Media Award: Peter Klinger (The West Australian)

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Known as ‘The Corporal’ to the media pack Klinger has been covering the Diggers & Dealers conference for more years than he cares to admit.

It’s a fitting reward to a journalist who began his career working around the corner from the conference at the Kalgoorlie Miner newspaper.

During this time he was awarded the 1995 Best Newcomer award in the Western Australian Media Awards.

Klinger moved to London to work on The Times covering the resources sector and UK investment markets.

He is currently Deputy Business Editor for The West Australian.

 

Panoramic broadens Gidgee outlook

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OUT AND ABOUT: Not all the news at Diggers & Dealers comes from the companies presenting their power points in the main auditorium.

Gold aspirant Panoramic Resources is telling everybody it bumps into at the conference that it plans to bring its recently-acquired Gidgee gold project back into production within three years with a forecasted production rate of 100,000 ounces per year.

The company is also eager to boost the current resource at the project from 310,000 ounces at 5.2 grams per tonne gold to around 500,000 ounces within two years.

Panoramic acquired the 1,200 square kilometres project, located 130km west of Wiluna in Western Australia, from Apex Resources in February this year for $15.5 million.

Since then an ongoing review of the asset has identified over 200 prospective drill targets.

The company has commenced an aggressive exploration program including a 20,000 metre air core drill program ahead of an initial 15,000m RC and diamond drilling program scheduled for the last quarter of the year.

Panoramic has over $100 million in the bank is expects to spend around $20 million of this to refurbish the in-situ 600,000 tonnes per year carbon-in-pulp mill as well as upgrading the mining camp and other infrastructure.

Like any self-respecting managing director should, Peter Harold believes his company’s project to be “significantly undervalued”.

He justified his claims by identifying the project’s attributes, namely its existing shallow high-grade resources, exploration potential and low capital cost to fast track production.

“With Gidgee we have acquired a large tenement holding, with over 20 existing open pits and two underground mines, and we have already identified 210 high-grade drill targets,” Harold said.

“The project is located in a greenstone belt area on tenements that have produced over one million ounces of gold, where less than three per cent of all drilling is more than 150 metres deep, which is why we consider the exploration upside to be substantial.

“There is good infrastructure in place and we have the financial resources to bring Gidgee back into production in a very short time.

“Our production target of 100,000 ounces a year is perfectly realistic, and we would place Gidgee among, or very close to, the top twenty gold operations in Australia.”

Western Areas flies Southern Cross

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OUT AND ABOUT: There were canapés and Caronas flying between the booths of Southern Cross Goldfields and Western Areas when it was announced that the latter would be acquiring 70 per cent of the former’s nickel rights across much of its tenement portfolio in the Marda and Southern Cross regions of Western Australia.

Western Areas will acquire the 70% holding for a cash payment of $1.5 million along with minimum funding commitments of $1 million on nickel sulphide exploration during the first year after completion of the agreement.

This will be followed by minimum annual expenditure commitments of $250,000 for the first five years and $300,000 thereafter.

In an announcement to the Australian Securities Exchange Southern Cross said the transaction is consistent with its focus to develop its gold assets in the Marda region and its previously announced gold production and consolidation strategy.

The company currently has a feasibility study in progress looking to establish a central gold processing facility at Marda.

Previous exploration undertaken by Southern Cross, and others, has identified multiple nickel sulphide targets within the Bullfinch North tenements.

This includes a 66 kilometre strike length with known favourable nickel sulphide host rocks, encompassing multiple targets, some with known drill intersections, such as Trough Well, Lady Agnes, Scorpio and Sirius.

At Trough Well, previous RC drilling has intersected multiple zones of nickel sulphides within a classic Kambalda-style setting including an intercept of 20 metres at 0.62% nickel including 4m at 1.41% nickel.

Southern Cross Goldfields managing director Glenn Jardine said the company was very pleased to have concluded a nickel rights agreement with Western Areas, which he described as a dominant and highly successful nickel sulphide explorer and producer in the region.

“The agreement will ensure that appropriate focus and resources are allocated to testing the nickel potential of the Marda and Southern Cross tenements by Western Areas,” Jardine said in the ASX announcement.

“It provides SXG shareholders with a highly leveraged exposure to any exploration success across much of SXG’s extensive tenement holding.

“In addition, it allows SXG to maintain its focus on its gold production and consolidation strategy in the region at a time of historically high gold prices.
 
“The agreement has been structured in such a way that SXG retains exposure to any future nickel exploration upside by retaining a 30% interest in any nickel mineralisation discovered.

 “That is consistent with our focus as an emerging gold exploration and development company in the region while ensuring that we maximise the value of all of our mineral assets in the area.”

Resources Sector risks losing assets

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OUT AND ABOUT: What is akin to making sure your name tag is sewn into your underpants the new Personal Property Securities Act (PPSA) is looming as a danger to resources companies that are unprepared for its introduction.

If the mining industry didn’t have enough to worry about with the Minerals Resource Rent Tax and the Carbon Tax, companies now have to ensure they don’t lose their assets.

According to law firm Minter Ellison the results of recent surveys have shown the mining sector falsely believes the new PPSA laws are more an issue for banks and financiers to deal with, rather than explorers or miners.

The frightening truth of the matter is that these companies potentially risk losing ownership their key assets such as mining fleets or even ore stockpiles unless they comply with the new property focused Federal legislation due to come into effect in three months.

The Act replaces more than 70 State, Territory and Commonwealth property security registers and has specific potential impacts on the resources sector for project assets sanctioned at Commonwealth level.

Speaking over the clinking knives and forks at a Diggers & Dealers breakfast briefing, Perth-based Minter Ellison special counsel Stephanie Rowland said that the very complexity of joint venture agreements and other wide-ranging contractual arrangements common across mining, dictated that earlier compliance could prevent significant financial disputation.

“The new law is a total rewrite of how ownership of personal property needs to be documented and registered,” Rowland said.

“This brings with it, significant new obligations on resources participants to clearly register exactly where their ownership interests lie in a project or their company.

“Explorers and miners that are not PPSA ready by October, run the risk of losing valuable rights to competing interests that will rank ahead of them under the new regime’s requirements.”

Rowland provided those present with a recent example of what could possibly happen to Australian companies that disregard the importance of registering.

Under similar laws in New Zealand an accommodation supplier was leasing five units to a client, which in turn was being supported by a merchant financier.

The original supplier failed to adequately register its interest in the units, while the financier, under its arrangements with the client company, held a debenture over its assets.

When this company became insolvent, the financier, not the original supplier of the units, was deemed to have correct ownership entitlement.

“It is those very type of arrangements which dominate agreements between parties driving Australia’s exploration, mine construction and mine operating regimes,” Rowland said.

“So the potential for damage or loss to a third party from non-compliance, is now sizeable.”

Ms Rowland urged the resources sector needed to appreciate the implications of the PPSA as there are any number of property relevant to most mining projects which are deemed ‘personal property’ and therefore have ownership rights defined.

These include:

– Plant and equipment;

– Ore stockpiles, ore in circuit and processed ore; and

– Confidential data (for example seismic data) which could be a very valuable part of a Joint Venture’s property pool.

To protect itself from needlessly losing the interest to its property, whenever a mining or joint venture or exploration party owning personal property (including lessors under lease arrangements) enabled another party to have possession of that property, that owner must register its interest on the PPS Register.

“The definition of a security interest under the PPSA has been made intentionally broader than under existing laws and is intended to capture arrangements not previously necessarily thought to constitute a security,” Rowland said.

“For miners and explorers contemplating or holding existing JVs, this could include for example, commercially sensitive information, and rights to its ownership need to be protected via proper registration on the PPS Register.

Rowland counselled miners and explorers to adopt a pro-active stance to the PPSA by preparing for it, and implementing its procedures.

She said this could be achieved by:

– Carrying out a comprehensive review which tested all current contracts in force;

– Checking the supply terms and financing arrangements and clauses in standard contracts; and

– Identifying those assets affected and transactions that may need registration, and to come to grips with how the PPSA would apply to their exploration and mining objectives.

 

Altona makes Little Eva sing

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OUT AND ABOUT: There was plenty of action around the booth of copper exploration play Altona Mining today following its announcement of further decent drilling results from its100% owned Roseby copper project near Mt Isa in Queensland.

The results came from an ongoing RC drilling program at Roseby and come on the heels of a major increase in the size of the Little Eva Resource at the end of July.

The declared resource for the Little Eva deposit is 74.7 million tonnes at a grade of 0.52% copper and 0.1g/t gold for 388,000 tonnes of contained copper and 205,000 ounces of contained gold.

Altona has now completed some 11,000 metres, from 53 holes, of the drilling program.

The company is conducting the drilling with the aim of completely delimiting the Little Eva Resource to around 250 metres to 300 metres, which is the likely depth limit of open pit mining.

Further excellent thick drill intersections from 36 drill holes were returned, with highlights including:

270 metres at 0.54% copper, 0.10grams per tonne gold from 0m;

225m at 0.64% copper, 0.12g/t gold from 0m;

121m at 0.56% copper, 0.03g/t gold from 137m;

55m at 0.64% copper, 0.06g/t gold from 40m;

63m at 0.54% copper, 0.06g/t gold from 128m;

42m at 0.59% copper, 0.03g/t gold from 68m; and

34m at 0.71% copper, 0.09g/t gold from 157m.

These latest drill holes were not included in the recent resource upgrade.

They were mainly targeted at defining the low-grade extensions of the deposit to the south-east and at higher grade extensions along the current western boundary of the deposit.

Altona said that it expects a further upgrade to the Little Eva resource will follow in coming months.

Deloitte recognises growing miners

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OUT AND ABOUT: Deloitte presented its High Growth awards a part of the Diggers & Dealers conference in Kalgoorlie last night.

The Deloitte awards recognised the top movers by percentage growth and $AUD growth as of 31 May 2011.

Deloitte WA managing partner Keith Jones said the percentage growth of the top mining companies in each of the last one, five and 10 years has been extraordinary.

“The growth has been underpinned by strong commodity and precious metal demand, however the capacity to find and exploit the resource opportunities demonstrates the creativity and effectiveness of the companies based in Western Australia,” he said.

“The Western Australian corporate culture has created an environment where talent, risk appetite, natural resources and entrepreneurial energy have combined to capitalise upon the generational opportunity available in the resource sector.”

Bathurst Resources, Atlas Iron and Fortescue Metals Group achieved the highest percentage growth for the one, five and ten year category, respectively. 

When reviewing the top 10 dollar movers over the last one, five and 10 years, Jones said the small have grown big and then bigger.

“The growth of value in Western Australian mining companies has been sustained throughout the period,” he said.

“Fortescue Metals Group, Equinox Minerals and Iluka Resources have occupied the top three positions in value growth over each of the three periods under review.

“Commodity producers have dominated the dollar growth companies as they have raised capital, explored resources and built infrastructure to take their position in the global commodity supply markets.”

The following companies were recognised for their outstanding performance over the 10 years. Congratulations on this outstanding achievement.

Mining industry movers and shakers – 12 months to 31 May 2011:

– Bathurst Resources, which increased its market capitalisation by 5,544.%, from $15 million to $846 million;
 
– Equatorial Resources, which increased its market capitalisation by 1,533%, from $15m to $239m; and

– Aspire Mining, which increased its market capitalisation by 993%, from $38m to $410m;

Mining industry movers and shakers – 5 years to 31 May 2011:

– Atlas Iron, which increased its market capitalisation by 6,900%, from $44m to $3.0 billion;

– South Boulder Mines, which increased its market capitalisation by 6,622%, from $4m to $297m; and

– Coal of Africa Limited, which increased its market capitalisation by 5,764%, from $11m to $643m.

Mining industry movers and shakers – 10 years to 31 May 2011:

– Fortescue Metals Group, which increased its market capitalisation by 338,217%, from $6m to $20.3 billion;

– Equinox Minerals, which increased its market capitalisation by 84,332%, from $8m to $6.8 billion; and

– Paladin Energy, which increased its market capitalisation by 48,895%, from $5m to $2.4 billion.

 

More highs for gold

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The US debt stand-off continues and depending on which expert you listen to, the seriousness of the issue varies.

Some claim it’s not such a big deal and that there’s a fair amount of brinkmanship going on. Their belief is that a deal will get done – sometime soon – and things will return to relative normality.

It’s undoubtedly true that a deal will eventually get done, but about the credibility of the US financial system and the nation itself? The longer this episode drags on the rest of the world cannot help but compare the events in the US with those in Europe and Japan.

The scary aspect from my perspective is that a resolution of the debt ceiling issue will not in any shape or form address the critical underlying issue of the US economy. The wild spending by government will continue, with the maintenance of ultra-low interest rates. The message to US citizens is to borrow cheaply and to spend, spend, spend.

It’s the same approach that created the mess in the first place. Dating back to President Bush Snr, the US has since systematically trashed its fiscal position, with an ever escalating level of debt. Both sides of politics have been party to the act.

The chart above tracks the performance of the A$ versus the US$ since the middle of 2006. What’s clear is that the value of the US currency has been on a steadily decline, with the exception of the GFC in mid-2008, where investors reacquainted themselves to some degree with the US dollar.

This was only temporary and the sell-off continued. 

The rise of gold since 2000 has coincided with investor acknowledgement of the scale of the debasement of the US dollar.

This is reflected in the chart below, which clearly outlines the relative performance of gold and the US$ in percentage terms. Since 2000 gold has risen by 476% whilst the US$ index has fallen by 27%.

The rise in the price of gold in 1999 coincided with the gradual decline of the US dollar.

The key point is that the economic malaise that has enveloped the US economy is not any shape or form a new phenomenon. It dates back to the 1990s, when US growth was bankrolled by easy credit and lending-fuelled housing boom.

The reality today is that the US has not taken its economic medicine. Perversely, the remedy promoted by the Fed is more of the same stuff that drove the US economy into the mire in the first place, culminating with the GFC.

Unlike politicians in Europe, the US has so far steadfastly opposed any measures that might be considered even mildly unpopular; to help cut the gap between spending and revenue.

There could not be a clearer message to investors right now than gold’s climb to further record highs of US$1,625 per ounce.

Gold’s inexorable climb is still very much underway and this is just the latest signal for investors to act. It’s not only about wealth accumulation; it’s also about wealth preservation.

Unsurprisingly, investors have cried “enough” as they stampede away from the world’s major currencies, driving gold prices to record levels, especially in US dollar terms. 

The world’s most indebted nations have debased their currencies to such a degree that permanent damage is being done to their collective international reputation.

Certainly Asian investors are well and truly cogniscant of the risks and are preparing accordingly. Gold fever has gripped Asian investors and in all likelihood will spread to central banks.

Asian giants India and China, the world’s two biggest consumers of the precious metal, expect to see demand continue to climb for the rest of the year, as growing wealth and stubbornly high inflation make bullion an attractive asset.

India and China together made up 57% of first-quarter global consumer demand for gold, according to the World Gold Council.

According to Antaike, a state-backed metals consultancy based in Beijing, China’s gold demand is expected to rise by around 20% to nearly 700 tonnes this year, from 570 tonnes in 2010. In India, the wedding season in mid-August is expected to drive up sales of gold, a fixture in dowry and gifts.

During 2010 central banks became net buyers of gold for the first time in 21 years, as developed nations of Western Europe and North America reduced selling in the wake of the global financial crisis while emerging economies tried to diversify their holdings of foreign currencies, especially the US dollar.

China has the world’s biggest foreign reserves, which stood at $3.2 trillion at the end of June. Gold holdings of 1,054.1 tonnes make up just 1.6% of its reserves, though China ranks sixth among the world’s top official holders of gold.

The People’s Bank of China plans to sell 500,000 1-ounce gold coins, or 66% more than its earlier target of 300,000. It also tripled sales targets for half-ounce, quarter-ounce, 1/10-ounce and 1/20-ounce gold coins to 600,000 each from 200,000 earlier. The increase in sales of these coins alone will represent a rise of 560,000 ounces in gold demand, or 17 tonnes.

This is why I remain convinced of the strong upside with respect to the gold price and I have confidence that the price can comfortably reach the US$2,000 per ounce mark within the next two years.

Silver Lake statue pushes gold barrow

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OUT AND ABOUT: Gold producer Silver Lake Resources is proudly showing off the fruits of its labours at this year’s Diggers & Dealers conference in Kalgoorlie.

The company has commissioned a statue by award winning sculptor William Eicholtz.

Silver Lake Resources managing director told The Roadhouse the statue is, “A tribute to the prospectors who endured great challenges in their relentless pursuit of gold.”

“Many pushed wheelbarrows from all over Australia to be part of the 1893 gold rush here in Kalgoorlie.

“We like to promote the industry that we work in and the product that we mine.”

It is not unusual for a gold company to have some form of gold bullion on its balance sheet, and most gold companies do that.

“We happen to have our bullion in art form,” Davis said.

The statue the company had made for last year’s conference has since appreciated $300,000 so there is probably some credence to Silver Lake’s thinking.

The statue is titled, “The Gold Prospector” and is a 1000 ounce statue made from pure gold mined from the company’s operations.

At current gold prices the statue is valued at $1.5 million.

Saracen to study Whirling Dervish underground potential

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THE DRILL SERGEANT: Goldfields producer Saracen Mineral Holdings is set to study high-grade underground mine potential at its Whirling Dervish deposit located adjacent to the Carosue Dam project.

Saracen said it has been encouraged by assay results from a recently completed drilling program at Whirling Dervish.

The company considers the results suggest significant resource potential for the deposit and possible future underground mine development.

The company will be moving additional drilling rigs into action at Whirling Dervish in the September quarter as it tries to delineate extensive additions to the existing resource.

When completed, a study on mining options, including either a cutback to the existing pit combined with an underground mine, or a sole underground operation will commence.

The current Measured, Indicated and Inferred Resource at Whirling Dervish to a depth of 260-290 metres totals:

11.3 million tonnes at 1.4 grams per tonne for 501,000 ounces of gold.

The recent drilling returned one deep intersection at 370 metres, which Saracen said suggests the existence of an exploration target of 20-30 million tonnes of similar grade material of 1.3 grams per tonne to 1.6 grams per tonne.

This would result in an additional 800,000 to 1.5 million ounces, inclusive of a potential high grade zone of 3-4 million tonnes at 4g/t to 4.6g/t for 400,000 to 800,000 ounces.

Saracen said the width, grade tenor and continuity of the high-grade mineralised core, indicates favourably to cost-efficient underground mining.

“The emerging story at Whirling Dervish is one of great potential given its size and close proximity, in the shadow of the mill at Carosue Dam,” Saracen Mineral Holdings executive chairman Guido Staltari said in the company’s announcement to the Australia Securities Exchange.

“Whirling Dervish could make a demonstrable difference to both our reserve profile, which is already significant, and to our production profile, through the blending of higher grade ore.

“We have only just started to test the depth extensions of the Karari-Whirling Dervish trend and how it might on its own fill the Carosue Dam plant for years to come.”

Saracen has one RC drill rig and one diamond core drill rig set to commence drilling in early August.

The company expects the initial results from the program either in the September quarter or early in the December quarter.

It will also be running an underground scoping study to determine initial underground mining parameters.

This will be expanded to a full feasibility study when additional drill results become available and the company has completed an updated resource.

 

Diggers & Dealers opens in Kalgoorlie

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Diggers & Dealers opens in Kalgoorlie

OUT AND ABOUT: From a spectator’s point of view it was something of an anti-climax when Diggers & Dealers forum chairman Barry Eldridge opened this year’s conference.

Opening the 2010 conference Eldridge reminded delegates that in its entire history Diggers & Dealers had maintained an arm’s length from federal politics.

“That is about to change,” he growled at the time.

Last year the conference opened with the sword of the Minerals Resource Rent Tax casting a shadow across the booths and brows of the mining industry heavyweights in attendance.

The MRRT is back to haunt the conference again this year, this time joined by its new friend in the Federal Government’s Climate Change Plan, better known to all and sundry as the Carbon Tax.

Eldridge was much more measured and composed this year as he began quietly welcoming delegates and dignitaries.

“Last year I made some reasonably direct comments about the impact our politicians have had on the resources industry in Australia,” he said opening his address.

“We had an election looming and the threat of a proposed mining tax.

“We’ve had the election and you can judge for yourself whether or not Australia traded up.

“We still have the threat of a mining tax, albeit somewhat narrower than what was proposed initially and still not yet introduced into parliament, although I suspect his will happen now that the balance of power in the Senate is with The Greens.

“God help us.”

Eldridge congratulations the industry’s efforts in presenting its case to the people of Australia’s of the negative effect the mining tax it says would have had on investment in Australia.

He was reluctant, however, to accept the promise made by Liberal Party Leader Tony Abbott that his party would remove the resources tax if it were elected on face value.

“This is positive, but my cynicism suggests that there are not many existing taxes that get removed and there is always an excuse for maintaining a revenue stream,” Eldridge said.

“As an industry we need to remain committed to ensuring that the Liberals deliver their promise.”

Eldridge told the audience he would not be making any comment on the potential impact proposed increases in State Royalties announced by the Western Australian government in May would have on the industry.

“Whether this is justifiable or not, and whether the relationship and communication of protocols between the federal and state governments are effective is not the issue,” he went on to say.

“Public statements to state budgets will result in Western Australia being penalised through reduced infrastructure spending, frankly is just immature and not useful to an industry that needs to demonstrate to investors, financiers and customers that projects can be developed and appropriate financial returns can be delivered.”

He then went on to say he would also not be making any comment on Prime Minister Julia Gillard’s new Carbon Tax assuring the audience they were all intelligent enough to know it is bad.

“We don’t have enough time to analyse the future of the resources sector under influences of Bob Brown and The Greens,” he continued.

“And frankly, heaven help us in the next period with the influence that this extreme balance of power might have on our industry with the government having to allow The Greens to punch well above their political pedigree.

“The extreme idealistic, but frankly, economic-superficial policies that now have political substance while we have a hung parliament has to be one of the most worrying long-term issues Australia and the resources sector has ever faced.”