Aruma Resources Rebuilds on Slate Dam Potential

THE INSIDE STORY: The Invincible gold deposit, being mined by Goldfields at its St Ives operation, set a new discovery benchmark for gold explorers in the Western Australia goldfields.

The possible discovery of such a deposit has reinvigorated industry stalwart Peter Schwann, managing director of Western Australia-focused gold explorer Aruma Resources (ASX: AAJ).

The Invincible deposit is considered by market watchers as one of the most important gold discoveries in recent decades for many reasons.

One being that it highlighted potential for new substantial gold systems within an existing gold district, hosted by an alternate geological setting.

Invincible readjusted the way geologists regard lithological units within the region, which were previously thought to never contain gold.

Now, with fresh eyes and open minds, these lithological units are considered to possibly host gold systems with economic grades.

The Invincible ore body was almost overlooked due to its unconventional geological setting and exploration hindered by surficial cover.

Invincible broke all the rules by being a hydrothermal gold deposit formed near the geological contact between the Black Flag Group and Merougil Sediments. 

With a lode thickness varying from one metre to over 20m, the ore body was defined over a strike length of two kilometres with both open cut and underground operations set to produce over two million ounces.

“We recognised that the major gold deposits around the world, and in Western Australia, are in sediments,” Schwann told The Resources Roadhouse.

“One thing about them is that they usually have large endowments and good grades.”

Schwann revisited Aruma’s land package paying close attention to the potential of sediment-hosted gold deposits.

“I had looked at Goldfield’s Invincible deposit at Kambalda and at the stratigraphy there,” Schwann continued.

“I realised we are also looking at gold in the Black Flag Group sediments and that they have been sitting right under our nose all along. Other companies to look at this included Sirius and S2.

“I have been a long-time believer in the Majestic Imperial area, but the Invincible discovery became very important and I recognised parallels with the Invincible discovery at both Norseman and up in the Paddington-Bardoc region.”

Schwann’s recalibrated view led to Aruma Resources carrying out a re-evaluation of the company’s Glandore project, located within the Kalgoorlie District.

From this, Aruma has identified that the geological sequence at Glandore bears similarities to that of the geology surrounding the two-million-ounce Invincible deposit. 

Aruma’s major project is Slate Dam, located 40 kilometres from Kalgoorlie where it recently extended its reach with the acquisition of the Juglah leases (EL25/534 and ELA25/558, 22 graticular blocks) over the southern extension of the project.

The tenements cover prospective gold ground within the geology that hosts the Majestic and Imperial gold deposits.

“The most recent land acquisition took our landholding in the region to over 260 square kilometres, located in a desirable address east of Kalgoorlie that is highly prospective for gold,” Schwann said.

Evaluation carried out by Aruma of the geology surrounding the Glandore project, identified the Slate Dam prospect as a potential site for an invincible-style gold deposit.

“Our activity in the area is progressing well as we prepare to drill covering the large high-tenor gold anomaly at Slate Dam,” Schwann said.

Slate Dam had previously been mapped as a felsic volcanic package and consequently explored for its potential to host a large intrusive porphyry-style gold system.

At first, the initial exploration looked extremely promising – identifying a large (7sqkm) bottom of hole gold anomaly (>200ppb gold).

Follow-up deep diamond drilling tested the porphyry intrusive model, returning thick low-grade intersections of mineralisation, including:

GWD013
19 metres at 1.09 grams per tonne gold.

Although the drilling results were encouraging, no gold-bearing intrusive porphyry units were intersected, resulting in little to no further groundwork being carried out on the prospect since 2002.

Fast-forward to 2012 and the discovery of the Invincible deposit opened the area for further potential discoveries for this style of mineralisation.

Aruma is confident the similarity of the sedimentary sequence of Slate Dam to that of the Invincible stratigraphic sequence, consisting of interbedded volcanic sediments, could results in the prospect being one of those discoveries.

The company has been busy conducting further investigation into Slate Dam geophysics, which has identified a large ring-structure, the company believes likely to represent a granite intrusive, a necessary potential driver for the mobilisation of gold bearing fluids.

The major geological structures of Slate Dam are covered by shallow lake sediments which could potentially be masking a Tier 1 gold deposit.

Aruma Resources aims to test its Invincible gold model theory at the Slate Dam project over coming months, and with initial ground reconnaissance and mapping confirming the similarities to the Invincible-style gold system, spirits are high.

Aruma’s decision to move on Mulga Dam followed a presentation by the company to Melbourne-based PAC Partners who suggested the ring structure in the magnetics.

“It was then that I realised we needed the other lease so I pegged Mulga Dam, which was also available,” Schwann explained.

The company was encouraged by results from a data search that identified an anomaly around 3.5 kilometres by two kilometres, which is bigger than the Golden Mile-Super Pit footprint.

“The anomaly was not a low-level anomaly and was basically greater than 0.25 grams and stood out as something too big for us to walk away from,” Schwann continued.

“The other thing is that it had large intersections – they weren’t high-tenor – but they were big and at 19 metres at 1.09 grams per tonne – they were deep, but they were thick.

Drilling to be undertaken at Slate Dam over the coming months will be targeting results greater than five metres and greater than two grams per tonne gold.

“It doesn’t sound very much, but it is a model we have called the Black Flag model,” Schwann said.

“Remember that Invincible was eight metres at six gram per tonne gold!”

“The targets are based on Kalgoorlie ore bodies that includes the likes of Golden Mile, Paddington, Bardoc and Invincible.

“It is the Invincible model we are working off for our upcoming drilling programs.

“I believe Invincible is probably one of the most important discoveries in, at least, the last 50 years in Australia.

“It was discovered with around one million ounces at four grams per tonne.”

Once statutory requirements for the approved program of work and Heritage Surveys are arranged and existing exploration databases and geology have been validated, Aruma will be on the ground at Slate Dam fervently drilling.

Aruma has scheduled 5,000m of first pass Reverse Circulation drilling over the high-tenor, drill defined gold anomaly at Slate Dam.

This will be done by drilling 200m spaced lines of 100m deep angled drill holes at 50m intervals into the steeply dipping stratigraphy.

Schwann can hardly contain his excitement when speaking about the Slate Dam project and the possibilities it holds for Aruma Resources.

“It has given me, and the company, a pulse,” he declared.

“We are sitting up, out of the recovery position and we are getting a renewed interest in the company from people who believe in the story we now have to tell.”

“I’m prepared to say that this is the best gold project I have had in my entire career.”

Aruma Resources Limited (ASX: AAJ)
…The Short Story

HEAD OFFICE
Level
6 Thelma St 
West Perth WA 6005

Ph: +61 3 9321 0177

Email: info@arumaresources.com
Web: www.arumaresources.com

DIRECTORS
Paul Boyatzis, Peter Schwann, Ki Keong Chong

Alliance Resources Fervently Exploring Zealous

THE INSIDE STORY: Alliance Resources (ASX: AGS) is manager of the Wilcherry project Joint Venture, located in the mineral rich Gawler Craton of South Australia with Tyranna Resources (ASX: TYX).

Alliance (51%) and Tyranna (49%) struck the Wilcherry JV in 2016, when the latter wanted to concentrate on its Jumbuck project, but did not want to divest totally from the quality 1,200 square kilometres of tenements, which are considered prospective for gold and base metals.

The Wilcherry project Joint Venture comprises three priority areas, including the Zealous tin-base metals, Telephone Dam zinc-lead-sliver, and Weednanna gold prospects.

Alliance as operator of the Joint Venture recently commenced a program of reverse circulation (RC) drilling at the Zealous tin-base metals prospect, which it identified as a first-order conductive target via a helicopter-borne electromagnetic (HEM) survey during December 2016.

This was confirmed by a follow-up high-powered moving loop electromagnetic (MLEM) survey completed in March 2017.

“When we first came into the Joint Venture we recognised the project was under a significant amount, covering about 80 per cent of the tenement, of mostly shallow transported cover,” Alliance Resources managing director Steve Johnston told The Resources Roadhouse.

“From that we saw an opportunity to use airborne electromagnetics to search for buried massive sulphide deposits.

“There were two really good data bases of magnetics and gravity, but the next step was to fly a regional airborne EM survey. 

“We did that and identified many late-time conductors, including the two big ones – the first at Zealous and the second at Telephone Dam.”

Alliance completed a moving-loop survey on both Zealous and Telephone Dam in March that confirmed the prospects to be conductor systems, being that there is more than one conductor at each prospect.

A program consisting five RC holes, totalling 1,500 metres, is being drilled to initially test the two conductors that comprise the Zealous target.

Three holes are planned to test the Zealous Main Conductor and two holes at the Zealous northwest conductor.

“The moving-loop survey conducted at Zealous confirmed a large southern conductor of 1500 metres by 1250 metres, dipping to the southwest at a depth around 100 to 200 metres and a northern conductor – more flat lying – 1500m by 750m and the interpreted depth to the top of that one was around 50 metres maximum,” Johnston said.

“There has been no previous drilling carried out into either of these conductors, however, there is some historic drilling 300m to the southeast of the southern conductor by Ironclad in 2012 as part of its search for iron ore deposits.”

The previous drilling at Zealous between 2012 and 2014 intersected sizeable tin grades, including:

12ZLRC007
20 metres at 1.29 per cent tin from 42m;

13ZLDH001
12.3m at 1.1 per cent tin from 119m; and

13ZLRC001
10m at 1.23 per cent tin from 128m.

“Because the initial analyses were for iron ore and base metals were not the focus, the lab reported missing mass in the iron suite XRF analyses,” Johnston explained.

“Introducing another analytical method showed up the presence of base metals, including an elevated level of tin.

“That resulted in Ironclad going back and looking at the project as a new tin target and they drilled around 25 holes that intersected shallow, but significant, tin intercepts.

“A couple of further holes in 2016 intersected lower grades whilst targeting a magnetic anomaly.

“However, our recent moving-loop survey showed the presence of the conductor system to the north and below the historic drilling.

“The Joint Venture has commenced drilling on the Zealous target and we are really looking forward to receiving the results of those holes.”

The MLEM survey data from Telephone Dam clearly confirmed the presence of weak bedrock conductors consistent with the HEM anomalism.

Two bedrock conductors have been defined with the northern conductor being strongest.

“Again, at Telephone Dam, there are two main bedrock conductors – a northern conductor that is around 1000 metres by 1000 metres in size interpreted to be around 150 metres to the top, and a slightly larger southern conductor 1500 metres by 1000 metres and a depth to the top of around 25 to 50 metres.”

Alliance has interpreted the conductors to potentially have some width/thickness to them and more complex geometry than simply a thin plate model approximation with constant dip.

Should this be the case, then Alliance expects the conductive unit could be intersected above the current modelled position.

“At Telephone Dam, there has been a lot of historic drilling carried out by a raft of owners since the 1980s for silver-lead-zinc,” Johnston said.

The historic drilling at Telephone Dam produced some impressive results, such as: 92m at 2.28 per cent combined lead and zinc with some silver credits, associated with the northeast corner of the Southern Conductor.

Upon completion of the drilling at Zealous, Alliance will commence a small program consisting three RC holes for 850m to test the MLEM conductors at the Telephone Dam zinc-lead-silver prospect.

The third target of the Alliance trinity is the Weendnanna gold prospect, which was another pre-existing project to evolve from the Ironclad legacy.

Ironclad viewed Weednanna as a magnetite prospect, and Trafford was keen on the gold potential of the prospect.

However, Ironclad was the operator and its view prevailed until 2015 when the two companies merged, resulting in Tyranna Resources.

“Whilst we were planning and flying the geophysics over the regional targets, we were keen to commence work at an advanced prospect and Weednanna fitted the bill,” Johnston explained.

“We couldn’t ignore that it had produced great gold results over a strike length of around 1.3 kilometres. 

“We identified three target areas we considered to have potential to have high-grade, but which required further drilling.”

Alliance drilled those targets in March and produced outstanding gold intersections including:

17WDRC003
49m at 6.3g/t gold from 45m, including 21m at 10.7g/t gold from 48m;

17WDRC012
2m at 61.1g/t gold from 167m;

17WDRC011
10m at 6.8g/t gold from 79m, including 3m at 15.5g/t gold from 81m; and

17WDRC013
7m at 11g/t gold from 82m, including 4m at 17.6g/t gold from 84m.

Weednanna is the most advanced gold prospect in the Wilcherry project area, having originally been identified in 1997 as a strong gold-in-calcrete anomaly coincident with a prominent north-north-west-trending magnetic anomaly.

Successive drilling campaigns identified gold mineralisation associated with skarn alteration and brecciation in the contact aureole of the adjacent granite, however, these failed to fully unravel the structural and lithological controls on the distribution of gold.

Alliance is now systematically re-logging all available RC chips and diamond core from Weednanna with the objectives of identifying structural and lithological controls on the distribution of gold, constructing a 3D geological model of the prospect, and planning further exploration with a view towards defining a mineral resource.

A further program of RC drilling is planned to test for extensions to, and infill, high-grade gold intersections at Weednanna Targets 1, 2 and 3 returned from the recent RC drilling program.

This drilling will follow the drilling to test electromagnetic conductors at the Zealous and Telephone Dam prospects.

Alliance Resources Limited (ASX: AGS)
…The Short Story

HEAD OFFICE
Suite 3
51 – 55 City Road
Southbank, VIC, 3006

Ph: +61 3 9697 9090

Email: info@allianceresources.com.au
Web: www.allianceresources.com.au

DIRECTORS
Ian Gandel, Tony Lethlean, Steve Johnston

Musgrave Minerals Lines-up New Cue Resource

THE INSIDE STORY: Methodology may not be recognised as a science, however, Musgrave Minerals (ASX: MGV) is putting it to effective use at the Cue project, located in the Murchison Province of Western Australia.

Musgrave Minerals is working towards an 80 per cent interest in the Cue project, from its current sixty per cent, as part of a Farm-In and Joint Venture Agreement with Silver Lake Resources (ASX: SLR).

The company’s major focus at the Cue project is on the Moyagee area, where it recently announced a sizeable upgrade to the total Mineral Resources at the Break of Day and Lena gold deposits.

The updated JORC 2012-compliant Mineral Resources include:

Break of Day (Indicated and Inferred) 868,000 tonnes at 7.15 grams per tonne gold for 199,000 ounces of gold; and

Lena (Indicated and Inferred) 2.682 million tonnes at 1.77g/t gold for 153,000 ounces of gold.

The numbers take the total Break of Day and Lena (Indicated and Inferred) Resource to 3.55 million tonnes at 3.09g/t gold for 352,000 ounces of gold.

“This is a significant milestone that will enable Musgrave to assess multiple processing options going forward to maximise shareholder value,” Musgrave Minerals managing director Robert Waugh told The Resources Roadhouse.

“We have now drilled more than 22,000 metres on the project.

“The Mineral Resource estimate strengthens the open-cut potential of Lena and the underground potential of Break of Day and together with the proximity to existing road and processing infrastructure, significantly increases the future development potential of the project.

“Break of Day is still open in all directions and we are yet to define the limits to the high-grade gold mineralisation.

“Further drilling planned for early August will aim to continue to grow the resource base.”

Drilling results from Break of Day confirmed the high-grade mineralisation with intersections including:

21 metres at 21.5 grams per tonne gold from 157m;

15m at 16.6g/t gold from 170m;

14m at 14.4 g/t gold from 111m;

11m at 6.8g/t gold from 23m;

6m at 46.5g/t gold from 99m; and

5m at 53.5g/t gold from 138m.

Break of Day consists of two parallel gold lodes with a combined strike extent of over 500m, an average lode width of approximately 1.7m and an average grade of approximately 16g/t gold.

“The drilling campaign we have completed at Break of Day so far this year has been extremely positive,” Waugh said.

“Not only does it leave the mineralisation on both lodes at Break of Day open to the south, we are consistently seeing higher-grade gold mineralisation at Break of Day below the 80 to 100 metres depth level where it is wide open with no current drilling in this area.

“This creates a significant opportunity for the company to grow the Resource further with further drilling.”

The Break of Day drilling campaign received great support from the Lena deposit, in the form of excellent gold drilling results supporting the potential for an open cut operation, including:

13m at 9.7g/t gold from 61m;

8m at 6.4g/t gold from 13m;

4m at 8g/t gold from 35m;

3m at 48.6g/t gold from 80m;

5m at 7.8g/t gold from 118m; and

2m at 12.4g/t gold from 3m;

The drilling confirmed the mineralisation at Lena to occur in vertical to steeply dipping, semi-parallel quartz lodes hosting gold within a mafic-ultramafic stratigraphic sequence and remains open along strike and down plunge.

The Lena mineralisation is currently defined along a 1.6 kilometre strike length and hosts a generous portion of the overall Moyagee total Mineral Resource.

“The results from the RC gold drilling program were always encouraging and enabled us to complete a significant upgrade to the Resources,” Waugh explained.

“The continued strong near surface gold results from Lena provide a good case for the establishment of an open cut mine.”

Musgrave is confident the Resource upgrade will enable the company to progress to a Scoping Study in the second half of 2017.

The Cue project is in what Real Estate Agents would describe as, ‘a desired location’.

The project is proximal to many established gold operations, meaning there is good infrastructure and multiple operating processing plants in the district (Ramelius 40km south, Westgold 130km North).

This potentially provides the company the ability to consider numerous development options.

“Although we have updated the Resource we still consider there to be potential to extend that mineralisation significantly, as it is still open,” Waugh explained.

“The amount of existing infrastructure within the Cue Region will definitely be a benefit for us to be able to get either a standalone or toll treatment operation into production.”

The potential of Break of Day has been highlighted by the completion of an initial metallurgical test work program that returned exceptional gold recoveries.

Positive results came from test work carried out on three composite fresh rock samples that were collected from nine representative drill holes across the strike of the gold lodes at Break of Day.

The samples were representative of the various gold lodes, ore types and feed grades for potential future mining and processing activities utilising conventional gravity and cyanide techniques.

The test work demonstrated very rapid leaching kinetics for all three samples and overall recovery of between 95.7 per cent and 96.3 per cent (average 96%), producing a maximum leaching of gold after the first eight hours.

Exceptionally high gravity recoveries of between 80.8 per cent and 86.1 per cent (average 84.2%) were also achieved from a single pass through a Knelson concentrator.

“The gravity recoveries are very high in comparison to typical Yilgarn gold ores,” Waugh said.

“The metallurgy results will enable us to assess multiple processing options going forward, while the high gravity recovery will enable flexible processing and potentially reduce capital and operating costs.”

Gold is not the only commodity on Musgrave’s Cue project hitlist.

An EM survey completed over the northern portion of the project area to identify basement conductors that may reflect copper-gold massive sulphide mineralisation delivered 13 separate targets for drill testing.

The targets all returned strong ground electromagnetic responses within the Hollandaire volcanic massive sulphide (VMS) field.

Musgrave believes a combination of strong geological, soil geochemical or rock chip sampling will provide the necessary support for the potential discovery of massive base metal sulphides.

That potential was supported with the company receiving WA government EIS co-funded support for the base metal drilling.

Drill testing of these high priority base metal targets has now been completed with assays awaited.

“We like the base metal potential of the Hollandaire project area,” Waugh said.

“Silver Lake demonstrated in 2011 with the Hollandaire discovery that there is potential for VMS deposits in the area.

“We hope to be able to emulate that and make significant discoveries on the base metals side to complement our gold discoveries.

“Our focus on the Cue project is a continuous process – we’ll be spending a significant drilling budget throughout the second half of 2017, focussed on extending and growing the gold Resource while we are carrying out the Scoping Study.”

Musgrave Minerals Ltd (ASX: MGV)
…The Short Story

HEAD OFFICE
28 Richardson Street
West Perth WA 6005

Ph: +61 8 9324 1061

Email: info@musgraveminerals.com.au
Website: www.mugraveminerals.com.au

DIRECTORS
Graham Ascough, Rob Waugh, Kelly Ross, John Percival

Australian Potash Making Rapid Advancement at Lake Wells

THE INSIDE STORY: Australian Potash (ASX: APC) completed a Scoping Study on the company’s Lake Wells potash project, located approximately 500 kilometres northeast of Kalgoorlie, in Western Australia’s Eastern Goldfields earlier this year.

The Lake Wells potash project consists of a 2000 square kilometre tenement package made up of 100 per cent-owned granted exploration licences, and licenses over which Australian Potash holds rights to all potash minerals.

The Lake Wells potash project tenement package covers palaeovalley and salt lake terrain in the northeast part of the Yilgarn Craton, which Geoscience Australia has recognised as a high-potential potash salt lake system with interpreted palaeovalley trends.

Australian Potash has verified this prospectivity through extensive drill hole brine sampling.

The recent Scoping Study confirmed both technical and economic aspects of the Lake Wells project to be strong and viable.

The Study determined the project has potential to take Australian Potash from its current explorer moniker through to being a long-life, low capital and high margin sulphate of potash (SOP) producer.

In conjunction with the Scoping Study, APC upgraded the Lake Wells JORC 2012-compliant Mineral Resource Estimate to 14.7 million tonnes of SOP, including 12.7 million tonnes sitting in the Indicated category.

Australian Potash believes potential exists for substantial upside in the resource model, encouraged by the Scoping Study mine plan based on the extraction of just 34 per cent of the project’s Indicated Resource in the Western High Grade Zone and 33 per cent of the Inferred Resource in the Southern Zone.

The Study also outlined life of mine extension opportunities with inclusion of the Eastern Zone (4.6 million tonnes SOP Indicated).

After completing the Scoping Study, APC received WA State Government approvals to proceed with developing pilot evaporation ponds for the project.

An on-site, pilot evaporation pond program has commenced to produce the first sample of SOP from the project.

Construction of the evaporation pond was finished in June 2017 with the program to operate for a minimum of six months.

The test-work from the bulk samples of potash salts from the pilot evaporation pond program will be used to further optimise process design.

“The Scoping Study provided areas we can improve and de-risk the project,” Australian Potash process engineer Shaun Triner told The Resources Roadhouse.

“We are finalising those while we carry out some optimisation work.

“Resource-wise, we identified the palaeovalley, which is effectively an old river system that has filled up with sediments over time.

“The hyper-saline environment of the Goldfields has effectively formed – what could be described as – a tank full of brine containing potassium.

“That palaeo-valley under our deposit goes to around 175 metres deep with substantial upper and basal sand layers, from where we will be able to extract brine.”

The optimisation work underway includes recently-conducted laboratory based test-work that confirmed the validity of the conversion process of Muriate of Potash (MOP) to SOP that APC proposes to implement at Lake Wells.

Unlike the Mannheim process, this natural, low-energy process can increase output from the project by up to 50 per cent.

The test-work also confirmed the Lake wells project can increase SOP output by 50,000 tonnes per annum to 150,000 tonnes per annum in stage 1, and by 100,000 tonnes per annum to 300,000 tonnes per annum in stage 2 by converting MOP to SOP.

To achieve this APC will use a non-Mannheim conversion process, similar to that used at the Compass Minerals brine SOP operation in the United States, the largest brine SOP operation outside of China.

The main differences between the conversion process APC intends using compared to the Mannheim process are it happens at low temperature and will not create additional reagent expense associated with purchasing sulphuric acid, as sulphate is already present.

The company considers the economic case for developing this conversion facility to be compelling considering the low marginal operating costs associated with producing an additional 50,000 to 100,000 tonnes of SOP from essentially the same plant.

APC is working to de-risk the three essential components of a brine SOP operation, being brine extraction, brine evaporation and salt processing and is about to commence a Stage 2 test-pumping program that will add to the plus-20 million litres of test-pumping already conducted.

This test-pumping program will feed into the brine flow model for brine extraction, building on decades of understanding and operation of brine bore fields in WA.

“We are now aiming to kick into a Feasibility Study, for financing purposes, during the second half of this year that should be ready for reporting in the first half of next year,” Triner said.

“As we move into a Feasibility Study – obviously there is the technical side of the project to consider, but we also need to have a market for our material, which is where the recent MoUs regarding offtakes come into play.”

A valuable lesson junior Resource companies learnt in recent times is that financiers can be reluctant to fund an operation that doesn’t have customers for its product.

To that end, APC placed a healthy chunk of its corporate puzzle in place by demonstrating to the right people the company does have potential customers interested in its product.

Australian Potash signed of a non-binding Memorandum of Understanding (MoU) for the supply of SOP to one of China’s largest fertiliser companies after striking a deal with Sino-Agri Holding Company Limited, a subsidiary of CNAMPGC Holding Limited Corporation.

The MoU portends potential high-level commercial terms for sales volumes of up to 30 per cent of estimated production – up to 100,000 tonnes per annum of SOP – from Stage 2 of the Lake Wells project.

“In the Scoping Study, we talked about a two-stage project, the first stage being 150,000 tonnes per annum and the second stage being another 150,000 tonnes per annum,” Triner said.

“That was based on getting funding for the first half, and then funding the second half through cash flow.

“Although it is still non-binding at this stage, the signing of a 100,000 tonnes per annum offtake MoU is an extremely important component of the project’s first 150,000 tonnes of production.

“We have been developing our relationships within the Chinese potash and fertiliser industries for some time and it is encouraging that we are now seeing the results in the form of a formal pathway to securing customers in the world’s largest fertiliser market.”

Australian Potash has a great deal of activity planned for Lake wells, including the commissioning of pilot evaporation ponds, completion of the Stage 2 test-pumping program, installation of Stage 2 test-production bores, continuing Resource upgrade and expansion program, and commencement of the Feasibility Study.

“We have made some rapid advancements with the release of the Scoping Study and we are now very confident the project is viable and should go ahead, which we have demonstrated to the market with the imminent commencement of our Feasibility Study,” Triner said.

“Although we haven’t quite kicked-off the FS at this stage, we are very busy finalising that work-optimisation phase on the back of the Scoping Study.

“The Scoping Study presented a few options we need to look at and we are just assessing those to finalise the fixed-scope of the Feasibility Study, which we anticipate will be underway by Q3 this year.”

Australian potash Limited (ASX: APC)
…The Short Story

HEAD OFFICE
31 Ord Street
West perth WA 6005

Ph: +61 8 9322 1003

Email: m.shackleton@australianpotash.com.au
Web: www.australianpotash.com.au

DIRECTORS
Matt Shackelton, Rhett Brans, Brett Lambert

Middle Island Resources Annexes Strategic Gold Project

THE INSIDE STORY: Middle Island Resources (ASX: MDI) clearly signalled its intentions with a recent land acquisition and an outstanding gold intercept.

Middle Island Resources consolidated its grip on the 100 per cent-owned Sandstone gold operation, located between Mt Magnet and Leinster in the East Murchison Mineral Field of Western Australia with the strategic pick-up of the adjacent Wirraminna gold project.

Through its 100 per cent-owned subsidiary, Sandstone Operations, Middle Island executed an Option Deed to acquire a 100 per cent interest in the Wirraminna gold project from two prospectors, Kym McClaren and Karl Mansen.

The deal came with a price tag of $300,000 payable at any time within the next four years, during which Middle Island will have access to explore for sub-surface gold.

The vendors will retain the surface gold rights to a depth of two metres prior to option exercise.

The 40.64 hectare Wirraminna gold project adjoins the western boundary of Middle Island’s existing Sandstone gold project but, more importantly, lies only one kilometre west of the company’s 600,000 tonnes per annum Sandstone gold processing plant.

“There are several aspects of significance with the Wirraminna project that we feel should spark market interest,” Middle Island Resources managing director Rick Yeates told The Resources Roadhouse.

“We identified Wirraminna early on as being of real strategic significance for our Sandstone operation.

“There are three principal attractions to the project, apart from the proximity to the Sandstone processing plant.

“There is already a JORC 2004-compliant Resource identified on the block.”

The Wirraminna project hosts an Inferred Resource (JORC 2004) of 106,300 tonnes at 2.07 grams per tonne for 10,674 ounces of gold.

Mineralisation is associated with a steeply dipping, northwest-trending, high grade quartz lode (Wirraminna line) that remains open at depth and, to a lesser extent, along strike to the northwest and southeast.

Although JORC 2004-compliant, the Wirraminna Resource obviously indicates the presence of gold mineralisation, which Middle Island hopes to upgrade to a standard consistent with the 2012 JORC Code guidelines in 2017-18 by completing a rigorous program of infill RC and diamond core drilling.

The Wirraminna project also hosts two identified, yet unquantified, mineralised laterite occurrences at surface.

These, in turn, are associated with the intersection of three distinct mineralised trends, being the Wirraminna, Goat Farm and Twin Shafts lines.

To date there has not been a great deal of meaningful exploration undertaken beneath or between these laterite occurrences, particularly along the Goat Farm line.

“The mineralisation we see at Wirraminna is a somewhat unique style of mineralisation compared to what we see elsewhere within the Sandstone project,” Yeates explained.

“It is very much an oblique, quartz, lode system, and certainly in the Sandstone district we know these types of deposits can be quite persistent at depth.

“We think there is a lot more potential – not just for an open pit, but also for a subsequent underground operation.

“The Wirraminna Trend has been subjected to a generous amount of near-surface drilling with not a lot completed at depth.

“We think this trend has plenty of legs and the opportunity to expand on the current 10,674 ounces is significant.”

The Wirraminna transaction makes infinite sense when taken in context with the findings of a recent study on the adjacent Sandstone project, providing a potential catalyst for the early re-commissioning of the Sandstone operation.

“Our overall strategy is to extend and enhance the production profile for the re-commissioning of the Sandstone operation,” Yeates said.

“To do that, we basically need 10,000 to 20,000 ounces of higher grade gold mineralisation up the front end of the schedule to improve the project’s initial capital payback.

“The Wirraminna acquisition is a big step forward in providing that and, while it may not be the entire answer, it is at least part of the answer to an early re-commissioning of the Sandstone mill.

“As such, in the second half of the calendar year we are planning some RC and pre-collared diamond drilling to verify, and hopefully extend, the existing Wirraminna Resource.”

Wirraminna also appears to incorporate the western margin of a substantially larger, intrusive-related target at depth, inferred from gravity data.

The majority of this target lies within Middle Island’s 100 per cent-owned tenure.

The recent Wirraminna purchase hasn’t distracted Middle Island from exploration on its existing Sandstone project, where it recently announced remarkable gold assay results from three diamond drill holes completed at the Two Mile Hill prospect.

The diamond coring program, co-funded under Round 14 of the Western Australa Government’s Exploration Incentive Scheme (EIS), was testing the down-plunge extent of gold mineralisation within the Two Mile Hill intrusive to a greater depth than any previous drilling.

The deepest hole to be drilled to date at the Two Mile Hill prospect, MSDD156, returned a gold intersection of 415.2m at 1.34g/t gold, ending in mineralisation.

The cored portion of MSDD156 is mineralised from start to finish and remains open at depth, with the final interval comprising 66.9m at 3.27g/t gold (from 432m to end of hole at 498.9m).

“This is a fabulous intercept that, while not necessarily contributing to the immediate recommissioning of the Sandstone project, does achieve two very clear objectives,” Yeates said.

“One: It demonstrates the potential longevity of the Sandstone project.

“And two: It brings Sandstone back into the spotlight – it’s not a new discovery, however, the intercept does re-introduce Two Mile Hill to the market as a deposit that could potentially be of far greater significance than the currently envisaged Sandstone production scenario.”

The drilling confirms the presence of a substantial gold-mineralised tonalite plug or stock measuring 250m in strike and up to 80m in width that is persistently mineralised to at least 500m depth.

The results increase the possibility of bulk underground mining beneath the proposed open-pit cutback at Two Mile Hill.

“The intercept demonstrates potential well beyond the realms of the proposed open pit cutback and the high-grade BIF-hosted mineralisation adjacent to the tonalite we are considering for underground mining,” Yeates said.

Middle Island Resources Limited (ASX: MDI)
…The Short Story

HEAD OFFICE
Suite 1
2 Richardson Street
West Perth WA 6005

Ph: +61 8 9322 1430

Email: info@middleisland.com.au
Website: www.middleisland.com.au

DIRECTORS
Peter Thomas, Rick Yeates, Beau Nicholls

Arafura Improves Nolans Process Design Following Project Review

THE INSIDE STORY: Arafura Resources (ASX: ARU) was recently awarded Major Project Facilitation (MPF) status with the Australian Government in recognition of the company’s 100 per cent-owned Nolans rare earths project in the Northern Territory. 

The Government offers a free MPF service to eligible projects to acknowledge the potential, government approval processes have, to add complexity to the planning and developing of major project investment.

The MPF program is administered by the Department of Infrastructure and Regional Development on behalf of the Minister for Infrastructure and Transport and endeavours to ensure Commonwealth approval processes are coordinated with relevant state and territory government approval processes.

The Minister, accordingly grants MPF services to projects deemed suitable, where a company has made the appropriate application and the project is assessed as meeting the eligibility criteria.

Arafura’s Nolans rare earth project was awarded MPF status following a review of the project, which delivered substantial process design improvements resulting in a more competitive and efficient project with greater capacity to withstand cyclical downturns in rare earth prices.

The Nolans deposit contains Measured and Indicated JORC resources of 34.9 million tonnes at 2.79 per cent total rare earth oxides (TREO) and 12.1 per cent phosphate (P2O5).

This is equivalent to over 970,000 tonnes of contained TREO with the current mine plan supporting a mine life of more than 20 years at a production level of 14,000 tonnes per annum equivalent TREO.

An important feature to emerge from the review was the introduction of phosphoric acid to the pre‐leach circuit, allowing an improved alignment with the project’s rare earth‐bearing phosphate‐rich feed.

This, along with other process changes, has assisted simplifying the Nolans flowsheet, thus reducing operating expenditure and environmental footprint.

It also enables production of 110,000 tonnes per annum of a merchant‐grade (54% phosphate [P2O5]) phosphoric acid product previously reported as a waste product.

“The review determined that process improvements will deliver higher rare earth recoveries at a reduced operating cost of US$6.23 per kilogram of TREO,” Arafura Resources managing director Gavin Lockyer told The Resources Roadhouse.

“The upshot from the comparatively high weighting towards neodymium and praseodymium (NdPr) rare earths – also referred to as magnet feed material – in the Nolans rare earth product mix, along with high rare earth and phosphate recoveries targeting NdPr and the reduced operating cost, is Nolans becoming one of the most efficient developing rare earth projects going around.”

The revised flowsheet includes the production of both a cerium carbonate and a phosphoric acid product in the Extraction Plant at the Nolans site.

“As a result, the offshore Separation Plant now produces three rare earth products compared with four from the previous Development Report flowsheet,” Lockyer said.

“Removing cerium at the Extraction Plant prior to refining at the Separation Plant reduces the volume of a rare earth intermediate product being exported.

“The rare earth product suite is made even simpler with production of a mixed samarium‐europium‐gadolinium‐heavy rare earth carbonate product.

“That means we can reduce the number of unit operations in the Separation Plant, and therefore refine capital and operating expenditure while the rare earths separation plant targets high recoveries for NdPr.”

The renewed process flowsheet also improved the CAPEX and OPEX equations with the project’s CAPEX reduced by US$658 million, close to 50 per cent, and OPEX by US$5.50 per kilogram of TREO, or 38 per cent.

The total initial CAPEX for the Nolans project is now estimated to be US$680 million inclusive of 20 per cent contingency.

In light of this information Arafura has commenced the process of scoping and tendering the next phase of engineering and design for the final Feasibility Study phase of the project.

In addition, the company recently commenced putting the flowsheet through a final round of rigorous pilot testing to support detailed engineering, and will soon submit a supplement to its draft Environmental Impact Statement (EIS) with Northern Territory regulators to advance environmental approval for the project.


Arafura Minerals Limited (ASX: ARU)
…The Short Story

HEAD OFFICE
Level 3, 263 Adelaide Terrace
Perth WA 6000

Ph: +61 (8) 6210 7666

Email: arafura@arultd.com
Website: www.arultd.com

DIRECTORS
Ian Kowalick, Gavin Lockyer, Chris Tonkin, Terry Grose, Cungen Ding

Impact Minerals well-funded to expand Commonwealth Gold Project

THE INSIDE STORY: Impact Minerals has managed to achieve what any number of ASX-listed companies would have been very happy to emulate in the past 12 months. By Mark Mentiplay

That has been to maintain positive momentum throughout the recent downturn, which is directly attributable to the company’s willingness to get out and do what exploration companies do best – explore.

This is one aspect that has set the company apart from most of its peers over the last couple of years and has paid off with it sitting in the enviable position of being well funded and able to sustain a good share price and market cap in that period.

Although its current focus is on its high grade precious and base metal Commonwealth project, Impact will still be keeping a close eye on the Broken Hill platinum-copper-nickel project where it intends to commence follow-up work on the highly-promising drill results achieved on the Red Hill propsect last year. Both of these projects are in New South Wales.

“It may appear to the market that we have taken our eye off the Broken Hill nickel-copper-PGE project by increasing our focus the Commonwealth gold, silver, lead-zinc and copper project,” Impact Minerals managing director Dr Mike Jones told The Resources Roadhouse.

“This is simply because the amount of aggressive exploration we have carried out over the two years has generated some very high-grade drill results for those metals on both of the projects.

So now we are beginning a new phase of significant follow-up drilling, starting at Commonwealth with the intention of heading then back to Broken Hill later in the year.”

Impact is now focusing on expanding the already outlined Commonwealth gold-silver-zinc resource for early production/cash flow. 

The Commonwealth project has an established mineable gold equivalent resource and a one million ounce – plus exploration target.

The company also has two powerful backers, which means it is now cashed up and ready to continue focusing its exploration spotlight on the Commonwealth gold project.

Commonwealth already has current Inferred gold-silver-copper-lead-zinc Resources of 720,000 tonnes at 4.5 grams per tonne gold equivalent (AuEq) containing 110,000 ounces AuEq, including 140,000 tonnes at 9.3g/t gold for 47,000 ounces AuEq, underlining the high grades being found.

According to Dr Jones, the 315 square kilometre project, located 95 kilometres north of Orange, has the potential for small scale, early production, with a one million ounce gold equivalent exploration target 

“The grades are coming up well and grade conquers all,” he said.

“That is necessary in this market.

“At the Commonwealth gold project, we believe we have found a starter pit, now we have to extend that.

“We haven’t had the discovery hole for a major deposit yet, but we are aiming for more than one pit and an underground operation.”

The 100 per cent-owned project sits within the Lachlan Fold Belt, a renowned region for major gold-silver-base metal mines.

Impact acquired the Commonwealth project in June 2013, since when it has demonstrated its potential to host two deposit types: a high-grade gold-volcanic massive sulphide (VMS), like the seven million ounce AuEq Woodlawn-style orebody; and porphyry copper-gold discoveries such as the 25 million ounce gold/4.9 million tonnes copper Cadia-Ridgeway project.

Impact has identified multiple targets at depth and along trend from the known resource as well as new, untested targets discovered by geophysics and soil geochemistry over 8sqkm and growing.

In all, the company boasts 50km of strike potential for the two types of deposits.

Previous exploration, including a ground electromagnetic survey, re-logging and sampling of previous drill core, is now being followed by ground radar and a major reverse circulation and diamond drilling program of up to 3,000m.

This will test the top dozen of 40 or so targets to have been identified at four prospects covering 5sqkm – these being the Commonwealth deposit, Silica Hill, Welcome Jack and Doughnut.

This work is designed to test Impact Mineral’s growing belief that the targets are all part of one large porphyry copper-epithermal system.

At the Commonwealth mine, intercepts from different holes have included:

4.7m at 5.5g/t gold and 253g/t silver from 54.3m; and
9.8m at 8.4g/t gold and 357g/t silver from 54.2m.

Commonwealth South has yielded:

4 m at 41 g/t gold; and
26m at 2.5g/t gold and 20g/t silver from 32m.

“Each time we’ve spent exploration money, we’ve had good results,” Jones said.

The Broken Hill PGM-nickel-copper project, located 20km east of the world-class Broken Hill silver-lead-zinc mine in NSW, has yielded the highest platinum grades ever found in Australia and has an exploration target of one million ounces PGMs.

Three priority targets have been identified over a prospective 40km belt within Impact’s 200sqkm EL in the SE part of the richly mineralised Curnamona Province.

The Platinum Springs target has yielded drill intercepts of 52.6g/t platinum equivalent and more recently, 0.6m at 11.5g/t platinum, 25.6g/t palladium, 1.4g/t gold, 7.6% copper, 7.4% nickel and 44.3g/t silver.

Red Hill has also yielded high-grade PGM, copper and nickel results.

Drill hole RHD012 demonstrated rare PGE rhodium of 4.6g/t, 7.2g/t iridium, 5.6g/t osmium, 3.1g/t ruthenium, 10.4g/t platinum, 10.9g/t gold, 294g/t palladium, 335.8g/t 6PGE+gold, 7.4% nickel, 1.8% copper and 19g/t silver over 1.2m.

This intercept sits within a high-grade 3.5m intercept of 1.7g/t rhodium, 2.6g/t iridium, 2g/t osmium, 1.1g/t ruthenium, 144g/t palladium, 5g/t platinum, 6g/t gold, 2.3% copper, 159g/t 6PGE+gold, 2.9% nickel, 2.3 copper and 14.5g/t silver.

In addition high grade zinc-lead-silver mineralisation has also been discovered and RHD018 returned 1m at 26.8% zinc, 2.8% lead, 133g/t silver and 1m at 21.4% zinc, 08% lead and 31.5g/t silver, within a 5.1m intercept of 10% zinc, 0.8% lead and 40.4g/t silver.

Spectacular high-grade rock chip and bulk samples have also been found over 9km of strike at Moorakai.

Work at the Broken Hill project is ongoing, with re-analysis and synthesis of previous exploration results expected to confirm the potential for bulk tonnage PGE mineralisation.

Jones said he expects follow up drilling at Red Hill after the current Commonwealth drilling, probably about 2,000m in the September 2016 quarter.

Impact is nicely cashed up with exploration funding of up to $8.3 million for its two prime NSW projects.

It has $4 million in the bank and another potential $4.3 million of funding when/if iron ore mining billionaire and Fortescue Metals boss Andrew Forrest’s Squadron Resources exercises its share options also an option to acquire a 19.9 per cent stakes in the Commonwealth and Broken Hill projects. This follows an earlier injection of $3 million cash by Squadron via a placement and convertible note. 

Impact has also received strong funding from 28 per cent major shareholder, the prominent German industrial Bunnenberg family.

There is a certain serendipitous aspect to Impact’s exploration and development of both the Commonwealth and Broken Hill projects.

Coincidentally, at the time of Impact’s interest, both projects were also being investigated by Squadron’s and Forrest’s right hand geologist, Dr John Clout, who along with Dr Jones, worked at pre-eminent Western Australian miner Western Mining in the 1980s-1990s.

Impact Minerals (ASX: IPT)
…The short story

HEAD OFFICE
26 Richardson Street
West Perth WA 6005

Ph: +61 (8) 6454 6666

Email: info@impactminerals.com.au
Web: www.impactminerals.com.au

DIRECTORS
Peter Unsworth, Dr Mike Jones, Paul Ingram, Markus Elsasser, Felicity Gooding.

MAJOR SHAREHOLDERS
Bunnenberg Family 28%
Squardron Resources 6%
Directors 7%.

World-class Resource wakes slumbering sector

THE INSIDE STORY: The Australian investment community finally took note of how impressive the Teena zinc deposit of Rox Resources (ASX: RXL) actually is.

All it took to shake everybody up was the release of a world-class Mineral Resource for Teena, placing it on par with the world’s largest zinc deposits.

Utilising a six per cent zinc-lead (Zn+Pb) cut-off, the JORC (2012) Inferred Mineral Resource is:

58 million tonnes grading 12.7 per cent Zn+Pb (11.1 per cent zinc, 1.6 per cent lead) for 7.4 million tonnes of contained zinc and lead metal (6.5Mt Zn and 0.9Mt Pb).

The Teena zinc deposit, located eight kilometres due west of the McArthur River zinc mine, is part of the Reward zinc-lead project in the Northern Territory, a Joint Venture between Rox and Teck Australia, (Rox 49%: Teck 51%), a subsidiary of Canadian major Teck Resources.

Teck is earning up to a 70 per cent stake by spending $15 million, having already spent $13.8 million.

Announcing the Inferred Resource, Rox declared the Teena deposit to represent the largest and highest grade zinc-lead mineral resource discovered in Australia for over 20 years.

“On a global scale, the estimated tonnage and grade of Teena is comparable to other giant zinc-lead Resources,” Rox Resources managing director Ian Mulholland told the Resources Roadhouse.

“Teena has zinc grades as high as currently operating mines at McArthur River, Mt Isa and the grades previously mined at Century.”

To provide some idea of scale – Teena contains a total of 16.3 billion pounds of zinc and lead metal (14.2 billion pounds zinc, 2.1 billion pounds lead), which in terms of contained metal exceeds the endowments of both the Cannington (South 32) or the Dugald River (MMG Limited) deposits.

Rox’s current 49 per cent interest will ultimately drop to a 30 per cent interest after Teck completes its earn-in.

This is still a considerable interest for a junior exploration company in such a project, and compares favourably to other companies with minority interests in substantial projects, such as Independence Group’s 30 per cent of Tropicana, Talisman’s 30 per cent of Monty, and Creasy Group’s original 30 per cent (now sold) of Nova.

“There are two lenses of zinc-lead mineralisation at Teena, which occurs as two sub-parallel lodes, termed the Lower Lode and the Upper Lode,” Mulholland explained.

“The upper lens has a Resource of 45 million tonnes at 13.7 per cent zinc and lead (12 per cent zinc, 1.8 per cent lead), while the lower lens is a little bit thinner and a little bit lower grade with a Resource of 14 million tonnes at 9.4 per cent zinc and lead (8.2 per cent zinc, 1.2 per cent lead).”

Drilling at Teena has defined a large stratiform mineralised system over one kilometre in length and Rox is confident the Mineral Resource will grow by further drilling, especially along the margins of the deposit.

Drilling has been constantly encouraging, returning results including:

38 metres at 16.9 per cent zinc and lead Zn+Pb;
26.4m at 13.3 per cent Zn+Pb, including 16.2m at 17.2 per cent Zn+Pb; and
20.1m at 15 per cent Zn+Pb, including 12.5m at 19.5 per cent Zn+Pb.

“The drilling has always returned high grades over good thicknesses, which have been defined over 1.3 kilometres – probably up to 1.5 kilometres,” Mulholland noted.

“It is worth noting that the drill spacing is still fairly wide, which is why this is only an Inferred Resource, but there is remarkable continuity between the drill holes – every drill hole virtually looks the same.

“The other remarkable aspect about the project is the zinc to lead ratio, which is around 6.5:1 , which we think will be favourable for metallurgy.

“We’re only at a preliminary stage with metallurgy but we think that is going to be quite good.”

Mulholland made a special effort to dispel a popular misconception about the depth of the Teena deposit, indicating it to be sitting between 400m to 1000m depth.

“It’s not deep when you compare it to other deposits and we know of no impairments to mining the ore body,” Mulholland said.

“Most of the mineralisation sits between 600 metres to 900 metres below surface – relatively speaking that is not very deep.

“We are really in elephant country – the Carpentaria zinc province, where over 20 per cent of the world’s zinc reserves are contained and mined at depths of well over one kilometre.

“Teena currently sits at number seven on the all-time Australian zinc deposit size list.”

The recent excitement being generated from Rox’s West Perth offices has not been contained to the goings on at the Teena deposit.

The company has also been busy elsewhere within its project portfolio, most recently at its Mt Fisher gold project, located in the north-eastern Goldfields of Western Australia approximately 230 kilometres north of the town of Leonora.

Rox has struck another shrewd JV agreement at Mt Fisher, this time with emerging WA gold production heavyweight, Doray Minerals (ASX: DRM).

Under the terms of the farm-in agreement, Doray is to sole fund an initial $5 million expenditure to earn a 51 per cent interest and a total of $10 million to ultimately earn a 75 per cent interest.

“There is a one million dollar minimum expenditure in the first year before they can withdraw,” Mulholland said.

“Then an additional $4 million over two years to earn 51 per cent and then another $5 million over another two years to move to 75 per cent.

“Rox is free-carried to the completion of a Pre-Feasibility Study.”

Once it was known Rox was looking for a JV partner for Mt Fisher there was a lot of interested parties knocking on its door.

“Being a small exploration company with limited resources we were very pleased to attract a Joint Venture partner such as Doray Minerals, a company with the credentials to accelerate the search for a significant gold deposit in the area,” Mulholland said.

The Mt Fisher project comprises a number of exploration tenements covering approximately 480 square kilometres, within the underexplored Mt Fisher greenstone belt.

This belt is located 40km east of the prolific Yandal greenstone belt, host of significant gold deposits such as Jundee, Bronzewing and Mt McClure.

When compared to neighbouring greenstone belts the Mt Fisher belt, with just on half a million ounces of gold endowment, can look a touch underdone – the Norseman-Wiluna belt has over 10 million ounces of endowment, the Yandal belt with over 17 million ounces of endowment.

“We see there is very good potential to find gold there, and at least define a few million ounces,” Mulholland said confidently.

“We have been conducting some extremely focused exploration here and have grown Resources to just under 100,000 ounces.

“The potential of this project really needs to be reassessed in light of the higher gold price.”

Mulholland’s confidence seems justified, given the price of gold is up 15 per cent since the company’s last project evaluation, which he believes makes the Mt Fisher gold project look even stronger.

“The gold-in-regolith anomaly is of significant size and contains a large amount of gold,” he said.

“We consider this indicates a deeper source of gold, and from the amount of gold in the weathered regolith that gold source must be sizeable.”

Rox Resources Limited (ASX: RXL)
…The Short Story

HEAD OFFICE
Level 1, 34 Colin Street
West Perth WA 6005

Ph: +61 8 9226 0044

Email: admin@roxresources.com.au
Web: www.roxresources.com.au

DIRECTORS
Stephen Dennis, Ian Mulholland, Brett Dickson

MAJOR SHAREHOLDERS
Drake Private Investments   3.4%
Rox Directors        2.1%

Gold price up, capital costs down. All’s well along the Gold Road.

THE INSIDE STORY: The broader market may be all doom and gloom after the boom, but gold producers and developers, such as Gold Road Resources (ASX: GOR), are relishing the opportunities being offered by a buoyant gold price.

Earlier this year the gold price to a peek over the $1700 mark, which was most encouraging for the sector given the all-time highs experienced during the ‘Good Days’ were in the $1800 per ounce range.

When the gold price was at these heady levels, operating costs, especially in Western Australia where the epicentre of the boom was located, were greatly inflated compared to today.

The oil price was almost double that now being paid, while the iron ore companies were relishing their time in the sun, subsequently driving labour costs up, and all other input costs were hitting the upper echelons.

“The gold space – particularly in Western Australia – is a very good space to be in at present,” Gold Road Resources executive chairman Ian Murray told The Resources Roadhouse.

“And, it’s also good to have a project like Gruyere, which is the largest undeveloped gold project in Western Australia, if not Australia.
 
“It’s no secret the other sectors are really suffering, so we have to make the most of the open window of opportunity.

“So that window of opportunity being open is providing us access to the best people, access to capital, allowing us to move a project of this size and scale on through development and to production as quickly as we can.

“In the past few months the cards have definitely fallen in our favour with the gold price sitting up near that top end of the spectrum, while operating costs have been at the opposite end.”

In February this year, Gold Road Resources released the results of a Pre‐Feasibility Study (PFS) for the development of the company’s 5.62 million ounce Gruyere project, located east of Laverton in Western Australia.

At the time the company boasted the PFS had confirmed the Gruyere project to be one of Australia’s best undeveloped gold deposits.

Its boasting would appear to be well-placed with the PFS demonstrating the project to be technically sound and financially viable, being capable of generating (off a $1500/oz gold price) over $1 billion in free cash flow (pre‐tax) over an initial 12‐year project life.

The total forecast capital cost is estimated to be $455 million, which includes a project contingency of $35 million.

The PFS produced a Whittle‐optimised open pit shell and Ore Reserve modelled at $1,400 per ounce.

All financial analysis was undertaken using an Australian Dollar $1,500 per ounce gold price, representing the five‐year historic average.

Other highlights from the study include development of the project to be based on a single large open‐pit mine and conventional SAG/Ball Mill Circuit, gravity/carbon‐in‐leach plant with throughput of 7.5 million tonnes per annum of fresh ore and up to 8.8 million tonnes per annum of oxide ore.

Estimated total forecast capital costs of $455 million, including $35 million contingency (US$335M and US$26M respectively), while estimated average all‐in sustaining cost (AISC) came in at $960 (US$700) per ounce over life‐of‐mine (LOM) with a payback of less than one third of LOM.

Following the completion of the PFS, Gold Road declared a Maiden Ore Reserve for Gruyere of 3.17 million ounces, which supports an average annual gold production of 265,000 ounces over the life of the mine, a rate that should elevate it into the ranks of Australia’s mid‐tier gold producers.

Based on the positive PFS outcome, the company approved the immediate progression to a Feasibility Study on the project to further define and support the case for project funding and development.

“Part of that Feasibility Study is looking for upside opportunities within the mine plan at Gruyere,” Murray said.

“We know the ore body carries on a lot deeper than the current picture, which goes to around 340 metres depth, as our deepest drill hole into the ore body intercepted gold mineralisation at around 1150 metres, so there is a lot of gold below the current picture.”

Having established there are 3.2 million ounces in the current Reserve, Gold Road now has further value adding work currently underway that is taking into consideration such aspects of the project as power efficiencies, in particular the cost of diesel.

The PFS looked at diesel costs at around 75 cents per litre, while current prices being paid for diesel by operating mines in the area around Gruyere have been around 45 to 50 cents.

The study also anticipated the Gruyere open pit will average more than 9,000 Reserve ounces per vertical metre to a final depth of 340 metres.

Recent work carried out as part of the Feasibility Study, however, suggest these numbers could also change dramatically.
 
“The pit slope angles in the PFS for the Stage 4 pit were 40 degrees, and that was because we didn’t have any geotech drilling down to that depth,” Murray explained.

“We have subsequently done 3,000 metres of geotech drilling and we now have more information telling us that for every one degree we steepen that wall angle we drop around $50 million of operating costs over the life of the project.

“That is a significant improvement in the operating costs from changing the wall angles.

“In addition to that, if we can steepen the wall angles – of course we already know that the Resource carries on deeper – the pit then actually pushes deeper providing the potential to increase the mineable ounces.”

The Gruyere project is a dynamic beast that basically changes on a day to day basis as gold prices and operating costs improve always adding value.

The PFS was completed based on a gold price of $1500 per ounce and the gold price is now sitting just over $1600 per ounce, and recently over the $1700 per ounce range.

Gold Road believes improvements to the gold price provide opportunities to improve the current mine plan, in conjunction with improvements to operation efficiencies allowing it to get more gold Resources into the mine plan.

Murray describes the PFS as a conservative model, enabling the company commence the Banking stage of the development process.

“The banks will conduct their Due Diligence and I don’t think they will be able to question any of the assumptions we have used because we can prove all of them to be conservative when they are compared to where costs are in the marketplace at the moment,” Murray said.

“Operating costs, certainly in Western Australia, continue to go down.

“Between the PFS and the Scoping Study – on the capital costs – we saw around a ten to fifteen per cent drop in costs on different items.

“Obviously costs cannot drop forever, but I would say that we are certainly not in an environment where the risks are that the costs will escalate enough to blow out a project.

“We will be able to build the Gruyere project and the costs should remain very close to what our studies have suggested that they should be.”

Gold Road Resources (ASX; GOR)
…The Short Story

HEAD OFFICE
2/26 Colin Street
West Perth WA 6005

Ph: + 61 8 9200 1600
Fax: +61 8 9481 6405

Email: perth@goldroad.com.au
Website: www.goldroad.com.au

DIRECTORS
Ian Murray, Justin Osborne, Russell Davis, Martin Pyle, Tim Netscher

MAJOR SHAREHOLDERS
RCF 9.8%
Platypus 8.6%
Van Eck 5.9%

Thunderbird PFS results drive Sheffield Resources straight into BFS

THE INSIDE STORY: Sheffield Resources’ (ASX: SFX) 100 per cent-owned Thunderbird mineral sands project possesses a number of very prominent attributes.

Located on the Dampier Peninsula, about 60 kilometres west of Derby, and 25km north of the sealed Great Northern Highway joining Derby and Broome, Thunderbird is the first major mineral sands discovery in the Canning Basin region of Western Australia.

Since its discovery, Sheffield has worked up the project to become one of the largest mineral sands deposits to be discovered in the last 30 years.

Thunderbird boasts a total Mineral Resource of 3.2 billion tonnes at 6.9 per cent heavy minerals (HM) across all three Measured, Indicated and Inferred categories at 3 per cent HM cut-off.

The Resource contains 18.5 million tonnes of zircon, 61.8 million tonnes of ilmenite, 6.9 million tonnes of leucoxene, and 5.9 million tonnes of HiTi leucoxene.

A recently-completed Prefeasibility Study (PFS) update concluded the project’s current Mineral Resource can support an initial 40 year mine life with substantial room opportunity to increase this in the future.

The project will eventually ramp-up to an 18 million tonnes per annum throughput, at which time it will become one of the world’s largest dry mining mineral sands operations.

Zircon is the key value driver of the project making up 59 per cent of forecast revenue, with the remainder generated from substantial amounts of high grade sulphate ilmenite and HiTi leucoxene.

Over 50 per cent of the world’s zircon supply is used in the production of ceramics, including tiles, sanitary ware and tableware.

Zircon is also used in refractories and foundry applications.

Globally, zircon demand reached an estimated 1.1 million tonnes in 2014.

Zircon prices trebled during 2011 to peak around US$2,400 to $2,600 per tonne, but since then they have come back to around the US$1,050 per tonne mark, however industry boffins do anticipate the longer-term outlook for zircon prices to be positive, due to increasing demand and a limited pool of new projects in development.

Key outcomes to emerge from the recent PFS update include a 26 per cent reduction ($96.6M) in pre-production capital expenditure to $271 million, a 13 per cent increase in annual EBITDA to $135 million, improvement of capital payback to 3.4 years and a 25 per cent increase in mine life to the initial 40 years mentioned above.

The PFS update was based on a conventional dozer trap mineral sand mining operation involving an initial 12 million tonnes per annum throughput, increasing to the much-anticipated 18 million tonnes per annum in year eight, and a low risk, conventional processing flow sheet with all infrastructure located on site.

The results of the PFS update attracted a lot of attention for the company and also the attention of highly credentialed mining executive Bruce McFadzean, who joined the company as Managing Director in November.

McFadzean brings to the company more than 35 years’ experience in the global resources industry, having led the financing, development and operation of several new mines around the world.

Across his journey, he has spent 15 years with BHP Billiton and Rio Tinto in a variety of positions and four years as managing director of Western Australia gold miner Catalpa Resources.

It was during his time at Catalpa, McFadzean oversaw the construction and operation of the Edna May gold mine, the acquisition of 30 per cent of the Cracow gold mine and the company’s eventual merger into Evolution Mining (ASX:EVN), after which Catalpa’s market capitalisation grew from $10 million to $1.2 billion.

“Accepting the appointment was an easy decision as I believe the Thunderbird project presents such a wonderful opportunity,” McFadzean told The Resources Roadhouse.

“The results from the PFS update were very hard to ignore as they confirmed what I considered the Thunderbird project to be – a strategic, high margin, zircon-rich asset located in one of the world’s most stable mining jurisdictions.”

The PFS update demonstrated Thunderbird to be a project requiring a modest capital expenditure that will eventually generate strong EBITDA margins over a very long mine life.

Sheffield took meticulous care in running the study using proven, cost-effective conventional mining and processing techniques, which determined Thunderbird will generate a highly marketable suite of products.

The primary zircon is of premium quality whilst the upgraded ilmenite demonstrates characteristics that are superior to other sulphate ilmenites in the market, meaning it should become a preferred feedstock. 

The quality of the zircon found a cheer squad in leading global mineral sands consulting group TZMI, which confirmed Thunderbird’s primary zircon and LTR ilmenite to be high quality products that will very likely receive strong market support.

Collectively, these products represent 81 per cent of the project’s total projected revenue and the company has already had some interest registered in these products by leading marketing specialists and industry groups. 

“Although we have received some strong interest in relation to Thunderbird’s products, we have, at this stage, chosen not to commit to offtake agreements until after completion of the Bankable Feasibility Study (BFS),” McFadzean said.

Just after the release of the PFS update, Sheffield announced an Access Agreement with the Shire of Derby-West Kimberley over the bulk handling facility at the Derby Wharf, confirming Sheffield as the preferred proponent and providing exclusive access to the bulk handling facility.

The agreement allows Sheffield exclusive access during the BFS to complete all work required to submit a development application and to complete terms of a sublease agreement by June 2017.

The company considers securing port capacity to be a major step towards development of the Thunderbird project as efficient and unconstrained access to export infrastructure is essential to establishing a cost effective mine-to-port logistics chain for its products.

The Derby wharf is well suited to the export of mineral sands products.

The PFS established that final products will be transported in bulk form by quad road trains from the mine site to the Derby wharf for storage and export.

Bulk ilmenite, zircon and HiTi88 products will be off-loaded at the port export facility to then be conveyed to a ship loader for transhipment via barge.

As a company that likes to keep things moving at a steady pace, Sheffield recently announced its intentions to raise up to $5 million through a placement of up to 11.4 million shares at an issue price of 44 cents per share to domestic and international institutional, sophisticated and professional investors.

This was supported by an offer to eligible shareholders to participate in a Share Purchase Plan (SPP) to raise up to $2 million.

Sheffield has earmarked the funds raised for the BFS at Thunderbird, to accelerate offtake and financing negotiations, to undertake regional exploration at the Dampier Mineral Sands project and the company’s Red Bull nickel project in the Fraser Range and for general working capital purposes.

“This capital raising will strengthen our balance sheet, which will ensure we can deliver on some very significant upcoming milestones we will have to achieve on the way to finalising the Bankable Feasibility Study in late 2016,” McFadzean explained.

“We are already well-advanced into this exciting phase, which is to include a number of catalysts including permitting, grant of the mining lease, a maiden reserve for the Thunderbird deposit and key offtake and financing negotiations.”

Sheffield Resources Limited (ASX: SFX)
…The Short Story

HEAD OFFICE
Level 1, 57 Havelock Street
West Perth WA 6005

Ph: + 61 8 6424 8440
Fax:   +61 8 9321 1710

Email: info@sheffieldresources.com.au
Website: www.sheffieldresources.com.au

DIRECTORS and MANAGEMENT
Will Burbury, Bruce McFadzean, Bruce McQuitty, David Archer