ACI Num 1 2019 by Prime Creative Media

VOLUME 13 NUMBER 1 | 2019

Australian Resources & Investment GOLDEN TIMES

THE APPLICATION OF BLOCKCHAINS TO MINING

ALUMINIUM: 5 THINGS TO LOOK FOR IN 2019

TH E G RE AT

GOOD NEWS FOR COAL

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ISSN 2201-9960

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COPPER COMEBACK

AUSTRALIAN RESOURCES & INVESTMENT

W W W. AUST R ALI AN R E SO U R CE S ANDIN V E ST M EN T.CO M . AU

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CONTENTS

I N T H I S I S SU E

4 4

T H E F E AT H E R S T O N E R E P O R T

SX dominates world resources A sector IPOs, by Tony Featherstone

20 F E AT U R E D P R E S E N TAT I O N

20 Bernard Rowe, Managing Director, ioneer Ltd

F E AT U R E D

MINE DE VELOPMENT

hat’s driving demand for Australian W mining companies? by Andrew Thake, Mines and Money

26 Foundations of advanced

Analysis with Regina Meani

28 The application of blockchains to

Paladin primed for uranium recovery

Galileo sets its gaze on Fraser Range

racking the Trends, T by Steven Walsh, Deloitte

ithium is finite, but clean technology L relies on such non-renewable resources, by Parakram Pyakurel, Solent University

GOLD

36 2019 is gold’s year to shine,

by Gavin Wendt, MineLife Pty Ltd

38 Golden ambitions 40 Golden times, by Anthony Fensom 42 RNC to follow up Father’s Day Vein discovery

analytics projects to industry, by Edson Antonio, Vale

mining, by Dr Ali Soofastaei, Vale

31 31

ENVIRONMENT

utomated groundwater monitoring, A by Louise Pobjoy, CSIRO

34 A new radar level transmitter for the water-supply and sewage industry

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COPPER

46 Encounter making the most of its resources

48 Copper positions for a comeback, by Steve Freeth

50 Auroch Minerals stakes copper claim 52

rion Minerals has a lot more ore O to give

AUSTRALIAN RESOURCES & INVESTMENT

54 ZINC

54 Galvanised rebar, by Mary Helen

Yount, International Zinc Association

66 S T R AT E G I C M E TA L S

66 TNG Ltd hitting its Peake

58 High-grade zinc zone discovery from Peel Mining

60 B AU X I T E

60 Aluminium: five things to look for in

B AT T E R Y M E TA L S

68 Powering the future, by Anthony Fensom

‘Disruptive’ Altech ticking boxes

2019, by Laura Hindley, WoodMac

65 Metro Mining poised for expansion

74 74

C OA L

ood news for coal, by Ian G Macfarlane, Queensland Resources Council

78 Environmental Clean Technologies on the path to low-emission steel in India

80 URANIUM

80 Vimy Resources poised for big uranium return

FOCUS

THE GREAT

Copper COMEBACK

AN IN-DEPTH LOOK AT COPPER’S RESURGENCE AND WHAT ARE PREDICTED TO BE BETTER DAYS FOR THE RED METAL

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T H E F E AT H E R S T O N E R E P O R T

THE

Featherstone REPORT

ASX DOMINATES WORLD RESOURCES SECTOR IPOS But mining floats struggle in the face of waning interest from investors. BY TONY FEATHER STONE

eadline figures show that 2018 was the best year in more than a decade for the ASX initial public offerings (IPO) market. But conditions for smaller floats, particularly junior explorers, remain tough, and a spike in market volatility could jam the IPO window shut for resources companies. About $8.5 billion in IPO capital was raised through the ASX in 2018, from $6.4 billion a year earlier. By volume, ASX made the top five exchanges globally that year, with 132 new listings. Two companies dominated IPO capital raisings: Wesfarmers through its $17.1-billion demerger of supermarket giant Coles; and the $9.7-billion listing of global shopping centre owner UnibailRodamco-Westfield as a result of last year’s Westfield Corporation takeover. The ASX was the dominant global exchange for resources sector IPOs and follow-on capital raisings. The ASX secured listings of Viva Energy Group, Jupiter Mines, Nickel Mines and Coronado Global Resources, one of the world’s largest producers of high-quality metallurgical coal. Each float has disappointed since listing, albeit in a struggling share market. Coronado fell from its $4 issue price in October 2018 to $3 a share, after scaling back its price during the bookbuild. Viva Energy dropped from its $2.50 issue price in July 2018 to $1.76 in January. The petrol retailer disappointed the market with an earnings downgrade due to weaker-than-expected refiner margins. But

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Viva is attracting broker ‘buy’ recommendations at the current price. Jupiter Mines, an investor in the South African Tshipi Manganese mine, and iron ore and other projects in Australia, has slumped from a 40-cent issue price to 24 cents. Jupiter had a difficult IPO, but its third-quarter report shows that production and sales are on track. Nickel Mines fell from a 35-cent offer price in August to as low as 22 cents, then rallied to 28 cents in January 2019. The Australian company holds an 80 per cent interest in the Hengjaya nickel mine in Central Sulawesi, Indonesia, which mines nickel laterite ore. The disappointing performance of these large resources sector IPOs, which collectively raised more than $3 billion, is a setback for mining and energy floats, which used to be a mainstay of the Australian IPO market but became far fewer in number this decade. In fairness, the timing of the large resources sector floats in 2018 was unfortunate. Some of them listed only months before the fourth-quarter share market correction when most stocks fell. Supporters could argue that their price falls are overdone, given only Viva had significant bad news. Nevertheless, it is clear that the market’s appetite for large resource listings is subdued. Several larger mining and energy IPOs had to price their offer at the low end of their indicative range, suggesting subdued institutional investor demand here and overseas.

AUSTRALIAN RESOURCES & INVESTMENT

Several small floats abandoned their listing or extended it by many months, unable to meet their minimum subscription or secure enough investors to meet ASX listing rules. Most small mining IPOs from 2018 are trading below their issue price and are struggling to attract investor attention. Worse, the outlook for resources floats is deteriorating. Global economic growth is weakening, and China’s latest economic growth figures were slightly lower than expected. Investors fear that China’s economy is slowing faster than official figures suggest. In theory, that means less commodity demand, lower commodity prices and headwinds for resources sector earnings. It also implies less risk appetite for resources sector IPOs from speculative and even established miners, given the outlook. UPCOMING RESOURCES LISTINGS There is some good news. Seven small mining companies in January sought ASX admission through an IPO, ASX data shows. The resources sector accounted for about half of all proposed listings in what is a traditionally slow period for IPOs, as investors return from holidays. African Gold sought $4.5 million to target largescale gold deposits in well-known African mining districts. The company fully owns four tenements in Cote d’Ivoire through its Agboville project, which it believes is an under-explored opportunity. Canterbury Resources sought $7.8 million through an IPO to explore for gold and copper opportunities in the South West Pacific region. Formed in 2011, the Sydney company has projects in Papua New Guinea, Australia and Vanuatu. Canterbury has Rio Tinto’s support on its Manus Island project and has acquired some of the mining giant’s Queensland projects. Canterbury has a strong board and is an explorer to watch. Expose Resources sought $4.5 million to develop the Red Gate gold project in the Eastern Goldfields region of Western Australia and the Roger River gold project in Tasmania. Red Gate is in the prolific Yilgarn Craton, about 10 kilometres north of the Porphyry gold mine. PVW Resources had a $7-million IPO to commence exploration of its 1000-square-kilometre land holding, having acquired three prospective gold tenement assets (Mount Clifford, Gordon Sidar and Tanami) in Western Australia. PVW is targeting projects that have had operating expenditure from past owners who

deferred larger-scale production due to timing and market concerns. Elsewhere, Trigg Mining sought $4 million to target exploration in Western Australia of sulphate of potash for high-value food crops around the world. Relentless Resources is the year’s largest mining IPO so far, with a proposed $10-million offer. The company is an emerging mineral sands explorer with projects in the Murray and Wentworth Basin in New South Wales. Relentless wants to move its projects into production in the near term, and pursue further exploration activities to discover projects and expand its existing resources. The company has nine fully owned tenements. XS Resources sought $4.5 million to acquire two exploration licences over an area of 84 square kilometres near Armidale in northern New South Wales. The company wants to advance the projects and undertake further exploration around a historical mine at Spanish River. It says highgrade zinc, silver and copper intersections occur at several prospect areas within its Halls Peak and Gibson prospects. Meanwhile, Raptor Resources finally withdrew its IPO, having persisted with it for more than a year. Raptor wanted to raise capital to acquire and develop gold and base metal projects in Western Australia. Raptor’s Yandicoogina project is 50 kilometres southeast of Marble Bar in the East Pilbara province of Western Australia.

Tony Featherstone is a former managing editor of BRW, Shares and Personal Investor magazines. The information in this article should not be considered personal advice. It has been prepared without considering your objectives, financial situation or needs. Before acting on information in this article, consider its appropriateness and accuracy, regarding your objectives, financial situation and needs. Do further research of your own and/or seek personal financial advice from a licensed adviser before making any financial or investment decisions based on this article. All prices and analysis as at time of print.

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F E AT U R E D

WHAT’S DRIVING DEMAND FOR AUSTRALIAN MINING COMPANIES? BY ANDR EW THAKE, GLOBAL HEAD OF CONTENT, MINES AND MONEY

It would be a mistake to think that it’s just the weakened Australian dollar that has triggered an export boom in the country’s mining industry.

hile the fall in the dollar has undoubtedly helped, many investors have also been impressed by the way Australian CEOs manage their mining businesses compared to their Canadian counterparts. Less prone to the merger and acquisition (M&A) frenzy over the last six months (witness Barrick/ Randgold; Newmont/Goldcorp), Australian mining companies seem to be more grounded in the KISS (keep it simple, stupid) philosophy, perhaps best demonstrated by Evolution Mining’s strategy of focusing on six core assets and keeping costs down. At the exploration level, Australian miners are cash flow conscious. Carl Dumbrell, CEO, Herencia Reosurces, promotes the philosophy. ‘We burn very little money and keep a tight rein on cash,’ he says. This is a policy followed by many of his Australian counterparts, and recognises that investors are much more cautious to open their chequebooks than they were 10 years ago. As a result of this prudent philosophy, investors from outside of Australia are putting ASX-listed companies back on to their share watchlists. Australian-listed exploration companies, such as Pacific American Coal, PolarX and White Rock

Minerals, are benefiting from Canadian retail investors coming off their cannabis highs and bitcoin bonanza (or bust if they exited too late), and came back to mining. Investors have also been coming back to mining companies in Asia, where the 12th Annual Mines and Money Asia conference will take place in Hong Kong on 2 to 4 April. Despite what President Trump thinks, there is only one world superpower, and that is China. China is still responsible for 50 per cent of the world’s demand for commodities, and savvy Australian mining companies realise this. Despite what Elon Musk thinks, Tesla is inconsequential when it comes to the electric vehicle (EV) revolution. China again rules the roost, whether it is in EV manufacturers such as BYD, or companies such as Tianqi Lithium looking for strategic acquistions to shore up their supply chain. Again, savvy Australian mining companies recognise this. They also recognise that Hong Kong, as the gateway to Chinese capital, is the perfect place to come to secure their investment. Hong Kong has the most private investment funds of any city. The Mines and Money Asia event has seen a steady increase in attendance of these funds, as smart money slowly flows back into the natural resources sector. The event also attracts investors from Singapore, South Korea, Japan and Indonesia from the Asia-Pacific region, as well as more than 500 investors from 20 different countries. Coupled with 150 mining companies in attendnance, it is the largest gathering of miners and investors in Asia.

The 12th Annual Mines and Money Asia event takes place at the Hong Kong Convention and Exhibition Centre on 2–4 April 2019. For more information, visit www.asia.minesandmoney.com.

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F E AT U R E D

— ANALYSIS — WITH REGINA MEANI The gold price and the Australian dollar.

Comex Spot Gold Price and the Australian Dollar

ta n

Increased volatility

m Gold

Divergence

THE RELATIONSHIP BETWEEN the Comex Spot gold price and the Australian dollar is historically very strong, as they move very much in tandem. There are exceptions when increased volatility forces a break in the relationship. While the relationship moved very much in sync between 2013 and 2016, the increased volatility exhibited between 2016 and 2018 has seen a divergence between the two. In August 2018, the gold price located a turning point in its downward trend and began to rally while the Australian dollar continued to decline. The gold price has climbed around 14 per cent into January 2019, while the Australian dollar over the same period lost another three per cent through the rest of 2018 before marking time and rising slightly into 2019. If we focus on the individual performances of the two, we find that the gold price appears to have been developing a positive consolidation since 2013, and the recent turning point achieved last August may be instrumental in the completion of the phase. For this to take place, the price would need to clear a major barrier zone located in the US$1350–1400 area. The combination of the steeper upward path launched in November 2018, and the approach to the resistance zone around US$1300 saw the short-term momentum peak and the price stall and move sideways during January. The breakaway to US$1325 on 31 January is a positive step to approach the next barrier zone, but this may still be hampered by high momentum. As the price stretches, support is located around US$1295, and between

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US$1260 and US$1275, but more importantly in the US$1230–1240 zone. A drop beneath this level could seriously delay or even possibly negate a continuation of the recent upward path. As the longer-term momentum firms up, we retain a positive outlook going forward for a breakthrough US$1400 and significantly higher prices. Turning our attention to the Australian dollar, we find that significant support and a shift in the longer-term momentum suggest that the Australian dollar has the potential to change direction. The drop to US$0.6932 in January this year may prove pivotal in a reversal for the currency, but more consolidation may be required in the US$0.71–0.72 region before the action can be completed. A break up through resistance around US$0.73 would suggest the potential to head towards old barriers located around US$0.74 and then US$0.76. A fall beneath US$0.7180 would find support around US$0.7070 with the near-term risk level located around US$0.7020. A drop beneath this level may put the above scenario in jeopardy. As mentioned earlier, the historical relationship between the two suggests that, following the gold price strength, the Australian dollar may play catch-up, swinging the relationship back into tandem and moving higher over the near to medium term in line with our scenario. Note: prices are at 31 January 2019. Comex spot gold price US$1319.7 A$1 = US$0.7264

AUSTRALIAN RESOURCES & INVESTMENT

Paladin primed for uranium recovery With industry experts predicting a uranium price recovery in 2019, Paladin Energy (ASX: PDN) is priming itself to be ready for this market shift.

hile the global uranium market has been depressed since the 2011 Fukushima disaster in Japan, later sinking to a low of US$18 per pound in 2016, there are signs that prices will improve further through 2019 after price increases in late 2018. Paladin has two uranium mines – Langer Heinrich in Namibia, and Kayelekera in Malawi – both of which are on care and maintenance; but with a potential uranium price recovery, this could change. In December, the company announced a concept study to optimise Langer Heinrich for a restart decision, which it will follow with a pre-feasibility study. Paladin Chief Executive Scott Sullivan says the studies would give priorities to initiatives that ‘strengthen Paladin’s plan for a rapid, reliable restart of Langer Heinrich’ once the uranium price improves. ‘We want to position Langer Heinrich to be among the first significant global producers to return to production once the uranium price recovers to acceptable and sustainable levels, which it is currently moving towards.’ L2 Capital Partners Managing Partner Marcelo Lopez is among the experts predicting a uranium price recovery, which he says was spurred by Cameco’s

decision to place its McArthur River Mine in Canada – the world’s largest highgrade uranium operation – on indefinite care and maintenance last year. ‘Until last year, the commodity was in a freefall,’ he says. But with McArthur River production ceasing to create a decrease in global supply, demand now has a chance to meet it. ‘The world needs clean energy and cheap energy – and uranium provides just that. [Demand] growth will definitely come from Asia,’ he says, citing China, India, Russia and South Korea as growing markets, as well as Japan, where nuclear reactors are returning to operation. A uranium market improvement is also tipped by Perth-based broker and advisory Argonaut, which sees price rises through 2019–2020 due to the curtailing of production by Cameco, as well as KazAtomProm. Argonaut has a buy recommendation on Paladin, with a $0.28 per share price target. It rates Paladin as its top pick in the uranium sector: ‘Paladin is best positioned for a uranium price recovery, with significant installed production capacity (>8 million pounds per annum triuranium octoxide), an established

product and a pipeline of quality assets. The company’s flagship Langer Heinrich Mine (LHM) is currently on care and maintenance, but retains a large resource base able to sustain over 20 years’ mine life with nameplate capacity of up to 5.2 million pounds per annum triuranium octoxide. Upon restart, we expect LHM to emerge as the most efficient low-grade uranium processing plant globally with one of the lowest all-in cost profiles,’ analyst Matthew Keane reports. Euroz is also strong on Paladin, maintaining its $0.36 per share target on the company following a site visit to Langer Heinrich in February. Analyst Michael Emery says: ‘We were impressed by the ongoing work on site, ensuring that LHM will be a frontrunner in the race to restart under the right uranium price environment. Already the lowest cost open-cut uranium mine globally, optimisation studies continue targeting opex reductions of US$4–5 per pound, which would propel the mine well into the lowest cost quartile for operations globally. The quality of the PDN team gives us confidence that operational efficiencies can be delivered after restart and that ultimately, LHM will become a long-term sustainable operation making PDN the go-to uranium producer on the ASX.’

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F E AT U R E DA R T I C L E

Galileo sets its gaze on Fraser Range Mark Creasy–backed Galileo Mining (ASX: GAL) has been listed for less than a year, but in that short time has built an enviable track record, proving that success in Western Australia’s fast-developing Fraser Range province is in its DNA.

alileo listed on the ASX in May 2018, with $15 million raised and a host of land in Western Australia’s Goldfields-Esperance region. The float raised eyebrows, not just for its size during a miserly period for new listings, but also because of the names behind it. Uber prospector Mark Creasy emerged holding approximately 31 per cent of the company, having vended in land holdings at Norseman and the Fraser Range – a region where he has made multiple major discoveries, such as Nova-Bollinger and Silver Knight. Other investors included ASXlisted miner Independence Group (ASX IGO), which has a track record in the Fraser Range with its wholly owned Nova project; and Mineral Resources’ founder Chris Ellison. With former Creasy Group General Manager Brad Underwood at the helm, the company has taken great strides, developing the Norseman cobalt project towards a scoping study and building up an exciting suite of prospects at the Fraser Range.

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Galileo holds two joint ventures with the Creasy Group in the Fraser Range, totalling 437 square kilometres of tenements highly prospective for nickelcopper-cobalt deposits. The explorer also has five applications covering 419 square kilometres in a ballot process, with two of these tenement applications adjacent to the Silver Knight deposit. While it has been active on the acquisition of land, it is the company’s exploration program where Galileo’s experience is beginning to show its value. The company recently conducted an induced polarisation (IP) survey at its Empire Rose prospect, delivering a highly chargeable response – suggesting the potential to hold sulphide mineralisation. The IP survey builds on previous exploration at Empire Rose, which includes an electromagnetic survey that successfully indicated a significant geophysical conductor, as well as first-pass air-core drilling, confirming the presence of anomalous nickel. ‘The IP survey results were outstanding, especially when put into context with

our other exploration activities at Empire Rose,’ Underwood says. ‘We now have a very compelling drill target containing a number of telltale signs of Fraser Range nickel. We are progressing drilling operations as quickly as possible, and hope that further work leads to a substantial discovery. ‘The story of the Fraser Range has been defined by massive, company-making projects, and we are optimistic that we have a good chance of enjoying similar success. ‘The Fraser Range project covers a large area, and we are also progressing other promising targets that have presented themselves since listing. ‘Currently, we have two additional prospects – Nightmarch and Lantern – which look very interesting and will be the subjects of an upcoming firstpass drilling campaign,’ he adds. The busy drilling activity in the Fraser Range demarcates a clear acceleration in Galileo’s exploration program, firmly placing the company on the radar for investors seeking the next big find in the Fraser Range.

Mark Creasy–backed Galileo Mining (ASX:GAL) on the hunt for Fraser Range nickel.

Emerging explorer Galileo Mining (ASX:GAL) is on the hunt for Nova-style nickel from Western Australia’s fast developing Fraser Range province. The Mark-Creasy backed company is close to kicking off a comprehensive drilling program targeting massive sulphide deposits, similar to the Nova-Bollinger and Silver Knight nickel-copper discoveries.

For more information on this exciting company, please check the website:

galileomining.com.au

F E AT U R E D

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AUSTRALIAN RESOURCES & INVESTMENT

TRACKING THE TRENDS The Australian mining context.

T BY STEVEN WALSH PARTNER, CONSULTING, DELOITTE

he beginning of a new year often brings reflections and predictions on what the year ahead holds for our industry. While we are all busy working on the plans and priorities of our own roles and organisations, pausing to reflect on some of these broader conversations can provide some useful ideas. Deloitte’s annual Tracking the trends global report, released in January, examines the top 10 trends transforming the future of mining. Reflecting on these in the context of the Australian mining sector, here are four global conversations that might be worth including in your thinking. R E T H I N K I N G S T R AT E GY Some of the most successful large-scale mining operations have historically been driven by a strategy simply to produce the highest volumes of product at the lowest cost, maximising the throughput of capital equipment. In an effort to break from the boom and bust cycle, organisations are now looking for other strategic alternatives. Sometimes this involves looking further afield than to the giants of the industry, and considering approaches that have proven successful by often smaller and more nimble operators. There is a strong push in many markets for strategy that considers a range of issues, including the role of

individual assets in the portfolio, the path to value creation, the balance between risk and return, and how the company is differentiating itself. When prices go up, this strategy may not immediately seem like the fastest path to value, but when the markets turn, we will see some organisations that have established a way to better ride the cycle and ultimately deliver greater overall shareholder return. I N V E S T I N G I N A N A LY T I C S A N D ARTIFICIAL INTELLIGENCE Analytics and artificial intelligence (AI) are some of the latest trendy terms in a wide range of industries. While it is appropriate to be wary of hype, there are good examples of organisations delivering real returns from these investments. These tools are being used to answer progressively more complex questions, moving from ‘what happened?’ to ‘what will happen?’, which allows mining companies to predict variability, mitigate emerging risks and more reliably manage stakeholder expectations. There has been a shift to the view of miners as datadriven organisations where information about resources, ore bodies, exploration tenements, technologies and customers is a competitive differentiator, and is more important than resources in the ground. ‘Extracting value from data is just as important as extracting resources from the ground.’

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F E AT U R E D

Figure 1. Three horizons of AI. Source: Deloitte Analytics and Cognitive practice

Australian miners are increasingly leaning on AI-driven scenario planning as they invest in areas to produce the next wave of production gains and long-term growth In addition to the value delivered by more accurate data and prediction, the analytics platforms are also a key component on the automation journey. As illustrated in Figure 1, the ultimate landing place for some of our analytics and AI initiatives will be automation. Australian miners are increasingly leaning on AIdriven scenario planning as they invest in areas to produce the next wave of production gains and longterm growth. C H A N G I N G T H E WAY C A P I TA L P R OJ E C T S A R E D E L I V E R E D Another interesting trend in Deloitte’s top 10 is the changing appetite for ‘traditional delivery of capital projects’. Mining and construction organisations are being challenged to find new ways to deliver in the construction phase. During the last boom, major projects routinely exceeded their budget and fell behind schedule, and stakeholders are indicating a lower tolerance for these mistakes being repeated. This time around, there will be a less capital-

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intensive growth model with miners leveraging the best of technology and product design to ratchet down costs. The best of technology of design will be key to the new breed of efficient, scalable, flexible and lowcapital intensity capital projects to raise the bar for project efficiency and cost. Modularisation, advanced automation and control systems, drones and simulators, along with truck-less operations, will assist in this goal. With increasing investor scrutiny on capex spend, robust government and project management structures will need to be applied to minimise risk of project cost/ scope creep. Risk-sharing arrangements with companies forming alliances and sharing development risk and financial burden, similar to the consortia model with LNG projects, may flourish, with an emphasis on collaboration and getting everyone on the same page, pulling in the same direction. T H E N E W W O R K F O R C E : AT T R AC T I N G T H E N E X T G E N E R AT I O N A N D E M B R AC I N G DIVERSIT Y AND INCLUSION There is a simple truth that underlies the last trend that I will call out. Mining faces a massive generational shift. With enrolment in mining-related disciplines down, filling those talent gaps will be no easy task. For the mining industry, already burdened with a perception problem among young people considering career choices, the need for new ways of attracting and retaining people to the industry will become urgent. Miners are beginning to work more closely with educational institutions to create the right skills for their future operations. This is vital to create skilled tradespeople and graduates alike to feed the mine sites of the future, as they shift further towards AI and remote operations.

AUSTRALIAN RESOURCES & INVESTMENT

The drive towards digitisation and automation has altered not only where work takes place (i.e., remote operations/telework), but also the nature of corporate talent needs. To improve diversity and inclusion in the mining industry, mining organisations are working to shift historical perceptions about the industry. Attracting diverse candidates will involve collaboration across organisations, as they recruit from education institutions and other online platforms. A focus must also be placed on exposing unconscious biases that influence hiring decisions and contribute to workplace inequality. Australian mining, as an industry, has a notable lack of females in the workforce. Just 16 per cent of the 220,000 mining jobs nationally are held by women, according to the federal government’s Workforce Gender Equality Agency. It’s the lowest rate of female participation of any industry in Australia, with women accounting for 10 per cent of the workforce as machinery operators and drivers, 4.9 per cent as technicians and tradespeople, and 7.1 per cent as labourers.

Each of us considering and taking action today to make our part of the industry attractive to the new generations and the community at large will mitigate a challenge that is only going to become more difficult with each passing year.

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F E AT U R E D

Lithium is finite but clean technology relies on such non-renewable resources BY PAR AKR A M PYAKUR EL, POSTDOCTOR AL R ESEARCHER AT THE WAR SASH SCHOOL OF M AR ITIME SCIENCE AND ENGINEER ING, SOLENT UNIVER SIT Y

Renewable energy is generally viewed as a long-term solution to climate change. It’s no surprise, then, that a great deal of effort is going into powering the world by using only renewable, and researchers are even looking seriously at the prospect of Europe switching to 100 per cent renewable energy by 2050.

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AUSTRALIAN RESOURCES & INVESTMENT

here is a downside, however – renewable energy depends on natural resources that exist on planet Earth in fixed amounts and are very much non-renewable. The issue of rare earth elements, used in many technologies including solar panels and batteries, is well known. Although these elements are not always as rare as their name suggests, they are finite and non-renewable. Also, just one country, China, presently has a monopoly on the production of most of these elements, which raises the question of energy security. But apart from rare earths, there are other non-renewable materials used for renewable energy – and the metal lithium is a good example. As it’s highly reactive and relatively light, lithium is ideal for use in batteries. And the ability to store large amounts of energy is crucial to renewable energy, because sunshine and wind don’t simply appear at convenient times when humans need electricity. Another major application of lithium is in the batteries of electric and hybrid vehicles. These vehicles certainly have lots of potential to reduce carbon dioxide emissions but, in the long term, their feasibility will be challenged by the use of lithium in their batteries. R E P L AC I N G C O N V E N T I O N A L C A R S WITH ELECTRIC CARS A quick calculation shows that if all conventional cars (those using petrol/gas or diesel) were replaced by electric cars, the world would run out of lithium in around five decades. I take the total amount from the US Geological Survey, which estimates that there are currently 14 million tonnes of proven reserves worldwide. I used industry figures for the total amount of passenger cars sold worldwide – about 69 million in 2016. That same year, less than a million electric vehicles were sold, even including plug-in hybrids. Now, if we imagine a future where all passenger cars were electric and the number of cars sold per year remains constant at 2016 levels, almost 69 million (technically 69.46 million minus 0.75 million) electric cars will have to be produced each year even at a very

A quick calculation shows that if all conventional cars (those using petrol/ gas or diesel) were replaced by electric cars, the world would run out of lithium in around five decades cautious estimate. Our assumption here that the demand of cars will remain constant is actually very conservative, as demand typically increases with time. Today, a compact electric vehicle battery (Nissan Leaf) uses about four kilograms of lithium. This means that around 250,000 tonnes of lithium would be required annually to produce enough electric cars to replace their petrol equivalents. At this rate, the 14 million tonnes of proven reserves would be exhausted within 51 years. The recycling of lithium from used batteries is not taken into account here. But it is important to note that electric cars are not the only product that use lithium. Currently, batteries use around 39 per cent of total production, while the rest goes into ceramics and glass, lubricating greases, and other applications. So, even if we imagine that 100 per cent of lithium in used batteries was recovered

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www.smartenergyexpo.org.au 12/2/19 1:47 pm

– 17 –

F E AT U R E D

Much of the world's lithium is found in the salt flats of South America

(not technically possible), much of that would still be used for other purposes, and supplies would still eventually be exhausted. FINDING MORE LITHIUM The world is not running out of lithium yet because renewable energy and electric vehicles are nowhere near replacing fossil fuels completely. Demand will increase in the future, however, which could prompt further exploration and perhaps the discovery of new reserves, or even improvements in mining technology to make more of the metal accessible to us. All these could make lithium last longer, but that does not mean we will be able to use huge amount of it indefinitely. Lithium is just one example of a worrying reliance within renewable energy on non-renewable natural resources that exist only in fixed amounts on Earth. Solar and wind power do have great

– 18 –

potential to cope with the problems of climate change, but much careful planning is needed, and we cannot assume that renewables will solve all environmental problems. Now is the right time to establish recycling plants for rare earth elements and other non-renewable natural resources used in renewable energy systems, such as lithium. More importantly, it is necessary to reduce our consumption of natural resources. If we go on with mindless consumerism, we will only shift the problem from one natural resource to another. This article is republished from The Conversation (http://theconversation.com) under a Creative Commons licence. Read the original article at https://theconversation. com/lithium-is-finite-but-clean-technology-relies-on-such-nonrenewable-resources-109630.

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F E AT U R E D P R E S E N TAT I O N

SE PRE

N TA

TION

NEY S Y DG C LU B IN MIN EM NOV

BER

2018

AMERICAN SOURCE OF LITHIUM AND BORON FOR AN ENERGY-EFFICIENT FUTURE Providing the materials for a sustainable and thriving planet.

W BY BER NAR D ROWE, M ANAGING DIR ECTOR, IONEER LTD

– 20 –

e recently had our annual general meeting, where our shareholders voted in favour of a proposal to change our name from Global Geoscience, which reflected where we have come from, to ioneer, which epitomises the direction in which we’re heading with our Rhyolite Ridge lithiumboron project. The name ioneer is a made-up word – a combination of ion and pioneer. We see our company, this project, and the lithium and boron that we’re going to be producing from this unique deposit in Nevada as being at the pioneering forefront of not only the electrification of the motor vehicle industry, but also energy conservation, energy management and urbanisation, which will ultimately lead to a bright future of sustainability for the planet. The ASX has approved our name change to ioneer, and our ASX ticker code is now ‘INR’. The company is looking at developing and delivering the first major lithium mine in the United States. Not many people realise that the United States produces only about 4000 tonnes of lithium carbonate per year, and that’s it. There are no projects in development that are going to increase that amount of production. For the largest vehicle fleet on the planet, which ultimately might be overtaken by or be close to the same numbers as China, the decision has been made that the car companies are going to need a long-term, stable supply of lithium to facilitate their operations. There’s also only one large boron mine outside of Turkey – Rio Tinto’s boron mine – which is in California. Rhyolite Ridge in production would represent the next major global boron producer.

We’ve just finished a pre-feasibility study at Rhyolite Ridge, which was delivered in October 2018. We’re looking at producing 20,000 tonnes of lithium carbonate and 170,000 tonnes of boric acid. With that quantity of boric acid, applied as a credit to the cost of lithium carbonate, we’re talking about the lowest-cost production of lithium carbonate anywhere in the world. It’s a very large deposit, so it will have a long life – multiple decades long – and there’s still a lot of exploration potential, so it’s eminently expandable. It’s really a unique and top-tier type of mineral asset. I think everyone has a pretty good idea of where the growth in demand for lithium is going to come from. In terms of boron, the major users are quite diverse, but are centred on the glass, ceramics, insulation, fibreglass and electronics industries. It’s a micronutrient in agriculture, and it also has myriad other uses, so boron is really very widely used. You put those two together and what you have is two elements that are in strong demand growth, and that are essential for modern life, urbanisation and energy efficiency. There’s a very limited supply no matter which way you look at it in North America, and that’s what makes Rhyolite Ridge such an interesting project. Just taking a step away from the project for a minute and looking at the company, we have an excellent board that has decades of experience in the sort of business that we are on the trajectory to become. We have James Callaway, one of the directors and former chairman of Orocobre, who I think is one of the only people who has actually put a lithium mine into production in the last two or three decades with Orocobre’s Olaroz mine in Argentina. Alan Davies

AUSTRALIAN RESOURCES & INVESTMENT

was formerly with Rio Tinto, and was the head of the energy and minerals division, which included US Borax. Alan oversaw both the boron mine in California and another deposit in Serbia, which is the only other lithium-boron deposit (Jadar) known on the planet other than Rhyolite Ridge. John Hoffmeister is here as well, the former president of Shell for North America and a director of Royal Dutch Shell, as well. Both James and John are based in Houston. Patrick Elliot, whom many of you here know, was one of the founders of the company with myself. Pat has had more than 30 years’ experience in the Australian mining and exploration industry. He was Head of Morgan Grenfell Corporate Finance in his early career. A key advantage of this project is its mix of lithium and boron products, which delivers dual revenue to this project. It’s a 70/30 split of revenue in favour of lithium. Another thing that really makes it a valuable asset is the Nevada location, which is in a miningfriendly jurisdiction. Also, the ore body itself is flat lying, 20 metres thick and covers several square kilometres. It’s about as easy as it gets when it comes to mining. It’s hard rock but it’s relatively soft, so mining and crushing costs are very low. It’s amenable to acid leaching, and that makes it really quite unique in the lithium world because in other hard rock deposits, the spodumene needs to be roasted at 1000–1100 degrees to liberate the lithium. Here, we’re talking about a deposit where you can use sulphuric acid in much the same way as you would with an oxide copper deposit and boom, out comes the lithium and the boron. And you can leach it just about any way you want with sulphuric acid, and the recoveries are in the high 90s. The studies we have conducted show that vat leaching is the best way for us to go because it gives us maximum control over all the parameters, but we’re talking moderate temperatures – 50 or 60 degrees at atmospheric pressure. There’s nothing fancy about the acid leach; it’s just a matter of putting in the acid. Many people think that there are only two types of lithium deposit. The first one is the brine type, which really was the start of the lithium industry and, incidentally, started in Nevada about 25 kilometres away from Rhyolite Ridge at the Silver Peak lithium brine mine. Then, of course, the other deposit that most people immediately think of is spodumene deposits. But there is another type of deposit referred to as sedimentary. Now, most people, if they know anything about sedimentary lithium, think that sedimentary means clay. It’s true for every other known deposit of sedimentary lithium except for

Board with Expertise for Li-B Development James D. Calaway | Non-Exec Chairman

Bernard Rowe | Managing Director

Former non-exec chairman of Orocobre Ltd

Qualified geologist with over 25 years international experience in mineral exploration and management including over 10 years in Nevada

Track record in building junior companies into successful commercial enterprises in sectors including lithium, oil and gas, solar and software

Managing Director of GSC since IPO in 2007

John Hofmeister | Non-Exec Director

Alan Davies | Non-Exec Director Former CEO, Energy and Industrial Minerals, Rio Tinto Highly successful natural resources and industrial executive including 20-year career with Rio Tinto Led Rio’s division containing the Boron Mine in California and the Jadar lithium-boron deposit in Serbia

Former President of Shell Oil Company, the US-based subsidiary of Royal Dutch Shell Highly successful company executive with diverse industry experience and a focus on the broader energy sector

Patrick Elliott | Non-Exec Director 30 years experience in investment and corporate management specialising in the resources sector Former head of corporate finance for Morgan Grenfell Australia Limited

ASX: GSC

Slide 1

Corporate Focus - Produce Lithium and Boron for a Modern World • Glass

• Electric Vehicles • Energy Storage

• Ceramics • Insulation • Electronics • Agriculture

Strong Demand Growth

Essential for Modern Life

Limited Supply in North America

Directors

Capital Structure Shares

1.47B

James D. Calaway

Options (unlisted)

58.1M

Bernard Rowe

Non-Exec. Chairman Managing Director

Performance Rights (unlisted)

1.5M

Alan Davies

Non-Exec. Director

Cash (at 30 September 2018)

A$75M

Patrick Elliott

Non-Exec. Director

Share Price (at 30 Oct 2018)

A$0.215

John Hofmeister

Non-Exec. Director

Market Cap.

A$316M

Ownership - Top 20 = 60%, Directors/Mgmt = 10%

GSC is in S&P/ASX 300

ASX: GSC

Slide 2

two: Rhyolite Ridge and Jadar in Serbia. Here, the lithium is with boron, and the boron is in a mineral called searlesite, which the rock is full of. This photo [slide 4] is core from the same drill hole in Rhyolite Ridge. The material on the right is clay rich in lithium and with no boron. The material on the left is what happens when you put 50 per cent searlesite or two per cent boron into that rock. It changes the physical properties of the rock completely, which is why you can acid leach this material on a heap, in a vat, in an agitation tank – any which way – because the boron

– 21 –

F E AT U R E D P R E S E N TAT I O N

Using proven and well-known processing technology is really what this project is about because of the searlesite

Key advantages of Rhyolite Ridge Rhyolite Ridge

Advantage

USA supplier of critical minerals

Integral to energy efficient future

Nevada location

Mining friendly & close to markets Long mine life, expandable

Large deposit

Open pit mining, low strip ratio

Shallow, thick & flat lying

Low-cost mining & crushing

Soft ore & waste rock

No roasting or new technology

Amenable to heap/vat leaching Lithium & boron products

Two revenue streams

= world’s lowest cost lithium producer at < $2,000/t lithium carbonate

ASX: GSC

Slide 3

Rhyolite Ridge – Two Distinct Types of Mineralisation

Li-B (Searlesite) Resource* 121Mt at:

1,740ppm Li 12,600 ppm B Contains 1.1Mt Li Carbonate 8.6Mt Boric Acid To be processed

* Indicated and Inferred Resource

Core containing Li-B (Searlesite) mineralisation

Boron grade 10x more than Li-only Resource

Core containing Li-only (Clay) mineralisation

Li-only (Clay) Resource* 354Mt at:

1,565ppm Li 1,185 ppm B Contains 2.9Mt Li Carbonate 2.3Mt Boric Acid To be stockpiled

ASX: GSC

Slide 4

is there. And of that material on the left, of which we have a resource of a 120 million tonnes, the grades are there. It contains about one million tonnes of lithium carbonate and about 8.6 million tonnes of boric acid, and that’s the focus of our pre-feasibility study. The other material, which we have 350 million tonnes of, is high in lithium, high in clay and has no boron. We’re just going to stockpile it and if, one day, someone comes up with an economic way to extract that, then we’ve got a lot of that material, but it’s not part of any mine plan.

– 22 –

Using proven and well-known processing technology is really what this project is about because of the searlesite. An onsite sulphuric acid plant provides the steam to do the evaporations so there are no evaporation ponds. After the ore is leached, the material that’s left is easy to dry stack. There are no tailings here, so you’re talking about dry stacking leach residue material. Once the material is leached into the pregnant leach solution containing the lithium and the boron, we then use evaporation from the steam and crystallisation to precipitate both boric acid and then lithium carbonate. Now I’m going to speak to a video which provides a very good overview of Rhyolite Ridge. A narrated version of this video is available on ioneer.com. There are no trees and little vegetation at the site, and some of the high-boron material is in outcrop. It is located in central Nevada, sort of halfway between Reno and Las Vegas. It’s about a 340-kilometre drive from Reno, where our technical team is based. Out to the right is Silver Peak, which is the original lithium brine operation. There’s grid power there and it’s about 25 kilometres from the site. I mentioned the mining history in Nevada; it’s a major mining state in the United States. The mineralisation itself is flat lying, it outcrops, and in the white rocks that you see in the mid ground here is the outcropping mineralisation, it dips gently towards us underneath the more flat lying area, which is covered by gravel. There’s a county road that goes right through the site, so access is excellent. The headline numbers in the pre-feasibility study are slightly different than in this

AUSTRALIAN RESOURCES & INVESTMENT

video, which shows the maximum throughput that we looked at as part of the pre-feasibility study – up to 30,000 tonnes of battery-grade lithium carbonate and 250,000 tonnes of boric acid for a 30-year period. It gives a net present value of about 1.8 billion dollars after tax, which is a very significant number for a long-life project – and that can be readily expanded. It has an unlevered internal rate of return after tax of 27.7 per cent. In red in the video it shows the actual extent of the mineralisation, so it sits underneath most of that flat area. Now we look underneath and show a 3D model of it, so you can see it’s quite flat flying and has a consistent thickness over many square kilometres. The total resource is 4.1 million tonnes and 11 million tonnes of boric acid but, more importantly, it’s that lithium-boron split that I talked about. So, of the lithium-boron-rich material, it’s a bit over one million tonnes of lithium and about nine million tonnes of boric acid. Again, showing the extent of the deposit, that’s all been drilled at 200metre spacing, so it’s all in the indicated resource, and we’re just about to put out our maiden reserve based on that, as well. The development plan is to focus on a starter pit for the environmental permitting requirements in Nevada to ensure that we can get this up and running as quickly as possible. We have a starter pit that will cover the first six or seven years. As we mine that starter pit, focused along the outcrop, over time that would extend out into the deeper parts of the basin. We also see that there’s a real opportunity to add a lot more of the shallow tonnes around the edges that haven’t yet been drilled. There’s an overburden stockpile and a lithium clay stockpile that we mentioned, and there is a process plant that’s about two kilometres down the road. The process plant consists of an onsite sulphuric acid plant with leach vats, and lithium carbonate and boric acid process facilities. The ore would be transported and then crushed. The crushed ore would then be loaded into the vats and moved through the process. The plant is a lump sum, turnkey type of plant that is very commonly used and built around the world, so there’s nothing special about the sulphuric acid plant. The important thing here is that it produces large amounts of cheap sulphuric acid, large amounts of steam that we can use for evaporation, and large amounts of electricity via a steam turbine. You’re talking about nearly 50 megawatts of electricity generated here, and the site would use somewhere between 10 and 12 megawatts.

Using Processing Technologies Proven at Commercial Scale Rapid leach times Overall lithium and boron recoveries of >80% Very low cash costs due to: Exothermic nature of producing acid Boron revenue offsetting most of site costs

Vats

Only lithium deposit in the world demonstrated to be amenable to heap/vat leach processing

On-site acid plant provides all of the steam and power required Vat leaching to be done at 50-60o C and at ambient pressure (similar to oxide copper) Crystallisation of boric acid from solution (similar to Rio’s Boron Mine) Crystallisation of lithium carbonate (similar to lithium brines)

Base case production of 20ktpa Lithium Carbonate and 173ktpa Boric Acid ASX: GSC

Slide 5

Delivering the first major lithium mine in the USA …and the next major boron mine globally

Rhyolite Ridge PFS has delivered: Rhyolite Ridge

Albemarle's Silver Peak Mine Producing: <4Ktpa Li2CO3 Only lithium mine in USA

20Ktpa lithium carbonate and 170Ktpa boric acid World’s lowest cost lithium producer >30 year mine life, expandable PFS delivered after-tax NPV(7% real) = US$1.8 billion

Rio Tinto’s Boron Mine Only major boron mine in USA

Globally significant lithium and boron producer ASX: GSC

Slide 6

The crushing facilities have a couple of run-of-mine stockpiles to blend different grades of boron in order to ensure consistency. The crushed ore would then be loaded into the vats via a conveyor system. The vats are flooded with sulphuric acid as the ore is loaded, and after four or so days, all the lithium and boron is leached out. Then, there’s some washing that goes on to ensure the higher recoveries. The vats are then unloaded with a clamshell-type crane from above. The liquor that comes out of the leach vats, pregnant leach solution, goes into tanks and is then pumped to the boric acid plant.

– 23 –

F E AT U R E D P R E S E N TAT I O N

Slide 7

Slide 8

We’re seeing the first stage of evaporators and crystallisers here, so the boric acid is at a concentration that’s near saturation. It requires cooling, and about 50 per cent of the boric acid comes straight out as it’s cooled down. The pregnant leach solution is then fed into the evaporators where the water is driven off with the heat from the steam, and concentrates the lithium and the remaining boron. The pregnant leach solution, with the remaining boron, goes into the boric acid plant where the

– 24 –

remainder of it is extracted through crystallisation. Ultimately, the pregnant leach solution, with a very high concentration of lithium of the order of one per cent, passes into a lithium carbonate process plant. All of this is based on the flow sheet that’s been developed as part of the pre-feasibility study. It is based on the detailed engineering design work that we’ve done, test work and then design work as part of the prefeasibility study. We’ve done a lot of work on testing all of these processes – the leaching, the evaporation and the crystallisation work. It’s 100 per cent federal land, so we only have to deal with the federal government in terms of permitting. There’s very little vegetation, there’s power, roads are nearby and there’s groundwater readily available in the valley. The key here is the $1796-per-tonne lithium carbonate cost after applying the boric acid credit. For every tonne of lithium carbonate, there’s about eight tonnes of boric acid produced, so that boric acid credit at $700 a tonne for boric acid, represents about $5600. That credit, of course, means that the lithium carbonate cost is exceptionally low – way lower than any other operation in the world with such a large credit. Even if you excluded that credit or split it separately and looked at the boric acid separate from the lithium carbonate, we’re still talking about lithium carbonate costs of about $4500 to $5000 a tonne, which would also make it very competitive in the lithium space. It’s a low-risk project, so we’re talking about conventional technology borrowed from the copper industry for the acid leaching, and from the lithium brine industry for the evaporation and crystallisation. As for the strong economics [slide 7], roughly you’re talking 20,000 tonnes of lithium carbonate and 170,000 tonnes of boric acid, which will create revenue of about $450 million a year and EBITDA of about $300 million a year. The capital expenditure is made up of two parts, the operation and the acid plant. Excluding the sulphuric acid plant, the capital expenditure is about $426 million, with the acid plant itself comprising $173 million. We split them because the acid plant here can be funded quite separately to the rest of the operation. We’re looking at various alternatives on how that would be done, but there are lots of options for funding that sulphuric acid plant. We expect a very rapid payback on those numbers of four years. This graph [slide 8] shows the boric acid revenue per tonne of ore. For every tonne of ore mined, there’s

AUSTRALIAN RESOURCES & INVESTMENT

Rhyolite Ridge is ideally positioned in that it’s large, long-life, low-cost, and sitting on the west coast of the United States, close to the large US market but also, importantly, to the Asian markets about $50 of revenue that comes from the boric acid, and the site operating costs are about the same – $47–50. So, the boric acid essentially pays for all of the site operating costs, and on top of that, the only other costs are the shipping and transportation costs. If you look at the margin there, you’re talking about higher lithium prices that are used in the prefeasibility study of about $100 a tonne of ore margin. Even using a conservative $10,000-per-tonne lithium carbonate price, you’re still talking about a $70 margin per tonne of ore processed. So these are very favourable numbers. Looking at global distribution of boron production and lithium, outside of Turkey and Jadar in Serbia, there are very few boron reserves anywhere in the world. So, while Rio Tinto has the boron mine in California that produces about 30 per cent of global production, it only represents about two per cent of global reserves. It’s a mine that has been in production for 100 years, and it’s getting towards the end of its life. It’s deep, its costs are rising and it’s not expandable; so as the boron market grows, we don’t think it will expand.

Slide 9

Rhyolite Ridge is ideally positioned in that it’s large, long-life, low-cost, and sitting on the west coast of the United States, close to the large US market but also, importantly, to the Asian markets. Looking at where we’re at and where we’re going on our timetable, we’ve just finished the pre-feasibility study, and we’ve already done a lot of the prep work to start the definitive feasibility study. We’ll be announcing within the next couple of weeks the appointment of an engineering firm for our definitive feasibility study. We’ve already started on the drilling work for that, so we’re well progressed there. On the environmental permitting process, we started that very early; we’ve done a lot of the baseline studies and monitoring was established very early, so we’re looking at having the environmental and the definitive feasibility study completed by early third quarter of 2019. This means that, late in 2019, we expect to be in a position to make a final investment decision. There will be about an 18-month construction period as long as we get in and do some work on the long lead-time items in the latter half of 2019, meaning first production around about the middle of 2021. Finally, our name change to ioneer is a very important thing for us. It really sets the direction of the company going forward as a supplier of the raw materials that we see as being integral to a sustainable and thriving planet. That was the aim of Global Geoscience, and still is for the new company, ioneer Ltd. We encourage you to have a look at our new website, www.ioneer.com.

– 25 –

MINE DE VELOPMENT

Foundations of advanced analytics projects to industry Quick tips to consider when starting an advanced analytics project in industry. BY EDSON ANTONIO, AI M ANAGER, AI CENTER, VALE

– 26 –

AUSTRALIAN RESOURCES & INVESTMENT

hould I care about outliers? Feature selection? Which methodology should I use? All of these are good topics to be addressed when starting an advanced analytics project in industry. But firstly, you should understand that advanced analytics projects are always a combination of three areas of knowledge: computer science, maths and statistics, and subject matter expertise. In the past, people thought that a data scientist was a specialist in IT techniques, a genius in maths and statistics, and also an expert in a particular subject area – for example, tyre maintenance in surface mines. It just so happens that finding someone like this is as easy as finding a unicorn in your backyard, which led data science to be understood not as an enlightened profession that represented the intersection of the above techniques, but rather as a partnership of multiple areas of knowledge. Data science is about multidisciplinary areas working together to provide reliable data to be used in machine learning models to contribute actions to be taken in adapted processes. In other words, you can understand a data science team as a multidisciplinary team, relying on the partnership of a minimum of two different groups: the algorithm team (comprising IT, statistics and math) and the subject matter team (consisting of the business matter, like tyre maintenance, engine replacement, et cetera). If one of these two areas is not working as a partner, and merely expects that the results will come from the other part for validation and consumption, then you have a high probability of failing at this initiative. Once you have this partnership foundation set, you may want to focus on processes and, finally, data, making sure that you have enough data and that it is of good quality. Do not underestimate this data evaluation process. Take advantage of the time you are spending to analyse the data and look for enhancements. You will be astonished at the number of functional improvements you will be able to propose even before you create complex models. Bear in mind that you will only be able to provide this benefit if – and only if – you are working on the foundations of partnership we talked about at the beginning of this article. Mining companies can have a diversity of environments, each one with its own governance and systems. Data lakes initiatives can be attempted by several different teams, creating big silos of information or multiplying the same information all around. Trying to have a corporate data lake is a good approach, but it may have to be stretched a bit as different demands fit better to different environments. Keeping enormous data warehouses to claim to have a big data strategy can be expensive and poorly scalable. Performance can become a problem when starting to deal with pictures, videos and social media feeds. Going on a Hadoop Distributed File System (HDFS) in these cases is an excellent and sustainable choice, but bear in mind that it’s not a simple choice. Governance has to be set in place, as security procedures change dramatically. Regular databases are much more privilege-oriented than HDFS, which can

Figure 1. Vale iron mine site in Brazil

Data science is about multidisciplinary areas working together to provide reliable data to be used in machine learning models to contribute actions to be taken in adapted processes allow a ‘party on the lake’ if you do not create and establish your access security policies. Don’t expect that the HDFS is doing it for you by default. Data lakes can be single points of access to several different operation sites, as well. Do you wonder what a hacker could do with your company if he found his way through it? Having demilitarised zones after a data lake is an excellent option to avoid big security problems. Another big temptation is to throw every bit of data you find on the data lake. After a few months, you will have the same problem finding information as we have today seeing the monster in Loch Ness. Having a governance team is necessary. Do not underestimate the amount of time you will spend gathering data (continuously data gathering). Once you acquire it, you have to maintain the relationship; it’s like a marriage. Having a dedicated person for this on your governance team is mandatory.

– 27 –

MINE DE VELOPMENT

THE APPLICATION OF BLOCKCHAINS TO MINING The opportunities and challenges of blockchains. BY DR ALI SOOFASTAEI, R ESEARCH DEVELOPER AT ARTIFICIAL INTELLIGENCE CENTR E, VALE

here is no doubt that the mining industry is facing a turning point in terms of its integrated value chains because the traditional management system can no longer continue to ignore the role of new technology. A technological revolution is underway, and the use of new methods will alter mining operations throughout the value chain, assisting companies to grow by offering innovative business models to deliver improved safety advancements, productivity and energy efficiency, and to reduce the final product cost. The use of novel technology is not an optional approach for the mining industry; it is essential for mining companies to use the latest technology to survive in a competitive global market. Many large mining companies have reported significant cyber attacks recently. These attacks are designed to steal intellectual

– 28 –

property (IP) and other registered information, and they can be overwhelming for any company.1 It is obvious that security is one of the biggest challenges for the mining industry. Blockchain technology can potentially assist mining companies to avoid falling prey to security breaches. The blockchain, as a distributed digital ledger, decreases the extent of hacking incidences throughout a company by limiting them solely to the affected block. Blockchains save a record of every transaction and safely encrypt that information without third-party intervention, thereby reducing the exposure of data to hackers. Blockchains herald a global revolution and their remit will soon alter the most practical procedures of day-to-day life, particularly in the natural resources industry. Welcome, blockchains!

AUSTRALIAN RESOURCES & INVESTMENT

B L O C KC H A I N S A blockchain, or a distributed ledger, is a continually growing list of records, called blocks, which are linked and secured using cryptography. Each block typically contains a cryptographic hash pointer linking to a previous block, as well as a time stamp and transaction data (Figure 1). Blockchains are designed using highly secure methods and are modelled on a distributed computing system with significant Byzantine fault tolerance. A decentralised consensus may, therefore, be achieved using a blockchain. This makes blockchains potentially suitable for the recording of events and other record-management activities, such as identity management, transaction processing, documenting provenance, food traceability and voting. By design, blockchains are inherently resistant to data modification. Data are replicated and synchronised across individuals and locations, and may be confirmed by anyone; however, they can be transformed only by agreement with the group contributing to the network. In

Figure 1. Blockchains

this network, all records are saved in the form of blocks, and each block references another block, creating a chain. Consequently, all distributed blocks must be hacked instantaneously for an attack to be successful, guaranteeing a high level of security. A blockchain forms a trusted, extensive record book of cryptographically linked entries that no-one owns and that no-one can quickly change, but that all agree on. With a blockchain, there are no more intermediaries to serve as trust intermediaries. There are many fields in which blockchains can aid mining companies, including the provision of improved cybersecurity, increased transparency with smart contracts and better visibility of the supply chain. T H E A P P L I C AT I O N O F B L O C KC H A I N S I N M I N I N G Presumably, a blockchain could be applied across the wholeof-mining value chain. Relevant questions include whether the blockchain might add unique capabilities and business value above and beyond existing processes, what solutions it may provide, and how it would be discriminated from the more general tools for program management in use today, such as configuration management or customer relationship management. Extensive security and the ability to control complex, multiplayer engagements make blockchains attractive for commercial applications; however, there is obviously a need to be careful not to make everything a blockchain problem. Some existing solutions would work correctly if the conditions for their effective use were present. These conditions may well be identical to the requirements for blockchains: for example, timely access to accurate operational and maintenance cost data. Mining contracts that apply a blockchain improve transparency between buyers and sellers, as goods are tracked in real time from their origins, removing the possibility of fraud, guaranteeing

MINING INDUSTRY Function area

Business value

Compliance

Trading

• eliminate law suits • avoid losses to fake buyers • reduce need of governance • reduce operating risks • clearance of contracts

• create new services • eliminate broker fees • simplify payments • reduce cost of ownership • accelerate information processing and real-time trading • reduce risk management

Exploration and production

• IoT integration to track history of each device and act in critical situations • streamlining processes • reduce cost of ownership in complex contracts do not need audit each other

Logistics

Health, safety and security

• reduce • enhanced transition demurrage security and lay • high transparency to times all stakeholders • accelerated processes

Table 1. Business value of blockchain application in mining industry 2

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MINE DE VELOPMENT

• •

Improve accuracy in complex processes and helps to reduce governance overhead Eliminates barriers caused by siloed ledgers and consequently arbitrage, as the movement of assets across the globe will be done real-time

• • •

Productivity •

•

Move from paperless to only electronic transitions will make some roles redundant Reduce or eliminate resources used to monitor process security, repeat information that leads to inconsistences or duplicate activities would gain time for higher-value activities.

•

Simplicity

•

Disintermediation Efficiency

Mining Industry Transformational Potential

Can support many document data formats as only digital fingerprint of a documents and storage pointers are stored and attested to, not the actual document. Easy data and document sharing amongst many parties independent of data format

•

Transparency

Reliability & Integrity

Flexibility •

Simple and more efficient to transfer data No single party controls the data or the information on the ledger Every party has access to the entire chain of information and can verify the record of the transactions

•

Security •

• •

All transactions are publicly visible within a network unless they are encrypted (private Blockchains). Each node, and user, on a blockchain has a unique cryptographic address that identifies it. Transactions are added in a chronological order with every block containing a hash of the previous block using various computational algorithms and approaches, maintaining the source of truth

Each constituent as a digital signature that provides identity, authorization and authentication. Ledgers are used to record and cryptographically secure events incl. timestamps that prove transaction provenance.

Cryptographic proofs secure both the ledger and proof authenticity of and authority to perform transactions. Economic incentives to maintain the ledger add security

Figure 2. Blockchain application in mining industry 2

trackability, and improving logistics, visibility, transparency and supply chain quality. Blockchains offer more insight into the supply chain, making procurement and delivery simpler, more reliable and more accurate. The digital ledger includes data from all suppliers and vendors in the network, providing a comprehensive image of the supply chain in actual time. There is copious evidence of cyber attacks on mining companies with the purpose of obtaining private information and hijacking IP. Newly published reports show that mining is at the top of the list of industries receiving spam emails.1 Despite the fact that there is little difference in the frequency of spam attempts between mining and other industries, the mining industry should be concerned as approximately one-third of emails contain viruses. This is not a list at the top of which mining wants to find itself. For this reason, the mining community is turning to the use of blockchains. Blockchains remove the need for any intermediaries, affording less time to hackers trying to steal data. In addition to adding a further layer of security, blockchains could drive productivity on the Internet of Things, create cost reduction, improve tracking and streamline contracts. The application of blockchain can significantly streamline the mining industry by potentially transforming it in seven different ways, including productivity, simplicity, transparency, reliability and integrity, security, flexibility, and disintermediation efficiency (Figure 2). The application of blockchain in mining can be categorised based on their functions’ areas, such as compliance, trading, exploration and production, logistics, health, safety, and security. Table 1 illustrates some business values of blockchain in each area separately.

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B L O C KC H A I N I S T H E F U T U R E The move to distributed ledgers in the future is certain. Nonetheless, the mining industry must begin with the reliable identification of small, yet effective cases for their use that do not require the entire market to participate. Blockchain technology can fundamentally alter transactions by cutting costs to create leaner organisations and improved security. It is a game changer that offers three significant features: accountability, security and immutability. The blockchain is gradually but surely moving to fundamentally change mining paradigms. The benefits are clear: decreased operational and maintenance costs, reduced risk, the creation of new revenue opportunities and the reduction of the cost of capital. Its adoption is expected to increase over time, and it will move into production within the mining industry over the next few years; however, the question is not whether distributed ledgers will be able to disrupt significant parts of the mining sector, but whether existing, high-volume applications can be migrated to distributed ledger platforms through transformational programs fast enough to avoid loss of business or even full disintermediation. A lot depends on finding the best uses in the right context and running with them – not tomorrow, not today, but now! For more information, visit www.soofastaei.net. References 1. Blockchain technology in the mining industry. (2017, Jan 21). ICT Monitor Worldwide. 2. Six Answers to get Blockchain right in the Natural Resources sector. (2017, May 10). Filip Mota da Silva. LinkedIn.

AUSTRALIAN RESOURCES & INVESTMENT

AUTOMATED GROUNDWATER MONITORING Heathgate Resources is trialling a world-first automated groundwater monitoring and reporting system that will save time and money, while paving the way for a new standard in environmental best practice for in situ mining. BY LOUISE POBJOY, CSIRO

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ENVIRONMENT

ffective groundwater management is vital for helping in situ recovery (ISR) and other mining sites to operate safely, efficiently and meet government regulations. It is also crucial for protecting the environment and local communities. The current best practice method for ISR operations relies upon a manual ‘pump and test’ method that has significant challenges. These include high installation and labour costs, high maintenance requirements, and lengthy processing times that delay corrective actions and can put the environment at risk. ‘To date, there is no embedded automated groundwater monitoring system that exists for ISR operations,’ CSIRO industry trial project lead Daniella Caruso says. Developed by CSIRO, SENSEI is the world’s first automated, real-time monitoring and reporting system that operates in remote and extreme conditions, including low pH conditions (acid) and groundwater pressures of at least 20 bar (i.e., to depths of around 200 metres below ground level). The end-to-end sensor, hardware and software solution features robust, solid-state electrochemical sensors for measuring multiple chemical properties in embedded aqueous applications. The small, proprietary button-sized sensors include a novel reference electrode, and measure oxidation-reduction potential and pH. Third-party conductivity, pressure, depth and temperature sensors have also been integrated into the product. The systems are currently hardwired for data and power transfer between the local surface communication gateway and sensor pack. Data from the gateway can be transmitted to an online server using wireless options. Measurements can be taken and transmitted as often as every few seconds, and sent to an online data server. This data can be viewed securely and live from anywhere in the world via a dashboard that makes it easy to interpret and make quick decisions. SENSEI offers a solar-powered solution for off-grid applications, and can be integrated with existing third-party systems or devices. ‘We can customise the software and hardware by adding or removing features so it suits our customer’s purpose and needs,’ Caruso says. In partnership with Heathgate Resources, Boss Resources and National Energy Resources Australia (NERA), CSIRO is trialling 10 SENSEI sensor packs at Heathgate’s Four Mile West uranium mine, situated in the Far North of South Australia. ‘The objective is to test the sensors in controlled conditions alongside current manual monitoring techniques,’ Heathgate Resources HSSE Regulatory and Compliance Superintendent Kathryn Levingstone says. ‘And with government support – subject to it all going well – have it recognised it as an approved or best practice technology.’ If the first trial phase is successful, 16 more sensor packs will be deployed in April 2019. ‘It will be a 12-month trial that will give us a really good indication of how the sensors are working,’ Caruso says.

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The current best practice method for ISR operations relies upon a manual ‘pump and test’ method that has significant challenges ‘We are already receiving measurements from the wells, so that’s given us confidence that we’re measuring and collecting data, which is exciting.’ Because staff no longer needs to manually take, transport and analyse samples, or enter and report data, SENSEI will reduce operational costs and help Australian mining companies to be more globally competitive. ‘The uranium market is in quite a tight place,’ Levingstone says. ‘Some of our overseas counterparts can produce uranium via ISR methods at a much more competitive price, due to lower costs and less rigorous regulatory standards.’ SENSEI sensors are also easier and cheaper to maintain than their current counterparts. ‘With a standard commercial pH electrode, you need to calibrate and do general maintenance – like cleaning and topping it up with solution – on a daily basis,’ Caruso says. ‘Whereas our solid-state pH electrode is fine for months with no daily maintenance once calibrated.’ The sensors are more stable and have a significantly longer life span than other sensors in harsh environments, thanks to the unique solid-state electrodes, construction materials, and specialised, Australian-designed casing and electronics. According to SENSEI’s co-inventors, CSIRO scientists Miao Chen and Mikko Vepsalainen, a traditional pH electrode is not designed to be embedded inside wells at depths of 100–200 metres. But, SENSEI’s stable reference electrode allows its sensors to operate for extended periods with little signal drift. The cases are also highly acid-resistant and can withstand the pressures at these well depths. SENSEI’s real-time results improve safety for the environment and local communities. Mining companies get results on the spot – instead of waiting up to two months using manual systems – so they can respond immediately to changes in water conditions. This will also help to improve all-round confidence in groundwater monitoring. ‘By getting real-time results, you can ensure that you’re not having a negative impact, or that any impact is contained immediately,’ NERA Project Manager Tim Duff says.

AUSTRALIAN RESOURCES & INVESTMENT

Sensei team

It’s hoped that online access to real-time data will increase trust between industry and government regulators. ‘We’d love to increase transparency with government agencies through use of this technology. The live, web-based monitoring portal enables review of the data at any location and at any time,’ Levingstone says. ‘SENSEI is a great example of Australian-developed technology, local manufacturing and local employment combining to solve a national challenge,’ CSIRO’s SENSEI Portfolio Leader, Kathie McGregor, says. Through ON Accelerate, a national technology and innovation accelerator program powered by CSIRO, the team behind SENSEI received funding to make a viable product. The team commissioned an Australian electronics manufacturing company to make a prototype, and contacted Heathgate to see if it was of interest. CSIRO’s team tailored SENSEI to Heathgate’s specific needs, including adding water pressure and depth sensors, and solar-powered gateways. Heathgate successfully applied to NERA for funding for the trial and brought Boss Resources on board as part of the funding agreement. Duff explains that NERA was happy to support the trial, seeing it as an opportunity for increased industry research collaboration with potential to commercialise Australian technology. ‘Regulatory groundwater monitoring for recovery operations is a costly and resource-intensive activity,’ Duff says. ‘We hope to show that this innovative Australian solution can be successfully and cost-effectively integrated into operational environments to reduce monitoring costs, and improve timeliness and environmental outcomes.’

Dr McGregor explains that CSIRO is exploring opportunities to partner with other mining and METS (mining equipment, technology and services) companies to conduct more commercial field trials of SENSEI in a variety of applications. As it needs little maintenance and is stable in acidic environments, SENSEI is ideal for monitoring areas with low pH and where current sensors aren’t effective, such as acid-mine drainage legacy sites, and remote or abandoned mining sites. It could also be used to monitor mine tailings, environmental toxicity, water quality at waste treatment plants or mineral leaching processes. It may even have applications in the pharmaceutical, food and beverage industries. SENSEI also offers a great opportunity to promote Australian technology overseas. ‘One direct application within international in situ mining operations is export into the United States and Kazakhstan markets to improve global environmental outcomes in those areas,’ Duff says. But until the trial’s completion in 2019, the focus remains on the Australian mining industry. ‘Nearly every mine has an impact on groundwater, and needs to monitor and manage it,’ Levingstone says. ‘Without any current commercially available technology to do that, the potential opportunities within the mining industry are tremendous.’ For more information, call Daniella Caruso on 03 9545 8847 or email daniella.caruso@csiro.au; or call Kathie Mcgregor on 03 9545 8912 or email kathie.mcGregor@csiro.au.

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E N V IRRI O N M E N T

A new radar level transmitter for the water-supply and sewage industry

VEGA radar level transmitters are proven in service and continually developed.

he VEGAPULS WL S 61 radar sensor is ideal for all simple applications in the water-supply and sewage industry. Featuring a wide range of mounting options, it is an especially cost-effective radar solution, as it can be readily integrated into new and existing installations. Just as with the VEGAPULS WL 61, which has been available for several years with a large installed base, the new VEGAPULS WL S 61 offers a design optimised for use in the water-supply and sewage industry. Radar technology offers numerous advantages compared to ultrasonic sensors, which used to be standard in this industry. For example, radar functions independently of weather influences, including strong sun, wind, fog or rain. In addition, no compensation is needed for variations in the signal transmission time due to air temperature fluctuations. With an accuracy of +/- five millimetres, the VEGAPULS WL S 61 covers a wide range of applications. This sensor is particularly suitable for level and flow measurement in water treatment plants. Its excellent

– 34 X ––

focusing enables it to be used in pumping stations and rainwater overflow basins, for flow measurement in open channels, and for level monitoring. The sensor’s robust housing is wearresistant and maintenance-free, and its high degree of protection, IP 68 (two bar), also makes it suitable for applications where the sensor may be temporarily submerged. The unit complies with the latest level probing radar (LPR) standard, and is approved for open-air use without restrictions or special attachments. In the development of this new sensor for simple measurement tasks, VEGA drew on its many years of experience. Already, there are more than 40,000 VEGAPULS WL 61 sensors successfully used worldwide in the water-supply industry. An entirely new feature is bluetooth wireless operation from a smartphone or tablet (and/or a PC with PACTware) when combined with a bluetooth USB adapter; this makes commissioning and diagnostics even simpler. Corresponding display and signal processing units enable the display of measurements

and provide the relay outputs needed, for example, to control a pump. For more information, go to www.vega.com/wls61. TECHNICAL DATA Measuring range

Measuring accuracy

+/- 5 mm

Cable length/material

12 m / PUR

Process temperature

-40–600C

Process pressure

-1–2 bar

Process connections

Thread G 1 ½ ‘‘

Housing protection type Output signal Operation Ex approvals

IP66/68 (2 bar) 4–20 mA App or DTM via Bluetooth none

Low-cost level measurement. Radar sensor for water management. Reliable level measurement in water treatment facilities, pump stations and rain overflow basins. Open channel flow measurement and water level monitoring.

VEGAPULS WL S 61 ▪ Measuring range up to 8 m

▪ Can be used outdoors without restriction ▪ Flood-proof IP 68 housing

▪ Operation via Bluetooth with Smartphone, tablet or PC

Further information: www.vega.com/wls61

Phone 1800 817 135

GOLD

2019 is gold’s year to shine BY GAVIN WENDT, MINELIFE PT Y LTD

You have to choose (as a voter) between trusting the natural stability of gold, and the natural stability of the honesty and intelligence of the members of the government. And, with due respect for these gentlemen, I advise you, as long as the capitalist system lasts, to vote for gold. — George Bernard Shaw

t was only a matter of time before the fragility of the current US political and economic situation was laid bare: a situation that has translated directly into a solidly recovering gold price. Speculation around the health of the US bull market, the future path of interest rates, international trade and the future of Trump himself have seen gold surge by more than $100 per ounce since mid August. Let’s take a look at recent events. Markets were optimistic going into the final Federal Reserve Board (Fed) meeting of the year on Wednesday 19 December. Volatility in the stock market, an ongoing trade dispute with China, sluggish economic growth in Europe, and the recent inversion of the yield curve caused many market participants to hope that the Fed would pause rather than hike the Fed Funds rate. Furthermore, President Trump has been a consistent critic of the Central Bank and his appointee, Chairman Jerome Powell. And in typical Trump fashion, he’s taken to Twitter to express his views. With rising calls for the Fed to leave rates unchanged, the price of gold rallied and stocks began to move to the upside; however, the Fed is an apolitical body and decided that the current environment – when it comes to GDP growth and employment data – called for

– 36 –

another rate hike, subsequently increasing its Fed Funds rate to 2.25–2.50 per cent. Now, while the market had expected the rate increase (after all, the Fed had promised it in June), most participants looked for a dovish statement and press conference, which would acknowledge the current market volatility and risks to the economy. The Fed subsequently reduced its guidance for 2019 – cutting the number of increases in the Fed Funds rate from three to two – but it was not enough to satisfy a disappointed market. The dollar rallied in the aftermath of the Fed announcement and Chairman Powell’s press conference. At the same time, both stocks and gold fell, as the market views tightening credit as toxic in the current environment. Gold equities weren’t spared either, with a combination of weakness in equities and the gold price itself sending gold mining shares lower; however, the following day, gold turned higher and the US dollar fell, as fear and uncertainty gripped markets. In a reversal of fortune for the gold market following the Fed rate hike, the price approached the 50 per cent retracement level of its fall from its April high to its mid August low. Furthermore, in an additional sign of strength for the gold market, gold’s price recovery since August has been robust, even though the

AUSTRALIAN RESOURCES & INVESTMENT

US dollar has moved to higher highs over the period. The most recent peak at just under 97.0 in the dollar index did little to deter the move to the upside in the gold futures market. After reaching a low at $1173.20 in mid August, gold has made higher lows and higher highs as it reached its most recent peak at $1320 on 30 January, a rise of $147 or 12.5 per cent – a positive trend as we begin 2019. Quite simply, gold has been a beneficiary of the fear and uncertainty that is gripping the stock market these days. While other commodities including crude oil and copper have experienced significant price declines, the yellow metal is at its highest level since mid July, as the bullish trend continued at the end of this year. Figure 1

S O , W H AT C A N W E E X P E C T I N 2 0 1 9 ? All signals point to a continuation of volatility in markets across all asset classes in 2019. The trade dispute between the United States and China continues to threaten the global economy. Furthermore, the potential for issues on the geopolitical landscape remains high going into 2019. Brexit will come to a head with a deadline of 29 March 2019. Meanwhile, the European Union faces myriad political and economic problems with their membership. Russia, China and North Korea could become problematic over the coming year. At the same time, the Democratic majority in the House of Representatives promises to create friction between the branches of government in the United States. The situation isn’t being helped by the current US Government shutdown over the border security issue. Markets reflect political and economic events, and as we move into 2019, there are more than a few issues that are likely to keep price variance high in markets across all asset classes. Accordingly, gold’s recent price action has been a response to the volatile year that lies ahead. To put things into even greater perspective, let’s take a look at the performance of the gold price in Australian dollar terms over the past 20 years. What we see is a situation where prices are currently trading at – or very close to – record levels. This, in turn, has flowed through into the earnings of our highflying mid cap gold companies like Northern Star Resources (ASX: NST), Evolution Mining (AZX: EVN) and Saracen Minerals (ASX: SAR). Figure 1 shows their share price performance over the past two years – a period that most experts would agree has been a tough one for the gold market. These companies, among a host of other Aussie gold players, have benefited from the strong Australian dollar gold price, robust operating margins and relatively low operating costs. They’ve been able to accumulate cash and rapidly pay down debt – a stark contrast to many overseas gold companies.

CONCLUDING THOUGHTS I believe that the gold price will continue its bullish price pattern that began in mid August. There are a host of factors that are supportive of gold, not the least of which is the ongoing turmoil directly related to the Trump presidency. Trade concerns with China and the rest of the world, the ongoing government shutdown in the United States, falling equity markets, and the mass resignations/firings taking place among Trump’s senior hierarchy are also contributing factors. And things have the potential to deteriorate further in early 2019, with the Democrats now assuming control of the House of Representatives and former Trump lawyer, Michael Cohen, set to testify before Congress about his past dealings with Trump. There is likely to be no end to the volatility. This is, of course, great news for gold, and I believe that prices will consolidate between $1250 and $1375 during calendar year 2019.

– 37 –

GOLD

Golden ambitions Golden Rim Resources’ Burkina Faso gold production ambitions have received a major boost, thanks to the upgrade of the gold resource at the group’s flagship Kouri project in the West African nation to 1.4 million ounces.

he 40 per cent increase in the resource estimate was announced in early December and succeeded in getting Golden Rim, with its modest but growing market capitalisation, firmly on investor radars. The company has also added fresh momentum to the rise of investor interest by adding three new potential growth legs to its Burkina Faso push, raising expectations that the company could become a multimillion ounce gold story before long. First up, the Red Hill ‘satellite’ gold deposit – 4.5 kilometres south-west of Kouri – has continued to demonstrate excellent continuity and remains open at depth. Its best recent results included 10 metres at 4.1 grams per tonne of gold. Then there was the recent agreement to acquire two exploration permits – Goueli and Margou – from the Pella Group, which will emerge as a 15 per cent Golden Rim shareholder. The

– 38 X ––

permits are adjacent to the eastern boundary of the Kouri permit. Golden Rim Managing Director Craig Mackay says the acquisition will secure the direct strike extent of the 1.4-million-ounce Kouri resource, providing a further 24 kilometres of highly prospective shear zone to explore for additional gold resources. ‘If we look at the magnetics, the same sort of structure is heading into the ground next door. And there has been some previous drilling there that hit some material. So, we are pretty confident that we are going to be able to extend that 1.4 million ounce Kouri resource across the boundary,’ Mackay says. Apart from the mineralisation extending into the newly acquired ground, a big granite intrusion some 10 kilometres from the current permit boundary also represents a new opportunity for Golden Rim. ‘There is mineralisation wrapping around the intrusion, which is the

subject of artisanal workings. It is actually high-grade quartz veins in granite. So, I think that there is real potential there for something of decent size,’ Mackay says. The third new potential growth leg for the company is the recently identified footwall shear zone that lies adjacent to, but outside of, the Kouri resource. It is suspected to be the main fluid transfer pathway for mineralisation at Kouri. Recent drilling returned two highgrade intersections separated by 300 metres (four metres at 44.7 grams per tonne of gold from 34 metres and three metres at 8.4 grams per tonne of gold from 10 metres). ‘The structure goes for about five kilometres in our ground and it crosses the boundary into the ground that we are picking up (Goueli and Margou) where it probably goes for the same distance again,’ Mackay says. ‘It is a major exploration target for us.’

1.4 million ounces and growing Golden Rim Resources

Kouri Gold Project, Burkina Faso

A decade of discoveries www.goldenrim.com.au | ASX : GMR

GOLD

GOLDEN TIMES BY ANTHONY FENSOM

Gold bugs are basking in the spotlight after a bright start to 2019 for the yellow metal. Amid multi-billion-dollar merger and acquisition (M&A) deals, increased central bank buying and slowing US interest rate increases, are the good times here to stay?

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AUSTRALIAN RESOURCES & INVESTMENT

MERGER MANIA Gold’s re-emergence was sparked by a mega-takeover deal in September 2018 that saw the precious metal back in the headlines. Canadian miner Barrick Gold’s US$5.4-billion acquisition of Randgold Resources sparked an M&A frenzy, leading to US miner Newmont Mining’s subsequent US$10-billion play for Canada’s Goldcorp. The sudden burst of activity, coupled with a rising gold price, geopolitical worries and the US Federal Reserve’s apparent slowing of future rate hikes, has revitalised the industry, including in Australia. ‘Merger mania is here and will save the sector,’ was the headline of a report by Macquarie Bank, which highlighted the potential for ‘a new cycle of acquisitions, exploration and construction’. The bank’s analysts wrote that the industry’s fragmentation had resulted in an inefficient allocation of capital, duplication of corporate and management costs, and increased competition for a limited pool of development-stage assets. Macquarie argued that ‘investable’ gold miners needed to have a market capitalisation of at least US$3 billion and daily stock turnover of US$30 million. With only around 10 companies fitting that criteria, the analysts predicted further consolidation among the larger miners. Among the Australian miners, Newcrest Mining and Northern Star have been nominated as two potential deal-makers. Macquarie’s analysts also pointed to the increasing amount of investor dollars going into either royalty-streaming companies or exchange-traded funds (ETFs), which now account for around onequarter of total gold investments. ‘We are seeing more interest in gold names and more incoming calls after a poor-performing 2018,’ investment bank Credit Suisse says. ‘Mergers have rekindled near-term interest in the sector, along with rising gold.’ PRICE RISE In late January 2019, the gold price moved above US$1300 (A$1820) an ounce for the first time since May 2018. The rising price and weaker Australian dollar have given local miners a timely boost, particularly with miners such as Newcrest and Evolution posting average all-in sustaining costs of around US$800. ‘A lot of large and mid-tier miners in Australia have all-in sustaining costs of around A$1000 per ounce, so we could see some serious cash generated over the next 12 months,’ Australian Bullion Company’s John Feeney told Australian Mining. Analysts at Goldman Sachs have predicted that the gold price could climb as high as US$1425 an ounce over a 12-month period. ANZ Research is also bullish, tipping an average price of US$1302 this year and US$1369 in 2020. Morningstar’s Senior Equity Analyst, Resources, Mathew Hodge, favours gold over other commodities. ‘Gold is tied to consumption growth in China and India, and should fare better than the investment-driven (iron ore, metallurgical coal, copper, alumina) commodities,’ he said in a 13 December report. Gold’s re-emergence has also been aided by increased central bank buying. In 2018, governments added more than 650 tonnes of gold to their coffers, up 74 per cent from the previous year and the biggest amount acquired since 1971, according to the World Gold Council (WGC).

Russia, which reportedly is ‘de-dollarising’ its reserves, led the government buyers, followed by Turkey and Kazakhstan. ‘Central banks chose to significantly increase their gold reserves, reinforcing the importance of gold as a reserve asset,’ the United Kingdom–based WGC says. The year also saw steady annual jewellery demand, rising retail investment but a contraction in ETF inflows, which dropped from more than 200 tonnes in 2017 to below 70 tonnes last year. The WGC suggests that increased market uncertainty and growing protectionism should make gold ‘increasingly attractive as a hedge’ in 2019, with economic reforms in key markets supporting demand for gold in jewellery, technology and as a means of savings. ‘While gold may face headwinds from higher interest rates and US dollar strength, these effects are expected to be limited, as the Fed has signalled a more neutral stance,’ the WGC says. $20-BILLION E XPORTS The Australian Government’s official forecaster is also seeing a brighter outlook. In its December 2018 Resources and Energy Quarterly, the Office of the Chief Economist predicted that gold prices would increase in 2019 and 2020. ‘Gold is likely to benefit from a levelling out in the US dollar in 2019 and 2020, as US economic growth peaks, and the US interest rate cycle tops out,’ the report says. A correction in US equity markets ‘would likely result in fund flows into gold,’ it adds, pointing to political instability following the US mid-term elections in 2018. The government forecaster sees the gold price averaging US$1275 an ounce and US$1310 in 2019 and 2020, respectively, with US–China trade tensions also supporting higher prices. For the world’s second-largest producer, Australia’s export earnings for gold are projected to reach $20 billion by fiscal 2020, on the back of higher prices and a lift in export volumes to 359 tonnes. Buoyed by higher prices and investor support, gold exploration expenditure rose by 24 per cent year on year in the September quarter 2018 to $240 million, of which Western Australia accounted for 73 per cent. Domestic production is seen growing to reach 320 tonnes by fiscal 2020 on the back of both mine expansions and new mines. Among the former are Evolution Mining’s Cowal mine expansion, Newcrest’s Cadia Valley expansion project and Northern Star’s Jundee expansion. New mines expected to commence production include Capricorn Metals’ Karlawinda mine and Gold Roads’ Gruyere mine, both in Western Australia. Victoria has also joined the new gold rush, led by Kirkland Lake Gold’s Fosterville operation, along with the planned restart of operations from the historic Morning Star and Rose of Denmark mines. Not to miss out, the Queensland Resources Council proclaimed in a September 2018 announcement that the state had ‘won the Melbourne Cup’, with Evolution’s Mount Rawdon mine near Bundaberg producing the gold for the prized trophy. For Australia’s gold industry, 2019 is shaping up as a winning year, with the excitement of an M&A boom adding further shine to the yellow metal’s performance.

– 41 –

GOLD

RNC to follow up Father’s Day Vein discovery RNC Minerals’ Beta Hunt nickel-gold mine, near Kambalda in Western Australia, has been given a new lease on life as a high-grade gold operation following last September’s discovery of the spectacular Father’s Day Vein.

he discovery yielded 25,000 ounces of gold from a small underground rock cut, and contained some of the biggest goldin-quartz specimen stones, or ‘slabs’, ever found, revitalising the ageing Beta Hunt mine in the process. Massive gold specimens mined from the vein – including the 1402-ounce King Henry specimen – are still on a world tour of mining conferences, museums and rock collector shows ahead of being sold at big premiums to their gold content. Importantly, the discovery was RNC’s reward for being the first owner of Beta Hunt to drill test sediment bands found 150 metres below the contact, between the Lunnon Basalt and the overlying Kambalda Komatiite – the focus of 50 years of nickel operations and the occasional source of high-grade gold pods. The exciting aspect for RNC is that while the same mechanism creates the gold adjacent to the nickel lenses and in the sediment layer, the sediment layer is property-wide, while the nickel lenses make up only a small fraction of the overall strike length. President and Chief Executive of the Canadian company, Mark Selby, says that while Beta Hunt was a 50-yearold nickel mine, it is now ‘basically a brand-new gold deposit’ that had the development benefit of four kilometres of historic gold intercepts, and a fivekilometre ramp to the surface sitting directly above where the gold starts. ‘We always thought we had the potential for a very large underground gold operation, although we never had the capital in the past to drill it out. But with the Father’s Day Vein discovery, we have been able to put the capital in place to really start unlocking the potential,’ Selby says. Selby expects that Beta Hunt’s four known shear zones will provide its gold production base while super high-grade material from the sediment layer will be the cream on the top. ‘We’ll see how much cream we find as we go along,’ he says.

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Beta Hunt Mine gold specimen

RNC followed up the Father’s Day Vein discovery with an intensive drilling program. First results were reported in late January and included high-grade hits at Western Flanks shear from testing of the sediment layer, and high-grade hits at the A zone targeting the sediment layer and the shear zone near Father’s Day Vein. Best results at Western Flanks

included an intersection of 1017 grams per tonne (32.6 ounces per tonne) over two metres, including 7621 grams per tonne (245 ounces per tonne) over 0.27 metres. Best results from A zone included 119.37 grams per tonne (3.83 ounces per tonne) over 6.4 metres in the shear, including 1406 grams per tonne (45.2 ounces per tonne) over 0.5 metres.

COPPER

Copper THE GREAT

COMEBACK

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AUSTRALIAN RESOURCES & INVESTMENT

An in-depth look at copper’s resurgence and what are predicted to be better days for the red metal.

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COPPER

Encounter making the most of its resources Encounter Resources is set to have its biggest year yet on the exploration front.

he exploration action will be spread across three key Western Australian project areas in joint ventures with leading mining groups, and on 100 per cent owned Encounter ground. In keeping with Encounter’s guiding strategy since joining the ASX lists in March 2006, the projects all come with the potential for large-scale gold and base metals discoveries. Encounter Managing Director Will Robinson says 2019 will be the company’s ‘biggest year ever in terms of investment in the ground through drilling’. ‘With the funding in place and our joint ventures, we are trying to make sure that there is exposure for shareholders to multiple, largescale exploration opportunities. ‘Over the last 18 to 24 months, we have put a lot of effort into putting the building blocks in place to deliver on that in 2019,’ Robinson says. He estimated that Encounter would be involved in the drilling of 10-12 tier one–type exploration targets during the year, making Encounter one of the Australia’s most active junior explorers. The exploration effort will take in programs in the Tanami-West Arunta region in partnership with Newcrest Mining, the Paterson Province in partnership with Independence Group, and the southern extension of the prolific Laverton Tectonic Zone beneath cover (100 per cent Encounter). Robinson says it is likely that the Laverton project would be the first to be drilled this year. Using an ultrafine geochemical sampling method developed by the CSIRO, Encounter has zeroed in on an interesting anomaly on a structure south-east of the Carosue Dam gold mine. ‘We are going to run some aircore drillholes over that first up in what will be a proof of concept effort,’ Robinson says. To protect the regional upside to what could be a breakthrough exploration technique, Encounter now has 700 square kilometres under tenement application. Exploration in the Paterson and the Tanami-West joint ventures will get started

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around midyear, although the actual drill plans are yet to be pinned down. In the Encounter-managed joint venture with Independence in the Paterson, large-scale copper-cobalt targets along a 70-kilometre-long prospective corridor will be targeted. Independence has cemented its relationship with Encounter by taking up a 9.15 per cent shareholding. The Paterson has become an exploration hotspot thanks to the Winu

copper discovery by Rio Tinto. As a result, the Encounter-Independence exploration program is set to be keenly watched. That is also true for the Tanami-West Arunta joint venture with Newcrest, Australia’s biggest gold producer. Under a project generation alliance, five joint venture project areas were selected last year that will be the subject of exploration work later this year. The alliance was also extended for a further 12 months.

A key player in the Paterson province

More than 1,400km² of tenure in the Paterson including the Yeneena Copper-Cobalt Project Exploration activity to ramp up in 2019 through 3D target definition and drill testing Broad project portfolio including five 50:50 joint ventures with Australia’s largest gold producer Newcrest Mining (ASX: NCM) in the Tanami and West Arunta province

As a fast mover and early adopter of cutting edge technologies and datasets, Encounter Resources (ASX: ENR) is at the forefront of finding the next generation of Tier 1 mineral deposits in Australia. In November 2018 Independence Group NL (ASX:IGO) and Encounter joined forces to advance Yeneena.

enrl.com.au

COPPER

COPPER POSITIONS FOR A COMEBACK Despite global uncertainties and China’s economic woes, the red metal still promises better days, says Steve Freeth.

hen Apple, the world’s richest company, recently said its performance in China had hit a wall, it made headlines globally and sent markets into a tailspin. Copper followed suit, as analysts and investors digested what looked like confirmation of China’s slowing growth. That’s a big deal when the country takes nearly half the world’s supply, estimated at about 24 million tonnes this year. The copper price has fallen by more than US$1000 per tonne since optimism peaked early in 2018. Alongside Apple’s stumble, other major overseas companies have also struggled in China lately, including Samsung, Daimler, HP Inc, Nvidia, Caterpillar, Tiffany & Co. and Starbucks. Falls in investment, consumer spending and factory activity all recorded drops last year, with the China Passenger Car Association saying auto sales in the world’s biggest car market slumped for the first time in over two decades in 2018. While US-imposed trade tariffs keep playing a role ahead of new talks already underway, it’s the outsize impact of a cooling China that’s kept markets guessing. Official Chinese statistics had the country growing at 6.6 per cent, its slowest for 28 years. China has taken some steps to calm markets. Vice-President Wang Qishan told the World Economic Forum in Davos recently that the rate is ‘not low at all’, saying the country is no longer chasing rapid growth, focusing instead on refining its economic structure, quality of growth from exports to consumer spending and services, and its efficiency. The government has also extended a fairly cautious fiscal and monetary stimulus. The People’s Bank of China recently freed up $210 billion of liquidity aimed at helping private sector companies concentrated in the manufacturing, real estate, retail and wholesale sectors get access to credit.

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COPPER IS KING No-one is quite sure just how the China story will pan out, especially if trade talks with the United States falter. But the Director of the International Monetary Fund, Christine Lagarde, also told the world’s finance and political elite at Davos that the ‘world economy is growing more slowly than expected, and risks are rising’. Copper is certainly being buffeted by no end of short- to mid-term concerns, but a major new report from global analyst Fitch Solutions says that copper demand will keep rising, driven by demand from the energy industry and electric vehicles. Specifically, they see global copper demand increasing 2.6 per cent per year, with the world seeing persistent undersupply and market deficit over the next few years through to 2021. A growing consensus puts the copper market deficit at 64,000 tonnes this year, up from 44,000 tonnes in a previous poll. As a result, miners and explorers are already on the hunt for new projects. The United States – once seen as a fairly moribund copper market – is now seeing major activity, with new mines expected to come online for the for first time in over a decade. With over a $1 billion in investment, companies like Nevada Copper Corp, Taseko Mines Ltd, THEMAC Resources Group Ltd and Excelsior Mining Corp are all aiming to open copper mines by the end of 2020. ‘Copper is king for this electrification trend taking over the global economy,’ Matt Gili, Nevada Copper’s Chief Executive, told the media recently. ‘We see demand increasing steadily in the years ahead and, so far, supply is not keeping up.’ Chile, already the world’s largest refined copper producer, is expected to exceed six million tonnes for the first time this year and continue to rise by about 30 per cent over the next 10 years. The country could reach

AUSTRALIAN RESOURCES & INVESTMENT

Domestic output, foreign demand and copper prices are forecast to rise over the next five years, increasing unrefined copper exports a record of 7.25 million tonnes as early as 2025, thanks mainly to new projects and planned expansions to come online this decade. Fitch also points to India as an emerging global copper star. With government support to increase output and lower the costs of production, Fitch forecasts India’s refined copper production to increase from 925 kilotonnes in 2018 to 1.8 million tonnes by 2027, averaging 7.3 per cent annual growth. HOME RUNS It’s a similar story for copper here, too. According to market analysts

IBISWorld, Australia’s copper ore production is expected to increase in 2018–19, as the industry’s major players ramp-up output in response to stabilising prices. ‘Domestic output, foreign demand and copper prices are forecast to rise over the next five years, increasing unrefined copper exports,’ IBIS’s latest Copper Ore Mining Report says. The company says that copper output is expected to increase at an annualised 1.0 per cent over the five years through 2023–24, as new copper mines are projected to start operation over the next five years or existing projects increase production levels. OZ Minerals Limited is one of those. Its Carrapateena mine in South Australia is scheduled to begin operating later this year, with plans to develop it into a 4.25-million-tonnes-per-year – 65,000 tonnes of copper and 67,000 ounces of gold – mine with a 20-year mine life. The company’s Prominent Hill mine will also be expanded to an underground capacity to 3.7–4 million tonnes. Other companies are equally as upbeat. BHP Billiton is planning to increase copper ore output and capacity at its Olympic Dam mine over the next five years, to 230 kilotonnes per year over the next five years and 450 kilotonnes per year over an extended time frame. Glencore and Newcrest’s Cadia mine are also projected to increase their output over the same period. Oz Mineral Limited’s CEO summed up the mood recently, telling the media that, ‘There are just not enough copper discoveries around the world to replace the depletion rate that we’re seeing’.

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COPPER

Auroch Minerals stakes copper claim Auroch Minerals has expanded its South Australian base metals hunt to include an exciting new project in South Australia’s Lake Torrens region, currently the hottest region globally for copper investment, exploration and discovery.

he new project comes at a busy time for Auroch, with the company following up promising exploration results achieved in 2018 at its two existing base metals projects – the Arden project to the north-east of Quorn, and the Bonaventura project on Kangaroo Island. The addition of the Torrens East Copper project represents a highprofile focal point for the company, with the project being adjacent to market darling Torrens joint venture (Aeris Resources and Argonaut Resources), which recently started drilling for South Australia’s next big copper deposit. The joint venture’s progress has been keenly watched, with commencement of exploration in November 2018 coinciding with a significant ramp-up in the share price of the joint venture partners, sparking near-ology activity for adjacent properties, including Auroch. Sharing a portion of the same large gravity anomaly as the Torrens joint venture, Auroch is currently collating all of the available data to design an exploration program for its own ground.

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Meanwhile, Auroch’s Arden project – a 3.5-hour drive from Adelaide in a region home to the Beltana (zinc), Angas (zinc) and Kanmantoo (copper) deposits – will be the subject of a new drilling program in 2019. Arden generated plenty of interest last year when early drillholes confirmed the presence of extensive but low-grade zinc in sedimentary exhalative (SedEx) mineralisation, first discovered by Kennecott (now part of Rio Tinto) between 1966 and 1972. It was not until the last hole in Auroch’s program that results really began to excite, with high-grade mineralisation – 12.8 metres at 4.96 per cent zinc from 53 metres, including 3.65 metres at 15.47 per cent zinc from 62.15 metres – encountered within the same limestone formations that host the Flinders project deposits (Perilya Limited), such as the high-grade Beltana Zinc Mine, which is located approximately 150 kilometres to the north of the Arden project. ‘We drilled that hole because our team identified an ironstone gossan

coinciding with an interpreted fault intersecting the known SedEx horizon,’ Platel says. ‘We will spend the next few months identifying similar geological targets for the next program of drilling.’ Down on Kangaroo Island, Auroch is also encouraged by results from a limited drilling program last year, which confirmed base metal potential across a number of prospects. Drilling at the Dewrang prospect, in particular, demonstrated that a 1.5-kilometre geophysical anomaly appears to correlate with base metal mineralisation including 8.9 metres at 2.12 per cent zinc and 0.5 per cent lead from 180.6 metres. Platel says their activity level reflects Auroch’s strategy to be an ‘aggressive’ explorer to distinguish itself from ‘a lot of juniors out there, who just sit on their hands’. ‘We are still actively looking for other base metals projects in Australia, with due diligence underway as we speak,’ says Platel. Auroch is staking its claim for copper in South Australia and remains an active explorer. Watch this space.

COPPER

Orion Minerals has a lot more ore to give

rion Minerals (ASX: ORN) is poised to join the ranks of ASX-listed base metals producers from its Prieska zinc-copper project in South Africa’s remote Northern Cape province. A key milestone in returning Prieska to production – it was mined until 1991 by AngloVaal and produced one million tonnes of zinc and 430,000 tonnes of copper – looms in the June quarter with the expected issue of a mining right. The June quarter will also see the release of a bankable feasibility study (BFS). The BFS will build on the positive scoping study released in December, which pointed to a phase-one development costing $300–$330 million, capable of generating an estimated $130 million annually in after-tax-free cash flow. Orion Managing Director Errol Smart says the company is ‘operating in a unique part of South Africa, and we are going to deliver a unique value proposition’. The release of the BFS will bring finance

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discussions to a head in the December half. ‘We are already in discussions with a number of banks,’ Smart says. ‘It has been encouraging, too, as the banks have been finding us, including the development finance institutions. It reflects the fact that there is an enormous amount of capital available in South Africa for projects post–feasibility study, like Prieska will soon be. ‘With the mining right in our hands by April/May, we don’t see why we won’t be breaking ground in the fourth (December) quarter this year,’ Smart says. Although Prieska processed 45 million tonnes of ore – and left behind seven million tonnes in supporting pillars – in its previous life, work by Orion has confirmed that it has a lot more ore to give up in the years ahead. Orion recently increased the mineral resource estimate for the main deep sulphide zone and an open-cut ore position to 30.49 million tonnes grading

3.7 per cent zinc and 1.2 per cent copper. Importantly, 19.13 million tonnes is in the higher confidence indicated category. ‘This is an exceptional ore body, and it remains open. We forget that some of the highest-grade intersections ever drilled in to this ore body are right on the edge of the indicated resource. There are not many ore bodies where you have the opportunity to continue to expand and extend it,’ Smart says. He adds that the exploration upside means there could be an opportunity to either expand the planned 2.5-milliontonne-a-year production rate, or to extend the life of the mine, which the scoping put at a current 10 years. Near-mine exploration upside has also been confirmed with the recent volcanogenic massive sulphide (VMS) discovery at the Ayoba prospect, 5.3 kilometres from the main Prieska VMS resource. VMS deposits are known to occur in clusters.

On the horizon… a major new 21st century African zinc-copper mine Developing the Prieska Zinc-Copper Project, South Africa • Located in infrastructure-rich, established mining district – Northern Cape, South Africa • World-class VMS Resource inventory: Total Indicated and Inferred Resource – 30.49Mt at 3.7% Zn, 1.2% Cu

PRETORIA JOHANNESBURG

UPINGTON

Deep Sulphide Resource – 28.73Mt at 3.8% Zn, 1.2% Cu (18.51Mt Indicated at 3.6% Zn, 1.17% Cu)

SISHEN KIMBERLEY

GAMSBERG BLACK MOUNTAIN

PRIESKA

• December 2018 Scoping Study confirms potential to redevelop historical mine as a modern, state-of-the-art base metals mine:

DURBAN

PRIESKA PROJECT

2.4Mtpa operation producing 70-80ktpa Zn, 22ktpa Cu in concentrates

SALDANHA

43% all-in sustaining margin, ~A$130m per annum free cash-flow after tax

PORT ELIZABETH

CAPE TOWN Towns

Railways

Project area

A$400-440m pre-tax NPV12.5%, 38% IRR Start-up CAPEX of A$360-390m to set up infrastructure foundation • Bankable Feasibility Study on track for Q2 2019 – Final Investment Decision 2H2019

FRASER RANGE PROJECT:

Western Australia

AUSTRALIA SOUTH AFRICA SOUTH AFRICAN OFFICES:

Prieska, Northern Cape

Johannesburg, Gauteng Kimberley, Northern Cape

Total Mineral Resource of 30.49Mt @ 3.7% Zn and 1.2% Cu

E: info@orionminerals.com.au

AUSTRALIAN HEAD OFFICE:

Melbourne, Victoria

• Ideally positioned to operate effectively within new South African Mining Charter and access South African capital markets to fund the Prieska development • Exceptional near-mine exploration upside within emerging VMS camp – confirmed by recent satellite discoveries and airborne EM survey • Intensive ongoing exploration to unlock the potential of the Areachap Belt

W: www.orionminerals.com.au

ZINC

Galvanised rebar Corrosion: a global issue.

BY M ARY HELEN YOUNT, INTER NATIONAL ZINC ASSOCIATION

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nfrastructure failure due to corrosion is a global issue that wreaks havoc on transportation systems and economies. Maintenance repairs create additional problems and disrupt daily activities for weeks – sometimes years – on end. The global cost of corrosion is a staggering $2.5 trillion annually, translating to about 3.4 per cent of the global GDP. Society relies on certain basic structures, such as bridges, to be safe, effective and dependable. Deteriorating infrastructure poses major safety issues; when failure occurs, it comes with undeniably huge costs, monetary and otherwise. There is, however, hope for this worldwide dilemma. Engineering technology to prevent structural corrosion before major deterioration occurs is available; it exists in galvanised steel. P R E V E N T I O N I S K E Y: Z I N C ’ S R O L E I N INFRASTRUCTURE LONGEVIT Y A long-term answer to this far-reaching problem is the use of zincprotected steel during a structure’s initial construction stages. Galvanising, or the process of immersing steel parts in a bath of molten zinc, protects steel structures – including, but not limited to, bars, beams, anchors and piping – from facing detrimental and potentially deadly battles with corrosion. Sixty per cent of all zinc consumed goes toward protecting steel from corrosion. Galvanised rebar, as opposed to bare (or black) rebar, is becoming an increasingly popular choice in construction for supporting concrete structures. Once the rebar has been cleaned with solutions to remove any dirt and contaminants, it is then dipped into a bath of zinc that is heated to 450 degrees Celsius. Once the steel cools, it is inspected for conformance to the predetermined specifications. The rebar can also be bent, coiled or otherwise shaped prior to the galvanising process. The International Zinc Association (IZA) is working across the globe to promote this material and educate stakeholders on its multitude of benefits, although this is by no means a new practice; zinc has been used to protect steel since 1837 and has a proven track record of success. Years of field testing have equipped experts with accurate standards for use in any environment. One of the world’s leading

AUSTRALIAN RESOURCES & INVESTMENT

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ZINC

experts on galvanised reinforcing steel is Dr Stephen Yeomans, who is a professor as well as the Head of the School of Civil Engineering at the University of New South Wales at the Australian Defence Force Academy (UNSW Canberra). He has authored a key technical book on galvanised rebar, Galvanized Steel Reinforcement in Concrete, and consults globally with various engineering and technical groups. A number of Australia’s most iconic structures have been constructed with galvanised steel materials, including the Sydney Opera House, Australia’s Parliament House and the Townsville Marina. Some engineers and product specifiers, however, remain unaware of exactly why zinc is such an outstanding choice for infrastructure longevity. Z I N C ’ S S AC R I F I C I A L M E C H A N I S M When left uncoated, steel will inevitably corrode in almost any environment. Factors like temperature, humidity and acidity can speed or slow the process. Most traditional coatings can be classified as barrier coatings, meaning that they provide steel with basic protection from air and water penetration to the material underneath. Barrier coatings are only effective if they remain intact themselves, and include paint and

– 56 –

epoxy coatings. Once a cut, scratch or abrasion occurs, the coating layer is chipped away, leaving the underlying steel exposed to corrosive elements. It is at this point that deterioration occurs rapidly. Corrosion initiates at the point of the unprotected area, albeit small, allowing for the growth of iron oxides underneath the coating. This rusting process puts stress on the coating, compromising the structure’s integrity, strength, and overall aesthetic. In contrast, zinc coatings are sacrificial in nature, meaning that, like paints, they offer barrier protection from the environment in addition to the zinc actually sacrificing itself before allowing damage to occur to the steel underneath it. In galvanised rebar, the impervious metallic zinc barrier formed around the steel isolates the steel surface itself from the surrounding concrete. The zinc barrier becomes the first line of defence in protecting the steel from corrosion, ensuring a clean, rust-free appearance and providing the lasting beauty. Even if the zinc barrier is missing, or if there are scratches up to a width of about four millimetres, it will still protect the steel from corrosion. To add to galvanised rebar’s list of advantages, zinc has an unparalleled bond strength due to its unique metallurgical bond,

AUSTRALIAN RESOURCES & INVESTMENT

allowing it to form a strong adhesion to the steel it protects. Because of this strong bond, the coating is extremely durable and can withstand extreme environments. Additionally, zinc has a low natural corrosion rate and possesses the ability to extend protection to adjacent exposed steel areas, an effect known as cathodic protection. In setting concrete, zinc reacts to form a thin protective reaction layer that also improves the bond strength between the rebar and the concrete compared to black steel. In atmospheric exposure, a protective patina called basic zinc carbonate is formed within months, in comparison with the non-adherent rust formed on exposed steel that is non-protective. This permits zinc to last seven to 14 times longer in outdoor exposures, depending on whether it is in rural, industrial or marine environments. C O S T A N D I M PAC T Many factors go into determining the monetary cost of galvanised rebar, including size, quantity, labour costs and the cost of zinc. Compared to the aforementioned damage control costs that go into reparation of a structural failure, the extra cost of using galvanised rebar is a very small investment in long-term corrosion protection.

Adding to the cost-effectiveness of galvanised rebar is its sustainability profile. Galvanising can extend the life span of steel and concrete structures to 100 years or more with little to no maintenance, significantly reducing the amount of energy, resources and waste associated with upkeep and end of life. Furthermore, the end-of-life recycling of zinc-coated steel adds to its appeal as a sustainable choice. Energy requirements for re-melting steel and recovering the zinc are far less than those required for producing the original materials. Once recovered, zinc is 100 per cent recyclable, enabling it to continue the mission of protecting steel while also contributing to a sustainable future. Zinc’s sacrificial properties make it an appealing option for protecting a vast array of steel structures; from tiny smart cars to gargantuan wind turbines, bridges running over water and mass transit stations in bustling cities, zinc’s abilities to protect span the globe. Galvanised rebar is a sustainable, cost-effective choice for ensuring a structure’s long life and rust-free aesthetic in any environment. For more information on galvanised rebar, and to view specific standards and case studies, visit www.galvanizedrebar.com.

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ZINC

High-grade zinc zone discovery from Peel Mining The near-term development credentials of Peel Mining’s Wagga Tank/Southern Nights zinc-rich polymetallic project in New South Wales has been enhanced by the discovery of a high-grade zinc zone.

he discovery – known as the Southern Nights Central Zone – comes as Peel Mining works towards establishing a maiden resource estimate for Wagga Tank/Southern Nights by June. The resource estimate is expected to contain a bigger component of the higher-confidence indicated category of mineralisation than was previously thought to be case, aiding Peel’s review of its development options. A dig and truck operation where the ore would be treated at one of the existing hungry mills in the Cobar region owned by others is being considered, alongside a standalone mining and milling option. Peel Mining Managing Director Rob Tyson says that the dig and truck option has a low capital cost and will have a simpler permitting route. ‘We have to review the options first and map out what the best pathway to development is,’ says Tyson. According to Tyson, what was more certain was that the Southern Nights Central Zone has given Peel Mining a ‘clear focus on what looks to be the best economic area’ to start a mine development. The Southern Nights Central Zone came to light in the recent December quarter, when resource drilling at Southern Nights (one kilometre south of the known mid-1970s Wagga Tank discovery) yielded a massive sulphide intersection over 18.2 metres, grading 40.3 per cent zinc, 15.7 per cent lead, 0.97 per cent copper, 356 grams per tonne silver and 2.77 grams per tonne gold from 182 metres. It was the highest-grade zincrich intersection that Peel Mining has encountered at Wagga Tank/Southern Nights. When coupled with adjacent intersections, the result indicated a zone of near-surface, very high-grade zinc-rich mineralisation in the central Southern Nights area (now known as Southern Nights Central Zone). As might be expected, the Southern Nights Central Zone is now

X –– – 58

the target of close-spaced infill and extensional drilling to better define the geometry and scale of the high-grade mineralisation in anticipation of the commencement of a scoping study. ‘The recognition of this central zone as a higher-grade part of the system has meant that we’re focusing in on that area with closer-spaced drilling,’ Tyson says. Extensional drilling at the main Wagga Tank deposit has also continued to yield high-grade hits. Best results in the December quarter included a 19.3-metre

intersection grading 7.32 per cent zinc, 3.38 per cent lead, 0.3 per cent copper, 183 grams per tonne silver and 0.69 grams per tonne gold from 243 metres. Meanwhile, Peel Mining and its joint venture partner, the Toho-owned CBH Resources, recently completed conceptual studies into a ‘dig and truck’ development of their Mallee Bull copper-rich polymetallic deposit. The studies envisage that Mallee Bull ore will be milled 150 kilometres away at CBH’s Endeavor operation at Cobar.

ASX:PEX

Cobar

DOMINATING THE COBAR BASIN

SOUTHERN NIGHTS / WAGGA TANK Near Surface, High-Grade Zn-Pb-Ag-Au-Cu

PEEL 100%

- 18.2m @ 40.3% Zn, 15.7% Pb, 0.97% Cu, 356 g/t Ag & 2.77 g/t Au from 182m - 26m @ 25.4% Zn, 9.9% Pb, 215 g/t Ag, 1.19 g/t Au from 190m - 53m @ 7.43% Zn, 3.46% Pb, 1.48% Cu, 114 g/t Ag, 1.47 g/t Au from 218m - 40m @ 10.2% Zn, 2.83 % Pb, 0.61% Cu, 49 g/t Ag, 1.04 g/t Au from 365m - 27m @ 10% Zn, 6.4% Pb, 89 g/t Ag, 0.4 g/t Au, 0.2% Cu from 204m

MALLEE BULL

PEEL 50%, CBH 50%

High-Grade Copper Resource Closing in on Development - 53m

@ 4.08% Cu, 42 g/t Ag, 0.22 g/t Au from 470m - 69m @ 3.48% Cu, 34 g/t Ag, 0.14 g/t Au from 533m - 84m @ 4.42% Cu, 38 g/t Ag, 0.14 g/t Au from 575m - 32m @ 3.62% Cu, 46 g/t Ag, 0.21 g/t Au from 634m

WIRLONG

PEEL 50%, JOGMEC 50%

Hallmarks of High-Grade “Cobar Style” Copper Discovery - 27m @ 5.3% Cu, 23 g/t Ag from 286m - 31m @ 3.19% Cu, 11 g/t Ag from 299m - 9m @ 8.0% Cu, 17 g/t Ag, 0.21 g/t Au from 616m - 17m @ 4.59% Cu, 8 g/t Ag from 738m

www.peelmining.com.au |

BAUX ITE

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AUSTRALIAN RESOURCES & INVESTMENT

ALUMINIUM FIVE THINGS TO LOOK FOR IN 2019 BY LAUR A HINDLEY, WOODM AC

The aluminium market whipsawed in 2018, against the backdrop of sanctions, tariffs, trade tensions and surprise production outages. As we start 2019, prospects for global demand are taking centre stage in defining price direction.

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BAUX ITE

Developments in resolving the US–China trade dispute will play a pivotal role in price direction in 2019

ow demand fares against the background of softer global economic growth will be a key feature of the aluminium market over the next 12 months. On the supply side, watch out for growing margin squeeze at Chinese smelters on the back of elevated cost and low Shanghai Futures Exchange (SHFE) prices. Chinese smelters will face the dilemma of bringing on new capacity amid weak demand and prices. Uncertainty surrounding the timing of the resumption of full production at the Alunorte refinery also adds to alumina price volatility. FOR ONCE IT’S NOT ALL ABOUT A L U M I N I U M S U P P LY Supply fundamentals for primary aluminium remain tight; however, it is the outlook for demand where the weakness in prices currently resides. The more the global economy (excluding the United States) slips toward recession, the less influence tightening supply fundamentals will have on prices. Should the demand outlook get a meaningful boost, especially in China, then we expect the market will soon start to refocus on supply side factors. Developments in resolving the US–China trade dispute will play a pivotal role in price direction in 2019. An early settlement to this issue will ease concerns over a sharp contraction in global economic growth; however, a continued stalemate will exacerbate already fragile sentiment.

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2019 WILL BE A CHALLENGING YEAR FOR GLOBAL DEMAND GROW TH Global aluminium demand moved down a gear in the second half of 2018 as trade tensions escalated. Just how low Chinese demand growth goes will be a key feature of the market in 2019. Even a truce between the United States and China may not arrest the slowdown in consumption growth. Aluminium-intensive end-use sectors, such as automotive, construction and general engineering, are already feeling the effects of weak final demand and investor sentiment. The government is already making more concerted efforts to stimulate the economy, but how much more is needed, and will it be enough? A feature to watch will be the ability of China to match the 2018 level of semis exports this year. Given China’s already dominant position in global semis trade, just how much more room does it have to penetrate new markets against the tide of rising protectionism and a slowing economic growth in the world ex-China? Pressure is already building in Asia, with Vietnam recently announcing an investigation on Chinese exports of semis. Trade barriers will also be something to look out for in Europe. Outside of China, there is also growing evidence of slowing consumption in the European manufacturing and construction sectors. The main contributory factor in the slower pace of growth in European demand is the weakness in the continent’s automotive sector. The region’s largest vehicle manufacturer, Germany, has been hit by Brexit woes, a decline in export demand and the ongoing fallout from the diesel emissions scandal. Poor domestic demand has been amplified by a sharp increase in imports of Chinese semis. G L O B A L P R E M I A AT A C R O S S R OA D Aluminium premia in the United States and Europe came under pressure in the last weeks of 2018, following the announcement by the US Treasury Department that sanctions against Rusal will be removed. With Russian supply fully unlocked, there is scope for more downward pressure on premia,

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BAUX ITE

The alumina market could swiftly move to a surplus with Alunorte operating at 100 per cent and Al Taweelah ramping up

at least until the supply chain normalises. In particular, European premia could be hit by the sharp accumulation of Rusal inventories. It will take some time for these stocks to feed through the supply chain or be re-exported, possibly to the United States. That said, the scope for the fall is limited given European premia are currently close to their intrinsic value. In addition, sporadic pockets of backwardation, which often lead to premia discounts, could dry up as Russian warrants will now be accepted back at London Metal Exchange warehouses. In the United States, the direction of premia is less clear. The assumption that Section 232 tariffs are going away or at least will be diluted by new trade deals remains a risk to the Midwest premia. There is a widespread expectation that the tariffs will be lifted or that quotas will be issued to Canadian smelters. The deal with Canada would allow 2.5 million tonnes of primary aluminium to enter the United States duty-free and significantly dilute the proportion of US imports from duty-paid countries, putting downward pressure on Midwest premia.

C H I N A’ S A L U M I N I U M P R O D U C E R S C AU G H T B E T W E E N A R O C K A N D A H A R D P L AC E After years of double-digit output growth, China’s production growth is losing steam. The rampant capacity build since 2010 has largely been led by private companies. As some of these assets were low cost, they were better placed to withstand periods of low SHFE aluminium prices than some of their peers. Private companies have executed projects at a much faster pace compared with state-owned enterprises. Slack project execution by the state-owned enterprises and limited growth among private companies constrained supply growth in 2018. However, we don’t expect that metal supply growth will fall off a cliff in 2019. We estimate that nearly seven million tonnes of replacement capacity quotas has been traded. Since these companies have paid a hefty price to secure quotas, they will have little reason not to execute these projects after sinking capital for replacement capacity. This is a classic case of new technically efficient projects replacing high-cost capacity. We’ve been here before and 2019 will be no different. A L U M I N A : U N C E R TA I N T I M E L I N E , C H AO T I C P R I C I N G The short-term alumina market supply-demand dynamic depends on when the Alunorte refinery ramps up to full capacity. Also, smelters are now eyeing the start-up of EGA’s Al Taweelah refinery. The alumina market could swiftly move to a surplus with Alunorte operating at 100 per cent and Al Taweelah ramping up. If that is the case, prices will slide fast in 2019. Last year, the aluminium industry survived raw material supply stress with only marginal smelters trimming output. China’s reluctance to import alumina due to high alumina prices and substantially increased exports offset the Alunorte loss. Most of these cargoes were diverted to smelters in other parts of Asia. Should Alunorte’s ramp-up be delayed, China has demonstrated that it can fill the void – for the right price. But can China sustain alumina exports for a longer time frame? The National Development and Reform Commission has already fired a warning shot by labelling alumina as an ‘overcapacity industry’. According to the notice, the construction of multiple coastal alumina projects has affected the health of the industry (read: affected the profits of China’s stateowned alumina major). There is a parallel with the controls imposed on the smelting industry – the notice comes first, then comes the detailed requirements. Expect more alumina capacity control guidelines in 2019.

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AUSTRALIAN RESOURCES & INVESTMENT

Simon Finnis, CEO, Metro Mining

Metro Mining poised for expansion Rising Chinese demand a tailwind for fast-growing bauxite producer.

merging resources star Metro Mining Limited is becoming a globally significant bauxite producer after successfully commissioning the Bauxite Hills Mine in Cape York. The Queensland company began production in April 2018, just 10 months after mine construction commenced – an achievement that reinforced Metro’s reputation as one of the market’s bestrun and governed small miners. Metro has since shipped more than 2.037 million tonnes of bauxite and forecasts production of 3.5 million wet metric tonnes in 2019. An update of their 2017 definitive feasibility study (DFS) will occur in the first half of 2019, examining mine expansion to six million tonnes annually by 2021. ‘Metro is now Australia’s leading independent bauxite producer,’ says CEO Simon Finnis. ‘We are expanding production at a time of rising Chinese demand and favourable price dynamics.’ Chinese bauxite imports will be almost 180 million tonnes in 2028, from 68 million in 2018, forecasts CM Group. Demand for imported bauxite, the primary ore of aluminium, from inland Chinese refineries has been higher than expected. But a subdued outlook for aluminium is weighing on listed bauxite

companies, says Finnis. ‘The share market is not sufficiently focused on the need for lighter materials, such as aluminium, in electric vehicles. Or that China will need to import more bauxite as local supply contracts.’ Metro Mining is well positioned to meet this demand. Its Bauxite Hills Mine has a 17-year life if expansion is approved after the DFS. The resource is 144.8 million tonnes and reserves are 92.2 million tonnes. Metro has a binding four-year offtake agreement with Xinfa Group, one of China’s largest aluminium producers, for around half of its output during this period. The mine’s ore has so far been shipped to five Chinese customers. Production costs, averaging A$46 per wet metric tonne in the September quarter of 2018, are expected to fall significantly as Metro lifts output and reduces costs. Production has increased each quarter, and existing infrastructure has been built for higher production. The company announced in late December that it achieved 2018 production guidance. Metro had revenue of $43.8 million in quarter three of 2018, and cash and receivables of $38.2 million. Capital expenditure for the mine’s stage two expansion is estimated

at $37 million (pending the DFS). Metro’s market capitalisation was $221 million in mid January 2019. The company has grown organically and through acquisition. Acquiring Gulf Alumina in 2017 doubled its bauxite resource and created significant operational efficiencies by adding a complementary, adjacent project. Key investors have recognised Metro’s potential. United Kingdom–based Greenstone Resources invested $8.9 million in Metro in July 2016, and conditionally committed to invest another $20 million in the mine’s development. Greenstone owns 19.75 per cent of Metro, and US investment giant BlackRock has 10.8 per cent. Like many resources stocks, Metro underperformed in the Australian share market in 2018 – a result at odds with Metro’s move into production and its potential to more than triple annual output within three years. ‘Everything is in place to build a larger mine, provide more employment in Cape York and support the local community,’ says Finnis. ‘Metro has several growth options and is firmly focused on bauxite. Our disciplined approach has achieved pleasing results so far, but it’s just the start.’ To learn more about Metro Mining, visit www.metromining.com.au

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S T R AT E G I C M E TA L S

TNG Ltd hitting its Peake The year ahead is shaping up as a pivotal one for TNG Ltd at its Mount Peake vanadium-titanium-iron project in the Northern Territory, as it closes in on completing financing for the world-scale strategic metals project.

umerous milestones were passed during 2018 for the vanadiumtitanium-iron project, which comprises the planned development of the Mount Peake deposit, 230 kilometres north of Alice Springs, and the use of the breakthrough TIVAN processing technology at a refinery in Darwin. The milestones also include the signing of a Native Title Mining Agreement, a binding term sheet for titanium offtake production, the award of the mineral leases, and the mandating of Germany’s KfW IPEX-Bank to lead a US$600-million debt raising for the development. TNG Managing Director Paul Burton says that the company is now focused on completing the project’s debt and equity financing package. He says a final development decision in the third quarter will be possible, assuming funding is in place as planned. ‘We think we will be in a position

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to at least start doing some mine development early next year,’ Burton says. Mount Peake’s development credentials have been enhanced in the last couple of years by rising vanadium and titanium prices. Vanadium is primarily used in steel production, but its growing role in the large-scale storage and dispatch of renewable energy in redox flow batteries has elevated its strategic metal status, driving prices higher. Titanium dioxide prices have also risen strongly despite concerns that there is a shortage of new mine developments to meet future demand at a time when existing operations are facing declining grades and sovereign risk issues at African operations. Mount Peake is effectively a new source of titanium feedstock for the pigment industry thanks to the TIVAN process, as without it, only the vanadium would

have been considered as a development opportunity. ‘In fact, it will be one of the best [titanium] feedstocks because we have removed the iron,’ Burton says. Burton says the recent appointment of KfW removed a key risk for the project. ‘The debt part of the finance was one of our key concerns. ‘But now, KfW is going to put a consortium together and will prepare a very detailed financial model, incorporating figures from the work by [Germany’s] SMS Group on the front-end engineering and design for the project. ‘Then we can solve the equity financing component of about A$300 million,’ Burton says. He adds that various options were being considered, including the potential for participation by offtake partners and strategic investors. ‘What we’re trying not to do is have a very heavy dilution of shareholders,’ Burton says.

TNG LIMITED

3 Strategic Metal Products - 1 Mine

JAPAN INDIA EUROPE

KOREA USA

DARWIN

VANADIUM (V2O5)

TITANIUM (TiO2)

IRON (Fe2O3)

MOUNT PEAKE

B AT T E R Y M E TA L S

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AUSTRALIAN RESOURCES & INVESTMENT

Powering the future Australian miners are leading the charge to meet growing demand for battery metals. BY ANTHONY FENSOM

ustralia has seized the initiative in the clean energy revolution, with Western Australia at the heart of the industry’s development. Amid forecasts of continued demand growth from the energy and transport sectors for battery metals such as lithium, cobalt and manganese, Australian miners are leading the charge with projects around the world. Launching the Western Australian ‘Future Battery Industry Strategy’ on 31 January, Western Australian Premier Mark McGowan described the battery industry as a ‘once-in-a-lifetime opportunity’ for the state. ‘Our Future Battery Industry Strategy will drive the development of the Western Australian battery materials industry that will create local jobs, contribute to skills development and economic diversification, and maximise benefits to regional communities,’ the premier said. ‘This is an exciting opportunity for Western Australia to be recognised as a world-leading producer and exporter of future

battery materials, technologies and expertise, with huge potential for industry growth and job creation across the battery value chain.’ Already the world’s largest producer of lithium, Western Australia currently accounts for around half the global supply with seven mines in operation. The state is also a major producer of other battery metals, including cobalt, nickel and rare earths used for battery production. The Western Australian Government plans to develop an investment attraction strategy to facilitate the establishment of new battery projects in the state, along with investing $6 million in hosting the Future Battery Industries Cooperative Research Centre in Perth. DEMAND SURGE Bullish demand forecasts have spurred increased investment in the industry, amid expectations of the rapid growth of battery-powered electric vehicles (EVs) to curb greenhouse gas emissions.

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B AT T E R Y M E TA L S

The global lithium battery market is seen growing to US$67.7 billion by the end of 2022, more than double its 2016 value of US$31.2 billion, according to Zion Market Research. Morningstar analyst Seth Goldstein expects EVs to comprise 15 per cent of global auto sales by 2028, which together with hybrids could account for more than one-third of total sales. The growth of EVs is expected to boost global lithium demand to around 775,000 tonnes by 2025, up from 175,000 tonnes in 2015. Other forecasts, such as by Benchmark Minerals Intelligence, point to a quadrupling of lithium battery-making capacity by 2023, with more than 60 battery ‘mega factories’ already built or in the pipeline, up from just three in 2015. Bloomberg sees a ‘seismic shake-up’ of the automotive industry driven by new EVs from China, with European and US automakers scrambling to catch up. Japan has also joined the race, with Toyota Motor and Panasonic recently announcing plans for a joint battery venture. Bloomberg New Energy Finance estimates EV output will hit 30 million by 2030, up from an estimated 2.2 million vehicles in 2019. The market is led by China with output of an estimated 1.1 million EVs this year, followed by Europe (490,000) and the United States (478,000). ‘The lithium boom has barely begun, primarily driven by electric vehicles and battery storage. New legislation is driving EV growth in China and Europe, regardless of global growth projections, with Chinese new EV’s growing 61 per cent year-on-year in 2018,’ says Steve Promnitz, Managing Director of Argentina-focused Lake Resources. ‘The supply-side growth continues to be overstated by the market due to bottlenecks and a lower spot spodumene market. Lithium companies with large projects are well-placed to benefit from the clean-energy revolution.’

The global lithium battery market is seen growing to US$67.7 billion by the end of 2022, more than double its 2016 value of US$31.2 billion, according to Zion Market Research – 70 –

Another Australian-listed miner, Sayona Mining, is pursuing projects in Canada along with Western Australia. Managing Director Dan O’Neil points to a bright future for lithium, despite recent price fluctuations. ‘Short-term price fluctuations are predictable, especially given the industry’s recent rapid growth; however, in the medium to longer term, the outlook remains bright for all lithium miners, including Sayona, given the massive growth in demand and the difficulty for miners of quickly ramping up supply,’ he says. ‘In Canada, we see our Authier lithium project as playing a key role in Quebec’s development of a lithium-ion battery industry, which could put the province at the forefront of this global clean and green energy revolution. ‘In Western Australia, we have acquired some 1898 square kilometres of tenement holdings in the world-class Pilgangoora lithium district, which is at the very heart of the lithium boom, helping Western Australia to produce half the world’s supply.’ S U P P LY S H O R T FA L L? The lithium boom saw prices surge from 2014 to 2017, before retreating in 2018 on fears of oversupply, including Western Australia’s new mines.

AUSTRALIAN RESOURCES & INVESTMENT

Exploration drilling at Lake Resources’ Kachi lithium brine project, Argentina.

The Australian Government’s Office of the Chief Economist expects lithium hydroxide prices to drop from around US$16,500 a tonne in 2018 to US$12,700 by 2020, as supply growth outpaces demand. Changes to China’s EV incentives have added to the volatility, along with a massive surge in lithium supply from Australia. ‘However, by 2020, rising demand for electric vehicles may outstrip this added supply, pushing prices back up again over the longer term,’ the government forecaster said in its December 2018 Resources and Energy Quarterly. After recording a huge increase in spodumene ore output in 2017–18, further supply growth is expected in Australia, including the first lithium mine outside of Western Australia, at Finniss in the Northern Territory. Along with the expansion of existing mines, such as Greenbushes in Western Australia, Australia’s production is seen reaching 311,000 tonnes (in lithium carbonate equivalent) by fiscal 2020, with Australia to account for around 80 per cent of global supply from hard rock deposits. Consequently, export revenue is expected to reach $1.2 billion by fiscal 2020, up from $900 million in fiscal 2018, helped by new exporters, including Altura Mining.

Local lithium miners have also been buoyed by new investment, such as Mineral Resources’ agreement in late 2018 to sell a half-share in its Wodgina lithium project to battery metals giant Albermarle for US$1.15 billion. Will the growth continue? In February, Benchmark Mineral Intelligence estimated that an additional US$24 billion worth of investment is required in the lithium sector to meet demand. It points to an estimated compound annual growth rate for lithium of 18 per cent through to 2030. Car makers have currently committed some US$300 billion worth of investment, with battery makers injecting another US$110 billion. ‘Lithium is at the heart of the electric vehicle revolution, and Australia is playing a major role in this, thanks to our world-leading deposits of spodumene ore and emerging downstream opportunities,’ says NM Events’ Phil Dickinson. ‘We are seeing continued interest in the sector from investors seeking to participate in its growth, and will again be hosting the Australian Energy and Minerals Investor Conference in Brisbane on 27–28 March, bringing investors together with some of Australia’s most promising ASX-listed energy and minerals companies.’ For battery metals, the future has already arrived, and Australia’s miners are switched on to the global opportunities.

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ER IALS B AT T E R Y M AT E TA LS

‘Disruptive’ Altech ticking boxes Altech Chemicals’ high-purity alumina (HPA) production ambitions are beginning to take shape with the first stage of development work at its ‘disruptive’ processing plant in southern Malaysia underway.

hile other groups with HPA production ambitions slowed their development in the wake of the equity market downturn in the second half of 2018, Altech has been ticking boxes on its way to first output in 2021. Iggy Tan, Altech Managing Director, says the ‘most important thing is that we are actually building the project, with Stage 1 underway. ‘The construction period is about two years and we should have first product out by the end of 2021.’ He says the market for HPA, or synthetic sapphire, remains strong, with demand growth in the lithium-ion battery sector for HPA as a thermal separator complementing demand from its more established markets of LED lights, semiconductor wafers and scratch-resistant glass. ‘The market for our planned product is still very strong, with prices of US$40,000 a tonne,’ Tan says. ‘We recently attended a battery

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conference in Europe and there was lots of talk about the growth in demand coming from lithium batteries. ‘While HPA is used as a separator in lithium batteries, it is also used in the cathode material and that means there is going to be strong growth in the future,’ Tan says. Altech is developing the Meckering kaolin deposit in Western Australia to supply the Malaysian processing plant, which will have initial capacity of 4500 tonnes per annum of HPA. Altech calculates that global HPA demand could increase at 17 per cent (compound) between 2018 and 2025. Such growth would require the development of another 15 Altech-scale plants, highlighting the scale of HPA demand growth, as well as Altech’s potential to eventually expand its project capacity. The Malaysian plant is considered disruptive because unlike existing HPA producers, which use aluminium ingots as their starting point, its aluminium-

bearing kaolin feedstock reduces the steps required to produce HPA. Stage 1 construction at the Malaysian plant started in August last year, under a US$280-million fixed price EPC contract with German engineering group, SMS. German bank KfW IPEX-Bank is providing US$190 million, or 64 per cent, of the pre-production capital expenditure. The project’s US$90-million mezzanine lender, an unnamed global investment bank, is reviewing a recently completed ‘positive’ technical study into the HPA project, and is due to report back its next steps and time line. Tan confirms that raising equity to support the project financing was planned. ‘Once the mezzanine debt is organised, we will look at the equity side of things,’ he says. He says the equity component of the project finance was being pursued in two distinct work streams – a joint venture or partial project selldown, and/or a placement of shares.

meeting a

SAPPHIRE future

HIGH PURITY ALUMINA (HPA) The critical raw material for synthetic sapphire (single crystal) and lithium-ion battery separator coatings

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+61 (0)8 6168 1555

ASX: ATC FRA:A3Y

COAL

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AUSTRALIAN RESOURCES & INVESTMENT

GOOD NEWS FOR COAL BY IAN M ACFAR LANE, CHIEF EXECUTIVE, QUEENSLAND R ESOURCES COUNCIL

Queensland’s coal sector is on track to deliver sizeable economic benefits to the state’s economy yet again after a record year in 2018.

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COAL

ueensland’s ports revealed total coal exports of 223 million tonnes, surpassing the previous record set in 2016 by two million tonnes. Global demand is driving these records, with the state’s metallurgical coal making steel needed for building modern cities, and its high-quality thermal coal delivering tomorrow’s energy needs through high-efficiency, low-emission coal-fired power plants. While green activists continue to claim the world is turning away from coal, the data proves that it’s an essential ingredient for the world economy to grow. Queensland coal was exported to 30 different countries or territories – Argentina, Brazil, Chile, China, England, Finland, France, Germany, Hong Kong, India, Indonesia, Italy, Gibraltar, Japan, Malaysia, Netherlands, Philippines, Poland, Singapore, South Africa, South Korea, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, Ukraine, Vietnam and Wales. According to the International Energy Agency (IEA), Australia’s net exports of coal are forecast to increase by 20 per cent by 2040,

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while the Office of the Chief Economist says that Australia’s coal earnings are on target to generate more than $67 billion in 2018–19, making it Australia’s largest commodity export. Separately, the Queensland Resources Council’s annual economic contribution report comprising data over the 2017–18 financial year found a similar good news story for coal and the wider sector. Released late last year, the report highlighted how the sector continued to drive jobs and investment in communities with a $62.9-billion (up 14 per cent) contribution to the state’s economy, with coal the largest contributor at a whopping $43.4 billion, or 69 per cent, of the total. Drilling down into the job numbers, it’s a very healthy story despite sluggish job growth in other industries. Resources delivered double-digit job growth, supporting 316,267 full-time positions after a 12 per cent increase. It’s not just diesel fitters and port workers but also butchers, chefs, lawyers and environmental scientists who have a job

AUSTRALIAN RESOURCES & INVESTMENT

While green activists continue to claim the world is turning away from coal, the data proves that it’s an essential ingredient for the world economy to grow

C OA L P O R T B R E A K D O W N

connected to the resources sector in communities across Queensland. Coal alone supported 215,656 full-time jobs, representing nine per cent of the state’s total employment – an increase of 14 per cent. The data showed that the sector had a resolute commitment to working with local communities and delivering the benefits from our natural resources to all Queenslanders. Resource companies have contributed to 1260 community organisations, which is up 38 per cent on last year. Community organisations provide vital services to all Queenslanders. If we look over the last nine economic contribution reports, the sector has contributed almost $600 billion ($594 billion), which is larger than the economy of Hong Kong. It was able to achieve this investment while operating within a strict environmental management framework and using only 0.1 per cent of Queensland’s land mass. It’s not always front of mind, but Brisbane is still the biggest mining town in Queensland, supporting 142,447 jobs and contributing

Port of Brisbane (Queensland Bulk Handling)

7.1

Abbot Point Coal Terminal

29.8

Hay Point Coal Terminal

48.9

Dalrymple Bay Coal Terminal

69.5

Port of Gladstone (RG Tanna & WICET)

67.9

$28.9 billion (up 12 per cent) to the state’s economy, which is three times more than Mackay; however, the economic influence of the sector is far-reaching, even in a big state like Queensland. From Toowoomba in the south to Cairns and Weipa in the north, and right out to Mount Isa in the north-west, the sector is employing locally and buying locally, spending $19.3 billion with Queensland suppliers – an increase of 19 per cent from the previous financial year. In the far north of the state, the economy surged 77 per cent to $959 million while achieving massive Indigenous employment targets. Indigenous participation in our sector has grown to four per cent, which is a genuine representation of the state’s four per cent Indigenous population. But in the end, all Queenslanders benefit regardless of where they call home through the royalty taxes paid to the state government, which grew by 12 per cent to $4.3 billion with coal royalties, totalling $3.8 billion. It’s these royalty taxes that provide funding for new hospitals, police stations and schools, and ensured that the state budget was kept in the black after another record return from coal royalties. This extensive independent report prepared by Lawrence Consulting is further evidence of the global demand for Queensland’s diverse resources deposits, and high-quality metallurgical and thermal coal. Looking ahead, the sector continues to grow its share of the total Queensland economy to almost 20 per cent, but we must not get complacent. We must embrace technology to stay globally competitive, compete for every contract, and earn the support of our governments and the people who elect them. Queensland is in the box seat to be Australia’s resources superpower for decades to come, which will be welcome news to every Queenslander.

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COAL

Environmental Clean Technologies on the path to lowemission steel in India Melbourne’s Environmental Clean Technologies (ECT) has passed a major milestone in its plan to commercialise its low-emission coal and iron-making technologies – Coldry and Matmor – through a research and collaboration agreement in India.

overnment of India–owned energy group NLC India and minerals miner NMDC are working towards financial closure for construction of an integrated ColdryMatmor pilot plant in the country. Success at the pilot plant level is seen as a prelude to the broader rollout of commercial-scale integrated Coldry-Matmor plants in India and elsewhere, targeting an initial annual output of 500,000 tonnes of iron billet. The appeal of the technologies to India is the ability to produce high-quality iron from the country’s abundant brown coal (after it is dried by the Coldry process, which upgrades it to a metallurgicalgrade replacement) and its equally abundant low-grade iron ore fines. Glenn Fozard, ECT's Chairman, says the company viewed the collaboration agreement as a ‘launch pad globally for the Coldry and Matmor technologies.’

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He says the recent development of the collaboration agreement and progress towards financial closure followed several years of engagement with India, a target market for ECT because of its natural fit with the technologies. ‘The country has substantial brown coal resources and it is an incredible growth story, like where China was 15 or 20 years ago,’ Fozard says. ‘It also has a highly supportive political and strategic national framework around growth that is targeting energy and resource security, and it has commitments under the Paris Accord on climate change in terms of reducing the carbon intensity of its industries. ‘Our technologies fit perfectly with all of those objectives,’ Fozard says. ‘We also fill a niche in the market that no-one else is addressing. There are several black coal–based ironmaking technologies out there. But they are all competing in the

traditional coal and steelmaking sectors. ‘What we are doing is introducing new technology that specifically target the brown coal space,’ Fozard says. ‘Through our steelmaking technology, we deliver the lowest value carbon resource (brown coal) into one of the highest-value applications – iron and steelmaking,’ he says. India’s interest in the potential of ECT’s technologies reflects a recognition of its raw material shortcomings for steelmaking. Its steel industry currently relies on imported metallurgial coals and there is a domestic shortage of high quality lump iron ore. ‘They are currently producing about 135 million tonnes per annum of steel, and they are aiming for 300 million tonnes per annum. To get there they recognise that they need to apply technological solutions to the constraints in their resources,’ Fozard says.

‘Matmor’ Iron rod Made from Indian iron ore & lignite Forged in Melbourne, Australia

Innovative steelmaking and energy upgrading technologies “Bridging the gap between today’s use of resources and tomorrow’s zero-emissions future” INDIA PROJECT - RESEARCH, DEVELOPMENT & COMMERCIALISATION ASX-listed ECT in partnership with two of India’s leading Public Sector Undertakings (PSUs), NLC India Limited and NMDC Limited, are poised to commence the largest ever R&D collaboration between Australia and India, embarking on a ~AUD35M pilot project as the next key stage on the commercialisation pathway ahead of the global rollout of its two groundbreaking Australian-developed technologies: Matmor is the world’s ﬁrst and only lignite (brown coal)-based primary iron making technology capable of replacing metallurgical coal and high-grade lump iron ore with lowercost alternative raw materials thanks to its unique, hydrogen-based chemistry and furnace design.

Coldry is a unique, zero-emission, lignite upgrading technology capable of producing a solid fuel for use in power generation, industrial thermal applications and as a feedstock to higher-value downstream products such as hydrocarbon liquids, gas, fertiliser, chemicals, chars, activated carbon, hydrogen and steelmaking via the Matmor technology. Coldry solid fuel is signiﬁcantly less CO2 intensive than lignite.

AUSTRALIA - UTILITY HEATING SOLUTIONS In addition to ECT’s flagship India project, the company currently offers a range of utility heating solutions to Victorian and Tasmanian businesses, including solid fuel sales, O&M, new equipment, finance and turnkey steam and boiler packages, which deliver savings of ~15%.

CONTACT: Glenn Fozard | Chairman Ph: + 61 (3) 9849 6203 E: info@ectltd.com.au

www.ectltd.com.au

ASX:ECT

URANIUM

Alligator River project

Vimy Resources poised for big uranium return Vimy Resources’ Managing Director, Mike Young, describes the uranium market as a giant rubber band that is being pulled back further and further.

ometime soon, it will snap back and drive uranium prices higher, with Vimy poised to benefit at its shovelready Mulga Rock project in Western Australia, and at its recently added Alligator River project in the Northern Territory. Mulga Rock’s development remains dependent on Vimy securing longterm offtake contracts. ‘We just have to wait for the American and European utilities to start writing contracts again, which is not too far off,’ Young says. The return of the utilities to the longterm contract market is expected to lead to higher uranium contract prices. ‘To sustain current global uranium production alone, the contract price (as distinct from the unrepresentative spot price) needs to be more than US$50 a pound, at which point Mulga Rock will be right in there,’ Young says. While Vimy plans to remain alert to long-term contract opportunities for the project as 2019 unfolds, it is planning another busy year at its

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Alligator River project, acquired from Canadian uranium giant Cameco in a deal concluded in July last year. The acquisition has made Vimy the biggest granted tenement package holder in the broader Alligator River uranium province, a premier uranium district. Despite a rich production history of more than 310 million pounds of uranium over the past 65 years, the province remains lightly explored, mainly due to Australia’s now abandoned three mine policy, which prevented new mine developments. ‘That period is behind us, and it is to Vimy’s great advantage that we have tied up such a prospective bit of ground,’ Young says. Vimy’s acquisition comprises three separate tenement packages: King River-Wellington Range, AlgodoBeatrice, and Mount Gilruth. Late last year, Vimy announced the completion of a scoping study for the Angularli deposit, 380 kilometres by road

east-north-east of Darwin in the King River-Wellington Range tenement group, a joint venture between Vimy (75 per cent) and Rio Tinto (25 per cent and diluting). It was based on an inferred mineral resource estimate of 910,000 tonnes grading 1.3 per cent for 25.9 million pounds of uranium. ‘The high-grade nature of the Angularli deposit provides Vimy with the opportunity to develop a tier-one asset, with the potential to be profitable in any uranium market,’ the company says. Vimy is particularly excited about the recent results from an initial drilling program at the Such Wow prospect at Alligator River. It is considered a stand-out exploration target due to the overall size of the structural corridor (more than five times the size of the Angularli prospect). ‘We are really excited about Such Wow. We plan to go in and drill some of the highpriority targets that we have generated, especially the Shiba Zone,’ Young says.

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