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
63
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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-MaxŽ 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
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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
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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
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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.�
81
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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
a
87
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MINING | Nusantara Resources
N U S A N TA R A
Awak Mas: Indonesia’s ne
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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
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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
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“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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