in the region.

In 2019, the Nickel Institute delivered dozens of workshops reaching thousands of engineers and specifiers. It also offers a technical inquiry help service in English and Chinese, which receives hundreds of technical questions annually, answered free of charge by a team of specialists. The goal is to give users and specifiers confidence in working with, and specifying, nickel and nickel-containing materials, like stainless steel and other corrosion-resistant alloys.

H I G H - P O T E N T I A L A P P L I C AT I O N S Three current focus areas where the potential for nickel is high are water distribution systems, marine scrubbers and batteries.

All are driven by society’s need to combat climate change and save scarce resources.

– 79 –

NICKEL

Urbanisation in developing countries requiring new infrastructure, coupled with the need to replace ageing infrastructure in older cities, is providing the opportunity for nickel-containing stainless steel WAT E R D I S T R I B U T I O N Water authorities and cities across the world are focusing on reducing water loss. Urbanisation in developing countries requiring new infrastructure, coupled with the need to replace ageing infrastructure in older cities, is providing the opportunity for nickel-containing stainless steel.

The Nickel Institute has thrown its weight behind an innovative, partially corrugated water tube (PCWT) solution. The technology has had excellent results over the past thirty years in Tokyo where, between 1980 and 2013, the leakage rate fell from 15.3 per cent to 2.2 per cent. The Nickel Institute is now demonstrating the benefits of nickel-containing stainless steel PCWT to water authorities across the globe, including in Australia, Asia, North America and Europe.

Matheson says that this is a technology whose time has come. ‘PCWT provides a durable, safe water distribution system at a competitive cost. The potential to reduce water leakage, especially in seismic and water-stressed areas, is significant – clearly helping to solve one of society’s most pressing problems.’

MARINE SCRUBBERS Marine scrubbers are another timely application for nickel.

Environmental regulations are changing and driving the increased use of nickel-containing materials in scrubbers for marine engines. New limits for sulphur oxide emissions, mandated by the International Maritime Organization (IMO), come into effect on 1 January 2020. To meet the IMO 2020 regulations, ship owners can opt to switch to more expensive low-sulphur fuel or fit an exhaust gas scrubber system. With the scrubber option, ships can continue to use cheaper, high-sulphur fuel.

– 80 –

Figure 1. Tokyo reduced leakage rate from 15.3 per cent (1980) to 2.2 per cent (2013). Source: Bureau of Waterworks/Tokyo Metropolitan Government

The inside of a scrubber is an extraordinarily harsh environment, where a hot acidic, chloride-rich solution circulates, requiring the use of highly corrosion-resistant, nickel-containing alloys containing up to around 30–50 per cent nickel. ‘If less robust materials are specified for scrubbers, the risk of failure is high,’ says Matheson. ‘And failure has potentially severe consequences for ship owners who risk punitive measures and loss of vessel operation while repairs are made. The Nickel Institute is working to provide sound technical information so that good procurement decisions can be made ensuring efficient operation of shipping.’

T H E B AT T E R Y R E VO L U T I O N And what about batteries? The transition to battery power and battery energy storage for EVs and renewable energy is well underway across the world. In recent years, nickel-metal hydride and nickel-cadmium batteries have been overshadowed in the public mind by ‘lithium’. It is poorly understood, but nickel is central to the revolutionary success of the dominant lithium chemistries in modern energy storage. How many people know that nickel is the principal ingredient in the most energy-dense lithium-ion batteries on the market today? With these batteries containing up to 80 per cent nickel, this energy transition mega trend represents a once-in-ageneration opportunity for nickel.

NEW AND TRADITIONAL OPPORTUNITIES While batteries, scrubbers and water pipes are examples of new opportunities for nickel, the traditional end-use markets are continuing. According to Matheson, ‘Nickel is buoyant, its annual use has grown between six per cent and seven per cent per year over the past decade. The opportunity is there’.

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