So the mining tax, the MRRT, the Mineral Resources Rent Tax, has finally made its way past the finishing post of the chamber of the House of Representatives.

The handicappers hadn’t been friendly to MRRT initially, which began the season a long way behind opening price favourite RSPT.

RSPT, having been uprooted from the Henry Tax Review by Treasurer Wayne Swan and Kevin Rudd, took the punters who had backed Mining Industry by surprise by heading the pack at the first pass of the judge’s tower.

 

Having not liked the odds on offer before the opening of the race they were very pleased to see it given short shrift as Mining Industry and Junior Sector worked it to the back of the field by the first turn.

Andrew Forrest parked a truck full of voices at one corner of the track to provide encouragement to Junior Sector, one of which belonged to iron ore heiress and self-imposed Greta Garbo-like exile Gina Rinehart.

Unfortunately her message was soon lost as the noise of the crowd, generated by a lot of open-ended discussion on AM Radio airwaves, grew louder.

Mining Industry and Junior Sector hopes rose, however, when K Rudd lost his way on RSPT.

Those hopes were soon dashed as Julia Gillard aboard MRRT stepped into his Prime Ministerial shoes.

Quickly she negotiated an easier passage along the rails in the form of a lower tax on iron ore and coal with the three heavyweights in the field BHP Billiton, Rio Tinto and Xstrata.

Again, the lesser fancied runners in Mining Industry and Junior Sector weren’t happy, but this time they found the going a bit more difficult and weren’t able to call the tune as they had earlier in the race.

The two miners’ favourites found an ally of sorts in Western Australia Premier Colin Barnett riding Secession, who decided the best way to head MRRT off, would be to nobble it by raising State Mining Tax Royalties.

As the field raced down the back straight MRRT began to make its move.

It seemed to have a clear enough run until given a few gentle nudges by the independents as a reminder to the Labor Government of Julia Gillard that it wouldn’t be crossing the line without their cooperation.

Tony Windsor riding New England Voter threw up a hurdle by demanding $200 million being set aside over four years for bio-regional assessments on the impact of coal seam gas extraction.

He also added a hazard by asking water to be a vital aspect in CSG approvals under amended environmental laws.

Labor acquiesced to the idea giving the commonwealth the power to override the states on coal seam gas projects.

Windsor’s final obstacle concerned a coal mining project on the Liverpool Plains where Santos has agreed to stop its plans to install a pilot gas well before an independent water study had been carried out on the project.

Rob Oakeshott drew the Steward’s attention with some rough riding on Lynne Likes Me as he raised concerns about inefficient taxation.

Oakeshott was eventually hemmed in by Antony Albanese on Filibuster but not before his requests had been given the thumbs up.

Coming to the final turn it was the chance for Andrew Wilkie as he pulled out the whip on Denison’s Pride to set the pace seeking to make the new levy less onerous for small miners.

Wilkie managed to extract the assurance from the government that it would lift the threshold at which miners become liable for the tax from $50 million to $75 million in profits.

Coming into the straight for the home turn it looked as though Gillard would coast MRRT across the finish line but she didn’t count on the old stager in Greens Leader Bob Brown putting in one final flourish to bring Plain White Envelope home for a photo finish.

The drama didn’t end there with a protest filed by the riders of Mining Industry and Junior Sector claiming Brown had allowed Gillard and MRRT to win after some backroom shenanigans.

A subsequent steward’s inquiry found that the two had in fact squared away a deal to manipulate the result.

Later it emerged the deal was no more than Brown pressing the government to find the millions lost each year due to Wilkie’s  demands by deferring an ambiguous measure involving foreign banks and interest withholding tax.

MRRT completed a victory lap on its way to the stalls to rest up before running the gambit of the Senate early next year.

Studying the developed print of the finish, Tony Abbott declared that neither runner should win and that the entire race should be re-run.

The Gold Symposium held ay Sydney’s Luna Park launched with the enduring musical tribute to the
yellowest of metals with 1980s new-romantic supergroup Spandau Ballet supplying the soundtrack.

Tony Hadley’s vocal gymnastics reminded the gathering audience of aurum acolytes of gold’s cognisance of its impervious properties as they settled in for two days of listening to a roster of speakers who would validate their faith in it maintaining its current standing in the investment community.

Kicking off his keynote speech at the Gold Symposium at Sydney’s Luna Park, Toronto-based bullion guru Eric Sprott took a quick straw poll.

 

Sprott asked those in the audience who actually owned physical gold to raise their hands.

The speed of their response didn’t really allow for an accurate count but a healthy portion; say 70 per cent to 80 per cent divulged they had.

He then asked how many owned physical silver and again the response was positive.

Not as many as gold, but again well over half the audience responded in the affirmative.

Sometime into his talk Sprott queried how many of his audience had bought physical gold in 2000, before it was in fashion to do so.

This time the numbers were down with only around 10 per cent (again the accuracy of our calculations is not to be relied heavily upon) said yes.

These participants were very quick to react to this particular question almost shooting their fingers through the ceiling of the iconic park’s Crystal Palace convention room with a, ‘pick me teacher, I’m ever so smart’, enthusiasm.

Sprott left little doubt he is bullish when it comes to investing in gold rather than paper or other investment forms.

He outlined the fundamental problem facing world economies at present as being they suffer from the dilemma that five cents of capital in physical gold held by central banks is protecting one dollar of their paper assets.

“What are the odds that that dollar has not depreciated by five cents,” Sprott asked.

“We had days last week when the stock market fell three or four per cent in Eurpoe. We had bonds falling three or four per cent in a day.

“If you live in the United States, try to sell your mortgage portfolio, it’s impossible.

“If you live in Paris and you ring up the guy at BNP saying that you would like to sell off your commercial lending portfolio he would respond by saying, ‘you know what I want to sell you my portfolio.

“Because we are all trying to de-lever at the same time and there is no net-buyer.”

The more he spoke, the more palpable the investment fear in the room became.

Paper savings were no good he said and basically we should all start dragging our money out of the bank and buying gold and silver, even if there isn’t any to actually buy.

“The important thing to know about gold is that mining production has hardly gone up for ten years,” he explained.

“Most people don’t realise… the world’s resource of gold above ground is around about 165,000 tons.

“We are only adding 1.4 per cent to the pool of gold each year, that’s a very minor amount.

“My partner John Emery has been a great proponent of gold due to Fiat currency and he has been absolutely right.”

A Fiat money system is one where money is not backed by a physical commodity such as gold or silver.

What provides money with its value is its relative scarcity and the faith placed in it by the people that use it.

In a Fiat monetary system, there are no restrictions on the amount of money that can be created, which ultimately allows unlimited credit creation.

It is in these environments that rapid growth in the availability of credit can be mistaken for economic growth.

As spending and business profits grow more often than not there is a rapid growth in equity prices.

“When I started in the gold business, it was my view, and there was some phenomenal work done by others who expressed the fact, there was probably going to be a physical shortage of gold,” Sprott said.

“I bought into it because gold was at a very low price, the miners were hedging, the central banks were selling, demand would probably only go up, and yet I imagined that the supply of gold each year would stay constant, therefore this marginal change in demand would move the price higher.”

Sprott admitted that like his native Canada the banks in Australia are also theoretically strong.

However, he also said that in a worst case global economic situation, like the one he claimed we are already experiencing, money starts flying in all directions as investors the world over attempt to liquidate what money they have in banks.

He described this as a risky situation and one of the fundamental reasons why he feels investors should have their money in gold and silver.

“Never paper; I don’t recommend futures, anything to do with paper I don’t recommend,” he said.

“It is always best to have it (your investment) in your own physical possession.

According to Sprott the market, not the central bank, and not government treasuries, has already determined gold is to now be the reserve currency.

“The markets have made up their minds that gold is the reserve currency; it’s up 600 per cent versus almost every currency,” he said.

“This diatribe of stuff we have to listen to every day about the dollar versus the euro, the yen versus the dollar, the pound sterling – whatever; they’re all crap!

“It’s like – who’s the prettiest horse in the glue factory? And they’re all lucky it’s a close competition.

“If they (media outlets) started reporting that all currencies are down today against gold – imagine if you turned on your telly on Saturday and they said all currencies were down two per cent against gold on Friday.

“And they kept repeating that day after day after day, would you finally get the message?”

The global potential of emerging Western Australian potash explorer Potash West (ASX:PWN) can’t be appreciated without learning what Potash is.

Potash – a generic term for salts of potassium used in fertilisers in the form of potassium chloride, potassium sulphate, or potassium nitrate.

Three essential fertiliser elements are needed in amounts of hundreds of kilograms of per hectare world-wide to yield good plant growth.

These are nitrogen (N), phosphorous (P) and potassium (K); together they constitute the NPK stamped on bags of fertiliser bought from garden centres every weekend.

They are not interchangeable and depending whether it is roses growing in Grandma’s garden, wheat in the fields of Western Australia or bananas in northern Queensland, the correct amount of each is vital to the cause.

The major force currently driving potash demand is world population, which between now and 2050 is predicted to grow from the current count of seven billion people to around nine billion.

At the same time the arable land quota per person will decrease from around 0.25 hectares to around 0.15 hectare per person.

This mix includes the increasing middle class in major population centres, such as India and China, all demanding higher quality foods.

Needless to say there will be a great strain on global food supplies.

The astounding statistic to emerge from all of this is that Australia doesn’t boast a domestic supply of potash.

“The world market place for potash is dominated by Canada, which produces around 45 per cent of world production, followed by Russia, Belarus and Germany,” Potash West managing director Patrick McManus told The Inside Story.

“Those four countries are responsible for 80 per cent of world potash production.

“Major global consumers of potash are India and China, accounting for just on 50 per cent of the world’s export business.

“Australia and India both have no domestic source of potash at all. All of the potash used in Australian agriculture is imported – the majority of this is from Canada.”

Potash West listed on the ASX in May following a successful and oversubscribed IPO raising $6 million.

The company has a major land holding over one of the world’s largest known potassium-rich glauconite deposits, the Dandaragan Trough situated in the Perth Basin of Western Australia.

Here it aims to define a substantial resource base and develop new technology enabling it to recover potash.

Potash West’s exploration licenses and applications cover an area of 2,900 square kilometres, a healthy amount of which has been subjected to historic exploration that has indicated glauconitic sediments are widespread along more than 200 kilometres of strike and at least 15 kilometres wide.

 

“We have an extensive landholding in a great area,” McManus said.

Glauconite is a potassium rich mineral that has been recognised as a potential source of potassium for many years.

In the Dandaragan trough it was deposited with quartz, producing distinctive greensand deposits characterised by high contents of iron and potassium.

In the 1960’s the Dandaragan Trough caught the attention of the West Australian government, which thought it may possibly host a number of greensand occurrences.

A wide-spread drilling operation was undertaken to evaluate the stratigraphic setting in which glauconite accumulated.

This campaign demonstrated the Dandaragan greensand beds to have a thickness of up to 200 metres in some areas, and to be present within most areas of the basin.

The units are flat lying, located on or near the surface and amenable to low cost open pit extraction in a similar style to mineral sands mining.

Potash West is focusing on two geological units of greensands identified by this historic exploration it considers may hold potential economic deposits.

These are the Molecap Greensand and the Poison Hill Greensand, both of which are widespread in the Basin.

“We have done some very detailed mapping looking at the Dandaragan Basin, which was a shallow sea 60 million years ago, when the glauconite was deposited,” Macmanus said.

“The mapping shows areas of general uplift, where the thicker Poison Hill greensands sequence is likely to be preserved.

“The company’s theory is the higher ground within our tenements hosts both greensand units and that is where we are concentrating.”

Molecap Hill located 1.4km south of Gingin was mined between 1932 and 1962 for 35,000 tonnes of greensand producing 6,510 tonnes of glauconite for use as a water softening agent.

It is not a target now however, as the upper Poison Hill sequence has been eroded away in this area.

“Where the tenement ground is higher, there will be less erosion and should therefore host the two units of greensand,” McManus said.

“Although there is a huge area there, and we are likely to be sitting on billions of tonnes of mineralisation, the challenge is to find fresh material close to surface.

“Greenstone weathers rapidly at surface, which is why you rarely see any fresh material.”

Although the 1960’s drilling was positive the price for potash was heading in the other direction so downstream processing of glauconite to yield potash was not pursued.

As time has marched on so have advances in technology and Potash West is now leading the parade as its works on developing its own potassium extraction and processing procedure.

Company director Gary Johnson has a well-documented background in hydrometallurgy.

He has previously developed a number of processes currently in use around the world for hydrometallurgical extraction of various metals.

Johnson and his team at Strategic Metallurgy are now working on the process development side of the Dandaragan Trough project.

A 2,000 kilogram bulk sample taken from the Poison Hill greensand sequence was subjected to extensive testing, evaluating a wide range of conditions and reagent regimes.

So far over 200 leaching tests have been conducted using a range of reagents and temperatures.

The company has been encouraged by the results to date, which have demonstrated potassium dissolution is achievable from the Dandaragan glauconite without resorting to extreme leaching conditions.

“When we have the process reasonably well understood is when we will be able to commence evaluating how much it will actually cost to produce a commercial-grade potassium sulphate product,” McManus explained.

The technical developments offer Potash West the opportunity to become a world leader in the field of potassium extraction.

“The fact there are a number of glauconite deposits around the world leads us to believe the technology we are developing may well become a valuable commodity in itself,” McManus explained.

“We are mindful of that, and because of that we won’t be disclosing all the processing steps we develop, basically in order to protect our intellectual property.”

The vital element to the Potash West story however, is the current situation where Australia imports all its potash fertilizer.

“Certainly, if you talk to farmers, which we have done, they feel they currently don’t use enough potash,” McManus said.

“the reason for this is simply because of the costs involved.

“By the time it reaches the farm gate it costs substantially more than when it leaves Vancouver at $500 per tonne.

“It arrives in a bag under the noses of a lot of people as an imported product – we don’t have any potash mines in Australia…at the moment.”

Potash West (ASX:PWN)
…The Short Story

HEAD OFFICE
Suite 3
23 Belgravia Street
Belmont WA 6104

Ph:     +61 8 9479 5386
Fax:    +61 8 9475 0847

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

DIRECTORS
Adrian Griffin, Patrick McManus, George Sakalidis, Gary Johnson

MAJOR SHAREHOLDERS
Elsinore Energy 16.70%
Siak Poh Yeo 2.40 %
Patrick McManus 2.30 %
Miew Leng Lee 2.00 %
Goon Eng Chua 2.00 %

SHARES ON ISSUE
43.6 MILLION

MARKET CAPITALISATION
$9.8 MILLION (at 17 November 2011)

Although mining companies operating in Australia are sometimes accused of not pumping enough money into greenfields exploration, Mark Fraser finds they are not exactly sitting on their hands when it comes to promoting the search for new ore bodies in frontier terrains.

Through the Deep Exploration Technologies Co-operative Research Centre (DET CRC), a number of miners and government agencies are making sure that sufficient funds are being channeled into research and development so the next generation of deep Australian mineral deposits can be found.

 

A non-profit organisation, the DET CRC has embarked on a multi-million dollar eight year program to come up with more cost effective, safer and environmentally friendly ways to target, drill and analyse mineralisation at depth.

Furthermore, the South Australia-based Centre is looking to implement a successful commercialisation strategy that will provide substantial windfalls to those in the mineral exploration sector.

According to the DET CRC professor Richard Hillis, the Centre and its mining sponsors were not planning to hold on to or cash in on any intellectual property (IP) developed during the course of the program.

Rather, they were hoping to establish commercial agreements with service companies.

“Our sponsors include the mining companies, and what they have said to us is that they don’t particularly want to own the IP – even though they are sponsoring it – nor do they want the universities or the CSIROs of the world to hold on to it and develop spin off companies because they feel that sort of slows the whole thing down,” Prof Hillis told The Resources Roadhouse.

 

“So what they wanted to see was that the IP developed by the DET CRC’s projects was licenced to the existing service sector.

“And I think the philosophy there is while the service sector is used to making a living out of commercialising technology, it’s also used to providing services to the mining industry, and that’s the quickest, best and most efficient way of getting the improved technologies back and available to the mining companies.

“And really that’s all they want … they are willing to put some money in to be the catalyst to develop the new technology, but they want it out in the market place so they can access it as quickly as possible.”

Hillis said the potential prize for companies within the mineral exploration service sector was enormous – particularly when compared with their petroleum counterparts, which had been at the forefront of developing and commercialising new technologies that had been so successful in expanding the petroleum search space beneath “cover” (deep water and sub salt) and, ultimately, helped grow global giants like Halliburton, Baker Hughes and Schlumberger.

“Boart Longfield is probably one of the biggest mining services companies – it’s a $2 billion company – but it is a lot smaller those in the petroleum sector and it doesn’t offer integrated services,” he said.

“It offers drilling, but it doesn’t really offer remote sensing or the analysis of data, the software for the analysis of data from holes and all those other services that are much more integrated which the oil patch service companies offer.”

Fundamental technology innovation in mineral exploration, Hillis said, required new technologies in drilling.

However, developments in this field were dependent on parallel advances in drill hole analysis as well as in geophysical/geological modeling based on that analysis.

Ultimately, the technological barriers which must be overcome arose because deeply buried deposits could only be explored by drilling. In addition, the current technology for drilling in hard rock was expensive, it had significant environmental impacts and it involved considerable manual handling with consequent safety risks.

“This is probably more applicable when dealing with highly explored terrains, so really it is a classic case of exploration risk verses sovereign risk,” Hillis said.

“It applies to counties like Canada, South Africa and Australia where a lot of the surface outcropping deposits have been discovered – there’s probably one or two more major deposits to be found, but the vast majority of the next ore bodies will be under cover.

“We are not saying this is unique to Australia.

“We are interested in it world-wide, but we are an Australian organisation, so we are particularly interested in the Australian context, which I believe is relevant to most highly explored terrains.”

Some of the mining houses backing the DET CRC include the publicly listed BHP Billiton, the Australian-Pacific arm of Barrick Gold Corporation, Newcrest Mining, Gold Fields Australia and Vale Exploration.

Meanwhile Geoscience Australia, CSIRO, the University of Adelaide, the University of Western Australia and the South Australian Government have also thrown their weight behind the initiative.

THE BOURSE WHISPERER: After 12 years at the helm of Australian-based nickel sulphide explorer and producer Western Areas Julian Hanna has announced he will be stepping down as managing director of the company at the end of January 2012.

 

Hanna was one of the founders of a small nickel exploration play in January 200 that was to become Western Areas, which is now one of Australia’s largest nickel mining companies.

Today Western Areas operates two of the highest-grade, lowest cost nickel mines in the world and boasts a sound balance sheet and a global portfolio of quality nickel projects.

The company now employs approximately 700 people as staff, consultants and contractors in a wide range of roles including exploration, mining, processing, transport, logistics and administration.

Although he may be out of sight of the Western Areas’ offices, Hanna won’t be out of mind as he has agreed to remain on the Board as a non-executive director and consultant to the company as it continues to identify and develop growth opportunities.

If that isn’t enough to keep him busy Hanna will be Western Areas’ representative on the Board of FinnAust Mining as its chairman.

FinnAust is planning to be listed on the boards of the London AIM market in early 2012.

Western Areas said it has plans to appoint a new managing director to replace Hanna.

The person in question will have some fairly big safety boots to fill but the company said it anticipates whoever it is will be able to drive the transition of Western Areas into its next major growth phase.

Such a move is obviously not one that is made overnight so Hanna and the Western Areas Board have been mulling over potential candidates and succession planning for several months.

The company has turned to the services of a specialist recruitment firm to identify a suitable replacement from a number of candidates both external and internal to the company.

An announcement is expected to be made regarding the outcome of the company’s search by the end of December.

“Julian has played a major part in growing Western Areas and in acquiring and developing the substantial assets that form the backbone of our company’s value during his twelve years in the role,” Western Areas chairman Terry Streeter said in the company’s announcement.

“Since the first days of Western Areas, Julian has put a huge effort into making this company the success it is today.

“Julian will leave us with a major ASX 200 company with a market capitalisation of over $1 billion, employment for 700 people, and a track record of profitability and dividend payments for shareholders.

“We could not ask for more from Julian after he has led the company to achieving what everyone hopes for but so few realise in this industry.

“Whilst it is difficult to wish Julian farewell from the role after his many years of sterling service, the Board looks forward to the time ahead for the company, building on the very strong platform Julian has left and pursuing the next stage of our growth.”

In response Hanna said that he has been very fortunate to work with a wonderful group of talented, hardworking, and professional people.

“I have also been fortunate in having a strong board and management team and a core group of loyal shareholders who have supported the company from its early years,” Hanna said.

“This year, I reached a milestone of 35 years as a geologist in the exploration and mining industry.

My time as managing director of Western Areas has certainly been the highlight of this career and it has been a great pleasure to see the company grow to where it is today.”