BCI Minerals Creating Tasty Iron-Salt Mix

THE INSIDE STORY: BCI Minerals (ASX: BCI) is determined to once again, as in the heydays of the iron ore boom, become a medium sized mining company.

The company hopes to achieve its aim by generating earnings from its iron ore and industrial mineral projects located in the Pilbara region of Western Australia.

True to its roots, iron remains at the heart of the company in its Iron Valley mine near Newman and the 100 per cent-owned Buckland iron ore project near Pannawonica.

Iron Valley is a producing mine with a mine life of approximately 15 years based on current production rates.

It is operated and managed by BCI’s operating partner, Mineral Resources (ASX: MIN), which recently executed an all scrip takeover for Atlas Iron.

At 30 June 2017, Iron Valley’s Mineral Resource measured 229.9 million tonnes at 58.4 per cent iron with Ore Reserves of 113 million tonnes at 58.7 per cent iron.

The mine is operated and funded by MIN, which pays BCI a royalty as a percentage of MIN’s FOB realised sale price.

The Iron Valley mine generated revenue of $63.5 million and EBITDA of $18.3 million for BCI Minerals in FY17.

Although 60 per cent iron products have recently attracted historical discounts to the 62 per cent iron index, Iron Valley is still providing a steady income stream.

BCI is advancing the Buckland iron ore and Mardie salt projects, which are both proposed to export product through the company’s planned 20 million tonnes per annum Cape Preston East Port facility.

BCI expects Cape Preston to become a multi-commodity, multi-user port exporting 15 million tonnes per annum of ‘Buckland Blend’ iron ore and more than three million tonnes per annum of salt and a small component of potash from the Mardie salt project.

“The immediate focus for BCI Minerals is to develop and grow our iron ore business,” BCI Minerals managing director Alwyn Vorster told The Resources Roadhouse.

In January, BCI Minerals inked a non-binding memorandum of understanding (MoU) with Sinosteel Australia to support development of the project.

The MoU provides a framework for facilitating discussions between BCI and potential offtake partners, and potential direct offtake by Sinosteel Australia as well as facilitating discussions with potential funding partners and possible JV investment by Sinosteel.

Results from drilling at Buckland (at the newly acquired Kumina Tenements) have been encouraging.

The first program identified several targets BCI considers to potentially host greater than 58 per cent iron channel iron deposits (CID) as well as greater than 60 per cent iron bedded iron deposits (BID).

The results initiated a major drilling program on the Kumina Tenements.

“This drilling at Kumina is to consist of at least another 300 holes to be drilled into the Kumina deposit,” Vorster explained.

“The Buckland project already has the Bungaroo South Resource, however, that is too small to support our envisaged 15 million tonnes per annum over 15 years operation.

“We bought the Kumina tenements targeting at least 100 million tonnes mining inventory additional to the Bungaroo South tenement, which should provide sufficient scale to make the entire Buckland project stack up to our investment hurdles and long-term ambitions.

“We anticipate releasing a maiden Kumina Mineral Resource estimate at the by mid-year.”

The drilling will test high-grade outcropping BID mineralisation at Kumina targets E and J.

Earlier rock chip sampling at these target areas returned grades of greater than 62 per cent iron from most of results with best results of up to 67 per cent iron.

Channel iron deposit targets B and C will also be included in the program.

“This tenement has had no drilling activity for over three decades,” Vorster said.

“We identified outcropping high-grade bedded iron deposits – which is different to most other deposits in the Western Pilbara region that are channel iron deposits normally containing around 57 to 58 per cent iron.

“In the new iron ore world with higher discounts if your product clears the 60 per cent iron level you immediately move to selling into a different market segment at a different price point.

“It shifts the whole market risk, revenue risk and confidence of potential project investors.”

Such is the BCI emphasis on higher grade discovery, that should the Kumina drilling program achieve, hopefully exceed, its objective of identifying 100 million tonnes of excellent quality mining inventory, it may be feasible for BCI to consider developing Kumina as a separate, standalone operation like the company ran in its early days at Nullagine, by shaping an infrastructure partnership with an existing player.

“The significant difference will be the grades…Nullagine was 57 per cent iron, but we are expecting to see much higher quality at Kumina,” Vorster said.

BCI Minerals also sees potential upside within its 100 per cent-owned Mardie salt and sulphate of potash (SOP) project that sits on the WA coast between Onslow and Karratha.

A Scoping Study for the 300sqkm Mardie project in July 2017, demonstrated potential technical and economic viability for a three to 3.5 million tonnes per annum operation producing high purity industrial-grade sodium chloride salt from seawater via solar evaporation, crystallisation and raw salt purification.

BCI has progressed its Pre-Feasibility Study enhancing the viability of the Mardie salt project.

BCI plans producing a high purity salt for use in industrial applications, specifically targeting the Asian market, where analysts predict salt consumption in the Asian chlor-alkali and soda ash industries to grow by approximately 4.3 per cent per annum from around 110Mtpa in 2016 to approximately 170Mtpa by 2026.

This total demand growth over 10 years would require increased supply equivalent to approximately two new Mardie sized operations each year.

“We believe the Mardie salt project is one of the last available sites of its size in one of the best locations in the world for a solar salt operation,” Vorster said.

“One change being covered in the PFS is that we are planning the processing circuit to also produce a component of sulphate of potash as a by-product.”

This turns the usual way a sulphate of potash (SOP) project operates upside down.

Many current Australia-based SOP projects produce lower quality salt as a by-product that ends up as waste due to the distances these projects are from port.

BCI will produce a high-grade industrial salt with SOP by-product that will both be within an economically viable distance from its Cape Preston East port.

Because the capex to establish the Mardie salt project will be high, BCI is open to discussion with JV partners, be they other producers or buyers.

Another option is the possible spin out of Mardie in an IPO.

“The rationale behind that is that Mardie has a long lead time to production but then has a 50-year plus mine life,” Vorster said.

“It is therefore a type of investment where very specific investors should be targeted, rather than the same investors who are attracted to quicker earnings from more volatile commodities.

“The reality is that while Mardie is sitting within BCI, we really won’t realise full value for the project.”

Targeting technical and ownership solutions for both projects during 2018 appears like an ambitious target, but Vorster says with an excellent management team and supportive board positive progress is being made on all fronts.

 

BC Iron Limited (ASX: BCI)
…The Short Story

HEAD OFFICE
Level 1
15 Rheola Street
West Perth WA 6005

Ph: +61 8 6311 3400

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

DIRECTORS
Brian O’Donnell, Alwyn Vorster, Michael Blakiston, Jennifer Bloom, Martin Bryant, Andrew Haslam

 

Market Movements Encourage Brownfield and Greenfield Explorers

COMMODITY CAPERS: The renewed optimism for the resources sector is built on the resurgence of interest in brownfield expansions and exploration of greenfield projects.

The Department of Industry, Innovation and Science, in its Resources and Energy Quarterly for December 2017, informs us that the mining industry has continued to account for a decent share of Australia’s overall economic growth in 2017.

The mining industry’s main concern is that the government bean counters place it in the same basket as the oil and gas sector, which does make it difficult to get a reliable reading on mining’s current standing.

Investment in oil and gas took a big hit last year, which DIIS suggests – when coupled with declining export values – could see the mining industry make a smaller contribution to overall economic activity in the coming two years.

“Steel production cuts in China have placed downward pressure on the price of Australia’s biggest export — iron ore — in the December quarter,” DIIS chief economist Mark Cully said in the report.

“Continued moderation in Chinese steel production, coupled with increased supplies from both Australia and Brazil, are expected to weigh further on iron ore prices over the next two years.

“The outlook for base metals prices are generally more optimistic than for iron ore and coal (although mixed across the individual commodities).

“Strong growth in global industrial production — particularly the manufacturing of stainless steel, vehicles and aluminium-based packaging — and infrastructure development, particularly in China, has boosted demand.”

Minelife founder, and old friend of The Roadhouse Gavin Wendt, recently noted that commodities prices moved higher by just under eight per cent during 2017.

This considered the performances of all the various sectors – including precious metals, base metals, energy, grains, soft commodities and animal proteins.

However, it was the drop in agricultural prices that dragged down the composite returns as many industrial commodities prices soared.

“When looking at the performance of the commodities sector as an asset class during 2017, many industrial commodities that are the building blocks of infrastructure around the world outperformed the major equity indices,” Wendt said.

“For example, the price of palladium – both an industrial and precious metal – appreciated more than 56 per cent over the course of the year.

“In addition, aluminium and copper both posted better than 30 per cent gains, whilst zinc, nickel and lead were all up more than 20 per cent on the year.

“As 2018 is upon us, I believe there are strong prospects for a continuation of a broad-based commodities rally.”

Of course, where it all begins is on the ground with exploration the first step in any long march towards mining project development.

Exploration is more than just throwing a dart at a map and saying, ‘let’s see what’s there’, it is an educated decision based upon gained knowledge about the location, type, quantity and quality of deposits, which helps to inform future development.

This means explorers need consider a range of factors to ensure the outcomes of their exploration activities exceed the costs involved.

Judgements need to be made in terms of include initial and long-term land access agreements, current and predicted commodity prices, regulatory environments, geological prospects, and tax and royalty arrangements.

The Western Australia, Department of Mines, Industry Regulation and Safety (DMIRS) tells us that Australia’s mineral exploration expenditure was $1.6 billion in 2016–17, up from $1.4 billion in 2015–16.

“Western Australia contributed over $1 billion of this spend with the gold and iron ore sectors attracting the largest share,” DMIRS said.

“Gold exploration expenditure in Western Australia increased significantly from $385.9 million in 2015–16 to $509.5 million in 2016-17.

“Iron ore exploration also increased (but only marginally to) $281.6 million.”

As well as WA exploration appears to be going, DIIS reckons the nation is lagging in terms of overall exploration expenditure.

Australian exploration expenditure fell by eight per cent in 2016–17 to $2.9 billion with the pesky petroleum industry emerging as the main culprit with its exploration expenditure decreasing by 23 per cent to $1.4 billion.

Minerals exploration managed to offset this marginally with a rise of 10 per cent in 2016–17 to $1.6 billion.

The increase in minerals exploration was largely driven by nickel, cobalt, and gold, all of which were credited to favourable movements in commodity prices.

“After five consecutive years of declines since 2012, exploration expenditure on iron ore has stabilised, remaining unchanged from 2015–16 levels of $291 million,” DIIS said.

“Growing global supply and expectations of low prices have discouraged a rebound in exploration activity.”

In 2016–17, Australian resources sector mineral exploration expenditure targeting new and existing deposits increased by 17 and 7 per cent, to $0.5 and $1.1 billion, respectively.

The positive movement in market conditions encouraged exploration at new deposits.

Greenfield exploration was also on the rise as mineral deposits not previously drilled – or known to exist – suddenly coming into vogue as commodity prices increased.

The old standard of commodities, gold, featured high in exploration expenditure, increasing by 26 per cent in 2016–17 to $689 million — accounting for 44 per cent of Australia’s total minerals exploration expenditure during the fiscal year.

Gold exploration activity was stimulated by higher world gold prices and a lower AUD/USD exchange rate, which improved the profit margins of Australian gold producers.

Base metals exploration expenditure rose by 17 per cent in 2016–17 to $271 million, again riding a wave of higher commodity prices, producing the first yearly improvement since low prices triggered a steady decline back in 2012.

Australia’s copper exploration expenditure was driven by an improved outlook for copper prices and was one area to enjoy the rise in battery metal interest and increased by 5 per cent, to $136 million — accounting for 50 per cent of Australia’s total base metals exploration expenditure.

The battery metal curiosity surrounding cobalt dragged nickel along for the ride with exploration expenditure for both also recording a strong rise in 2016–17, up by 59 per cent to $81 million.

Nickel prices also enjoyed more traditional support following stronger than expected demand growth in China, which is seeking to increase its output of stainless steel.

Other base metals recorded a rebound in exploration activity in 2016–17 resulting in an increase in exploration expenditure on zinc, lead and silver by 10 per cent, to $55 million.

 

 

A Sea of Super Change

THE BIG STORY: Following the passage of the Minerals Resource Rent Tax in the Senate, various Superannuation Bills will also be introduced.

RBS Morgans private client adviser Andrea Morgan takes a closer look at three of the changes to be made.

 

This will affect you in some way, shape or form, so having knowledge about the changes will help you in making investment decisions, especially inside of your Superannuation.

Changes from 1 July 2012

1. Contribution Rebate for Low Income Workers

Effective 1 July 2012, a contribution rebate of up to $500 (not indexed) will be payable to workers with adjusted taxable income of less than $37,000.

The rebate will be calculated by applying a 15 per cent matching rate to the concessional contributions made by or for the individual.

The maximum rebate is $500 per individual. That is: $37,000 x 9 per cent = $3,330 x 15 per cent = $500.

The rebate will be paid in the following financial year (so from 2013/14 Financial Year) based on the previous year’s contributions, and paid into the individual’s super account.

It will not be necessary to lodge a tax return. The Australian Tax Office will use available data on hand to determine eligibility for the rebate.

To be eligible for the rebate, the individual must be working. Individuals who earn less than 10 per cent of their total income via employment or business income will not be eligible (this is the same test as per the Government Co-contribution payment).

2. Higher Concessional Contribution Cap for over 50s

The transitional contribution limit for individuals over age 50 is currently $50,000 per annum, compared with a $25,000 contribution limit for individuals under age 50.

This has been terrific for boosting funds inside of Super, especially beneficial for Self-Managed Super Funds.

The higher transitional limit for over 50s is unfortunately due to end 30 June 2012.

The Federal Government has proposed to continue the $50,000 concessional contribution limit post 1 July 2012 but only for those individuals over age 50 who have less than $500,000 in total within superannuation (accumulation and pension accounts).

Unfortunately at this point in time details of how the $500,000 threshold will be determined have not yet been released. I will keep you informed.

3. Superannuation Guarantee (SG) Contributions and Eligibility

Currently, employers are obliged to make contributions of 9 per cent of an employee’s salary to superannuation where the employee is under age 70.

In some instances, particularly for government employees, this rate can be higher.

Legislation has now passed to increase the SG rate from 9 per cent to 12 per cent, (in incremental stages 0.25 per cent for 2 years and 0.5 per cent every year after that), by 2020.

The eligibility age for employer SG contributions will be abolished from 1 July 2013.

In other words, SG contributions will extend to all workers regardless of age.

The intention of this change is to provide an incentive for older working Australians to remain in the workforce longer.

To find out more about how these changes may affect you, contact Andrea Morgan at RBS Morgans Perth on (08) 6462 1986 or andrea.morgan@rbsmorgans.com

 

RBS Morgans Limited ABN 49 010 669 726. AFSL 235410. A Participant of the ASX Group. A Professional Partner of the Financial Planning Association of Australia. Andrea Morgan Authorised Representative 404960. This advice is general in nature, does not take into account individual personal circumstances and the shares or figures stated are purely for example purposes.  RBS Morgans Limited are not authorised to give tax advice Please speak with your accountant or tax agent advice on your personal tax planning strategies

Reaching over the FIFO fence

THE BIG STORY: When the debate concerning the effects of Fly In Fly Out on regional communities is raised mining companies often look like the bad guys.

Silver Lake Resources is supporting the expansion of the company’s Murchison project by having a 250 man camp built in the town of Cue.

The company has struck a good relationship with the local community, which is just as excited as the company about the benefits the new camp can bring to the town.

Silver Lake Resources is anticipating commencing mining at its $65 million 1.9 million ounce Murchison project in the March 2013 quarter sourcing ore from across 14 open pits and four underground deposits.

The company is spending $35 to $40 million on Murchison’s processing capability and a further $25 million on pre-production mine capital to generate an 8 to 10 year underground and open pit mine life at a minimum 100,000 ounces a year.

None of that is too far out of the ordinary, however Silver Lake has made a conscious decision to utilise many of the services the local community offers rather than isolate its Fly In Fly Out force from the local townsfolk.

 

Many mines require thier workforce to be accommodated in remote locations.

“The logic behind that was that if we build the camp in town, then any business activity that brings along with it, the town gets,” Silver Lake Resources executive director Chris Banasik told The Roadhouse.

“We’re not going to have a shop in the camp, we’re not going to have a wet mess; so if the workers want a drink they have to go to the local pub, or if they want a choc-milk they will go to the local shop.”

Building the camp in Cue, positions Silver Lake within four kilometres of the town’s airport and only 25 kilometres from its mine site.

The idea creates a symbiotic relationship between the miner and the town as the new camp will not involve the cost of installing a wet mess or other similar facilities and its workers can be easily transported from the airport to the camp to the project.

They payoff for the town is that local businesses should be able to grow with the new business the mine generates for them.

“It would be great if we could generate enough business, such that tradespeople would be encouraged to move back into the town,” Banasik said.

“I hope that the extra number of people based in the town will mean that health services will improve.

“While we can’t force people to live in the town at least we can provide enough of an excuse for people to go and participate in the local economy.

“Hopefully that is something we can do that will add a bit of vibrancy to the town.”

The establishment of a FIFO camp within, or close to, a regional centre can often be problematic, especially if the two entities are walled off from each other and not encouraged to associate with one another.

Shire of Cue acting chief executive officer John Read told The Roadhouse the local council has always been supportive of the mining camp being situated in town and encourages the company to become an active participant in the community.

“The town of Cue will welcome these workers very much into the community and we would encourage them to utilise the services and facilities here,” Read said.

Read outlined plans for parts of the camp to be made available for public use.

“For example one of the directors of NT Link, who are building the camp, took me over to the village the other day and one of the buildings he showed me was a substantial building that will be a gym,” he said.

“He told me that will be available for members of the community, the general public, to utilise, if they wish.”

When Silver Lake takes up full capacity of the new camp of 250 it will effectively double the population of Cue.

Even now while NT Link is constructing the camp the town is already feeling the effects of a substantial increase of usage at the airport, which has gone from catering two flights a week to two flights a day.

The local Shire has already demonstrated a realisation of the need to keep ahead of the FIFO phenomenon beyond that of the state’s capital city Perth with the commencement of an upgrading to the facilities at the airport.

“We are widening and resealing the airport road from the Great Northern Highway in town to the airport,” Read explained.

“We are also resealing and extending the apron area and taxi way at the airport.

“And we are extending the sealed area of the apron to almost twice its present size to accommodate two parked aircraft at any one time as the current apron only has room to accommodate one.

“We are also about to take delivery, in a couple of months, of a brand new pre-fabricated airport terminal building.”

Aircraft traffic is not the only area the Shire of Cue has experienced a surge with the growth in the town’s population set to increase the volume of rubbish that will need to be collected.

“So next financial year we have budgeted to purchase a new rubbish truck with compaction facilities,” Read explained.

“Of course our rubbish tip will also be catering, not only for the increased population based rubbish, but also for commercial rubbish from the Silver Lake mine and other mining activity in the area.

“So we are going to have to employ a part-time rubbish tip manager to better manage it because the volume of rubbish is set to triple, at least.”

There can be no doubt Silver Lake Resources has approached the idea of ensuring its FIFO workforce integrating with the local community of Cue with the intention of bringing a great deal of new business to the town, which it will.

However beneficial such a process, put in place in any mining region by any mining company, will be for individual businesses, it will always place some heat on the ability of the local councils to bring their communities up to speed.

“Silver Lake’s decision to have its workforce located in the town site of Cue is appreciated by the Shire,” Read said.

“But at the same time while it benefits businesses in the town the Shire itself – this growth has caused considerable capital expenditure on our part.”

Greens agree with uranium industry…to a point.

THE BIG STORY: Addressing the first day audience of the Paydirt 2012 Uranium Conference in Adelaide this week chairman of ASX-listed uranium developer Toro Energy, Dr Erica Smyth said the uranium industry needs to do more than, “simply present the facts”, to the Australian public.

Smyth’s was addressing industry concerns of public misapprehension in regards to the mining of uranium.

She said in order to allay these fears the industry needs to present its case in language or principles the general population more readily understands.

In her presentation, Uranium in Australia – Exploring our Softer Side, Smyth focused on the issues afflicting the uranium industry in Australia.

Source: Comapny web site

“By ‘soft’ I really mean the most difficult issues, because they are related to what the general population thinks and how people react and behave, and in our industry this often includes a lot of unnecessary fear and emotion,” Smyth said.

“This starts with the general population’s fear of radiation,” she said.

“Because radiation cannot be seen or felt, because it is a very difficult science to understand, and because many people think any radiation exposure will cause cancer, there is a lot of fear – and that is not helping our industry.”

It will probably come as a surprise to many, but Smyth’s comments were met with some support from Western Australia Greens MLC and spokesperson on Mining, Robin Chapple.

 

Source: Web site

“In essence, just about everything, Erica said was true,” Chapple told The Roadhouse.

“But it’s what she didn’t say that is important.

“Yes, we need scientific knowledge. Many people…know nothing about radiation. So I think that’s where we really need to start.”

Chapple said there was a need for people involved in the telling of and listening to the uranium discussion to understand the difference between radiation and radioactivity.

“So to say radiation exposure will cause cancer, and there is a lot of fear because it cannot be seen or felt is correct, Chapple said.

“Very few people will have been exposed to beta or gamma radiation, unless you are a worker in either the medical fraternity, nuclear facilities, or indeed, a uranium mine.

“And you have got to have pretty significant exposure to actually affect the gene pool associated with beta or gamma radiation.

“She [Smyth] doesn’t mention the majority of issues posed by radiation, or posed by uranium mining per se, [which] is that we only extract only, on average, about one per cent of the ore body, which becomes U3O8, which is uranium.”

The problem outlined by Smyth is that not enough people are endowed with the scientific expertise or grasp of the vernacular to fully understand the issues confronting them or, for that matter, to be able to adequately voice their concerns.

This, she said, is one of the main reasons for it to be such, “a poorly articulated discussion”

“And in these modern times when anyone can write unsubstantiated claims and put them on the web for everyone else to read, it is very easy for people to lock onto a thought bubble as a ‘fact’ and engender fear,” Smyth said.

“There are many people in our community who fear that those cancers which just appear, and cannot be directly related to a specific cause, are in fact caused by invisible radiation.

“We scientists might think if we just present the facts we can counter these fears, but often we do not use language or principles that the general population can understand.”

Smyth said the general community’s fear of radiation was escalated by its combination with the wide-spread belief held by some people that it can easily be used to make nuclear bombs.

In many public debates on uranium mining she said, some areas of the community had simplified the issue to mining uranium equals the manufacture of nuclear bombs.

“What Erica has done is to provide a very simplistic statement, which has a significant element of truth about it, but actually doesn’t deal with half of the problems,” Chapple said.

“The problem with uranium mining is the impact on workers, and that impact isn’t immediate.

“You don’t go to a uranium mine and get sick, you go to a uranium mine and you work there and you get sick 20 years later.

“This is the legacy that has been shown in France and in America.

“It is a worker related issue, but not a here and now [issue], it’s a future problem.”