Havieron – the next great development

The Havieron gold project site in Western Australia.

AN OPPORTUNE TIME FOR HAVIERON

The Havieron joint venture project in Western Australia between Newcrest Mining and Greatland Gold is shaping up to be a frontrunner in Australia’s gold industry.

Gold and copper mining in Australia is showing no signs of slowing down with demand for both metals strong and exploration activity around the country peaking.

The Havieron gold-copper project in the highly prospective Paterson Province of Western Australia, adjacent to Newcrest Mining’s Telfer mine, is shaping up as one of the standout future operations that will start production in Australia this decade.

London-based explorer Greatland Gold discovered Havieron in 2018, setting the scene for a $US65 million ($86.8 million) farm-in agreement with Newcrest in 2019, followed by a joint venture (JV) being formed in November 2020.

The partnership has delivered an initial inferred resource of 3.4 million ounces of gold and 160,000 tonnes of copper from the site’s South East Crescent zone.

In October, Newcrest delivered the stage one pre-feasibility study (PFS), which focusses on the South East Crescent zone, adding more promise that Havieron will enter first production in the 2024 financial year.

By completing the stage one PFS, Newcrest is entitled to 70 per cent of the JV, which is up from its initial 60 per cent interest.

With Newcrest and Greatland now entering the stage two PFS, there is already strong potential for Havieron to be developed into an operation that delivers a mining and milling rate of more than three million tonnes per annum.

“The stage one PFS is based on the currently defined indicated mineral resource located in the upper sections of the South East Crescent, which is a small portion of the existing resource inventory and excludes inferred mineral resources,” A Newcrest spokesperson tells Australian Resources & Investment.

“The feasibility study scope is expected to include the completion of a further infill drilling program by the end of calendar year 2021 to increase the indicated mineral resource base for potential ore reserve expansion, and completion of the growth drill program immediately below the Crescent Zone for potential mineral resource expansion.

“Further opportunities include an enhanced development option which will consider increasing mining and milling rates to three million tonnes per annum or higher compared to the two million tonnes per annum assumption upon which the PFS has been based.”

Newcrest flagged in August it is aiming to find more high-grade gold deposits around the Havieron area, including the Northern and Eastern Breccia targets, which contain open high-grade mineralisation.

Both Newcrest and Greatland’s exploration foothold in the Paterson is shown through the Juri JV, an agreement which entered stage two in October.

Newcrest’s total investment at Juri could grow from $3 million to $20 million, which would see the project become the next Havieron as exploration advances next year.

According to Greatland chief executive

officer Shaun Day, Havieron will be leveraged by existing infrastructure at Newcrest’s Telfer gold mine, which is driven by low capital expenditure with a 27 per cent rate of return under the spot gold price.

“What’s driving that is this combination of low capex expenditure, which is provided by leveraging existing infrastructure of the Telfer mine combined with an extraordinarily low cost per ounce, where Greatland Gold would actually emerge as the second lowest cost gold producer on the planet at about $US643 an ounce, which would deliver a margin comfortably in excess of $US1000,” Day says.

The PFS also uncovered that Havieron will have 17 per cent of its revenues generated from copper production.

Copper supply is crucial to the world’s clean energy revolution with the commodity climbing to record high prices in 2021.

Newcrest managing director and chief executive officer Sandeep Biswas noted in September the company’s copper output is increasing in importance ahead of a spike in demand this decade.

The company hopes to deliver a higher copper output after producing a record 143,000 tonnes of the red metal in the 2020-21 financial year, delivering $US4.5 billion in revenue.

“I think the best gold mines or the best gold mining companies are those that contain copper as well,” Day says.

“With Havieron sitting at around 20 per cent copper, it’s an extraordinary opportunity for shareholders.

“I don’t think there’s a better way to play the EV (electric vehicle) and battery electrification thematic than with copper, so we’re really blessed of having the benefit of gold coupled with copper as well, so I think that’s one of the great strengths of Greatland.

“Particularly in the Australian context,

Aerial view of Havieron’s boxcut. it’s probably what differentiates us from a lot of our peers as very few have copper in their portfolio, so it does gives us a competitive advantage.”

Greatland has enjoyed its fair share of success on the London Stock Exchange (LSE) with its market capitalisation sitting at £693 million ($1.25 billion) in October.

The company has not ruled out a listing on the ASX in the future, but Day says it currently remains comfortable trading solely on the LSE.

The ‘elephant country’ of the Paterson Province puts Havieron not only in the company of Telfer, but also Rio Tinto’s Winu project in the north, which provides promising signs for how far the JV resource can grow.

“We have 50,000 metres of drilling that hasn’t been captured in the PFS and another 90,000 metres of drilling to June 2022,” Day continues.

“It’s a a huge volume of information that will come to the market in the next coming months and gives us an opportunity to build the resource.

“We have a huge amount of growth as we unlock the value of the bulk mine sitting, not just in that South East Crescent, which is a fraction of the orebody, but rather the broader zonation of Havieron.

“Looking at larger bulk mining methodology that not only takes advantage of the size of the Havieron orebody, but also takes of the availability of processing space at Telfer.”

With a feasibility study for Havieron on the horizon next year, Greatland and Newcrest will be gearing up to sustain Australia’s gold and copper output with a resource that holds eye-catching promise.

Through efficient collaboration in a prospective region, Havieron is on its way to becoming a monolith in Australian mining.

Havieron’s decline entrance.

Will Australia’s ‘technology, not taxes’ approach to lowemissions energy deliver net-zero target by 2050?

BY ALEXANDRA COLALILLO

Australia’s new Long Term Emissions Reduction Plan to deliver net-zero emissions by 2050 will rely on two trends: economies of scale to facilitate cheaper low-emissions energy production; and industry and consumers making the switch to an energy mix dominated by low-carbon sources.

A $20 billion investment in new technology by the Australian Government over the next decade may not be enough to precipitate at least $80 billion of total private and public investment in clean hydrogen, carbon capture and storage.

This plan, presented at the Conference of the Parties (COP26), is underpinned by the following principles: ‘technology, not taxes; expanded choices, not mandates; driving down the cost of new technologies; keeping energy prices down with affordable and reliable power; and being accountable for progress’.

These principles sound fair, but will this plan be fit for purpose to establish our nation as a leader in low emissions technologies, while simultaneously preserving existing industries, regions and jobs at risk?

There are three fundamental concerns: (a) the plan rules out taxes or a legislated mechanism to avoid costs on households, businesses and regions.

However, alternate plans to raise revenue in an effort to service new technology investment isn’t comprehensive; (b) while Australia intends to reduce emissions, it will continue to serve traditional markets that will ultimately dampen our ability to reach a netzero target, such as coal; and (c) the strategy behind protecting Australian jobs is granted through continuing to operate mines in these traditional markets with little consideration to ensure current skill sets are transferable to serve the energy transition of the future.

Australian Prime Minister Scott Morrison stated: “The plan will deliver results through technology, not taxes … it guarantees that we keep downward pressure on energy prices and secures reliable power. It will ensure Australia continues to serve traditional markets, while taking advantage of new economic opportunities.”

This objective seems challenging amid concerns that Australia’s energy policies are not integrated, nor coherent.

There is uncertainty that Australia’s electricity networks are not designed, governed and operated to tackle increases in electricity demand as we undergo a significant energy transformation in Australia.

Key elements absent from the plan are: specific measures to reduce emissions; estimates of their effectiveness and their impact on existing industry and employment; and measures to reduce such impacts. This leaves Australia’s plan open to criticism.

(A) TECHNOLOGY, NOT TAXES

Minister for Industry, Energy and Emissions Reduction, Angus Taylor, noted: “Our plan is built on a set of key principles; the most important being technology, not taxes ... we won’t introduce a carbon tax that drives Australian jobs overseas and punishes the most vulnerable in our community through higher prices for electricity and other essentials.”

How realistic is the net-zero emissions target if we continue to serve traditional markets that ultimately produce emissions?

The idea of an Australian green revolution depends on creating demand for a concept and a product in its infancy, while simultaneously soliciting support from the government.

The US Special Presidential Envoy for Climate, John Kerry, acknowledged that approximately 50 per cent of the “technology” required for net-zero doesn’t yet exist.

Therefore, $20 billion isn’t likely to fund critical technologies domestically, many of which require 15-20 years to come to fruition.

While the Australian Government has a plan to invest $20 billion into new technologies, such as carbon capture and storage and hydrogen production, where is future revenue coming from in the absence of a carbon tax? We are instead placing our reliance on future taxpayers and investors for support.

Andrew Forrest recently pledged to produce 15 million tonnes a year of green hydrogen by 2030 and announced that Fortescue Metals Group would no longer just extract and ship 180 million tonnes of iron ore. Instead, it would zero out its own carbon emissions and become a renewable energy powerhouse.

However, are Australian billionaires the solution to this environmental problem? Australia’s reliance on investors is a cause of concern if lower-profile investor confidence in

Australia’s emissions reduction plan was presented to the world at COP26.

Image: Fortescue Metals Group.

new technology dissipates.

Ultimately, if investors pull out and alternate government revenue streams dry up, there is a risk that Australia will be left with a large debt and a heavy burden on future taxpayers.

This is very possible given Australia’s incoherent energy strategy to achieve the 2050 goal. Instead, investors may turn to other countries whom they deem to have a clear plan to drive down emissions.

(B) WE’RE STILL SERVING TRADITIONAL MARKETS

Minister for Industry, Energy and Emissions Reduction, Angus Taylor, noted: Our plan “will not shut down coal or gas production, or require displacement of productive agricultural land.”

Australia is the world’s biggest exporter of coal and the resource is often cited as a cheap form of energy. However, the environmental impacts are considerable on air quality and the climate. In 2020-21, export revenue for thermal coal equated to $16 billion and $23 billion for metallurgical coal alone.

Given we rely on a large proportion of coal export revenue to serve the productive capacity of the Australian economy, a global decrease in coal demand will hit hard.

Countries globally drive their own agenda to reduce emissions and we can therefore speculate that future tariffs may be imposed on Australian exports of coal in an effort to support global environmental agendas.

For example, America is aiming to switch off its coal-fired power stations in 14 years which will contribute to a deteriorating coal market, driving down coal prices and ultimately placing pressure on coal producers.

Will the demand reduction stemming from the lack of popularity in coal be the catalyst to drive away production of unclean energy sources? This is a future consideration and if we are serious about net zero emissions, the federal government needs to determine how best to transition communities in coal regions towards other forms of energy export.

(C) PRESERVING EXISTING JOBS

Minister for Industry, Energy and Emissions Reduction, Angus Taylor, also noted: “Our plan continues the policies and initiatives that we have already put in place and that have proven to be successful, while preserving existing industries and jobs, and supporting regional Australia.”

The question is, how do we deliver on net zero emissions while preserving Australian jobs?

Preserving existing industries and jobs may be perceived as a short-term solution to a long-term problem. If industries and consumers globally intend to switch to low emissions technology, the forces of supply and demand will inevitably drive out traditional markets, such as coal. Given Australia is heavily reliant on our resources export revenue, this shift could be damaging.

Therefore, those employed within those markets will be unemployed unless there are strategies in place to train and retain our pool of skilled labour.

Around 1.2 million people are already on JobSeeker and Youth Allowance benefits payments, yet businesses and the NSW Premier are calling for more immigration due to skills shortages.

It is the responsibility of governments, businesses and the education sector to develop strategic and operational plans in an effort to preserve Australian jobs amid the new energy transition.

However, if we call upon our leaders to make Australia the world’s leading exporter of renewable energy by 2030, this could be one step in the right direction.

Fortescue is leading mining’s charge to cut emissions.

Alexandra Colalillo

Alexandra is an economist and manager at a multinational professional services firm in Western Australia. A key part of Alexandra’s role involves assisting global and mid-tier mining companies respond to risk, fluctuating economic conditions and building strategies to minimise financial and operational uncertainty. She also hosts her own economics podcast - ‘The Shady Economist’ – designed to break down topical Australian economics and geopolitics. Alexandra writes about the local, national, regional, and international economy as it relates to the mining and oil & gas sector.