RESOURCE Volume 7, Issue 3
GLOBAL NETWORK
Mining, renewable energy and oil & gas worldwide
AGUIA RESOURCES Phosphate supply for Brazil’s agricultural juggernaut GENSOURCE POTASH A pioneering vision for potash VERDE AGRITECH Improving your health and the world’s health
MINERAL FERTILISERS THE KEY TO BOOSTING FOOD PRODUCTION FOR THE RISING GLOBAL POPULATION RESOURCEGLOBALNETWORK.COM
EDITORIAL
looks at three natural fertiliser mining companies helping the world achieve food security.
“
If there was an issue with potash supply to Brazil, the impact would be far greater than the impact of COVID-19. Not only economically, but most certainly with far greater loss of life.” These are the words of Cristiano Veloso, the boss of Brazilian potash producer Verde AgriTech.
Jacob Ambrose Willson Editor
Executive Team Editor Jacob Ambrose Willson Content Director (APAC and Americas) David Hunter Creative Director Hugo Currie ICT Director Stuart Clark Managing Director Simon Curran Contributors Steve Halabura (Halabura Potash Consulting Ltd) Savio D’Souza (Brand Finance) Carole Nakhle (Geopolitical Intelligence Services) 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. Disclaimer: The opinions expressed in this publication are not necessarily those of the publishers. Whilst every effort is made to ensure accuracy the publisher and editor cannot be held responsible for any inaccurate information supplied and/or published. Copyright: The copyright for all material published in this magazine is strictly reserved.
While this warning should by no means diminish attempts to prevent the spread of the deadly virus which has claimed around 292,000 lives worldwide at the time of writing and reversed the economic growth made in the decade since the global financial crisis, it does bring into focus the importance of crop production and the potential impact that any disruption to food supply chains would have on populations around the world. Potash (another name for potassium salt) is one type of natural fertiliser that is required for healthy plant growth. It has been proven to improve plant durability and resistance to drought, disease, weeds, parasites and cold weather. These qualities make potash and similar plant nutrients irreplaceable products for crop farmers around the world. And with the global population expected to increase by two billion in the next 30 years to 9.7 billion people in 2050, according to a 2019 United Nations report, the need to drastically expand food production through greater agronomic efficiency becomes crystal clear.
This issue of RGN focuses on a selection of innovative mining companies in the business of extracting essential natural plant fertiliser from the ground. We concentrate on the stirring fertiliser mining sector in Brazil – one of the world’s key breadbaskets – with spotlights on the aforementioned Verde and Southern Brazil-based phosphate developer Aguia Resources. We also take a closer look at Gensource Potash in the Canadian province of Sasketchewan – another key hub of global potash production. Gensource plans to revolutionise the potash industry with its proposal to build small-scale, expandable and environmentally sustainable production modules. Saskatchewan-based potash expert Steve Halabura endorses this ‘Small Mine’ approach in a column focusing on what lies ahead in the sector this year, and this issue also revisits the takeover saga which enveloped struggling UK miner Sirius Minerals earlier this year and threatened the future of the world’s largest potash and polyhalite mine. Finally, readers of RGN this month can learn about the impact COVID-19 could have on the top brands in the mining industry and how the virus has decimated the global oil market, courtesy of Brand Finance’s Savio D’Souza and leading energy sector commentator Carole Nakhle.
Jacob Ambrose Willson jacob@resourceglobalnetwork.com
Anderson Murray Media Fulham Green, 69-79 Fulham High Street, Main Reception, Bedford House, London SW6 3JW | Tel. +44 (0)207 148 5630
a r
CONTENTS
NEWS 6 Global resources news Our selection of mining, oil & gas and renewable energy stories from the last month
SIRIUS MINERALS
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10 News in depth Anglo American’s protracted acquisition of the world’s largest polyhalite mine
COLUMNS 14 Steve Halabura (Halabura Potash Consulting) Leading global potash expert casts his eyes over prospects in the market this year
GENSOURCE P O TA S H
40
AGUIA RESOURCES
54
22 Savio D’Souza (Brand Finance) How are the mining industry’s biggest brands going to be impacted by the COVID-19 crisis? 30 Carole Nakhle (Geopolitical Intelligence Services) Energy analyst explains the events that are defining the most volatile period in the history of the oil industry
MINING 40 Gensource Potash A pioneering vision for the future of the global potash market 54 Aguia Resources Domestic phosphate supply for Brazil’s agricultural juggernaut
VERDE AGRITECH
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68 Verde AgriTech Improving your health and the world’s health 82 Josemaria Resources The latest large scale resource project to be delivered by the Lundin Group
JOESMARIA RESOURCES
98 NTM Gold A unique proposition in the Australian junior gold exploration sector
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EVENTS 112 Events Our pick of the top mining, oil & gas and renewable energy events happening around the world in the months to come
NTM GOLD
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NEWS
DELOITTE TIPS BIG MINERS TO ‘WEATHER THE STORM’ OF COVID-19 Deloitte has said it expects mining majors to be in a much better financial shape once the COVID-19 pandemic subsides compared to the aftermath of the 2008 global financial crisis (GFC) and the last commodity market downturn in 2015. The global accountancy giant also predicted that the coronavirus-induced global economic downturn would be ‘as severe, if not more,’ than the GFC. “Most companies should be able to weather the storm without having to tap shareholders for cash or fire sale assets,” said Deloitte. “The impact of coronavirus on supply and production operations may partially offset downward pressure on commodity prices.”
However, the company noted a fall in industrial metal prices since March, including copper, nickel and zinc. Copper has dropped by 20%, while zinc and nickel have fallen by 13% and 14% respectively. Deloitte also highlighted the increased risk of supply shortages across key commodities due to the number of operations announcing production cutbacks. “Efforts to contain the virus by restricting the flow of labour and transport will inevitably have a production impact,” the firm stated. 6
NEWS
Mining, oil & gas and renewable energy news from around the world US OIL PRICE TURNS NEGATIVE IN HISTORIC COLLAPSE US crude oil for May delivery turned negative for the first time since trading records began, with oil producers forced to pay buyers to take the product over fears that storage facilities reach full capacity. The COVID-19 pandemic has destroyed oil demand in the first four months of 2020, while the collapse of a long-standing OPEC supply cuts deal exacerbated the situation after Saudi Arabia and Russia flooded the market with excess oil in a bitter dispute. Not even a patched-up OPEC+ agreement to cut supply by a record amount could stop
the oil market reaching a new nadir during trading on April 20, when US benchmark West Texas Intermediate (WTI) fell as low as minus US$37.63 a barrel. US crude’s dive into negative territory was in part driven by the expiration of May futures contracts, which meant traders moved to offload those holdings to avoid having to take delivery of the oil and incur storage costs. WTI for June delivery is still trading above $20 a barrel. OWNER OF THE WORLD’S LARGEST
UNCOMMITTED HARD LITHIUM “$30 is already quite bad, butROCK once you get to RESERVE $20 or even $10, it’s a complete nightmare,” said Artem Abramov, head of shale research at Rystad Energy.
7
NEWS
BANK OF AMERICA PREDICTS GOLD PRICE TO REACH $,3000 PER OUNCE An imminent global economic downturn brought on by the COVID-19 pandemic will push the value of gold to US$3,000 per ounce by October 2021, Bank of America has projected. The firm’s analysts lifted their 18-month price target for the precious metal from $2,000 per ounce to an unprecedented $3,000 per ounce – what would be the highest ever price for gold in trading history. Gold reached its highest level in eight years in April, trading at highs of over $1,700 per ounce. However, Bank of America reckons potent easing policies around the world will send the safe haven asset 50% higher than its all-time record.
“As economic output contracts sharply, fiscal outlays surge, and central bank balance sheets double, fiat currencies could come under pressure,” analysts including Michael Widmer and Francisco Blanch said in the report. “Investors will aim for gold.” The average gold price in 2020 will reach $1,695 per ounce before the onset of a worldwide recession and soaring demand for gold pushes the average price to $2,063 the following year. However, Bank of America noted that gold rallies could be halted if some calm returns to financial markets and the US dollar strengthens. Weaker jewellery demand in India and China could also drag on the gold price.
8
NEWS
Mining, oil & gas and renewable energy news from around the world GLOBAL ENERGY SYSTEMS WILL RELY ON RENEWABLES AMID FOSSIL FUEL COLLAPSE Renewable electricity will prop up global energy systems more than ever before this year following the COVID-19-induced collapse in demand for fossil fuels including oil, gas and coal. This assertion was made by the International Energy Agency (IEA) in its latest report on the global energy market. IEA projected multi-decade lows for global consumption of oil, gas and coal while countries around the world remain in lockdown to contain the spread of the virus, but added that renewable energy will continue to grow during the most severe plunge in energy demand since the second world war.
The combination of a steady rise in renewable energy and the collapse in demand for fossil fuels in 2020 means clean electricity will help erase a decade’s growth of global carbon emissions. Fatih Birol, the IEA’s executive director, said: “The plunge in demand for nearly all major fuels is staggering, especially for coal, oil and gas. Only renewables are holding up during the previously unheard of slump in electricity use.” Renewable energy is expected to grow by 5% this year, to comprise almost 30% of the world’s OWNER OF THE WORLD’S LARGEST reduced demand for electricity. Birol added UNCOMMITTED HARD ROCK LITHIUM that the growth ofRESERVE renewables could spur fossil fuel companies towards their goals to generate more clean energy.
9
NEWS
In Depth
London-listed Sirius Minerals first proposed the development of a deep potash and polyhalite mine in North Yorkshire back in 2011, after geological studies confirmed the area contained the world’s largest deposit of polyhalite – a naturally occurring fertiliser used in agriculture. By 2015, planning permission had been granted for the Woodsmith project and the wheels were set in motion for the largest mining project seen in the UK for decades and one that would deliver over 1,000 jobs and generate over £100 billion for the UK economy over a period of 50 years. Over the next four years, the project was seemingly making steady progress towards first production in late 2021, but in August last year it emerged that Sirius was struggling to raise debt financing for the construction of the project. By the end of 2019 it was clear that the project was in grave danger of being shelved, which would come as a critical blow to Sirius and its legion of local retail investors who owned up to half of the company’s shares. Global mining giant Anglo American handed the project a lifeline with a takeover bid in early January, however it was met with fierce opposition by Sirius’ local investor base, who bought the shares at much higher prices when horizons were brighter for the project.
10
After an acrimonious shareholder vote in March, Anglo’s takeover was narrowly approved and the future of the world’s largest polyhalite mine was secured. Displayed here is a seven-month timeline outlining how the saga played out.
T H E W O O D S M I T H P O LY H A L I T E MINE, YORKSHIRE, THE UK
Sirius relying on junk bond to complete polyhalite mine construction Sirius needed to raise £400 million from the debt market to unlock a £2 billion revolving credit facility being provided by JPMorgan to complete development of the Woodsmith mine. It issued a bond rated within speculative or junk territory.
Sirius looks to attract £490 million investor with new pl for project Sirius announced it was in ‘active’ discussions with potential partners and investors in order to overcom technical challenges that ha arisen within the project. The company also planned to rai £2 billion from banks and infrastructure funds to finish construction of the mine.
AUGUST 5, 2019
NOVEMBER 11, 2019
AUGUST 2019
SEPTEMBER 18, 2019
JANUARY 8
Sirius cancels £400 million bond sale The future of the project was thrown into doubt after managing director Chris Fraser cites poor market conditions – including Brexit and a lack of government support – for the cancellation. Sirius’ share price collapsed in half on reaction of the news.
Anglo Ame takeover ta Mining gian confirmed i discussions making a £ offer. The 5. bid came in share price
lan
me ad e ise
h
NEWS
A timeline of Anglo American’s eventual takeover of Sirius Minerals “ T O D AY M A R K S A N E W C H A P T E R FOR THE WOODSMITH PROJECT, THE EMPLOYEES OF THE BUSINESS AND EVERYONE WHO HAS AN INTEREST IN ITS FUTURE,” ANGLO AMERICAN CHIEF EXECUTIVE MARK C U T I FA N I – M A R C H 1 7 , 2 0 2 0
Last ditch plea from shareholder group against Anglo deal A shareholder action group issued an open letter to the Sirius board urging against the Anglo deal, which would see thousands of local retail investors - who purchased shares at considerably higher prices – lose money.
Anglo’s acquisition of Sirius is confirmed Sirius de-listed from the London Stock Exchange following the final completion of the legal process in Anglo’s takeover, with payment to be made by Anglo no later than March 31. The deal secures the future of the Woodsmith mine.
MARCH 2, 2020
MARCH 17, 2020
MARCH 2020
8, 2020
MARCH 4, 2020
erican in advanced alks with Sirius nt Anglo American it was in advanced s with Sirius after £386 million takeover .5p per share cash n at 34% above Sirius’ at the time.
Sirius shareholder’s vote in favour of Anglo deal Anglo’s £405 million takeover bid was backed by 80% of Sirius’ shareholders at a key meeting, paving the way for the completion of the deal. The offer needed 75% approval from the 1,300 investors involved in the vote to go ahead.
11
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Green shoots: What lies ah the global potash sector in
Leading global potash expert Steve Halabura casts his eyes over prospect 14
COMMENT | STEVE HALABURA (HALABURA POTASH CONSULTIN G)
head for n 2020
ts in the market this year 15
For those of you who are not familiar with the fertiliser trade, ‘potash’ is a generic term describing various forms of potassium-bearing fertiliser compounds. The most common of these compounds is ‘Muriate of Potash’ or ‘MOP’ which is potassium chloride (KCl) in a high-grade form. MOP provides the potassium macro-nutrient in the formulation referred to as ‘N-P-K’, or NitrogenPhosphorus-Potassium. Other potassium-bearing fertiliser components include ‘Sulfate-ofPotash’ or ‘SOP’ and potassium nitrate.
oil, geopolitics does not play a major role in pricing; however, soil conditions and weather do. Also unlike oil, potash is a naturally occurring mineral which cannot be synthesised and that cannot be replaced by other elements, so in my mind its future demand is assured. I believe there are three key factors when prognosticating future potash demand, and thus future prices. First, it is important to understand farmers planting intentions for the upcoming crop year. This will be a function of global market demand for
weather patterns for the year.
agricultural products, which
Will the planting season be
To understand potash markets,
range from cereal grains,
warm and dry, thus allowing
demand and pricing, it’s
legumes, vegetables, and palm
farmers to apply fertiliser?
interesting to compare potash
oil. Farmers are capitalists,
Has rainy weather caused a
to oil. Like oil, potash is a
so they will plant whatever
depletion of soil nutrients? If
global commodity with a
crop will provide the highest
weather causes crop failures,
major global production and
economic return, and if
this will negatively impact
supply chain whereby primary
they can see a good return,
farmers incomes, which may
production from a limited
they will maximise fertiliser
make them more hesitant to
number of sites is distributed
applications so as maximise
invest in more fertiliser for the
to end-users throughout the
crop yield and thus profits.
upcoming year.
world, in the process passing through a variety of processors, Second, one must obtain marketers, and brokers. Unlike
some sense of longer-term
Third, the supply chain must be considered. There is no such thing as a ‘potash futures’
16
COMMENT | STEVE HALABURA (HALABURA POTASH CONSULTIN G)
When I am asked for advice as to how one can understand this trade, I like to offer the following advice: Go to a mine, then physically follow the rail car or truck to the distribution point, then continue to follow the shipment to the farmer’s gate, all the while keeping alert for the weather, the condition of the crops, any stockpiles of fertiliser material and the general economic well-being of the recipient farmer. Once you understand the process of moving the physical product, you will be in a better position market, so anyone investing
to understand markets and
in potash must realise it is a
pricing.
physical commodity that must
distribution point, from where
So, what are my thoughts concerning the potash business in 2020?
it must then be transported to
To begin with, the potash
distribution sites. Supply chain
business during the first
havoc can result if labour
quarter of 2020 showed
strikes occur, if floods prevent
surprising resilience in the
barges from plying river
face of truly unprecedented
systems, or if intermediary
global economic factors. These
brokers and distributors have
challenges include a decrease
be picked up from a mine or production point, then transported by truck, railcar, barge or ship to an end-user
built up inventories.
Steve Halabura Steve Halabura is a global expert in the geology of potash. He has been involved in over 100 potash and salt projects since 1989. His areas of expertise include exploration, mineral resource estimation, stratigraphic modeling and mining integrity. Steve has a bachelors and masters degree in Geology from the University of Saskatchewan and is registered as a Professional Geologist with the Association of Professional Engineers and Geoscientists of Saskatchewan
j
17
in seaborne shipping, drastic
out of the market in 2019,
in 2019 as slides in price
supply chain disruption, the
citing sufficient availability of
reflected several fundamental
inability of farmers to access
stockpiles, however returned
factors that started in Q3
supplies due to varying state
to sign a contract with BPC for
and Q4 2018. A wet 2018 fall
lockdowns and shutdowns
delivery of potash at $220 per
(autumn) delayed harvest in
of compound fertiliser
tonne. Several market analysts
the US Midwest, which caused
production operations. Despite
suggest that this price is a floor
a set back in fall fertiliser
these challenges, potash
resulting from depletion of the
applications. Continuation
spot prices were somewhat
Chinese stockpile, and that the
of wet conditions during
stronger during Q1 up to
contract should bring stability
the 2019 planting season
US$245 per metric tonne.
to pricing for the remainder of
contributed to lower fertiliser
the year.
applications and thus lower
Of great interest to the
consortium of Chinese buyers
What is supporting this apparent price stability?
in late April. China remained
First, the potash environment
market was the signing of a deal between the Belarusian potash marketer BPC and a
proved to be challenging 18
demand. Wet conditions in Q1 and Q2 2019 flooded the US Midwest river transportation system, so physical product could not be moved down to
COMMENT | STEVE HALABURA (HALABURA POTASH CONSULTIN G)
users and distributers. This
Raising the $3-4 billion of
which is well above the long-
resulted in backing up product
capital required to build
term average of 2.8%. I expect
at potash production sites in
large (3Mtpa) mining and
potash prices to remain firm
Saskatchewan.
production facilities is always a in 2020 as pent-up demand challenge, however in 2019 the
caused by inventory drawdown
Decreased demand led to an
risk associated with financing
should adequately absorb
oversupply situation among
large projects increased
existing and possibly new
producers which was reflected
due to a number of global
supplies.
by Mosaic shutting down
uncertainties, including the
‘for an indefinite period’ its
trade war between the US and
The recent global pandemic
Colonsay SK mine and Nutrien
China and the UK’s continuing
crisis has drawn attention to
suspending production at its
discourse concerning its exit
food security, which led to
Allan, Lanigan and Vanscoy
from the EU. This was clearly
fertiliser production being
mines. The situation was
illustrated by Sirius Minerals’
deemed an essential service
exacerbated by China’s
failed $500 million bond issue
both in the US and Canada.
announcement in September
to be used for financing its
This is especially true when
2019 that it was suspending
Woodsmith polyhalite sulfate
I consider causes of food
potash imports. In the face
of potash (SOP) mine.
instability including the
of these uncertainties,
decrease in arable land, the
buyers preferred to draw
Nevertheless, world demand
decrease in available cultivated
down existing inventories
remained strong as reported
acreage due to changes
rather than face the risk of
by the Food and Agriculture
brought about by climate
overpayment in the weaker
Organization of the United
shifts and declines in soil
demand environment.
Nations (FAO), that forecasted
quality caused by depletion of
world demand in 2019 for
micronutrients.
Market and price weakness
potash - in all its forms - to
caused proponents of new
reach 68 million tonnes (Mt).
One trend I foresee is a change
potash projects to slow their
This forecast remains similar
in the supply chain paradigm.
efforts in 2019, in part due
in 2020, whereby forecasts
Up to this point, ‘Big Mining’,
to the risk of exacerbating a
range from 66-68Mt. Potash
i.e. the construction of large
possible oversupply situation
demand has been strong with
production facilities that
by bringing new production
a 4% annual consumption
produce millions of tonnes
capacity online.
growth over the last five years
of potash, has favoured a
19
global supply chain model whereby large tonnages are moved to large distribution centres, and then distributed by equally large networks of sellers. While this is the most efficient method of getting a product into the hands of a user, it makes the supply chain vulnerable to interruptions. This has led to a small number of potash players considering an alternative system of production whereby smaller, capital and energy-efficient mines produce a bespoke product that is sold directly to users, thereby bypassing the traditional network of distributors and middlemen, what I call the ‘Small Mine’ model. The key driver for the Small Mine approach is innovative mining technology, whereby wells drilled into the potash beds inject brines that selectively dissolve and bring the potash to surface as a solution from which potash is crystallised and processed. Tied to this concept is the
20
COMMENT | STEVE HALABURA (HALABURA POTASH CONSULTIN G)
marketing strategy of allowing
modular and more flexible, as
consumers to obtain a direct
the smaller lots can be shipped
supply of potash in smaller
by truck, by containers and by
scale lots.
barges or rail cars for larger shipments. Modularity means
In this sense, ‘selective
production can be expanded
solution mining’ is not simply
by adding more production
a production technology but
units, as determined by market
a complete business model
demand.
that uses smaller, modular mine and production facilities
In closing, my forecast is that
to make a MOP product that
the large-scale fundamentals
is sold to a specific end-user,
for potash remain unchanged
who may or may not be a
and 2020 will be a better
co-owner of the facility. This
year than 2019, especially
model is characterised by
with China again in the
it having environmentally
marketplace. However, I
more sustainable production
temper this optimism with the
capability and an associated
old-time farmer’s wisdom that
simplified supply chain. Since
declares ‘the weather makes
the mines are smaller and
fools of us all’. Nevertheless,
generate little to no excess salt
the UN recently said that it
waste, the capital expenditure
expects eight billion people
required to build such mines
to be on the planet by 2050.
is much less than for larger
Population growth will force
conventional mines.
the expansion of agricultural production, and for this to
The advantage of the Small
happen, more fertiliser will be
Mine model is not only
required. In my mind, there
lower capital expenditure
is nothing more fundamental
to commence production,
than the need for people to
but also a production and
eat, other than clean water
distribution model that is
and air to breathe, but that is another story…
21
Mining and COVID-19: A B
How are the mining industry’s biggest brands going to be impacted by th 22
COMMENT | SAVIO D’SOUZA (BRAND FINANCE)
Brand Perspective
he COVID-19 crisis? By Savio D’Souza (Brand Finance) 23
The mining industry is no stranger to booms and busts; it has closely mirrored global economic conditions. Generally, this has been driven by volatile demand and the low responsiveness of supply. Figure 1 shows the commodity cycles over the past 200 years, with the peaks coinciding with major wars or industrialisations of large economies.
do the following: • Research and analyse the current drivers of corporate reputation by the key stakeholders • Plan for the future and create scenarios for the drivers of reputation and stakeholders • Understand the value impacts of the different scenarios • Create a plan for
number are closing down mines, as well as quarantining
execution to inform any
parts of their operations to
The current COVID-19 crisis has
brand repositioning
protect employees. Due to
an extra layer of uncertainty
and its impact on
the lack of a concerted global
given its global nature. Brand
communications, and
response to the pandemic,
Finance expects the following
brand building activities
companies are having to
factors to have varying degrees
implement different measures
of impacts on the industry:
Operations and Supply Chain
• Operations and Supply
Supply chain disruption has
For example, most of BHP’s
been a cause of concern as
operations are still operational
• Global demand
workers have to practice social
save a few in LATAM.
• GDP
distancing, limitation on fly
Glencore, Anglo American,
in fly out workers has taken
Antofagasta, Codelco and Teck
Finally, we will assess how
place, and goods in transit
Resources have temporarily
companies can prepare their
might be staying in ports for
halted or slowed some
brand for the future. At Brand
longer periods.
operations. Recently, Freeport-
chain
in different countries.
McMoRan, the world’s
Finance, we believe crises
24
FIGURE 1
present an opportunity for
Most companies have
largest publicly listed copper
brands to plan for recovery. In
suspended non-essential
producer, had to suspend
our experience brands should
operations and a growing
operations indefinitely.
COMMENT | SAVIO D’SOUZA (BRAND FINANCE)
the lockdown restrictions in China are being lifted and factories are returning to full utilisation, there are doubts as to how much domestic consumption can make up for lost international demand for goods as the rest of the world reels from varying levels of economic damage from lockdown.
Savio D’Souza
high-profile examples of
GDP
automation in the industry,
The IMF is expecting global
this is not the case for the
GDP to fall by the largest
vast majority. It remains to
percentage since The Great
be seen whether COVID-19
Depression.
Savio is a director at Brand Finance. He advises B2B clients within the natural resources, industrial and technology sectors on how best to leverage the brand for commercial purposes such as corporate reputation management, licencing and brand management. Savio also has experience in assignments for technical purposes including, tax and transfer pricing, legal disputes and business combinations.
While there have been some
will accelerate investments to automate core operations, with What will probably be a long-term benefit of building
remembered as ‘The Great
resilience in operations and
Lockdown’ is predicted to
improving productivity.
have an impact of as much as
Global demand and brand implications
-6% for advanced economies (source IMF).
material. The growth driver for
What do past recessions tell us about the speed of recovery from this crisis?
mining in the last two decades
The most recent recession was
had been slowing from China
the financial crash of 2007/08
even before the crisis. While
and it took mining companies
By far the most significant impact on the industry will be declining demand for raw
ab j
25
FIGURE 2
around three years to recover
for over four years, iron ore
with a larger exposure to
the losses from that period.
prices are recovering due to
iron ore are expected to fare
Given the greater severity
an expected uptick in demand
well, as are companies with
of the current crisis, Brand
from Chinese mills (in spite
more balanced portfolios.
Finance would expect the
of record inventory levels)
Companies that specialise in
mining industry to be under
in Q2 2020. Unsurprisingly,
one or two metals are at risk.
pressure for at least four to
in precious metals, gold is
five years depending on the
up while silver and platinum
2. Financial strength of
severity and length of the
are decreasing. Companies
companies - The Altman score
lockdown period.
Which brands are likely to be affected the most? 1. Product Mix - While most metals such as aluminium, copper, zinc, lead and nickel have seen the lowest prices
26
FIGURE 3
COMMENT | SAVIO D’SOUZA (BRAND FINANCE)
FIGURE 4: THE ALTMAN SCORE SPECTRUM
of the top 25 most valuable
Unsurprisingly companies
mining brands according to
with a large debt load,
Brand Finance. The Altman
and suffering from poor
score indicates the probability
profitability, are at the highest
of a company filing for
risk of bankruptcy, for
bankruptcy within the next
example Thyssenkrupp.
two years. The higher the value, the lower the probability Brand Finance also ascribes of bankruptcy. A score below
a Brand Strength Index (BSI)
1.8 indicates bankruptcy is
score to brands (out of 100) in
imminent. A score above
addition to putting a financial
3 indicates bankruptcy is
value to a brand.
unlikely. Altman’s Z-Score is only available on publicly
Our research indicates that
listed companies with all the
companies with a lower risk of
requisite fundamentals for the
bankruptcy have a BSI score
model1.
that is 9% higher compared to
“It remains to be seen whether COVID-19 will accelerate investments to automate core operations, with a longterm benefit of building resilience in operations and improving productivity” Savio D’Souza, director Brand Finance
27
the highest risk brands, while
compared to regional or
medium risk brands had a BSI
local players, given the need
score 7% higher.
to maintain their licence to operate in different areas of
This points to the fact that a
the world. However, there is
well-managed brand can act
little differentiation amongst
to de-risk the business and
brands on the key attributes
contribute to greater business
that drive reputation. This
value.
crisis presents an opportunity
What are the opportunities for brands from this crisis? Apart from companies taking the right commercial
for boards and management to take stock of: • The reputation of the corporate brand with different stakeholders • The drivers of reputation
and operational steps to
by each stakeholder and
protect their businesses – for
their relative importance
example conserving cash and
• How reputation varies by
protecting worker and supply
geography
chains - there is also a need to understand the role that their
Managements need to map
brand currently plays in the
out and plan for the likely
business, how it might change
scenarios coming out of the
due to the crisis and how it can
crisis and assess the long-term
be leveraged further.
business impact. This could mean that brands might need
Brand Finance’s research
to be repositioned in line with
indicates that mining is one
any operational changes being
of the least reputable sectors.
made. For example:
Large multinational mining
28
companies unsurprisingly
1. Some companies will
have better reputations,
come out of the crisis with a
COMMENT | SAVIO D’SOUZA (BRAND FINANCE)
much higher debt burden or
In summary, Brand Finance
lower reserves leaving them
believes that brands will need
vulnerable to takeovers from
to consider how they might
stronger players.
need to reposition themselves during the recession with an
2. Increasing protectionism
eye on long-term recovery.
around the world and how
The best brands research
brands can help minimise the
their stakeholders and track
geopolitical risk. For example,
changes to brand and business
will the Chinese Government
drivers to inform how the
step in to create a mining
brand needs to be positioned,
industry champion that can
which in turn informs future
control and influence the
CSR, communication and
entire supply chain?
brand building activities.
3. There is an opportunity for strong brands to move into adjacent categories or highly valuable categories where the return is higher and less cyclical. For example, mining companies moving
1. Altman’s Z-Score = 1.2 * (Working Capital / Tangible Assets) + 1.4 * (Retained Earnings / Tangible Assets) + 3.3 * (EBIT / Tangible Assets) + 0.6 * (Market Value of Equity / Total Liabilities) + (Sales / Tangible Assets)
up the value chain into high value engineering and manufacturing to get closer to the end consumer. 4. How to attract the mining workforce of the future to keep up with innovation such as the increasing use of big data and AI.
29
Relevance beyond the cris
Energy analyst Carole Nakhle explains the events that are defining the m 30
COMMENT | CAROLE NAKHLE (GEOPOLITI CAL INTELLIGEN CE SERVICES)
sis: The oil-market crunch
most volatile period in the history of the oil industry 31
This will be a watershed year in the history of oil markets. Since 2020 began, several unprecedented developments have taken place, from an unparalleled decline in global demand, to negative prices for the first time, to record production cuts aiming to salvage revenues and the closest cooperation among oil producers the industry has ever seen. Governments aim “to use all available policy tools to…maintain market stability,” the G20 said in its April Energy Ministers Meeting Statement.
because of oversupply and infrastructure bottlenecks. Also, in the early days of the American oil industry, oversupply caused some oil to be wasted. The waste led the Railroad Commission of Texas to introduce production quotas long before OPEC came into existence in 1960. Today, oil market drivers are
resulted in a spectrum of
much bigger than the sector
forecasts – which in turn lead
itself. There is no guarantee
to several scenarios for oil
that any government action
markets.
can deliver market stability. Powerful outside forces will
If history is any guide, it may
likely dictate the market’s
take a long time for oil prices
shape throughout most of
to regain their pre-pandemic
the year, perhaps even into
levels. That prospect is most
2021. To slow the spread of
alarming for oil-producing
As of late April, the negative
COVID-19, countries around
countries, particularly those
price phenomenon has
the world imposed strict
where economic
occurred only in the United
lockdowns, which have hit
diversification has made little
States and affects one crude
the global economy hard
headway and governments
oil, West Texas Intermediate
and subsequently reduced
are most dependent on income
(WTI). Other important crude
oil demand. How the world
from the energy sector.
‘Crisis like no other’
markers, such as Brent, remain will recover from a ‘crisis
32
in positive price territory.
like no other’ to quote the
The rock-bottom oil prices,
Records show that natural
International Monetary Fund
however, are not uniformly
gas prices turned negative
(IMF), will depend on a wide
disastrous. On one hand, they
on several occasions over
range of uncertain factors.
may not boost oil demand
the last few years in the US
This unpredictability has
during the lockdown, which
COMMENT | CAROLE NAKHLE (GEOPOLITI CAL INTELLIGEN CE SERVICES)
A few weeks later, such fears evaporated as the developing pandemic began to capture the attention of the global community. Until the end of February and early March, however, the prevailing perception was that coronavirus, like SARS before it, would largely remain
Carole Nakhle
confined to Asia. “Within a
Dr Carole Nakhle is the founder and CEO of Advisory Firm Crystol Energy. She is a recognised international authority on global energy issues, in particular in the fields of oil and gas markets, policy, governance, regulation, fiscal regimes, and contractual arrangements. Dr Nakhle has worked with oil and gas companies (Eni and Statoil) at the executive level, governments and policy makers (including Special Parliamentary Advisor in the UK), international organisations, academic institutions, and specialised think tanks on a global scale.
cripples the transport sector,
couple days [it] is going to be
a leading user of oil. On the
down close to zero,” President
other hand, low oil prices
Trump stated on February
will support an eventual
26, referring to the rate of
economic recovery. Depressed
infection in the US.
oil revenues also provide a powerful incentive for many
Also in February, BP’s chief
governments to start pursuing
financial officer estimated
long-delayed economic
that oil demand would be only
reforms.
300,000 to 500,000 barrels per
Miscalculations
day (bpd) weaker this year on the account of the virus.
At the start of 2020, oil market
Similarly, in its February Oil
discussions were focused on
Market Report, the
one central issue: geopolitical
International Energy Agency
risks. Following the United
(IEA) expected the demand
States’ January 3 attack that
to fall by 435,000 bpd year-
killed Iranian General Qassem
on-year in the first quarter
Soleimani, experts rushed
of 2020. The agency also cut
to analyse its impact on oil
its 2020 growth forecast by
markets, with many fearing
365,000 bpd to 825,000 bpd.
an Iranian retaliation would cause a spike in prices.
Dr Nakhle lectures, among others, at the Blavatnik School of Government at Oxford University, the University of Surrey and the European University Institute, and is a sought-after commentator on energy and geopolitics in the press. She also founded the not-for-profit organisation ‘Access for Women in Energy’ in 2007, with the aim of promoting the development of women in the energy sector.
ab j
33
ALL OIL-PRODUCING COUNTRIES ARE HURTING NOW, BUT AN EXTENDED CRISIS MAY PROVE PARTICULARLY DANGEROUS FOR THE STATES WITH THE LEAST-DIVERSIFIED, INFLEXIBLE ECONOMIES THAT ARE MOST DEPENDENT ON INCOME FROM THE ENERGY SECTOR (SOURCE: MACPIXXEL FOR GIS).
Likewise, in early March,
Short-lived war
“from April 1, no one —
OPEC still expected a demand
Just before the substantially
neither OPEC countries
increase, albeit smaller than
revised data began surfacing,
nor OPEC+ countries — are
its previous forecasts. The
highlighting the overlooked
obliged to lower production.”
organisation projected oil
severity of the crisis, OPEC+ (a
Saudi Arabia announced that
demand growth of 480,000
group of 23 oil-producing
it would put an additional
bpd in 2020, down from 1.1
countries that includes Russia
2.6 mbpd above the March
million barrels per day (mbpd)
and Mexico) made a mistake.
ceiling into the market (with
in December 2019. As a result,
total production reaching 12.3
on March 5, OPEC reconvened
For the first time since its
mbpd in April) and drastically
in Vienna and announced
formation in December 2016,
cut its export prices. The UAE
additional production cuts of
OPEC+ failed to reach an
also said it would increase
1.5 mbpd (OPEC 1 mbpd and
agreement. Russia, which has
output by around 1 to 4 mbpd.
non-OPEC 500,000 bpd) until
led the non-OPEC group of
the end of 2020. A short while
producers within the alliance,
later, all these figures appeared refused to play along. Russian
a price ‘war’ - variously
minuscule.
described as launched by
Energy Minister Alexander Novak told reporters that
34
The media labelled the move
COMMENT | CAROLE NAKHLE (GEOPOLITI CAL INTELLIGEN CE SERVICES)
the Saudi kingdom against
Chuck Grassley, stated: “It’s
Russia, or against the US shale
long past time to put an
industry, or even – in one of
end to illegal price fixing by
many conspiracy theories –
OPEC. The oil cartel and its
by the kingdom and Russia
member countries need to
jointly against the US. This
know that we are committed to
‘war’ was, however, short-
stopping their anti-competitive
lived. In hindsight, it looks like
behaviour.”
“Low oil prices will support an eventual economic recovery” Carole Nakhle
both Russia and Saudi Arabia surprised each other and
These days, however, the
would not come from formal
overlooked the consequences
US - the world’s largest oil
commitments, but declines
of their actions.
consumer - is also its biggest
caused by lower prices.
producer thanks to the shale Oil prices were in freefall,
industry – a sector that the
The order of magnitude of
crashing by more than 50%
current administration is
the agreed cutbacks and the
between March 1 and March
keen on protecting, especially
collusion from countries
18. Brent oil reached a low of
now, during the presidential
that normally follow market
nearly $15 per barrel by the
elections campaign.
principles, is unprecedented.
end of the month.
It highlights the mammoth On April 2, President Donald
challenge faced by the oil
Trump referred to a potential
industry. The big question is,
In an unprecedented move,
cut by OPEC+ of 10 mbpd. One
however, whether such cuts
the US called on Saudi Arabia
week later, OPEC+ announced
are enough to salvage it. The
and Russia to put their
an output decrease plan of 9.7
answer lies in demand.
differences aside and for
mbpd over two years, effective
OPEC+ to reconvene. This
from May 2020. Furthermore,
Demand story
would have been unheard
OPEC+ cuts would be
Because of the COVID-19
of in the past. The US was
accompanied by decreasing
lockdowns, economic growth
never shy expressing its
output (of somewhere between
has been hit hard. Despite
resentment of OPEC. In 2018,
3.7 to 5 mbpd) from other
a lack of consensus, all
for example, the champion
large producers, mainly the
economic growth forecasts
of the No Oil Producing and
US, Canada and Brazil. That
continue to paint an
Exporting Cartels (NOPEC)
latter reduction, however,
increasingly dire picture. In its
The U-turn
bill, Republican Senator
35
36
COMMENT | CAROLE NAKHLE (GEOPOLITI CAL INTELLIGEN CE SERVICES)
April (2020) World Economic
the IEA. A few days after
jointly with OPEC+ and other
Outlook, the IMF projects
OPEC+ announced its cuts in
producers if these are deemed
that the global economy
April, the agency predicted
necessary.” This is, however,
will shrink by 3% in 2020, a
demand for oil would fall by a
easier said than done. OPEC+
whopping downgrade of 6.3
whopping 9.3 mbpd year-over-
has not acted coherently since
percentage points from the
year in 2020.
its formation and cheating has
January 2020 projection. That
continued throughout.
is a remarkable revision over a
OPEC projects a smaller
very short period.
decline – of 6.8 mbpd – and
If demand falls by less than
the US Energy Information
the production cuts, prices
This downturn makes the
Administration (EIA) puts the
and production may recover.
‘Great Lockdown’ as the IMF
figure still lower, at 5.2 mbpd.
Under such a scenario, US
calls it, the worst recession
Goldman Sachs expects a drop
tight oil, which is the first to
since the Great Depression
by some 4.3 mbpd. Either
leave the market when oil
and far worse than the Global
way, this is easily the biggest
prices decline, will be the
Financial Crisis of 2007/08.
demand shock ever.
first to re-enter the market,
However, the IMF cautions
again giving OPEC+ the same
that such forecasts depend
Hazy outlook
“on the epidemiology of
Under today’s market
last three years. Either way,
the virus, the effectiveness
conditions, supply is merely
oil-producing countries cannot
of containment measures,
chasing demand. If, over
expect a smooth ride. This
and the development of
the next two years, average
applies particularly to those
therapeutics and vaccines, all
declines in oil demand
that rely on oil revenues to
of which are hard to predict.”
exceed production cuts,
keep their economies afloat
commodity prices will come
and need high oil prices to
Economic activity is, by far,
under pressure again. In
balance their budgets.
the most important driver of
a joint statement on April
energy consumption. Just like
17, 2020, Russian Energy
forecasts of economic growth,
Minister Novak and his Saudi
projections for oil demand
counterpart Prince Abdulaziz
are becoming increasingly
bin Salman highlighted
pessimistic, with the direst
their countries’ readiness
scenario to date coming from
“to take further measures
headache it has had over the
This report is part of a GIS series on the consequences of the COVID-19 coronavirus crisis. It looks beyond the short-term impact of the pandemic, instead examining the strategic geopolitical and economic effects that will inevitably be felt further in the future.
37
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GENSO POT
A pioneering vision for the futu 40
MINING | GENSOURCE POTASH
OURCE TASH
ure of the global potash market
41
Gensource Potash is an innovative pre-production company in the potash industry with a plan to operate in a markedly different manner to the incumbents of the global fertiliser market. The TSXV-listed firm’s business model rests on two core ‘pillars’ – the first is to be a small, efficient and environmentally sustainable potash producer and the second is to be vertically integrated from mine to farm. Gensource’s vision is to ‘achieve food security by supplying the world with a key macronutrient at an affordable cost within an open, transparent and sustainable environment’. “We think our vision represents the way potash will be done in the future,” says Gensource’s president and CEO Mike Ferguson. “Our method is clean, efficient and we have the end-user, the farmer, in mind. It’s focused on what the market needs rather than what’s best for the producers of the product.”
42
MINING | GENSOURCE POTASH
Gensource aims to ultimately
K+S subsequently brought the
create a series of small-
large-scale solution potash
scale and environmentally
mine into production in May
sustainable potash production
2017 and the US$4.5 billion
facilities referred to as
project (later renamed the
‘modules’, with the Tugaske
Bethune mine) is expected to
Potash Project in Saskatchewan,
produce 2.86 million tonnes
Canada being the first module
(Mt) of potash per year by 2023
to be developed by the
and that could still be ramped
company.
up further to 4 Mt per year.
Skin in the potash game
“It was a conventional solution
The Gensource team has
large potash project that
worked in potash production
required a lot of money and
for several decades and
time to develop and construct.
developed a collective
The global potash industry has
insight into the workings
been, at times, a true cartel,
of the industry, focusing
but nowadays is more properly
particularly on market-focused
described as an oligopoly.
mining method and a typically
improvements.
“For this reason, it’s been very In fact, the core team at
difficult for outside players to
Gensource is the same one
enter the fray, regardless of
that led a company called
whether they can afford to pay
Potash One from 2007 to
the billions of dollars required
2011. This Canadian firm
to develop the large tonnage
developed the Legacy potash
projects.
project in Saskatchewan until it was acquired by German
“While we were still
fertiliser manufacturer K+S
developing the Legacy project
Aktiengesellschaft.
at Potash One, we started to develop these ideas of small-
43
scale, efficient production. After selling the project, we reconvened within Gensource to implement those ideas around entering on a small scale with environmentally friendly mining practices. That’s the story of how we formed Gensource.� While new participants continue to find it difficult to break into the established oligopoly of potash producers, Gensource has also identified other weaknesses in the potash market, including inefficient and environmentally damaging production methods, and a lack of integration among supply chains. Gensource’s pillared approach aims to address these issues. First, the production of small modules will allow the company to start small and ramp up into additional modules as the market develops. Second, its production method is remarkably more efficient and environmentally friendly
44
MINING | GENSOURCE POTASH
than conventional potash mines. And third, a vertically integrated mine-to-farm structure will directly unite the potash supply chain all the way to end user.
Right sizing production Gensource’s first module from the Tugaske project will produce 250,000 tonnes per year of potash – a significantly smaller operation when compared with the Legacy project developed by the team in their former roles. The Tugaske project will use a selective solution mining method along with industry-standard cooling crystallisation processing, both of which are driving the project’s unprecedented levels of efficiency and environmental sustainability. In contrast to traditional solution mining, which uses fresh water to dissolve potash and salt underground,
45
46
MINING | GENSOURCE POTASH
selective solution mining uses
product become insignificant
need for surface brine ponds,
brine to only dissolve potash
and subsequently, it ends up in
for either tailings or cooling.
from underground caverns.
large tailings piles next to the
Selective solution mining also
The result is a significantly
operation.
uses about a quarter of the
more efficient extraction,
water per tonne of product
lower capex and opex, no salt
“These huge piles of salt
compared to normal solution
tailings and no brine ponds.
then need to be encircled
mining activity.
with control dykes or ponds, A typical potash operation
which represents a significant
“Overall selective solution
produces almost two tonnes of
environmental issue because
mining lets us be small and
excess salt for each tonne of
over time ponds leak, and you
it puts us at the forefront of
product produced, according
have brine migration down
the whole industry from an
to Ferguson. This is such a
to groundwater sources. But
environmental perspective.�
large volume that the minor
with our method, we leave
secondary uses of the by-
no salt tailings and have no
47
Full environmental approval
At the local community level,
In fact, having demonstrated
its smaller scale compared
the Tugaske’s negligible
to the 10 existing potash
environmental impact to
operations in Saskatchewan.
the local regulator, the
All of these mines are much
TSXV:GSP
Saskatchewan Ministry of
larger, often employing more
MARKET CAPITALISATION
the Environment, the project
than 2,000 construction
was granted full government
workers over a period of up to
approval without the need
five years and hundreds more
for Gensource to produce
long term at the project site
an Environmental Impact
during operations.
G E NS O UR C E POTAS H AT A G L A N C E
STOCK TICKER
US$25.5 million (as of April 22, 2020)
abj
Assessment (EIA) – an unprecedented feat in the global potash sector.
48
the Tugaske project has also been warmly received due to
MINING | GENSOURCE POTASH
“The local communities in
period of less than two years,
Saskatchewan are made up
with only 42 people employed
A direct link with the market
of small towns that can have
permanently at the site.
Gensource’s most recent
as few as 50 people in them.
project milestone was
If you show up with 2,500
“Our size and the
the capture of German
construction workers for five
environmentally sustainable
conglomerate HELM AG as
years and 500 more people
aspect of our project have
offtake partner for 100% of
working there permanently,
been enthusiastically
the production from Tugaske.
you can imagine it almost
embraced by local towns
Following the announcement
obliterates the community.”
and local governments as
in January, HELM is also
something that really fits in
expected to become an equity
However, in the case of
to the community, instead
partner in the project.
Gensource’s Tugaske project
of dominating it,” Ferguson
there will be only 200
proudly asserts.
construction workers over a
“They plan to be a future owner of their own supply
49
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MINING | GENSOURCE POTASH
chain, which is a key business
begin as early as Q2 this year.
tenet to Gensource – to create
The company estimates a two-
that streamlined supply chain
year construction period, with
in the potash world. We are
plant start up and first potash
working with HELM and one
production slated for mid-
other financial partner and we
2022.
are in the middle of the debt
“We think our vision represents the way potash will be done in the future. Our method is clean, efficient and we have the market in mind” Mike Ferguson, Gensource Potash president and CEO
The lead bank that Gensource
The start of something bigger
has mandated for the senior
The Tugaske project resembles
can grow to suit the market.
debt financing is KfW IPEX-
just the tip of the iceberg for
It allows us to grow in small
Bank out of Germany – a world
Gensource and its radical plans increments to meet the
class lender according to the
for the global potash market.
requirements of the market,
company. Ferguson reveals
“The bigger business plan is
rather than what happens
that Gensource expects to
all about becoming a new and
now with large multi-billion
announce project financing
independent producer in the
dollar investments that bring
milestones by late second
potash industry and doing so
multi-million tonnages to
quarter of this year.
by starting small.
the market, which negatively
finance due diligence process.”
impact supply chains and With all environmental
“We are starting with one
prices.”
approvals in place and a
module, but we plan to expand
bankable feasibility completed
this with a second module that
Herein lies Gensource’s novel
back in 2017, the Tugaske
would bring our production to
proposal for the future of the
project is essentially ‘shovel-
500,000 tonnes per year. At the
global potash industry – small,
ready’, and the fulfilment of
same time, we could start an
expandable production, more
project financing is the last
entirely new project under a
like manufacturing than
hurdle that Gensource must
new JV company, operating in
mining, using environmentally
overcome before construction
the same project area and of a
sustainable methods
can begin.
similar small scale.
while establishing a direct connection between the
This means that construction
“The idea is that these things
production facility and the
of the Tugaske project could
can start out very small and
global fertiliser market.
51
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54
MINING | AGUIA RESOURCES
AGUIA
RESOURCES
Domestic phosphate supply for Brazil’s agricultural juggernaut
55
ASX-listed Aguia Resources is primarily focused on advancing its phosphate assets in Southern Brazil, along with a copper exploration portfolio in the same region. The company’s corporate office is in Sydney but its highly experienced in-country team in Porto Alegre is intent on delivering high quality phosphate mines that will supply Brazil’s colossal agriculture sector with the key fertiliser product. Since Dr Fernando Tallarico was promoted from technical director to managing director last October, Aguia has made significant technical progress at its flagship Três Estradas phosphate deposit, obtaining a preliminary licence (LP) and redesigning the entire project in a new scoping study. “On the corporate level we have restructured the company in many ways resulting in a much leaner structure that will help us be more cost-efficient,” Tallarico tells RGN. “My primary task now is to work towards the granting of the installation licence (LI), which will allow us to start construction of our phosphate mine and processing plant.”
56
The Três Estradas project is
Despite possessing a thriving
located in Rio Grande do Sul -
farming industry, there are no
Brazil’s Southernmost state with
active phosphate mines in Rio
an area of about 292,000 km²,
Grande and it is 100% reliant on
of which 203,000 km² is arable
imports of fertiliser products
and active in the production of
which are so crucial to the high
soybean and rice crops.
level of agricultural output in the state.
In fact, Rio Grande is the third largest agricultural producer in
Aguia plans to change this
the country having produced
on the way to becoming the
about 35 million tonnes (Mt) of
only local producer in the
grains in the 2018/2019 harvest,
region after making a series
and it is the second biggest
of greenfield phosphate
producer of grains per hectare
discoveries in Rio Grande over
in Brazil.
the last decade.
MINING | AGUIA RESOURCES
“Our flagship project Três
then around 30,000 metres of
“Following this, we went
Estradas is in the central zone
diamond, reverse circulation
through a sequence of
of the state and is surrounded
and auger driller has been
metallurgical testing followed
by very productive farms and
conducted, mostly by Rede
by economic assessments of
crops. Within a 300 km radius
Engenharia e Sondagen –
the project.
from the project there is a
an extremely well-known
demand of 245,000 tonnes per
company in the Brazilian
“Then we conducted all
year of P2O5 nutrient, which
mining industry.
the baseline studies and
is equivalent to 2.5 Mt of fertiliser grading 10% P2O5.”
environmental assessment This work has resulted in
of the project area and this
the delineation of a JORC-
resulted in the granting of the
Aguia drilled the first
compliant resource of 105
LP in October,” says Tallarico.
exploration hole in the Três
Mt, of which 83 Mt at 4.11%
While the environmental
Estradas carbonatite in
P2O5 is in the measured
permit applications were being
September 2011 and since
and indicated categories.
prepared, Aguia was also busy
57
redesigning the downstream elements of the project.
Overhauling the project The company overhauled its existing bankable feasibility study, which called for a column flotation circuit that would have involved the construction of a water dam and a tailings dam, opting instead for a direct application natural fertiliser (DANF) product. “When we decided to produce DANF, the processing became extremely simple as it only includes a comminution plant with no water used in the
hectares, with 60 hectares of
The first phase of the study
process and no tailings being
open pit area.
will deliver a post-tax NPV
generated. Thus, we were able to eliminate both the water
The DANF plan informed
an IRR of 51% and a quick
dam and the tailings dam.”
a new scoping study for
payback period of 3.3. years.
Três Estradas conducted
Aguia envisages a three-phase
This single move succeeded
by independent Brazilian
development for the long-life
in bringing down the project’s
consulting firm GE21
project, with the DANF Phase
capex from US$75 million
Consultoria Mineral. The study
1 focused on mining high-
to around $7 million and
was published in February
grade oxidised material from
will reduce the size of the
and highlighted the strong
surface down to a depth of 30-
processing plant and other
economics of the project.
40 metres.
facilities of the mine by 77% to an optimised area of 93
58
of around $45 million with
MINING | AGUIA RESOURCES
have to be stored in the tailings dam and then progressively be reclaimed and sold to the market over time in Phase 3.”
The copper opportunity When Aguia first started working in the central area of Rio Grande its focus was on the yet-to-be explored phosphate opportunities in the region, but after establishing first mover advantage in the fledgling phosphate sector, the company began to consider exploration for other commodities, particularly copper. “After 18 years of mining
concentrate grading at least
The prolific Rio Grande
and exhausting the oxidised
30% P2O5. This will generate
Copper Belt is a well-known
material, the fresh carbonatite
tailings composed essentially
geological trend with many
will be exposed and can
of carbonate minerals that
projects in development along
be then mined in Phase 2,
were characterised as a high
with existing mines and one
depending on the economic
quality agricultural lime
depleted copper mine that
constraints at that time.”
(aglime), used to correct the
happened to be in the same
acidity of the soils.
area that Aguia was exploring
Tallarico explains that mining
for phosphate.
fresh carbonatite will require
“Because the volume of aglime
a column flotation plant that
tailings produced in Phase 2 is
Already with two exploration
will produce a phosrock
very high, we expect that about
field offices in the region,
two thirds of these tailings will
Aguia subsequently took
59
advantage of its position and
From these targets, Aguia has
the main copper mineral in
staked 52 tenements, acquiring
defined an inferred mineral
Andrade is chalcocite, which
eight for a total of 86,187
resource of 10.8 Mt with an
carries about 80% copper
hectares within the Rio Grande
average copper grade of 0.56%
and offers the possibility of
Copper Belt.
and 2.56 g/t of silver for the
developing a low capital cost
Andrade project, and proven
project of open pit mining and
“Over the past three years we
a high grade zone surrounded
processing via heap leach,
were able to consolidate a
by a lower grade envelope
followed by the crystallisation
district scale position with 860
through modelling and recent
of copper sulfate.
km2 of granted exploration
drilling.
permits, that include six
In addition, copper sulphate is
extremely prospective targets
More recently, the company
widely used in Rio Grande by
with copper mineralisation at
has looked into the option of
farmers as a pesticide and for
surface,� says Tallarico.
producing copper sulphate as
treating copper deficient soils, so copper sulphate production
60
MINING | AGUIA RESOURCES
could open up another
information should inform an
revenue stream for Aguia in
initial economic assessment.”
the regional agriculture sector.
Next steps
At Três Estradas, Aguia will push towards the next stage
“For the next year at Andrade,
of permitting in the next 12
we need to continue drilling
months, which is the granting
and expanding the high-grade
of the LI – the permit that will
core zone. By doing this we
allow the company to start
will improve the overall grade
construction of the mine site.
and tonnage of the resource. In parallel we want to run the
“To achieve this we have
initial leaching tests with our
to work in four different
material to understand how
areas along the year: 1:
exactly it will perform. This
Environmental plans and
“Over the past three years we were able to consolidate a district scale position with 860 km2 of granted exploration permits, that include six extremely prospective targets with copper mineralisation at surface” - Dr Fernando Tallarico manager director, Aguia Resources 61
62
MINING | AGUIA RESOURCES
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programmes, 2: Detailed
April from the Development
engineering of Phase 1 -
Bank of Southern Brazil for a
DANF, 3: Permitting with the
development loan to fund up
National Mining Agency and
to 50% of the capex for Três
4: Secure the use of the land,
Estradas.
via acquisition or possession agreements.”
All the stepping stones are in place for Aguia to progress
In parallel, agronomic
its long-term phosphate
efficiency tests are ongoing
project in the next few
with the DANF product applied
years, underpinned by open
to key crops as soybean,
attitudes to mining in Brazil
rice, maize and ryegrass.
and its position as a global
On the financing side, Aguia
agricultural powerhouse.
“Our flagship project Três Estradas is in the central zone of the state and is surrounded by very productive farms and crops. Within a 300 km radius from the project there is a demand of 245,000 tonnes per year of P2O5 nutrient”
received a letter of support in
63
64
MINING | AGUIA RESOURCES
“Projections for 2028/29 are for a grain harvest of around 300 Mt in Brazil - an increase of about 27% from the current production, at a growth rate of 2.4% per year. To support this growing production without encouraging deforestation, the only solution is the intensive use of fertilisers,” says Tallarico. With a strong portfolio of phosphate projects in Rio Grande and 10 years of incountry operation under its belt, Aguia is well-positioned to take advantage of these favourable conditions for fertiliser production in Brazil.
AGUIA RESOURCES AT A G L A N C E
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a 65
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VER
AGRI
Improving your healt
68
MINING | VERDE AGRITECH
RDE
ITECH
th and the planet’s health
69
Brazil is the largest importer of potassium fertiliser in the world, obtaining 95% of its potash needs from abroad for use in the commercial agriculture industry. Agriculture is one of the strongest sectors in the Brazilian economy, accounting for around 25% of its GDP and providing up to a third of all jobs, be they directly or indirectly related to agronomy. As a result of this, Brazil is widely regarded as one of the key breadbaskets of the world, and it is the valuable nutrient potash which plays a vital role in the production of crops for food production. “If there was an issue with potash supply to Brazil, the impact would be far greater than the impact of COVID-19. Not only economically, but most certainly with far greater loss of life,” says Cristiano Veloso – CEO and president of sustainable potash producer Verde AgriTech.
The TSX and OTCQB-listed company’s mission is to feed and nourish a growing global population through the production of innovative products of high agronomic efficiency that foster sustainable, profitable and productive agriculture.
Agricultural experts Verde was founded in 2005 when a team of experienced explorers and professionals from the mining industry assembled a grassroots mineral exploration portfolio with properties in Brazil. After evaluating several mineral projects, the company decided to concentrate its efforts on the production of natural mineral fertilisers in 2006. The Verde team has been focused on developing the Cerrado Verde Project in Minas Gerais state since discovering the potassium-rich deposit in 2008. The current board of directors possess unrivalled experience in mineral exploration, potash production and Brazilian agriculture.
70
MINING | VERDE AGRITECH
The board is headed up by a dynamic duo comprised of the company’s founder Cristiano Veloso and Dr. Alysson Paolinelli – the former Minister of Agriculture for Brazil and ‘the Pele of agriculture’ according to Veloso. “Alysson has made more for Brazilian farmers than any other person. He has done more for food production on a global basis than anyone else and he was recognised for that with the World Food Prize in 2006. “He adds a lot of credibility to what we are doing. He is a great leader and a very smart person to have on the board,” Veloso adds.
The Cerrado Verde Project Years of exploration and research culminated in the publishing of a pre-feasibility study (PFS) and the start of small-scale production from a pilot plant in 2017. The PFS revealed a huge, long-
71
life potash deposit, with 772
the project and allows the
transportation expenses,
million tonnes in reserve and
company to provide the lowest
which further highlights the
1.5 billion tonnes in resource
delivered cost to the market
attractiveness of having a
that can be converted into
out of all potassium producers
domestic potash source.
reserve over a 36-year mine
in Brazil and from abroad.
life.
72
“Most imported mineral Verde’s product – marketed
fertiliser comes from Russia
The project’s net present
in Brazil as K Forte® – is
or Saskatchewan in Canada. It
value (with an 8% discount)
delivered to the consumers
is very expensive to transport
is estimated to be just under
at a price below C$68 per
an industrial mineral like KCl
US$2 billion with an after-
tonne, while the average cost
from these places to Brazil.
tax internal rate of return of
of potassium chloride (KCl)
Brazilian ports are often
approximately 290% and a
in Brazil is around C$408 per
extremely overcrowded, so a
total capex $369.5 million.
tonne – nearly six times more
ship carrying KCl can wait for
These attractive economics
than K Forte®. A significant
up to 60 days after arriving to
reinforce the longevity of
part of KCl‘s cost is due to
dock and unload the material.
MINING | VERDE AGRITECH
“Then you have the added cost
products, Verde’s customers
of transporting the product
will also notice the differences
from the coasts of Brazil to
in quality between the two
the rural agricultural regions
products. K Forte® is a multi-
in the centre of the country,”
nutrient fertiliser that contains
Veloso adds. “With our project
68 minerals and trace elements
located in the heartland of
– including potassium, iron,
Brazil’s largest agricultural
magnesium and manganese
market, our product is much
– that improve chemical,
cheaper as a result.”
physical and biological
A superior alternative
conditions of the soil. In addition, K Forte® does
Aside from the significantly
not add salt or chloride to
lower delivered cost of K
the soil. It is approved for
Forte® compared to KCl
organic production and its
““If there was an issue with potash supply to Brazil, the impact would be far greater than the impact of COVID-19. Not only economically, but most certainly with far greater loss of life” - Cristiano Veloso, Verde AgriTech founder, CEO and president
73
silicon content increases plant
soil microorganisms, which
resistance against pests and
are very important as much
diseases. These advantages
for crops but also for storing
make Verde’s product a
carbon into the soil. 100 kg of
sustainable KCl alternative for
KCl applied to soil is equivalent
tropical soils.
to adding 800 litres of bleach,” Veloso reveals.
“Chloride is very bad for environment. It burns crop
Rapid annual sales growth
roots and is a problem in terms
The rising popularity of
of seed germination. It brings
Verde’s product in the
solidity to soils, which is bad
Brazilian market is shown in
for future agricultural activity.
its year-on-year (YoY) growth
agriculture and for the
figures. In 2018, the company “And in terms of its damage to
built its own plant and the
the environment, chloride kills
product quickly sold out. Last year, Verde upgraded the
V E R DE A G R I TE C H
AT A G L A N C E
plant’s production capacity to 500,000 tonnes per annum. By increasing its production capacity to meet the increasing amount of K Forte® demand in Brazil, Verde succeeded in increasing YoY revenue by 344% to just over C$6 million for the 2019 financial year,
STOCK TICKER
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MARKET CAPITALISATION
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r abj
74
with a gross margin of 48%. “For this year we are predicting to grow another 80% on last year, when we grew nearly 350%. We are on
MINING | VERDE AGRITECH
75
VERDE AGRITECH DIRECTORS
76
MINING | VERDE AGRITECH
Spotlight on
Dr Alysson Paolinelli Alysson began his illustrious career in Brazilian agriculture after graduating with a degree in Agronomy from the Federal University of Lavras. He has previously served as the Brazilian Minister of Agriculture, the president of the National Confederation of Agriculture, and the Secretary of Agriculture for Minas Gerais State. As the Minister of Agriculture, Dr. Paolinelli established the Brazilian Agricultural Research Corporation (EMBRAPA), the world’s leading tropical agriculture research institution. The father of ‘tropical agriculture’ – as he is often known - won the World Food Prize in 2006 and is currently the president of the Brazilian Corn Growers Association.
77
78
MINING | VERDE AGRITECH
track to deliver another year
of buying it from Canada or
with significantly higher
of significant growth. We
Russia.”
nutritional value due to the 60+
are a small company, so our
trace elements added to the
sales mainly come from our
While cementing its position
product, thus improving the
customers recommending our
in the Brazilian potash market
health of the food’s recipients.
product to their neighbours.”
in 2019, Verde also developed its international footprint by
With the bulk of its customers
One would be forgiven for
exporting its product to the
in Brazil, which accounts
assuming that the company’s
Canadian and Chinese markets
for around 10% of global
C$10.6 million sales target for
for the first time, adding to
agricultural production and is
2020 would have to be revised
its existing presence in the
one of the largest exporters of
down due to the unforeseen
US – where the product is
foodstuff in the world, Verde’s
outbreak of COVID-19
sold under the name Super
unique product could make a
(coronavirus) around the
Greensand®.
positive difference to people’s
world and its devasting socioeconomic effects.
Up to the challenge
diets all around the world. “We also improve the health
However, Veloso believes that
Verde sees itself playing a big
of the planet by removing
the pandemic will actually
role in providing solutions to
KCl from our customer’s
accelerate Verde’s growth
two of the biggest challenges
soils. Using our product will
trajectory this year, as there is
facing the world in the 21st
preserve soil microorganisms
a need for Brazilian farmers
century: Adequate food
that would otherwise be
to secure domestic sources
supply for the growing global
killed by KCl products. These
of crop fertiliser in case
population and climate change
microorganisms capture
of sustained disruption to
brought about by human
carbon into the soil, so we are
international supply chains.
industrial activity.
helping to fight climate change in this way.”
“Farmers are worried about
These ambitions are
the potential disruption in the
crystallised in the company’s
international supply of potash.
motto: ‘Improving your health
At the moment, they have an
and the planet’s health’.
added incentive to procure
Farmers using Verde’s potash
domestic potassium instead
product will cultivate crops
79
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82
MINING | JOSEMARIA RESOURCES
JOSEMARIA RESOURCES The latest large scale resource project to be delivered by the Lundin Group
83
The Lundin Group was founded by Swedish oil and mining entrepeneur Adolf H. Lundin over 40 years ago and is today comprised of 13 publicly traded companies dotted around the global resources sector. In the beginning, the Group was driven forward by Adolf’s passion for natural resources and his desire to supply the world with key commodities. In order to do this, he quickly learned that you need to find large, high quality resources and bring them into production wherever they are to be found in the world and no matter how unfavourable the jurisdiction might appear to be.
“The Lundin Group modus
the business, the Lundin Group
operandi is to find tier 1 assets
has production out of Norway,
that benefit local communities.
Canada, Nigeria, France,
We’re not scared to go to any
Malaysia and Iraqi Kurdistan.
jurisdiction, as long as the local country wants to do it
“In Argentina, we’ve had ups
together. This belief has taken
and downs but my father went
us across the world,” says
there in the early 90s and
Adolf’s grandson and current
found success and we never
president and CEO of Josemaria
left. Overall, it’s a Group where
Resources, Adam Lundin.
a lot of people came together
A truly global resources group
who were passionate about making the world a better place and doing that through
The poster child of the
the extraction of natural
Group’s success in the mining
resources.”
sector is Lundin Gold, after it brought into production the
The Lundin Group’s early
multi-million ounce Fruta del
success in Argentina goes back
Norte gold mine in Ecuador
to the discovery of the Veladero
– a jurisdiction that precious
gold deposit in San Juan
few Western companies had
Province. The project was soon
explored in prior to Lundin’s
acquired by Homestake Mining
discovery.
after fighting off a hostile bid by Barrick, who ultimately bought
Elsewhere, the Lundin
Homestake to get their hands
Group has been involved in
on the prized deposit. Veladero
developing one of the largest
has remained one of the largest
copper-cobalt mines in the
gold mines in the world over
Democratic Republic of Congo
the last two decades.
through Lundin Mining, which
ADOLF H. LUNDIN, LUNDIN GROUP FOUNDER
84
currently operates mines in
On the back of this divestment,
Brazil, the US, Portugal, Chile
the same Lundin Group
and Sweden. On the oil side of
exploration team decided to
MINING | JOSEMARIA RESOURCES
85
stake some ground on the Chile-Argentina border, not far from the Veladero deposit, at the turn of the century. The subsequent exploration campaigns yielded three grassroots discoveries – one being the Josemaría coppergold deposit in 2004. The three discoveries are in the same land package and are located within 15 km of each other, but have since been spun into three separate companies within the Lundin Group. “Josemaría is currently the most defined project. We feel we’ve found the boundary of the resource, so the view now is to get something into production and maybe we can later tie in the other two deposits to form a district that will allow us to be mining here for 50+ years,” says Lundin.
Faith in Argentina In years gone by, international mining companies have been wary of investing in
86
LUKAS AND ADAM LUNDIN WITH ARGENTINA PRESIDENT ALBERTO
MINING | JOSEMARIA RESOURCES
an emerging market like Argentina, especially while some of its provinces receive low rankings for attractiveness as a mining jurisdiction. However, it has never been the remit of the Lundin Group to be put off by warnings of this nature. As we have already learned, if a project is large and of a high quality, the group will commit to its development. In the case of San Juan Province, where Josemaría is located in the shade of the resplendent Andes mountains snaking through Northern Argentina, mining is entrenched in the political and economic fibres of the region. “San Juan is where we made the Veladero discovery, so it has producing mines and they understand mining and how it can help benefit the local economy. Before Veladero came into production, San Juan was one of the top five FERNÁNDEZ (MIDDLE), JAN 2020
poorest provinces in Argentina
87
and now it’s one of the top five
At the federal level, Lundin
wealthiest, because of those
and his father Lukas managed
royalties and benefits attached
to arrange a meeting with
to the Veladero mine.”
President Alberto Fernández during a visit to Buenos Aires
In addition, Josemaria’s
in mid-January. “To be able
experience working with the
to meet the president at short
different layers of government
notice and get in front of key
in Argentina thus far has been
government officials shows
overwhelmingly positive.
their willingness and their
On the provincial level, the
want to get mining going.
company has been in close contact with the minister of
“This is their resource. We
mines for San Juan Province,
are happy to help put it into
who was recently appointed
production but they will be
federal minister of mines,
biggest benefiters, followed
reporting directly to the
by our shareholders,” Lundin
president.
asserts.
J OS E M A R I A RES O U R C ES
Entering a new era
AT A G L A N C E
Following the publishing of a robust pre-feasibility study (PFS) at the end of 2018, Josemaria made the decision to plough on with the bankable and full feasibility studies. And so, last year became a
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88
transformational year in the development of the company and the project. The company’s name was changed from NGEx Resources
MINING | JOSEMARIA RESOURCES
89
90
MINING | JOSEMARIA RESOURCES
(the original entity that made the three discoveries) to Josemaria Resources and Adam was brought in to head up the refreshed organisation, along with several other additions to the board and management team. “We strengthened the board by bringing in Paul Conibear, the previous Lundin Mining CEO. We have Ashley Heppenstall, who is former Lundin Petroleum CEO. We also brought in Ron Hochstein who’s currently running Lundin Gold.” Adam’s father Lukas is also on the board of directors alongside Jack – Adam’s brother and Lukas’ son. Alongside the familial connections, the board retained the services of renowned geoscientist Wojtek Wodzicki - who made the initial Josemaría discovery. “I think it’s important to keep that continuity,” Lundin adds. Christina Batruch rounds off Josemaria’s experienced board
Spotlight on
Adam Lundin
Adam Lundin was appointed president and CEO of Josemaria Resources in September 2019, succeeding Dr. Wojtek Wodzicki, who had been at the helm of the company for over 10 years. Adam is the grandson of Adolf Lundin, the man who founded the Lundin Group over forty years ago. Following in the footsteps of his grandfather and father, Adam chose a career in natural resources and has accumulated several years of experience in capital markets and public company management across the sector. Working across the Lundin Group, Adam is also CEO and a director of Filo Mining Corp and a director of NGEx Minerals and Africa Energy Corp.
91
“We have big camaraderie in the Lundin Group. All the companies are independent from one another, but we learn from each other and we’re always there to support each other”- Adam Lundin, Josemaria Resources president and CEO
92
team and is responsible for
Going back to the 2018 PFS,
helping guide the company’s
Lundin was pleased with
sustainability strategy.
the anticipated economic metrics for the Josemaría
On the management side,
project, particularly the capital
Ian Gibbs was brought in as
expenditure (capex) estimate
chief financial officer owing
of US$2.75 billion. This may
to his previous project finance
seem like a large figure in
experience from the oil side
comparison to Josemaria’s
of the Lundin Group and
market cap, but this is a large
with Lundin Gold. With an
scale project that requires
extensive history across global
large scale investment.
engineering companies, Arndt Brettschneider, VP Projects,
Furthermore, Josemaría’s
was also recruited to lead the
production profile is also
feasibility study.
attractive. The operation will
MINING | JOSEMARIA RESOURCES
produce 125,000 tonnes per
Lundin Mining agreed when it
field programme that included
annum of its main commodity
bought the Candelaria mine in
condemnation, geotechnical
copper over a 20-year mine
Chile, as a way of financing the
and water drilling.
life, along with 230,000 ounces
capex for Josemaría.”
of gold and 790,000 ounces of silver per annum over the same period.
Ploughing ahead in 2020
Josemaria is blessed with a supply of groundwater just 1.5 km away from the project – a
The first quarter of 2020
considerable benefit given that
“The gold production is
has been about polishing
just across the border, Chilean
significant and accounts for
elements of the PFS ahead of
authorities insist on miners
around 25% of our revenue
the publish of a full feasibility
building desalination plants
of the mine life. That gives us
study and building towards
for their water supply.
flexibility when it comes to
applying for environmental
project finance. Maybe we will
and social permits. The
After proving its main source
look to the streaming deal that
company conducted a large
of water supply, the company
93
was about to test another basin
times. We’ve collected a lot of
Josemaria has also been
as a future supply source until
our baseline studies, so we’ll
monitoring the local
Argentina was placed in full
be in a good position to apply
environment in tandem with
lockdown to quell the spread
for permits in Q4.”
BGC Engineering over the last
of COVID-19 (coronavirus), so the work was cut short.
94
five years, specifically focusing On the social side, Josemaria
on minimising any potential
has engaged with the Lundin
impact on a glacier around
“The original plan before
Foundation and started to run
seven km away in the Andes.
COVID-19 was to finish the
social programmes within
feasibility and publish it in
the community. One aim is
Q3. I think it’s better to start
to eventually assist water
guiding the market towards
treatment facilities in the local
A standout company and project
the second half of the year,
city of San Juan.
The Lundin Group is bullish
just to give us some flexibility
about copper and a believer
as we adapt to these changing
in the forthcoming electrical
MINING | JOSEMARIA RESOURCES
revolution as the world looks
of experience in different
Despite the global
to shift away from fossil fuels,
geographical contexts and
resources sector facing an
and Josemaría is a large scale
economic cycles.
unprecedented squeeze from
mine that is going to stand
the coronavirus pandemic,
out in an environment where
“Lundin Gold was one of
Lundin is quietly confident
not many copper projects of
the first projects we built by
that Josemaria can emerge
an appropriate scale for the
ourselves and we are hoping
stronger. “Downturns is when
projected demand increase are
Josemaria is the next one.
we benefit the most as a
coming to market.
We have big camaraderie in
Group. We can push projects
the Lundin Group. All the
forward and retain key talent
Josemaria the company also
companies are independent
where other companies are
stands out in the junior space,
from one another, but we
sitting idle.”
as its part of a much larger
learn from each other and
family of natural resource
we’re always there to support
companies with decades
each other,” Lundin exclaims.
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NTM
A unique pro Australian junior go
98
MINING | NTM GOLD
GOLD
oposition in the old exploration sector
99
In April 2020, ASXlisted NTM Gold Limited acquired a 426 km² gold tenement package called the Wells Group in the Leonora region of Western Australia (WA). This deal expanded its vast footprint within the Redcliffe Gold Project to over 720 km². The Redcliffe project is centred around the Mertondale Shear Zone – a geological linking structure between two regional shear systems stretching across WA’s Eastern Goldfields. NTM considers the Wells Group, located in the Northern extension of the Mertondale Shear, to be a highly prospective early greenfields stage opportunity and will focus its initial work on further geological and data review followed by targeting studies prior to on-ground work.
In search of mineralisation NTM has been involved in the Redcliffe project for the best part of 20 years through various company guises but it was wasn’t until around 2015 that it became the primary focus for the Australian gold junior. “We’ve been quite successful in our exploration,” says NTM’s managing director Andrew Muir. “In 2017, we found a deposit called Bindy, then in 2018 we found one called Hub and in 2019 we found Redcliffe East. “We’ve been going pretty well of late and it’s a highly prospective area. Given the history of the region, it’s still relatively underexplored. The Redcliffe project largely tracks the Northern end of the Mertondale shear. The vast majority of our exploration to date has focused on that zone.” Consistent drilling over the last few years has allowed NTM to increase the Redcliffe resource to over half a million ounces of
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MINING | NTM GOLD
101
gold - 537,862 oz to be precise
deposit in October 2018. The
terms of ounces, or we could
– while making a name for
company has been steadily
toll treat through the existing
itself on the junior exploration
drilling the deposit out since
plants nearby. And any one of
market in Australia with the
then and delivered some
the companies that own those
results of its recent drilling
fantastic grades close to
plants might want to take us
campaigns.
surface in June and July last
over to feed our ore through
year.
their facilities.”
now because the market
Near surface grades as high
Following the exciting drill
is definitely rewarding
as 468 g/t Au at the Hub
results of last year, NTM aims
exploration success, even
deposit seem to have caught
to publish a resource estimate
with the uncertainty relating
the attention of the investor
for the Hub deposit by the
to the COVID-19 outbreak
market, which has resulted in
middle of 2020 and remains
overhanging the market. There
rises in both the share price
confident of achieving this
has been an unusually high
and market capitalisation of
despite the state restrictions in
number of discoveries made
the company over the last nine
place to prevent the spread of
in Australia over the last six
months.
COVID-19 since March.
Having gained the attention of the market with attractive
Business as usual
grades, Muir believes that
The location of the Redcliffe
interest has been retained by
project in the vast expanses
NTM’s most notable
the recognition of the Redcliffe
of WA’s Eastern Goldfields –
exploration success of late
project’s strategic location,
where the nearest inhabited
was the discovery of the Hub
within trucking distance to
area is the historic mining
four existing processing plants
town Leonora 40 km away
in the region.
– has meant that NTM’s
“It’s interesting right
months and they are being rewarded with investment.
An exploration Hub
“We’ve been quite successful in our exploration. In 2017, we found a deposit called Bindy, then in 2018 we found one called Hub and in 2019 we found Redcliffe East” Andrew Muir, managing director NTM Gold
10 2
operations haven’t been “Our strategic location gives
significantly impacted by
us optionality on how we
social distancing measures
monetise Redcliffe. We could
and drilling has continued as
build our own plant if we
normal.
get enough critical mass in
MINING | NTM GOLD
103
However, the company has put an infectious diseases policy in place, has modified some of its commuting procedures and is continually assessing the risks as Australia and the world faces up to the threat of a global pandemic. Although the company is still working on the numbers for the Hub deposit ahead of the maiden resource, Muir reveals that the deposit has the potential to be not just the biggest deposit in the Redcliffe project, but also the highest grade. NTM has relied on several drilling outfits to undertake its exploration activities over the last few years, including ASX200 mining services group Ausdrill (now part of the Perenti Group) as part of a drill-for-equity arrangement. “The company most consistently on-site has been Challenge Drilling. They have provided excellent RC and AC drilling services. We’ve
1 04
MINING | NTM GOLD
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“Regionally, we have high grade oxide mineralisation close to surface that can be mined and processed cheaply. The downstream optionality of the project is a key feature, as are the high grades we have seen, which are always a good thing”
Exploration Drilling (PXD)
Broadening the horizons
and our diamond drillers are
After completing RC and
normally Westralian Diamond
DD campaigns for the Hub
Drillers (WDD).
deposit earlier this year, NTM
also recently used Precision
is now looking to step away “All our drilling contractors
from intense resource-style
have done a great job despite
drill outs in favour of a wider
some of the ground at Hub
regional AC drilling campaign
being quite tricky at times. It’s
looking for new deposits. The
something we need to try and
company hopes this kind of
understand to see if we can use grassroots exploration will some different techniques to
be key to achieving its total
overcome those issues.”
exploration target of 1.382.24 million ounces (Moz) at Redcliffe.
1 06
MINING | NTM GOLD
“In our current AC
base, but that drilling is getting
can do that is by testing new
programme, we are testing
a lot more expensive due to
areas, and that’s we’ll do.”
some of the major structures
the depths of the holes and we
that aren’t on the Mertondale
don’t think any of these will be
Shear and may provide a
gamechangers.
Finding a niche in the elevated gold market
of these targets haven’t ever
“Instead we can get better
The gold spot price has
been drilled so we are doing
bang for our buck by finding
strengthened in recent weeks
some higher risk exploration
new deposits as we think
and months amid the global
but hopefully we will be
the ground has potential.
uncertainty and market
rewarded.
We found the Hub deposit
volatility brought about by the
through AC drilling and that’s
COVID-19 pandemic. A high
“We could go and drill out the
made a huge difference to the
gold price can only mean good
deposits we already have at
awareness of the company. So,
news for all players in the gold
depth to increase the resource
the aim is to find more of those
mining sector, including early
deposits and the only way you
stage explorers like NTM.
different style of deposit. A lot
1 07
10 8
MINING | NTM GOLD
As existing producers operate under higher margins in an elevated gold market, a well-located outfit like NTM may be ripe for the picking according to Muir. Indeed, many analysts are already predicting increased levels of M&A in the gold sector as established players making higher returns look to cherry pick smaller assets to bolster their portfolios. Alternatively, should NTM want to go it alone, higher gold prices will make it easier to start up the operation, because margins are going to be higher and the company will make better returns. Ultimately, a high gold price is good for sentiment, says Muir. “Whether you’re a producer or an explorer, if the gold price is continuing to go up, people are going to want to invest in the gold sector.� So, how does NTM differentiate itself from the sea of explorers and producers
109
ANDREW MUIR, NTM GOLD MANAGING DIRECTOR
110
MINING | NTM GOLD
market? Muir believes that
mined and processed cheaply.
the combination of sustained
The downstream optionality
exploration success over
of the project is a key feature,
the last three years and the
as are the high grades we
optionality on monetising
have seen, which are always a
the Redcliffe project is key
good thing.”
in making NTM a unique proposition. “Regionally, we have high grade oxide mineralisation close to surface that can be
NTM GOL D AT A G L A N C E
STOCK TICKER ASX:NTM
MARKET CAPITALISATION
US$34.2 million (as of May 01, 2020)
j
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