THE DRILL SERGEANT: Pilbara-focused Atlas iron Joint Venture partner Altura Mining has announced an increase to the Ore Reserve estimate for the Mt Webber Direct Shipping Ore project.

The standings for each partner in the Mt Webber JV are 30% Altura Mining / 70% Atlas Iron.

The new JORC compliant Ore Reserve estimate for Mt Webber represents a 33% increase, or 6.22 million tonnes, over the initial estimate of 19.01 million tonnes the company announced last September.

The ore reserve upgrade is the result of an infill and evaluation drilling program Altura carried out on the Ibanez and Gibson deposits.

The company said it expects additional upgrades to the Reserve once drilling programs on the Gibson and Fender deposits are completed during the current financial year.

The current Mt Webber JV Ore Reserve estimate of 25.23 million tonnes of DSO material represents 32% of Atlas Iron’s current North Pilbara reserves.

Atlas views Mt Webber will be a key contributor to its production target of 12 million tonnes by 2012 and beyond.

Altura has commenced negotiations with Atlas in order to form a Joint Operations Agreement (JOA) for the development and mining of the Mt Webber JV deposit.

The proposed commencement date for Mt Webber is late 2012 or early 2013, subject to all necessary approvals, with both joint venture partners working towards a suitable agreement to allow both parties to agree on the decision to mine.

Altura said the JOA is a vital step for it in securing an agreement to mine and additionally provides the company a market access point for its share of the DSO production, which is expected to be in the vicinity of 1 million tonnes per annum.

Atlas increase North Pilbara reserves by 50%

Meanwhile the folk over at Atlas Iron headquarters have announced a 50% increase in DSO Reserves for its combined North Pilbara projects.

The new Reserve stands at 79.3 million tonnes at 57.8 per cent iron, and is inclusive of depletion from mining in the past 12 months.

The North Pilbara projects comprise the Mt Webber JV with Altura as well as the Pardoo and Wodgina mining operations and the Mt Dove, Abydos and McPhee Creek development projects.

“Atlas is now an established iron ore producer and exporter with strong customer relationships,” Atlas Iron managing director David Flanagan said in the company’s announcement to the Australian Securities Exchange.

“The company has achieved significant growth in resources and reserves in the same period where we expanded production by 600%.

“The whole team are to be congratulated on a brilliant result.”

Atlas is now exporting consistently at a rate of six million tonnes per annum and is targeting a ramp up to an export rate of 12mtpa by December 2012, as it commences mining at its other North Pilbara projects being Mt Dove, Abydos and Mt Webber.

THE BOURSE WHISPERER: The regular game of musical chairs continues within the boardrooms across the resources industry. The Whisperer pokes his head down the corridors of power to take a quick look at some of the chairs to have recently been vacated and to find out which ones have been filled:

Resignation of Non-executive Director

Thor Mining has advised the market Norm Gardner has resigned as a non-executive director of the company with immediate effect.

Gardner is also managing director of Western Desert Resources and his resignation from Thor is aimed at devoting his full energies into that company’s activities.

Commenting today, Mr Mick Billing, Executive Chairman of Thor Mining, said:

“Norm Gardner has been very influential in helping set the direction for Thor during the past 3 years, and we have greatly appreciated his contribution.  We are pleased to retain an ongoing contribution to our Board from Mr Mick Ashton who is also a director of Western Desert, our largest shareholder.”

Changes to Fortescue’s Board of Directors

Fortescue Metals Group announced the retirement of Dr Ian Burston from the board of directors.

Burston joined the board in October 2008 and has been a member of the Audit and Risk Committee since that time.

Personal issue have led Burston to hold concerns regarding his ability to devote the requisite time to Fortescue.

Fortescue also announced that Dr Geoff Raby accepted an invitation to join its board as a non-executive independent director.

In announcing the appointment, Fortescue chairman Andrew Forrest said the company was delighted to have a person of Raby’s experience join the board.

“Geoff brings to the Board a unique cross section of skills in the arena of international trade and particularly in relation to China that will strongly compliment the depth of experience already existing within the current board structure,” Forrest said.

Resignation of Managing Director

Iron ore producer and explorer, IMX Resources informed the market of the resignation of managing director Duncan McBain.
 
Company chairman Johann Jacobs, said McBain had lead IMX for the past four and a half years, taking it from a multi commodity explorer to a being an iron ore producer, steel maker and raw material and copper explorer.

McBain will undertake the role of chief executive officer pending the appointment of a new managing director.

Changes at the Board Level

Dourado Resources announced a number of new additions to its current board of directors.

The company announced the appointments of Graeme Allan as non-executive chairman and Shane Casley as non-executive director.

Peter Del Fante will remain as managing director of the company.

Allan is a director of WGM Asset Management, which is in partnership with WGM Indigenous Services to increase and develop Indigenous employment in the civil and mining industry in the mid-west region of Western Australia.

He is also a Director of civil construction company BGA Civil.

Casley is currently a managing partner at Affinity Accountants – a well-regarded Victorian firm.

Casley is also one of Australia’s most respected advisors in Sports Management and has been an accredited Australian Football League Agent since 1996.

Appointment of Managing Director

Forge Resources has appointed Dr Matthew James to the role of managing director.

James joins Forge Resources from Lynas Corporation where he held the role of executive vice president Strategy and Corporate Communications with accountability for strategy and business development, as well as investor relations and corporate communications.

“We are particularly pleased to have Matthew join Forge and know that his strong background in strategy and business development coupled with his experience in assisting growth companies will be invaluable to Forge as it looks to continue the development of its projects and reviewing and assessing other growth opportunities,” Forge Resources non-executive chairman Nicholas Curtis said.

THE DRILL SERGEANT: Almost uranium miner Toro Energy has confirmed current drilling from its Theseus prospect in Western Australia has demonstrated it to be a large uranium mineralised system measuring at least 7.5 square kilometres in area.

The company said uranium mineralisation reported has defined grades at levels that it considers, warrant further economic analysis.

Significant averaged intersections received from the drilling program include:

4.46 metres at 837 parts per million uranium equivalent from 98.11 metres, including 1.54 metres at 1909 parts per million uranium equivalent from 98.47;

1.8m at 430ppm uranium equivalent from 102.08m;

3.54m at 378ppm uranium equivalent from 105.63m, including 0.44m at 1469ppm uranium equivalent from 106.57m;

4.84m at 293ppm uranium equivalent from 107.54m, including 0.66m at 1032ppm uranium equivalent from 108.6m; and

9.02m at 619ppm uranium equivalent from 100.38m, including 0.78m at 1156ppm uranium equivalent from 101.14m and 1.46m at 2204ppm uranium equivalent from 102.58m.

“We are excited and encouraged by the size, extent and grade of uranium mineralisation so far intersected,” Toro Energy managing director Greg Hall sadi n the company’s announcement to the Australian Securities Exchange.

“The minimum extent of the system is now five kilometres by 1.5 kilometres in area and is open in all directions.

“Toro now intends to ramp up its drilling effort at the prospect.

“Toro’s systematic approach to defining the location of the higher grade uranium mineralisation in Theseus is key to ensuring the system is well defined before more closely spaced drilling is used to define a resource prepared in accordance with the JORC code.”

Toro claimed the lithological and mineralogical association at Theseus to be similar to the 4 Mile and Beverley uranium deposits in South Australia.

Both of these benchmark uranium deposits are amenable to In Situ Recovery (ISR).

ISR is an operating system where slightly acidified water is pumped to depths of 150m through confined sand layers, extracting and transporting uranium to a surface processing plant.

“The geological environment and the consistency of the mineralised zones at Theseus, albeit at an early stage, continue to support the possibility of ISR extraction methods as a potential development scenario for Theseus although the development scenarios and economics remain undefined at this time,” Toro Energy said.

One of the curious aspects of the surge in gold prices over the past few years has been the relative lack of performance by the companies that actually dig, produce and make the stuff – gold producers.

And it’s not just Australian gold companies either; this has essentially been a worldwide phenomenon. Unfortunate and bewildered gold equity investors have been left scratching their heads, wondering where they’ve gone wrong with their investments.

It’s a good question too, because in the old days the accepted theory was that to best maximize leverage to a particular commodity you had to buy shares in the companies that dug the stuff up (or in the case of oil, the companies that pump the stuff out of the ground).

In Australia, the disconnect between the price of gold and the share price performances of gold companies has been particularly pronounced. In fact over the past three years, half of the gold stocks in Australia’s gold mining index have returned less than investing directly in the gold price itself.

According to EIM Capital Managers’ John Robertson, among the 47 stocks within the S&P/ASX All Ordinaries gold index, just 25 rose outperformed the Australian dollar gold price and just 22 outperformed the US dollar gold price over the last three years. During this period the gold index increased by 55% to the end of July 2011, the US dollar gold price rose by 78% and the Australian dollar price rose by 53%.

One of the major explanations for the relatively lackluster returns from gold equities has been the rampant performance of our currency versus the US dollar.

The Hawke-Keating economic team floated the Aussie dollar way back in December 1983 and for at least the first couple of the almost three decades that have since passed, the currency was commonly and affectionately referred to as the “the battling Aussie dollar.”

Even just a few years ago the consensus from experts and traders around the marketplace was that the Aussie’s rise in value wouldn’t be sustainable; opinion dictated it would return quickly to its long-term average level versus the US currency of around $0.75.

But rather than follow the experts’ predicted path, the Aussie currency has instead surged to record levels on the back of escalating commodity prices as a result of the Chinese economic boom.

From my perspective however, you didn’t really need a degree in rocket science to figure out that this was going to happen.

Fundamentally, Australia’s dollar has always been a commodity-driven currency, dating back to the days of sheep and wool as our primary exports. These have now been replaced by iron ore, coal and gold; but the analogy is still the same.
What seems to have caught many of the experts napping was the rise of China.

From the wreckage of the train-crash that was the dot-com sharemarket meltdown more than a decade ago, came the lesson that it was ok to run an ‘old-fashioned’ economy.

The concept of the ‘new economy’ was all well and good. Except most of the internet promoters in the marketplace hadn’t the foggiest idea of what their businesses were, or how they’d ever make money from them. Unsuspecting stockbrokers and investors had even less idea, but went along for the ride anyway.

The dot-com boom began in 1995 and died a merciful death in 2000. At the same time, China was emerging with its economic miracle and caught many market-watchers napping.

Most of the resource companies that had been dabbling in IT quickly jumped shipped back to being miners and explorers once again. As China swamped the world with its demand for raw materials, Australia realized that low-tech was ok and that digging stuff out of the ground was once again cool and hugely profitable.

And it was a business that investors here at least understand. And it wasn’t long before the Aussie dollar began its inexorable climb just a year later. The chart above shows the almost decade-long rise in the value of the A$ since 2001.
This is a very roundabout way of bringing me back to our original discussion with respect to gold and the apparent disconnect between gold prices and gold equities. Our currency has always been a rather valuable hedge for our commodity exporters.

Being essentially a commodity currency the A$ tends to decline when commodity prices fall, helping insulate companies from the worst of the market. Likewise it tends to rise when commodity prices increase.

This however tends to take the edge of commodity price gains, meaning company earnings aren’t as substantial as they otherwise would have been had the currency remained stable.

It’s essentially swings and roundabouts. But the currency does provide a somewhat natural hedge for our exporters. I view it as a sort of insurance policy that helps protect miners during tough times.

The problem for Aussie gold companies is that it hasn’t just been the currency that’s flattened their earnings. They’ve been hit by a bunch of other factors like rising fuel costs, labour charges, capital costs and funding charges, which have all eaten into operating margins. And at the end of the day, maximizing operating margins is what making money is all about.

The chart above clearly shows the rising cost of mining and producing gold in all of the world’s key jurisdictions. What’s significant is where Australia sits. Australia ranks second in terms of cash operating costs, behind only South Africa. And South Africa these days is a virtual gold mining basket-case in terms of the problems afflicting its aging, deep, high-cost gold mines, with falling production levels.

So operating margins in Australia are being impacted by the strong A$ and other rising input costs.

Interestingly, over the course of the past week heightened volatility and risk aversion in international markets have led to a plunge in the value of the A$ and a corresponding rally in the gold price. This has propelled the A$ gold price to a new high of around A$1,739/oz.

The A$ gold price has it must be said been relatively muted for much of the past three years, with the last record A$ gold price reached during the GFC in early February 2009. At that time the A$ gold price peaked at A$1,545/oz. The red trend-line below (A$ gold) is much flatter than the black one (US$ gold).

So it’s possible that the latest break-out in the A$ gold price could be just what long-suffering Australian gold investors have been waiting for. That is, an opportunity to start realizing the full value of their investments.

It might also provide an opportunity for those investors who have watched bemused from the sidelines, with an opportunity to jump in and start enjoying the fun.

Gavin Wendt is the founder of MineLife, publisher of the MineLife Weekly Resource Report

THE BOURSE WHISPERER: West Africa-focused iron ore exploration play Nemex Resources has announced results of 17 ironstone samples from its Coastal project located in western Guinea.

The samples were collected as part of a program to target a regionally extensive ironstone unit across the company’s exploration licence portfolio.

These samples are from the 244 square kilometre Télimélé licence, which is one of the company’s three Coastal project licences.

The results returned iron grades ranging from 53 per cent to 64 per cent (averaging 60.7% iron).

Nemex considers the latest samples to be consistent with five ironstone sample results of between 60% to 63% iron that it announced to the ASX in June.

The company said the new results are representative of the ironstone unit and confirm it to be regionally significant.

“We are delighted with these results and Nemex has now demonstrated that this ironstone unit is not only a consistently high-grade direct shipping ore (DSO) iron product, but that it appears to cover a very large area,” Nemex Resources managing director Dr Peter Turner said in the company’s announcement to the Australian Securities Exchange.

“Our strategy now is two-fold: to explore the other 2,000 square kilometres of our licences whilst drilling at the Télimélé licence.”

Nemex’s initial plans include the digging of a series of pits to determine the thickness of the ironstone at various sites across the Télimélé licence area.

A company-owned Rotary Air Blast and Reverse Circulation (RAB/RC) drill rig is scheduled to depart Perth in August, arriving in Guinea later in the year.

Metallurgical testwork is planned once the drilling is underway.

“Although we are trying to determine what type of rock this represents and the effect weathering has had on iron enrichment, we are happy that it is consistently high-grade in iron, occurs at surface and that it sits close to rail and ports,” Turner said.

The project is situated within 60km of two Government-owned rail lines, which Nemex said could link the Coastal project to one of two ports if Nemex was to move into the develop phase with the project.