RGN Vol 6 Iss 5

RESOURCE Volume 6, Issue 5

GLOBAL NETWORK

Mining, renewable energy and oil & gas worldwide

MEASURING INNOVATION IN MINING LATEST STATE OF PLAY REPORT SHEDS LIGHT ON FACTORS DRIVING INNOVATION IN MINING COMPANIES WORLDWIDE

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WELCOME

The concept of innovation in business is difficult to define, particularly within capital intensive industries like mining. Therefore, it was no surprise that there was a relative paucity of information relating to innovation and strategy in the sector prior to the formation of the State of Play initiative in 2012.

Created by global management consulting company VCI and the University of Western Australia, State of Play aims to take a datadriven approach to measure the relationship between innovation and shareholder returns in mining companies worldwide.

State of Play’s latest innovation report was published in July, and in this issue of RGN you can discover the key findings of the survey that includes responses from 800 mining professionals across 399 companies, after I spoke to the platform’s co-founder Graeme Stanway.

Elsewhere, we catch up with lithium chemicals firm Lepidico who have undertaken a rapid transformation in the current year to date. Staying with lithium, CRU Group market analyst James Jeary writes about the price volatility affecting Australian spodumene miners.

Executive Team Editor Jacob Ambrose Willson Content Director (APAC and Americas) David Hunter Creative Director Hugo Currie ICT Director Stuart Clark Contributors Alex Atkins James Jeary Managing Director Simon Curran

We speak to three Australian-listed miners with projects abroad, starting with gold explorer Tietto Minerals in Côte d’Ivoire. Nusantara Resources is also making strong progress at its own gold project in Indonesia and Consolidated Zinc is benefitting from Mexico’s miningfriendly jurisdiction.

Our Australian theme continues with Centrex Metals and Leigh Creek Energy – both of whom have domestic projects in the phosphate and in-situ coal gasification sectors respectively.

Finally, we give you the latest news across the global resources sector from the last month, plus a round-up of the 2019 Diggers and Dealers Mining Forum in Kalgoorlie-Boulder, Western Australia.

We hope you enjoy the issue and encourage you to connect with us on email, Twitter and LinkedIn.

Jacob Ambrose Willson Jacob Ambrose Willson, Editor

RGN is published by Anderson Murray Media: a diverse media and information services company focused on creating and distributing engaging content to business leaders across the globe.

Anderson Murray Media Fulham Green, 69-79 Fulham High Street, Main Reception, Bedford House, London SW6 3JW Tel. +44 (0)207 148 5630

VISIT US ONLINE AT RESOURCEGLOBALNETWORK.COM

CONTENTS

STATE OF PLAY

NEWS 8 Global resources news Our selection of mining, oil & gas and renewable energy stories from the last month 16 Diggers and Dealers Mining Forum Reviewing the 2019 event with outgoing chairman Nick Giorgetta

COVER STORY 26 State of Play Dissecting the findings of the latest State of Play report on strategy and innovation in mining

COLUMNS 40 Alex Atkins (Alex Atkins & Associates) Recent mining disasters reflect need for greater board assurance of technical and operational risk 48 James Jeary (CRU Group) Leading research on the contemporary lithium market in Australia

DIGGERS & DEALERS

ALEX ATKINS

CONTENTS

LEPIDICO

MINING 62 Lepidico Lithium chemicals company undertakes rapid transformation 76 Tietto Minerals A steady stream of progress at the Abujar gold project in Côte d’Ivoire 90 Nusantara Resources Awak Mas: Indonesia’s next large scale gold mine 104 Consolidated Zinc Owner of the high grade Plomosas zinc mine in Mexico 118 Centrex Metals Phosphate production for fertiliser markets across the APAC region

OIL & GAS 128 Leigh Creek Energy Commercialising East coast Australia’s largest uncontracted 2P gas reserve

APPOINTMENTS & EVENTS 144 Appointments Notable appointments in the resources industry from the past month 145 Events Our pick of the top forthcoming mining, oil & gas and renewable energy events happening around the world in the months to come

TIETTO MINERALS

NUSANTARA RESOURCES

CENTREX METALS

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NEWS | Brookfield Multiplex MINING

GLOBAL RESO

Our selection of mi renewable energy news

Resource Global Network

OURCES NEWS

ining, oil & gas and s from around the world

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NEWS

LONDON STOCK EXCHANGE RECLASSIFIES OIL AND GAS FIRMS IN CLEAN INVESTMENT DRIVE The London Stock Exchange’s index provider FTSE Russell has reclassified oil and gas companies listed on the market under a ‘non-renewable energy’ category, in a move that aims to differentiate between heavily polluting firms and cleaner producers.

Oil and gas groups including BP, Royal Dutch Shell, Cairn Energy, Petrofac, Premier Oil and Tullow Oil will be affected by the rebranding, along with coal mining firms that were previously categorised under basic materials/ mining.

Meanwhile, green energy producers have also been re-categorised under ‘renewable energy’ in the same stroke. Previously, these companies were grouped together under the phrase ‘alternative energy’.

Danish wind turbine manufacturer Vestas Wind Systems and Spanish offshore wind giant Siemens Gamesa Renewable Energy are set to benefit from the new classification, according to Susan Quintin, managing director of product management at FTSE Russell.

The changes to the industry classification benchmark will provide “greater visibility to other forms of energy such as renewables,” said Quntin.

However, leading trade association Oil & Gas UK pointed to the process of energy diversification undertaken by several oil and gas companies in recent years.

Resource Global Network 11

AFRICA’S LARGEST WIND FARM OFFICIALLY OPENED IN KENYA On July 19, Kenyan President Uhuru Kenyatta unveiled the Lake Turkana Wind Power (LTWP) project – Africa’s largest operational wind farm.

LTWP’s 365 wind turbines have the capacity to generate 310MW of renewable energy for Kenya’s national grid, increasing the East African nation’s electricity supply by 13% according to Kenyatta.

“Today, we again raised the bar for the continent as we unveil Africa’s single largest wind farm,” said the President at the launch of the project. “Kenya is without doubt on course to be a global leader in renewable energy.”

The project will help Kenya reach its ambitious goal of achieving 100% green energy by 2020, while also serving to reduce power outages by 12.5% and cut power costs by between 7-10% over the next few years.

Around 70% of Kenya’s national electricity originates from renewable energy, such as hydro power and geothermal. The country is ranked 9th in the world for its geothermal capacity of up to 700MW. At a total cost of US$680 million, LTWP represents the largest single private investment in the history of Kenya.

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NEWS

BARRICK GOLD FINALLY STRIKES DEAL TO BUY OUT ACACIA MINING Barrick Gold will buy out minority shareholders at its subsidiary Acacia Mining after agreeing a deal that values the firm at around US$1.2 billion, thus ending a bitter dispute between the two parties.

The world’s second largest gold miner made an informal offer in May to acquire the 36% stake in Acacia that it didn’t already own, however this was knocked back by Acacia’s minority shareholders who argued the $285 million bid significantly undervalued the shares.

While Barrick CEO Mark Bristow insisted that he wouldn’t raise his company’s bid, Acacia announced that Barrick had increased its bid to around $428 million for the remaining

shares on the deadline day for a formal offer, set by the UK takeover panel.

The takeover had been complicated by Acacia’s deteriorating position in Tanzania, after it was accused of decades of misreporting revenues by the Tanzanian government, who subsequently handed the firm an enormous $190 billion tax bill in 2017.

Barrick then took on the role of negotiating a settlement with the government on behalf of its subsidiary, which led Acacia to complain that it was locked out of negotiations with Tanzania.

Resource Global Network 13

BHP CONSIDERING PLANS TO DIVEST THERMAL COAL BUSINESS BHP has become the latest mining giant to consider exiting thermal coal as climate change pressure from investors and activists continues to push companies away from polluting fossil fuels.

According to unnamed sources familiar with the matter, BHP is looking at options to divest its thermal coal assets in Australia and Colombia. However, there is no guarantee the company will go ahead with a sale, the people said.

Rival miner Rio Tinto has already removed its exposure to thermal coal, which is considered one of the dirtiest fossil fuels, while Anglo American has been cutting production amid growing pressure from investors. Even the world’s biggest coal

shipper Glencore has said it will look into reducing output.

Despite thermal coal only contributing to a small section of BHP’s overall portfolio, the world’s largest mining company has already indicated a reduced interest in the sector, after chief financial officer Peter Beaven said it had no appetite for growth in the commodity earlier this year.

Instead BHP’s long-term strategy will primarily focus on iron ore, especially after the firm recently announced it could build up to 11 more iron ore mines over the next 50 to 100 years in Western Australia’s Pilbara region.

Building a Multi-Asset Mid-Tier West African Gold Producer

TSX: TGZ OTCQX: TGCDF

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MINING | Diggers & Dealers

DIGGERS&

Reviewing the 2019 event with o

&

Resource Global Network

DEALERS

outgoing chairman Nick Giorgetta

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MINING | Diggers & Dealers

The 2019 Diggers and Dealers Mining Forum was billed as one of the biggest and brightest in the event’s 28-year history by outgoing chairman Nick Giorgetta, and after overseeing a general mood of optimism among the 2,450 attending delegates, it can be stated confidently that Giorgetta delivered on his claim. Taking place once again in Australia’s gold capital – the city of Kalgoorlie-Boulder in WA – the three-day conference coincided with a resurging confidence in the domestic mining industry, particularly in the gold sector as the Aussie gold price hit a record high of $2,207 per ounce during the event. RGN’s editor spoke to Giorgetta after the close of the 2019 show to get a deeper look at the key themes and discussion topics of what was a highly successful Diggers and Dealers.

Jacob Ambrose Willson: Nick, congratulations on another successful Diggers and Dealers Mining Forum here in Kalgoorlie-Boulder. Can you summarise the general mood of the 2019 event now that it has come to a close?

Nick Giorgetta: Thank you. The mood was

Stephe

Resource Global Network

en Parsons of Bellevue Gold accepting the 2019 Best Emerging Company award

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MINING | Diggers & Dealers

“The m and the s

N

Hon. John Howard delivering the keynote address

Resource Global Network

mood was very buoyant this year, with the strong gold price second highest attendance at Diggers on record, with 2,450 delegates attending the event�

Nick Giorgetta, Diggers and Dealers Mining Forum chairman

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MINING | Diggers & Dealers very buoyant this year, with the strong gold price and the second highest attendance at Diggers on record (2,450 delegates).

We also witnessed a very high standard of presentations from the junior resource companies.

JAW: What were the main points you made relating to the Australian resources sector in your opening remarks on day one of the event?

NG: The main point I wanted to get across is the enormous contribution that the resources industry makes to the Australian economy, and the importance of a strong mining sector to the nation’s wealth.

I also made the point that it is very encouraging to see the current government taking steps to reduce the red tape involved in getting mining projects up and running.

Following on from my comments last year regarding the need to have more students enrolled in mining-related courses, I wanted to highlight a couple of new initiatives in this area, and also make the point that we still have a way to go if we wish to meet the future demand for skilled mining workers.

JAW: How was the keynote address, delivered by the Hon. John Howard OM AC, received by the audience and what insights on the contemporary resources sector did the former Prime Minister offer?

Nick Giorgetta - Diggers and Dealers Mining Forum chairman, 2015-19

Resource Global Network NG: We received a great response from the delegates to the keynote address. Many of the delegates wanted to meet Mr Howard, and he was kind enough to walk around the marquee and speak to people and have photos taken with them.

Mr Howard used his keynote address to highlight the importance of the resources sector to the Australian economy, and his belief that our strong mining and banking sectors are some of the main reasons that Australia emerged relatively unscathed from the global financial crisis.

He also spoke about the need to find a balance between legitimate concerns about climate change, and the desire to preserve energy supplies at affordable prices in Australia.

JAW: The Australian gold price reached highs of $2,207 per ounce during the event. What conversations were had about the current gold price and how Australian miners can benefit from the record highs of this year?

NG: There was a belief among delegates that this high gold price should be sustainable in the short-term. Gold miners are fortunate in that they can take advantage of these prices by hedging their future production and locking in these record prices.

Bill Beaumont of Northern Star Resources - Winner of the 2019 Dealer award

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MINING | Diggers & Dealers

JAW: How much attention was paid to the

JAW: Who were the winners of the various

implementation of advanced technology

Forum Awards and how successful was the

across the sector by presenting

WesTrac gala dinner as a means of rounding

companies and exhibitors throughout the

off the 2019 event?

conference?

NG: The award winners were as follows: NG: Almost every presentation this year mentioned new technologies. There was a

• Digger of the Year – Roy Hill

lot of focus on automation and driverless

• Dealer of the Year – Northern Star Resources

vehicles, and how these can be used to

• Media Award – Barry FitzGerald

achieve efficiency and improved safety.

• Ray Finlayson Award – Samuel La Macchia • Emerging Company Award – Bellevue Gold • GJ Stokes Memorial Award – Mark Creasy

Resource Global Network

“The WesTrac gala dinner was a lovely way to round out the event, with tickets selling out early this year and 1,300 attendees present. The mood was very upbeat, with the gold price breaking through US$1,500 during the dinner.”

JAW: Finally, on a personal note this is your last year as chairman of the event.

How much have you enjoyed heading up Diggers and Dealers for the last five years and what can we expect from next year’s event under new chairman Jim Walker?

NG: I have very much enjoyed my five years with Diggers and Dealers. I have made new friends through my involvement with the event and have been able to catch up with old friends and colleagues at the forum each The WesTrac gala dinner was a lovely way to

year.

round out the event, with tickets selling out early this year and 1,300 attendees present.

I believe that Jim will make a very capable

The mood was very upbeat, with the gold

chairman. Every year with Diggers, we try to

price breaking through US$1,500 during the

make small improvements so that the event

dinner.

will be a little better each year, and I’m sure that Jim will continue this.

a bj

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MINING | State of Play

S TAT E O

Dissecting the findings of the latest repor

O F P L AY

rt on strategy and innovation in mining

Resource Global Network

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MINING | State of Play

The State of Play platform was created in 2012 by global management consulting company VCI in partnership with the University of Western Australia, and is now the largest mining survey in the world. The initiative aims to support industry discussion of innovation and performance at a strategic level through publicising the findings of its comprehensive biannual surveys on innovation and strategy within mining companies worldwide. The latest report was published in July 2019 and RGN’s editor Jacob Ambrose Willson caught up with VCI’s CEO and State of Play co-founder Graeme Stanway to breakdown its findings and shed a brighter light on the factors driving success in innovation across the mining sector supply chain.

Graeme Stanway: There was limited information in public literature on strategy and innovation in capital intensive industries with long time perspectives like mining.

Most information is focused on fast moving consumer goods, and IT related industries.

Mining, and to some extent oil and gas, is very different. The capital involved is very large, the life of the projects are decades long, and the projects are closely linked to the communities they reside in. This set of dynamics is very different.

The survey dataset that underpins the report is the largest of its kind in the global mining industry, surveying more than 800 mining professionals across 399 companies.

More than one third of the participants are Australian-based executives and the VCI analysis includes companies like Rio Tinto, BHP, FMG and South32.

JAW: Define what ‘innovation’ means for mining companies and explain how State of Play has created a formula to identify relationships between returns and how mining companies innovate.

GS: Innovation, the way we describe it, is

Jacob Ambrose Willson: Hi Graeme. To

doing things differently to change the value

start off can you talk about the formation

delivered from the same amount of effort.

of the State of Play platform in 2012, in

Because it means doing things differently,

collaboration with VCI and the University

there is inevitably some implementation risk

of Western Australia. Was there a gap in

that needs to be managed.

research on innovation in mining that you intended to fill with the State of Play

What we have done is to take all of the

initiative?

companies with a significant suite of

Resource Global Network

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MINING | State of Play responses to the survey, analyse their riskadjusted Total Shareholder Return (TSR) in comparison to peers in the mining industry, and uncover statistical relationships between TSR performance and approaches to innovation according to the survey responses of leaders from those organisations.

JAW: What are some of the most prevalent themes that come up when mining companies speak about innovation?

GS: Social expectations of mining companies are increasing and coupled with increased transparency regarding the supply chains of mining companies, those social expectations are having an impact on companies’ operations and investment plans, for example, Glencore.

Automation is the main focus when discussing mining innovation, however artificial intelligence could also present significant opportunities for supply chain optimisation and getting further value from autonomous equipment.

We are also anticipating significant changes coming in the energy requirements for mining operations whether it comes from renewables or sources like hydrogen.

JAW: The fourth biannual State of Play report on strategy and innovation was published in July 2019. What were the main aims of the study from the outset?

Resource Global Network

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MINING | State of Play GS: Once again, we wanted to fill the gap

they are always the people who are closest

in research on innovation in mining. We

to the issues so they know them the best.

wanted to take a strategic level approach

It is a bit of a numbers game as well. There

to innovation, enabling us to uncover the

are a lot more of these (junior) people in

impediments and success factors driving

an organisation so the probability of them

innovation across the industry supply chain.

coming up with a very good breakthrough

More broadly, we hope our reports have

idea is higher.

the potential to position the industry for a strategic shift.

As people work through the organisation and become senior leaders they become much

JAW: The study is based on survey

more focused on governance and control. We

responses from 800 mining professionals

have had some great discussions with CEOs

across 399 companies around the world.

where they recount their most influential

How important is it to take a data-driven

experiences with innovation being when they

approach to analysing the relationship

were close to the operations and given plenty

between innovation and returns?

of autonomy.

GS: Since our inception in 2012, we have

JAW: How much weight should mining

collected over 200,000 data points. This

companies place on implementing long-

year we were able to make the connect

term innovation given the report found

with shareholder returns and financial

that short to mid-term timeframes

performance. This gave us an entirely

delivered poorer returns?

different lens to approach the data with, and demonstrates a tangible link

GS: Our findings suggested that a primary

between innovation and holistic company

focus on one-to-three year or three-to-five-

performance. Ultimately the data-driven

year timeframes failed to drive urgent or

approach was critical. Innovation and

hard-edged improvement at an operational

strategy are subject to plenty of unfounded

level and also stymied major strategic

mythologies – we wanted to test these.

change.

JAW: The report found that junior

Instead, it was the bifurcated approach

employees at mining firms deliver higher

which focuses on immediate survival and

shareholder returns through executing

improvement in the short term as well as

innovation than executive figures. What

long-term repositioning and transformation

are the key reasons behind this?

over the five-to-10-year time horizon that delivered greater financial outcomes.

GS: If you look at junior staff, and by that I don’t necessarily mean just young staff,

Resource Global Network

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MINING | State of Play

“This year we were able to make the connect with shareholder returns and financial performance. This gave us an entirely different lens to approach the data with, and demonstrates a tangible link between innovation and holistic company performance” Graeme Stanway, co-founder State of Play

Ultimately the mid-term planning can

What are the notable hallmarks of a

perpetuate the ‘J curve’. That is, there is not

mining firm with a strong culture and how

sufficient urgency to move immediately on

do these traits enable innovation to take

innovation, but the really disruptive shifts

hold?

that happen are not addressed.

GS: Culture is by nature intangible, and it JAW: Maintaining a good company culture

can often be hard to choose specific traits

correlates with better innovation and

and implement them in company cultures.

higher returns, according to the report.

However, there are a few general elements

Resource Global Network

of company cultures that tend to enable

innovation is most successful, bottom-up.

innovation.

The second is providing staff with the The first is highly aligned incentive schemes

required autonomy to address challenges in

that encourage innovation, generally by

an innovative manner. This should be done

incentivising output or performance. This

while maintaining a strong focus on health

provides a direct driver for staff to address

and safety governance, however through a

the way they work and operate to improve

combination of incentives and autonomy to

their performance, which is often how

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MINING | State of Play

act, staff often provide all the resources and

to international peers, which tends to be

capabilities to innovate far more effectively

less successful than long-term, strategic

than just through leadership telling their

approaches to innovation. Australians

people to innovate.

also tended to customise their approach to innovation more than other miners,

JAW: Over one third of the participants

which tends to lead to the best innovation

in the study were Australian-based

outcomes.

executives. How did Australian mining companies compare with other firms

JAW: After publishing its latest biennial

from around the world with regards to

report into mining innovation, how will

innovation and shareholder returns?

State of Play build on the findings of this research in order to provide even stronger

GS: Australians tended to have a much more

future guidance for mining companies

short-term focus on innovation compared

wishing to implement better innovative practices?

Resource Global Network

GS: We will continue to publish our biennial

our biennial report and develop how mining

results going forward. In the interim we are

companies should approach particular issues

currently writing reports on specific areas of

of strategic interest in mining.

focus within the mining industry. The next ‘drill-down’ report on cyber security in the

We are also looking to extend our research

mining industry will be released over the

into the oil and gas sector, and further

next six months or so, as well as a drill-down

develop understanding of complex strategic

on venture capital in the mining industry.

questions in the global natural resources

These reports build on the findings from

industry.

a j

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COLUMNS | Alex Atkins

WHY WE NEED OF TECHNICAL AND

Recent mining disasters reflect need fo

Resource Global Network

TO IMPROVE BOARD ASSURANCE D OPERATIONAL RISKS IN MINING

or greater board assurance of technical and operational risk, by Alex Atkins

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COLUMNS||Ian Alex Thomson Atkins 42 COLUMNS

The independence of boards, with the right diversity of thought and skills balance to ask the right questions at the right time, is something shareholders and regulators expect and are constantly monitoring, particularly on management of risk and on timely and balanced disclosure.

Over the past decade, there has been a growth in regulatory and class actions relating to mining company directors and officers duties of care and diligence, most notable being actions following the Samarco1, , and Brumadinho3 tailings dams failures in

2

Brazil which have had a materially adverse impact on both BHP and Vale and threatened their social licence to operate (SLTO). There has been a lot of pressure from groups like the Church of England to establish a global reporting framework specifically for tailings dams governance.

A more systematic and proactive framework, which covers all types of mining technical and operational risk, is required within mining companies, by mining companies.

What I will argue in this article is that more rigorous board assurance of technical and operational risk should reduce the likelihood and consequence of major value-destructive events in mining, which in turn protects the value of the company (i.e. shareholder’s

ResourceGlobal GlobalNetwork Network 43 Resource

ALEX ATKINS Alex holds two BEng Degrees from the University of Queensland and WA School of Mines qualifying her as a mining engineer, geotechnical engineer and geologist. She holds First Class Mine Manager’s Certificates for WA & Queensland, has an MBA(Finance), is a graduate of Australian Institute of Company Directors and Chartered Professional Fellow of Engineers Australia and The AusIMM. Alex has 25+ years’ multi-commodity experience through the full mining value chain in roles that find, design and run mines, regulate mines and in the Big 4’s auditing mining companies. Alex is a non-executive director of global miner Ausdrill Ltd, founder of her own consultancy and director of International Women In Mining (London) and Global Mining Sustainability (Toronto). In 2018 Alex was named one of the Top 100 Global Inspirational Women in Mining by WIM UK (London) and was inducted into the WA Women’s Hall of Fame.

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COLUMNS | Alex Atkins

interests) and a company’s SLTO (i.e.

and warn directors and officers of impending

stakeholder’s interests).

issues, but also to provide evidence of diligent and competent execution of

In many countries directors and officers

fiduciary duties. In light of this, it’s obvious

face strict personal liability under reverse

a systemic, organisation-wide framework of

onus of proof legislation. They also face

identification, management and assurance

difficulty obtaining comprehensive insurance

of risk management is in everyone’s best

coverage for breaches. Board assurance

interests.

activities are undertaken not just to inform

ResourceGlobal GlobalNetwork Network 45 Resource of controls. Greater transparency on key controls effectiveness for prevention of the types of incidents that can lead to mine disasters would significantly improve board attention.

The ICMM’s Health & Safety Critical Control Management Guide6 sets out a process to provide assurance (verification) of critical controls. While it is a good document, it covers critical controls for Material Unwanted Events (MUEs) from a statistical analysis of past accidents and does not go into any detail on each risk type or the competencies of those who must provide the assurance/ verification.

It is also industry standard practice to ensure compliance with international standards for safety and risk management (i.e. ISO 45001:2018 Occupational Health and Safety Management Systems and ISO 31000:2018 Risk Management). Is this enough? It is possible that assurance can become a simplistic, siloed, tick box exercise if carried out by generalists using generic guidance.

Understanding ‘what can go wrong and what must go right’ in the technical and operational aspects of mining is the domain Many mining companies are adhering to the

of technical experts, who should be driving

Critical Controls Framework promulgated

the assurance process, preferably both from

by the International Council of Mining and

the front-line and at the board level.

Metals (ICMM)5 which is intended to be a process that facilitates: selection of the right

Mining is technically complex. Disasters can

controls; having the controls adequately

and do happen and when they happen, the

specified; monitoring and maintaining

whole mining industry loses a degree of its

controls and assurance of the effectiveness

SLTO. Many mine accidents and disasters

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COLUMNS | Alex Atkins

Alex Atkins working as a WA District Inspector of Mines in 2011

Resource Global Network are due to geotechnical engineering issues

Over the past decade we have seen

including: tailings dam failures; rockfalls;

the addition of another layer of audit

inrush; seismicity and air-blast. Non-

and assurance on Environmental Social

geotechnical engineering issues such as: poor

Governance (ESG), as promulgated by the

ventilation; fire and explosion also feature

ICMM8,9, and the UN Global Compact, such

highly in mine disaster literature7 as well as:

as the “Global Reporting Initiative (GRI)

machinery incidents; electrocution; falls from

Sustainability Reporting Guidelines”. ESG/

height and entrapment in confined spaces.

GRI10 reporting and assurance is mainly focused on standards for: occupational

Some experts argue that board members and

health and safety; emergency preparedness;

executive teams do not have to understand

environment; compliance with laws and

the technical details of mining as long as

regulations; resettlement and closure

they are provided with advice from technical

planning; emissions; climate change and/

experts in terms they understand (i.e.

or carbon management; human rights

probability of failure and monetary terms).

and indigenous rights; industrial relations

But how do boards and management know

and collective bargaining; anti-corruption

what assurance to request if ‘they don’t

and anti-competitive behaviour; economic

know what they don’t know’? Consider the

benefits to the jurisdiction/community;

multitude of existing audit and assurance

diversity, equal opportunity and equal pay;

standards and think about whether they

and materials stewardship. There are so

provide appropriate assurance to prevent

many categories, so it is not surprising that

mine disasters.

audit and risk committees struggle to provide appropriate oversight over the effective

Scoping audit and assurance activities is the

management of technical and operational

remit of chief financial officers (CFOs), chief

risks associated with the actual act of mining!

risk officers (CROs) and board audit and risk and/or sustainability committees and their

ESG frameworks promulgate GRI Key

assurance providers, which often lack mining

Performance Indicators (KPIs) which

domain experts such as mining engineers,

major multinationals transparently report

geotechnical engineers, geoscientists,

against, aiming for high GRI ratings. These

metallurgists and asset managers. Standards

ratings are used by proxy advisors, ethical

followed are on: auditing; IFRS accounting;

investment groups and private equity groups

corporate governance; communication;

for investment decisions, by insurance

greenhouse gas and water accounting;

companies and banks. The implication is

quality control; risk management; COBIT

that it should be easier and cheaper to

framework; etc.

obtain investment and insurance if your company has a high GRI rating. A strong ESG performance means a lower weighted

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COLUMNS | Alex Atkins

“A more systemati which covers all typ operational ris compan Alex Atkins, founder o

average cost of capital (WACC), which means

not always give mining companies a right

a lower discount rate applied to valuations,

to reply. Inaccurate ESG rankings could

resulting in higher valuations which lead

potentially lead to market distortions and

to higher share prices. I have heard ethical

arbitrage, which may create additional

investors claiming they will be using ESG

burdens for companies as they respond to

transparency to ‘seek alpha’.

regulatory requests for explanations of their disclosure practices or volatility in their share

Many of the ESG rankings publicly available are created by unregulated groups who do

price. Pressure from proxy advisors is also

Resource Global Network

ic and proactive framework, pes of mining technical and sk, is required within mining nies, by mining companies” of Alex Atkins & Associates

high ESG rankings, which may lead to the ESG system being focused on things which are easy to quantify but which may not matter as much as things which are harder to quantify.

We are also entering a world where mining companies must expend considerable effort reacting to potential ESG related ‘white noise’.

Surely this effort would be much better spent proactively, internally improving board assurance of technical and operational risk, by ensuring the right mix of people are at the board table to improve outcomes for all.

1. https://en.wikipedia.org/wiki/Mariana_dam_ disaster 2. Morgenstern, NR, Vick, SG, Watts, BD, & Viotti, C 2016, The Fundao Tailings Dam Investigation, http://fundaoinvestigation.com/ 3. https://en.wikipedia.org/wiki/Brumadinho_dam_ disaster 4. https://www.churchofengland.org/investor-miningtailings-safety-initiative 5. https://www.icmm.com/en-gb/members/memberreporting-and- performance 6. https://www.icmm.com/ website/publications/ pdfs/health-and-safety/8570.pd 7. Quinlan, M 2014, Ten Pathways to Death and Disaster: Learning from Fatal Incidents in Mines and Other High Hazard Workplaces, The Federation Press, Alexandria. https://www.icmm. com/ website/publications/pdfs/health-andsafety/8570.pdf 8. https://www.icmm.com/en-gb/members/memberreporting-and- performance

leading to reported ESG KPIs being linked to executive remuneration packages.

9. https://www.icmm.com/en-gb/members/memberreporting-and-performance 10. https://www.globalreporting.org/Documents/ ResourceArchives/GRI-G4-Mining-and-MetalsSector-Disclosures.pdf

We are potentially entering a world where mining executives are incentivised to obtain

aj

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50

COLUMNS | James Jeary

LITHIUM MINERS BLINK F

Resource Global Network

FIRST IN FACE OF FALLING PRICES Leading research on the contemporary lithium market in Australia

51

COLUMNS||Ian James Thomson Jeary 52 COLUMNS

The burgeoning electric vehicle (EV) sector has seen Western Australia fast become a hub for hard rock lithium mining as an increasingly important source of supply. But the influx in spodumene production from the region, combined with shortterm demand weakness, has weighed on lithium prices. This has prompted miners to react to the oversupply picture – most recently in Australia. We believe that these production curtailments are a sign of things to come in the global lithium market.

Australia has led the surge in lithium supply growth

lithium supply growth – notably its suitability for producing lithium hydroxide and increased environmental concerns over brine operations.

This investment has been particularly prevalent in Australia. The country hosts nearly a fifth of the world’s stated lithium reserves, in the form of spodumene-bearing pegmatite deposits. In just three years, six mines have commenced production, with two

Lithium brine operations have long been the

more advanced projects, several expansion

mainstay of global lithium supply. However,

phases and four chemical conversion plants

the strong lithium prices of recent years – in

in the pipeline. The country was by far the

the face of the prospective demand surge

world’s leading producer of mined lithium

from the EV sector – has prompted a flurry

units last year (see figure 2).

of investment in hard rock mining, despite its

There are several key reasons why hard rock

Influx of spodumene concentrate hits lithium prices…

mining has dominated the recent charge in

Rising mine supply, notably from Australia,

inherently higher costs (see figure 1).

has pulled spodumene concentrate prices

ResourceGlobal GlobalNetwork Network 53 Resource

JAMES JEARY FIGURE 1 | DATA: CRU, USGS lower since H2 2018. Latest indications suggest that 6% spodumene concentrate shipment prices are trading either side of $600 per tonne CFR China, having been above $1,000 per tonne in Q3 last year.

Lithium carbonate and hydroxide prices have similarly dropped, exacerbated by the largerthan-expected drop in Chinese EV subsidies in April.

The fall in spodumene prices has exceeded our original expectations for the decline this year, largely due to the bearishness pertaining to short-term demand. We now expect spodumene concentrate prices to average $650 per tonne for 2019 as a whole, with prices declining through the remainder of H2.

James Jeary is an analyst within the Base Metals team at CRU Group, based in London. He is responsible for supplyside developments at the mine and refinery stage of the lithium market and is the editor of CRU’s molybdenum market analysis.

James graduated from the Royal School of Mines, Imperial College London, with an MSci in Geology in 2016.

During his time at university, James visited a host of mines and projects to examine exploration, mining and processing techniques, and completed an internship as a Minerals Processing Researcher at the University of Cape Town.

CRU’s latest Lithium Market Outlook was published in June 2019.

Please contact james.jeary@crugroup. com for more information.

54

COLUMNS | James Jeary

FIGURE 2 | DATA: CRU, USGS

…prompting miners to take evasive action

partners. Both Ganfeng and General Lithium, according to Pilbara Minerals, are

It has long been CRU’s view that the lower-

facing delays ramping up their spodumene

price environment will cause production

conversion capacity in China.

cutbacks and the postponement of lessdeveloped projects, to stop further raw

Pilbara Minerals is also looking to slow and

material oversupply. We have seen some

subdivide the development of its proposed

casualties since the start of the year – namely

Stage 2 expansion at Pilgangoora. This is to

the Val d’Or operation in Canada, owned by

align capacity growth with the incremental

North American Lithium, and AMG Lithium’s

increase in chemical conversion capacity.

expansion plan at its Mibra mine in Brazil.

The expansion phase is expected to increase mine capacity to 800,000-850,000 tonnes

Now, it seems that Australian spodumene

per year of 6% spodumene concentrate

miners are looking to address the glut of

(119,000-126,000 tonnes per year LCE before

spodumene supply coming from the country.

conversion losses), from its current 330,000

Pilbara Minerals moderated production at

tonnes per year (49,000 tonnes per year LCE).

its Pilgangoora operation in June and will continue to do so until October, to meet

Elsewhere, Mineral Resources is progressing

reduced requirements from its offtake

with the development of the 750,000 tonnes

ResourceGlobal GlobalNetwork Network 55 Resource

FIGURE 3 | SOURCE : CRU per year (111,000 tonnes per year LCE)

concentrate in the market. Furthermore,

spodumene concentrate plant at Wodgina.

Albemarle – which is awaiting final approval

Western Australia’s Department of Water and

to form a joint venture to operate Wodgina

Environmental Regulation (DWER) issued an

with Mineral Resources – has reportedly

Amendment Notice in mid-July, requesting

indicated that it will curtail production from

additional information about water usage

the mine accordingly to track demand. This

and recovery during the commissioning of

will almost be certainly required, given that

the second train at Wodgina.

Wodgina will become the world’s second largest spodumene mine once all three

These delays have perhaps helped to ease some of the oversupply of spodumene

modules come online at the site.

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COLUMNS | James Jeary

Alita Resources, formerly Alliance Mineral

Alita is reviewing its existing offtake

Assets Limited, has temporarily postponed

agreement with Jiangxi Bao Jiang Lithium

construction of an optimisation circuit

Industrial Limited (JBJLIL), which operates

(producing lithium fines) and other capital

a lithium carbonate line in China. This

expenditure at the Bald Hill mine. This is

agreement has a floor price of $680 per

while the company completes a strategic

tonne FOB for 6% spodumene concentrate.

review, because of the current weak market

With spodumene prices currently trading

conditions, and secures additional offtake

below this level, JBJLIL could theoretically

partners.

seek concentrate elsewhere at prevailing market prices, although this would be subject to rigorous specification and quality checks.

Resource Global Network

“Australia hosts nearly a fifth of the world’s stated lithium reserves, in the form of spodumene-bearing pegmatite deposits. In just three years, six mines have commenced production” – James Jeary, analyst at CRU Group

CRU therefore believes that Alita may well be

in other markets after prices dropped

looking to renegotiate the deal to safeguard

below previously agreed levels. China’s GEM

the offtake agreement for the future and

stopped purchasing cobalt from Glencore

ensure satisfactory pricing conditions for

late last year after prices fell below the level

both parties.

agreed in a contract signed in March 2018, forcing the deal to be renegotiated. Should

This is not without precedent – given the

spodumene prices continue to fall over the

volatility of battery metals prices over the

next few years, we could see similar price

past few years, we have seen buyers renege

dynamics occur.

on their contracts with suppliers elsewhere

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COLUMNS | James Jeary

Further curtailments are likely

This includes the slow ramp up of prospective expansion phases with lower weighting in

CRU sees this production moderation

our classification system, as they will be

persisting for the foreseeable future.

dependent on how initial production ramps

Australian miners have become, and will

up – as Pilbara Minerals is now suggesting.

continue to be, key drivers in lithium market

Even so, global mine supply looks to be

fundamentals. This is because of their ever-

plentiful into the 2020s.

growing dominance in the spodumene supply chain and offtake agreements with leading

As a result, spodumene prices will likely

Chinese downstream users. We expect them

continue to decline in the near term. We

to trim output over the next five years to

are subsequently conservative with our

mitigate further oversupply of spodumene

assessment of new projects’ viability and

concentrate and have factored this into our

the likelihood of them entering the market.

supply forecast.

Mining companies with early-stage projects will struggle to secure financing in the current

Resource Global Network

price environment, putting their development first steps in attempting to stem the flow in at risk – at least for the time being. They

falling spodumene prices. This, in our view,

will be forced to weigh up the benefits of

is symptomatic of the need to tackle the

progressing their projects and assuring

potential for further raw material oversupply

market presence ahead of longer-term

in the global lithium market. Such is the

demand growth, against absorbing shorter-

strength of the project pipeline that – despite

term losses.

the longer-term demand story – there will both winners and losers in the lithium mining

There is no doubt that Australia will

sector.

consolidate its position as a hard rock powerhouse over the next few years. But the country’s miners look to be taking the

aj

59

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62

MINING | Lepidico

Resource Global Network

LEPIDICO

Lithium chemicals company undertakes rapid transformation

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64

MINING | Lepidico

For Perth-based lithium chemical company Lepidico, the 2019 June-ending quarter has been a truly transformational period. In April, the firm announced that its pilot plant project for the production of lithium carbonate, using its patented L-MaxÂŽ technology, had commenced the commissioning phase. This milestone was followed by three significant announcements on May 7th: First, Lepidico confirmed an-all share offer to acquire lithium company Desert Lion Energy Corp, listed on the TSXV. Then it announced a Memorandum of Understanding (MoU) with Abu Dhabi-based chemical manufacturer Gulf Fluor. Finally, Lepidico launched a rights issue to raise up to AUS$10.8 million in new shares.

Factor in the company’s earlier pivot towards lithium hydroxide production, utilising its new LOH-Max™ process, and it is clear to see that Lepidico has undergone a significant metamorphosis since the beginning of 2019.

The successful commissioning of the pilot plant project in Western Australia, onschedule and within budget, delivered a big

Resource Global Network

65

66

MINING | Lepidico boost to ASX-listed Lepidico, according to

“When we evaluated projects that received

managing director Joe Walsh.

final investment decisions and funding commitments in 2018, they were almost

“It should give our shareholders and potential

exclusively hydroxide projects. Furthermore,

future stakeholders confidence that we can

in various discussions with prospective

deliver on our development plans,” he says.

customers, we were informed that there was

“L-Max® is a new process and this is the first

a strong preference for hydroxide. These was

time that a plant using small scale industrial

factors that we couldn’t ignore.”

equipment has been built.”

Taking into account the industry’s changing The pilot project moved into the operational

preferences, Lepidico consulted with its

phase in May, with first concentrate being fed

major shareholder Strategic Metallurgy to

into the plant towards the end of the month,

begin research and development work on a

after which it will start to produce lithium

novel process to produce lithium hydroxide.

carbonate and the various by-products from the L-Max® process, including sulphate of

In parallel with this, Lepidico had also

potash (SOP).

become aware of a fundamental risk to the

A new processing technology

project associated with the production of sodium sulphate as a by-product from its lithium carbonate process flowsheet.

Lepidico also plans to build LOH-Max™ lithium hydroxide capability into the plant

After a risk review session, the company

later in 2019, also using industrial equipment.

found that long term offtake for the highly soluble by-product may be hard to come by,

“We intend to rapidly advance the

given the increasing maturity of the global

process development for LOH-Max™

sodium sulphate market, which is mainly

to demonstration scale. We’ve got the

used in powdered detergents and pulp and

foundation plant infrastructure now to

paper manufacture.

achieve this and thereby put LOH-Max™ process development onto a fast-track,” says

“While we were looking for a hydroxide

Walsh.

process, we were also keen to develop a process step for the back end of L-Max®

Having closely followed the development

that didn’t lead to the production of sodium

of the lithium market over the last 12-18

sulphate. Those two components are what

months, it became apparent to Lepidico

led to the development of the LOH-Max™

that preferences in the lithium chemicals

process.”

supply chain were shifting towards hydroxide production over carbonate.

Resource Global Network

67

68

MINING | Lepidico Lepidico began engineering work in June, with a planned four-month schedule for its consultant Lycopodium to complete the required circuit engineering and integrate it into the Phase 1 plant design.

“We have set an aggressive but realistic timeline so we don’t impose too much of a delay on our planned development of the Phase 1 plant project,” says Walsh.

Becoming vertically integrated Lepidico’s recently announced acquisition of Toronto-based Desert Lion Energy represents a major advancement for the company. The merger will create a vertically integrated lithium development company, from the mine all the way to chemical The LOH-Max™ process has been designed to production. treat a lithium sulphate intermediate product that is produced both from L-Max® and from The deal will give Lepidico direct ownership the conventional conversion of spodumene

in Desert Lion’s lepidolite deposits and large

concentrates. Therefore, LOH-Max™ has

exploration package in Namibia, in contrast

broad application within the lithium industry, to its position at the Alvarrões deposit being applicable to most hydrometallurgical

in Portugal where Lepidico has access to

conversion processes that employ sulphur-

lepidolite ore under an offtake agreement

based chemistry.

with the mine owner Grupo Mota.

During the March quarter, Strategic

According to investment research firm Edison

Metallurgy produced the first samples of

Group, the merger will therefore de-risk

lithium hydroxide using the proprietary

Lepidico as an investment proposition from

LOH-Max™ process. Preliminary design work

a strategic and operational perspective, since

also indicated that considerable capital and

it will not be dependent on a single source of

operating cost savings may be realised, as

lepidolite supply.

the LOH-Max™ design had fewer process steps and less mechanical equipment than

“The Desert Lion deal gives us direct

conventional processes.

ownership in our own lepidolite deposit.

Resource Global Network

69

70

MINING | Lepidico

“We intend to rapidly advance the process development for LOH-Max™ to demonstration scale. We’ve got the foundation plant infrastructure now to achieve this and thereby put LOH-Max™ process development onto a fast-track” – Joe Walsh, Lepidico managing director Furthermore, it will give us an alternate feed

Dhabi-based chemical company Gulf Fluor

source for the Phase 1 chemical plant and/

for the supply of sulphuric acid and land for

or a feed source for a second plant. We are

the construction and operation of its Phase 1

looking at building up a portfolio of assets

Plant Project.

to support our longer-term strategic growth objectives.”

Gulf Fluor operates a large industrial plant in the Industrial City of Abu Dhabi (ICAD) and

These strategic growth objectives

is the largest producer of sulphuric acid - a

were underlined by the subsequent

critical reagent in the L-Max® process - in

announcement that Lepidico had entered

the region. In addition, the firm leases a large

into a supply and marketing alliance with Abu

parcel of land in ICAD on which it is envisaged

Resource Global Network

that Lepidico could build its Phase 1 plant

same site of an exisitng sulphuric acid plant.

project.

This negates the requirement for transport, logistics and handling of sulphuric acid,

Lepidico stands to benefit from a number

thereby reducing risk.

of operating advantages should it choose to locate its Phase 1 project in ICAD, including

“ICAD is specifically designed for medium to

the fact that sulphuric acid can be piped

heavy industry and the Gulf Fluor site has its

directly to Lepidico’s plant.

own wharf. It’s got all the infrastructure and services that we need for our Phase 1 project.

“This is the first time we’ve had an opportunity to locate an L-Max® plant on the

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MINING | Lepidico

Resource Global Network “We also completed a study evaluating

Finally, Lepidico undertook a renounceable

whether regional markets exist for our by-

rights offer to raise up to AUS$10.8 million

products. Given the level of construction

which will go towards for the integration of

and agricultural activity happening in the

Desert Lion into the business, the evaluation

broader region, we identified that there are

of Abu Dhabi into the feasibility study for the

sizeable markets for both SOP fertiliser and

Phase 1 plant, the engineering of LOH-Max™

amorphous silica, which can be used as a

into the plant design, plus further resource

building material.”

development and exploration work.

ICAD also has a ‘plug and play’ approach

This neatly encapsulates the intense

towards new industrial developments, which

transformation of Lepidico’s business during

means that the approvals and permitting

the first six months of 2019. It has pivoted

process is expected to be able to be

towards lithium hydroxide production with

completed within three to four months.

the advent of a new processing technology,

Integrating ICAD

become a vertically integrated lithium company and taken the first steps to

Lepidico is currently working on an ICAD

establishing its operations in an exciting, high

trade-off study that will fully evaluate the

growth potential location.

prospect of a plant development in Abu Dhabi. Until the study is completed in late 2019, Lepidico will continue to use the basecase scenario of locating the Phase 1 plant in Canada.

Therefore, the company’s ongoing evaluation of a plant development in Abu Dhabi, along with its incorporation of LOH-Max™ capabilities into the Phase 1 plant has meant that the final feasibility study for the plant is now due in the first half of 2020, at which point Lepidico will seek to finalise its offtake and financing agreements.

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76

MINING | Tietto Minerals

TIETTO MINERALS A steady stream of progress at the Abujar gold project in Côte d’Ivoire

Resource Global Network

77

78

MINING | Tietto Minerals

In April 2019, ASX-listed explorer Tietto Minerals announced it had grown its resource at the Abujar gold project in Côte d’Ivoire by 146% to 1.73 million ounces (Moz), including a high grade core of 1.06 Moz at 2.1 g/t Au. This substantial resource upgrade is the latest major success achieved by the company at its flagship West African project since going public in January 2018. “The new estimation of 1.73 Moz is a substantial increase over our previous resource,” says managing director Caigen Wang.

“The update gives the market and our investors increased confidence that the project has further resource growth upside, because only a small portion of our overall 70 km mineralised structure has been tested.”

The Abujar project is comprised of three contiguous tenements totalling 1,114 km² in central Western Côte d’Ivoire (Figure 2), and it remains largely underexplored as attested to by Wang, with 90% of the 70 km long shear zone still to be tested by Tietto.

A significant resource upgrade The April resource upgrade was based on 26,000 metres of successful reverse

Resource Global Network

Figure 1: Diamond core from Abujar Gludehi (AG) deposit

Figure 2 : Location of Abujar Gold Project in Côte d’Ivoire and JORC resources defined at the Abujar project

79

80

MINING | Tietto Minerals

Figure 3: Plan view of Abujar Gludehi (AG) deposit circulation (RC) drilling and diamond drilling

The AG deposit currently has a JORC 2012

(DD) on the middle tenement across two

resource of 26.4 million tonnes (Mt) at 1.6 g/t

areas: the Abujar-Gludehi (AG) and Abujar-

for 1.38 Moz, having been extended along

Pischon-Golikro (APG) deposits.

strike, down dip and towards depth in the previous drilling campaign.

Resource Global Network

Figure 4: Oblique Long Section view of Abujar Gludehi (AG) deposit In addition, around 85% of the AG Resource is defined within 1.4 km of strike along AG line 15-29, which has been estimated to contain 15.7 Mt at a higher grade of 2.1 g/t for 1.06 Moz (Figure 3 and Figure 4).

Meanwhile, the APG deposit is located just 5 km South of the AG deposit and the resource is estimated to be 11.2 Mt at 1.0 g/t for 0.35 Moz. “In terms of mineralisation structures, we are rapidly expanding the resource along strike and down dip along this major shear corridor.

At the same time, the tenor and width of

Figure 5: Diamond drill rig owned by Tietto operating at Abujar project site

drilling intercepts give us encouragement that Abujar is on the way towards becoming a large gold mining operation.�

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MINING | Tietto Minerals

Year-end drilling campaign Tietto will now look to complete a 30,000

fresh rock samples exposed by large scale artisanal workings returned one grade of 50.8 g/t Au in an elevated gold zone.

metres combined DD and RC/AC drilling campaign during the rest of the year, using

Tietto’s managing director is very encouraged

its own company-owned rigs (Figure 5), ahead by the new discovery at the Abujar-Potoco of an additional resource upgrade before the

Prospect (APP) see Figure 2 for location,

end of 2019.

approximately 900 metres East of the Abujar shear, and the company has mobilised one

The drilling will focus primarily on extending

of its three DD rigs to drill below the artisanal

the AG deposit along strike and to a vertical

pit at Potoco.

depth of 350 metres, along with the APG very shallow depths, averaging less than 120

Côte d’Ivoire’s ASM industry

metres.

Workings (Figure 6) left behind by artisanal

deposit which to date has only been drilled to

miners across the tenement areas at Abujar In July the company announced the discovery

have previously helped Tietto identify where

of an entirely new gold-mineralised shear

mineralisation was taking place at the project,

zone parallel to the Abujar Resource, after

with artisanal and small scale mining (ASM)

Resource Global Network

Figure 6: Workings left by previous artisanal miners within Abujar project areas continuing to resemble a major feature of the

not allowed to apply for exploration licences.

mining industry in Côte d’Ivoire.

Instead they are designated for small scale alluvial mining or ASM.”

Recognising the ongoing presence of the ASM sector and its contribution to livelihoods in

The establishment of specific areas for

rural communities, the Ivorian Government

small scale miners removed from licenced

has taken steps to ensuring the practise

exploration zones has gone some way

can take place side-by-side with the nascent

to alleviating tensions between the two

industrial scale mining industry.

groups, while also paving the way for the formalisation of the ASM sector.

“First of all, illegal miners are not allowed to undertake any mining activities on the

Formalisation is a vital process for ASM in

tenement licences of exploration companies,”

order to reduce environmental impact and

explains Wang.

health and safety risks to those engaged in the sector, of which there were 100,000

“At the same time, the government has set

people working directly on ASM in Côte

up a number of small scale mining districts

d’Ivoire, according to estimates from 2016.

where we as industrial mining companies are

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MINING | Tietto Minerals

Developing an attractive mining jurisdiction

The code set a goal of developing the most attractive mining code in West Africa, which would dovetail with the underexplored

Along with beginning to regulate small scale

nature of Côte d’Ivoire’s position extending

mining activity across the country, the Ivorian

across 34% of the highly mineralised Birimian

Government and the Ministry of Mines has

Greenstone Belt to create an attractive

made it a vital priority to support exploration

proposition for investors into the sector.

and mining companies investing into the sector, particularly since the introduction of

“Côte d’Ivoire has created very good fiscal

the 2014 Mining Code.

regimes for investment in the gold sector.

They have a five-year tax-free holiday starting from commercial production. They have

Resource Global Network

reasonably low corporate tax after that and

“From our own experience, the government

their royalties regime is also attractive,” Wang

quickly granted us an exploration licence in

highlights.

2014 and has worked closely with us ever since to ensure the project runs smoothly.

The impact of the investment-friendly mining code has been tangible in Côte d’Ivoire’s gold

“From the local communities to local and

sector, with production growing from 630,000

central government, they are all very

oz per year to 900,000 oz per year between

comfortable with what we are doing and each

2014 and 2018. This 40% increase in just

group has suggested we put in an application

four years can be directly attributed to the

for a mining licence as soon as we can.”

enabling environment provided by the fiscal regimes of the new code.

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MINING | Tietto Minerals

“The resource update gives our investors increased confidence that the project has further growth upside, because only a small portion of our overall 70 km mineralised structure has been tested�

Caigen Wang, managing director Tietto Minerals

Resource Global Network

Strategic goals

feasibility studies for the Abujar project and

In June, Tietto’s board of directors held

build the mine.

a strategic planning meeting which laid out several objectives for the year-end

“Since we started the project in 2014,

and beyond. First, the additional resource

everything has moved smoothly. We don’t

update is slated for around November

see any significant difficulties or challenges

2019. Secondly, Tietto will then seek to

ahead of us in the progression of the project

advance scoping studies, followed by a PFS

or the eventual development of the mine.

commencing in first half 2020.

“We are very excited about the progress Given the recent upward movement in the

we have been making and we fully expect

gold price, now is a good time to be a gold

to deliver on our short-term and long-term

producer and Wang believes it is only a

targets,” he concludes.

matter of time before Tietto can complete its

ASX:TIE

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MINING | Nusantara Resources

N U S A N TA R A

Awak Mas: Indonesia’s ne

Resource Global Network

RESOURCES

ext large scale gold mine

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MINING | Nusantara Resources

Indonesia’s mining industry has The executive chairman also highlights not always been kind to foreign the vital importance of fostering strong incountry relationships to ensure those positive investors down the years, with a string of high-profile incidents development outcomes he mentions. putting a blot on the sector’s Nusantara has achieved this by employing copybook amongst potential locally across the business and building an investors. However, since the executive team with first-hand experience lifting of a raw ore export ban working in Indonesia. “We are a local in 2016, investor confidence in employer, with local geologists and local the mineral resources sector is people working in the business. Our model, beginning to return. ASX-listed and the Indonesian way of doing business, is to have Indonesians working in the company.

Nusantara Resources is one company that is benefiting from improving conditions for foreign “On the corporate side, our director Boyke Abidin has been with this project for over investors in Indonesia, having made rapid progress at its Awak 20 years, so he knows the local community Mas Gold Project on the island of first-hand and has good relations all the way through to government.”

Sulawesi since its IPO in August 2017.

Delivering the DFS “Indonesia’s mining industry has had an

A little over 12 months after its IPO,

interesting history, and there are many

Nusantara published a definitive feasibility

positive things about operating here,” says

study (DFS) for the Awak Mas project in

Nusantara’s executive chairman Greg Foulis.

October 2018. The company completed over 10,000 metres of drilling ahead of the study

“First and foremost, there is the mineral

in order to prove its new geological model for

endowment in Indonesia from a copper and

the project.

gold perspective. Following that, there have been plenty of recent examples of investors

Awak Mas was first discovered in 1991 but

getting very positive development outcomes

after a series of previous owners failed to

out of Indonesia.”

take the project through to feasibility stage, Nusantara proposed a new geological

Foulis recounts Australian private equity

approach based on an ‘intrusion related’

firm EMR Capital’s US$1.2 billion sale of the

hydrothermal model.

Martabe gold and silver mine last year as a recent example of a foreign investor getting

This different approach to the geology

a strong return in Indonesia.

is what has set Nusantara apart from its

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MINING | Nusantara Resources

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AMC Consultants (AMC) started working with Nusantara in 2017 and was instrumental in the delivery of a definitive feasibility study that confirmed an asset with a 1.1 million ounce gold ore reserve and an 11-year mine life. AMC is currently working with Nusantara to update the project implementation plan.

Under the leadership of David Varcoe, AMC’s team developed a strategy to develop the mine in tropical Sulawesi, overcoming a challenging terrain with a relief of more than 500 metres. Initially, the team completed strategic planning work while the mineral resource was drilled out.

Nusantara then engaged AMC to determine the pit shell size, pit design, mine area layout, production schedule, equipment selection and to develop operating and capital costs. AMC worked with the Nusantara team and other consultants to determine the plant throughput and processing methodology to maximise overall project value.

In addition, AMC provided guidance to assist with planning the next stages of exploration and reserve development drilling. The mining costs were developed using AMC’s proprietary OPMincost Model.

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MINING | Nusantara Resources predecessors and allowed it to progress the project to feasibility stage, according to Foulis.

The DFS included a 2 million ounce (Moz) mineral resource with a grade of 1.4 g/t Au, as estimated by Nusantara’s partner Cube Resources. The company also engaged several other well-credentialled consultants

AMC helps Nusantara mine smarter

on the study.

“AMC Consultants completed the mine planning, estimated mining costs and the ore reserve, DRA Minnovo helped with metallurgical testwork and an Indonesian company called Resindo worked with us on

AMC worked with Nusantara to develop the Definitive Feasibility Study at Awak Mas. This included mining strategy, costs, & project value maximization.

infrastructure and capital cost estimation.

“We have also an opportunity to work with an EPC mining business called PT Petrosea through our partner Indika Energy. We think there is an opportunity to work with them in the construction of this project.”

The DFS also outlined sound economics including a post-tax NPV of US$152 million with 20% IRR, based on a conservative gold price of $1,250 per ounce. The study also built in gold price sensitivity where a 10% rise would see the project’s NPV reach $217 million, with an IRR of 26%.

Prior to publishing the DFS last year, Nusantara achieved another key objective

amcconsultants.com

when it secured a contract of work agreement with the Government of Indonesia for the Awak Mas project.

Resource Global Network

“We have a very good licence situation, we’ve completed the feasibility and brought in a very respectable and significant local partner that is also looking to be diversified in the gold business in Indonesia” Greg Foulis, executive chairman Nusantara Resources

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“Firstly, we confirmed our licence with the

“We don’t use the word partnership lightly,

Government of Indonesia and had the

this is not just a business transaction. We

five-year period before we move into a

are working very hard on our relationship

mandatory sell-down extended to 10 years.

with this partner, to make this a partnership where everybody brings something to the

“We have a very good licence situation, we’ve

table.

completed the feasibility and brought in a very respectable and significant local partner

“Our partner has financial capability and

that is also looking to be diversified in the

they also have a very good understanding of

gold business in Indonesia.”

business in Indonesia. We also bring a lot of

Introducing Indika Energy

technical and gold industry experience to the equation.”

In December 2018, Nusantara announced

Nusantara is aiming to achieve a project level

that it had formed a strategic partnership

transaction that satisfies both parties and will

with Indonesian cornerstone investor Indika

look to be aligned with its partner to ensure

Energy, who will provide a pathway to project

both debt and equity capital is secured for

level investment in return for a 19.9% interest the project, according to Foulis. in Nusantara.

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MINING | Nusantara Resources

The company has engaged with project

Nusantara’s attention is focused on project

finance banks and observed a track record

enhancement and additional exploration in

of multinational financiers and international

2019.

banks supporting mining projects in Indonesia in recent years, including the large Firstly, Nusantara will seek to enhance the scale Martabe and Tujuh Bukit projects.

project through what Foulis calls ‘mine level geology’ – wherein the company expects

In addition, Nusantara received confirmation positive reconciliation on grade and will test from an independent technical expert that

this concept with additional close spaced

there are no fatal flaws in the Awak Mas

diamond drilling.

project, further strengthening the case for international investment.

“Essentially, in a mining situation we expect to pick up a lot more vertical structure than

“We understand our ability to project

what we are seeing in the resource model

finance and are working through other

and from the wide spaced drilling. That’s

complimentary options as well as what the

what we expect from the mine performance.”

various equity pieces may look like for this project. We are certainly confident that we

Furthermore, the company recently kicked off

will get this project banked, particularly given its first ground-based electrical geophysical the current $1,400 per ounce gold price.”

The icing on the cake

programme in the area surrounding Awak Mas. The programme is lighting up some fantastic structure over an existing satellite

While fast-tracking the development of the

deposit along with extensions to that deposit,

Awak Mas project towards the construction

says Foulis.

stage by 2020, an equally large part of

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“This is all about the icing on the cake.

“If you look at the scale and location of our

We believe we have an exciting base case

satellite deposits, this is certainly what we

development scenario, but like most gold

call a ‘big system’. We are running a two-

operations we have an extremely high

pronged approach. We want to get this into

expectation of adding a lot of ounces, pre-

production, that’s our number one focus,

development and or when we move into

but we also see very significant exploration

production.”

upside over and beyond our existing footprint.”

Based on the significant opportunity to add further resources through project

Overall, Nusantara has developed into a

enhancement and satellite exploration,

well-credentialled business in Indonesia

Nusantara has strong reason to believe

with strong community and government

it could be sitting on a 5Moz mineralised

support and a local partner that is providing

system.

a pathway to investment for the large scale Awak Mas project.

“We believe that ultimately there are a number of intrusives relating to our mineralisation that certainly have the potential to demonstrate that this is part of a larger porphyry-style system. We also have signs of copper mineralisation that we need to follow up.

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MINING | Consolidated Zinc

CONSOLIDA

Owner of the high grade Plo

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ATED ZINC

omosas zinc mine in Mexico

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MINING | Consolidated Zinc

The Plomosas Zinc Project in Chihuahua state, Mexico became known to ASX-listed Consolidated Zinc in mid-2014 and became more interesting to the company when a buyin deal materialised for the mine, which has historically operated at three times higher than the average grade of zinc mines around the world.

Located around 350 km from Mexico’s border with Texas, Plomosas was underground mined from around the end of World War II to 1974 at grades of approximately 17% zinc and 7% lead. Based on these outstanding historical grades, Consolidated decided to acquire a 51% interest in the project, which was increased to 90% in December last year. Mexican joint venture partner Retec Guaru currently retains the remaining 10% interest in Plomosas, although Consolidated is pursuing a move to 100% ownership of the mine.

The Mexican dream

“Especially with the increasing levels of trade with the US, Mexico has developed a high-tech market. The country provides very good internet services, infrastructure, communication, medical services – it’s like coming home. It’s fabulous!”

An added bonus for Marwood has been the opportunity to sample Mexico’s worldfamous culinary scene, particularly in Chihuahua where the Texmex dishes are tremendous, according to the MD. From an operational perspective, mining in Mexico goes back over 500 years and the contemporary industry is occupied by some of the largest mining houses in the world, including domestic giant Grupo Mexico and North American powerhouses Newmont Goldcorp and Agnico Eagle Mines.

The presence of these mining majors in Mexico denotes a jurisdiction that is proforeign direct investment in the mining sector, which contributes around 8.3% to industrial GDP and 2.5% to national GDP, while supporting over 370,000 direct jobs and over 1.7 million indirect jobs in 2017.

The only drawback to operating in Mexico comes in the form of high local interest rates of around 18-20%, which necessitate up front payments for many goods and

After buying in to the Plomosas project,

services. This sometimes provides a cash flow

Consolidated found itself entering a

management challenge for Consolidated.

progressive and advanced Mexican economy that is one of the largest in Latin America,

“The cost on a pump or renting a vehicle

says managing director Brad Marwood.

is very high because there is an inherent

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MINING | Consolidated Zinc

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interest charge associated with the US dollar

production taken by the previous owner.

borrowing rate in the space. Whereas, I go across the border into Texas and the

“The mine had been in operation in 2013 but

borrowing rate can be counted on one hand.

without a JORC resource defined. It was very

That brings things down to around half the

much hand to mouth – let’s drill some holes

price,” says Marwood.

and then mine it. That was very unrewarding

Defining the resource

because it didn’t define the ore sufficiently well enough to have continuity of production.

In April 2018, Consolidated defined a JORC

We felt that the better approach was to get a

resource of 1.17 million tonnes (Mt) for

resource defined.

the Plomosas project at an average grade of 14.3% zinc, 2.63% lead and 17g/t silver.

“Given the history of 30 years of operation

Within five months of defining the resource,

from post-WW2 to 1974, we felt confident

the company had commenced mining at the

that the orebody was more like a metronome

operation in September.

in a consistent operational environment and so we didn’t feel the need to drill off to

For Marwood, getting a resource defined was

measured and indicated, and we brought

crucial to re-starting production at Plomosas,

the mine into operation against the inferred

especially given the haphazard approach to

resource.”

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MINING | Consolidated Zinc Operations commenced at the Tres Amigos section of the mine, although the company has recently moved across to the Semioxidised (Sox) area of mineralisation, which is in the original higher grade host environment.

“We’re currently operating, mining and delivering to our process plant at around 27% zinc equivalent. I don’t think there are many operations in the world that can claim that level of head grade,” Marwood claims.

Higher grades, higher revenue Consolidated produced 7,000 tonnes of ore in May 2019 – the first full month that utilised material from the Sox section of the mine.

Providing Global Mineral Processing Solutions

The company had initially laid out plans to increase its monthly production to 10,000 tonnes, but a new toll treatment agreement will allow Consolidated to meet its revenue expectations without hitting the 10,000 tonnes target.

A market leader in safe, quality and cost competitive engineering solutions delivered on

The new offtake deal with Grupo Mexico

time, within budget and in accordance with client

includes an alternative toll treatment

requirements. We have a proven track record of delivering turn-key projects in over 20 countries.

agreement for the Sox material, which will provide a higher revenue per tonne to

Feasibility Studies

Consolidated due to the 27% zinc equivalent

Engineering and Procurement

grade versus the 15.5% grade of the Tres

Design and Construction Project Management and Commissioning

Amigos ore.

Consulting Services

In addition to this, the stockpiles at the

Asset Management

mine and mill are currently at full capacity,

Learn more at www.gres.com.au

so Consolidated has had to slow down its

Denver +1 303 881 4401 Perth +61 8 6272 6000

mining rate until the throughput of the

Brisbane +61 7 3838 8000

process plant is increased. The company is working with the owners of the Aldama plant Resource Global Network - Half Page Vertical Consolidated Zinc Limited Feature.indd 1

15/08/2019 8:38:17 AM

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MINING | Consolidated Zinc and has assisted them in the installation of a new mill and flotation cells.

The expansion should significantly boost the plant’s capacity from the current 100 tonnes per day nominal rate to around 250 tonnes per day, which is around 7,500 tonnes per month.

“If we start putting 27% zinc equivalent through the plant at 7,500 tonnes per month, then compared to our aspirations of 10,000 tonnes per month with the Tres Amigos ore, we’re talking about a serious uplift in the revenue stream.”

Resource expansion There is also a significant opportunity to add additional resources to the project through in-mine exploration at Plomosas, and Consolidated is following a cost-effective strategy to unlock those extra resources.

The company is close to completing a dewatering process down to the bottom of Level 10 of the mine, 400 metres below surface.

“With access to Level 10, we can drill very short drill holes up into the orebody and down into the orebody to do our exploration drilling, with far more cost-effective results. Instead of drilling 200 metres for an intersection of 4-5 metres of orebody, we will drill 30-50 metres with a 5 metres intersection.

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MINING | Consolidated Zinc

“We’re currently operating, mining and delivering t I don’t think there are many operations in the Brad Marwood, managing d “Our plan is to get started on that before

Hypothetically speaking, there could be up

the end of the year. A programme of six

to 20Mt of ore available at a grade of 23%

months of drilling should see us achieve the

zinc equivalent over the 4 km mineralised

outcomes that we seek, which is to define

zone, based on historical production within

and drill extensions down dip of the high

the 600 metres area. Consolidated’s mid-

grade Sox mineralisation to the Level 10 area, term exploration strategy revolves around which could be sufficient for multiple years of extending along the 4 km zone to capture the operation.”

extra resources.

There is also near-mine exploration potential “Our target is to define that deposit and at Plomosas, especially given that during 30

build a fit-for-purpose processing plant

years of historical mining 2.5Mt of ore was

with a capacity of up to 0.75Mt per annum,

extracted from just 600 metres of a known mineralised area of 4 km.

Resource Global Network

to our process plant at around 27% zinc equivalent. world that can claim that level of head grade” director - Consolidated Zinc which will produce 50-70,000 tonnes of

rather than diluting shareholders with

zinc concentrate per year,” says Marwood.

additional capital raises for exploration.

“We would also like to set up a long-term

Within a two-year timeframe, the company

relationship with a smelter, preferably in

aims to deliver a full-scale operation at

Mexico.”

Plomosas that is capable of delivering annual profits North of US$50 million.

Right now, Consolidated is offsetting exploration expenditure, putting cashflow into the company and meeting its costs

ASX:CZL

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MINING | Centrex Metals

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CENTREX M E TA L S

Phosphate production for fertiliser markets across the APAC region

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MINING | Centrex Metals Therefore, the decision to move into Centex Metals was formed phosphate mine development made sense back in 2001 and listed on the from a thematics perspective, according to ASX in 2006 as a developer Slesarewich. Centrex’s starting point in the of iron ore projects in South business was the Oxley Potash Project in Australia, signing two large Western Australia, which was acquired in joint venture agreements with 2015.

Chinese steel firms in 2010. But, anticipating the oversupply of At around the same time it purchased the iron ore into global markets, Oxley project, Centrex identified the Ardmore Centrex soon began a process Phosphate Rock Project in Queensland as of diversification into other bulk a high priority, owing to its close alignment with the company’s new focus. While it took commodities. Today, Centrex is some time to unlock the project, it has been focused on the development of phosphate projects in Australia owned by Centrex for two years now and is to feed fertiliser markets in the the firm’s flagship development.

Asia-Pacific (APAC) region. “We have an increasing middle class Slesarewich was appointed CEO of Centrex in April 2019, bringing a track record of success in the APAC region and arable in mine development across Queensland land is decreasing because of over a 20+ years career. Next to Slesarewich that growth,” says CEO Simon in the firm’s new look leadership is CFO Slesarewich. “Therefore, there Mark Terry. He also brings over 20 years of is a requirement to get more experience in financial roles for mining firms. productivity out of each of those Together, they lead the senior management hectares used for production team from Centrex’s head office in Adelaide. of important plant-based food The flagship project crops.”

Based on the results of Centrex’s definitive

Phosphate is essential to the production

feasibility study (DFS), the Ardmore project

of fertilisers, which provide vital nutrients

is a high-quality asset with a relatively low

to plant-based crops, boosting yields and

capital requirement, low technical risk and

supporting food supplies for growing

the potential to provide strong returns.

global populations, particularly in the APAC region, which contains 60% of the world’s

“At Ardmore, we have been blessed with a

population and continues to grow at a rapid

combination of premium grade phosphate

rate.

rock and ultra-low cadmium content. Our product will be delivered to the processing

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MINING | Centrex Metals

plant at around 30% P2O5 [phosphorous

An optimised DFS was published in February

pentoxide], compared to the mid-teens for

2019 and laid bare the economics involved

most other projects around the world.

in the delivery of the project, including capex which has been estimated at AUS$69 million

“Therefore, we’re able to easily make a

providing an initial payback of 1.8 years for a

high grade product at around 34-35% P2O5,

10-year operation.

via simple washing of the ROM ore,” says Slesarewich. Meanwhile, the low cadmium

Although much of the infrastructure required

content of the ore means that local

for the project is already in place, with

manufacturers can use the product without

a railway line only 90 km away that can

the need for blending.

support the delivery of material to the Port

Resource Global Network

of Townsville, thereby negating the need

items. That makes it a lower risk delivery

to develop costly and long lead logistics

methodology.

infrastructure.

Low risk capex requirements

“And, we think there is a very significant opportunity to decrease our operating costs by looking at bulk handling solutions. The

“Overall, the capex does not include any

base case in the DFS was to containerise the

high risk investments with large pieces of

material and use rotainers throughout the

capital that need to be delivered. Instead,

logistics chain, but we are now looking into a

it’s quite a group of small projects like roads,

bulk rail and bulk port solution.”

camps, office blocks and other infrastructure

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MINING | Centrex Metals

On top of that, the state government recently

Global for the mineral resources, Optima

announced an annual $20 million subsidy

Consulting & Contracting for the ore reserves

to users of the Mount Isa to Townsville rail

and mining, GR Engineering Services for

line, for the next four years, which will reduce

process and mine site infrastructure as well

access charges on the line. Centrex hopes to

as overall compilation of the study.

take advantage of this in the final two years of the arrangement.

The start-up mine Centrex has designed a start-up mine facility

Elsewhere in the DFS, the optimisation

at Ardmore which will produce up to 30,000

increased the project’s pre-tax NPV by 56%

tonnes of premium concentrate, ahead

to $269 million with an IRR of 63%, while

of the upgrade to the full-scale mine. The

annual production at Ardmore has been set

start of June saw the arrival of the modular

at 800,000 wet tonnes – making it one of the

processing plant for the trial mine, which

most significant undeveloped phosphate

should be commissioned before the end of

deposits in Australia.

the year.

Key contributors to the DFS included RPM

Once the start-up mine is fully operational, the company plans to ship 5,000 tonnes trial

Resource Global Network

shipments to priority potential customers.

“The company is very pleased to be

This underlines the importance of the start-

partnering with one of New Zealand’s

up mine with regards to securing long-term

leading fertiliser producers in Ballance,” said

offtake contracts for Centrex’s product.

Slesarewich after the deal was announced.

“The contract validates the quality of

“What we need to do is get a couple of large

Ardmore’s product and its attractiveness to

bulk samples out to high priority customers,

target customers.”

let them process the product and that should underpin offtake negotiations for next year.”

Meanwhile, the Northern Australian Infrastructure Facility (NAIF) completed a

Centrex has already signed off two 5,000

strategic assessment of the Ardmore project

tonnes trial shipments with priority

in May and is currently engaged on a due

customers based in New Zealand, the latest

diligence investigation into the viability of

of which is with nutrient supplier Ballance

Centrex receiving funding assistance through

Agri-Nutrients, who previously trialled 400

the $5 billion facility, which aims to provide

wet tonnes of run-of-mine ore from Ardmore

loans and support the development of

to produce single superphosphate.

infrastructure projects in Northern Australia.

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MINING | Centrex Metals

Full steam ahead

“We’ve also got some near-mine exploration

Centrex is continuing to make steady

that we can look at to increase the mine life

progress on its path towards full-scale

around the existing mine plan at Ardmore,

production at the Ardmore project, which

and there are some high priority exploration

is slated for late 2021. Before that, the

targets within trucking distance as well.

company must wrap up offtake and financing agreements next year, while construction of

“We will look at other similar style deposits

the mine is planned to commence at the end

in the Queensland region to see if we’re able

of 2020.

to get involved in those projects and use the

Resource Global Network

“At Ardmore, we have been blessed with a combination of premium grade phosphate rock and ultra-low cadmium content. Therefore, we’re able to easily make a high grade product” Simon Slesarewich, CEO Centrex Metals In summary, Centrex is closing in on the development of the uniquely positioned Ardmore Rock Phosphate project in Queensland – a high grade, minimal capex project that will benefit from existing infrastructure, along with attractive state subsidies and funding support facilities.

When it starts up full-scale production in 2021, the project will become the latest significant source of phosphate for fertiliser markets in the APAC region, helping to enhance the growth of plant-based crops knowledge from Ardmore to deliver those

that are vital in feeding the ever-expanding

projects as well.”

population in the region.

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OIL & GAS | Leigh Creek Energy

LEIGH CREEK ENERGY Commercialising East coast Australia’s largest uncontracted 2P gas reserve

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OIL & GAS | Leigh Creek Energy

Leigh Creek Energy (LCK) is an ASX-listed energy company that is making rapid progress towards realising a goal it set almost a decade ago. That goal is to successfully deliver its Leigh Creek Energy Project, located within a former coal mine 550 km North of Adelaide in the state of South Australia. The project is based on a process called in situ gasification (ISG), which converts deep and difficult to obtain coal from its solid state into synthesis gas (syngas) – a lower carbonemitting form of energy compared to thermal coal.

In the first quarter of the year, Leigh Creek achieved first commercial production-grade syngas from its demonstration plant and had its resource at the site independently certified as the largest uncontracted 2P gas reserve serving the East Coast market. These present two major milestones for the company in terms of proving the commercial viability of the project and underlining its importance to the starved domestic energy market. RGN’s editor finds out more on the continued progress made by Leigh Creek this year in a discussion with managing director Phil Staveley.

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OIL & GAS | Leigh Creek Energy

Figure 1 Jacob Ambrose Willson: Leigh Creek

sum of proved and probable reserves - ed].

achieved first commercial syngas production from the demonstration

• Produce syngas comprising energy gases

plant in February 2019. What were the

of carbon monoxide, methane, nitrogen

key achievements from the trial and how

and hydrogen

important was its success to the future success of the project?

• Produce syngas at over 1 million cubic feet per day • Capture information required to upgrade

Phil Staveley: The company’s plan to run a

the existing SPE-PRMS 2,964 PJ 2C

Pre-Commercial Demonstration (PCD) was

resource to 2P reserve

to demonstrate to the regulator and the

• Demonstrate that LCK can operate the ISG

wider community that we could utilise ISG

gasifier safely and in an environmentally

for commercial use in an operationally and

responsible manner

environmentally safe way, but also produce targeted commercial quality and quantities of

• Provide key data and information for the development of the commercial project

gas to have a portion of its sizeable resource upgraded to reserve status.

JAW: The company was able to upgrade The objectives (see bullet points) were all

the resource making it the largest

achieved, and LCK subsequently received

undeveloped 2P gas reserve available to

third-party validation of a PRMS certification

the East Coast markets. How important

of 1,153 petajoule (PJ) 2P reserve [2P is the

is the scale of this resource, given the

Resource Global Network

Figure 2

current critical energy situation in the

about the petroleum accumulation at

region?

Leigh Creek is established. This additional information will be derived from a variety

PS: Australian natural gas demands have

of sources, such as further drilling, seismic

increased around 300% since 2014, and an

work, and production testing.

undersupply in the domestic market means there is an urgent need for large-scale

Figure 2 shows LCK’s reserve in comparison

pipeline gas supplies.

with other gas suppliers in Australia. The first six producers are primarily contracted for

There are also limitations for significant

LNG exports, while the rest are primarily for

exploration and extraction within regulatory

domestic use.

framework in other states (see figure 1).

JAW: At the end of June, the company LCK’s 2P reserves of 1,153 PJ (1.1 Tcf) is a

was able to successfully decommission

significant number, capable of producing and

the PCD project. How vital was it to

maintaining a commercial project for at least

sign off the project with no significant

30 years.

environmental or safety incidents?

Furthermore, LCK’s PRMS reserve certification PS: The company’s successful PCD justifies will increase over time as more information

commercial suitability and provides evidence

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OIL & GAS | Leigh Creek Energy

Resource Global Network of how a commercial ISG project can operate

you’ve already had discussions in Hong

safely in accordance with environmental and

Kong and Beijing?

regulatory guidelines.

PS: The reserve certification has allowed We have a track record beginning in April

commercial negotiations with bankable

2018 when the regulator looked at the

partners, mainly due to the booking of LCK’s

science and backed our expert staff with

maiden reserve. A reserve means the gas

an environmental approval. The reserve

has been independently qualified, assessed

certification now justifies their decision and

or judged to be of a commercial grade,

shuts the door on any argument suggesting

suitable for a commercial project.

ISG can’t operate in a commercial application safely and within environmental standards.

Partners wanted to see that the gas could be commercial before they would formally and

JAW: How symbolic is this move in terms of Leigh Creek transitioning towards commercial negotiations, particularly as

seriously negotiate.

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OIL & GAS | Leigh Creek Energy

JAW: What are the company’s targets for

In 2020, the company will complete its

the second half of the year and then into

pre-feasibility studies, have submitted

2020?

appropriate applications to government and announced relevant commercial

PS: 2019 will see Leigh Creek Energy

partnerships.

complete its options analysis, which will determine its preferred commercial pathway

JAW: How prepared is Leigh Creek for any

between pipeline gas, urea fertiliser, or both.

form of speedbump that may slow down

All these options show significant economic

the pathway to commercial production?

perspectivity.

PS: LCK is writing the blueprint for The remainder of 2019 will see our

commercial success using this technology

technical team engage in more geotechnical

in Australia, and as is the case with new and

investigation, and progress towards

unconventional developments, we have

applying for appropriate permits from

to often face and solve issues subsequent

the state government regulator to move

developers don’t have to deal with.

forwards towards commercial operations.

Our executives continue to progress with

This is why the PCD was so important – not

commercial negotiations.

only to demonstrate to the regulator and

Resource Global Network

the wider community that we could utilise

JAW: You previously identified two

the technology for commercial use in an

potential commercial pathways for your

operationally and environmentally safe and

syngas product - fertiliser (urea) and

sustainable manner, but to understand and

natural gas. Which market do you think

react to any issues that could potentially arise

your product is best suited to?

on a larger scale.

PS: The most financially attractive To successfully operate the PCD and get

commercial direction for LCK is to maximise

this far is a huge achievement and speaks

the value of the company’s vast gas resource

volumes of the quality of staff and technical

at Leigh Creek and to turn this asset into

knowledge under the LCK roof.

fertiliser products on site. Factors influential in this decision include existing transport

They’ve proven to be fully equipped to react

infrastructure which enables LCK to access

accordingly to any unexpected hurdles that

markets for the product mix, demand for

any company may face when pioneering

the product with stable pricing, and LCK’s

a relatively little-known and innovative

natural advantage in having a large feedstock

technology.

resource that can be used in production at a very low price.

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OIL & GAS | Leigh Creek Energy

Resource Global Network

139

“LCK’s past financial year has featured our greatest achievements to date and our most significant steps forward towards realising a goal set almost a decade ago” Phil Staveley, managing director Leigh Creek Energy

140

OIL & GAS | Leigh Creek Energy

However, our recent reserve certification

Leigh Creek is generating excitement from

cements LCK’s project status firmly in the

potential end markets. Couple that with the

gas market in Australia too. The company

fact we can produce it cheaper than anyone

is working through negotiations with gas

else in the industry certainly means the

purchasers who are seeking a material

option must be considered and carefully

amount of gas supply, while we progress

analysed.

the dual path and scoping aspects of a compelling fertiliser strategy.

However, our greatest potential for value creation means our preferred commercial

JAW: When RGN last spoke to Leigh Creek

pathway will be along the pipeline gas and/or

in 2018, another possible commercial

urea fertiliser production sectors. Ultimately,

route discussed was that of hydrogen

our remote location and the infancy of

production. Is this still an option being

technology solving hydrogen transportation

considered by the company?

issues means hydrogen may not be as viable an option for LCK right now.

PS: As we’ve mentioned previously, the volume of hydrogen potentially produced at

Resource Global Network

JAW: Finally, can you summarise how

But seeing the growth of the company, the

excited everyone at Leigh Creek is

high calibre of experts working towards the

following the recent progress made

common goal and everyone knowing we’re

towards the commercial project?

closer than ever to achieving something significant certainly makes us excited.

PS: LCK’s past financial year has featured our greatest achievements to date and our most

Our position also makes us more determined

significant steps forward towards realising

than ever to make the most of the huge

a goal set almost a decade ago. Those of

opportunity we’ve created for ourselves, the

us at LCK who were here at the beginning

Australian resource sector and the global ISG

understood the enormity of the challenge

industry.

they faced trying to commercialise an ISG project in Australia.

ASX:LCK

j

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APPOINTMENTS & EVENTS

APPOINTMENTS Vernon Baker becomes new CEO of Jaguar Mining Brazil-focused Jaguar Mining has made Vernon Baker its new CEO, with interim CEO Ben Guenther stepping down from the role.

“Mr. Baker is an experienced executive with extensive underground mining experience and a diverse operational background,” said Jaguar’s chairman Thomas Weng.

“We are excited by his commitment to continue executing Jaguar’s key strategic priorities and turnaround strategy,” he added.

Great Panther Mining appoints Jeffrey Mason chairman of the board Jeffrey Mason has been named chairman of the board at precious metals miner Great Panther Mining. Mason will succeed R.W. (Bob) Garnett, who remains on the board.

Mason has been on the board of Great Panther since May 2014, and he also serves on the boards of Auryn Resources and Torq Resources.

Anglo American appoints two South African women to board following shareholder pressure Anglo American has appointed two South Africans to its board, following calls to by its biggest shareholder to have more local representatives.

Businesswoman Hixonia Nyasulu will join Anglo’s board as a nonexecutive director on November 1, while Nonkululeko Nyembezi-Heita will join the board in a non-exec role in January 2020.

Western Midstream Partners announces senior executive changes Texas-based gas company Western Midstream Partners has elected a new president and CEO along with a new senior vice president and chief operating officer (COO).

Michael P. Ure will fulfil the role of president and CEO, while Craig W. Collins has been named senior vice president and COO of Western Midstream.

Resource Global Network 145

EVENTS Our pick of the top mining, oil & gas and renewable energy events happening around the world in the months to come

5th Africa Mining Summit September 24-25 Gaborone Botswana 2019 International Renewable Energy Conference (IREC) October 23-26 Seoul South Korea

International Mining and Resources Conference + Expo (IMARC) October 28-31 Melbourne Australia

Africa Oil Week November 04-08 Cape Town South Africa Mines and Money London November 25-27 London UK

Want to promote your resources event?

Email the editor at editorial@resourceglobalnetwork.com

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