RGN Vol 7 Iss 3

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

10

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

68

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

82

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

98

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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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,

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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.

95

NTM

A unique pro Australian junior go

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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

105

“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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