Vertical Mining OCT10 by Business Excellence Magazine

Mining, metals & minerals

Mine Business Excellence Online

www.bus-ex.com ISSUE 1

Editor’s Letter

EDITORIAL Editor In Chief Martin Ashcroft mashcroft@bus-ex.com Managing Editor Becky Done bdone@bus-ex.com

DESIGN Production/Creative Director Zachary Smith zsmith@bus-ex.com Assistant Creative Director Mallory Lindsley mlindsley@bus-ex.com

BUSINESS Director of Editorial Research Scott Mason smason@bus-ex.com Director of Sales Sean Brett sbrett@bus-ex.com Assistant Research Directors Vincent Kielty vincent@bus-ex.com Sam Howard showard@bus-ex.com Richard Halfhide rhalfhide@bus-ex.com Robert Hodgson rhodgson@bus-ex.com Administration & Operations Alice Doran adoran@bus-ex.com Chief Executive Andy Turner info@bus-ex.com Subscriptions info@bus-ex.com Infinity Business Media Ltd Suite 22, St Francis House Queens Road Norwich, NR1 3PN UK Tel: +44 (0) 203 137 7100 Fax: +44 (0) 1603 666466 www.bus-ex.com

Mine

Welcome to the Business Excellence vertical magazine dedicated to the mining sector. Mining has always been a cyclical industry, with mining projects very much at the mercy of market forces. The last few years have been more turbulent than most, with mines closing and many new projects put on hold while the industry navigated its way through the recession. Business Excellence talks to executives from all sections of the mining sector on a regular basis, and between these covers you will find a representative sample of the articles we write every month—from gold mines as far apart as Australia, Canada and Mali, to coal mines in the UK and Mozambique; from copper mines in Kazakhstan to diamonds in Lesotho—not forgetting the service industries and equipment manufacturers who support the industry all over the world. Until relatively recently, the mining industry has been tainted by a poor reputation as a destroyer of the environment and an uncaring neighbor, riding roughshod over the interests of the people who inhabit the land where the resources are found. Happily, the industry has taken great strides in repairing its image over the last few years, as you will see in our article Good business in this issue. Mining is a diverse industry, often occurring in the remotest of places in the harshest of climates, but one unifying factor is the enthusiasm of the people who work in it. They all seem to love what they do. We love to talk to them, and we hope you will love reading about them. Whatever sector of the industry you are in, I hope you find this magazine to be a mine of information.

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STRATEGY: Ups and downs How has the mining industry balanced its longterm strategies with the short term disruption of the economic downturn? SUSTAINABILITY: Good business A useful guide for board members and executive committees to clarify the ethical basis for executive choices.

Letšeng Diamonds Jewel in the crown This Lesotho-based company produces the highest quality white diamonds of anywhere in the world.

Newmont Asia Pacific Pure gold Newmont’s Boddington mine in Western Australia is set to become the biggest producing mine in the country.

Kalgoorlie Consolidated Gold Mines A positive impact Operating Australia’s largest gold mine, KCGM has a positive approach to sustainability, employees and community.

Goldcorp: Musselwhite Mine Keeping pace The Musselwhite mine complex shows how mining operations can peacefully co-exist with First Nations peoples.

6 New Gold Steady production The new owner of the Mesquite Mine in Southern California has the financial backing and resources it needs.

Agnico Eagle Mines: Goldex Mine Explosive production A hybrid mining approach, along with recordsetting underground blasts, help the mine be economical, safe and a good neighbor.

Avion Gold Corporation Africa sunrise This Toronto-based company aims to produce half a million ounces of gold a year from its mineral properties in Mali.

Highveld Steel & Vanadium Corporation Ltd Changing times Currently the only South African producer of heavy steel sections, Highveld is making plans to boost productivity

BC Iron A philosophical view A start-up mining company has found its own solution for getting into production, and plans to grow organically.

Zimasco Rising to the challenge Emerging strongly from the economic downturn, ferrochrome producer Zimasco is planning further growth.

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Contents

Tli Cho Logistics Growing exponentially A new kind of business relationship between a native community and mining companies is attracting attention.

Assmang Manganese The heart of steel The Kalahari manganese field contains highgrade manganese ore reserves, vital to the world’s steel industry.

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Hatfield Colliery The changing face of UK coal UK coal mining is more progressive and forward-thinking than popular perception gives it credit for.

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Riversdale Mining Putting Mozambique on the map This company is bringing some much needed expertise and capital to the transformation of Mozambique.

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Taggart Global Clean coal An international giant in the coal preparation and mineral material handling industry after fewer than 20 years in business.

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Hitachi Construction Trucks Mega truck making With a global customer base in huge mining trucks, this manufacturer is raising its profile in the North American market.

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Mintek Mining for improvements This research institute is still going strong after 76 years—and has plenty of innovations on the horizon too.

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First Majestic Silver Corp. From the ground, up Committed to building a senior silver-producing mining company based on an aggressive development and acquisition plan.

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Frontier Mining Changing times Currently the only South African producer of heavy steel sections, Highveld is making plans to boost productivity

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Kennecott Eagle Minerals The Eagle has landed A company that believes the tough mining legislation introduced in Michigan in 2004 will benefit the mining community.

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Bisha Mining The golden horn Eritrea’s economic prospects are looking up with the approaching opening of Bisha Mining’s operation.

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Foskor Mining a fertile field This mining and processing group is no longer mining foskorite as it refocuses its strategy and resources.

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Martin Ashcroft analyses the effect of the global recession on the mining industry, and investigates how companies have balanced their long-term strategies to cope with this short term disruption

ining is a notoriously cyclical industry. The last couple of years, however, with a financial crisis and a subsequent recession in the world’s major economies, must have felt like a roller-coaster ride to executives in the mining industry. Metal values, which peaked at record highs in 2008, collapsed by over 40 percent in less than 15 months afterwards. “Volatile” is a word often used to describe metals and minerals markets. You can put “highly” in front of that to describe the phenomena we have witnessed recently. In the UK we use a sport inspired phrase to describe a situation where fortunes are reversed unexpectedly over a period of time. We call it “a game of two halves”. You could certainly apply that epithet to 2009. The year began with commodity prices taking a nosedive. But mining companies responded swiftly and decisively, restructuring their funding, closing mines and cutting production. By the end of the year, the market capitalization of the top 40 mining companies had returned to the heights of 2007, and a cautious optimism was returning. The aggregated financial results of the Top 40 mining companies in 2009 showed total revenues declining 15 percent year-on-year against 2008, net profit down 26 percent, and cash flow from operations down 27 percent (figures from the PwC report Mine, Back to the Boom: Review of global trends in the mining Industry – 2010). As the downturn evolved into a full blown recession, it became obvious that some exploration activities and

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and

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â&#x20AC;&#x153;We have always tried to have only good quality assets, because those mines can survive when the market is low and when the market for copper is high. If you have lower-quality assets, it becomes much more difficult to survive the trenches in the cycleâ&#x20AC;? 8

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plans for new mines would have to be put on the shelf. Under-performing mines would have to be examined carefully for potential closure. Cash conservation and cost management became top priorities. The climate was also ripe for any cash-rich company to make strategic acquisitions at knock-down prices, with an eye on the eventual recovery. PwC’s Mining Deals publication noted, however, that although the total number of mining deals increased 16 percent from 2008, M&A activity was concentrated around small scale deals of less than $250 million. There were no major transactions completed in 2009. Investment continued, but although the Top 40 spent $74 billion in 2009, the vast majority was spent on plant and equipment for existing projects, as companies concentrated on production and reserve replacement rather than exploration. Mining is a long term venture. It takes years from the discovery of new resources until a mine begins to produce, and the price of the end product on world markets has a huge influence on the viability of a mine. Strategic planning must be a nightmare for those who have to second guess the markets. The big question for miners as prices fell was whether the sudden downturn would cause a relatively short-term interruption in growth, or whether it signaled a long term decline in demand. Mining companies have to constantly juggle short-term responses with long-term strategy, weighing the timescales needed for major infrastructure projects against sharp downturns in prices and demand. It helps, of course, if the resources being mined are high-grade, which is a cornerstone of the strategy of Chile-based Antofagasta, one of the world’s top producers of copper, as president and CEO Marcelo Awad told us. “We’re in a very cyclical market,” he said. “We have always tried to have only good quality assets, because those mines can survive when the market is low and when the market for copper is high. If you have lower-quality assets, it becomes much more difficult to survive the trenches in the cycle. You can make a lot of cash from those mines when things are going well, but you break even or operate at a loss when the price is low, and we don’t want to be in that position.” Antofagasta has spent 15 years developing its Esperanza high-grade copper mine in Chile, which is still on track to start up in Q4 of this year. During the economic downturn, joint ventures have been an increasingly popular strategic tool, either to spread risk, or to gain access to local expertise when

expanding into new territories. The headlinegrabber is BHP Billiton’s proposed iron ore venture with Rio Tinto, announced last year. Not welcomed downstream in the supply chain, the deal has taken a long time to come to fruition, and it now looks as if Rio is ready to walk away from it, as conditions (and iron ore prices) have recovered significantly in the intervening period. One wonders if the timing of this and BHP’s bid for Potash Corp are entirely coincidental (more of which later). Nevertheless, JVs remain prevalent in frontier regions such as Africa and Central Asia, to spread risk (as with the Antofagasta and Barrick JV in Pakistan) or to benefit from international relationships. The Rio Tinto / Chinalco tie-up in Guinea, for instance, will benefit from China’s strong presence in Guinea. Exploration After six years of increased exploration budgets—including five years of growth averaging almost 60 percent annually—junior mining companies’ aggregate exploration budgets fell by more than half in 2009. But they were not wiped out by any means. The number of juniors actively exploring fell by only six percent from 2008 to 2009. While there was some attrition in the junior ranks, others simply stopped exploring, conserving their cash to survive. The lower than expected attrition rate suggests that many of them had followed the old adage of

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“We know that the ore bodies are open to the east and west at a depth, so we are spending several million dollars right now to test the depths, with a view to targeting underground mining operations by 2013” raising money while you can, against leaner times to come—and it appears to have worked. According to Halifax, Nova Scotia-based Metals Economics Group’s report World Exploration Trends, nonferrous exploration budgets for 2009 suffered the steepest one-year decline in more than two decades, plummeting to around $8 billion from a record $13.2 billion in 2008, as companies focused on late-stage projects with better prospects of short-term returns. While many exploration activities were curtailed in 2009, however, that’s not to say they ceased altogether. The rate of the fall reflected the rate of the earlier rise. Despite the cuts, the industry’s 2009 nonferrous exploration budget was still some way ahead of the levels experienced before 2006. Excluding gold, however, exploration expenditure declined 29 percent in 2009. This is most notable among greenfield

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sites for base metals and bulk commodities A significant portion of greenfield expenditure is conducted by the junior exploration sector, which felt the downturn keenly because it relies on equity funding. As financing dried up in 2009, the juniors were forced to slash their exploration to survive. Understandable though this is, the inevitable consequence for the industry as a whole is fewer new discoveries. In terms of geography, exploration was hardest hit in Canada and Latin America, while the Pacific/Southeast Asia and the United States were less affected. From a resource point of view, after six years of increases in exploration spending for almost all nonferrous minerals, allocations for gold, base metals, diamonds, platinum group metals, and

Strategy

others decreased in all regions of the world in 2009. As the world suffered its worst economic and financial downturn in decades, and most analysts were predicting a long and protracted global recession, few would have guessed that metals prices, and the mining industry as a whole, would begin to recover as quickly as it has. Metals prices are the primary driver of exploration spending. While they have not regained the peak levels of 2008, most have improved steadily and are again trading above their long-term trends. “The general consensus among industry watchers is that most metals prices will remain relatively firm and are expected to increase somewhat in 2010,” said Jason Goulden, vice president, research, for Metals Economics Group, “resulting in a healthy increase in worldwide exploration allocations in 2010.” Gold The term “gold mine” is often used as a metaphor for a rich source of something valuable—and over the last few years the real thing has more than justified its reputation. Even through 2009, gold consistently traded above $1,000 an ounce, showing its value as a safe haven in troubled times. Such is the allure of gold that in the depth of the global economic downturn, Australian gold producer Catalpa Resources (formerly Westonia Mines Ltd until it was renamed two years ago) was able to secure sufficient funding for its Edna May project in April 2009. Edna May is currently an open pit operation in Western Australia with a mine life of nine-and-a-half years, capable of producing 100,000 ounces a year. “We know, however, that the ore bodies are open to the east and west at a depth, so we are spending several million dollars right now to test the depths, with a view to targeting underground mining operations by 2013,” said managing director and CEO Bruce McFadzean. “Our aim is to reach 150,000 ounces of production each year for the next twelve to fifteen years.” The feasibility study conducted in 2008 demonstrated future profitability to such an extent that by February 2009 Catalpa had secured $65 million in funding from a bank. March and April 2009 saw a further $40 million raised through placement and entitlement offers with shareholders. “Since then, our investors have seen threeand-a-half times growth,” McFadzean commented. Gold One International, an Australian and African gold resource company, is a junior entrant to South Africa’s goldfields, with a unique and innovative approach. The company has a clear strategy to seek out shallow, low risk and technically accessible resources, whereas most of

South Africa’s gold reserves are typically deep and technically challenging. Opportunities that fit with Gold One’s strategic approach are thus few and far between, but when they do occur, there is a significant competitive advantage. Potash While there may not have been any major acquisitions in 2009, at the time of writing it looks like the mother of all deals could be about to happen. I refer, of course, to the hostile $38.6 billion bid by BHP Billiton for Potash Corporation of Saskatchewan. This bid puts potash on the mining map as never before. The battle for ownership of Potash Corp. shows that it has suddenly become a hot commodity, and PwC has included potash companies in its Top 40 this year for the first time. Used to make fertilizer, potash is critical for food producers to meet growing world demand for food.

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The size of this potential deal is off the normal scale. BHP Billiton is the world’s largest miner. Potash Corp. operates the world’s largest potash mine. It is also Canada’s third-largest natural resources company and one of only two major mining companies in the country still under Canadian ownership, the other being Barrick Gold. Inco, Falconbridge and Alcan have all been taken into foreign ownership in the last few years, but all has not gone smoothly since. Vale of Brazil suffered a year-long strike after trying to cut benefits at Inco, for instance. So this is a big deal for the provincial and national governments of Canada, both of whom have pitched in to the cat-and-mouse game. The Investment Canada Act allows the Ottawa government to block a foreign takeover if it does not result in a “net benefit” to the country. But how is that to be calculated? The Act has only been used once, in 2008, to prevent the takeover of Vancouver’s MacDonald Dettwiler and Associates’ space division on national security grounds. A vexing question for Ottawa is whether its determination of net benefit should consider how potash prices are set. Potash Corp is a member of Canpotex, a cartel that markets and distributes the products of Saskatchewan’s three potash producers around the world. In the same way that OPEC influences the supply (and therefore price) of oil, Canpotex is in a position to restrict production so that prices remain comparatively high. Saskatchewan producers make more money from high prices that they do from high volumes, but if the BHP bid is successful, might it take Potash Corp out of Canpotex? And then there’s China, the world’s largest consumer of commodities, which understandably wants a guaranteed source of potash at the lowest possible price. But even if the Chinese came up with a viable counter-bid to BHP Billiton, which is looking ever less likely, would Saskatchewan and Ottawa be happy for potash prices to be set by the Chinese? It’s a fascinating strategic story, worthy of an article in itself, but it begs the question, if potash is so desirable right now, why are there no other bidders?

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busine Good

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Sustainability

Martin Ashcroft examines how the concept of sustainability has been embraced by the global mining industry, and how some of the major players have used it to their commercial advantage

he mining industry has not traditionally been known as a good neighbor, nor even a good employer. For many years, mines were dangerous places that left a legacy of environmental damage, and disturbed and disadvantaged local populations. The past twenty years have seen a great change in the approach of mining companies, however, due in part to public concern and subsequent government regulations, but also to an enlightened breed of modern leaders who have begun to embrace sustainability as good business, rather than a public relations exercise. Tim Netscher, senior vice president of Asia Pacific operations for Newmont Mining Corporation, epitomizes this new leadership approach. In his 35 year experience in the industry in South Africa, Indonesia, the US and Australia, he has seen issues such as energy consumption, water use, safety, social responsibility, environmental concerns and regulations take up ever more of his time. “I’m spending more than half my time on what we call the soft issues,” he says. “And the same applies to my counterparts in Newmont’s other regions. “We have no choice ethically or legally except to do those properly,” he insists. “Quite frankly, it takes years to build a company’s reputation, plank by plank by plank, and it takes only one or two incidents to destroy that reputation, so you don’t want to get into those situations.” Netsher’s comments are backed up by compelling evidence. In 2007, Newmont was the first gold mining company to be included on the Dow Jones Sustainability World Index, which recognizes world leaders in economic, environmental and social sustainability.

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The first official definition of sustainability was provided by the Brundtland Commission of the United Nations in 1987, formerly the World Commission on Environment and Development (WCED). The Commission’s report, Our Common Future, contains the oft-quoted sentence, “Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” Inherent in the definition is the understanding that sustainable development contains three distinct constituent parts: environmental sustainability, economic sustainability, and socio-political sustainability. The term “triple bottom line” was coined in 1994 by John Elkington, who later expanded on it in his 1998 book Cannibals with Forks: the Triple Bottom Line of 21st Century Business. The concept requires a company to be responsible to “stakeholders” rather than shareholders—stakeholders being everyone who is influenced, either directly or indirectly, by its actions. Under stakeholder theory, the business should be a vehicle for coordinating stakeholder interests, rather than maximizing shareholder profit alone. Wherever mining takes place it is subject to regulations requiring environmental impact assessment, environmental management plans, mine closure planning (which must be done before the start of mining operations), and environmental monitoring during operation and after closure. All this is as it should be, but the risk remains that governments in the developing world, where mineral resources are often found, may not be consistent in their enforcement of these regulations. At the Rio Earth Summit in 1992 a draft code of conduct for transnational corporations was proposed by the UN Centre for Transnational Corporations (UNCTC), but counter arguments for self-regulation prevailed, paving the way for the Global Mining Initiative established by nine of the largest metals and mining companies, and the subsequent formation in 2001 of the International Council on Mining and Metals (ICMM). “This is a CEO-led organization and its aim was to set up a platform to promote sustainable development in the industry and enable mining companies to share best practice,” explained Philip Woodhouse, head of sustainable development at Gold Fields, one of the world’s largest producers of gold, and an ICMM member. The ICMM now combines 18 mining and metals companies as well as 30 national and regional mining associations and global commodity associations with interests at over 750 sites in 58 countries. All the major players are involved,

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“It takes years to build a compa and it takes only one or two i you don’t want to get into tho

including Barrick, BHP Billiton, Anglo American, Goldcorp, Newmont, Rio Tinto, Xstrata, Sumitomo Metal Mining, Teck, and Vale. Gold Fields is based in Sandton, Johannesburg, with operational gold mines in South Africa, Ghana, Australia and Peru. It has a long history of commitment to the environment and to the local communities in which it operates. “Sustainable development is not new to us,” said Woodhouse. “We have been investing in things like environmental education, socioeconomic development and communities since the 1980s. But we’re now consolidating all of

Sustainability

any’s reputation, plank by plank by plank, incidents to destroy that reputation, so ose situations”

this into an overall sustainable development framework.” The economic advantages of energy efficiency, waste reduction and careful resource management are obvious, but Woodhouse is in no doubt that social sustainability is good business practice, too. “In each country where we operate we’ve set up a foundation dedicated to socio-economic development within the community,” he explained. “The days have long gone when commodity sectors can simply rely on market forces to push their product. To me, it’s becoming increasingly important to brand yourself. We have in fact had government officials recognize us for what we do in local communities and actually invite us to mine in their countries, so our efforts

are bearing dividends. Responsible practices represent a competitive edge.” In parts of the world where stakeholders include indigenous people who occupy the land on which resources are found, their interests are now taken into account much more seriously than in the past. This was made clear to me as long ago as June 2007, when Jim Gowans, president and CEO of De Beers Canada, told me about the upcoming opening of the Snap Lake and Victor mines, De Beers’ first diamond mines outside of Africa. Canada’s First Nations people are becoming

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increasingly effective in negotiating Impact Benefit Agreements, and both Snap Lake and Victor were subject to four IBAs. “That adds another level of complexity but it’s not unique to diamond mining,” said Gowans. “If I was operating a base metal mine in the same area, the same conditions would apply.” Some of the First Nations tribes have considerable experience with IBAs now, and the agreements are becoming more sophisticated. “The first ones, Gowans explained, “were all about simple payments, training, education and jobs.” Some also wanted payment for the right to work in their traditional lands, he said, almost like granting a license to operate. But as the number of mines in the locality increased, so the needs of the people changed, too. “With other mines already operating, jobs are less of a priority than they were when the first agreements were negotiated,” Gowans explained. “So are education and training, which other mines are already doing. Business development has now risen up the agenda, joint ventures with aboriginal corporations, and revenue sharing based on cash flow, or net revenues from the property.

“If they have been getting education and training from one company, perhaps they want business opportunities from another,” he continued. “It’s part of their overall strategy. Their first priority was to get people hired and working and educated and now it’s long term business development. It changes quite a bit.” Concern for local populations is equally evident in Africa. Golden Star Resources has spent the past 10 years on gold exploration and mine development in Ghana. “We commit a percentage of our resources to developing sustainable businesses and jobs,” said COO Scott Barr, “with the aim that when we depart there will continue to be something for the people to do.” Funding is managed by GSR’s Development Foundation and projects are selected by a committee formed by community leaders. All the usual needs are being tackled, such as healthcare facilities, schools, roads and markets. One initiative that Barr is particularly proud of is the oil palm project which won the 2008

“Whenever I leave a job or a project, I want to leave that community in a better position than it was in before I got there”

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Sustainability

“The days have long gone when commodity sectors can simply rely on market forces to push their product. It’s becoming increasingly important to brand yourself. Responsible practices represent a competitive edge” Nedbank Capital Green Mining Award. With the help of the local authorities and chiefs, GSR acquired access to land around its mines, which it planted with oil palms to create a sustainable local industry. “The local chiefs then identified suitable local smallholders and we allocated them four-hectare parcels of planted land— enough for a family group to maintain,” Barr explained. “But this is really only the beginning of the initiative. We have several hundred hectares of land under cultivation so far, and a long line of people waiting to step into the scheme. And at some point in the future, we may consider building a common palm oil processing plant for the community.” From the point of view of environmental sustainability, water management is a major issue. Mining often takes place in arid and semi-arid regions where water threatens to become a limiting factor for future mining operations. Even in regions where water is not yet considered a scarce resource, the impact of mining on natural water quality and its availability for industry, agriculture or domestic use is a major concern for the surrounding community. The mining sector in Chile has been particularly proactive over the use of water (and other aspects of sustainability). Members of the Chilean Mining Council, for instance, signed a Clean Production Agreement in 2000, which includes voluntary commitments for water efficiency and consumption, as well as energy efficiency, reduction of greenhouse gas emissions, industrial solid and liquid waste management, acid drainage and mine closure management. Audited results show a 33 percent reduction in water consumption per metric tonne of copper production over six years, from 90.98 cubic meters in 2000 to 60.72 by 2006. Many of Chile’s mining operations are located in arid desert, so its mining industry is promoting new technologies for water exploration, higher recirculation, more efficient use and new water sources. Antofagasta, the country’s largest privately owned copper mining company, has decided to use pumped seawater for its entire industrial processing operation on its Esperanza project. When it acquired the mine, president and CEO Marcelo Awad told us, Antofagasta also acquired water rights to

aquifers in the area, but had never obtained permits to pump the water. Switching to seawater undoubtedly helped the project win relatively quick approval from environmental regulators. Esperanza is the first large-scale mining project in Chile to use pumped seawater, and involves an 87-mile pipeline from the seashore to the project site. This is a massive and complex undertaking, especially considering the unfavorable topography and the 2,400 meters (7,200 feet) of elevation change which required four pumping stations along the line. There is no doubt that leading mining companies are successfully integrating sustainability into their overall strategies, partly out of the necessity to comply with an increasingly environmentally conscious regulatory environment, partly for the obvious economic advantages of efficient operations, but also for the intangible but undeniable benefits of creating a socially acceptable brand that will leave a positive legacy after a mine has closed, opening doors for future mining permits wherever the next discovery is made. But let’s not overlook the feel-good factor here. All the mining executives we have spoken to about sustainability are enthusiastic about what they are doing. They want their businesses to be successful, they believe that a sustainability strategy will help to achieve that goal, and they are passionate about it. Let’s give the last word to Tom Netscher of Newmont Mining. “I couldn’t work in this industry if I was destroying the environment or if I wasn’t advancing local and indigenous people,” he concludes. “Whenever I leave a job or a project, I want to leave that community in a better position than it was in before I got there, across the entire spectrum of issues. If I don’t believe that honestly myself, then it’s time to hang up my boots. And I look for that sort of thing in the people I hire as well.”

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Letšeng Diamonds

Letšeng Diamonds produces the highest quality white diamonds of anywhere in the world. Jane Bordenave investigates the challenges associated with extracting them and how the company is working to overcome these

etšeng Diamonds was registered in 1995 and granted the mining lease in 1999. The Letšeng Diamond mine is the highest diamond mine in the world at over 3,000 metres above sea level. It is also the producer of the highest quality kimberlite diamonds globally, with an average market value of over $1,700 per carat—nearly 20 times the market average.

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Letšeng Diamonds

While commercial production began at the site in 2004, Letšeng Diamonds is not the first company to carry out extractions in the area. Initial exploratory work was carried out at the mine in 1936 and until 1986, it was operated by diamonds giant, De Beers. When the facility closed due to adverse economic and market conditions, it spelled the end of the diamond mining industry in Lesotho for 13 years, until Letšeng Diamonds was granted the mining lease in 1999 and began commercial production in 2004. The company has two shareholders, Gem Diamonds Ltd and the Government of Lesotho. The whole operation, managed by an experienced management team, is overseen by Mazvivamba Maharasoa. “I have been involved in Letšeng Diamonds since its inception, working as part of the

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Letšeng Diamonds

“We are looking into the opportunity of adding value to our own product, by participating downstream—cutting and polishing our own stones to sell as a finished product” government legal team and later sitting on the board as a government-appointed director,” she says. “I came on board full time in 2007 in the position of resident director and am now the CEO.” Despite the fact that the mining industry is largely male dominated, Maharasoa showed herself to be the right person for the job and was appointed CEO in 2009. Although the Letšeng mine is characterised by a low-grade ore body, producing less than two carats per 100 tons, it is also renowned for producing some of the largest diamonds, such as the 603.5 carat Lesotho Promise, the 493 carat Letšeng Legacy and the 478 carat Light of Letšeng —the thirteenth, sixteenth and seventeenth largest white diamonds

ever found, respectively. There are, however, certain difficulties associated with extracting diamonds from the Letšeng mine. The location of the mine itself presents some logistical challenges due to its geographical location and altitude. The facility is subject to severe bad weather, particularly during the winter months. At these times, temperatures can reach minus 30 degrees Celsius, which can present technical problems, as well as being potentially uncomfortable for the workforce. To overcome these problems, the company has implemented various systems, such as ensuring that the site is self sufficient in terms of water supply and that it has back-up power. Additionally, the site only has one main access road,

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Letšeng Diamonds

“In five years, I hope to have seen growth in the region of 30 to 40 per cent and the business working as a highly efficient operation” which is very mountainous and is shared with the entire northern district of Mokhotlong. When moving heavy equipment into the site this can cause logistical challenges; but fortunately, bringing heavy machinery onsite is not a day-to-day occurrence. Processing ore and liberating the diamonds is the company’s core business, and thus Letšeng’s most recent large capital investment was the construction of a second ore processing plant at the mine. The $50 million project ensures that the diamonds are liberated and processed carefully but rapidly. The diamonds are then sorted and securely transported for sale in global markets. Most of the management’s energy is focused on geological surveys and monitoring the ore body. “Keeping an eye on the resource is an important part of any mining plan,” says Maharasoa. “However, due to the grade and resultant margins, we have to

pay very close attention to this area and allocate additional resources.” Aside from the geology and geography of the mine, another challenge that the company has faced is a severe skills shortage in the country. “There are two reasons for this problem,” says Maharasoa. “Firstly, there is a lack of adequately qualified and experienced engineers globally. While we are a Lesotho-based outfit, we compete on the global diamond market and all of our competitors are looking for the same skills sets to work in their mines. The number of skilled engineers has decreased significantly in the past few years, so it really is a problem for everyone.” This is compounded by the second issue—a local lack of experience in commercial mining. When the mining business dried up in Lesotho during the mid 1980s, the skilled workers moved into other areas such as South Africa, leaving

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Letšeng Diamonds

Lesotho high and dry. To overcome this issue, Letšeng Diamonds invests in the skills set of the local Basotho to increase the pool of human resources available. “Currently we have 23 students who we are putting through tertiary education,” explains Maharasoa. “They are being trained in mining-specific skills such as mining engineering, geology and so on. We have reached a stage in this programme where we are beginning to reap the rewards, and have recently employed four graduates from the scheme.” The company has also set up several community investment schemes to benefit the population as a whole, not just those employed by the mine. The north

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Letšeng Diamonds

Maseru Business Machines Maseru Business Machines (the official and only Xerox distributor in Lesotho) has been a supplier of office automation to Letšeng Diamonds for more than a decade. When quality is paramount and no compromise can be made on service, isn’t it good to know that one company in Lesotho can deliver on all its promises— continually taking your business to new heights.

of Lesotho is particularly known for its wool and mohair farming, so Letšeng Diamonds has decided to invest in this area to assist commercial enterprise. Additionally, it has developed infrastructure to enable a local community to develop a thriving eco-tourism business. “Education and enterprise development are sustainable and extremely important to us and we aim that, when the mine eventually

runs out, these businesses will be around for a long time afterwards,” says Maharasoa. So where does Maharasoa expect to see Letšeng Diamonds in five years’ time? “We are working to optimise our business right now to enable future growth. In five years, I hope to have seen growth in the region of 30 to 40 per cent and the business working as a highly efficient operation. We are also looking into the opportunity of adding value to our own product, by participating downstream—cutting and polishing our own stones to sell as a finished product. This is something I hope will be an established contributor to our bottom line by 2015. And, of course, we are looking for the opportunity to increase production.” A diverse company indeed, providing a diverse future for both itself and the wider community. It’s not a claim every diamond mine can make; but it is a claim that this jewel in the crown of diamond production certainly can. www.letsengdiamonds.co.ls

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Pure gol Newmont Mining Corporation’s Boddington mine in Western Australia is set to be the biggest producing mine in the country, but is not losing sight of its ethical responsibilities, David Hendricks hears

ustralia is a land blessed with natural resources. It is the world’s second largest producer of gold, with 58 producing gold mines, of which the Super Pit, a Newmont/ Barrick Gold JV at Kalgoorlie, Western Australia, is currently the largest. But not for long. For its part, Denver, Colorado-based Newmont Mining Corporation is the world’s second-largest single gold mining company, with significant assets or operations in the United States, Australia, Peru, Indonesia, Ghana, Canada, New Zealand and Mexico. The Asia Pacific region will shortly become the company’s largest production region when the Boddington mine in Western Australia overtakes the Super Pit. Officially reopened on 3 February 2010 the mine is expected to become Australia’s largest gold mine once it reaches full production.

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Newmont Asia Pacific

ld MINING SECTOR www.bus-ex.com

Newmont Asia Pacific

ABB Switzerland Ltd For twenty years ABB Switzerland Ltd and Newmont have been successfully running a close business partnership in the field of mining precious metals. Newmont and ABB have put to work numerous mining projects in Indonesia, Australia, South America and the USA. ABB supplied gearless mill drive (GMD) and high pressure grinding roll (HPGR) systems for customized grinding applications. During the cooperation both partners have constantly enhanced and refined the engineering technology and improved management methods and know-how in the industry. Both partners look forward to tackling new challenges jointly, to respond to the growing demand of the market.

“For a while we’ll be producing nearly half the volume of Newmont’s global gold output— approximately two and a half million ounces annually,” says Tim Netscher, senior vice president of Asia Pacific operations. “Of course, gradually we’ll have projects coming up in other

regions, and the volume from this mine relative to the company’s total production will go down. And Boddington will also produce a fair amount of copper.” Mining began at Boddington in 1987, when Billiton (now BHP Billiton) was the main owner and also owned the Worsley Alumina refinery, a largescale processing plant about 150 kilometres away on the coast. Boddington has changed ownership over the years, and in 2001, when the market for gold was in decline, mining at Boddington was stopped and a maintenance program put into effect until 2006, when an expansion was begun by joint venture partners Newmont Boddington Limited (two-thirds) and AngloGold Ashanti Australia Limited (one-third). Three years later Newmont bought out its partner. Since the best gold at Boddington has been mined in its early years, the remainder is a lowergrade ore, and the priority now is to move and process large volumes of material. The mine is sizable enough to allow a large-scale operation, with the processing plant within conveying distance from the mine. “The mine has to be large in order

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Newmont Asia Pacific

Bucyrus Bucyrus is a world leader in the design and manufacture of high productivity mining equipment for surface and underground mining. Bucyrus draglines, rope shovels, hydraulic excavators, drills, and trucks are used for mining coal, copper, iron ore, oil sands, and other minerals in surface mining applications. Bucyrus automated longwall and room & pillar equipment is primarily used for mining coal in underground mining applications, while the Bucyrus Highwall mining system links surface and underground coal mining operations. Bucyrus belt system solutions are used in both surface and underground mining applications for all bulk material handling requirements.

“For a while we’ll be producing nearly half the volume of Newmont’s global gold output—approximately two and a half million ounces annually” to make the economics work,” says Netscher. “The key to success is sufficient scale and world-class operating techniques, in terms of double-sided loading of trucks, efficiency in use of the amount of cyanide per ton of gold, and other measures. “We have benchmark standards that we have to deliver to. We’re mining around one gram of gold per ton of ore, with large-scale equipment. At full production, we’ll be moving 10 million tons of material per month. In a month, we will process about what we process at our Jundee and Tanami mines in one year, and at Waihi in two years. That gives an indication of the size of the processing plant. The only other mining operation this size in our portfolio that moves comparable quantities of material is Batu Hijau in Indonesia.” Netscher reflects with pride on the evolution the mining industry has undergone over the decades. With over 35 years’ experience in the business himself, including gold, copper, nickel, cobalt, coal and platinum group metals in South Africa, Indonesia, the US and Australia, he’s seen the giants like Newmont embrace a smarter way of mining, learning a better way of using resources, of improving energy consumption, water use, safety, relations with local communities and indigenous peoples, environmental concerns and regulations, sustainability, and the other factors that are changing the image of an industry that historically had a track record of being not exactly the most socially and environmentally responsible.

“To put it into context, I’m spending more than half my time on what we call the soft issues. And the same applies to my counterparts in Newmont’s other regions. If we’re developing a new mine project, associated with it are hard measures such as on-time delivery, on-budget delivery, fit for purpose and so on. In this industry 25 or 30 years ago, that would have been typical. Today it’s less than half the focus, because the majority of our effort is on those other issues. And we have no choice ethically or legally except to do those properly. Quite frankly, it takes years to build a company’s reputation, plank by plank by plank, and it takes only one or two incidents to destroy that reputation, so you don’t want to get into those situations. You simply have no choice but to devote the time to them. “I’ve been very fortunate in my career,” Netscher continues, “in that I’ve been exposed to those soft issues in various countries, so I understand cultural sensitivity and I honestly believe in those things. I couldn’t work in this industry if I was destroying the environment or if I wasn’t advancing local and indigenous people. Whenever I leave a job or a project, I want to leave that community in a better position than it was in before I got there, across the entire spectrum of issues. And if I don’t believe that honestly myself, then it’s time to hang up my boots. And I look for that sort of thing in the people I hire as well.” www.newmont.com/asia-pacific

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A positive

impact W

estern Australia is a vast, arid region that on the face of it offers little encouragement for prosperity. Yet in 1893, the discovery of gold near Kalgoorlie-Boulder was the catalyst for an oasis. Since 1893, when Irishman Paddy Hannan first made his famous discovery, more than 55 million ounces of gold have been mined from what became known as the Golden Mile. For many years the site was split up

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As operator of the largest Consolidated Gold Mines h sustainability, its employee Andrew Pelis finds out mor

Kalgoorlie Consolidated Gold Mines

gold mine in Australia, Kalgoorlie has a positive approach towards es and the surrounding community. re MINING SECTOR www.bus-ex.com

Kalgoorlie Consolidated Gold Mines

Emco The Emeco difference Since 1972 Emeco has been a leading supplier of heavy earthmoving equipment solutions for the global mining and heavy construction industries. Our dedicated team of service focused experts has extensive technical expertise in equipment rental, machinery sales, parts, maintenance, and asset management. Regardless of how big or small your project our team will leverage its global expertise and networks to deliver the right equipment solution for your needs. Call us today to discover the Emeco difference.

into various mining activities, until businessman Alan Bond (of America’s Cup fame), began buying up the individual leases to create one big pit, in order to mine the area far more economically. Bond failed to complete the takeover but in 1989, the entire area was combined as a single, amalgamated site (the Super Pit) under the management of Kalgoorlie Consolidated Gold

Mines Pty Ltd (KCGM) to manage the assets and operations of joint venture partners Normandy Ltd and Homestake Gold of Australia Limited. Today the Fimiston Open Pit, colloquially known as the Super Pit, is Australia’s largest open cut gold mine. It is located off the Goldfields Highway on the south-east edge of Kalgoorlie-Boulder, Western Australia. “We are a twenty-one year old

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Kalgoorlie Consolidated Gold Mines

gold mine and we also mine a small amount of silver,” says Russell Cole, general manager at the Super Pit. “Today we’re a fifty/fifty joint venture between Barrick Gold Corporation and Newmont Mining Corporation.” The Super Pit is currently the largest gold producing mine in Australia—it is 3.7 kilometres long, 1.6 kilometres wide and will have a depth of 660 metres when finished. “We also operate an underground mine at Mount Charlotte that runs to a depth of 1.2 kilometres, which has been functional for 48 years,” says Cole. KCGM currently produces up to 800,000 ounces of gold each year, with the on-site process plant working through 13.5 million tonnes annually. Cole cites historical activities as one of the major current operational challenges. “We are the fourth generation of mining to go through the area— there has been lots of mining activity here over the last 110 years. A significant amount of alluvial work and underground mining took place in the past and the old pits do present an extra hazard to us; we run three extra drill rigs to confirm where the old holes are located.” However, KCGM has been able to draw on the considerable experience of the two corporations that own the venture, implementing safety measures to world class standards. “We have two owners and each has its own unique initiatives on safety and continuous improvement—it’s a luxury having two corporate offices to draw on. We also follow ISO standards,” explains Cole. An important part of that process is ensuring that KCGM’s 700-strong workforce (as well as its 400 long-term contractors) is well-informed on operational developments and how they impact upon safety and the environment. “We run training courses, with the majority done in-house,” Cole explains. “We have an integrated approach with regular refresher courses covering safety and operations, environmental and community relations training—our view is that you need to develop your workforce.” Staff retention can be a challenge but Cole suggests KCGM has a unique advantage in terms of recruitment. “We are potentially entering another boom cycle and we insulate ourselves a little bit having a large city close by. Most of the other sites around the country are remote and we are able to recruit people that want to live in the city.”

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Kalgoorlie Consolidated Gold Mines

Part of the company’s drive to develop its workforce has been to instil a distinctive set of company values. “We have six core values that embody all that we do and we say to our workforce that if any activity doesn’t align with our company values, we question whether we should be doing it.” These core values are a very important part of KCGM and the foundations upon which its culture is built. “They have been designed to create a clear understanding of what is important, valued and acceptable at KCGM and cover good practices in safety, the environment and social responsibility; an ‘ownership of the company’ mindset and an awareness of the need to act with a sense of urgency in a safe, timely manner,” Cole affirms. Investment in fleet at KCGM is currently continuing apace, with plans to acquire six new trucks and two new hydraulic shovels in the next twelve months, adding to an impressive range of trucks, shovels, wheel holders, graders and wheel dozers. Cole says there are a number of suppliers who operate an on-site service, providing maintenance on their machines. With a long-term investment approach from its owners, KCGM recently announced it has extended the mine life out to 2021, following extensive consultation with the local community. “We have just started the last of the cutbacks involving cutting back one side of the pit; and the exploration department is looking at ways to further extend the mine life,” Cole explains. He is quick to reassure that any future expansion will not adversely impact near neighbours. “There is an urban myth that the gold seam runs underneath the city, but in reality it runs from north to south. We have a good, positive relationship with the local community, and we take great care to ensure

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Kalgoorlie Consolidated Gold Mines

that our operations don’t impact upon them.” Existing planning indicates the Super Pit will close in 2021, and the company is investigating ways to economically extend the life of the mine beyond that date. However, the company recognises the importance of involving the local community in the closure conversation. “We are at the point where we have a long-term sustainability programme, but our main focus is to define where the end of the mine life could be and to talk to people about what the site could be when we leave. “Talking about closure will help us understand important community views on what KCGM should be doing to ensure that if we do close, our withdrawal from the community is done in an agreed way with agreed outcomes,” he concludes. http://superpit.com.au

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Keeping

Goldcorp’s Musselwhite mine complex has been a major producer of gold since 1997 and has long been seen as an example of how mining operations can peacefully co-exist with First Nations peoples. Keith Regan learns from the mine’s general manager how the foundation is being laid for possible production expansion to feed the continued record-high demand for gold

ince it went into operation in April 1997, Goldcorp’s Musselwhite Mine has produced more than 2.85 million ounces of gold, including more than 230,000 ounces in 2009 alone. Now one of the most remote mining operations in the fast-growing Goldcorp operational portfolio, the mine continues to feed a hungry market while its owners explore opportunities for maximizing output as the operation continues up to and possibly even beyond the current expected mine life target date of 2018. The Musselwhite Mine has evolved over the dozen-plus years since it opened, with trucking to the surface being augmented in 2003 by a conveyor system as the mine moved to ever-deeper parts of the ore deposit. And now Goldcorp is looking ahead to its next major infrastructure improvements that will pave the way for extending the mine or increasing production in the meantime.

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Goldcorp: Musselwhite Mine

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Goldcorp: Musselwhite Mine

Windigo Catering LP Message from the President The Board of Directors of Windigo Catering LP is very proud of its business success and the dedication of the many staff who work diligently to provide high quality food and housekeeping services to our customers. Since the mid-90s, Windigo Catering LP has enjoyed and profited from a cooperative working relationship with Goldcorp’s Musselwhite Mine, and looks forward to maintaining this. We are enthusiastic to sustain the ‘forward motion’ of business growth, and to continue working towards the economic and investment goals of the Windigo Council Chiefs and their people. Working together; growing together. Frank McKay, President

“We plan to use this year to continue to do our exploration and understand what we have, and get even more confidence on what we have ahead of ourselves so we can make that right decision,” says mine general manager Gil Lawson, who worked for former mine owner Placer Dome when it brought the project through the feasibility process and helped bring it into production in the mid-1990s. “We’re studying different options on what the next 10-year material handling approach will be, whether that’s a new shaft, continued trucking or an expanded conveyor system.”  Even as it prepares for that decision, Goldcorp is constantly investing in the mine, having sunk C$90 million into the operation in 2009 alone, with upgrades to the mine’s ability to handle additional tailing capacity and upgraded underground ventilation installed. The mine’s heavy equipment fleet is also constantly being updated through partnerships with manufacturers such as Caterpillar. Lawson says Goldcorp is also in talks with regional authorities about ways to improve the existing hydroelectricity grid in the northern reaches of the province of Ontario, a grid to which the mine is currently connected via a single transmission line that runs along the allseason road built when the mine was under construction. To provide additional capacity and redundancy until that upgrade can happen, the mine has installed 8 megawatts of diesel-powered generating capacity. “We’d rather not rely on that long-term because it does add to our cost profile, but it at least gives us

the capacity we need as we work with the First Nations communities and the government to look at various options for bringing more capacity into the region,” Lawson says. “Overall, we feel we are in great shape as far as our infrastructure goes right now.” Musselwhite is one of almost 20 active gold and silver properties in the Goldcorp portfolio worldwide and one of three active operations, along with mines at Red Lake and Porcupine. Goldcorp also has a fourth Canadian mine under development at the Éléonore Property, where extensive exploratory drilling took place during 2008 and 2009, as well as operations or projects in development in the United States, the Dominican Republic, Argentina, Mexico and Honduras. Goldcorp recently announced that it ended 2009 with probable and proven gold reserves of 48.8 million ounces and another 1.3 billion ounces of silver. Musselwhite, located on the southern shore of Opapimiskan Lake, more than 180 kilometers from the nearest town of Pickle Lake, Ontario—which has a population of less than 500 people—and almost 500 kilometers north of Thunder Bay, has long been seen as a model for its First Nations relations. The Musselwhite Agreement, forged in the mid-1990s as the mine was being planned, places priority for Goldcorp to employ First Nations from signatory communities and support business development. The mine currently contracts with a local First Nation-owned business that provides catering and cleaning services. In addition, the main air charter service used to

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Goldcorp: Musselwhite Mine

Rector Machine Works For over 75 years Rector Machine Works has provided Canada and the US with quality workmanship and excellent service within the mining, steel, forestry and power generation industries. Our decades of experience give us a competitive advantage in mechanical manufacturing, installation and repairs. Rector Machine Works appreciates doing business with Goldcorp and looks forward to continued success and momentum for new opportunities and mutual growth.

move employees and cargo in and out of the mine— an all-season road is used solely for large, truck-based deliveries of mine equipment and supplies—is a First Nation-owned firm. “In terms of those relations and agreements, this mine has pretty much set the standard on how to do things properly,” says Lawson. The agreement also includes environmental remediation and monitoring of the lake and other waterways surrounding the mine site. “We take a lot of pride in the cooperation we have earned from our host communities.” The resource at Musselwhite is not as high in grade as some other Goldcorp mines, meaning there is pressure to increase overall throughput of ore while keeping costs in check. Ongoing programs focus on energy management and reducing the use of consumables. “This resource requires that we focus on throughput and production rates. Moving rock is not for free, and

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Goldcorp: Musselwhite Mine

B&D Manufacturing B&D Manufacturing has been designing innovative products and technologies since 1980 that focus on increasing production and improving safety for industries globally. Committed to customer satisfaction, B&D has been proudly supplying Goldcorp Musselwhite Mine with products and services since 2001 including aluminum safety products, crusher repair services and a portable align boring machine. B&D wishes Goldcorp Musselwhite Mine continued business success.

we have to guard that bottom line and try to do things efficiently,” Lawson says. “Our mantra is always about operational excellence. We know we can never change the cost structure unless we make changes to what we do. We’re constantly examining what we do and trying to engineer ways to do things better and cheaper.” Partnerships with suppliers are another key element of keeping costs stable and low. “We’re always negotiating with suppliers for best pricing and forging partnerships that take the long view,” Lawson says. “We plan to be around for a while, and our suppliers know and appreciate that.” Alliances with heavy equipment providers help keep fleets young and costs down. A program to replace older equipment got under way in 2007 and resulted in a new fleet of mucking equipment, a new hauling fleet, and soon the replacement of

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Goldcorp: Musselwhite Mine

support vehicles such as scissor lifts and boom trucks. The mining approaches have changed over the years that Musselwhite has been in operation, but no major technique changes are anticipated going forward. One area of possible future mining activity may require backfilling with cement-like fill to support ore removal. “We’ve perfected the processes we need to follow to mine this property,” Lawson says. “It’s just a question of matching the best approach to get the most out of the resource while keeping our cost profile as low as possible.” While the resource is large, the most valuable asset at Musselwhite may well be the people who operate the mine and related operations. Most of the workforce works at the remote location on a two-week-in, twoweek-out schedule. The workforce is a blend of First Nations peoples and miners from elsewhere in Ontario as well as more distant provinces such as Newfoundland

and British Columbia. “Those people are our greatest strength,” Lawson says. “It’s just an incredible team.” He credits Goldcorp’s solid reputation as a great place to work and the investment that Goldcorp has made in both mine infrastructure and training and workforce development. An extensive health and safety program at Musselwhite helps keep the mine safe, and its mine rescue team recently reached the finals in the Ontario Provincial Underground Mine Rescue Competition. “We’re the lowest cash-cost gold company out there, so we have that capacity for the large-scale investment that’s required to make a facility a safe, clean and positive place to work,” Lawson adds. “Miners know we have the stability and resources, and that’s appealing in an industry where they otherwise might have to move more often to chase the work. They know if they come to work here, they will know where they’ll be working for a good number of years.”

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“We know we can never change the cost structure unless we make changes to what we do. We’re constantly examining what we do and trying to engineer ways to do things better and cheaper”

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Goldcorp: Musselwhite Mine

As it looks to plan the proper infrastructure going forward, the mine is looking to move into several new zones of gold-bearing ore. Areas dubbed the “Thunderwolves” and “Moose” zones—named by mine employees after regional hockey teams they cheer for—have shown promise for future exploration. Goldcorp invested around C$10 million on drilling and other exploration efforts at Musselwhite in 2009 alone. “For the past 12 years we’ve been working in our core resource, and now we’re starting to look beyond that and see where some new opportunities might be available to us as we look to keep the mine producing at the highest levels possible,” Lawson states. “We know the mine is going to be around a number of years more,” Lawson adds. “The question we’re really trying to answer now is how much growth in capacity do we have available to us and what the best way to go about getting that ore out of the ground will be. It’s not so much a question just of longevity but what the potential for growth in output is in the years in between.”

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Steady

prod

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New Gold, Inc.: Mesquite Mine

duction Its location near the farmlands of inland Southern California has made the Mesquite Mine unique in the gold mining industry ever since production began in 1986. Now owned by New Gold, Inc. thanks to a recent business combination, the mine has the financial backing and resources it needs to remain viable for years to come, as Keith Regan learns from the mine’s general manager, Cory Atiyeh

esquite Mine found its way into the New Gold portfolio in 2009, when the company completed a business combination with Western Goldfields, Inc. It now stands as a key part of New Gold’s global strategy, which includes operations and assets in the United States, Mexico, Australia, Canada and Chile. Mesquite has been actively producing gold since the mid-1980s, though the mine was not active for a short time before Western Goldfields restarted operations in 2007. The open-pit mine is unique for its location in California’s Imperial County, a region in the southeast corner of the state best known for agricultural production.

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New Gold, Inc.: Mesquite Mine

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Having New Gold take over the mine means strong support and access to valuable resources and expertise, says vice president and general manager Cory Atiyeh, who has been on the site for some three and a half years. “It has been a very beneficial transaction,” he says. “New Gold has been very supportive not only with technical assistance but also with a culture of and focus on continuous improvement.” Most recently, Atiyeh adds, New Gold invested in two new haul trucks that in the short term boost the amount of ore being hauled to

the processing facility and in the long term improve the overall reliability of the haul fleet. Over the course of the mine’s history, production has ranged from 140,000 ounces of gold to 200,000 ounces annually. Production in 2010 is estimated at 145,000 to 155,000 ounces—a strong output given the record-high gold prices being seen on the worldwide spot market. According to Atiyeh, the mine is believed to have 10plus years of life left at current production rates, though New Gold has planned additional exploratory efforts currently under way that could extend that life. At some points during its history, Mesquite used an ore-crushing process, but it now focuses on a run-ofmine, heap leach operation approach. Ore is drilled and blasted within the open-pit mine, loaded on trucks and subsequently transported to the leach pad, which leads to a new conventional carbon-in-column recovery plant. This plant was replaced as part of an upgrade completed by Western Goldfields before the mine was restarted. The company estimates total production costs for 2010 to be between $540 and $560 per ounce. Mesquite currently employs approximately 260 people, and early on, virtually all the miners hired had

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to be trained from scratch in mining operations. “The main industry in this area is agriculture, and there aren’t really any other mining operations in the vicinity,” Atiyeh notes. Some experienced miners were brought in from Arizona, Utah and other nearby states. “We did a lot of training and we had a lot of success with getting people up to speed quickly on the operational side of mining.” That training has included a heavy emphasis on safety, something New Gold emphasizes at all its locations. “Even though about 70 percent of the people who work with us had never seen a mine before they came to us, we have an injury frequency rate that is below the national average for a mine of our size. We take a lot of pride in that, though we know we can always do better.” Mesquite is now one of three active gold mines in the New Gold portfolio, along with Cerro San Pedro in Mexico, which produced about 100,000 ounces of gold and more than 1 million ounces of silver in 2009, and Peak Mines in Australia’s New South Wales territory, which was expected to produce 100,000 ounces of gold and up to 15 million pounds of copper this year. New Gold also owns several development projects, including the New Afton underground gold-copper mine site in Canada and the El Morro Development Project in Chile, where it is a 30 percent joint venture partner with Goldcorp Inc. The Mesquite Mine’s location in California—at the base of the Chocolate Mountains, about 50 miles northwest of Yuma, Arizona, and 35 miles east of Brawley, California—has exposed it to more stringent environmental regulation and permitting requirements than in jurisdictions where mining is more common. “As you could guess, being in California we are very tightly regulated,” Atiyeh notes. “That’s just a fact of life that comes along with our location.” New Gold’s current production got a boost from an earlier decision made by past owners. Although production was shut down in 2001 due to lower gold prices that made the mine’s cost profile less attractive, the decision was made by then-owners Newmont Mining Corp. to continue to press forward with applications for permits to expand production at a later date. Western Goldfields was able to boost production rates when it restarted the mine as a result. “From a startup standpoint, that decision to press for needed permits for expansion was very beneficial.” Looking ahead, New Gold may endeavor to expand production further at the site, with an eye toward finding an alternative processing method to handle the sulfide resources that lie beneath the pits now being mined. “We have a permit application submitted to expand slightly, but for now we’re focused on getting the most out of our current operations, working safely and maintaining our strong environmental record,” adds Atiyeh. www.newgold.com

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New Gold, Inc.: Mesquite Mine

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Agnico-Eagle Mines Ltd.: Goldex Mine

xplosive production Agnico-Eagle Mines’ Goldex mine is unique in a number of ways, from its urban location to the techniques being used to reap the benefits of the low-grade gold ore deposit. Keith Regan learns from the mine’s general manager and its engineering superintendent how a hybrid mining approach, along with record-setting underground blasts, have helped the mine be economical, safe and a good neighbor

ate in 2009, the Goldex mine operation of Agnico-Eagle Mines Ltd. set a record when it detonated the largest known underground blast that impacted some 1.5 million metric tons (tonnes) of material. In March 2010, the mine was set to break its own record with a controlled blast of 1.8 million tonnes. Impressive as those blasts sound, what makes them all the more challenging is the mine’s location within the city limits of the northern Quebec city of Val-d’Or. “We’re about a kilometer and a half from the Wal-Mart and two kilometers from a McDonald’s and a shopping center,” says mine general manager Yvon Sylvestre. “And we’re just a stone’s throw from some residential neighbors, with houses as close as about 600 meters to the mine borders.” Planning for, managing, controlling and carrying out those blasts in a safe way that doesn’t negatively impact those neighbors is something the mine perfected with a lengthy ramp-up process that started with smaller explosions and used data from that activity to predict how the property would react to more intense seismic activity, says Marc Moffette, superintendent of engineering at the mine. “Over time we got to where we are very good at being able to predict the vibration levels around the mine,” Moffette says. The blasts are part of a unique hybrid process at the Goldex mine that essentially uses surface mining productivity techniques in an underground setting. That approach helped make it economically feasible for Agnico-Eagle to commence production at the mine after years of exploration and false starts. “This deposit has been known for years, but due to

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Agnico-Eagle Mines Ltd.: Goldex Mine

its low-grade nature, it has never been able to be mined economically,” says Sylvestre. Over the past three decades, the site had been explored on numerous occasions, with a ramp built in the 1970s, a shaft installed in the 1980s, and that effort expanded in the 1990s, each time only to have the owners flood the mine again because of economic realities. “It took some out-of-the-box thinking to make it possible. Adapting the ore body and its lowgrade nature to the hybrid mining method is key to the success of this project. We’re essentially mining a big open pit underground.” The solution uses bulk movement of the ore body and high-throughput processing rates to overcome the economic challenges of the relatively low-grade ore body. “The thinking in the past was always to highgrade the ore body zone, but we’re taking on a bulk approach,” Sylvestre adds. “The whole method has been set to having the lowest possible mining costs.” The mine is seeing processing costs of between $20 and $30 per tonne, compared to conventional mining costs of up to $100 per tonne in underground settings. “Those other mines might have better revenue per tonne, but the bottom line is that net value with the mining costs taken into account.” To help keep those costs down and to get more of the buried treasure to market while gold prices hover near all-time highs, the mine, which initially began operating in the spring of 2008, was recently expanded to handle 8,000 tonnes per day. Although blasting is scheduled to wind down by 2012, the mine’s life is expected to extend to 2018. The expansion at Goldex is part of a larger push by Agnico-Eagle to boost gold production to meet surging worldwide demand. Overall, five internal mining expansion projects are underway or

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Agnico-Eagle Mines Ltd.: Goldex Mine

have been recently completed, with the result being that the mining company expects to boost gold production to between 1 million and 1.1 million ounces annually by the end of 2010 while expanding its reserve base to as much as 21 million ounces on its properties in Canada, the US, Finland and Mexico. At Goldex, Moffette says, the high quality of the rock deposits on the property has helped make it possible to keep stope walls stable during extensive excavation and to use heavy equipment almost never seen in underground mine settings, including some of the largest excavators and rock crushers ever used underground. The mine is also designed to be as unobtrusive as possible to its neighbors, using an underground ventilation system and a surface footprint as small as possible. Ore is stockpiled beneath a dome that minimizes dust and noise. In addition, the decision was made early on to use a cyanide-free processing system, with a grinding gravity circuit system used in its place that poses less environmental threat to

the area neighborhoods as well as a nearby river. In addition to producing gold bullion on site, the mine also produces gold ore concentrate that is shipped to a sister operation at Laronde, which has a cyanide-based processing system in place. The result of that is tailings that can be safely reused and are in fact acid-neutralizing in nature. Through a partnership with the provincial government, Agnico-Eagle pipes those tailings some 24 kilometers to a former mining site known as Manitou. The basic nature of the tailings helps remediate highacid-content soils on that property and will result in it being reclaimed and with new vegetation introduced over time. “We took the money we would have spent building our own tailings facility and invested it in helping to restore that site much faster and at a much lower cost to the community,” says Sylvestre. “We’re helping to undo the sin of a mining past. We’re doing our part in every way we can to help improve the image of the mining industry.”

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Afric 72

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Avion Gold Corporation

casunrise

Two years after acquiring its first mineral properties in Mali, Toronto-based Avion Gold Corporation has gone some way towards its goal of producing half a million ounces of gold a year. COO Andrew Bradfield talks to Gay Sutton about progress so far

hy start from scratch and reinvent the wheel? That was the thinking of Toronto-based Avion Gold Corporation in early 2008, and the strategy has proven successful. The companyâ&#x20AC;&#x2122;s long-term vision, according to COO Andrew Bradfield, is to become a significant player in the gold mining sector, producing half a million ounces of gold a year. Now, just two years after acquiring its first concession, the company owns five gold bearing mineral properties, four in Mali and one in the neighbouring country of Burkina Faso. Mineral resources currently stand at 3.3 million ounces and that is likely to increase significantly if the results of recent exploration are anything to go by. Some 75 per cent of exploration drillings have intersected gold; new mine development sites have been identified; and resources across all five properties are progressively being evaluated upwards. Avionâ&#x20AC;&#x2122;s first acquisition, however, was critical to this success. With the entire world as a shop window, Avion set out to find a property that had previously been in production, and would therefore have site infrastructure in place. Tabakoto and Segala in Mali

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Avion Gold Corporation

CTA CTA is an international leader in procurement services with over 30 years experience in the mining sector. With headquarters in the heart of Europe, CTA adds value and expertise to the supply chain, moving core equipment to remote locations in a timely fashion and handling everything from capital purchases to customs arrangements and payments to inventory management. More recently CTA began to service the petrochemical, construction and plantation industries. CTA’s team of procurement experts is dedicated to cost saving, open book management and providing clients with all major brands at preferential rates.

and get the properties back into production quickly.” A large programme of exploration was initiated at Segala and Tabakoto in 2008, and continued through 2009, which increased the measured, indicated and inferred resources from just under one million ounces to 2.6 million ounces. Based on the exploration findings, the mine plan was to convert the existing and planned open pit mines on both properties into underground mines. “Our new resource model showed that the open pit potential—particularly at Tabakoto—was shallow and that the real future of these deposits was underground,” says Bradfield. Meanwhile, the strategy for getting the plant up and running began with a productivity improvement campaign. Using a core of staff who had worked for the previous company, Avion focused on studying and removing bottlenecks at the processing plant, improving

“Our new resource model showed that the open pit potential— particularly at Tabakoto—was shallow and that the real future of these deposits was underground” appeared to be a perfect match. In early 2008 they were lying dormant, but their previous owners had been producing 101,000 ounces of gold from them over a 20 month period. “We saw this as a great opportunity. It was a huge time-saver overtaking a grassroots property from basic exploration into production,” explains Bradfield. Avion acquired an 80 per cent stake in the two properties in May 2008—the remaining 20 per cent being retained by the Mali government. “Our strategy at that time was to undertake exploration, firm up the mine plan

both the recovery rate and tonnage throughput. In parallel with this, work was done to increase capacity of the tailings dam, and the hunt began for a mining contractor. “And this proved to be quite a challenge,” says Bradfield. “We planned to operate the mines as open pits for just two years and then to go underground,” he continues. “Most mining contractors like to work with a mine life of at least five years as they have to purchase equipment and then depreciate it.” Avion, however, struck lucky. A

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Avion Gold Corporation

Storm Procurement Our global locations ensure mining operations receive the best possible deal available. We work in unison with our clients on the implementation of more efficient management and administrative policies that form key features of the supply chain facility that we offer. You will be assigned an account manager who is committed to helping you enhance your business through technology, personal service and commitment.

Malian contractor had purchased equipment for a project in Senegal which was then cancelled. “They found themselves with a whole fleet of equipment and no project for it. We hired them, and it’s worked out well for both of us.” Avion’s gold production commenced in February 2009. It has not always been that easy, and much has been learned along the way. “One of the first things we came to terms with was the rate at which paperwork moves through various government ministries,” says Bradfield. “We therefore employ an ex-ministry person whose sole job is to keep in touch with the ministries and make sure our paperwork and applications are progressing through the departments.” 2010, however, has been a period of expansion for Avion. “Our short-term objective is to double the existing plant capacity at Tabakoto from 2,000 tonnes per day to 4,000 tonnes per day to meet the needs of our expansion programme,” explains Bradfield. Around $50 million is being invested in an extension to the Tabakoto plant, and the installation of a new SAG mill and ball mill to double the current capacity. Construction is due to commence in 2011 and the new plant should be up and running in 2012. Meanwhile, the company has continued to focus on its long term vision by engaging in an aggressive programme of acquisition. In January 2010 the company acquired Kenieba—a property lying adjacent to Tabakoto—from Great Quest Metals. That was followed by the acquisition of Axmin’s Kofi concession lying some 50 kilometres away, and then in July the deal was completed for Hounde, in neighbouring Burkina Faso. This year has also been remarkable for the success of Avion’s exploration. “We have an extensive $12 million exploration programme underway on all our properties, including the most recent one in Burkina Faso,” Bradfield says. “Our total resources to date stand at 3.3 million ounces. But with some rigs still drilling and a considerable

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Avion Gold Corporation

Industrial Supply & Support Industrial Supply & Support (I2S) supplies, amongst others, several mining industries in Africa with machinery, spare parts and consumables. The company also gives support to projects such as site development or workshops and seeks solutions to procurement departments. Since the reopening of the Semico mining operations, I2S has been a major supplier on all kinds of goods and materials.

number of assays still outstanding, there is more to come.” Currently around 75 per cent of drill holes have intersected gold and many have the potential for development. “Dioulafoundou, for example, is very close to the process plant and has yielded some fantastic results, with grades up to an average of six grams per

tonne in the largest of the open pit zones,” he reveals. “And it’s very rapidly shaping up to be an open pit mine with the potential to go underground.” Development of the site has already begun, permits have been acquired and the site is fenced off and ready for mining. “Our plan for the rest of 2010 is to complete this round of drilling by August, analyse the results and set out new mine plans by the end of the year.” In the long term, the programme of exploration will undoubtedly continue, year on year. The company is also looking to make further acquisitions in the region of West Africa,

building on the experience and knowledge gained over the past two years and utilising the upgraded infrastructure at Tabakoto. With significant successes under its belt, Avion has certainly gone some way towards achieving its vision of producing half a million ounces of gold a year. www.aviongoldcorp.com

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Changing

times

Moving to a new country and taking over the running of a new company can throw up challenges for even the most experienced of managers, as Alan Swaby learns

he new CEO of Highveld Steel and Vanadium Corporation Limited in South Africa has been in the industry long enough to remember when vertical integration among steel makers was the norm. “Then businesses went through a phase of focusing on core activities,” says Scott MacDonald, “and steel producers divested their iron ore mining interests. Once again, the wheel is turning full circle but Highveld is already there. We never went down that route; we have always processed the ore we mined ourselves and benefited considerably in the process.”

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Highveld Steel and Vanadium Corporation Limited

es MINING SECTOR www.bus-ex.com

Highveld Steel and Vanadium Corporation Limited

“Highveld has considerable respect among end users and we have to take full advantage of that” One of the benefits is that in its 50 year history, Highveld has been profitable every single year and in fact only ever lost money in the first quarter of this year. “Our oxygen supplier had a problem,” explains MacDonald, “and failed to deliver for three weeks. Production was hit badly, not only because of the lack of oxygen but also the need for a gradual thermal build-up once the situation stabilised.” In 2006, this long-standing record attracted the attention of Evraz, a Russian steel producer every

bit as vertically integrated as Highveld but much more global in outlook. In 2008, the sale of Highveld from Anglo American to Evraz was completed to go with its other world interests in the UK, the Czech Republic, Italy, Canada, the US and Russia. MacDonald’s recent appointment has coincided with one of the most volatile periods in the company’s history. “Like all steel producers,” he says, “sales have been hit badly and last year they fell by almost half back down to R4.25 billion. When

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Highveld Steel and Vanadium Corporation Limited

Transnet Freight Rail Transnet Freight Rail and Highveld Steel have worked together since 1957, with Transnet supporting Highveld’s growth and efficiency drives. Transnet Freight Rail is responsible for over 66 per cent of Highveld Steel’s inbound and outbound traffic, linking the mines to the plants by a rail network that helps ensure raw material arrives on time and healthy stockpile levels are maintained. We acknowledge Highveld Steel’s importance in the domestic and export steel markets. The fleet of specialised steel wagons supports Highveld in transporting the finished products safely and according to customer orders. Highveld remains one of Transnet Freight Rail’s key customers. Our mutual objectives mean we value and support the roles and interdependencies we share.

demand improves they’ll bounce back but it’s my job to see that we have the structure and the strategies to capitalise on market improvements.” No doubt the world perspective he gained from senior roles at Corus and Klöckner & Co will help considerably in structuring management, broadening the customer base and overseeing plant upgrades. “For a business the size of ours,” he says, “we don’t have as much direct contact with customers as would normally be the case in any other industry. Highveld has considerable respect among end users and we have to take full advantage of that.” At the back of his mind will be the fundamental difference between South Africa and Europe in the relative relationship between steel and concrete. In the UK, for example, 25 years ago concrete accounted for 65 per cent of the raw material used in construction projects, compared with 35 per cent for steel. Today, thanks to effective marketing by steel producers, that

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Highveld Steel and Vanadium Corporation Limited

Vesuvius SA The Vesuvius SA team works in a successful partnership with Highveld Steel, with the common objective to optimise total refractory performance in all the Highveld divisions. The latest Vesuvius materials and designs are continuously introduced in all areas. Vesuvius development and service at Highveld is not only aimed at reducing refractory costs, but also improving steel throughput and quality.

ratio has reversed completely. But in South Africa, concrete remains dominant. “It’s a long term goal,” says MacDonald, “but if we can convince architects and developers with the same sort of arguments used in Britain, that will have a considerable impact on sales.” That’s something of an understatement because Highveld is currently the only South African producer of heavy steel sections. The financial barriers for other suppliers to get into the market are high and not justified by the relatively small local market. So small, in fact, that the home market cannot take all that Highveld produces. But if demand picks up, Highveld might find it has competition in this sector. Which turns the focus on the second part of

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Highveld Steel and Vanadium Corporation Limited

Harsco Metals Harsco Metals has a long and proud association with Highveld Steel, providing resource recovery services on site. Highveld Steel’s innovative solutions for steelmaking echo our own solution-driven approach to metal recovery and slag recycling around the world.

Mukundi Mining Resources An aspirant global leading mining company. MMR’s vision is to create superior value and benefits on a sustainable basis for all its stakeholders, ensuring that everything we do and deliver today will enable others to realise their vision tomorrow. Striving for excellence and looking after our people are firm commitments in ensuring sustainable growth; and for us “excellence” is an attitude not a skill.

MacDonald’s role. It’s 50 years this year since magnetite iron ore was discovered at the company’s Mapochs mine, 140 kilometres north-east of eMalahleni (previously known as Witbank) where Highveld’s steel plant is located. The high titanium content of the magnetite ore has necessitated Highveld developing unique processes for smelting and refining the iron ore but parts of the plant are now long in the tooth. Along with his COO and deputy COO, MacDonald has been charged with developing a three year investment plan which will have the greatest impact on productivity with the shortest payback period. “Part of this might involve adding new capacity or new products,” he says, “but most likely it will be a case of updating the plant. And here, we have to assess whether to upgrade what already exists or whether to take a different approach.” As well as changing the hardware, MacDonald also wants to change the mindset of the business. Dealing through steel service centres—steel merchants—the

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Highveld Steel and Vanadium Corporation Limited

way it does, Highveld has little understanding of how end users work and think. For that matter, MacDonald is not convinced his company fully understands steel merchants either. “We need to get closer at every level,” he says. “It’s the only way we can understand and influence matters.” MacDonald is on a mission to take cost out of the supply chain. He’s aware that the construction industry is very traditional and works today much the way it has for decades but the objective is to inject some philosophies from the automotive world. “Everyone involved with the supply and consumption of steel needs to modernise,” he says. “We’ll never really match the automotive way

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Highveld Steel and Vanadium Corporation Limited

of working but our aim has to be to satisfy customers’ needs within days, not weeks or months.” With steel having a well earned reputation as one of the more polluting of industrial processes, MacDonald is torn between the desire to clean up the business he is in and the commercial dangers of doing so unilaterally. “The governments of fully developed European countries are keen to meet their targets of reducing carbon emissions,” he says, “but is the price acceptable? At Corus, we spent a lot of effort trying to explain that clean Western steel can never compete economically with Far East steel.” On a personal note, as a newcomer to the country, MacDonald is impressed by the atmosphere in South Africa. No doubt the World Cup has been a wonderful catalyst for cohesion and certainly moved on the infrastructure much faster than would otherwise have been the case. “Despite the obvious problems, there seems to be a vast reservoir of goodwill,” he says, “that surmounts even the most potentially damaging events that occur. Long may it last.” www.highveldsteel.co.za

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philosophica

view

A start-up Australian mining company has fo getting into producti 94

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ound its own solution for ion, as Alan Swaby learns

BC Iron

lying for the first time to Australia comes as something of a shock. When you do finally reach terra firma, there’s still likely to be three or four hours of flight time over a uniformly red interior before actually touching down. Too small to be noticed but breaking up the hundreds or thousands of kilometres of scrub are the occasional towns whose locations are invariably linked with the country’s mining history, cattle or Christianity. Nullagine is one such place. A former gold mining town located on the old Great Northern Highway, 1,190 kilometres north of Perth and 240 kilometres east of Port Hedland, it saw the gold rush of the 1880s and produced the first diamond found in Australia. At its peak, the population numbered 3,000 and may yet again, thanks to a current interest in exploration not only for gold and diamonds but also copper and iron ore. One company that has already struck ‘gold’ is BC Iron—established three-and-a-half years ago when Alkane Resources and Consolidated Minerals pooled their iron ore interests. A series of 20 drill holes in early 2007 established the presence of commercial quantities of iron ore at its lease site in Nullagine; and further exploration and feasibility studies went on to confirm the validity of going into production.

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BC Iron

“The geology of the Nullagine deposits is unique,” says managing director Mike Young. “Think of the ore bodies as five storey office blocks 400 metres wide and stretching for four kilometres. The iron ore starts from halfway up and only needs the top layer slicing away. There’s not even an open involved and the quality of ore is highly desirable.” The flat topped hills, or mesas, will be skimmed up to half a metre at a time with a Wirtgen surface leveller. It’s a technique not common to Western Australia but has been proved effective on adjacent ore deposits such as FMG’s Chichester Operations. Although the extraction process is straightforward, the mine does have the drawback of being in a locality not blessed with public infrastructure. Consequently, Young and his board had to decide how best to marshal their limited resources. The business is publicly listed and capitalised to the extent of A$160 million but that would have been a flea bite compared with the cost of financing its own needs. The mining company Hancock is developing an iron ore mine in the region at a cost in excess of A$7 billion—an option obviously outside the

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â&#x20AC;&#x153;The geology of the Nullagine deposits is unique. Think of the ore bodies as five storey office blocks 400 metres wide and stretching for four kilometresâ&#x20AC;?

www.bus-ex.com MINING SECTOR

BC Iron

Precision Mining Camps & Services A Western Australian owned and operated company, Precision Mining Camps and Services (Precision) is a remote location design, catering, accommodation and facility management services company committed to exceptional service delivery for our state’s mining & resources and oil & gas sectors. Precision’s core business activities centre on catering and camp management where the emphasis is always based on the quality of man days and not the quantity. Working with BC Iron at Nullagine will be an exciting project for Precision. “BC Iron shares similar views as Precision in providing a quality lifestyle for the camp residents,” says general manager Michael Olsen. “Providing excellent food and camp management services makes work life better on site for everyone. We are proud of our association with BC Iron.” www.precisioncamps.com.au

scope of a junior operator such as BC Iron. The answer has been to enter a 50:50 joint venture with neighbouring mining company Fortescue Metals Group Limited. “Some have criticised the size of the 50 per cent we’ve given up,” says Young, “but the equation is simple: 50 per cent of something is better than 100 per cent of nothing.” The deal with Fortescue is that BC Iron will be responsible for extracting the ore and trucking it 55 kilometres to the Fortescue railhead. A new, dedicated and private haulage road will be built to provide the conduit down which monster road trains measuring 65 metres in length and comprising four wagons and two motors will travel, each capable of shifting 350 tons of ore at a time. From there, BC Iron will contract Fortescue for use of its rail and port facilities to transport the iron ore to China’s insatiable steel industries. Construction of this new A$20 million road is part of the contract BC Iron has made with Watpac Limited, to which BC Iron has also contracted all the extraction, crushing, and screening—a not unusual strategy for startup companies reluctant to incur excessive debt. Mitchells West will carry out haulage once the road is complete. BC Iron is taking a bit of a flier in that it has placed contracts with subcontractors even though final permits have yet to be received. However, Young is confident

that the company’s way of keeping all stakeholders up to speed will continue to smooth the way. Once ore gets to the purchaser, the first part of the process of making steel is to convert iron ore into pig iron. Blast furnaces need to use the coarse or ‘lump’ ore, so BC Iron’s ‘fines’ ore will need to be agglomerated or ‘sintered’. So the greater the propensity for those fines to sinter and agglomerate into lumps under heat, the more desirable the ore is. A key component of good fines ore is the ‘ultra-fines’ or material less than -0.15mm. In comparison with neighbouring pisolite and hematite ore bodies—which can contain anything up to 20 or 30 per cent of ultra-fines—Nullagine ore contains no more than 10 per cent in its ready for shipping state. Normally, 57 per cent iron content of the ore would be considered a low grade ore, but the low incidence of impurities, minimal ultra-fines and their ability to sinter plus the fact that the mining process requires no beneficiation all add up to a readily saleable product. The grades are similar to the mighty Yandicoogina and Robe River deposits of Rio Tinto and BHP. At a current market price of US$135 per ton and maximum operating costs of around A$50 per ton, the Nullagine project is theoretically highly profitable. The proof will be available at the beginning of next year when production starts in earnest. Already, an 80,000 ton test pit has been mined to prove the processes; and when the road to Fortescue is complete in December, BC Iron has made a commitment to ship one million tons by the middle of next calander year. When the mining has been ramped up to normal production levels, output should be three million tons per annum. BC Iron is in no rush to grow haphazardly. The plan is to increase in size organically within the present lease boundaries rather than embark on a programme of acquisition. There are other DSO deposits on the lease as well as some which are of a lower grade; and when the latter are worked, they’ll require the beneficiation that current workings have not needed. www.bciron.com.au

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Rising to the

Zimbabwean ferrochrome producer Zimasco is emerging strongly from the economic downturn. CEO Sydwell Jena talks to Gay Sutton about turning a challenging situation into an operational advantage, and about the company’s plans for growth

frica is a continent rich in resources—not only at the human level but also in terms of its minerals. Mining has long played a key role in Africa’s development. The oldest known mine on archaeological record is the Lion Cave in Swaziland, a landlocked country to the south of Zimbabwe, which is sandwiched between South Africa and Mozambique. This ancient mine has been carbon dated to the palaeolithic period some 43,000 years ago, when stone-age man mined the ground hematite and ground it to produce the red pigment called ochre. The ancient Egyptians were also prolific miners, venturing south from their own country into Nubia in the search for gold and precious stones such as malachite and turquoise. Visitors from India, Rome and ancient Greece are also believed to have worked the continent. However, it wasn’t until the mid nineteenth century and the discovery of diamonds at Kimberley followed by gold at Pilgrim’s Rest and Barberton, that a great gold rush to Witwatersrand finally opened the continent for mining.

100

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Zimasco

MINING SECTOR www.bus-ex.com 101

Zimasco

Engineering & Electrical Supplies cc Engineering & Electrical Supplies cc has been providing a complete mining, industrial procurement and logistical service to Zimbabwe, Malawi, Zambia, DRC, Angola and Mozambique since 1988. As agents and distributors of a large variety of equipment, EES has delivered more than 23,000 different items to various industries across Africa in the last 22 years. Specialising in consolidation of consignments, EES prides itself on delivering consignments in the most cost effective way, thus saving customers money. EES enjoys good working relationships with various organisations across Africa, among them Zimasco (Pvt) Ltd, Zimbabwe, with whom it has been working for the last 15 years.

Since that time, natural resource exploitation in all its forms—coal, mineral and oil—has became one of Africa’s major sources of revenue, and Zimbabwean ferrochrome producer Zimasco has played a proud part in that development. The company can trace its lineage back to 1926, when its precursor African Chrome Mines of Zimbabwe began exporting chromite ore. Following many evolutions, including a long spell under the Union Carbide Corporation—which ended in 1995 with a management buyout—Zimasco arrived at its current form in 2007. Sinosteel Corporation of China acquired 92 per cent of the holding company, Zimasco Consolidated Enterprises, which had been set up in Mauritius following the management buyout. Meanwhile the Zimbabwe operating company which had officially changed its name to Zimasco Holdings following the buyout, assumed its current name, Zimasco (Private) Ltd. Today, the company is a significant contributor to ferrochrome production worldwide, and its ongoing operations play an important role in the economy and social well-being of Zimbabwe. Directly employing some 3,000 people across its mining and smelting operations, and indirectly providing employment for around 6,000 people, the company is ranked sixth largest ferrochromium producer in the world and boasts an enviable global reputation for quality and efficiency. “Zimasco is well respected in the global marketplace,” explains CEO Sydwell Jena, “and it has consistently supplied a high-quality product to the main global

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Zimasco

“Zimasco is well respected in the global marketplace and it has consistently supplied a high-quality product to the main global stainless steel mills for the last 25 years” stainless steel mills for the last 25 years—even during the various political and economic upheavals that affected the country.” Headquartered in Harare, Zimasco mines chrome ore in its own right at Peak Mine and Railway Block in Shurugwi and at Valley Mine. Meanwhile, cooperative and tributor miners are contracted to produce chromite ore exclusively for Zimasco from the company-owned mining lease areas at Railway Block in Shurugwi and along the Great Dyke—a mineral rich geological feature which runs roughly northsouth through the centre of Zimbabwe. In order to manage this resource effectively, Zimasco’s geologists have divided the region into three segments—the North, Middle and South Dyke. Ore currently being mined from the South Dyke appears in a variety of deposit types. Podium deposits are being

exploited at Shurugwi and the Valley Mine at Guinea Fowl, while seam deposits are being worked at Lalapanzi and south of Shurugwi. Mining at the Peak and Railway Block mines is largely of an underground nature, where sub-level open-stoping mining methods are employed. Mining in the northern sector of the Great Dyke is exclusively underground in nature and is outsourced to tributors. In the Middle Dyke section, which is outsourced to tributor and contract miners, a combination of surface strip mining and underground operations is employed. The ore is transported via rail from each of these mining areas to a 210,000 tonne per annum capacity smelting operation located at Kwekwe. This complex consists of four furnaces in the West Plant, which were constructed between 1965 and 1972, and a further two

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Zimasco

furnaces in the East Plant, constructed between 1976 and 1980. At Kwekwe, the chromite ore undergoes a range of smelting and crushing processes to produce a high quality carbon ferrochrome alloy. The finished product is then transported by rail across the border with Mozambique to the port of Maputo, from where it is shipped to stainless steel mills around the world. Quality has always been at the heart of Zimasco’s operations, and the company has built strong long-term relationships with its customers in Europe, the Far East and North America, based on product quality. In fact, Zimasco achieved ISO 9001 accreditation way back in 1992 when the standard was still in its infancy, and has progressively updated with each of the subsequent certifications in 1997, 2000 and 2008. “We believe that the acquisition and maintenance of certification to ISO quality standards for the last 18 years has served to bolster and enhance the company’s reputation in the global ferrochrome marketplace,” Jena says. Like ferrochrome producers worldwide, Zimasco was affected by the global financial crisis that began during the second half of 2008. “We saw a complete dearth of demand for the product in the fourth quarter

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Zimasco

Redan Petroleum Supplies cc Redan Petroleum was established in 2004 and has established itself as the leading locally owned and managed oil company in Zimbabwe through the acquisition of assets and infrastructure that support current growth trends and long term sustainability of market share. The Redan clientele base includes mining, agricultural, transport and other commercial concerns along with embassies and non-governmental organisations. Redan believes continued growth will be achieved through a constant review of its customer offer to ensure products and services fully meet customer expectations in a changing environment. Smart partnerships with future associates are critical to consolidating market leadership status.

with the unfavourable socio-political situation that prevailed in Zimbabwe during the last ten years led, for example, to a significant skills drain in the country,” Jena explains. “And the mining industry was significantly affected. To overcome that we crafted a skills retention and capability programme, which has helped to mitigate against this factor.” To this day, the company continues to operate a range of training schemes, including a structured two year graduate development programme, a four year apprenticeship programme, and technical development courses that cover a range of disciplines from metallurgical engineering and accounting through to motor mechanics, rigging and HR. The collapse of the Zimbabwean currency also made global trading more challenging for Zimasco. However, in February 2009, Zimbabwe adopted a multi-currency regime commonly known as dollarization; and this created a relatively more stable operating environment for the company.

“We believe that the acquisition and maintenance of certification to ISO quality standards for the last 18 years has served to bolster and enhance the company’s reputation in the global ferrochrome marketplace” of 2008,” Jena explains. As a consequence, Zimasco switched off its furnaces at the beginning of December 2008 and embarked on a series of cost cutting exercises. “We managed to ride the storm through our ambitious cost saving initiatives and by obtaining significant concessions from our strategic partners and the government,” says Jena—an undoubted recognition of the importance of Zimasco to the local economy. Production finally resumed in a small way in April 2009, financed by a US$7 million investment from the company’s major shareholder Sinosteel, and then ramped up progressively as market conditions improved, eventually returning to full capacity in April 2010. Today, the company is once again positioning itself to achieve long term viability. Jena also believes that in such a cyclical business where crises of this nature tend to occur periodically, Zimasco has proven itself to be well equipped to respond quickly and deal with the challenges. Of course, operating a mining company in Zimbabwe has also presented a number of challenges in recent years, and working successfully within these constraints has strengthened the company’s operational ability. “The hyper-inflationary economic environment coupled

The benefits of this have been far reaching. Not only has it slowed the skills drain and led to some expatriate Zimbabweans returning home, it has also created a more stable operating platform. “This has enabled us to reestablish our medium to long term planning and strategy,” says Jena, “as opposed to the short term and survival strategy that was necessitated by the turbulent hyperinflationary mode that had prevailed over the last ten years. We are now able to devise growth strategies in line with our substantial high quality chromite ore resources.” Growth is certainly now at the top of the company’s long term agenda. Plans are in place to increase capacity by some 80 per cent through two strategic investments. Firstly, a US$37 million investment is required for the reconstruction of Furnace No. 2, which will increase the company’s ferrochrome output from its current level of 180,000 tonnes per annum to 230,000 tonnes per annum. A further investment of US$200 million will then be required for the construction of two new furnaces and a sintering plant to process the high-quality friable resources that are currently left unused, further increasing output to 325,000 tonnes per annum. However, much needed re-capitalization of key state infrastructure to support Zimasco’s planned growth also

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“We move approximately 800,000 tonnes of raw materials and finished product a year by rail” needs to take place. Power shortages in Zimbabwe and the Southern African region as well as the need to rehabilitate the country’s rail network and its rolling stock are challenges that must be overcome to achieve these expansion plans. In addition, despite the recent improvements in the social, economic and political landscape of Zimbabwe, much still needs to be done to make the country an attractive investment destination, believes Jena. The final element in the company’s growth strategy is to engage in exploration work. Some 98 per cent of Zimasco’s reserves are in the Great Dyke, a geological feature that yields chromite ore across its length and breadth. However, of these extensive reserves, only one per cent is currently ready to be mined, meaning they are in the measured, probable and proven categories. Therefore, a diamond drilling programme has been

set up spanning the next five years, to upgrade the categorisation of the known chromite ore resources and increase the proven portion. This will enable Zimasco to fully utilise the planned increased production capacity of the Kwekwe Smelter. The current viable position and future expansion of Zimasco is undoubtedly going to have a positive impact on Zimbabwe as a nation. The company has long played a significant role in its economy: not only does it bring in revenue—projected to be in the region of US$213 million for 2010—but it is a major user of the country’s infrastructure. “We are the largest user of the country’s rail system,” Jena says. “We move approximately 800,000 tonnes of raw materials and finished product a year by rail and this contributes to the National Railways of Zimbabwe’s continuing viability. We are also the largest consumer of

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“In addition to health services, we are also actively involved in educating the communities in which we operate, with substantial sponsorship of primary, secondary and tertiary education” electricity in Zimbabwe, therefore consistently providing the largest single revenue base for the power authority, and impacting positively on its viability.” Zimasco also plays its part in directly supporting the communities in which it operates. A well equipped health services department provides quality and comprehensive health services to its employees, their dependents and the communities in which it operates. The Chrome Mine Hospital in Shurugwi provides specialist, surgical, pharmaceutical, radiological, laboratory, in-patient, out-patient, occupational and ambulance services. In addition, the company runs four clinics located in Shurugwi, Kwekwe, Lalapanzi and Mutorashanga, and runs a Medically Affected Employee Programme to cater for life threatening diseases such as HIV/AIDS. “In addition to health services, we are also actively

involved in educating the communities in which we operate, with substantial sponsorship of primary, secondary and tertiary education. This includes provision of books, computers, erection, repair and maintenance of infrastructure,” says Jena. The company offers learnership programmes for various levels of school and university graduates, and in recent years, it has also built the Kwekwe Polytechnic College and donated it to the State. Now, with an expansion programme in place, and a management structure that is able to respond quickly to challenge, Zimasco is well placed to capitalise on the economic upturn. Moreover, as Africa is tipped to be the next region to enjoy rapid globalisation and growth, the company has positioned itself to play a key role in the development of Zimbabwe. www.zimasco.co.zw

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hear The

The manganese resources of Assmang Limited are located in the Kalahari manganese fie Northern Cape Province, which contains some 80 per cent of the world’s known high-gra reserves—vital to the global steel industry. John O’Hanlon reports on major recent and p at one of Africa’s largest manganese mining operations

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Assmang Manganese

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ssmangâ&#x20AC;&#x2122;s name is a contraction of Associated Manganese Mines of South Africa, as it was originally known when it was founded in 1935. For many years it specialised in manganese ore and iron ore extraction and beneficiation, as well as manganese and chrome alloy production, to which it added chrome ore production and beneficiation in the late 1990s. Today it is jointly owned by African Rainbow Minerals Limited and Assore Limited and it currently has three operating divisions based on its three commodities: chrome, manganese and iron ore.

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Collaborative Risk Applications Collaborative Risk Applications is a well qualified multi-skilled risk engineering company with vast experience in risk engineering solutions, assisting a multitude of clients. For many years we have assisted Assmang in reducing its exposure to the entire spectrum of risks, from the project phase through to commissioning and day-today running of the operation, benchmarking the client against competitors using dynamic risk management database software tools. Safety is a cornerstone of Assmang’s success, hence our proud association with them for many years and in particular, with the new Black Rock process plant, where our key responsibility is project managing the design, fabrication and installation of fire protection systems.

Sechaba Letaba is a senior general manager within Assmang’s manganese division, responsible for the company’s Nchwaning and Gloria manganese mining operations, each of which started production during the 1970s with a projected output of one million tonnes per annum. A second shaft was added to the Nchwaning property in 1981 and early in 2000, Assmang announced an expansion involving the development of a third shaft complex to add about two million tonnes capacity, which would make Nchwaning the world’s lowest-cost underground manganese mine and extend its expected lifespan by some 30 years. The new shaft complex was successfully completed in May 2005 and full production from Nchwaning 3 was achieved in February 2006. The complex is serviced by two shafts: a vertical personnel shaft to a depth of 450 metres and a 2.2 kilometre 11.5 degree decline shaft equipped with conveyors, through which up to 200,000 tonnes of ore are hoisted every month. “Nchwaning 3 is

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“Decentralisation allows us to make autonomous decisions based on our own market” our future, and we are planning to produce more than five million tonnes a year eventually from our mining operations,” says Letaba. “We are still in the process of building capacity towards this target.” Nchwaning mine is semi automated, he explains. The ore is transported from the face, where it has been blasted, to four run-of-mine ore bins. “We sample the rock before blasting and analyse it in our laboratory on the surface— that is how we know what grade we are mining and which products we will be producing each time.” Accurate grading is an essential part of the process, Letaba emphasises. “Of the elements analysed, manganese and phosphorus are probably the most important, but several other elements are also analysed.” From the underground bins the material goes through below-ground crushers that reduce it to less than 150 millimetres in diameter, so that it can be conveyed into one of seven underground silos, each of them with a capacity of 2,000 tonnes, already graded according to specific customers’ specifications.

As production ramped up at Nchwaning, the existing surface beneficiation plant was identified as a bottleneck, as it did not provide sufficient surface crushing, screening and washing capacity. “You can only ship out as much product as you can produce,” says Letaba. “If anything went wrong in the surface plant it affected our underground operations immediately because we could not empty the underground storage bins.” Accordingly the company appointed TWP, a leading mining industry project management group, to design and install a new state-of-the-art beneficiation plant at Nchwaning, at an approximate cost of R700 million. The new kilometre-square plant is being commissioned at the time of writing and will come on stream before the end of March 2010. It will make a huge difference to the efficiency of the mining operation, he believes. “The new beneficiation plant will not only process ore from underground at an improved rate, but it will also incorporate four silos whereby ore can be stored on the surface to provide more operational flexibility. If we can

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Bateman Engineering Bateman Engineering N.V. is a process engineering and project management house providing the full range of services, equipment and technology required to establish a process plant for converting natural resources into marketable products. Bateman Engineering’s client base spans the global minerals and metals industry, covering all commodities and ranging from the world’s largest resource companies to junior companies, with many repeat orders.

store material on the surface we can keep the underground silos below capacity, and the actual mining operations at the rock face need never be interrupted because there’s nowhere for the material to go.” This is a highly automated plant, he continues. “That is another big advantage for us. Another considerable cost benefit will come from its throughput capacity—when your throughput capacity increases, you can realise the cost benefits from economies of scale improvements, thus we can reduce our operating costs. TWP managed all the installation and procurement connected with this

plant, based on the specifications we gave them.” The new plant will process 900 tonnes of material per hour, almost double the capacity of the old plant, he says. The sized and graded manganese ore is loaded onto Transnet rolling stock for the 1,000 kilometre journey to Port Elizabeth harbour where two conveyors deposit it in one of four storage bins with a total capacity of 460,000 tonnes, ready for conveying to the ships. Investment in this vital link has been supported by Assmang—clearly, increased efficiency at the mine needs to be matched by efficient transportation.

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Eighty per cent of Assmang’s beneficiated ore is sent overseas through Port Elizabeth, Durban and Richards Bay ports. The remainder is sent to customers within South Africa, much of it being processed at Assmang’s own ferroalloys smelter at Cato Ridge near Durban, by far one of the country’s biggest ferromanganese smelting plants. Assmang’s high grade manganese ore is particularly valued in the international markets for its high manganese content and relatively low phosphorus content. South Africa has the lowest phosphorus manganese ore in the world. Assmang was negatively affected by the recent international economic collapse; but it could continue its mining operations due to strong customer support from a variety of markets. China and India reported positive steel production growth for 2009 compared to 2008, and demand for manganese ore continued to grow for these countries. Assmang’s other markets for manganese ore have already recovered to pre-economic crisis levels. – Editorial research by Richard Halfhide

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The

changingfa of coal

Hatfield Colliery near Doncaster is proving that the UK coal mining industry is more progressive and forward-thinking than popular perception gives it credit for

or many people during the past three decades, the perception of the UK mining industry has been one of a sector in decline. However, Hatfield Colliery is turning such assumptions around, providing ample proof that UK mining is very much alive and kicking, thanks to a cleaner, greener approach to coal usage. Hatfield Colliery closed down in 2001 at a time when the future seemed very bleak for mining and the communities that had supported it since the rich coal seam was first exploited sometime around 1908. The land to the north-east of Doncaster, between Hatfield and Thorne, had always been rich in coal reserves, with several seams of good quality, low ash content coal. By 1921, Hatfield Main was in full production, with excellent transport routes thanks to local railway, canal and river outlets to the Humber, combined with unlimited demand for coal. The region offered what seemed to be a hugely optimistic future.

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Heaton Planning We continue to provide town and country planning and environmental assessment services to Powerfuel at all stages in the development of Hatfield Power Park. We have achieved positive outcomes in the granting of planning permission for all the major elements of the project, including mining development, the clean coal power station and CCS, and the motorway link road.

Closure was announced some 80 years later on 9 August 2001 and for several weeks, the future of the mine hung in the balance. Then in October of that year, Richard Budge took over the running of the colliery under the name of his new company, Coal Power. By 2006, Budge had launched a new enterprise called Powerfuel plc and not long after that an announcement was made that Kuzbassrazrezugol, one of the largest coal producers in Russia, had acquired a 51 per cent stake in Powerfuel. In August 2006 the new company announced contract arrangements with Joy Mining Machinery for two sets of coal cutting, support and ancillary equipment for longwall faces at its Hatfield Colliery, near Doncaster, in a deal worth a total of £37 million. The significant investment in capital equipment and the full refurbishment of the colliery were expected to see Hatfield back into full production as early as 2009 and possibly producing as much as two million tonnes of coal per year. In reality, after £150 million of investment that created 400 jobs, longwall coal face production resumed at Hatfield in 2007. Longwall mining is a form of underground coal mining where a long wall of coal is mined in a single slice (typically one to two metres thick). The concept dates back to the late 17th century when miners would undercut the coal along the width of the coal face, removing coal as it fell and using wooden props to control the fall of the roof behind the face. Powerfuel Mining was able to resurrect the Doncaster colliery, having created access routes to no less than 27 million tonnes of high quality reserves in the Barnsley seam as a result of the purchase of new tunnelling equipment.

Further evidence of the resurgence of mining in the area came with the announcement in November 2008 that Doncaster College was admitting 40 mining apprentices, over 20 of whom hailed from Hatfield Colliery, for the first time in three years. At that time, Michael Neil, the college course leader for Mining Engineering, commented: “The College has a long and successful history of working closely with the mining industry and these relationships have led to 43 mining apprentices starting training this autumn.” At the same time, Rob Lucas, training and development manager at Powerfuel Mining, said: “Mining today has changed significantly from past generations with the modern miners integrating technology in every aspect of their work. With the recent investment at Hatfield Colliery in new technologies and equipment to secure the long term future, Powerfuel must invest in young people to take the company forward.” Hatfield had enjoyed a busy year in 2008. In July, Powerfuel Power, part of the Powerfuel Group of Companies and an independent power generation company formed to develop a power station adjacent to Hatfield Colliery at Stainforth, South Yorkshire, announced the selection of GE Energy technology to power its planned 900 megawatt integrated gasification combined cycle (IGCC) power plant. Under a letter of intent signed by the two companies, GE Energy would supply gas turbines capable of burning the synthetic gas produced from gasifying the coal, which is basic hydrogen emitting water vapour that will support cleaner coal plants. News of the proposed power plant had first broken the previous year, when Powerfuel announced it had signed a licence agreement with

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â&#x20AC;&#x153;We are delighted to be working with Shell in our vision to be the first commercial-scale coal fired power generator with carbon capture in the worldâ&#x20AC;?

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Hatfield Colliery

Shell Gas & Power International BV (a unit of the global energy giant Shell), which entitled it to use Shell’s proprietary gasification technology at the coal fired power station. Coal gasification is regarded as the cleanest method for converting coal’s energy into electricity; but it can also be converted into transportation fuels including gasoline and diesel following further processes, making it an attractive proposition for countries with abundant coal reserves but little in the way of petroleum. One of the big challenges for the new operation was capacity, with the existing skip winding system limiting the speed (and therefore output) at which coal could be brought to the surface. However, Powerfuel announced plans to double Hatfield’s saleable output through investment in a new system and larger headstock that could carry a capacity of 32 tonnes of coal at a saleable output

level of approximately five million tonnes, at a cost of around £30 million. “We are delighted to be working with Shell in our vision to be the first commercial-scale coal fired power generator with carbon capture in the world,” said Budge of the agreement. “Success in this project would be enormously significant for UK and EU energy policy as it offers the benefits of a local, inexpensive fuel, improved security of electricity supply and very low carbon emissions. This agreement maintains our leading position in the development of carbon capture from coal fired electricity generation in the UK.” With the power plant scheduled to open at the end of 2012, endorsed by the UK government and the European Union and of course, fuelled by Hatfield’s coal reserves, it is perhaps time to look again at the perception of the UK’s coal mining industry. www.powerfuel.plc.uk

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Putting

Mozambiq

Mozambique is on the brink of a transformation driven by its mineral resourc and Riversdale Mining is bringing some much needed expertise and capital t party, as chief operating officer Andries Engelbrecht tells John Oâ&#x20AC;&#x2122;Hanlon 130 www.bus-ex.com MINING SECTOR

Riversdale Mining

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iversdale Mining, a resource company with its headquarters in Sydney, Australia, was set up in late 2004 by a group of experienced coal mining professionals interested in exploration, mining and development projects. The company currently has no assets in Australia itself, and is named after the Riversdale Anthracite Colliery (RAC), near Vryheid in KwaZulu Natal, South Africa. Riversdale’s first opportunity was in the form of the Zululand Anthracite Colliery (ZAC) based in the province of KwaZulu Natal. The colliery was purchased as a going concern from resources giant BHP Billiton in 2005. Anthracite is a hard, high rank coal containing a high percentage of fixed carbon and low percentages of volatile matter and ash. Due to the high fixed carbon content of the anthracite found at ZAC, it is sought after in the metallurgical markets, both domestic and abroad. “We purchased ZAC with a three year projected life,” says Andries Engelbrecht, who joined Riversdale six months later as a manager at ZAC, of which he had intimate knowledge as a BHP Billiton manager. “The first thing we did was to start an extensive programme of exploration and development, and as a result of that the productive life of ZAC has been extended to 2023—and we are still prospecting there.” ZAC is the only true anthracite mine in South Africa, he adds. “We are expecting it to yield 980,000 tons of run-of-mine material this year, and with at least ten years’ life, it has huge upside potential.” Engelbrecht’s role has been expanded and he is now chief operating officer for all African projects. In 2006 Riversdale acquired 16 coal tenements in the Lower Zambezi Coal Basin in Mozambique and in 2007 a further six in Tete province, adjoining large holdings of the Brazilian company Vale. In all it now controls 250,000 hectares in Mozambique, close to the railhead at Moatize from where there’s a link to the port of Beira on the Indian Ocean. Though it doesn’t feature at all on present day league tables, Engelbrecht believes Mozambique has the potential to become a really important exporter of hard coking coal, second only to Australia which is currently the largest exporter of seaborne hard coking coal to world markets. The primary market that will absorb this production will be the global steel industry, where massive expansion in the BRIC group of countries is certain to take place.

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Siemens Energy Sector The Siemens Energy Sector is the only company worldwide that supports customers with our own efficient products, solutions, services and know-how along the entire chain of energy conversion—from the production of oil and gas to power generation and the transmission and distribution of electrical energy. For more information visit us at www.siemens.co.za

parastatal authority that oversees the railway and port systems, are working together to upgrade the port’s coaling Berth 8, ready for export cargos from the two mining companies. If that were the end of the story, it would be a huge boost for the Mozambique economy, which will get substantial revenues from royalties and taxes. The country further benefits from the inflow of mining expertise from both Australia and South Africa (not to mention Brazil). Working in

“We are expecting it to yield 980,000 tons of run-of-mine material this year, and with at least ten years’ life, it has huge upside potential” Mozambique is singularly well placed to supply hard coking coal to India and Brazil. Not only is the steel industry booming in these countries, but a large number of new coal-fired power stations are being built. Mozambique coal will have a significant freight advantage over Australia and Canada because of the easy shipping route from Beira to the west coast coal ports from Maharashtra to Gujarat. So the Mozambique operations are really exciting, Engelbrecht says. Not all the 21 tenements can be developed at once; however coal from one of them—the Benga mine in Tete province—will provide Riversdale with its first shipments out of Beira in the second half of next year. It is a four billion ton resource developed in a smart joint venture between Riversdale and Tata Steel of India, with Riversdale holding a majority 65 per cent share. Tata Steel will be taking up 40 per cent of the hard coking coal produced from the Benga mine. Production from the mine will equal 5.3mt of run-of-mine during phase one. The feasibility for phases two and three have commenced; and phase three will see the Benga mine producing 20mt of run-ofmine coal per annum. The 575 kilometre Moatize to Beira rail link already existed, but was severely damaged during the conflict years and had to be repaired. The aforementioned work was completed in January 2010 with the first train in 25 years arriving at the Moatize Station. The Port of Beira requires extensive repairs and upgrading in order for it to cope with the approximately 6mt of product to be exported through the facility between Riversdale and Vale. Riversdale, together with Vale and CFM (Portos e Caminhos de Ferro de Moçambique), the

Mozambique, despite its relatively low stage of development, is not the uphill struggle one might expect, Engelbrecht insists. “Mozambique’s legislative system is modelled on that of South Africa, and we are expected to apply world best practices in all aspects of operations, health and safety, and environmental responsibility.” He is keenly aware of the company’s social impact, which starts simply through employment. The Benga project currently employs more than 600 people, predominantly contractors; and though the project is in its early stages, he regards support for local education, agriculture and the control of endemic disease like malaria and HIV/Aids as being very much in the interests of the business. The government of Mozambique has been very supportive and it is easy to see why. Not far away from the Benga project lies Riversdale’s Zambeze Coal Project which Engelbrecht confidently describes as one of the biggest open pit coal resources in the world. It has, he says, been assessed as a resource of nine billion tons, easily accessible, on relatively flat terrain and not far from Tete and the Zambezi River. Riversdale has signed a non-binding memorandum of understanding (MoU) with Wuhan Iron and Steel (Group) Corporation (WISCO) and a logistics partnership agreement with the China Communications Construction Company (CCCC) for the development of the Zambeze Coal Project (Zambeze). The MoU provides for the acquisition by WISCO of 40 per cent of the Zambeze Coal Project (EPL 946L) for a total consideration of US$800 million, to be paid in three tranches and subject to achievement of certain milestones. When completed, the transaction values Zambeze at US$2 billion. www.rivmining.com.au

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Clean coal In business just under 20 years, Taggart Global is already an international giant in the coal preparation and mineral material handling industry, as April Terreri discovers

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aggart Global, with world headquarters in Pittsburgh, plays a major role in providing coal to power generation utility companies who offer costeffective energy to American manufacturing companies and the public. “The fact is that 50 percent of our country’s energy is produced from coal, and this reality will not go away anytime soon,” says Ken Lund, president. Taggart is an international engineering and construction company providing turnkey design, supply, construction and commissioning of coal preparation plants and coal and mineral material handling systems. “Our engineering, procurement and construction management solutions deliver improved performance, increased efficiencies and accelerated returns on investment to our clients throughout the world,” says Lund. “We also have the resources domestically to design, build and construct ourselves with a fullservice construction group based out of Beckley, West Virginia, that allows Taggart alone to provide full turnkey solutions to our clients.” Overseas, the company typically teams with construction companies who work closely with it to provide the Taggart solution. Founded in 1993, Taggart has an international presence designing, building and operating coal preparation plants. In fact, just seven years after opening its doors to domestic commercial projects, Taggart entered the Chinese market, which is the largest coal producer in the world, producing about three times more than the United States. Lund notes that Taggart is mature in the Chinese market and that the company now sees South Africa as its next area of rapid growth following its recent acquisition of Jim Harrison Design Associates in Johannesburg, South Africa. This acquisition will mean that Taggart will be a full-service provider in the South Africa region. “This is really big for us,” notes Lund.

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Ta g g a r t G l o b a l

JABO Supply Corporation Taggart

Global

what

success

story!

Congratulations on being featured in Achieving Business Excellence magazine. It’s exciting to work with a company like Taggart that has already been so successful but continually develops business plans to ensure future growth. JABO Supply is proud to be a part of their success by supplying pipe, valves and fittings for many of their projects including building new coal preparation plants from the ground up and refurbishing existing plants. See our advertisement for more information, including contact details and website.

Lund reports that South Africa is a growth market for coal extraction and production. “South Africa is extremely reliant on coal as an energy source, and the country even exports to Europe and China. It’s a major growth area for coal worldwide.” Jim Harrison Design has been involved with the top international mining companies such as Xstrata, BHP Billiton and Anglo Coal, says Lund. “So now Taggart is able to handle the greenfield major infrastructure projects for these groups since we have the dimension and capacity working with Jim’s core group to take on the largest projects in South Africa.” Taggart is also very close to closing on another South African transaction with a major coal and mineral material handling group, LSL Tekpro. This partnership will enhance Taggart’s presence and capabilities in that region. With about five feasibility studies with these major mining companies currently ongoing in South Africa, Taggart expects a good percentage of these to be approved by the end of this year. “These are major

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Ta g g a r t G l o b a l

Somerville Fabricators The joint efforts of Somerville Fabricators and Taggart Global have been tremendously successful. Throughout the years, our ability to be flexible to their needs while maintaining quality is what sets our company apart from others. Honesty, integrity and excellence are key components that enable both companies to meet or exceed expectations on every project.

infrastructure projects,” reports Lund. “We plan to receive approval soon so that we can begin our engineering, followed by construction to kick in by early 2011.” Currently, about 75 percent of the company’s work is focused on the US, but that will move to a 50/50

balance over the next few years as Taggart moves more aggressively into the international market. “Our strategy is working to diversify within our industry spheres as well as world geographies,” Lund states. “There are policies still to be determined that will affect our industry here in the US. If those policies do cause a slowdown in the coal industry here, we are prepared to ramp up overseas to keep our revenue growth where it needs to be.” Already established in China, Taggart is positioned to service projects anywhere in the world from its center of excellence in Pittsburgh to handle North American projects, and its other center in Johannesburg to handle projects in that region. The company is also active with three of the top five coal-producing companies in the US. “We have major projects ongoing right now in West Virginia, Indiana and Colorado,” notes Mike Ferguson, vice president. “So again, these projects reflect the characteristic geographic diversity Taggart strives for domestically and internationally. And with

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Ta g g a r t G l o b a l

“Our engineering, procurement and construction management solutions deliver improved performance, increased efficiencies and accelerated returns on investment to our clients throughout the world” our project delivery system in place, we can set up and complete projects at a price and schedule that can accommodate all our customers’ requests, and they know that we’ll deliver a solution that will last and operate without any problems.” A number of elements contribute to Taggart’s success. “Everything in this industry begins with safety,” Lund states. “A safe project is a successful project. Then you have to have the kind of innovative group of process engineers that Taggart has. Our 40 process engineers work diligently every day to improve efficiencies and reduce capital costs for our customers. This group of dedicated engineers is unparalleled in the industry.” Taggart’s innovative contract structure encourages clients to share an open-book transparency on things like procurements efforts to get the best price from suppliers. “This approach gives our customers the chance to reduce their costs, so there is a teaming approach that can achieve significant cost savings for both of us.” Currently about 60 percent of Taggart’s revenues come from the coal production industry; close to 30 percent of revenues derive from the power generation industry, and the remaining 10 percent of the business focuses equally on raw material handling for steel manufacturing and bulk handling systems at port facilities. The company plans to increase its work in the power generation industry so that by 2011 it will have achieved a 50/50 balance between work in this industry and in coal production.

Lund adds that Taggart can provide a better schedule and cost solution than its competition in the power generation industry. “We have proven this time and again, and our track record demonstrates that we really deliver,” he says. “Cost and scheduling are at such a premium to utilities,” he says. Ferguson explains that Taggart’s emphasis is on the pre-combustion side, as opposed to the postcombustion side of the coal production and preparation equation. “It’s all about starting with clean coal,” says Ferguson. “We think the emphasis needs to be on delivering the cleanest coal fuel possible to the boilers versus dealing with how to handle post-combustion cleaning. So it starts at the preparation plant where we wash the coal and where our technologies help produce the cleanest stream of coal possible. We constantly study coal upgrading technologies, and currently we’re commissioning a plant in North Dakota that dries the coal to enhance its quality before combustion.” The bigger picture of coal as a resource requires the understanding that coal is a cost-effective energy source, adds Lund. “Alternative modes of energy today can be three to four times more expensive. Cheap energy is necessary to keep our manufacturing base here in the US viable through affordable energy. We all want what’s best for the environment, but we have to balance that with making sure there are jobs here for the American people.”

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MEGA

Ontario-based Hitachi Construction Truck Manufacturin mega mining trucks around the world but receives surprisi Executive VP Bruce Murray explains to Gay Sutton how the profi

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H i ta c h i Co n st r u ct i o n Tr u c ks

truck making

ng has a strong customer base in ingly little recognition in Canada. company is preparing to raise its ile in the North American market

n 2000, when Japanese company Hitachi acquired sole ownership of construction equipment company VMEâ&#x20AC;&#x201D; itself a joint venture between Clark Michigan and Volvo of Swedenâ&#x20AC;&#x201D;there was little hint that the newly formed Hitachi Construction Truck Manufacturing (HTM) would evolve to become a significant player in the global mining equipment industry. Today, HTM stands alongside Caterpillar and Komatsu as a manufacturer of mining trucks.

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H i ta c h i Co n st r u ct i o n Tr u c ks

Significantly, the production site in Guelph, Ontario, is the sole manufacturing site for Hitachi mining trucks worldwide, and its role within parent company Hitachi Construction Machinery Co. Ltd. (HCM) is different. “The company underwent considerable reorganization in 2000 when we became a wholly owned subsidiary of Hitachi. Our headquarters were moved to Guelph while the engineering, sales and marketing responsibilities were assumed by our Japanese parent,” explains executive vice president Bruce Murray. “Since then we have acted primarily as a manufacturing facility, while John Deere has taken over the sales and marketing as North American dealers with HCM. Our focus, therefore, is on processes, quality and delivery, and our main customer is in fact our Japanese parent.” The Guelph plant has the capacity to produce some 300 units a year—a mix of construction, quarry and mining equipment models—and when operating to capacity it employs 500 staff. And though to the untrained eye the products appear to be part of a range of standard equipment, each is highly individual. “We customize pretty much everything we do. This may be adaptation for the type of mine it will operate in, or to comply with local regulations, or even to suit specific operating conditions. For example, in high altitudes we have to customize the machinery to enable it to run with less available oxygen. We therefore have a strong contingent of engineering staff at the plant,” Murray says. These enormous mining trucks can cost several million dollars each, and when a new mine is being equipped it will require not one but a fleet. “This is a significant investment for the mine,” Murray says. “The due diligence alone could take up to a year from the time we receive a request for information to the signing of the purchase order. Then once we receive that, the investment for us is also huge. A fleet of 10 mining trucks can require as much as $20 million in new working capital. Therefore, managing the financial side of the business is critical, and inventory is one of the key elements that we control.” Where possible, inventory is kept to a minimum, not only to keep costs down but also to prevent stock becoming obsolete as product designs are constantly evolving. “Although we don’t operate just-in-time to the same degree as the automotive

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industry,” says Murray, “we nevertheless follow those principles in many areas. Tires are a good example. We only need them during the last week of a 16-week assembly cycle, so that’s when they’re delivered.” Procurement, however, is complicated by the extremely long lead times on some critical components—12 months in some cases. To manage this, the company runs forecasts on each product model and calculates when to order critical components and in what quantity. Suppliers obviously play a significant role in HTM’s success, and in many cases work in close partnership. About 80 percent of the typical mining truck, by value, is sourced externally. “We procure the highly complex drive systems from Siemens, for example, who are then involved in significant customization,” Murray says. “Siemens also then provides us with on-site assistance to ensure the products perform as required.” In common with most businesses, HTM has felt the effects of the global recession, particularly in the construction equipment line. At its height, capacity at the plant fell from 250 units a year to just 60. However, the robust aftermarket parts side of the business along with sluggish investment in mining helped to ease the situation. “On the manufacturing side at that time, our only option was to adjust the workforce,” Murray says. “However, on the salary side we employ a number of highly skilled people, most of them specialists in their fields. And we made the conscious decision to hold on to these people, believing that the situation would be relatively short-term in nature.” It turned out to be a good decision. Business is now beginning to pick up, and the company is starting to recall some of its manufacturing workers. “We’re seeing that highly skilled technical staff are now in short supply across the industry.” The company is now focusing on a strategy for growth. “Our products are shipped around the world. We have major customers in the US, South Africa, Colombia, Australia, Singapore and Indonesia. But, strangely, we don’t do a huge amount of business in Canada,” Murray says. “There are enormous opportunities for expansion in North and South America. We have the quality of product; we just don’t have the history in the region yet.” To support this strategy, a new sister plant is

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H i ta c h i Co n st r u ct i o n Tr u c ks

“A fleet of 10 mining trucks can require as much as $20 million in new working capital. Therefore, managing the financial side of the business is critical, and inventory is one of the key elements that we control” under construction in Japan to bring production for the Far East and Australia closer to the customer and to liberate capacity at Guelph for expansion. Meanwhile, the company is developing its own customer service offering, transferring the knowledge and experience gained through achieving a world-leading construction equipment industry and delivering this into the mining industry through its extensive dealer network. “For our mining customers, what really matters is equipment availability, and each of our competitors has a unique approach to this,” Murray explains. “What we’re offering is a

complete service package—an integrated system that includes the maintenance of the vehicles.” The global mining industry is certainly active at the moment, but Murray is realistic about the future. “Like many industries, it can be feast or famine,” he says. “As long as the demand is being created by China and India it will be robust, but it can quiet down as well.” However, with a strong portfolio of products that includes worldleading construction equipment and a robust aftermarket parts business, the company is well placed to adapt to fluctuations and changes in the marketplace. www.hitachiconstruction.com

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Mintek

for improvements One of South Africa’s foremost research institutes is still going strong after 76 years— and has plenty of innovations on the horizon too, as Alan Swaby learns

or an organisation dedicated to scientific and industrial change, Mintek has seen its fair share of structural, political and commercial changes over the years. When it was set up by a South African act of parliament in 1934, just about every one of the 25 people working there was able to paper their office walls with qualification certificates, so concentrated was the assemblage of doctorates and PhDs. Completely funded by the state and free to pursue original research in any way pursuant to its mandate of helping develop the minerals industry, advances were made available as published scientific papers, free to anyone who wanted to utilise the technology. Mintek operated in this way for half a century until the winds of change started blowing through its corridors in the 1980s. But although he considers the pendulum might have swung a little too far, Dr Roger Paul, general manager of business development, is pleased that the organisation is still partly funded by the public purse. “The 30 per cent of funding we receive,” he says, “enables us to do long term, blue sky research,

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Mintek

De Bruyn Spectroscopic Solutions De Bruyn Spectroscopic Solutions remain committed to providing high quality analytical results combined with a rapid turn-around time. This is underpinned by a cost-effective delivery, and the ability to develop client specific procedures that are best suited for the analysis at hand. Our laboratory is designed to serve the requirement of mineral processing and mineralogical test programs, and we are closely associated with Mintek, and provide them with the analysis of metallurgical and geological samples. Projects done for Mintek: • Analysis of solvent extraction solutions, aqueous and organic for uranium and trace elements. • Rare earth metals on process solids, aqueous and organic solutions. Services provided: • Inductively coupled plasma optical emission spectroscopy (ICP-OES) • Multi-acid digestion (microwave) and fusions. • Assay methods calibrated to certified reference materials.

not immediately linked to a specific need. Without it, technologies such as bio-leaching probably wouldn’t exist—but a little more freedom would be welcome.” Compared to the CSIRO in Australia, which receives 70 per cent funding, Mintek’s contribution is relatively modest. As such, although it is ring-fenced and can’t be used in any way to subsidise unsuccessful commercial ventures, its application is still subject to strict rules on how it can be used and internal applications for funding are rigorously scrutinised. “Having this kind of control is useful,” admits Paul. “Without it, there’s a tendency for research to drift. We still have at the back of our minds the question—‘how can this technology be used?’” But with one foot in pure research, the other is very definitely in the commercial world. Last year, Mintek made R39.6 million in profit through the licensing or sale of technological solutions—all of which is ploughed back into the business as the flow of money from the government is one way only, and Mintek has no dividends to pay. When asked what had been the greatest change he’d observed in his 34 years at Mintek, Paul immediately cited the decline in the numbers of scientists with postgraduate degrees. “There’s been a sea change,” he says. “Students don’t want to spend another four years getting a second or third degree. Instead they are immediately assessing what career path is best for them.”

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Nevertheless, the 750 strong workforce still has a commendable record in producing improvements for the mineral industry. One of the most recent projects to make the transition from laboratory to workplace is a more energy efficient way of recovering uranium. “There are 45 new nuclear power stations in varying degrees of construction worldwide,” explains Paul, “and already demand for uranium exceeds production, pushing up the price from $8 per lb to $60. To complicate matters further, the grade of uranium ore being mined is falling. Where once you could get 5,000 grams per ton, 150 grams is now more the norm.” The only thing keeping demand and supply in balance is the availability of weapons grade uranium being salvaged as part of the disarmament agreement between the US and Russia. The 80 per cent enriched uranium goes a long way when diluted to around 10 per cent as needed by power stations. But unless the super powers agree to more weapons dismantling, this supply will eventually dry up. Mintek developed an ion exchange recovery process 15 years ago; but the general antipathy towards

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nuclear power deterred any further development. These days, the mood is much different and a large scale pilot plant has been installed at Harmony Gold, to be commissioned in the next couple of months. “The new version,” says Paul, “is not only continuous in operation but does not require the dissolved uranium to be filtered from the ore. We expect it to deliver higher recovery rates for less energy input.” These days, with its commercial hat on, the business has to be alert to every opportunity and interestingly, the world’s emphasis on green issues (in their widest sense) has thrown up a couple. Although the Kimberly Process raised awareness and a ban on conflict diamonds, no-one has yet found a foolproof method of fingerprinting diamonds so that their origin can be verified beyond dispute. Plenty of efforts have been made by looking at colour or trace element impurities but no single analytical process has been shown to work. However, Mintek suggests that applying a basket of technology might just fit the bill. Working in close collaboration with scientists in Canada

Mintek

“The 30 per cent of funding we receive enables us to do long term, blue sky research, not immediately linked to a specific need. Without it, technologies such as bio-leaching probably wouldn’t exist” and Australia, a new lab has been commissioned at Mintek, and work has begun on compiling a database of diamond characteristics that eventually will form the basis of verifying a diamond’s place of origin. It will probably take a decade before enough diamonds have been analysed and sufficient reference data is accumulated; but at that time, a process of random sample checks on diamonds moving through the supply chain or specific checks on any diamonds under suspicion will give a definitive verdict on its precedence. In a somewhat similar vein, there are many in the gold business concerned about the ‘dirty gold’ tag. Not only

are ore grades so low that even more rock per ounce is being processed—soaking up ever greater amounts of energy—but cyanide, and all the connotations it raises, is an inevitable part of the process. The industry itself has drawn up codes of practice on every aspect of creating, transporting, using and disposing of cyanide, for which Mintek is acting in the role of auditor. “Mintek has maintained a position of importance,” says Paul, “by embracing change and evolving. Today, sustainability is at the top of the agenda and we are pleased to be playing a role in this, as well as in developing new technology.” www.mintek.co.za

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Growing

expo

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Tå î c h ô L o g i s t i c s

onentially A different business relationship between a native community and mining companies is attracting attention in the far north, David Hendricks learns

åîchô Logistics was established by the Tåîchô (pronounced “tlee-cho”) First Nations band in 1999 in Yellowknife, Northwest Territories, Canada, as a joint venture with ATCO Frontec Ltd. to contractually provide site services and personnel to the mining companies that were constructing and operating mines in the region. The intention for the Tåîchô people was self-governance, and by the summer of 2005 full self-management of this company was realized. It meant that instead of each mining company with permits to mine on Tåîchô land negotiating mineral rights and hiring native workers individually, the mining companies had to sign Impact Benefit Agreements (IBAs). These don’t include a negotiation over mineral rights per se; they’re more of a comprehensive agreement that includes members of the band being employed to work at the mine site and related areas. “There were opportunities under those IBAs to take advantage of working for the mining companies,” says vice president of operations Cliff Robertson, “and that’s how Tåîchô Logistics began, by supplying site services, and it took off from there. Site services include functions like building roads, pumping sewage, and other things comparable to municipal works services in small towns.” The giant companies mining locally—Rio Tinto Zinc, BHP Billiton (Yellowknife) and De Beers Canada (Yellowknife)— have lived up to their commitments under the IBAs, he says. “We’ve been treated well by all the main players,” Robertson says. “All three of them are mining on Tåîchô land, and they respect that and want to leave a decent legacy behind. In the meantime, we’ve expanded beyond site services into civil projects, such as constructing buildings and other structures for the mining companies, whose commitment is to hire aboriginal people first, then people from the northern region. Then if they still can’t find people with expertise, they go to the southern provinces. And we made sure we stepped up to the plate and delivered, by recruiting the right people, still by our charter values, which means hiring as many Tåîchô citizens as we can and performing well, to make money for our shareholders.”

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Tå î c h ô L o g i s t i c s

Included in the stated goals of Tåîchô Logistics, beyond providing employment opportunities for its people, is to train them in several skills, involve young people in activities that lead to business and professional development, and to “create sustainable business capacity and wealth for the company’s shareholders.” When the Tåîchô started their business, Robertson points out, “they didn’t have a lot of money, so they had to earn some and used it to get a cash flow going.” At the time, he was in charge of human resources for BHP Billiton at its diamond mine in Yellowknife, where he had a record of hiring a lot of native workers. Tåîchô Logistics was looking for someone “soft on people but hard on issues.” He was hired as general manager of the logistics firm, and two years later is vice president of operations. Neither Robertson nor his managers are natives, but that doesn’t prevent him from understanding Tåîchô’s goals in business.

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“Tåîchô Logistics is quite progressive, with a lot of support from the leaders, and their relationships are built on trust” “Tåîchô Logistics is quite progressive, with a lot of support from the leaders, and their relationships are built on trust.” The company’s board of directors is composed of Tåîchô natives, “and anytime one of the company’s divisions wants to expand its business, it has to do research and sell that business opportunity to the board, which has to approve it before it moves forward. They make the final call on it.” Those other company divisions were created for diversity, but first the native workers had to be trained in certain skills, including certified trades—electrical, heavy-duty mechanical, welding, millwright, pipefitting, carpentry,

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cement finishing, ironworking—“so that when mining shuts down, we have other work for them.” Tåîchô Logistics started to invest in an infrastructure that would diversify the company away from general mining work, “so there was less dependence on mining for income.” The decision was made to invest in a transport company, Ventures West Transport of Fort Saskatchewan, the second-largest bulk fuel and bulk chemical (fire retardants, fertilizers, etc.) hauling service in Western Canada. Tåîchô Logistics currently owns 60 percent of it and operates the trucking service in the Yukon, Alaska, and five southern provinces. “The

Tå î c h ô L o g i s t i c s

mines in our region use millions of liters of fuel,” says Robertson, “and we’ve secured the contracts for hauling that fuel for them. So we now have a major share of a successful trucking firm, and in five years we’ll acquire the remaining 40 percent.” A division—Aboriginal Engineering Ltd.—was created to do reclamation breakdown and cleanup work on sites when a mine is shut down in the northwest region. “That’s a good business here because there are plenty of mines of all sizes,” Robertson says. “We also have a 30 percent investment in IND Management, which supplies heavy equipment to mines.” Another division—Tåîchô Landtran—hauls cargo throughout the region, which is especially tricky on difficult, treacherous roads that are mainly snow-covered year-round. Tåîchô Lafarge Cement Ltd. is a joint venture company (51 percent owned by Tåîchô Logistics and 49 percent by Lafarge North America) supplying cement to mining companies. “A lot of mining companies and aboriginal groups from

near and far have been visiting us to study our business model, in the interest of perhaps applying it to their own situations,” Robertson explains. “In many countries they seem to have problems in this regard, so they’re curious to see how we make it work. As we move forward, we’ll continue to look for other business opportunities in order to expand our diversity, still springboarding from the mining part of the business. We’re fortunate that the mining companies are cooperating in that side of it, bringing us business, as they see that our commitment is there. The future looks promising because not only are the Tåîchô people being taught how to operate various kinds of equipment and machinery, for which they’re proving to have somewhat of a natural aptitude, they’re also learning how to operate various aspects of a company. Whereas in the past the post-secondary educational achievements of Tåîchô students have been rather sparse, today they’re growing exponentially.” http://www.tlicho.ca/tlichoinvestmentcorp

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From the

ground,

First Majestic Silver Corp. is committed to building a senior silver-pro based on an aggressive development and acquisition plan with a focu Davila takes David Hendricks on a virtual tour of the companyâ&#x20AC;&#x2122;s thre

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oducing mining company us on Mexico. COO Ramon ee producing silver mines

First Majestic Silver Corp.

irst Majestic Silver Corp. was established in Vancouver, British Columbia, in 2002 as a silver mining company focused on Mexico. The company currently has three underground mines in production and is nurturing two other projects for future production. Ramon Davila, First Majestic’s chief operating officer in Mexico, is based in Durango. He has an engineering degree in mining and metallurgy and a master’s degree in minerals economics. He worked for Industrias Penoles, the largest silver producer in Mexico from 1978 to 1987 and then became vice president of mining operations for Luismin until 1993. Five years later Davila became president of Plata Panamericana SA de CV, a wholly owned subsidiary of Pan American Silver Corp., where he was in charge of exploration and production of its Mexican operations. He’s a past president of the Association of Mining Engineers, Metallurgists and Geologists of Mexico, and he is currently a director of the board of Mexico’s Chamber of Mines and a member of the Society for Mining, Metallurgy and Exploration.

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Davila says the La Encantada Silver Mine— located in the Sierra Madre Oriental mountain range in the state of Coahuila in the northern part of central Mexico, fairly close to the US border— is First Majestic’s main operating asset at the moment. It’s in an isolated area, so it’s important to the local communities as a source of jobs. The infrastructure includes an airstrip, housing, offices, ancillary buildings, a laboratory, restaurant, general store, school and recreation facility. The mine is situated within First Majestic’s land package of approximately 4,000 hectares (about 10,000 acres). “Last November we completed a major construction project there,” Davila says, “a cyanidation [a metallurgical technique for extracting precious metals from oxide ore] mill upgraded from 800 to 3,500 tons per day capacity. The plan there is to reprocess all tailings left behind, because the previous companies operating that mine over the past 30 years didn’t perform the correct process for the type of ore. There are plenty of valuable tailings, so threequarters of our current production is coming from those, and one-quarter is coming from fresh ore, from the mine.” The mineralogy of the deposits is predominantly iron oxides, carbonates and lead sulphates, with high concentrations of silver (argentite and native silver) values, as the result of an oxidation process and enrichment in a known vertical range of more than 400 meters. The full production capacity of the La Encantada mine is more than 4 million ounces of silver in the form of dore bars. First Majestic currently has nearly 500 people working full time, and a further 1,500 are employed in indirect jobs. “In the next four years we’re going to increase the capacity of this mine and reduce the amount of tailings that we feed to the plant. Our strategy from the start of this project was to construct the most up-to-date facility using the latest technologies. Currently over 80 percent of all water used is recycled, including a large portion of the cyanide. The result is one of the cleanest operations in Mexico.” The silver dore bars are shipped to Toreon in Mexico and will also be shipped to the US and Europe eventually. La Parrilla Silver Mine and mill sit within First Majestic’s land package of more than 53,000 hectares located in the state of Durago, about 75 kilometers from the city of Durango, in the western

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First Majestic Silver Corp.

“The plan is to reprocess all tailings left behind, because the previous companies operating that mine didn’t perform the correct process for the type of ore. Threequarters of our current production is coming from those tailings and one-quarter from the mine” MINING SECTOR www.bus-ex.com 163

part of the Mexican Altiplano, an extensive volcanic plateau characterized by narrow, northwesttrending, fault-controlled ranges separated by wide, flat-floored basins. The town of San Jose de La Parrilla is just north of the property, and Vicente Guerrero is 16 km to the southeast. The La Parrilla mine is currently producing about 1.8 million ounces of silver equivalent per year. The current mill runs with twin circuits, each 425 tons per day: one to handle oxide ore, and the other

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to handle sulphide ore. “In the flotation circuit we produce zinc and lead concentrate, which also contains silver,” says Davila. “In the cyanidation circuit we produce oxide ore and silver dore bars. The mine is close to a community called La Parrilla, and we’ve been working closely with the community and the local government to maintain a good relationship with them. We’ve been doing projects with them like paving the road and other public works. And despite being a mine, we are

First Majestic Silver Corp.

also certified as a clean industry in Mexico.” The San Martín Silver Mine is located 250 km north of Guadalajara in the northern part of Jalisco State. “It produces about 1.2 million ounces of silver equivalent per year with a cyanidation process. It’s been a mine operated by other companies for the last 20 years, and we are now exploring it in order to try to increase the reserves and the capacity. We have a good relationship with the local community.” The San Martín mine suffered from a lack of reinvestment for several years. First Majestic identified an opportunity to make investments in development, exploration and mill improvements, and it took control of operations of the mine in June 2006 by purchasing a majority stake in First Silver Reserve Inc. In September 2006 First Majestic purchased the remaining shares of First Silver, resulting in 100 percent ownership.

First Majestic also has two projects in consideration of development. One is Del Toro Silver Mine, which consists of numerous areas of interest for mineral exploration within the Chalchihuites mining district in Zacatecas State, including the San Juan and the Perseverancia mines. Both were historic mines; the Perseverancia was mined for high-grade silverrich sulphide ore, and the San Juan is believed to be the oldest mine in the district, dating back possibly 500 years. “Del Toro could become our next mine,” Davila says. “The other is Real de Catorce, a relatively new mine that we acquired in November 2009 as a result of the purchase of all the issued and outstanding shares of Montreal-based Normabec Mining. The property consists of 22 mining concessions covering 6,327 hectares. It’s still somewhere in the future for us.” www.firstmajestic.com

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Rising from the

ashes

The story of Frontier Mining is one of an amazing turnaround. Jane Bordenave finds out how the company went from bust to boom in just 12 months

hile it is listed on the London Stock Exchange, Frontier Mining is in fact a Kazakh mineral exploration and development operation that has been working in Kazakhstan since 1998. It is involved in gold and copper mining and was bought in 2009 by a group of investors led by entrepreneur Erlan Sagadiev.

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Frontier Mining

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Frontier Mining

The first 10 years of Frontier’s life were difficult, to say the least. The company was originally set up by a group of American mining experts and geologists who had been working in Kazakhstan on various projects largely related to the US government but who then decided to strike out on their own. While they had the technical knowledge, unfortunately regulatory constraints held the firm back and it was only able to bring online its poorest asset, the Naimanjal gold mine, located in the north-east of the country. In November 2007 the company purchased 50 per cent of the Benkala copper project, situated in western Kazakhstan, in a joint venture with Coville Intercorp Ltd. This $21 million investment was made through cash and shares; however, it was not enough to put the mine into production, which had a negative impact on the organisation’s shares. Despite overtures made to the markets, no one was willing to invest due to the global economic crisis and by the end of 2008, with shares worth 0.1 pence, the organisation was on the brink of bankruptcy. It was in early 2009 that Sagadiev stepped in with a rescue package, providing a much needed lifeline. Initially joining the company as president of Kazakh operations in the February, the following month he was made CEO and chairman. “Frontier Mining was a great opportunity for investment,” he says. “The company had some great assets which were near production and I saw that it could be turned into a very successful business.” By April, he announced he was giving the business a $10 million credit line, of which he had put in an initial $4 million cash investment. His investment

in the company alone brought the value of shares up to 15 pence, although this has since settled to a stable five pence. Having renewed the package earlier this year, the group of investors led by Sagadiev has in effect invested $20 million into the company, in order to make it viable once again. This was a distinct risk—although Frontier had at the time a 50 per cent share in the Benkala project, to date only exploratory excavations confirming the deposit have been carried out. However, this risk is mitigated by Sagadiev’s extensive knowledge of the Kazakh business landscape and how to negotiate the red tape that had ensnared the previous management. The company is now in a position to merge with Coville Intercorp, which will give it 100 per cent ownership of the Benkala venture. This is a very significant development, as it will allow Frontier to bring Benkala online within the next 18 months. It will also facilitate growth without capital expenditure, as through the merger the firm will acquire a gold mine in Russia currently owned and operated by its joint venture partner. The Benkala project is a $20 million investment that represents various challenges and opportunities for the organisation. It is an oxide/ sulphide copper deposit located within the Urals copper/gold ore belt and, as it was a completely greenfield site when it was acquired, the firm has had to engage in an amount of traditional drilling to ascertain its quality and size. These investigations have revealed that the deposit contains just under 2.8 million tonnes of ore, worth $490 million. “Although we do of course have other assets,

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Benkala is the largest and is also, conveniently, the closest to the production facility. All these factors are very important and combine to make it our most significant and most valuable site,” Sagadiev explains. The extraction process will take place in stages, with an initial extraction rate of 7,000 tonnes per annum starting in the final quarter of 2011, and gradually rising to full capacity of 20,000 tonnes. With this in mind, Frontier Mining is building a production plant that will be able to handle this capacity straight away, although initially it will be running at 35 per cent capacity. The facility is being designed by Calder Projects Services, an Australian technical consultancy; however, components are being largely sourced locally in Kazakhstan. When it is completed, Benkala is projected to be the most technologically advanced site of its type in the country. Although investments have been made in bringing electricity and potable water to the site, there is much infrastructure already in place, particularly in terms of transport links. This is an important bonus for the company, as it will facilitate export of product to countries such as China without the need for extensive capital expenditure. However, the site is greenfield, so Frontier has brought in Wardell Armstrong, a surveying company that specialises in environmental development and management. This consultancy has helped Frontier ensure that its operations have as minimal impact on the environment as possible, as well as ensuring environmental safety such as preventing pollution of the water table. Frontier also believes firmly in staff training and continuous professional development, with education for personnel taking two forms. Firstly there is the basic training that enables the company to comply with the terms of its mining licence— ensuring that its workers are aware of health and safety issues and how the plant works, even if they are already experienced. Secondly, it provides supplementary training related to each worker’s role. This could be basic skills such as first aid, or more specialised training such as sending a staff member on a university course. What matters to the company is relevance—enriching the knowledge base of its people in a way that will also bring new skills and expertise to the company. “Our goal is to become a world class company and unless we continue to improve our team we cannot get

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Frontier Mining

Guthrie Tax • Advisory Guthrie Tax • Advisory is a CPA firm focused on providing high quality international tax consulting and compliance services. Our goal is to help businesses such as Frontier Mining develop efficient tax structures and strategies that support their business objectives. Our specialty and deep expertise in cross-border tax matters complements the services our clients’ accountants, attorneys and other advisors offer.

there,” says Sagadiev. “Therefore we understand the importance of strengthening our personnel and improving their overall knowledge and skills.” While current production rates are small, Frontier’s plans for the future are big. Within five years, not

only will Benkala be producing at full volume, there are also plans for expansion in that area and increased output. “By 2015 we should be producing 40,000 tonnes of copper and 40,000 ounces of gold per year. At this stage we will be generating a cash flow of over $300 million, giving us very substantial market value,” explains Sagadiev. Contracts selling copper to refineries in fast growing markets such as China are also in mind, and subsequent listing on the Hong Kong stock exchange if all goes well. All of these factors will make Frontier Mining a significant player in the world copper markets, as well as an extraordinary example of a successful turnaround. To get from the verge of bankruptcy to becoming a growing company within 12 months has been impressive enough; but with Sagadiev at the helm, his expertise is bound to lead the firm on to even bigger and better things. www.frontiermining.com

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Eagle

The

lan

Kennecott Eagle Minerals has been feeling it mining law and regulations enacted in the State manager Jon Cherry talks to Gay Sutton about the c why the new law will b 172

www.bus-ex.com MINING SECTOR

has nded

ts way through the tough new e of Michigan in 2004. General challenges of the process and benefit the mining community

Kennecott Eagle Minerals

ining in the United States today is light-years from the popular image of the old miner with a mule, a cart and a pickaxe. High-tech and comprehensively regulated, the industry uses the latest science, technology and mining practices to safeguard health and wellbeing, to improve the efficiency of the mining and extraction processes, and to prevent contamination from the mine jeopardizing the natural environment. Interestingly, it’s the State of Michigan—which has been in deep economic recession for the past 10 years—that is pioneering even more stringent mining environmental legislation. Intuitively, you would expect this to stifle mining, which would be a disastrous consequence for the traditionally strong mining communities, not to mention the Michigan economy. Shockingly, more than half the private-sector job losses across the whole of the US in the past 10 years have occurred in Michigan. However, the reverse looks likely to be true, according to Jon Cherry, general manager of Kennecott Eagle Minerals, a Rio Tinto company that has been the first to pick its way through the legislation and is now investing an additional $469 million in the construction of a new nickel and copper mine in Michigan’s Upper Peninsula.

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Kennecott Eagle Minerals

Foth Founded in 1938, Foth offers a tradition of personalized service and smart solutions to industrial, commercial and government clients. Our firm provides expertise in environmental, industrial and infrastructure consulting and engineering. As part of Foth Infrastructure & Environment, LLC, Foth’s Environmental Division focuses its efforts on the following areas: • Mining • Water resources • Environmental program management and compliance • Solid waste management • Land based remediation. Foth listens to your needs, and works strategically to advance your objectives and help you achieve unprecedented

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Kennecott has been engaged in exploration for many years in this mineral-rich area, and Cherry has represented the mining community during the early formation of the new legislation—working with environmental groups, state regulators and elected federal, state and local government officials and state legislators to design laws that everyone could buy into. “Some people believe that you have to choose between mining and protecting the environment. But mining and environmental care are not mutually exclusive. You can design a mine in such a way as to protect the environment,” explains Cherry. “That’s what these laws aim to do, and that’s how our company has always operated.” There are several unique points to the legislation. First, requirements for dedicating funds to cover end-of-life closure costs are stringent. The bonds must be signed over to the State rather than held by the company, and the State has the authority to demand increases annually as may be necessary to reflect changes in the operations and to cover costs projected to cover reclamation needs, should unforeseen circumstances require the State to be engaged in reclamation. The law requires that

environmental issues must be addressed and not left lingering, so as to perpetual care. The most interesting aspects of the law, however, cover how mines are designed and how the permitting is managed. Two years of environmental baseline data must be collected before mine design begins. The potential impact of the mine design on that baseline data is then assessed. “This then becomes an iterative process to reach the final design.” Perhaps most significantly, there are proscribed timelines for the entire permitting process, giving local communities extensive opportunities to engage in the process through multiple public hearings. “This, however, provides business certainty,” Cherry says, “as it occurs over a 220day period, and businesses can plan for that.” The new law certainly sets the environmental bar very high, and Cherry has no doubt about its importance. “Not only is the statute good for the environment, it’s good for business. And mining companies that are not able to achieve that high standard probably shouldn’t be mining.” The regulations also resonate with Kennecott’s standard business procedures. “We design our mines backward,” Cherry explains. “Before we begin designing a mine, we work with the local communities to determine the best post-mine use of the land. Once we have that vision, we put together a design that addresses the various environmental issues and allows us to reach that desired endpoint. We then take the plans through the permitting process.” In the case of Kennecott Eagle, the mine and surface facilities are located in a timbered area used by local communities for leisure activities. The plan, developed in partnership with community groups, is to return the land to outdoor recreational use after closure. The mill facilities, meanwhile, are being located on a brownfield site some 25 miles south of the mine at Humboldt, which has several benefits. It will minimize disturbance to the timbered mine site, regenerate an old disused mill site, and bring a significant number of jobs to a depressed area. “At the end of the mine’s life, the community here is interested in seeing it reused by future businesses. There are two opportunities: it can be turned into a regional milling center and used by other mines in the area, or, because the

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infrastructure is in place, it can be used by other industries moving into the area.” One of the critical design factors for both the mine and the mill is water management. Although the top of the ore body is just 200 feet below the surface, the mine has been designed as an underground operation rather than an open pit in order to reduce environmental disturbance on the surface. Rock will be brought to the surface and placed on a double-lined highly impermeable pad. “We have about 300 inches of snow a year at the site. Any water that comes into contact with the rock on the surface will be collected, analyzed and treated,” Cherry says. The site is to be equipped with water capture and holding facilities and a large water treatment plant. “The discharge from this plant will be cleaner than drinking water.” At the mill site there is little waste other than tailings, and as part of the sustainable development plan these will be placed in an old iron ore pit adjacent to the mill. Water plays a key role in moving the crushed ore through the flotation process (where nickel and copper concentrates are extracted) and then to the tailings pit, and this is managed in a closed loop. The water is removed from the tailings reservoir and recycled through the process. “Studies from previous mining operations have shown that any water that could discharge into the local environment from the pit is clean,” Cherry says. “Nevertheless, as a contingency we’re building a water treatment plant here that is capable of treating all the water in the pit if it’s ever needed, and it will always be on standby.” The biggest challenge facing Kennecott with the Eagle mine project is that it was the first to have to satisfy the new mining law. “So we—the regulators and the public—were all feeling our way through the process with this first application, and I’m glad it was our company that was the first to go through it,” Cherry says. “There have been many lessons learned along the way, including how absolutely important it is to reach out to the community and the regulators ahead of the more formal permitting process.” Over a long period of time, Kennecott, as part of Rio Tinto, has developed a number of vehicles for communicating with the public and incorporating their needs into a mine plan, and these have proven their worth. “One of these is an advisory

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Kennecott Eagle Minerals

group that includes elected officials, environmental groups, businesses, universities and community representatives. And it’s a two-way dialogue,” Cherry explains. “We use it to inform the community about what we’re doing. But just as important from my perspective is that we get feedback from them in terms of what they want to know, what they’re hearing, and their suggestions for changing the mine design and making improvements.” The advisory group is not required under the new law. “However, it enables us to take extensive community baseline data, to examine the impacts and the benefits of our project to the community.” The Eagle project is in the midst of this assessment right now, “and this will help us identify how the public perceives the project, where we’ve excelled and where we simply need to do more.” The most obvious benefit to the community is that it’s an additional $469 million investment in the local community. During the three-year construction

period some 500 contractors will be employed on the two sites. Once up and running, the operations will require over 200 full-time employees over the seven-year life of the mine. In the long term, having worked through the requirements of the legislation and proved that it can be done, Cherry believes the business certainty created by the new law will encourage other mining companies to invest in exploration and mine development in Michigan Kennecott, meanwhile, is wholly committed to the region. It currently holds roughly 450,000 acres of mineral rights in the area and has an extensive ongoing program of exploration, not only with a view to extending the life of the Eagle Mine but also looking for additional nickel ore bodies in the region. Having successfully navigated the new legislation and demonstrated that it can work very well, the company is in a great position to follow through on this exploration. www.eagle-project.com

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The

go ho

Eritreaâ&#x20AC;&#x2122;s economic prospects ar approaching opening of Bisha Mining manager Stan Rogers gives Ruari M

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Bisha Mining

olden horn

re looking up with the gâ&#x20AC;&#x2122;s operation. General McCallion the lowdown

ritrea, located in the north-east of the continent on the northern shore of the â&#x20AC;&#x2DC;Horn of Africaâ&#x20AC;&#x2122;, has had a troubled post-colonial history. Initially subsumed into Ethiopia, it finally achieved self-determination after decades of struggle in 1993. European powers and neighbouring states coveted its mineral deposits and deep-water access to the sea; ironically, the deposits remained essentially undisturbed for 70 years during the decades-long upheavals of the Second World War and the post-colonial period, so the object of exploitation was not achieved. And every cloud has a silver lining, as the saying goes. Eritrea has had a stable government since independence and its attractiveness as a source of minerals is once more gathering attention. The new wave of exploration has a different aspect to it, however; it is a long way from the colonial era and from other models of foreign direct investment. The government, both directly and through the Eritrean National Mining

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Bisha Mining

Senet The Bisha Project in Eritrea has been a momentous opportunity for SENET, furthering the company’s reach throughout the African continent. SENET commenced work in 2007 on the initial design and engineering for Nevsun Resources Limited through its Eritrean subsidiary Bisha Mining Share Company (BMSC). Currently, Bisha is in the advanced construction stage of the oxide (gold) phase which is poised for completion late 2010. This will be closely followed by the supergene (copper) phase. SENET is privileged to be part of BMSC’s Bisha Project as it sets the benchmark as the first modern day mine in this NE African country.

Corporation (ENAMCO), is able to take a share in all mining exploitation, as Stan Rogers, general manager of Bisha Mining, explains. “In the case of Bisha Mining Share Company [BMSC], ten per cent of the company is owned by the state under ‘free carry’ interest and a further 30 per cent of Bisha is being purchased at fair value by ENAMCO from Nevsun Resources Ltd, which retains the other 60 per cent,” he says. “We will go through an international assessment for the value of the property at first pour, when the balance will be paid. During the construction process, costs have been split two to one, between Nevsun and ENAMCO.” Rogers has been impressed with the way the partnership has worked thus far. “Trust has been the essential element. It was vital that both sides trusted

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Bisha Mining

each other, especially as this was a new experience for both sides,” he says. “All the way through, BMSC has found the government to have been very cooperative. They have stuck to every agreement. This is the most honest nation in Africa I have ever worked in. There are low levels of observable crime, the lowest levels of financial corruption I have ever come across and deals stick. It’s very straightforward—there are no hidden agendas and we have developed this very high degree of trust.” The project has proceeded pretty rapidly since the exploration company (and Bisha Mining’s privatesector parent) Nevsun Resources completed its feasibility study in October 2006. The social and environmental impact assessment was completed the following December and the mining licence was granted a year later, after the state’s participation agreement was concluded in October 2007. The Bisha mine is located about four hours’ drive (220 kilometres) west from Asmara, Eritrea’s capital, which is at an elevation of 7,000 feet—so the area enjoys a climate that isn’t beset by extremes of heat and cold. The project is in a large precious and base metal-rich volcanogenic massive sulphide (VMS) deposit, with a gold and silver oxide zone underlain by a copper supergene and then copper and zinc sulphide zones. It is planned to be a producer of gold for the first two years, by the end of which time it will have generated enough value to repay the initial costs, including construction, which commenced in 2008. “The mine is being developed on the basis of a 10 year life, which is pretty standard,” says Rogers. “The reality is that there is more to find and things change. We know there are additional minerals at depth, which haven’t been taken into account—the deposits we will be exploiting are at relatively shallow depths and will

be extracted with open-cast methods.” And there are satellite deposits, as well. “The mine has no course gold—it is very fine grained, which makes it secure and unobservable until it reaches the gold room, after which it has to be refined. In the ore, the gold is within a matrix of other materials and yields about eight grams per tonne—which is actually very high; most people would love to have that concentration from open cast mining. We expect to produce around 500,000 ounces a year for two years, so over one million ounces in 24 months.” Which adds up to a lot of value. At the end of the initial gold extraction period, the emphasis will shift to copper extraction. The price of copper has fallen dramatically since its high in September 2008. “Viability has never been an issue—metal prices change all the time,” Rogers explains. “We looked at the total package: we have gold at the top, then copper and zinc, plus silver to exploit. It ultimately depends on the market but the costs are relatively low and we anticipate making money throughout the project.” Making money is important, for all parties. The Bisha mine will be a valuable earner of foreign currency for Eritrea—indeed, the only foreign exchange earner of any significance. It also acts as a catalyst for change in the country, for the raising of skills levels and the development of its rich mineral deposits, which have lain undisturbed for so long. But there are challenges, and skills are at the heart of them. “We have, in effect, a clean sheet but that means we are trying to develop an entire system,” says Rogers. “We have to bring everything in to a relatively isolated area. There are skills in Eritrea but a degree of conversion is required, for engineering and administration. However, there are no mining people here so we have had to bring in expatriates for geology, control of basic functions and operation of specialist big machinery, which we have purchased from Caterpillar and Atlas Copco, for example.” Eritreans will eventually have to be sent for specialist training in mining to institutions in South Africa and other countries; and will return with higher skills and knowledge. BMSC currently employs around 1,000 people, of whom around 54 are expats. “When we have finished all phases of construction in about another five years, we expect there will be around 10 expats going forward,” says Rogers. “This is a great project,” he concludes. “Our eyes are firmly set on starting production later this year and it will be fascinating to see how it, and Eritrea, develops in the years ahead.” www.bishamining.com

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Mining a

fertile field

South African phosphate mining and processing group Foskor gave its name to foskoriteâ&#x20AC;&#x201D;but ironically, it is no longer mining that ore as it refocuses its strategy and resources. John Oâ&#x20AC;&#x2122;Hanlon speaks to the VP of Mining, Johan Horn

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Foskor

he macronutrients in fertilisers are nitrogen, phosphorus (in the form of phosphates) and potassium—usually described as NPK. World demographics and climate change mean that demand for these ingredients can only rise: the exponential growth in global food production sent the price of fertilisers skyrocketing in 2008 and it was feared there could be a world shortage of phosphate within decades. All this gives South Africa’s only indigenous phosphate mining and processing company a sustainable future, both for the rock concentrate that Foskor mines and feeds to its processing plants and for the phosphoric acid and granular products it sells to the world fertiliser industry. However, the high prices that it was obtaining in 2008 slumped during 2009, says the company’s VP of Mining, Johan Horn. “At its peak we were getting $2,200 a tonne for the phosphoric acid produced at our Richards Bay facility. During the last year, that dropped to $450!” Recently world prices have risen, Horn says, and are currently at around $750 a tonne, but he’d be surprised to see prices anywhere near 2008 levels before 2011. The divestment by South Africa’s national oil corporation Sasol of the phosphoric acid plant it ran in Phalaborwa close to Foskor’s mine and its closure in the latter part of 2009 was a blow to Foskor. This plant was its biggest external customer for phosphoritic rock, taking some 20 per cent of its entire production. It therefore made commercial and strategic sense for Foskor to buy the plant, and negotiations commenced; however, the national antitrust authorities blocked the sale. Sasol Nitro is in talks with other potential buyers, but for the time being this important resource remains closed. The Phalaborwa plant consumed half a million tonnes of rock, but the good news is that Foskor has not needed to cut back production during the closure. “We had almost completely run down our stockpiles last year, so our reaction to this situation has been to continue at capacity and build up our reserves to a comfortable level: when the plant comes back on-stream, we will be ready.” In the medium to longer term, Foskor’s mining division will need to be able to supply even more milled rock than it does already. In order to be able to do this, it is in the process of commissioning a new mine to the south side of its existing pyroxenite deposit at a cost of R550 million (around $71 million). Up until the present, Foskor has mined two distinct types of ore—pyroxenitic and foskoritic. The latter was first exploited by Foskor, which accounts for its name. The foskorite, though, accounts for only a small part of the huge deposits in the Phalaborwa region, though it contains other metals, including copper—which until very recently provided a separate revenue stream for the company—as well as magnetite, a source of iron ore. The pyroxenenes from the new south pit will yield greater quantities of phosphate per tonne mined, so it has been decided to focus entirely on pyroxenitic rock and discontinue the production of copper, which was in any case a marginal activity. The South Phalaborwa Mine lies in the same geological complex as the existing North Phalaborwa pyroxenite mine. “The deposits are enormous, and this has the potential to grow into a very large open pit mine. We have already started production there and are currently ramping up operations with the eventual objective of deriving about 60 per cent of our feed from the south pit,” says Horn. The south pit material will be used to feed two of the company’s four production streams, the crushing and milling facilities at Phalaborwa mining company and the largest of the four flotation circuit that separate phosphates from other minerals in the ore.

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A side effect of the strategic Pyroxenite Expansion Projects (PEP), being overseen by Horn, will mean the end of foskorite, and by implication copper, production by the end of this year. “We don’t own any foskorite resources any more—there will be no copper revenues in the financial year 2010/11 and we have run down our foskoritic rock reserves and successfully changed over to pyroxenitic,” he asserts. The big positive effect will be to increase the annual production of concentrate from 2.2 million to 2.6 million tonnes without any increase in processing capacity: it will be achieved simply through the higher yield from pyroxenitic feedstock, and this will more than compensate for the loss of the copper revenues, Horn affirms. The South Pyroxenitic Mine is PEP Phase 1. Phase 2 is a project to remove a significant bottleneck that had arisen in the milling capacity at Phalaborwa. In 1999, a Loesche mill was commissioned with an annual capacity of 4.4 million tonnes. This was a vertical air swept table mill of a type successfully used in the cement industry, but it proved less successful than had

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been hoped in milling phosphoritic ore, says Horn. It simply couldn’t feed the flotation capacity that the company has, so in October 2008 a series of conventional horizontal wet ball mills were commissioned to make up the shortfall. “We are in the process of installing milling capacity of 250 tonnes per hour,” Horn explains. The EPC contract was awarded to Bateman Engineering. “The project involves the design, supply and construction of a tertiary crushing, rod milling, ball milling, classification and flotation feed thickener circuit, fully integrated into the Extension 8 process facility to make use of the surplus flotation capacity the Loesche mill can’t feed.” Horn is delighted with the progress by the contractor, which has shaved at least six months off the scheduled completion date: it ought to be on-stream by January 2011. That will enable the current year’s output target of 2.6 million tonnes to be increased to 2.85 million in 2011. “After that, we will engage in smaller debottlenecking projects and we think these will increase our overall output of

Foskor

phosphoritic ore concentrate to about three million tonnes per annum in 2012.” Looking further forward, Horn says that Foskor’s strategy will be to achieve its annual production of diammonium and monoammonium phosphate of 4,000 tonnes. “After looking at further value-added products like purified or defluorinated acid, we may consider entering the retail NPK market, but that’s in the mid to long term,” he concludes. Horn is one of nine members of the executive membership team led by the CEO and president of Foskor, Alfred Pitse. The political and economic landscape has changed significantly since Pitse took over the helm in June 2003. Despite the cyclical nature of the phosphate and fertiliser industry, Pitse has managed to turn Foskor around from a loss making entity. In 2005 Foskor broke even after successive losses and in 2008/09 Foskor made record profits when operating profits increased by 149 per cent to

R2.7 billion from the previous year. Foskor expected much weaker performance in 2009/10 on the back of the second round effects of the global financial crisis. The appreciating rand hurt export earnings and commodities slumped from its 2008 peak. Under Pitse’s stewardship, firm controls and prudent financial management enabled Foskor to make profits yet again, when at best, management was hoping for break-even due to hardening trade conditions. Pitse reiterates: “I am exceptionally proud of my management team and the consistent successes they achieve. Mr Horn’s team have executed a R1.2 billion expansion project with military precision, despite the extraordinarily difficult environment we operate in. PEP, to date, is running ahead of schedule and well below budget. Mr Horn’s passion and determination for delivery value is commended and he remains a true leader in the Mining Division and an example to the rest of Foskor.” www.foskor.co.za

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