THE CONFERENCE CALLER: In making its case for the planned spinning off of manganese assets into a new Australian publicly-listed identity, Firefly Resources (ASX: FFR) came up with four compelling reasons for the move. By Mark Fraser
First, there has been a systematic shift in the global manganese sector over the past decade, with South Africa – the largest exporter globally – now facing significant challenges regarding logistics, labour and fiscal regimes.
Coinciding with this is the fact Australian operations are currently experiencing higher operational costs, declining head grades and/or are approaching the end of their mine lives.
In this regard, manganese head grades are also starting to decline across the board, while the carbon steel material’s demand continues to grow as a key and un-substitutable element within steel production.
Second, overlying supply-side challenges have emerged, with the uptake in lithium-ion battery utilisation significantly enhancing investor understanding of manganese’s importance.
Third, Firefly’s Oakover manganese project – which is located 85 kilometres east of Newman and some 200km south of the high-grade Woodie Woodie manganese operation in Western Australia’s East Pilbara – is uniquely positioned to capitalise on projected demand and potential supply shortfall through its planned focus on exploration and development of direct shipping ore (DSO) opportunities.
Amongst other advantages, the Firefly spin off can undertake expansion capacity through the evaluation of beneficiation processes in order to upgrade medium grade mineralisation. Furthermore, Oakover sits in a tier one mining jurisdiction that is ideally located given the short shipment time to key Asian markets.
Additionally, it already has significant resource expansion potential based on a firm targeting model.
Finally, the fourth key reason for the development is the fact the demerger would be a “win-win” for the company, allowing it to crystallise shareholder value from the non-core Oakover asset while ensuring its management had the time and resources available to remain focused on both its wholly-owned flagship Yalgoo gold project in WA’s Murchison as well as its Paterson copper-gold play, which is also in the state’s East Pilbara.
Firefly launched its maiden drilling program for Yalgoo in August last year and – during mid-December – announced it had further consolidated the asset via the acquisition of the historic high-grade City of Melbourne gold mine.
Since beginning operations in 1937, it has produced 8,500 ounces at an average grade of 14.7 grams per tonne over four years.
It was briefly opened again in 1991, but with no recorded production, before lying dormant once more until mining resumed in 2015.
As it stands the historic (non-JORC) inferred resource for the operation is 40,348 tonnes at 5.9 grams per tonne gold for 6,602 gold ounces.
It is currently functioning as a small-scale underground operation employing hand-held mining methods wherein high-grade gold is extracted from a consistent quartz “reef” narrow vein gold system.
The City of Melbourne’s mineralisation is associated with a north-south porphyry intrusive that has pushed in along a structural contact.
This is analogous to the company’s neighbouring Melville gold deposit, which has been the main focus of drilling since the Yalgoo asset was acquired.
“With the market currently ascribing little or no value to Firefly for the Oakover manganese project, this demerger represents an outstanding opportunity to release substantial value to Firefly shareholders as a stand-alone ASX-listed vehicle,” Firefly Resources managing director Simon Lawson explained.
“The demerger will enable shareholders to retain exposure to this high-quality manganese exploration and development opportunity, while also allowing Firefly management to focus its efforts on the flagship Yalgoo gold project and the drilling of our exciting Paterson Province assets in early 2021.”
Upon listing the new company – to be called Firebird Metals (ASX: FBM) – will undertake in-fill drilling of the current resource.
It will also conduct along-strike extensional drilling over an identified 4km strike, assess multiple advanced regional prospects that have undergone limited drill testing to date, evaluate additional metallurgical beneficiation testing in parallel with the assessment of DSO strategies (to potentially increase overall project scale) as well as look at consolidation opportunities within the region.
Back in 2012, JORC-compliant due diligence noted that Oakover’s manganese mineralisation appeared to be a partially regolith-controlled supergene enrichment of epigenetic manganese mineralisation of the underlying Balfour shale, where very rich (up to 55% manganese) surface layers overlie thicker deposits of layered manganese in shales of varying grade.
According to Firefly, the drill hole spacings differ only by a small degree, generally conforming to 50m along lines and 100m between them.
Drill coverage at depth is variable, with the maximum hole being 122m.
Drilling density, Firefly said, was considered appropriate at this stage of development.