Opportunity Worldwide | Q4 2014 | InternationalResourceForum.com
CARDNO
Aiding in the Development of Cambodia
KENYA CHAMBER OF MINES
SPECIAL REPORT WATER ISSUES
AUSTRALIA
Western Australia Premier Colin Barnett
FOCUS ON
WEST AFRICA
HUMMINGBIRD RESOURCES FROM EXPLORER TO PRODUCER OVERNIGHT
An exclusive with CEO Daniel Betts on acquiring all of Gold Fields interests in Mali
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InternationalResourceForum.com
PUBLISHER’S NOTE Welcome to another edition of
The International Resource Forum Earlier this year, The International Resource Forum (IRF) team was invited to cover the West Africa Mining Investment Summit (WAMIS) that took place at The Waldorf Hilton in London. The two-day event featured a reasonable turnout, with some significant government officials from the nations Liberia, Ghana, and Mali, to name a few. The impressions from the event left us thinking it would make for a good edition to focus on the region. Since the event, we’ve been hit with news of the world’s worst Ebola breakout since 1976, which is threatening many of the countries we’re discussing in the edition. We can only hope the efforts of the World Health Organisation and those on the ground can contain this severe disease. During the WAMIS event we had the opportunity to speak with the Liberian Deputy Minister for Operations Sam Russ who had flown in specifically for the event. Our conversation with the Minister addresses Liberia’s continuing effort to attract investment to the country. The ongoing stability of the country is making it more attractive to international investment and Minister Russ discusses this, as well as their plans to address the country’s lack of infrastructure assets through public-private-partnerships (PPP). In our cover story we speak with Daniel Betts, CEO of Hummingbird Resources who have recently acquired all of Gold Fields interests in Mali. Dan outlines what this means to shareholders as they view becoming a producer in 2015. It’s pertinent as Hummingbird continues to grow when many other companies are reducing their operations.
We continue our West African focus as we speak with PPM Director Jeremy Clarke. Under his leadership, the project management company has done work in 18 African countries. Jeremy discusses the company’s services to a number of key companies including Sierra Rutile, Nimini Gold, Stellar Diamonds, Taurus Gold and Kuma Iron Ore. He stresses the need for using best technology from a number of different mineral technologies to deliver the best outcomes for clients. Also on the rise is the Kenya Chamber of Mines (KCM). Relatively new to the international resources scene, the country will continue to see its stock rise. With a vast amount of unexplored lands, and no historical data, Kenya is making strides to develop its mining industry while tackling its outdated legislation. The IRF speaks with KCM CEO, Monica Gichohi about representing the individuals of the industry and the ongoing attraction to its highly prospective lands. In our Australian content we speak with arguably the country’s most important voice in the minerals sector. Western Australia Premier Colin Barnett discusses his second term and his continued efforts to strip red tape from preventing investment. In his time, his Government has successfully gone through a back-log of 16,000 mining applications. He’s adamant that Australia’s good fortune is far from over and in our interview he’ll explain why. Until the next edition…
All rights reserved. Reproduction in whole or in part is strictly prohibited without written permission. Opinions expressed in the International Resource Forum are not necessarily those of the editor or publisher. All reasonable care is taken to ensure truth and accuracy, but the editor and publishers cannot be held responsible for errors or omissions in articles, advertising, photographs or illustrations. Unsolicited manuscripts are welcome but cannot be returned without a stamped, self-addressed envelope. The editor is not responsible for material submitted for consideration. 3
CONTENTS REGULAR FEATURES Publisher’s Note
3
News in Brief
6
Project Updates
18
Appointments
20
Events
88
COVER STORY DAN BETTS
Hummingbird Resources
32
24
WEST AFRICA FOCUS West African Mining Investment Summit Event Wrap-Up
26
Liberian Deputy Minister for Operations Sam Russ PPP’s and Liberia’s Growth
29
COVER STORY Hummingbird Resources From Explorer to 32 Producer Overnight Paradigm Project Management (PPM) Focusing on West African Growth 4
40
CONTENTS
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AUSTRALIA
48
Kenya Chamber of Mines WA Premier Colin Barnett
62
Western Australia Premier Colin Barnett Red Tape Eradicator
62
South Australian Chamber of Mines and Energy Australia’s Most Favourable Place For Mining Investment
68
Cardno Helping Cambodia Break Out of Poverty Through Irrigation
74
SPECIAL REPORT
AFRICA Kenya Chamber of Mines Facilitating Kenya’s Mining Sector
Water Issues
79
DPR Can Safely Supply Drinking Water
80
‘Direct’ May Be The Best Way To Go By Jurg Keller
82
Where Does Australia Stand on Drinking Water Recycling
85
By Stuart Khan
48
By Ian Law
Mining Business & Investment Conference 2014 Event Preview
52
Ecovest Holdings Empowered Homes, Sustainable Communities
56
Cardno
74
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NEWS IN BRIEF MINING RIO TINTO ANNOUNCES EARNINGS UP TO $5.1 BILLION Rio Tinto chief executive Sam Walsh said “Our outstanding half year performance reflects the quality of our world-class assets, our programme of operational excellence and our ability to drive performance during a period of weaker prices. These results show that our current strategic and management focus is making a meaningful contribution to cash flow generation.
“During the first half we have increased underlying earnings by 21 per cent to $5.1 billion and enhanced operating cash flow by eight per cent. We delivered what we said we would, exceeding our $3 billion operating cash cost reduction target six months ahead of schedule while producing record volumes and driving productivity improvements across all our businesses. “We have decreased net debt by $6.0 billion compared with this time last year, through our stronger operating cash flows, sharply reduced capital spend and proceeds from divestments. We are confident Rio Tinto’s low cost, diversified portfolio will continue to generate strong and sustainable cash flows over the coming years. This solid foundation for growth will result in materially increased cash returns to shareholders, underscoring our commitment to deliver greater value.” First half results demonstrate the strength of our business • Increased underlying earnings by 21 per cent to $5.1 billion. Underlying earnings per share rose to 276.8 US cents. • Achieved $3.2 billion of sustainable operating cash cost improvements since 2012, exceeding the $3 billion reduction target six months ahead of schedule. Momentum in cost reductions is now expected to realise a further $1 billion of savings by the end of 2015. • Shipped record iron ore volumes, set production records for iron ore and thermal coal and delivered a strong operational performance in copper. • Increased cash flows from operations by eight per cent to $8.7 billion.
Rio Tinto Mine of the Future™ © 2014 Rio Tinto 6
• Reduced capital expenditure to $3.6 billion in the first half. 2014 capex is now expected to
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be around $9 billion, $2 billion below previous guidance, and around $8 billion each year from 2015.
Frieda River, Glencore will receive a 2% net smelter royalty (on PanAust’s interest in the Project) to a total aggregate amount of USD50 million.
• Decreased net debt by $1.9 billion in the first half to $16.1 billion at 30 June 2014. This compares with $22.1 billion at 30 June 2013. Reduced adjusted total borrowings by $2.5 billion in the first half to $25.7 billion at 30 June 2014. • Achieved EBITDA of $1.1 billion in Aluminium, up 26 per cent on 2013 first half, despite London Metal Exchange (LME) aluminium prices averaging nine per cent lower. • Completed the review of the Kitimat Modernisation Project: total approved capital now stands at $4.8 billion. Net earnings of $4.4 billion reflect $0.8 billion of further impairments related to Kitimat, non-cash exchange rate gains of $0.6 billion and other excluded charges of $0.5 billion. • Increased interim dividend by 15 per cent to 96 US cents per share.
GLENCORE ANNOUNCE SALE OF FRIEDA RIVER PROJECT Referring to Glencore’s announcement on 31 October 2013 relating to the execution of a share sale agreement (“SSA”) with PanAust Limited for the sale of its interest in the Frieda River Project in Papua New Guinea. Glencore is pleased to announce the Transaction has completed, effective 25 August 2014. The consideration for the transaction is a cumulative USD125 million.The first installment of USD25 million has been paid on completion in addition to reimbursement of approximately USD4 million in costs incurred by Glencore between the execution of the SSA and 25 August 2014. The second installment of USD50 million1 will be made on 31 December 2015. In addition, on successful completion of a development at
Frieda River Project water sampling Photo: © Glencore
BLACKTHORN AND INTREPID MINES ANNOUNCE MERGER The Boards of Intrepid Mines Limited and Blackthorn Resources Limited are pleased to announce their agreement to merge by way of a Scheme of Arrangement. The Merger will create a well funded copper company in a strong position to realise the potential of the Kitumba Copper Project and add value to the broader Mumbwa Project licence areas in Zambia. 7
News In Brief
Intrepid shareholders will also be given the opportunity to participate in a A$110 million equal access share buyback from Intrepid’s cash holdings before the Merger is effective (the Intrepid Buyback).
project management company to the world’s natural resources industries. AMEC has extensive experience in all aspects of the potash industry and related infrastructure.
Intrepid considers that the level of the proposed Buyback appropriately balances the funding requirements of the Merged Group with the stated desire of a number of Intrepid shareholders to receive a return of capital. The Merged Group’s pro-forma cash balance, net of transaction costs, at the time of announcement is approximately A$80 million.3 This will position the company to complete the Definitive Feasibility Study (DFS) for Kitumba and to explore the previously underexplored near-Kitumba targets and the wider Mumbwa Project licence areas. Both Intrepid and Blackthorn are confident this will enable substantial upside value to be realised, through a combination of de-risking the project and extending the mine life of Kitumba. The Boards of both Intrepid and Blackthorn consider that the combination of Intrepid’s substantial cash resources with Blackthorn’s high quality development project is capable of delivering superior returns to both sets of shareholders. Intrepid and Blackthorn have entered into a binding Scheme Implementation Deed to give effect to the transaction.
ALLANA POTASH ENGAGES AMEC ON DANAKHIL PROJECT Allana Potash Corp. announced that it has engaged AMEC Americas Limited to complete Front End Engineering and Design (FEED) on its one million tonne per year MOP Danakhil Potash Project in Ethiopia as preparatory work in anticipation of the completion of project financing and expected start of construction. This work will be undertaken primarily by AMEC’s Saskatoon office and is estimated to take approximately six months to complete. AMEC is an international engineering and 8
Danakhil Project Site Tour Photo: © Allana Potash
Farhad Abasov, President and CEO of Allana, commented, “We are extremely pleased to have engaged AMEC to complete the FEED portion of the EPCM work for our Danakhil Potash Project. AMEC brings a wealth of experience in the potash industry including process design, solution mining and construction management to the operation, which we believe will advance our project in preparation for the construction phase. We look forward to working with AMEC to optimize and finalize the project design and advance the project to the next level.
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The initiation of the FEED work is a first for the potash industry in Ethiopia and represents another milestone accomplishment for Allana and the government of Ethiopia. Allana remains committed to developing the Danakhil Project and the securing the FEED work with a major engineering firm such as AMEC represents a significant achievement for the project.“
sands space in Western Australia in recent years and it is very pleasing to see our brand is recognised for our knowledge and expertise in this space despite a difficult market.”
WATPAC AWARDED $29 MILLION MINING SERVICES CONTRACT FOR HANKING GOLD
“We are pleased to be providing drill, blast and conventional mining services at the Cornishman Pit over the next 19 months, and expect approximately 50 people to be employed as part of the contract,” Mr Hall said.
Watpac Limited announced it has been awarded a contract with Hanking Gold Mining to provide mining services at its Cornishman Pit, located at the centre of its Southern Cross Operations.
“Our collaborative approach with mine owners enables us to deliver a broad range of mining and heavy civil works tailored to each unique operating environment and supported by bestpractice safety and management systems.”
With works to commence in the coming month, Watpac Limited Chief Executive Officer, Martin Monro said the contract award was a boost for the Group’s Civil and Mining business.
Hanking Gold is a member of China Hanking Holdings Limited, and is a diversified international mining company listed on the Hong Kong Stock Exchange, with more than 20 years mining experience in China, Indonesia and Australia.
“While the outlook for the resources sector has been mixed, Watpac Civil and Mining have continued to perform well over the past 12 months, and the announcement of this contract with Hanking Gold is an example of the team’s efforts to maintain a healthy forward work book,” Mr Monro said. “Watpac has developed extremely strong credentials in the iron ore, gold and mineral
Watpac Civil and Mining General Manager, Russell Hall said the Group was looking forward to commencing work with Hanking Gold.
As Managing Director of Hanking Gold and Executive Director of Hanking Holdings, Dr. Mark Qiu said that Hanking Gold is on track to become a low-cost gold producer in Australia through both organic growth and M&A, and is looking forward to a long working relationship with Watpac.
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NEWS IN BRIEF OIL & GAS SHELL ANNOUNCES MARJORAM-1 GAS DISCOVERY IN DEEP-WATER MALAYSIA Shell announced further exploration success’ in Malaysia with another gas discovery at the Shell-operated deep-water Marjoram-1 well. “Our strategy to expand our heartland areas through technologically advanced exploration is delivering tangible success in deep-water in Malaysia,” said Andrew Brown, Shell Upstream International Director.
RN Nordic Oil AS is partner in the licence (PL713) with Statoil (that is the operator), North Energy ASA and Edison International Norway Branch. RN Nordic Oil AS, a subsidiary of Rosneft, will be involved in the operations on the project. The start of this exploration operations marks an important milestone in developing the cooperation between Rosneft and Statoil. The companies plan to implement their experience of exploration and development of hydrocarbon fields in regions with harsh climate.
“We have a long history in the region, and the addition of new natural gas resources this year ensures we are able to continue to provide cost-effective, reliable, cleaner energy options for the future.” The Marjoram-1 well is located 180 kilometres off the Malaysia coast in Block SK318, in 800 metres of water. Earlier this year, Shell announced the Rosmari-1 gas discovery, also in this block. Block SK318 is operated by Shell with an 85% interest, with the remaining 15% held by PETRONAS Carigali Sdn Bhd.
ROSNEFT AND STATOIL START EXPLORATION IN BARENTS SEA Rosneft together with Norwegian company Statoil Petroleum AS started exploration operations at the Pingvin License PL713 prospect in the Norwegian section of the Barents Sea. The first exploration well Pingvin-1 will be drilled by the Transocean Spitsbergen rig. The water depth is 422 meters and the drilling target total vertical depth (TVD) is 1516 meters. The companies expect to analyse the drilling results until the end of 2014. 10
The Aker Barents drilling rig, Barents Sea Photo: Harald Pettersen / Statoil
Q4 2014 | InternationalResourceForum.com
APACHE DISCOVER OIL OFFSHORE WESTERN AUSTRALIA Apache Corporation announced an oil discovery at the Phoenix South-1 well – the company’s first discovery in Australia’s offshore Canning Basin. Wireline and formation pressure tools have confirmed at least four discrete oil columns ranging in thickness between 85 and 151 feet (26 to 46 meters) in the Triassic Lower Keraudren formation, within an overall, sandrich section between 13,648 and 14,763 feet below sea level (4,160 to 4,500 meters). Six light oil samples have been recovered from three intervals to date; permeability measurements from the sampled zones indicate a productive oil reservoir with preliminary estimates that there might be as much as 300 million barrels of oil in place.* Evaluation of the formation penetrated in the Phoenix South-1 is under way, and final calculation of hydrocarbon pay will depend on additional analysis. The Phoenix South-1 well is located in permit WA-435-P, offshore western Australia, 110 miles (180 km) north of Port Hedland in 435 feet (133 meters) of water. Apache has a 40-percent interest and operatorship of WA-435-P and
the adjacent permit WA-437-P; co-venturers are Carnarvon Petroleum (20 percent), Finder Exploration (20 percent) and JX Nippon (20 percent). Apache also has exercised its option to acquire 40-percent interest and operatorship of two additional adjacent permits (WA-436-P and WA-438-P) for a total position of more than 5 million acres (20,000 square kilometers). The area includes a number of large, undrilled structures, including the Roc prospect on WA-437-P, with potential to be significant additional oil accumulations. Further drilling and evaluation is planned for 2015. “Although evaluation is at an early stage, Phoenix South-1 is an exciting result,” said Thomas E. Voytovich, Apache’s executive vice president and chief operating officer – International. “The oil and reservoir quality we have seen point to a commercial discovery. If these results are borne out by further appraisal drilling, Phoenix South may represent a new oil province for Australia. We look forward to working with our partners to continue evaluation of the area.” * Oil in place estimate based on 10th percentile probability.
Apache-operated Ningaloo Vision FPSO stationed offshore North West Western Australia Photo: © Apache Corp. 11
News In Brief
WÄRTSILÄ TO SUPPLY SYSTEM FOR HARVEY GULF LNG FACILITY The contract for the control system for a shorebased liquefied natural gas (LNG) fuelling facility in Port Fourchon, Louisiana, USA, has been awarded to Wärtsilä. The facility is owned by Harvey Gulf International Marine, a major owner-operator of offshore supply and specialty vessels headquartered in New Orleans. It will be used to supply fuel to Harvey Gulf’s fleet of LNG powered platform supply vessels (PSV), and will be the first source of LNG fuel in the Gulf of Mexico. The order was placed in July, 2014. The Wärtsilä scope of supply comprises the control cabinets, the PLCs, computers, software programming and service commissioning. It is designed to enable the entire fuelling process to be fully controlled from the control room onboard the HARVEY ENERGY class platform supply vessels, thus making the fuelling far more efficient and safer than would be otherwise possible. Delivery is scheduled for November, 2014.
“The Harvey Gulf PSVs are to be fitted with the Wärtsilä LNGPac gas control system, so it was natural that the same basic technology should also be used for the shore fuelling facility. There is a growing need for an LNG fuelling infrastructure in the Gulf of Mexico, so this represents an important step forward. Both Harvey Gulf and Wärtsilä are fully committed to promoting environmentally sustainable operations, and by facilitating the use of LNG as a marine fuel, this philosophy is clearly enhanced,” says Joe Amyot, Sales Director, Wärtsilä Ship Power. The new fuelling facility will enable the refuelling of offshore supply vessels powered by LNG. It will also have the capability to provide a fuel source for LNG fuelled cargo ships operating in the Houston – New Orleans region. Harvey Gulf currently has six LNG fuelled PSVs under construction, all of which will be powered by Wärtsilä 34DF dual-fuel engines. The vessels will also have various other Wärtsilä equipment onboard, including the Wärtsilä LNGPac gas storage and supply system. The company, additionally, has two diesel-electric construction vessels in production equipped with Wärtsilä 32 engines and other Wärtsilä solutions.
SCHLUMBERGER LAUNCHES PHOTOREALISTIC RESERVOIR GEOLOGY SERVICE Quanta Geo service enables geoscientists to confidently model reservoir distribution Schlumberger haslaunched the Quanta Geo* photorealistic reservoir geology service at the Offshore Northern Seas Annual Conference and Exhibition.
Harvey Gulf’s LNG fuelled Platform Supply Vessel Photo: Harvey Gulf 12
The new service includes the industry’s first microresistivity imager that produces oriented, photorealistic, core-like images of the formation in wells drilled with oil-base mud (OBM). Interpretation of the images identifies geological
Q4 2014 | InternationalResourceForum.com
features and predicts reservoir trends in 3D with a high degree of certainty. “Geological imaging in wells drilled with OBM has long been recognized by operators as a major technical challenge, particularly in deepwater,” said Hinda Gharbi, president, Wireline, Schlumberger. “The Quanta Geo service provides photorealistic images that can be used to condition and constrain reservoir models, enabling our customers to better understand their reservoirs and make decisions with more confidence.” The physics of the Quanta Geo service’s high-resolution array of 192 microelectrodes overcomes the electrically resistive barrier imposed by OBM. The unique articulated caliper and independently applied pads enable down-logging at up to 3,600 ft/hour, which significantly reduces rig time while mitigating operational risk and delivering data assurance. The service is combinable with most other Schlumberger wireline openhole tools. Using the Schlumberger Techlog* wellbore software platform, data acquired by the Quanta Geo service are easily rendered, creating an image of 0.24 in resolution that resembles a whole core. Geologists interpret these images in the same manner that they would perform continuous core description, with the added benefit that these images cover a longer continuous interval and are precisely oriented.
This enables extraction of key reservoir parameters such as the structural dip, or the identification of sand body type, extent and orientation. The Quanta Geo service has been field tested in more than 50 wells in deepwater, unconventional and carbonate environments in the Gulf of Mexico, West Africa, North Sea, North America and Australia. In the Gulf of Mexico, a customer drilled a deepwater exploration well in an area of limited seismic resolution. Images were acquired with the Quanta Geo service to address large uncertainties related to the type and distribution of sand bodies intersected by the well. For the first time in an OBM environment, the customer was able to visually categorize the various sands and directly measure their orientation. This information was used to refine the geological model and define the field appraisal strategy. Quanta Geo service is the inaugural member of the new Quanta Family* reservoir characterization services, which employ new measurement physics to deliver highest accuracy, workflow-ready downhole measurements for direct use in refining reservoir models. *Mark of Schlumberger
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NEWS IN BRIEF RENEWABLE ENERGY PRESIDENT INAUGURATES CHILE’S LARGEST WIND FACILITY The President of Chile, Michelle Bachelet, together with Jean-Paul Luksic, Chairman of Antofagasta Minerals SA (AMSA) and Mike Garland, CEO of Pattern Energy, officially opened operations at the 115 MW El Arrayán Wind facility in a Grand Opening ceremony held in August, 2014, at the project site, located 400 km north of Santiago on the coast of Chile.
The President of Chile, Michelle Bachelet, said “I’m very happy to be here today because this project is important for our present and future energy needs. El Arrayán is the biggest wind farm in Chile and we are pleased at what we can achieve when we use the natural resources the earth has to offer. This project is another step toward meeting our energy agenda objectives. We want to have 45% of our energy come from clean energy resources by 2025.” “Through this partnership, we have combined our financial and management skills to be part of the solution to one of the major challenges facing our country and the mining industry, which is the generation of clean energy sources,” said Jean-Paul Luksic, Chairman of Antofagasta Minerals SA. “We are honored to be joined at the project site by Madam President as we celebrate the opening of the country’s largest wind facility,” said Mike Garland, CEO of Pattern Energy. “Chile is a great market because of the President’s strong support for renewable energy policies, the country’s strong, stable economy excellent natural wind resources, which can supply domestic energy to the country. We are also especially pleased to be here with our strong partner AMSA, which is demonstrating to the world that a global mining company can be a leader in clean, domestic energy.” The El Arrayán Wind facility, which completed construction in June, will generate clean, renewable power equal to the needs of approximately 200,000 Chilean homes each year, according to the World Bank. The facility is utilizing 50 Siemens 2.3 MW wind turbines, which Pattern Energy is also using at other wind projects in Canada and the United States. Pattern Energy owns 70% of the El Arrayán Wind facility, which it also operates. AMSA owns the remaining 30% minority stake. The project sells approximately 70% of its output
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to Minera Los Pelambres through a long-term fixed-for-floating hedge. The facility sells its remaining output into the Chilean spot market at the prevailing market price at the time of sale. In addition to its minority interest in the facility, AMSA is the controlling party of Minera Los Pelambres. El Arrayán Wind connects to the Sistema Interconectado Central’s 220kV transmission system. The facility is located on approximately 15,320 acres of coastal land on a long-term lease with a single landowner. Approximately 200 jobs were created during construction, as well as up to 15 ongoing permanent positions. The project was constructed by Skanska Chile SA, a subsidiary of Skanska AB and one of the leading windfocused construction firms in Chile. Compared to generation from a coal-fired power plant, the electricity produced annually by El Arrayán Wind will offset more than 300,000 metric tons of carbon dioxide, the equivalent to the annual carbon footprint of an estimated 70,000 Chileans, and will conserve enough water to meet the needs of more than 11,000 Chileans, according to statistics from the International Energy Agency, the World Bank and the U.S. Energy Information Administration.
VERIZON TO INVEST $40 MILLION IN ITS ON-SITE ENERGY PROGRAM LAUNCHED IN 2013 Verizon announced that it will invest nearly $40 million to expand the on-site green energy program that it launched in 2013. This year, Verizon will install 10.2 megawatts of new solar power systems at eight Verizon network facilities in five states – California, Maryland, Massachusetts, New Jersey and New York.
To date, Verizon has invested nearly $140 million in on-site green energy. With the 2014 solar investment announced today, Verizon is on target to deploy upward of 25 megawatts of green energy upon completion of the new solar projects. The system will generate enough green energy to power more than 8,500 homes each year. Verizon’s total green-energy efforts are expected to offset 22,000 metric tons of carbon dioxide annually, which is equivalent to taking nearly 5,000 passenger vehicles off the road each year.
This investment nearly doubles the amount of renewable power generated by solar energy systems installed at six Verizon facilities last year.
“Our investment in on-site green energy is improving the quality of life in the communities we serve by reducing CO2 levels and reducing strain on commercial power grids, while 15
News In Brief
increasing our energy efficiency,” said James Gowen, Verizon’s chief sustainability officer. “By almost doubling the amount of renewable, solar energy we’re using, we are making further progress toward Verizon’s goal of cutting our carbon intensity in half by 2020, in part, by leveraging the proven business case for cleanenergy alternatives to the commercial power grid.”
YINGLI TO SUPPLY 66 MWP OF PV MODULES FOR FOUR LARGESCALE PROJECTS IN THE UK Yingli Green Energy, the largest vertically integrated photovoltaic (“PV”) module manufacturer in the world, known as “Yingli Solar,” announced that it has partnered with renewable energy developer Push Energy to supply Yingli Solar’s multicyrstalline modules for four large-scale PV power plants in the United Kingdom. The four sites will collectively have a clean, renewable electricity capacity of up to 66 MWp and will be located in East Anglia, U.K. The projects will be completed by February 2015. Push Energy works with landowners, local stakeholders, planners and the power networks to supply renewable, green power into the grid for local use. The company has a strong background in farming and conservation management and selects sites that have minimum visual impact with appropriate landscaping. “Solar PV farms have an important role to play in the U.K.’s long-term energy security. Working with strong partners such as Yingli Green Energy is critical to our vision for the future. The company has provided invaluable support and hands-on practical advice which has allowed us to complete all projects to a very tight time schedule,” said Mr. Jason Wallis, Finance Director of Push Energy. “We are thrilled to work with Push Energy in Europe’s largest and most promising solar market to date,” said Mr. Liansheng Miao, Chairman and Chief Executive Officer of Yingli Green Energy. “We are committed to working with well-established companies with a solid project pipeline such as Push Energy. It also supports our long-term commitment to the U.K. market where we see sustainable growth potential in the coming years.”
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ABB LAUNCHES WORLD´S MOST POWERFUL UNDERGROUND AND SUBSEA POWER TRANSMISSION CABLE SYSTEM ABB, the leading power and automation technology group, has announced a breakthrough in cable technology. It has successfully developed and tested a 525 kilovolt (kV) extruded high-voltage direct current (HVDC) cable system to make renewable energy installations more efficient and costeffective. This latest innovation will more than double the power capacity to about 2,600 megawatts (MW) from 1,000 MW. It will also expand the cable’s reach to distances of 1,500 kilometers, up from less than 1,000 kilometers, while keeping transmission losses under 5 percent. The new cable offers a 64 percent increase over 320 kV, currently the highest voltage deployed for this type of technology. The 525kV cable system can be deployed in subsea and underground applications, making it ideal for efficient power delivery through densely populated or environmentally sensitive areas or coastal and open-sea applications. “This major technology breakthrough will
change the feasibility of renewable energy projects and play a defining role in using underground and subsea high voltage cables to integrate renewables over long distances,” said Ulrich Spiesshofer, CEO of ABB. By enabling more power over greater distances with reduced losses, ABB’s new 525 kV cable technology offers solutions for countries and utilities seeking to enable their electricity transmission systems to integrate more renewable energy being generated by distant solar and wind installations. A single pair of 525 kV extruded HVDC cables could for example transmit enough power from giant offshore wind farms in to supply two million households. The new technology offers savings in capital and operational expenses. It also supports the development of DC grids where ABB removed a key technology hurdle with the development of the hybrid HVDC breaker. The innovative cable system consists of cables, utilizing a new DC cross-linked polyethylene (XLPE) insulation material developed with Borealis, a recognized industry leader, as well as termination and joints manufactured by ABB. HVDC cable links are essential components of future sustainable energy systems that will need to transmit vast amounts of electricity over long distances, often across or between countries.
Cable System Mounting Photo: ABB 17
PROJECT UPDATES ABB TO PROVIDE GRID CONNECTION FOR MEYGEN TIDAL ENERGY PROJECT
the University of Edinburgh and University of Oxford indicate the Pentland Firth’s tidal stream has vast energy potential, with ocean currents estimated at 5 meters (about 11 feet) per second, among the fastest in the British Isles.
ABB, the leading power and automation technology group, has been awarded a contract by Atlantis Resources Ltd. to provide the onshore grid connection for Phase I of the MeyGen tidal stream project in Scotland’s Pentland Firth.
“Forming partnerships with the leading players in the energy sector is key to delivering commercial-scale tidal power projects that allow us to harness the untapped potential of global tidal resources. ABB has clearly demonstrated exceptional expertise in this area and we are confident they will deliver the highest quality results. We look forward to working with the team at ABB to ensure the success of the MeyGen project” says Tim Cornelius, Chief Executive Officer, Atlantis Resources Ltd.
The MeyGen tidal stream project is at the forefront of world marine energy development and will harvest the tidal resources of one of the most energetic maritime sites in Europe, the strait connecting the Atlantic Ocean to the North Sea between the Orkney Islands and the Scottish mainland. The first 6MW demonstration phase of the UK’s first large-scale tidal array scheme will see four submerged turbines installed in the Inner Pentland Firth just north of Caithness, with first power expected to be delivered by 2016. ABB is responsible for the onshore power conversion and grid connection systems to feed the electricity safely and reliably into the local distribution grid. ABB’s project scope includes design, engineering, supply and commissioning of the power conversion, switchgear and transformer solution as well as associated civil engineering and cabling works. Major product supplies include transformers, medium voltage switchgear and power converters. “We are pleased to facilitate this innovative project and tap the potential of marine energy“ said Claudio Facchin, Head of ABB’s Power Systems division. “It reaffirms the faith our customers have in ABB’s technology and proven capability to deliver safe, reliable and efficient grid connections which play a key role in integrating renewables, that are making an increasing contribution to the energy mix.” Studies including those by engineers from 18
The initial phase of the MeyGen development has the potential to generate up to 86 MW of electricity, enough power for around 42,000 homes,potentially catering to the needs of almost 40 percent of households in the Scottish Highlands.
Q4 2014 | InternationalResourceForum.com
into world markets”, Masoud Alikhani, BERKELEY MINERAL RESOURCES metals Chairman, commented RECEIVES APPROVAL FROM ZEMA ON KABWE PROJECT ENI STARTS PRODUCTION AT Berkeley Mineral Resources Plc, which is DEKA PROJECT IN EGYPT primarily engaged in processing mining tailings in Zambia through its wholly owned subsidiary Enviro Processing Limited (EPL), announces that the Zambia Environmental Management Agency (ZEMA) has issued a written approval of the Environmental Impact Statement (EIS) submitted by EPL for lead-zinc recovery and copper processing at Kabwe. ZEMA’s approval of the EIS is based on its review of the EIS, on EPL’s environmental base line studies and information provided by EPL, on written and verbal comments from interested and affected parties and on its own site verification findings. The approval is subject to normal conditions relating to monitoring of protection for such matters as water and air quality, noise levels, dust suppression and employee health. It is also subject to EPL implementing the project within three years. ZEMA first notified EPL of the requirement for an EIS in September 2013. For lead and zinc, the phase one processing, detailed in the Company’s Definitive Feasibility Study, is anticipated to be by gravity and magnetic separation. For copper production, EPL’s plans are for a cementation process to produce concentrates from ores to be secured from Zambia and the DRC via EPL’s trading connections.
Eni, through its affiliate Ieoc Production BV and in joint venture with BP Egypt, started production from the DEKA project (DenisKarawan) through the new subsea well Denise South 6 at a gas rate of 1.8 million cubic meters per day and associated condensates of about 800 barrels per day. The DEKA Project envisages the development of gas discoveries by means of the drilling of 5 subsea wells, the installation of subsea production systems together with sealines and gas processing at the El Gamil Gas Plant onshore. The project’s peak production is expected by 1Q 2015 with a total gross gas rate of about 6.5 million cubic meters per day. The Denise South 6 is the first development well of the DEKA Project located in the Temsah Concession Area, in the offshore Nile Delta, Egypt. The well is located approximately 65 Km north of Port Said, in a 100 meters water depth. IEOC holds 50% working interest in the Temsah Concession and operates through its JV Petrobel (50% IEOC and 50% EGPC). Eni has been present in Egypt since 1954 and is the largest international energy player in the country. In 2013, the Company’s oil and natural gas equity production averaged approximately 228 thousands boed.
BMR now intends to carry out final metallurgical studies to determine the optimal process route for treating the lead and zinc tailings so that pilot production can commence as soon as possible. In the meantime, EPL will commence small scale processing of copper ore secured locally. “We are delighted to receive approval from ZEMA for our plans following their full review. From now on, our focus can and will be on commencing production. We will also be concluding off-take agreements for sales of the
Eni present in Eygpt since 1954, Sinai-1 drilling activity 19
APPOINTMENTS BP NAMES NEW CE OF US LOWER 48 ONSHORE BUSINESS BP announced that it has named David Lawler chief executive officer of its US Lower 48 Onshore business.
Lawler joins BP from SandRidge Energy, Inc., an Oklahoma City-based independent oil and gas producer, where he most recently was executive vice president and chief operating officer. Before that, Lawler was the CEO and president of PostRock Energy Corporation, another independent oil and gas producer in Oklahoma. Lawler spent the first part of his career working for major integrated oil and gas companies, including Shell for 10 years. “It is an honor to join BP and have the opportunity to work with the talented members of the Lower 48 organization,” Lawler said. “I’m looking forward to leveraging BP’s talent and resources while running the business as if it were an independent.”
David Lawler © BP Images
Lawler, who brings more than 20 years of industry experience to the role, will begin on Sept. 15 and report to Lamar McKay, BP’s Upstream Segment chief executive. Lawler, 46, takes over just months before BP formally establishes a separate business to manage its onshore oil and gas assets in the continental United States. The move is designed to give the business the flexibility it needs to aggressively compete in the rapidly changing market. “With an impressive track record at integrated oil and gas companies as well as independents, Dave is uniquely qualified to lead our onshore business during this exciting transition,” McKay said. “His experience and skills match up perfectly with our goals for the business. I’m confident he will create a competitive and sustainable operation that will be a key component of BP’s portfolio for many years.” 20
In March, BP announced that in early 2015 it would establish this separate business. BP will continue to own it but Lawler and his leadership team will develop and implement the strategy to expand the company’s crude oil and natural gas liquids portfolio.
NEW FULL-TIME CHAIRMAN APPOINTED TO SYNERGY Energy Minister Mike Nahan announced the head of the State’s Economic Regulation Authority, Lyndon Rowe as the new, full-time chairman of the State-owned energy retailer and generator Synergy. Mr Rowe succeeds Michael Smith who stepped down from the Synergy board after eight years at the helm of the government trading enterprise. Dr Nahan said Synergy was in a significant period of transformation and the time was right for a change at board level after the successful merger between the old Synergy and Verve Energy. “Mr Rowe brings a wealth of experience in areas of the electricity market and a new
Q4 2014 | InternationalResourceForum.com
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Appointments
perspective to the role as the full-time chairman of Synergy,” he said. “The new business will continue to evolve as the State Government focuses on dealing with the challenges confronting energy utilities in a changing marketplace and reducing Synergy’s reliance on its operating subsidy.
His South African background and experience in the US and Australia tie well with our large footprint in both Australia and Africa. His trackrecord in building a great culture and an agile, growing business are a great strategic fit for us as an expanding global business.” Giam leaves his current role as Chief Executive Officer of Deloitte Australia after a highly successful 12 years in the role.
“Mr Rowe is the right person to position the new Synergy for the future while simultaneously ensuring the government trading enterprise maintains its critical role in underpinning the State’s energy security.” The Minister said the scale of the newly merged Synergy now required a full-time chairman to support CEO Jason Waters in turning the business around from a commercial, cultural and operational perspective and reducing its reliance on taxpayer-funded operating subsidies. Mr Rowe has been chairman of the ERA since March 2004, is a former chief executive officer of the Chamber of Commerce and Industry of Western Australia and is a current director of Perth Airport Pty Ltd. Mr Rowe said he was delighted to be appointed chairman of Synergy and was excited by the challenges that lay ahead of the corporation Dr Nahan also announced the appointment of David Hunt as a Synergy director. Mr Hunt is a former director of the old Synergy, has served as chief executive of New Zealand-based Contact Energy, and is a current director of Concept Consulting.
AURECON APPOINTS NEW CEO Global engineering and technical services company Aurecon today announced the appointment of Giam Swiegers as its new Chief Executive Officer (CEO) effective 1 February 2015. He will be based in the company’s Sydney office. Aurecon Chairman, Teddy Daka, said, “After an extensive global search for a new CEO, we are delighted that Giam will be joining Aurecon. He has an outstanding track record as a CEO and is a great cultural fit for us as a business. 22
New Aurecon CEO, Giam Swiegers and Aurecon Chairman, Teddy Daka Giam began his career as an auditor with Deloitte in South Africa, and subsequently worked for Deloitte in the USA before returning to become Managing Partner of its Tshwane office. He moved to Australia in 1997 and became CEO on 1 June 2003. He has been a member of Deloitte’s Global Board and Global Board Governance Committee for three years and is a member of the Deloitte Global Executive Committee. Giam said, “This is an exciting time to take a global role in a leading engineering company with the ability to be agile in the market. The sector is experiencing unparalleled change and offers immense opportunities for a company like Aurecon which is already leading in technology driven innovation and in tailoring its services to meet client needs around the entire infrastructure lifecycle. I am very impressed by the people I have met at Aurecon. They are clever and passionate. I look forward to working with them to grow the company even further around and beyond its excellent core design and engineering business.”
The International Resource Forum Presents:
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Q4 2014 | InternationalResourceForum.com
In the last decade, West Africa has increasingly drawn the attention of mining companies from around the world, particularly in gold and iron ore. Ghana, Burkina Faso, Ivory Coast, Guinea, Senegal, Liberia, Sierra Leone, Mali and Mauritania are of particular interest to local and international mining companies. Much of the area has a varied record for political stability, yet with its mineral wealth, attraction to the West African region is likely to remain strong. Predicted to account for over 15 per cent of global iron ore exports in the next five years, construction has commenced at Rio Tinto’s $7 billion Simandou project in Guinea as well as BHP Billiton’s Nimba project. We take a look at few of the movers and shakers of the region and highlight their progress. 25
Event Spotlight
West Africa Mining Investment Summit 2014 Event Wrap-Up
Q4 2014 | InternationalResourceForum.com
Taking place in central London’s Waldorf Hilton, the second West African Mining Investment Summit offered the perfect place to meet key industry members and government officials. With the conference running for two days, Resourceful Events provided a great venue for attendees who had come from all areas of the globe to meet and discuss business opportunities in West Africa.
Panel discussion at the Summit
Rebecka Obiago & Harry Chapman Resourceful Events
“It’s been
a good two days with good investor interest “ Harry Chapman Resourceful Events #WAMIS
Resourceful Events Conference Director Harry Chapman: “We’ve had a very good conference and it’s been larger than it was last year. It’s been a good two days with good investor interest. “ On offering value to conference attendees: “We carry out a very extensive research process. Not only with past delegates of the conference, but for new people, and new people in the industry. We spend a lot of time consulting and surveying with the industry about what’s relevant to them, what’s important to them and what needs to be covered in the program. We also spend a lot of time with the industry and the market, setting up meetings to meet key people at the conference - making sure they get core value to do as much business as can be done over the two days.” 27
West Africa Focus | WAMIS 2014
Main conference, speakers included: • Hon. Minister Alhaji Minkailu Mansaray, Ministry of Mines and Mineral Resources, Republic of Sierra Leone • Hon. Deputy Minister of Operations, Sam G. Russ, Ministry of Lands, Mines and Energy, Republic of Liberia • Hon. Minister Boubou Cisse, Ministry of Mines, Republic of Mali • Ismael Diakite, Managing Director Rio Tinto Guinea, Rio Tinto, Guinea • Tom Holl, Fund Manager, Blackrock, United Kingdom • James Chang Yue, Director of Chairman’s Office, China Kingho Energy Group, China • Ed Bowie, Fund Manager, Altus Capital, United Kingdom • Rian Raghavjee, Principal, NuCap, United Kingdom • Roland Janssens, Deputy Head – Emerging Africa Infrastructure Fund, Frontier Markets Fund Managers, UK • Dr. Peter Ruxton, Principal, Tembo Capital LLP, UK • Serafino Capoferri, Consultant, CRU, United Kingdom • Joseph Mathews, General Manager – West Africa, ArcelorMittal, United Kingdom • Alhassane Haidara, Chief Investment officer – Mining, African Development Bank, Tunisia • Fidel Jonah, Founder and Executive Director, Jonah Capital and Cavalla Resources, South Africa • Edward Bickham, Senior Adviser, Critical Resource Ltd, UK • Julian Fisher, Managing Director, Africa Integrity Services, UK • Sahr Wonday, Director General, National Minerals Agency, Sierra Leone • Tara O’Connor, Managing Director, Africa Risk Consulting, UK • Adam Kendall, Partner, McKinsey & Company, South Africa • Charles Gibson, Director, Sector Head Mining, Edison Group, UK • Kristian Lempa, Project Director – Regional Resource Governance in West Africa, GIZ, Germany • Mark Smith, Executive Vice President, Arikymo, USA
Hon. Minister Mansaray - Minister of Mines & Mineral Resources, Sierra Leone
Ian Brown Director of Hatch Management Consulting
Government representation from: Ghana | Liberia | Mali | Mauritania | Sierra Leone Attendees: ArcelorMittal | Arikymo | Cavalla Resources | China Kingho | Enthalpy | FBN Bank Hatch Engineering | Henning Gold Mines | Karalco Resources | Jobs4Mining | Kinross Gold | Layla Resources | Paradigm Project Management (PPM) | Pace Global Rothschild Assets | Stratex International | Sunergy Gold | Wafa Mining & Petroleum | www.westafricainvestmentsummit.com 28
James Chang Yue Director of Chairman’s Office, China Kingho Group
Exclusive Interview
An IRF exclusive with Liberian Deputy Minister for Operations
SAM RUSS
The International Resource Forum had the chance to do an exclusive on-site interview with Liberian Deputy Minister for Operations, Sam Russ at the recent West Africa Mining Investment Summit (WAMIS) in London.
Minister Russ gave us his thoughts on the development of the country, public-private partnerships, and the logistical issues facing Liberia’s growth.
West Africa Focus | Deputy Minister of Operations, Liberia, Sam Russ
International Resource Forum: During your talk today you outlined win-win relationships. Can you elaborate on what you mean by this? Minister Russ: Quite clearly we need to recognize that investors are taking risks and they have expectations for a fair return. That can be in terms of direct flows from government to create an able environment to ensure that happens, or ensuring laws are put in place and enforced for access to land. We are working to facilitate investors in a number of different ways. IRF: Why should business consider investing in Liberia over a neighboring West African country? Minister Russ: For a number of different reasons. First of all we know that we are very endowed, but virtually unexplored because of years of civil unrest. We’re disproportionally focused on iron ores because for 50 years we’ve had a lot of it. What we’re seeing now is a significant increase in exploration activities. We see that industrial minerals are acting currencies, and it suggests to us that better opportunities are the upside for this type of investment. Let’s include the fact that we’ve built a regime with laws that are rational, that provide security of tenure for investors, and an environment that investors can look forward to. IRF: Tell us about the major highlights of your draft law that you were speaking about? Minister Russ: It’s very, what we say “zero draft”, meaning we will be looking at all of the components of it. It was intended to address issues of gaps in the system, and the system was implemented in 2000; a lot of changes have occurred since then. So first of all we want to make sure we are linking an appropriate level of new institutions and new laws. Second of all, we want to be sure that issues like land rights are done in a more rational way. We recognize that land owner rights and 30
land user rights are key, but without frustrating investors access to land, and use of land. We want to be sure we have enough safeguards in process that when a conflict occurs there is cover to ensure a fair resolution to issues including licenses and so forth. In addition we want to be sure local content is an important part of the process, that we have a structure and a rational local content plan. In effect, if we are processing locally, we are generating wealth within the country and in our communities. IRF: Talking land owner rights and partnerships, how do you promote opportunities for Liberian citizens? Minister Russ: That’s really important as we review our regime. A key component of the whole strategy of the government is to look at and ensure that the inter-linkage between the mine development of the resources and all the communities is very clear. Local procurement is an important part. Employment, specifically local employment of our nationals is very important, including training, and capacity building. We will have a structure to ensure benefits are flowing to the communities. IRF: How will you address the infrastructure issues you spoke of earlier today? Minister Russ: There are a number of different things. On the energy side, we are talking to the concessionaires, but because a lot of capital investment is involved, we are putting our transmission lines close to generate capacity where we are close to strategic areas for service distribution. We have to create an environment where the concessionaire has confidence that the service level that they expect for the project will be given to them. It includes dialogue with government. It includes good management to ensure the project is on time, not disrupted, and that pricing arrangements are fair and rational. In terms of rail issues, each investor has a right to rail, but with the case of ArcelorMittal
Q4 2014 | InternationalResourceForum.com
Dep. Minister Russ Speaking at the WAMIS Event, London rail, we’re hoping we can begin talking of partnerships and making sure that the investors get firm collaborations with other concessionaires. IRF: Can you give us your thoughts on using hydropower as a renewable resource in the country? Minister Russ: It’s a huge part of our national strategy. We’re trying to rebuild an earlier hydro dam that was broken during the war. As you know, the cost for hydro is significantly lower. It will bring down our costs to use it as part of the power mix. We have small villages using micro hydro to supply power, so we’ll continue to use that strategy. IRF: What about your initiatives to use unconventional energy resources? Minister Russ: We’re looking at other ways to generate energy, including solar. We increasingly see solar as a very valuable resource. IRF: Are there any tender auctions for solar projects in the near future? Minister Russ: That’s a really good question. In our regime if we have the value of the resource, we have a law required to auction it. If solar comes along, we have to form a proper partnership (PPP). So we need to build
“We’re talking about how we can collaborate on a number of different issues: infrastructure, power, and so forth “ the framework so that investors coming into solar have confidence they will get paid. It’s an arrangement we continue to look at. IRF: How West African states work together for growth through a symbiotic relationship? Minister Russ: The time is very interesting because we can see for the first time convergence at the highest levels. Presidents are talking, and the discussions are at a technical, and tactical level. We’re talking about how we can collaborate on a number of different issues: infrastructure, power, and so forth. So I think we’re seeing a movement to be excited about, and once we get one or two projects underway, others will follow suit, showing the benefit of these collaborations.
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HUMMIN RES Hummingbrid’s Dugbe Camp, Liberia
NGBIRD SOURCES From Explorer to Producer Overnight
An Exclusive Interview with CEO Daniel Betts Interview By: J. Landry Coming from a family history in the mining sector, Hummingbird Resources CEO Dan Betts knows better than most how to uncover value. Having discovered Africa’s largest gold find in 2012, the West African focused gold explorer has expanded its operations beyond Liberia with their first acquisition. In this exclusive with the International Resource Forum, Dan discusses the company’s acquisition of Gold Fields interests in Mali, what this means for shareholders, and the transition from a gold explorer to producer.
West Africa Focus | Hummingbird Resources
Dan Betts CEO, Hummingbird Resources International Resource Forum: Dan, you come from strong family history in resources - can you tell us about some of the industry insights and lessons learned while growing up in this environment? Dan Betts: It’s difficult to summarise all of the lessons learnt over the generations but I think the key insight is that you need to plan longterm and not be knocked off course by short term gold price volatility. Long-term, the price trend is going to be upwards. IRF: How was the decision made to look into Liberia in 2005? DB: It was an opportunity that the Liberians brought to us. They had an area that they thought could be prospective but absolutely no commercial gold mining activity had occurred in the country. They knew us from trading gold in the 1980’s and offered us the chance to come and pick up exploration ground there in 2005. Initially we looked to partner with established miners but ultimately took the decision to branch out vertically and develop our own gold company. This obviously culminated in an AIM listing and the discovery of just under 1Moz in 2010, before growing the resource to over 4Moz. IRF: Can you talk about the conditions in Liberia, its stability and working with government? 34
DB: Logistically it is good, especially by West African standards. We are only 40 miles from a deep water port, and there is a good road linking us. The pro-mining government was democratically re-elected in 2011 and the mining code is based on Australian mining regulation code. The fiscal terms are set to encourage investment with an expected Royalty of 3% and a 25% basic tax rate. IRF: You also had Africa’s largest gold find in 2012 didn’t you? DB: Yes. We announced our maiden resource of 812Koz in 2010 and had increased that to 1.8Moz by the end of that year, and to 3.8Moz in 2012. An infill drilling campaign was completed in March 2014 which resulted in a further increase to 4.2Moz, including 2Moz at Tuzon with a grade of 1.5g/t. This resource is built on 2 deposits but we have already identified a further 3 deposits and 140 targets that require further exploration and have only really just started to scratch the surface of our 3,000 km squared Liberian licence acreage. IRF: You recently acquired the Yanfolila Project from Gold Fields in Mali. Can you tell us about this? DB: We have agreed to acquire all of Gold Fields interests in Mali which comprises of over 3,000 square kilometres of highly prospective belt scale exploration operation in two groups
Q4 2014 | InternationalResourceForum.com
“We’re extremely excited, we think it’s a transitional and transformational deal for Hummingbird ” of licences. Yanfolila being one, and Kangare being the other. Within the Yanfolila package is the Yanfolila Project which is a well defined, fully permitted project. It consists of 1.8Moz of gold grading 2.6g/t, and it has significant upside in both near pit and further afield resources. The reason for Hummingbird acquiring this project is it’s a perfect fit with our large worldclass project in Liberia and it will give us the ability to get into early cash flow and production very quickly. The project Gold Fields were trying to build was a 2Mt/y plant and we believe the opportunity is in building an oxide only plant that will process around 850,000 tonnes of ore/year, for an average gold production of 55-60,000 ounces per year and the capital cost will be in the region of $50M and we believe we’ll be in production next year. We’re extremely excited, we think it’s a transitional and transformational deal for Hummingbird and it’s a perfect opportunity to exploit the current gold market where there is tremendous value out there. To put this in perspective, Gold Fields themselves have spent in the region of $105M on the Yanfolila Project and there was significant money spent before they took control of it. So it really is one of the best defined, ready to go, fully permitted projects I’ve seen and we’ve looked at a lot of projects. We’re very happy to be at this point.
IRF: What was the rationale behind the Yanfolila acquisition? DB: That’s a good question. There are a couple of reasons for the strategy and the acquisition. In Hummingbird, we had a single project in Liberia. The project is a large-scale open pit gold mining project. We’re completing our DFS studies on the Dugbe 1 Project at the moment. The Dugbe 1 Project which has a 4.2Moz resource and will get significantly bigger over time. It has no option to really start with a small scale, small capex project. I think in this current gold pricing market, challenges for accessing capital are going to be significant. What we don’t want to do is find a world-class gold project and be in a position like many other juniors where we can’t fund it. Over the last two years we’ve been looking to either find a way to bring Dugbe 1 into production for a small capex or to find another strategy to do that, and this Yanfolila Project fits the bill perfectly because we can bring the whole project into production for about $50M of capex. The second reason for the purchase - it is our belief at Hummingbird that the current gold market presents almost a once in a generation opportunity to access quality projects for very cheaply. Over the last two years we’ve looked at dozens and dozens of projects, and for various reasons we haven’t liked them. There’s been problems with the resource or the permitting or the politics, but the Yanfolila Project is as complete as any project I’ve seen. The work done by Gold Fields is worldclass. They’ve drilled almost 500,000 metres of drilling and the project is fully permitted with a thirty year mining permit and all the tax and fiscal regime in place. It’s a perfect fit for Hummingbird to build a gold company off of the back of it. IRF: How close is Yanfolila to production? DB: The simple answer is we believe we’ll be in production in 2015. This is a very short time frame. The project Gold Fields envisaged was 35
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Q4 2014 | InternationalResourceForum.com
across, so it’s not like Hummingbird will be understaffed or under resourced to manage both projects. We fully anticipate motoring ahead with the DFS on the Dugbe 1 Project and not delaying it at all. IRF: Did you always envision Hummingbird Resources to be a multi-faceted operator with a West African focus?
Work on primary access a 2M t/y plant and the project is fully permitted. There’s no licencing issues or anything. It’s ready to go; it’s ready to start. Now before we start building the project we’re going to right-size it. What we mean by this is we’re looking to build an oxide only plant and build a smaller scale plant as phase one of the development. We image a 4-6 month optimisation period at the start of the project, and a twelve month build. So by the end of next year we’ll be in production. IRF: Hummingbird Resources transitioned from a gold explorer to producer almost overnight. What does this acquisition mean for the Dugbe 1 Project in Liberia? DB: It’s outstanding news for the Dugbe 1 Project in Liberia because it de-risks it significantly. I’ve said previously, one risk in this market is that we bring out a DFS on-time and on budget and it shows a very robust project at Dugbe 1, but you have a large capital challenge to raise the finance to build the mine. With the Yanfolila Project coming onstream with a more manageable capital cost, it totally derisks the development pipeline to bring Dugbe 1 on stream. We can use the cash flows from the Yanfolila Project to help assist with the development of Dugbe 1. With the Yanfolila Project some of the key members of the Gold Fields team are coming
DB: The answer to that question is that I’ve always envisioned building the best possible gold company that we could. It seems that at the moment we have a West African position, but I wouldn’t rule out looking at the right asset in any jurisdiction. I think that this market is unique and that there are opportunities everywhere, but yes, I always envisioned building the best possible company that we could and creating shareholder value through either buying or discovering assets that could make a significant economic return. IRF: Why have you chosen this time for your first acquisition? DB: A lot of these acquisitions happen when they happen, you can’t choose everything. Gold Fields have their own strategy looking to divest of certain assets in Africa and the opportunity arose now. So I think the key is being ready to react to the market and to opportunities as they arise. As I’ve said, we’ve had a strategy of looking for a suitable project for about two years now, but the worst thing you can do, is do a deal for the sake of it. We’re infinitely patient, we have a world-class project in Liberia and we didn’t need to do anything. But this opportunity arose and its clearly a fantastically robust project. It’s got an RRR of 54% at the current gold price. It was really too perfect for Hummingbird not to do the deal. So in answer to that question, we’ve been ready but we didn’t specifically choose now. The time almost chose itself. IRF: What does this mean for Hummingbird shareholders? DB: As a significant shareholder myself I hope its good news, otherwise I wouldn’t have 37
West Africa Focus | Hummingbird Resources
supported the deal! I sincerely believe it derisks Hummingbird in terms of its ability to deliver, and the ability to become autonomous and self-generating with cash flows. It diversifies your political risk to two countries; it utilises our skillset operationally in West Africa. I think that the project itself is so robust at the current gold price and the capital required to bring it into production is manageable, particularly with Hummingbird’s extremely supportive existing shareholder register. I think it will not only deliver value in itself, but it will unlock the value in Dugbe 1, because it’s my opinion that Hummingbird is significantly undervalued compared to its peer group, and the stage of development its at. A lot of the reason for that underrating is that the market perceives a potential capital challenge to build a project. This acquisition eliminates that capital challenge and shows a clear pipeline to production for both projects. It’s a great deal for Hummingbird shareholders. IRF: What is the structure of the deal? DB: The deal we’ve agreed with Gold Fields
38
is that we will acquire the Yanfolila package. Glencar Mining is the company we’re acquiring off Gold Fields with their Mali interests. We’re paying $20M of Hummingbird paper – it’s an all share deal at 56 pence/share. It means Gold Fields will become Hummingbird’s largest shareholder. That has obvious strategic benefits for us having a world-class gold major on our share register. It also means we don’t have to find the cash to acquire the asset and we can use cash to develop it. The deal’s structure is real straight forward. Hopefully extremely value accretive to shareholders, as we unlock the value and prove the economics of the oxide only plant, and how quickly it will come in to production. You will see a lot of value coming through off the back of that deal. For $20M of Hummingbird paper, we’re acquiring an asset that has had $100M spent on it. Over 500,000 metres of drilling, and we get a $65M tax credit against future profits for the work done to date. And with a 54% RRR at the current gold price, it’s a very attractive deal for us.
Q4 2014 | InternationalResourceForum.com
IRF: What is Hummingbird’s current cash position and what are your deliverables over the next six months? DB: Hummingbird currently has nearly $8M of cash in the bank and we’ve also got a number of other facilities and options available to us for further funding should we require it. But we have enough money in the budget to conclude an optimisation study on Yanfolila and continue with the Dugbe 1 feasibility studies. During the next six months our objective is to complete the optimisation studies at Yanfolila. Everything has been fully permitted and fully done on the Yanfolila Project for the scale of project Gold Fields envisaged. All we need to do is make amendments. There’s no permitting or licencing issues at all. It’s purely internal workings, and we’ve already started that. Through the due diligence period we’ve already started optimising the resources for the project we imagine. We’re looking at a project with a cash cost of just about $500/oz of production. The main purpose now is to prove it’s real and get into construction as quickly as possible.
Community engagement
IRF: Can you talk about Hummingbird’s responsibility to the local community and the activities you’ve undertaken? DB: Working with the communities is key and will become more so as we go into production. We run a comprehensive range of community projects with initiatives in areas such as healthcare, education, and infrastructure. We are proud to have a good working relationship with our host communities. IRF: Lastly, can you explain what the Pygmy Hippo Foundation is?
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DB: The Zoological Society of London estimates that there are less than 2,000 pygmy hippos remaining in the wild. The majority of these are believed to be located in southeast Liberia’s Sapo National Park. In July 2011 we founded the Pygmy Hippo Foundation, a UK registered charity, dedicated to improving conservation in Liberia. Through the re-development of the Sapo National Park, enabling broader conservation initiatives in the surrounding forest areas and facilitating education programmes, the Pygmy Hippo Foundation aims to promote the conservation, preservation and protection of endangered species such as the pygmy hippo in their natural environment.
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www.hummingbirdresources.co.uk 39
West Africa Focus | Paradigm Project Management (PPM)
PARADIGM PROJECT MANAGEMENT (PPM) Focusing on West African Growth An Exclusive with PPM Director Jeremy Clarke Interview By: J. Landry
Having been in business for nearly ten years, Paradigm Project Management (PPM) have a wealth of experience in diligence work, concept, pre-feasibility, and feasibility studies. Working in 18 countries in sub-Saharan Africa, the organisation is well positioned to discuss 40
the current issues facing the region. In our exclusive with Director Jeremy Clarke, he candidly discusses their efforts to focus on West African growth, and PPM’s success in mine and project management for clients including Sierra Rutile, Nimini Gold, Stellar Diamonds, Taurus Gold and Kumba Iron Ore.
Q4 2014 | InternationalResourceForum.com
International Resource Forum: Can you tell us about your background? Jeremy Clarke: I started in mining in 1977 by leaving the UK for South Africa and joining the Anglo American Corporation as a trainee process engineer, or metallurgist as we called them then, and went through various parts of the Anglo American and De Beers Group doing some work in gold, some in copper but mainly in diamonds. I then went to work in mining in Botswana, Namibia and various mines in South Africa before being appointed as the Consulting Metallurgist at De Beers. In 1997 I left De Beers and moved to Toronto where I was involved in the start-up and subsequent public listing of various junior mining companies. All three of these companies are still operational, but I decided to return to South Africa in 2002 in order to start my own consultancy company, Metcon. This company started to undertake a lot of work with PPM, and therefore it seemed sensible to merge the two companies around seven years ago and that’s when I started playing a more significant role in PPM.
Marropino Mine, Mozambique
My background therefore started in operations, moved through executive management within De Beers, then into the junior mining industry, including the financing, listing and ownership of mining companies, and now contracting back into the mining industry as a service provider with PPM. This experience therefore covers the majority of the potential sectors of the global mining sector. IRF: Can you talk a little about when you came on board with PPM and how that changed the dynamic of the business and its service offering? JC: At the time the consulting company Metcon was just me.
Jeremy Clarke PPM Director
I had a large network within the junior industry but my work was purely consulting and I couldn’t undertake work in the downstream sectors. PPM however was positioned to undertake a much broader scope of services 41
West Africa Focus | Paradigm Project Management (PPM)
including due diligence work, concept, prefeasibility, and feasibility studies, and moving into EPCM implementation. So we just linked the two. PPM was doing implementation work with companies I was in consulting to, and they provided a bigger engine room for me and I brought in a larger client base for them. Now we’ve done over a hundred projects for 18 countries across Africa, covering 17 commodities. So, it’s been a synergistic merging of the two. IRF: What are the changes you’ve noticed in the industry from when you started to present day? JC: That’s the tricky one. PPM is now eight years old and started at the tail end of one recession, has benefited and grown though the past resources boom, seen through the global financial crises, and now we’re hopefully just getting out of this. The business has therefore been up and down in-line with global mining cycles. I believe that there has been a change with this latest financial crisis and downturn. Previously, mining ventures were generally driven by growth for long term value in the companies, but the recent serious downturn, especially in the mining industry, has been driven more by the perceived need for investors to gain quarterly returns, rather than understand the high costs of entry to mining and the need for a long term vision. The mining industry is a long term industry. It can take ten years for a project to come to fruition. Trying to supply quarterly returns to investors in this industry is extremely difficult and I think that eventually reality has set in; unfortunately there have been many casualties along the way. Hopefully the right investors are now getting into the market where people are not chasing instant returns and understand the industry better. This is having an impact on solution providers like us. PPM tries very hard to increase the value of projects. We have proven examples where we’ve taken what we consider 42
“PPM tries very hard to increase the value of projects ” to be non-viable projects and made them economically viable. We believe that’s a niche market we want to stay in and grow. IRF: When facing down turns in the mining cycle, what does PPM do to try to diversify their offering and differentiate itself in order to continue to find new projects to undertake? JC: We look at the number of different scenarios in the mining industry. PPM undertakes a lot of studies: concept, prefeasibility and feasibility. In this latest downtown, we moved into business optimisation work streams for current and operating mines. Due to our operational and executive management experience, we are able to go in and assist clients with modifying plants, equipment and infrastructure, in order to improve availability and overall utilization thereby increasing the revenue stream with limited investment, thereby immediately improving their bottom line. PPM has also moved into managing the overall mine operations for clients putting our own operating teams on site. PPM has also been very successful in the areas of Business Rescue which is a new South African law designed to minimise company failures that allows for an experienced management team to be parachuted into a failing company in order to rescue it from liquidation. We also do project management consulting whereby PPM develops and integrates project management systems into companies: one recent success being Kumba Iron Ore. We have a broad spectrum of services that can
Q4 2014 | InternationalResourceForum.com
Letseng Diamond Mine, Kingdom of Lesotho
help clients. IRF: Are there any common issues that clients tend to overlook? JC: We have found that there is often lack of integration in some companies approach to their projects. For example, some companies will try to save money by getting numerous organisations to look after different aspects of a feasibility study. Unfortunately there is often no internal capability to ensure that these disparate services are correctly integrated throughout the study which can significantly reduce the veracity of the final document. Some design parameters will not be consistent between disciplines due to the inevitable changes of scope during the study, and some things will fall between the cracks all together. This leads to errors in both the scope of work and the estimate which, when subjected to the financiers due diligence, leads to a reputational
risk as well as additional time to rectify and therefore also more costs. Very few people in this day and age are looking at new and innovative ideas. It is one of the biggest problems of the mining industry. The financiers are generally extremely risk adverse and want “proven technology�; however proven technology is inevitably old technology. When this approach is adopted, the capital cost risk may be mitigated, but the mine’s operational costs will increase due to this old technology and will generally not be able to so easily ride out price fluctuations as other more modern mines due to not being in the lowest quartile of operating costs. Thus in many cases, current financiers are condemning new mines to a long and difficult life. The solution is the correct application of innovation. IRF: Do you have an example of PPM using your innovative solutions to address this? 43
West Africa Focus | Paradigm Project Management (PPM)
“PPM’s focus
is sub-Saharan Africa, and our niche market is more geared to assisting the junior, and mid-tier mining companies.”
Kalagadi Mine Thembeka Myedi Shaft South Africa
Q4 2014 | InternationalResourceForum.com
JC: Yes. Utilising a unique project tool that PPM calls Strategic Value Management (SVM) we were able to re-vitalise a project in Botswana with a project that was previously seen as uneconomic.
through a bad time in the mining industry. There is a general lack of investment in the country due to political and labour instability, including the recent talk about mine nationalisation and the more regional debate concerning resource nationalism.
We were able to reduce the capital expenditure by approximately 60%, as well as reducing the operating costs, when compared to other similar operations, by about 40%, whilst retaining the mines functionality. This mine has been built to these standards and is currently operating very well.
New projects have therefore been few and far between. West Africa on the other hand is seen as a more exploration friendly area in terms of geology and to some extent in terms of the fiscal and the political regimes. So, there’s been a move by a lot of investors into this area, and PPM follows the investors and their projects.
Another example, currently at pre-feasibility study level is a junior mining company’s project in West Africa. PPM has reduced the capital expenditure by 30% on just the plant design alone compared to our competitors. The operating costs will also be considerably lower as there is 40% less power required saving the client over a million dollars per annum on power costs alone.
IRF: Are there any specific countries that you identify with opportunities in the near future?
All these changes can be made with innovations which don’t necessarily change the functionality of the mine. IRF: Is that typically through the streamlining of these processes? JC: It’s through numbers of factors. One is definitely streamlining, that’s a good word for it. The other thing is using technologies that are proven, but not necessarily currently used in the same industry. If you look at the copper industry they’ll do things one way, the platinum industry in another way, the gold industry also have their own standard methodologies. Sometimes you can cross-fertilise between industries. So it’s not necessarily taking brand new ideas off the shelf, rather taking proven technologies and moving them across to other applications. IRF: PPM has been active in immersing itself in other opportunities across Africa. What is the theory behind this? JC: As you know South Africa has been going
JC: I think in terms of what we’re doing, we’ve looked at all of the African countries. We think Sierra Leone is a good area. We’re also looking to work in Guinea, Cote d’Ivoire, Togo and Burkina Faso. We’re not currently working in Ghana, Mauritania, Mali, and Liberia, but we think there are good opportunities there as well. PPM’s focus is sub-Saharan Africa, and our niche market is more geared to assisting the junior, and mid-tier mining companies. Our market is not to compete with the much larger project management companies; we work in a different market to them. Where we have access to the more junior companies who identify good exploration projects, that’s where we’ll go. IRF: What sort of on the ground knowledge does PPM have that would make our readers consider you first and foremost? JC: PPM’s focus is sub-Saharan Africa as we have experience of operating in 18 countries in this region. We understand the difficulties of managing mines and projects in remote and difficult locations including the ever more challenging area of logistics. We also understand the localisation needs of providing jobs to the communities as well as proper training, healthcare, and services such as potable water. PPM staff have all worked in those operations and know the difficulties 45
West Africa Focus | Paradigm Project Management (PPM)
that will be faced by the mining companies and this allows us to build this experience into our feasibility studies and the overall mine design such that a complete solution is derived that will last for the total life of the mine. A lot of projects in Africa don’t fall over because of technical issues. They fail or become more difficult because of environmental, social and sustainability issues. PPM has experience of managing those types of operations and can therefore assist our clients in better understanding the project requirements. IRF: What are you doing with Sierra Rutile? JC: That project is now finished. We completed the feasibility study for their dredge 3 that involved looking at a complete new dredging operation including final treatment plant, modifications to the land plant and additional on-site infrastructure. That project was completed about two years ago, but was a major one for us in the area.
“PPM’s SVM model is a powerful tool for brainstorming possible innovative solutions “ We’ve also done work with Nimini Gold in Sierra Leone. We completed a preliminary economic asset done in conjunction with the MSA Group. Nimini Gold is now looking at increasing the mineral resource before it moves into the feasibility study, and we obviously hope to be an integral part of that ongoing project. Also in Sierra Leone we’ve done a lot of work with Stellar Diamonds. PPM completed a conceptual study for a new diamond project in the area. This project is now moving forward to the next stage of deriving the mineral resource such that a feasibility study can be completed. 46
Finally, we’ve also done a project in Cote d’Ivoire for Taurus Gold on their Afema project. This pre-feasibility study was finished for them about a year and half ago I believe. There’s therefore been a good mixture of projects and commodities for us in West Africa. IRF: When undertaking projects like these for clients, what sort of problem solving is required to find the best solutions? JC: I think all the projects require a proper analysis of the problem areas and if this is not done it can lead to future difficulties. PPM’s SVM model is a powerful tool for brainstorming possible innovative solutions. These concepts are not just valid to the mining and processing aspects of a new project but must be carried through into areas such as infrastructure, power generation, HR, etc. PPM believes that, for remote operations, simplicity is the key. This has a massive impact on difficult operational problems such as logistics which is the most underestimated problem-child when working in West Africa. The less you have to take in to the mine, the better. On the Stellar Diamond project we looked at very innovative ways for shaft thinking and getting early access to ore. We also recommended utilising much higher percentages of local labour and local skills than has been done before with regard to developing the required surface infrastructure. This will help to provide skills and ensure sustainability for the local communities. IRF: Is growing the local economy important to you in these emerging economies that are seeing a lot of investment? JC: I don’t think it’s important, I think it’s absolutely essential. I don’t think you will get a license to operate in Africa unless you undertake the effort to benefit the local area and local economy. I think that mining companies ignore that at their peril. IRF: Is PPM committed to ensuring this in the countries that it works within?
Q4 2014 | InternationalResourceForum.com
Afema Mine, Cote D’Ivoire
JC: Absolutely, we have long term environmental and sustainability policies within the company and we’re fully committed to that. In fact, we have persuaded a number of our clients to develop similar policies since they are good long term goals for their company economically, as well as politically. We’re committed to the sustainability side of projects, and we undertake our own sustainability projects in the areas that we work. IRF: Is there anything else that you’d like to share with our readers?
Secondly PPM is a solutions provider to projects. We have a track record of taking projects that other companies find difficult to do and make them viable through the innovative routes that we take. Not just in technology, but also in the methodology, costs and time taken to do the studies themselves, and hence the solution that they generate. We’re always aiming to ensure the industry can move faster, and with more value from a greenfields position to an operating mine than has been done previously.
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JC: I think that there are two things that we try and push as hard as we can in PPM: First, is adding value to the projects that we undertake. We always see the project itself as the client. If we believe that the project needs specific attention in certain areas, then we strongly recommend this. Sometimes that can lead to initial difficulties with our clients but as long as both parties see the project as their end client, these will always be adequately resolved. www.ppmprojects.co.za 47
Association
KENYA CHAMBER OF MINES (KCM) Facilitating Kenya’s Mining Sector Interview by: Tabrez Khokhar
As part of our two-part series on the East African Mining Industry, we sat down with Kenya Chamber of Mines (KCM) CEO, Monica Gichohi. In this exclusive, Monica gives us an overview of the Chamber, challenges being faced by the organization and lobbying with government agencies for the mining bill and mineral policy. Though Kenya is not generally known as a mining investment destination, recent developments have proven that the country actually holds a significant potential for mineral development, which is largely unexplored. Kenya currently produces soda ash, fluorspar, cement, coloured gemstones and gold, the latter two mainly from artisanal mining activity. A heavy mineral sands (titanium) operation is being developed in the Coast Province, and there has been a recent increase over the last years of the activity of gold exploration companies. The Kenya Government, in hand with KCM, is currently putting in place a Mining Policy and revising its out-dated Mining Act in order to encourage development of the mineral industry in the country.
Monica Gichohi Kenya Chamber of Mines, CEO Tabrez Khokhar: Give us a brief history of KCM and its establishment? Monica Gichohi: The Kenya Chamber of Mines (KCM) was established in 2000 with the goal of representing the interests of Kenya’s mining companies, exploration companies, mineral traders, equipment suppliers and professionals in the sector.KCM endeavours to lead the industry as a representative, lobbyist and preferred interlocutor for the government, communities, and other stakeholders. KCM is focused on resolving the country’s mineral sector issues and growing it sustainably. TK: Highlight KCM’s track record and how the combined experience of the team contributes to its success. MC: Since its establishment, KCM has consistently represented the industry’s interests, gaining recognition as the central representative body of the sector in the country. Currently, the organization represents over 100 companies with vested interests in the Kenyan mining scene. KCM is led by an executive council made up of the leaders of selected member companies including African Barrick Gold,
Kenya Chamber of Mines
Kenya Flourspar Company, Tata Magadi, Base Titanium, StoutMin and Kilimapesa Gold. The executive council members are accomplished and experienced miners who include a former Commissioner of Mines and the former chairman of the Chamber. TK: What are the key services provided by KCM and priority activities you’re involved with at the moment? MC: KCM focuses on growing the mining industry in Kenya through creation of a conducive business environment for mining. The organization has been heavily involved in lobbying with government agencies for the mining bill and mineral policy. Community outreach is also a key activity that the chamber has been involved in with the goal of disseminating information to the small-scale miners whose livelihoods are dependent on mining. KCM also holds numerous corporate events aimed at strategizing on the industry’s growth and attracting investors into the local mining industry. KCM partners widely with like-minded organizations to structure Kenya’s business environment into an investor destination, with an emphasis on mining. TK: What are KCM’s major milestones achieved to date? MC: KCM advocated for the outdated mining laws in Kenya to be updated since the regulatory framework currently in operation has been in place since 1940 and no longer governs the sector efficiently. The law in place limits the profitable exploration and extraction of minerals in the country and has not been effective in encouraging the exploitation of these resources. KCM recognized Kenya’s mining potential and set out to ensure its realization, successfully convincing the relevant government agencies to review the regulations. The Mining Bill is currently undergoing debate in parliament. 50
Demsas Faloppa KCM, Chairman During the development of the Mining Bill 2014, KCM has been at the center of the consultation and drafting of the clauses, with the members taking part by submitting reports to the committee tasked with the development of the bill. KCM also managed to educate and constantly update the members and the public on the proceedings and on the specific clauses in the bill that will affect their operations. TK: Tell us about the challenges being faced by the organization? MC: Being a non-profit organization, Kenya Chamber of Mines faces financial challenges in implementing its strategies for growing the mining sector in Kenya. Activities such as community outreach programs require the organization to spend on logistics and facilitation costs and so the chamber has to limit the number of sessions held. As Kenya’s mining sector is still young, there is limited data on mining. Information such as the types of minerals present in the country and their locations is unavailable. The chamber is therefore unable to accurately advise members, the public and investors on the minerals. KCM also faces difficulties in attracting investors into the country due to an underdeveloped sector. Several African countries have been involved in large-scale mining for decades, making them more attractive mining investment destinations.
Q4 2014 | InternationalResourceForum.com
“KCM has been instrumental in promoting miners in Kenya ” Further, the country faces insecurity and political instability that increases investor risks. TK: Discuss the potential of the Kenyan mining sector? MC: Kenya’s mining sector received a major boost in the last decade, with mining companies announcing discoveries of minerals in several parts of the country. Minerals such as gold and titanium have since been certified as commercially viable and extraction started. In February 2014, Base Titanium, Kenya’s biggest mining operation started exporting Ilmenite and Rutile to Asia and is expected to ship about 330,000 tonnes of Ilmenite and 80,000 tonnes of Rutile annually. This makes up 10% and 14% of the global supply of the two minerals respectively. Other notable operations in the country so far include African Barrick Gold, Karebe Gold, Kilimapesa Gold, East African Copper. The Kenyan government has also started making efforts to boost the mining sector by improving the sector’s regulatory framework through the Mining Bill that is currently in parliament. Additionally, universities in the country have started offering mining courses with Taita Taveta University College, a member of the chamber, opting to specialize on mining courses. TK: How is KCM supporting/helping to facilitate the mining sector in the country in line with, Kenya’s Vision 2030 initiative? MC: Kenya’s Vision 2030 is geared towards the country’s continuous development into economic success. KCM has been instrumental in promoting miners in Kenya and enabling their operations to be successful and profitable.
These mining operations provide employment for Kenyan locals, advance the country’s infrastructure and greatly improve the skills of the workers. Additionally, the chamber represents small-scale miners whose mining activities provide their main source of income. KCM solely advocated for mining activities to be included in the Vision 2030 initiative, raising the awareness of mining as a potential high GDP contributor. TK: Highlight the various key projects or events KCM is involved with and has implemented in the country. MC: KCM is a co-organizer of the Mining Business and Investment Conference (MBI 2014), which is the regions premier forum on the mining sector. The MBI is an Eastern African event intended to grow the mining sector by addressing the major challenges in the industry, discussing the investment opportunities available and raising the regions profile as a mining destination. The chamber has also endeavored to provide the region with relevant, up to date and objective information through the EA Mining Review, a project that is underway. KCM regularly holds community outreach missions to reach the small scale miners to provide information and empower them to exploit the minerals within their reach profitably. TK: How does KCM plan to keep expanding its future outlook? MC: KCM intends to continue growing its membership towards representing the entire mining fraternity in Kenya. The Kenyan extractives sector promises to be the next economic frontier and holds great potential for business. With this in mind, the Kenya Chamber of Mines continuously strives to ensure a suitable business environment for all the stakeholders in the country.
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www.kenyachambermines.com 51
Event Preview
MINING BUSINESS & INVESTMENT CONFERENCE
MBI 2014 Eastern Africa
Q4 2014 | InternationalResourceForum.com
The Mining Business and Investment Eastern Africa Conference (MBI) is an annual event that is held under the auspices of the Kenya Chamber of Mines and Prescon Limited with the support of the Ministry of Mining, Kenya and the East African Community. Over the last three years, the event remains the ONLY platform in Eastern Africa that holistically captures current trends in the mining industry in the region. This has been facilitated by a focus on harnessing the mining potential in the Eastern Africa through critical themes such as; fiscal matters, policy and legislation, mining investment, mining technology, infrastructure and mining services. As a result, the conference has attracted at least 5000 delegates and 500 companies since opening up the Eastern Africa region to local and international investment. The International Resource Forum talks to Joy Wanyonyi, Marketing Manager to discuss the event and what we can look forward to.
International Resource Forum: How did the MBI Eastern African event first come about? Joy Wanyonyi: In 2011, while mining was still under the ministry of environment, Prescon Ltd approached the ministry to participate in the Mining Business & Investment Conference. The sitting minister, Hon. John Michuki, quickly got on board, endorsing the conference. During the opening ceremony, the visionary minister urged KCM and Prescon Ltd to take on the mantle and promote the sector, which was still largely unexplored. Since then, Eastern Africa has sparked global interest following numerous discoveries of oil, gas and minerals. It became quickly apparent that while the discoveries hold great promise for economic development of the region, this potential would only be realized with faultless management of these resources. This realization led the Kenya Chamber of Mines and Prescon Ltd to continue holding the conferences with the goal of steering the industry towards sustainable growth. The conference started with the three East African countries and has since grown to include the entire Eastern African region. IRF: What are the key objectives of MBI Eastern African 2014? JW: MBI’s slogan is ‘Harnessing Potential Mining Investments in Eastern Africa’. The conference aims to develop Eastern Africa’s mining sector by tackling challenges in the nascent industry. This is done by creating a platform for the industry players to discuss issues, experiences and expert opinions with the intention of carving out strategies for success. The conference allows investors to learn about potential investment opportunities and to objectively evaluate them.
Delegates at MBI 2013
Through product exhibition and demonstrations, the mining and exploration companies also get access to a variety of 53
Event Focus: MBI 2014 East Africa
suppliers of products and services that they require. IRF: What makes mining such an important industry for the East African/ Kenya region?
Hon. Najib Balala Minister of Mines, Kenya in discussion with visitors to MBI 2013
JW: Eastern Africa, and Africa by extension, has a long history of being an underdeveloped continent with sluggish economic development. One of the reasons for this is the poor exploitation of the available resources in the region. The discovery of minerals offers a new hope for Eastern Africa since minerals such as gold and titanium could earn the countries significant income to enable socioeconomic development on an unprecedented scale. Eastern African nations are keen to avoid the ‘natural resource curse’, which has haunted many mineral-rich African countries, and therefore, the nations are going to great lengths to ensure proper management of the minerals.
In Kenya, for instance, the discovery of minerals has led to the government putting in place measures to govern the sector. The ministry of mining was set up and parliament is currently debating the Mining Bill 2014 which will govern the mining industry with a modern view of it.
IRF: What signs are there that East Africa’s or the Kenyan mining industry is advancing?
IRF: Why was Nairobi chosen to host the event?
JW: When the mineral discoveries were made in Eastern Africa, the initial concern was the economic viability of the deposits. These concerns were rapidly settled once companies carried out feasibility studies and confirmed the volumes of mineral deposits as being economically viable for exploitation.
JW: Kenya’s capital, Nairobi is strategically placed in Eastern Africa and acts as the business center for the region. This is evident in the number of leading international companies that have selected Nairobi as the African hub for operations, including Coca Cola, IMF, World Bank, Diageo, Google, IBM and General Electric.
Eastern Africa has since become an investment hub in Africa, with exploration and mining companies venturing into the region. For instance, in 2003 Tanzania became the third largest producer of gold in Africa after South Africa and Ghana. In early 2014, Base Titanium exported the first significant shipment of titanium to China and is expected to export over 450,000 tonnes within the year, placing Kenya on the global map as a mineral exporter. Economic analysts and development experts including African Development Bank’s regional director for Eastern Africa, Gabriel Negatu, have also confirmed the potential natural resources have to transform the region’s economy. 54
Kenya also acts as the region’s access to the ports since countries such as Uganda, Rwanda and Burundi are land locked. The country’s advanced infrastructural and technological networks, coupled with the high literacy levels also make Nairobi a strategic center for conducting business effectively. IRF: What are the key points and contributions to the MBI 2014 event? JW: Mining Business & Investment Conference offers a range of participation packages. Companies trying to reach out to mining and exploration firms can contribute as sponsors,
Q4 2014 | InternationalResourceForum.com
“The executive level interaction that is attained through MBI makes it a great networking forum for the entire sector “ Panel discussion at MBI 2013 earning the opportunity to exhibit their products, brand the venue and communicate value to the audiences.
with a single platform to communicate their agendas to the entire region’s audiences, enabling companies to grow businesses.
Companies can also send individuals to participate as delegates at the conference. A delegate pass allow the participant access to the entire two-day conference, including the dinner gala and cocktail.
IRF: Who are some of the key exhibitors/ partners at this year’s event?
Subject matter experts on topics that are relevant to the mining sector are welcome to present at the conference. These have to be experienced thought leaders who can authoritatively speak on selected topics and steer conversations on the issues involved. IRF: What opportunities and other developments has MBI enabled? JW: Over the years, MBI has connected numerous mining companies with investors and suppliers that they needed to advance their projects. These links have enabled the firms to raise funds for mining and as a result, grow their operations. The forums have enabled companies to tackle major challenges through discussion of best practices in different areas. The expert presentations made during the conference address major concerns such as financing mining operations and taxation. MBI also presents the industry stakeholders
JW: Some of the companies participating in this year’s MBI include Base titanium, Transcentury Group, African Development Bank, Kenya Flourspar Company, Atlas Copco, Altaaqa Global, PanAfrican Equipment, Vivo Energy, SAP, United Spectrometer Technologies, Canadian Embassy, Ernst & Young, Deloitte, European Gold Center and Tancoal Energy. IRF: What other reasons are there for investors, ministers or the general public to attend? JW: The executive level interaction that is attained through MBI makes it a great networking forum for the entire sector. The MBI has also played a key role in profiling Eastern Africa as a mining investment destination in the region. This has been done through continued communication and information dissemination to interested parties worldwide.
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MBI 2014 East Africs. 16 - 17 October 2014 at the Safari Park Hotel, Naitobi, Kenya. For further information, please visit: mbieastafrica.com 55
Ecovest Holdings
ECOVEST HOLDINGS Empowered homes, Sustainable communities an exclusive with Ecovest Holdings Managing Director, Christiaan Taaljard
Interview By: Tabrez Khokhar
Established in 2006, Ecovest Holdings has grown to become a key player in the Gauteng’s custom home solar solutions market. Recently shortlisted by the South African National Energy Development Institute (SANEDI) for the SANEDI RECORD RERE ENERGY AWARDS 2014, 56
The International Resource Forum spoke with Managing Director Christiaan Taljaard to give us an in-depth look at Ecovest’s innovations and discuss the establishment of their OffGrid Manufacturing Plant (OMP).
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Tabrez Khokhar: Give us a brief history of Ecovest and the company’s values and its mission. Chris Taljaard: The lack of European type marketing, supply chain and distribution channels makes the African market unique in industrialized countries – it also highlights the need for custom African design and inclusivity. Established in 2006 Ecovest commenced to research the developmental value chain that would commercialize and deliver, not evolve, a custom African solar home lighting solution product. There are basically two schools of thought to provide Africans with energy. The first, grid energy, like Eskom does in South Africa to the community and the second, developing point solutions, i.e. product-by-product solutions, thereby powering households. Ecovest realized that grid would not be possible because of the attitude and the lack of rural infrastructure in South Africa. Hence, we chose to develop point solutions and commenced to design the products. We quickly realised it was a very comprehensive delivery that we were facing, because we didn’t have the grid as well the distribution. To date, we quote our local manufacturing capability as the grid of point solutions into African communities. TK: Highlight Ecovest’s track record and how the combined experience of the team contributes to its success. CT: Well again, if you stand back and the see the magnitude of the market, about 600 million Africans are without energy and probably another 200 million with intermittent power supply which is regularly interrupted, plus, it is a huge market.
Chris Taaljard Ecovest Managing Director
Our business philosophy is not to partner, is to perish. We integrate capable partnerships into our designs that are supported by community driven manufacturing. Reduced price points and business enrichment modularity by design is followed by a custom African retail 57
Ecovest Holdings
distribution network. It is one thing to claim the capacity to supply once you’ve developed, but the supply chain needs a consideration. We realised this and knew that we could not do it alone, hence we partnered with capable manufacturers in South Africa, which enabled us to stand next to, promise the capacity, and supply these developed products. That is the theme that has developed as they are committed to us; we have been working together for over 5 years now and each are specialists in their respective fields. We believe that is what makes a company work in a modern world, which is very competitive and for us to deliver competitive products that are capable and sound. TK: Highlight the product range and solutions of Ecovest CT: If you analyse the need of off-grid unelectrified households, you will note that the primary energy requirements are lighting and cooking. You have to eat! You have to see! Based on these obvious requirements we proceeded to develop our products. Parallel to what we researched, we were going to need a distribution network which would have off-grid manufacturing capabilities and distribution in a custom African network. These factors influenced our product design. After our initial introduction of the solar lighting and cooking products, we identified another primary lifestyle product, the television. If you look at TV in a European context, it is a used for relaxing, but, here in South Africa, we believe, it is an absolute necessity to uplift Africans. Hence, the solar TV is now included in our product range. Ecovest is securing the delivery of lifestyle with the manufacturing of solar home systems (lighting, television, electronic station and multi cell phone charger) and two cook stoves (biomass and biofuel). Those are our primary products that we lead with and have fully commercialized. 58
“off-grid communities pay more for their energy than on-grid households! ” TK: What are the benefits of the your products? CT: The best way to answer that is if you analyze a typical rural household. The strange thing is that off-grid communities pay more for their energy than on-grid households! Lighting, cooking and communication are recognized to be primary need by both African decision makers and the International Community. Lighting a shed rurally will cost more than lighting a ‘gridded’ house with normal power supply. The rationale here created the opportunity from a business perspective. Offgrid households pay more for their cooking and lighting then others and therefore an excellent business prospect arose. Un-electrified families currently spend 25 to 30 percent of the household income on cooking and lighting – the introduction of eco-friendly technologies can save R275 per month. In South Africa the potential saving on primary energy is 15 Billion Rand pa. This is the real benefit, which is real and tangible. There is an immeasurable social benefit that also follows. Another is the communication capability into these communities; with our products they can enrich themselves with knowledge and not be so exploitable. TK: What impact has Ecovest had in offgrid areas? CT: We are at the coal phase of implementation and are one of the first companies (in South Africa) with this delivery. We never entered the market with irrational claims touting to have found a solution, throw some money at us and will change the world. We have partnered with several companies and
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The ECOlite Kit institutions that understand the opportunities of African energy as well as the complexities. This includes The Innovations Hub South Africa and the University of Johannesburg. In our seven years we have delivered our own value systems as well as the opportunity to look into other developments, combined these, and sharpened our own initiatives.
our commercialized product in 23 informal settlements in Gauteng each with 2000 households on average.
That is where we have played a bigger role and have had successful impacts - in partnerships, development fronts, social deliveries, and ultimately entering the market successfully.
CT: Our Off-grid Manufacturing Plant (OMP) answers the essential question, what about human energy? Ecovest has delivered a unique metals manufacturing technology that delivers an un-electrified off-grid factory (business-in-abox).
We started off by delivering our low cost products to homes where they proved reliable. To date, we have successfully installed
TK: Tell us about Ecovest’s manufacturing plant, its use of local labour, and facilitating the socio-economic development of the area?
As an example, our competitors utilize plastic 59
Ecovest Holdings
components for their products, whereas ours are fashioned wholly from stainless steel at our plant. We did this knowing full well, from the outset, that South Africa has limited distribution networks once your product is developed and commercialized. What OMP enabled us to fully rely on our manufacturing capability at the plant without having to rely on poor distribution and supplier networks. Thus, answering our own question on how we can design our products so that we can manufacture off-grid, and create our own distribution network. Our labour is wholly local, tools are designed and created within the country, research is done using local partners and it all comes together as a product in our OMP plant. The Ecovest OMP employs and sustains three factory workers, 25 informal retailers and ten sales technicians. Plus, we have a capacity of sustaining 175,000 off-grid end users.
“The money remains within the community without the use of middlemen who are taking out the profits ” TK: Can you tell us about some of your recent projects? CT: The main project, if it can be considered that, is that we have successfully completed our parent OMP plant in Pretoria, which is now delivered; it is fully functional and operational. We bring in communities, put them through a 1-day training course in household energy management as well as educate them on offgrid manufacturing rationale, so they can go back to their communities and tell others what they have learnt and seen. The parent OMP plant is vital to us. We are 60
proud of the accomplishment that we can show it instead of just talking about it. We will now be setting up OMP sales offices in Gauteng, KZN, Vereeniging and Witbank. TK: What are some of the company’s major achievements? CT: Having now established our OMP plant, it’s not such a battle to market our solution and products. You cannot blame investors for being sceptical, which they are. Along with the South African government, we are manufacturing 15 plants for installation across continental Africa. Having shown the model of the OMP to the government including its success, an agreement was reached that they will market our solution across Africa on a government-to-government level starting regionally, and then onwards to East & West Africa. Further, Ecovest has a Mining CSR and CSI marketing initiative using the same model of the OMP plant. We are specifically targeting the mining industry to invite them and show the OMP model and illustrate its benefits and uses. Having put a practical solution forward, we are actively seeking to market our OMP to the American-African Energy Consortium that is spearheading President Obama’s power initiative and investment into the continent. TK: What are the corporate social responsibility activities Ecovest is involved with locally? CT: If you know the African marketing style, then you would also know that the youth always play a big role in the society. We are assisting a Canadian social objective (Solar for Life) to install solar charging stations to support students in 7000 KZN schools with modern lighting solutions. With Solar for Life we have established the Ecovest Schools Project (ESP) Africa. The initiative commenced with the manufacturing of battery charging stations that are installed at schools to support poor students with lighting
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Ecovest at a local exhibition energy for LED lamps sponsored by affluent students. The working principle is simple and pragmatic – the student returns a used rechargeable battery for a unit that is re-charged in a solar charging station at the school by paying a nominal fee. Everybody wins. The household saves money and the school earns a perpetual income from the station. We have presented it successfully and are now installing a further 3 stations in rural schools within the KZN province. TK: What can we look forward to in terms of new technology and products? CT: We are looking at increasing the life cycle of our products as well as expanding our product range by introducing solar ovens, water warmers, even home system coolers. We have a 45-55 litre fridge which we have researched and are now capable of commercializing. By the end of this year you will be able to purchase the solar oven too! TK: Is there anything else you’d like to discuss? CT: The debate raging on in the commercial environment is if African energy is an opportunity or not? We would like to say that
the African off-grid client lives in distressed communities and they pay more for household energy than on-grid consumers. Additionally, compared to Europe, Africa consumes less of the world’s natural resources per capita. The point is, they are rural communities and it is logical that the money must remain in the community with the installation of such OMP’s. The OMP system delivers the requirements of the value chain to unlock market access. The manufacturing is done in the plant, distribution is supported, eco-energy awareness and product features and benefits are taught and shown to these communities who don’t have a clue about these subjects. Moreover it makes sense to install these OMP’s in remote locations due to the maintenance of the products if they break down. We are now illustrating the missing link, which is our OMP Plant, which comes full circle with the manufacturing, delivery, awareness all wrapped in one OMP installation. On the plus side, the money remains within the community without the use of middlemen who are taking out the profits.
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www.ecovestholdings.co.za 61
COLIN BARNETT
RED TAPE ERADICATOR Western Australia’s Premier talks business, excessive regulation and a bright future for mining
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By Nicky Prouse, CCI Journalist, Adam Duke, CCI External Relations Advisor and Tim Bray, CCI General Manager, Corporate Communications. In our sit-down with Western Australia’s Premier Colin Barnett at Parliament House, there is one point the Premier really wants to make: “What hasn’t been written is the extent in which this Government has had strong agendas on social, environment, education and health which often get overlooked,” said Mr Barnett. “This not like any previous Liberal Government. We have a strong environmental and social agenda. We have contributed $600 million to community-based organisations, which is unprecedented not only in this State, but in Australia. I challenge you to find a Labor Government that has had such a strong social agenda.” It’s this legacy that seems to drive the Premier, who also points out that he believes the broader business community may have partially misunderstood the Government’s actions. “I think sometimes the business community doesn’t look at the bigger picture or look at what has already been done or is currently underway,” Mr Barnett said. “If you look at what this Government has done, we’ve had great success in Asia, we have
big projects underway including Wheatstone, Gorgon and Ord River, we have a $35 billion per year budget, employ over 150,000 people, over 100 business organisations... Government is a difficult job and I think people and business can underestimate that. “I acknowledge what business would say about red tape, regulation and the like, but business should recognise that this Government has done an enormous amount. We have gone through a back-log of 16,000 mining applications, we have made fundamental changes to reform and to streamline processes by putting applications online.” Mr Barnett points to his Government’s work to settle large a number of claims of native title on the land and is about to settle a huge area in the South West of the State. While this has cost the Government and taxpayers financially, it was designed to take regulatory delays off business with planning and mining applications. The State Government also has what it calls ‘repeal week’ once a year when it gets rid of any unnecessary acts of Parliament that have been there for years, obstructing business operations. Mr Barnett’s message is clear to businesses on this issue – give us specific examples of what regulations unduly hold your business back. Mr Barnett, however, doesn’t claim that he, 63
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have good people coming through.
“I really don’t think people in the business community would want us to slow down on the infrastructure expenditure “ or indeed the Liberal party, are perfect and he does acknowledge areas for improvement, but of course is quick to point out some of the party’s better qualities. “What people overlook when they look at this Government is that we had a remarkable election victory in 2008 when we won 10 seats off Labor, then an equally remarkable second election when we held onto all of these seats and won another five while the Nationals picked up one,” Mr Barnett said. “Politics is an unusual experience. Most of our Members of Parliament are new and in their first or second term. They are the future leaders of this State and looking to the future after I am no longer Premier, it’s good to know that we
“There has been speculation that I make all the decisions, but that’s not true. As Premier, my job is to lead the Government and guide Ministers and I spend a lot of time doing that. A good Minister’s job is to make decisions on good advice - those that don’t do well fall into the detail. During the election campaign and in the early parts of the Government’s second term, speculation continues about whether the Premier will still be leading his party to the next election. Mr Barnett says that is not his focus and he will address that a year out from the election. “We are only six months into a four year term and I am concentrating on the job at hand,” he said. Mr Barnett’s focus right now is on continuing to lead a State that has grown remarkably over the last decade with people moving into WA and placing greater strain on infrastructure and pressure on the State’s budget. With that in mind, the Premier acknowledges the recent loss of the AAA Credit Rating from Standard and Poor’s points to the fact decisions will need to be made. “The AAA Credit Rating is a political issue, 65
Colin Barnett: Red Tape Eradicator
but I don’t think it’s a financial crisis,” said Mr Barnett. “It’s a matter of State pride to get it back. We obviously can’t allow debt to grow at that rate, so we will curtail some projects, maybe push some out in time, sell some assets and restrain some current spending, but there is no sense of crisis in the Government at all. This hasn’t come from any flamboyant business deal - it is simply from bettering the State.” Mr Barnett does concede that the Government may have bitten off a little more than it could chew in one go with massive ongoing infrastructure investment, but sees the growth of Western Australia as a positive for the business community. That includes regional areas, such as the Pilbara.
both consumers and business, according to Mr Barnett, a growing WA population brings with it a larger economy, more employment, higher wages and greater consumer spending, which in turn profits WA small to medium businesses with consumers spending big on housing, retail and entertainment. The Premier doesn’t prescribe to the language and commentary that the WA resources boom has peaked. “I think people have to step back and look at what is really happening. I think the national media commentary is often quite shallow and turns it into a joke,” said Mr Barnett.
“I really don’t think people in the business community would want us to slow down on the infrastructure expenditure,” added Mr Barnett.
“The very nature of the WA economy is that it is very jagged. With the resources boom, we had a peak and suggesting that we are going into a production phase is just wrong. There is an enormous amount of commercial activity going on in the resource sector and in the city.
“The WA population is growing by 800,000 people per year and that puts enormous pressure on the major areas of Government spending - education and health. We are hopeful the Abbott Government will address the Federal spending in our State, which will free up some State Government money to be used on other projects.”
“I think we will see major sectors like iron ore and petroleum mature in the next couple of decades and this will be one of the golden decades for WA. A successful economy is externally and internationally oriented and the Western Australian economy has expanded significantly with links to Asia that other States just don’t have.
Despite the reported drop in confidence of
“We are leveraging off these relationships,
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“Energy investments have cost the taxpayer a fortune and it’s not affordable for the State to be cross subsidising electricity producers “ especially in the resource and agricultural industries. We have extraordinary Government to Government relationships and this will flow onto business. The business community needs to take advantage of these relationships and it will only get easier for them in future,” Mr Barnett continued. “With China, the big issue is about food security and safety and we have a golden opportunity to make it work for us.” Energy is again on the agenda, with the Government’s legislation to remerge the two Government energy wholesale and retail arms, Verve and Synergy. The question for investors and consumers is what comes after this merger? “I think the reform is continuing and the market is complicated,” said Mr Barnett. “Energy investments have cost the taxpayer a fortune and it’s not affordable for the State to be cross subsidising electricity producers. Small business and households will be affected.” So, with such a tough job in the spotlight and under continuous scrutiny, how does one deal with such pressure? “I have a big job, a complex job and it’s controversial - you can be under attack all of
the time,” said Mr Barnett. “I’m very fortunate that I don’t have trouble switching off. Some people can’t do that and it makes it difficult. I’m busy - I am doing things most days of the week, but I walk my dogs in the morning - that’s my thinking time. My wife Lyn and I have a farm at Toodyay where we get away to and I play tennis with friends over the summer and go to the beach.” With a recently-elected second-term government and testing budget circumstances, that thinking time will be needed to determine the as yet undecided legacy of the second-term Barnett Government.
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Association
South Australian Chamber of Mines and Energy SA is Australia’s most favourable place for Mining investment Story courtesy of SA Mines & Energy Journal.
In recent decades South Australia has increased its perception as an attractive place to invest in minerals, but with declines in the last two Fraser perception surveys and a host of projects needing investors, Dayne Eckermann investigates our advantages - and what needs to change to entrench South Australia on the global mining map. Discovered by a donkey cart wheel chipping off a piece of rock in the hills behind Glen Osmond, South Australia laid claim to the first commercial metalliferous mine in Australia: Wheal Gawler. The methods of finding and developing deposits have certainly come a long way since the Cornish mining era of South Australia.
Today, South Australia is host to a large range of minerals explorers either searching for the next tier one deposit or developing known resources into a viable commercial venture. Activity in recent years has increased with vigour due to the recognition of South Australia’s mineral wealth, thanks largely to pro-active polices by current and recent State Governments. Since the introduction of the hailed PACE program in 2003, exploration for minerals has increased from $41 million annual expenditure to the present $312 million, with last year marking the first time greenfield exploration expenditure reached levels higher than pre-GFC. The majority of the State’s exploration expenditure has been targeted at copper, claiming an average 45% of the minerals exploration total, followed by iron ore, base metals, gold and uranium. These figures acknowledge the world class copper region of the Gawler Craton, particularly as 62% of all exploration tenements in the State are within this area. Iron ore is South Australia’s second most explored and produced mineral, and is undergoing a transformation from exploration expenditure around $1 million per year in 2000, to current levels around $50-70 million per year. The production of iron ore has also risen sharply, from three million tonnes per year to nine. As for the State’s other minerals, levels of exploration have increased accordingly - with the notable exception of uranium which in recent years has suffered depressed prices due to global supply and demand factors. Nevertheless, with the end of the ‘Megatonnes to Megawatts’ program and increasing demand for nuclear fuel from Asia, the price is expected to return and uranium mine development– including the re-opening of the Honeymoon mine - to follow suit. At a time where attracting investment
South Australian Chamber of Mines
“The government index highlights that South Australia has the most favourable policy environment to encourage investment in minerals projects compared to the other Australian states. “ is already a challenge for junior explorers, South Australia’s record investment in the next generation of mines is certainly impressive, with an increase of 16 mines or 400% over the last decade. But the question remains: are the State’s mineral and regulatory strengths adequate to balance its mounting challenges, attract investment and ensure a healthy continuation of activity through the highs and lows of the economic cycles? A good starting point in understanding South Australia’s unique environment is the annual Fraser Institute Mining Survey that assesses the attractiveness of jurisdictions to mining investment. The global survey has two components; a mineral potential index and a policy potential index. A jurisdiction’s overall potential is weighted 59% towards the mineral potential factors and 41% towards the policy potential factors. The latest survey from the Fraser Institute ranked South Australia 20th overall. SACOME has compiled and analysed the State’s results over the past decade to understand trends and weaknesses, and how policy changes impact on perceptions of investment destinations. The introduction of the Resources Super Profits Tax and subsequent Mineral Resources Rent Tax, for example, saw the State’s ranking in the taxation category drop from the top 20% of 70
investment destinations to the bottom 40%. For investors and companies exploring for minerals, it is essential to understand the risk in terms of local mineral prospectivity and the policy risk of government actions and regulations. To further examine how investors view the State, SACOME divided the areas surveyed by the Fraser Institute into two key categories to create a measurable index: government, to include all the regulatory categories, and land access, to include all the concerns over this issue. The government index highlights that South Australia has the most favourable policy environment to encourage investment in minerals projects compared to the other Australian states. This is reinforced by a study commissioned by the Minerals Council of Australia that found South Australia to be the best scoring state in each of the regulatory judgement criteria. Another survey that investigates the investment attractiveness of a jurisdiction is conducted by Resource Stocks magazine, which this year found: “South Australia has again won the ‘battle of the states’ with its reputable mines and petroleum department bending over backwards as always to facilitate investment, and its geology still highly regarded”. The State is highly regarded for providing precompetitive data, bipartisanship and stability in supporting the industry, so it’s certainly a safe place to operate. However little progress seems to be occurring in terms of its challenges. Land access, infrastructure, taxation and skills and labour still weigh on the minds of investors and are hindering project investment and development, with the added technical and economic challenges of accessing deposits deep under cover adding to this mix. Land access concerns arise over multiple users
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deposits, efforts by the State government to encourage innovation excellence have been increasing. Bodies such as the Deep Exploration Technologies CRC, based in South Australia, are discovering cheaper technologies such as coil-tubing with real-time data sensors to address this issue. Dr Heithersay says the research and mining service capabilities of South Australia are a unique advantage and as well as providing solutions to the technical challenges in the State, could well establish Adelaide as a global centre for mining excellence. “We have a lot of natural advantages including a very high ratio of mining service companies, a great city to live in and the university students to back it up. The notion of being a national hub of research and excellence is a realistic one,” he says. Always the elephant in the room, infrastructure remains a key issue for the State’s mineral exploration future. Improvements in mineral development clusters of power, water, rail, road, and port developments will enable projects that are marginally economical due to the demands of providing this infrastructure, to cross the line over to attractive investment prospects. Although lack of resolution on the infrastructure issue seems to be a never ending story in South Australia, Dr Heithersay believes that is about to change. He says the regional mining and infrastructure planning project (led by Deloitte) as a result of the RESIC 2011 Infrastructure Demand Study, is due to be completed very soon and will provide concrete recommendations. “The Federal Government invested $1.5 million in this study, and it’s provided us with a complete picture of what’s coming up in the next few years,” he says. “The report shines a light on South Australia’s potential – including 100 mtpa of additional iron ore exports - and will include clear business
“South Australia is a highly prospective state for mineral development “ cases for infrastructure development to support project needs based on real and verified data and costings.” Upon completion of the study, the State government will make recommendations for port, power and water, both to companies and the Federal government through Infrastructure Australia. Taxation is viewed as another deterrent to investment in South Australia, however the State is competitive with the rest of the nation, particularly through the recent introduction of the new mine royalty rate of 2% for the first 5 years. Fraser survey results for this category include Federal taxation policies, and the introduction of the RSPT and MRRT had a profound effect on all Australian jurisdictions in recent years. In Australia, federal corporate taxes combined with additional taxes on the resource can see the mining industry’s effective tax rate hit a whopping 45% - larger than any other industry in the nation. South Australia is a highly prospective state for mineral development and few question the government’s pro-active support over recent decades in fostering this vital industry. However issues surrounding increasing activity on agricultural land, complicated legislation and sector growth highlighting an urgent need for infrastructure, are amongst other challenges combining with global factors to dampen the investment attractiveness of our State. “We might be number one in Australia, but not number one in a global context,” Dr Heithersay says. “And that’s the challenge going forward.”
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South Australian Chamber of Mines
and stakeholders in the land. Recent conflicts between exploration and agricultural land use have highlighted the need for government legislation and regulation to be crystal clear on the rights of those who own the land and those with the right to explore under it.
of DMITRE, agrees the issue is a ‘three leg dog’, involving communities, industry and government and says part of the PACE program includes funding to beef up governments capacity to deal with community issues in a proactive way.
Criticisms of the current processes include a view that the government is fence sitting when it comes to exploration access to agricultural land.
“We can see clearly by looking at the interstate coal seam gas issues what happens when it goes wrong,” he says.
One exploration company described a case where they needed to purchase land at the early exploration stage in order to gain access, commenting: “There needs to be some real way the State balances income from the land with income from a new land use, and if this stacks up, then provide a process to allow positive access.” Others say legislated provisions for compensation at realistic levels based on modifying factors would be a welcome mechanism to help resolve some of these issues. Some feel the government lacks experience with activist groups and should be doing more, including publicly correcting inaccurate statements designed to build unnecessary fears in the community. Dr Paul Heithersay, Deputy Chief Executive 72
“We all need to be smarter and more open for discussion than we currently are.” Jason Kuchel, Chief Executive of SACOME, says industry bodies play a role in supporting companies with community engagement, such as through SACOME’s Code of Practice for Stakeholder and Community Engagement and Code of Conduct for Mineral & Energy Explorers in accessing rural land, and stresses the need for land access issues to be addressed to ensure investment is not stifled. “Misinformation in the media, anti-mining groups and certain politicians thrive on spreading fear campaigns that promote an unnecessary and damaging ‘farmers versus miners’ situation that could be avoided if people had a clearer understanding of the way the industry operates.” The duplication of environmental approvals is also seen as important to improve industry
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growth and investment attraction through improving approvals times. Steve Brown, Chief Operating Officer at Eyre Iron cites the company’s Port Spencer approvals as an example. ”We had State approval for the marine side of our port and then were landed with additional requirements from the Federal government – this cost us one year’s additional work, not to mention considerable funds,” he says. Generally though, mining approval times in the State are considered excellent in comparison to the rest of the country. However the system is not consistent and while many companies comment that turnaround times are fast, others report long delays. Nicole Galloway Warland, Geology Manager at Phoenix Copper and Chair of SACOME’s Exploration Committee, says: “I know from my involvement with the SACOME Exploration Committee that many companies have reported negative experiences, especially lengthy delays.” South Australia’s case management system and government approvals process is recognised as leading practice, winning praise regularly from studies including the Mineral Council of Australia’s recent approvals scorecard and Resource Stocks risk survey, both rating the State top nationally for approvals. Dr Heithersay says there are numerous examples in South Australia where the system has worked well and efficiently and other states are modelling their own processes on South Australia’s one stop shop approach. “However there is always room for improvement,” he admits. Tony Belperio, Executive Director Business Development at Minotaur Exploration, a junior exploration company, says although DMITRE led the pack in pro-active exploration attraction policies 10-12 years ago, important improvements are needed now – particularly in regards to encouraging greenfields exploration.
“I see the problems as being due to an inability of the regulatory system to differentiate between exploration and resource definition/ feasibility work,” he says. “The mining act needs a simple section on exploration with a clear code of practice and minimal prescriptive regulations that is separate to the more onerous requirements for resource definition, feasibility and mine development.” Many of the challenges of mineral exploration and investment attraction are felt strongest by the junior sector, who account for two-thirds of the mineral resource companies listed on the ASX. They dominate minerals exploration in the early stages and shoulder the greatest burden in greenfield exploration. Due to their smaller size and exposure to the initial stages of exploration, they can be early victims of volatile and skittish markets. An investigation by the Standing Council on Energy and Resources (SCER) recently identified an increasing reliance on the junior sector. The SCER report concluded, “There is a strong argument that governments should foster and support this sector…as [they] are critical to the discoveries of the future”. South Australia can proudly claim to have achieved two of the key recommendations by the Victorian Government’s investigation into Greenfield exploration and the SCER report: a wealth of accessible pre-competitive geosciences data, and co-funding government initiatives through the PACE program. In order to keep up the necessary investment levels, the government’s continued support of successful programs like PACE is essential. Dr Heithersay has overseen PACE since its inception and has even higher hopes for investment into the sector. “We have mineral exploration expenditure currently around the high two to $300 million mark,” he says. “I’d like to see that increase to around $600 million.” With the technicalities and costs constraining the level of drilling that can be conducted on many of South Australia’s deep mineral 73
CARDNO Breaking Out of Poverty Through Irrigation Most of Cambodia’s rural poor are dependent on agriculture as a vital source of income. While water is relatively abundant in Cambodia, farmers are inhibited by a lack of reliable access to water resources. This affects their ability to produce crops and generate a consistent, predictable income.
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CAVAC 1: Simple technology, such as a water pump, has the ability to markedly improve a farmer’s livelihood
CAVAC has built and rehabilitated 7 irrigation canals this year. 8 more are planned in 2013, and up to 25 will be completed before the project closes. Contemporary agriculture techniques and technologies have the ability to improve production and may provide opportunities for enhanced access to irrigation. However, for most low-income farmers with smaller plots of land, these solutions are typically not available. It is estimated that 70% of Cambodia’s rural population is dependent on agriculture, with households commonly owning less than two hectares, or acres, of land. Given this, Cambodian land owners must extract as much as possible from their limited land area to lift them out of poverty. The Cambodia Agricultural Value Chain Program (CAVAC) aims to improve farmer incomes in the rice-based farming system of Cambodia by increasing the value of agricultural production. It is an AusAID program implemented by Cardno, working in partnership with the Ministry of Agriculture, Forestry and Fisheries and the Ministry of Water Resources and Meteorology. CAVAC aims to stimulate sustainable and systemic change in the farming systems on which smallholder farmers depend, such as low-cost irrigation infrastructure, quality agricultural inputs and equipment,
and appropriate research and information. Most importantly, before intervening in these complex systems, CAVAC seeks to understand all of the issues. CAVAC’s expertise lies in examining complex market systems. CAVAC analyses the system considering existing financial and social incentives as well as historical and cultural norms and habits, roles and responsibilities, group dynamics, legal environments, and constraints and opportunities. This is followed by an assessment of the viability of investments looking at all their uncertainties. The program assesses what innovations are needed and how to facilitate the required changes through working with different market players. With this understanding, CAVAC judges the likelihood of sustainability, as well as the risks and potential value for money prior to any investment. CAVAC also assesses additional capacity required, introduction of innovations, and which players need incentives to change the way they operate. The socio-economic realities of irrigation in Cambodia are complex. Most farmers cultivate rice only in the wet season and too often famers’ rice crops have low yields. Farmers have the ability to gain high yields during the dry months from December to May; however, most farmers have no access to irrigation to plant and harvest a second dry season 75
Cardno
CAVAC 2: Rural women harvesting rice on a CAVAC constructed canal crop. CAVAC, in partnership with the Ministry of Water Resources and Meteorology, has decided to invest in the construction of river run-off irrigation canals, which provide a greater opportunity to promote sustainable, systemic changes in Cambodia’s rice-based farming process. This is due to the fact that: • Canals present opportunities to provide year round access to water, allowing for doubleor triple-cropping; • Canals may have a lower cost to build, rehabilitate and maintain per hectare, or acre; • Most reservoirs only provide water for single-cropping and the net revenues do not allow farmers to pay for the full costs of operational management; and • Run-off river schemes provide for multiplecropping with higher net revenues, allowing farmers to involve the private sector more actively. These partnerships may include actors such as private water sellers that can contribute to the costs for operational management. Taking this into consideration, there are many challenges that CAVAC must address to create sustainable irrigation systems in Cambodia. CAVAC’s research has revealed that most farmers using canal systems avoid paying water fees in the wet season, and many of the 76
functioning reservoir schemes do not have enough water in the dry season to serve more than 15 to 20% of the farmers. Hence, with only 15 to 20% of the farmers using water in the dry season, there are not sufficient numbers to cover operational and maintenance costs. Further, farmers’ ownership through Farmer Water User Committees (FWUCs) is an essential element in a well-functioning irrigation scheme, but to date in Cambodia, these have been largely unsustainable. Sustainability is often hampered by the widely considered notion that irrigation is a public good by rural communities and is seen as something which the government should provide. This reliance on the government and donors reduces the likelihood of sustainability as the reality of the situation is that farmers need to pay water fees for ongoing operations and maintenance requirements. To ensure sustainability, CAVAC supports entrepreneurs and enterprises that regularly interact with irrigation markets, as these stakeholders in particular will have an incentive to ensure that the canal with be maintained after the program has been finalised. Therefore, during the process of developing an irrigation infrastructure, CAVAC works closely with all concerned stakeholders, including farmers, local government authorities (district, commune and village), local businesses and
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CAVAC has observed that as a result of program work, more land is cultivated; farmers double-crop and cultivate higher yields; water access is more reliable; local traders interact more regularly in the irrigation market; and the farmers make more money. the Provincial Department for Water Resources and Meteorology (PDoWRAM). CAVAC has a team of 18 experts, employed to design and supervise construction, as well as establish systems for operation and maintenance, of between four and six schemes each year. In close collaboration with the Provincial Government departments, CAVAC first assesses if investments make sense from an engineering, agricultural, and economic point of view. If a scheme is assessed as commercially viable, CAVAC then identifies the possible stakeholders in each scheme and outlines what their roles and responsibilities will be and what incentives and commitments they will have to fulfil. As CAVAC often enters into relationships willing to share the cost of interventions, a costsharing arrangement is then established with the farmers and the relevant local government departments. CAVAC pays for the construction of the scheme, and farmers voluntarily contribute the land required for construction; in many cases, farmers or water sellers may also construct secondary canals. In some cases, CAVAC may even go a step further by sharing the costs for the construction of the canals with the local community and private water sellers. Cost-sharing is an important element of local ownership for the scheme, and helps change the perception that irrigation is a public good. With support from CAVAC, specialists from the PDoWRAM help the farmers set up FWUCs and provide capacity building training as needed. FWUCs are then supported in their new role as managers of their scheme. This process often requires support provided over a number of years in order to ensure sustainability. CAVAC’s approach is relatively simple. The
program aims to reduce poverty for the greatest number of people, while providing the best value for money for AusAID and the Royal Government of Cambodia. This can only be done through supporting long-lasting, systemic changes in Cambodia. By 2016, it is expected that approximately AUD$40M of additional net income will be generated annually as a result of interventions by the programme, benefitting 160,000 small farmers within the target provinces, and an additional 70,000 in other provinces. This exceeds the program’s preliminary projection of benefitting 130,000 farmers. Further, using a ten-year time horizon from the start of the programme in 2010, the benefitto-cost value for money ratio of CAVAC is approximately seven to one. The real challenge lies supporting sustainable systemic change; in canals this is initial the organisational aspect of irrigation schemes dealing with various stakeholders holding different expectations, incentives and interests. Understanding these perspectives will remain the main focus for the CAVAC irrigation and water management component until the end of the program. CAVAC is committed to ensuring that sustainable solutions are executed effectively, to sustain CAVAC irrigation investments now and into the future.
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Ben Miqueu is a Consultant for Cardno’s Emerging Markets AP office, working out of Melbourne, Australia. Copyright Cardno Connect Magazine Edition 12, May 2013. For further information please contact: Carolina Ravinskas - Communications & Knowledge Management Specialist at Cardno Emerging Markets USA, Ltd. E: Carolina.Ravinskas@cardno.com 77
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ATSE SPECIAL
REPORT on
WATER
ATSE: Special Report on Water
DPR CAN SAFELY SUPPLY
DRINKING WATER
By Stuart Khan
Potential benefits of DPR, relative to indirect potable reuse (IPR), include significantly lower energy requirements, construction costs, and operational costs. The Australian Water Recycling Centre of Excellence recently funded a study, undertaken by the Australian Academy of Technological Sciences and Engineering (ATSE) regarding the future of potable reuse in Australia. The report from this study focuses on direct potable reuse (DPR) systems, where treated water is returned immediately to the drinking water supply system. This differs from indirect potable reuse (IPR), where water is pumped into ‘environmental buffers’ such as rivers, lakes or aquifers for temporary storage. There are no direct potable reuse (DPR) water projects operating in Australia and no specific proposals for their development. However, ongoing interest in sustainable water supply systems, advances in the science and engineering of water treatment, and recent international developments in DPR have prompted consideration of DPR as a potential future component of Australian water supply systems. Potential benefits of DPR, relative to indirect potable reuse (IPR), are likely to be highly casespecific. However, they include significantly lower energy requirements, construction costs, and operational costs. DPR can also provide an opportunity to allow potable reuse in situations where a suitable environmental buffer is not available for IPR. Potential obstacles or disadvantages for DPR, relative to IPR, are primarily related to public perception and acceptance. Importantly, the ATSE Report Drinking Water through Recycling: The benefits and costs of supplying direct to the distribution system 80
concluded that the scientific and engineering hurdles to implementing safe and reliable DPR are manageable. However, a number of technical issues relating to the functions of an environmental buffer would need to be addressed to the satisfaction of the community generally. Key among these issues is the need to ensure consistent and assured levels of reliability. It is apparent that existing frameworks for the planning, approval, management, and oversight of drinking water quality and recycled water in Australia could accommodate a well-designed and operated DPR project as a water resource management option. In addition, there are a number of advanced risk assessment and risk management tools which can be considered for the implementation of DPR projects, relative to more established or conventional water sources. The key findings derived from this work include: The science, technology and engineering associated with DPR have been rapidly advancing in recent decades. DPR is growing internationally and will be an expanding part of global drinking water supply in the decades ahead. DPR is technically feasible and can safely supply potable water directly into the water distribution system, but advanced water treatment plants are complex and need to be designed correctly and operated effectively with appropriate oversight. Current Australian regulatory arrangements can already accommodate soundly designed and operated DPR systems. High levels of expertise and workforce training within the Australian water industry is critical.
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This must be supported by mechanisms to ensure provider compliance with requirements only to use appropriately skilled operators and managers in their water treatment facilities. This will be no less important for any future DPR implementation and to maintain high levels of safety with current drinking water supply systems.
implementation and acceptance of any DPR proposal in Australia. Widespread media attention accompanied the successful launch of the report in October. This included segments on television news, broad radio coverage and articles in most of the capital city newspapers. This coverage was refreshingly intelligent and positive.
Some members of the community are concerned about the prospect of DPR. Planning, decision-making, and post-implementation management processes should acknowledge and respond to these concerns. Public access to information and decision-making processes needs to be facilitated. Individual recycling schemes, as with other supply options, will present unique opportunities and risks that need to be systematically identified and managed. In ATSE’s view, the Australian Guidelines for Water Recycling provide an appropriate framework for managing community safety and guiding responsible decision-making.
The headline in the Fairfax media was “Drinking recycled effluent ‘inevitable’ in smarter Australia” and the article was accompanied by a readers’ poll on the question “Would you drink recycled effluent?” Of the 1766 respondents, 63% voted “yes”.
Ultimately, water supply decision-making should be based on an objective assessment of available water supply options to identify the most economically, environmentally and socially sustainable solution. While optimum solutions will continue to be case-specific, ATSE is convinced of the technical feasibility and safety of drinking water supply through DPR when properly managed. ATSE considers there may be considerable environmental, economic, and community benefits of supplying highly treated recycled water direct to drinking water distribution systems in appropriate circumstances. ATSE therefore concludes that DPR should be considered on its merits – taking all factors into account – among the range of available water supply options for Australian towns and cities. Furthermore, ATSE is concerned that DPR has been pre-emptively excluded from consideration in some jurisdictions in the past, and these decisions should be reviewed. Governments, community leaders, water utilities, scientists, engineers and other experts will need to take leadership roles to foster the
While there is still more work to be done, it is apparent that the Australian community has come a long way in beginning to appreciate the significant potential advantages of potable water reuse, and coming to terms with some of the natural psychological barriers. An objective of this report was to identify key areas of change required of Australian institutions and communities in order to facilitate taking full advantage of the potential offered by DPR. In order to do so, the report provides a series of recommendations regarding necessary improvements in regulation, oversight, research and development, and community engagement. The full report is available from the ATSE website: www.atse.org.au
Dr Stuart Khan is a Senior Lecturer for the School of Civil and Environmental Engineering, University of NSW, and an active water researcher with a focus on chemical contaminants in drinking water, wastewater and recycled water. He is the leader of the Trace Chemical Contaminants research stream at the UNSW Water Research Centre. He is a member of the Water Quality Advisory Committee (WQAC) to the National Health and Medical Research Council and led the revision of all aspects involving organic chemical contaminants in the 2011 revision of the Australian Drinking Water Guidelines. Dr Khan has also made significant contributions to other Australian water quality guidelines, particularly the National Guidelines for Water Recycling.
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ATSE: Special Report on Water
‘DIRECT’ MAY BE THE BEST WAY TO GO We are increasingly recognising that water supply will not keep up with demand for much longer – at least not if we only use it once. By Jurg Keller Water is undoubtedly one of our most important resources, but we take it for granted. We expect it to run, nice and clear, from the tap then ‘disappear’ again from the sink or shower. But this major achievement of modern life is not without its limitations and challenges. Through population growth, urbanisation and the growing variability of global climates, we are increasingly recognising that supply will not keep up with demand for much longer – at least not if we only use it once. Therefore water recycling has to be a key consideration in the diversity of supplies into the future, together with alternative water sources such as seawater or stormwater (urban runoff). Many cities have recognised this in recent years. Water recycling systems have helped to address the supply shortages and built up valuable experience and public confidence. The Singaporean ‘Four Taps’ approach is probably the best-known example of integrating various water sources from dams, seawater desalination, water recycling and stormwater harvesting into their long-term supply strategy. The recycling of used water (aka wastewater) is by no means an obvious or ‘easy to swallow’ proposition, challenging the public and water professionals across the world. The very foundation of our remarkable improvements in public health and life expectancies over the past century or more has been the strict separation of clean drinking water from polluted wastewater – and now we are starting to connect the two systems deliberately, and calling this “progress”. It has been happening for quite a long time. There are numerous examples, also in Australia, where the water supplies of downstream cities 82
along a river contain significant fractions of treated wastewater discharged from upstream populations. Despite its somewhat ad-hoc nature, this unintentional water recycling has actually not caused serious water quality or human health incidences despite the widespread occurrence, particularly in highly populated areas such as central Europe or coastal areas in the US. The key to this success is the fact that we have developed an excellent understanding of the important water quality criteria and how to maintain them, which has translated into well-performing treatment operations at both wastewater discharge and water intake. In fact, the performance of our modern wastewater treatment processes has been pushed up continuously over the past decades mainly to ensure environmental protection of downstream waterways, estuaries and bays. Given the considerable investments into these processes, the question can be raised how we could make better use of the treated water than simply discharging it into the environment. AWT technologies The development of intentional potable water recycling in recent years has been enabled by the application of Advanced Water Treatment (AWT) technologies – mainly an extension of current water treatment approaches to include a multi-barrier train of different treatment processes, including membranes, activated carbon filtration and advanced oxidation processes. These AWT plants are typically located directly after the existing wastewater treatment plants and generate a water quality that is at least comparable to, and in many cases far
Q4 2014 | InternationalResourceForum.com
better than, the ‘natural’ sources we have for our drinking water supplies. Particularly in catchment areas with significant human or agricultural activities, or after major natural events such as floods or bushfires, the raw water quality running into our dams is often significantly compromised and difficult to control. Despite these extraordinary advances in the treatment technologies used in the AWT plants, most potable reuse systems still include an “environmental buffer”, such as an aquifer, dam or a river/wetland. These buffers in the Indirect Potable Reuse (IPR) schemes provide time to react to potential incidences, may achieve some further treatment and potentially create a psychologically important separation of wastewater and water systems. But are environmental buffers that important? The recycled water going into these buffers is usually far better quality than the “natural” water there already. And with the extensive on-line monitoring and control systems in modern AWT plants, there is no real need for further reaction time. The control systems simply shut down a process as soon as certain ‘critical control point’ parameters are not met, therefore stopping the entire recycled water production. It is therefore time to consider “Direct Potable Reuse” (DPR) – without the environmental buffers – in securing diverse water supply options for our growing populations, both in urban and regional areas. This is also the conclusion of the recent ATSE report that considered all aspects of DPR, including cost and energy/material requirements relative to alternative water supply options. DPR was often one of the best-ranked options for alternative water supplies, even compared to non-potable (dual pipe) recycling systems. Significant advantage Such direct potable reuse systems have a significant advantage over the indirect option in that they provide more flexibility in the overall water supply strategy, even in situations where the traditional surface water supplies may be compromised – for example, during floods
or when there are significant water quality incidents in the dams, due to algal or bacterial outbreaks, the supply of recycled water to the dam will not alleviate any possible supply shortages. Conversely, the direct recycling of highly treated water, either to the water treatment plant or directly into the network, will ensure a reliable and safe supply even in such challenging situations. This situation is not at all ‘hypothetical’ – as was experienced during the 2011 and 2013 floods in Brisbane. In both cases the poor raw water quality seriously affected the water treatment process capacities and only the supply from the desalination plant, and from other unaffected plants connected to the network, ensured an uninterrupted supply to consumers. The introduction of direct recycled water could further enhance the supply security in such cases and also reduce the pressure on the water treatment plants to get back to full capacity as quickly as possible. This in turn will improve the overall reliability and safety of our water supplies especially in such challenging situations. DPR requires us to break the age-old tradition of not connecting wastewater and water systems, but with a careful and conscientious implementation strategy, it will provide at least the same (and possibly even better) public health protection as current drinking water systems do. We may still have to deal with the psychological impacts, but humans have successfully adapted to far greater changes in the past. Professor Jurg Keller FTSE is IWA Fellow, Director of the Advanced Water Management Centre at The University of Queensland and Professor in the School of Chemical Engineering. He is a member of the Executive of the CRC for Water Sensitive Cities and has more than 20 years’ experience in water industry research, particularly in biological wastewater treatment, environmental biotechnology, microbial fuel cells and resource recovery concepts. Republished courtesy of ATSE Focus magazine.
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Enhancing Australia’s prosperity through technological innovation The Australian Academy of Technological Sciences and Engineering (ATSE) ATSE is made up of some of Australia’s leading thinkers in technology and engineering. One of Australia’s four Learned Academies, it’s an eclectic group, drawn from academia, government, industry and research, with a single objective in mind – to apply technology in smart, strategic ways for our social, environmental and economic benefit. To achieve that goal, ATSE has formed a variety of expert, independent forums for discussion and action – platforms to move debate and public policy on issues concerning Australia’s future. These focus on energy, water, health, education, built environment and innovation – and the international collaboration necessary to ensure that Australia is abreast of world trends. It’s an open, transparent approach – one that government, industry and community leaders can trust for technology-led solutions to national and global challenges. Each year, the Australian Government recognises the importance of the work we do by awarding the Academy an establishment grant to help with: n Fostering research and scholarship in Australia’s technological sciences and engineering; n Providing and conducting administrative support, workshops, forums and similar events to enable the Academy and its Fellows to contribute on important national issues; n Managing the development and execution of our programs; and n Supporting relationships with international communities.
The Australian Academy of Technological Sciences and Engineering (ATSE) 1/1 Bowen Crescent Melbourne Victoria 3004 Australia +613/ (03) 9864 0900 info@atse.org.au www.atse.org.au
Q4 2014 | InternationalResourceForum.com
Where Does AUSTRALIA Stand on Drinking Water Recycling? By
Ian Law
Water professionals and researchers have shown that direct potable reuse is a safe and sustainable water supply option that must be considered in the development of future water supply portfolios. Water recycling is playing a significant role in the diversification of water supplies in many countries of the world – including Australia and we have seen tremendous growth in its application over the last few years. As we strive to develop sustainable supplies for our cities into the future, there is increasing pressure to consider all options and in particular, the potable reuse (PR) option. Planned Indirect Potable Reuse (IPR) is the term given to a scheme in which the water produced by an advanced water treatment plant (AWTP) is first discharged into an ‘environmental buffer’, surface storage reservoir or an underground aquifer, before being again treated in a water treatment plant and then conveyed to communities. Examples of such applications can be found in the US, South Africa and Europe, with the oldest one being that at the Upper Occoquan Sewerage Authority (UOSA) plant in Virginia, US, that was commissioned in 1974. If one then adds the incidences of unplanned or defacto potable reuse – whereby one community discharges its treated wastewaters into a river that then serves as a water supply for a downstream community – then there are many more examples of potable reuse occurring around the world, including in Australia. There is now a growing realisation that a more sustainable potable reuse option is to discharge the highly treated water from the AWTP directly to the drinking water distribution system – the Direct Potable Reuse (DPR) option. This concept is not new. The first DPR scheme in the world is located in Windhoek, Namibia, where a plant was commissioned in 1968 – 45 years ago.
Potable reuse has recently been enshrined in legislation in California. A Bill was passed by the Californian State Senate in October 2010 instructing that State’s Department of Public Health to complete indirect potable reuse regulations and evaluate direct potable reuse. California thus views potable reuse as a viable option. International developments 1968 – 2000: As mentioned above the in 1968. The drivers for the commissioning of the world’s first DPR plant in Namibia were: • Low rainfall, high evaporation rates and low runoff; • All surface sources within 500km had been exploited; • Further sources were expensive and controversial; • Groundwater usage had been maximised; Demand management had already been implemented; so there was no other feasible option but water reclamation These drivers are similar to those now being faced by cities and towns of the US, South Africa and India – as well as Western Australia. The Windhoek plant has undergone four technology changes since 1968, with the most recent being in 2002. 2000 - Present: There was very little interest in the DPR option over the period 1968 to 2000 but prolonged drought and climate change concerns in many parts of the world, together with the search for sustainable solutions for future water supplies, prompted DPR to be included in many evaluations. 85
ATSE: Special Report on Water
May 2008 for the Augmentation of Drinking Water Supplies with water reclaimed from municipal effluents – the Potable Reuse option – with these guidelines being produced by an eminently qualified working party of scientists and health regulators, subjected to international and national refereeing and subsequently accepted by the then Environment Protection and Heritage Council, the National Health and Medical Research Council and the then Natural Resource Management Ministerial Council (EPHC 2009).
The New Goreangab water reclamation plant, Windhoek, Namibia Many DPR schemes now being planned and in many cases implemented: United States • Cloudcroft, New Mexico (commissioned 2007)Aurora, Colorado (2010) • Big Spring, Texas (2013); • Witchita Falls, Texas (commissioning due 2014); • Brownwood, Texas (regulatory approval January 2013); and • San Diego, California (has obtained approval for an IPR scheme but is conducting research to determine feasibility of DPR by end of 2016). South Africa • Beaufort West, Western Cape (commissioned 2011); • Durban, Kwazula Natal (under consideration after feasibility studies completed); • Hermanus, Western Cape (construction due to commence); and • Cape Town (tenders submitted in July 2013). India • Dehli (182ML/d - tenders called in 2014/15); • Bengaluru (140ML/d – tenders called in 2014/15); and • Others in planning/evaluation stage. Australia’s stance? Australia has had Guidelines in place since 86
The Water Services Association of Australia (WSAA), representing Australia’s major water utilities, in its Occasional Paper 25 of July 2010 (WSAA 2010) stressed the need for a diversified portfolio of water supply options to meet the future water needs of an increased population. It noted “It is expected that the development of a diverse portfolio of water supply options including recycled water for non-drinking and drinking purposes, desalination, rural to urban water trading, rainwater tanks, groundwater, stormwater and dams will be required to mitigate the risks associated with population growth and climate change. There should not be any blocks to the different sources of supply and each case should be examined on its merits.” Further, WSAA noted “It is imperative that there are no policy blocks in place that would preclude a source of water being considered for inclusion in a diverse portfolio of water supply options.” The National Water Commission also strongly supports consideration of water recycling on its merits as an option to be reviewed when determining future water supply sources, and notes that “water recycling – including for drinking purposes – can provide a significantly greater proportion of Australia’s future urban water supplies. The Commission recognises there are intrinsic risks associated with recycled water. However, in our judgement, advances in science and improved regulatory arrangements mean that such risks can now be managed to levels of safety that are equivalent with other supply sources” (NWC 2010).
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Despite these opinions stressing the importance of considering all water supply options, South Australia and Victoria still have policies in place precluding the potable reuse option from consideration, despite the fact that Queensland and Western Australia have seen merit in giving the option due consideration in recent times. It is suggested that these policies are driven by a lack of ‘political will’ which in turn results from advice based on sensationalised media reports and/or perceptions of community concerns. This lack of ‘political will’ is causing a growing frustration in the industry as it strives to ensure that future water supplies are developed on a sustainable basis, very much as recommended by WSAA and the NWC.
a National Demonstration, Education and Engagement Program that supports successful public engagement and addresses stakeholder concerns through the provision of contemporary scientific information on the urban water cycle and potable reuse. It will involve leading edge methods of communication to overcome known social barriers to acceptance and adoption. This project also covers research into governance and pricing practices with the aim being to identify the impediments to investment in potable recycling, compared to alternative water supplies. References
Water professionals and researchers in Australia and elsewhere have shown that potable reuse, and indeed direct potable reuse, is a safe and sustainable water supply option that must be considered in the development of future water supply portfolios.
EPHC (2009) Australian Guidelines for Water Recycling. Environment Protection and Heritage Council, the National Health and Medical Research Council and the Natural Resource Management Ministerial Council. http://www.ephc.gov.au/ taxonomy/term/39.
This divide between water supply reality and ‘political will’ must be removed if cost effective and sustainable water supplies into the future are to be realised.
NWC (2010) Urban Water Recycling, http://www. nwc.gov.au/__data/assets/pdf_file/0004/9724/ Recycled_water_position_statement_23.11.101.pdf
The way forward Given that ‘political will’ is driven by perceptions of community attitudes – as evidenced by the Western Corridor decision in Queensland – there would appear to be a clear need to focus on the community at large as, if it accepts the advantages of including potable reuse into the mix of options, the politicians will surely follow. It was Mahatma Ghandi who said “If the people lead, the leaders will follow”. The Australian Water Recycling Centre of Excellence (AWRCE) has taken up this challenge and is funding a project that will address one of its four Goals, Goal 3 – overcoming the barriers to reclaimed water being viewed as an acceptable ‘alternative water’ for augmenting drinking water supplies. This project has the objective of developing
WSAA (2010) Implications of population growth in Australia on urban water resources. WSAA Occasional Paper 25, Water Services Association of Australia, Melbourne, 5 July 2010, https://www. wsaa.asn.au/FreeDownloads/Occasional%20 Papers/Implications%20of%20population%20 growth%20in%20Australia%20on%20urban%20 water%20resources.pdf
Mr Ian Law is a Chemical Engineer with a Masters Degree in Public Health Engineering from the University of Cape Town in South Africa who is an Adjunct Professor at the University of Queensland. He was, until March 2003, CH2M HILL’s Technology Director for South East Asia, Australia, and New Zealand and has since started his own business and trades as IBL Solutions. He has more than 30 years’ experience in advanced wastewater and reuse projects in Southern Africa, SE Asia and Australia. Mr Law currently serves on the Research Advisory Committees for the Australian Water Recycling Centre of Excellence and the Urban Water Security Research Alliance.
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