THE BOURSE WHISPERER: Recent dry magnetic separation beneficiation test work carried out by Brazilian-focused iron ore company Centaurus Metals has demonstrated the capability to produce a high-grade hematite product grading 65.8 per cent iron with low impurities at a strong mass recovery of 50% and metal recovery above 90%.

The positive results stem from test work carried out by the company on iron from its 100%-owned Jambreiro iron ore project in south-east Brazil.

This was the company’s first attempt to undertake dry magnetic separation test work on any of its iron ore projects in Brazil.

The testing was carried out on friable ore from Jambreiro and the company has taken much encouragement from the idea that an initial dry processing route can be established as part of the ultimate process flow sheet for a significant portion of the Jambreiro orebody.

“This is a great result which enhances the Jambreiro Project by providing us with greater optionality for the future processing of friable surface ore to produce a high-grade product,” Centaurus Metals managing director Darren Gordon said in the company’s announcement.

“The results could provide a number of significant operational benefits in that we would potentially be able to start generating cash flow before having to incur all of the capital expenditure requirements associated with wet processing, such as the construction of a tails dam.

“The final product achieved under these dry magnetic tests is once again high grade and has low impurities and should be highly sought after by the growing steel industry in Brazil,”

The type of friable ore used in the test work currently represents approximately 25% of the resource base at Jambreiro.

Environmental regulations also work in the company’s favour as in Brazil they allow for a shorter approvals process for dry beneficiation circuits, though this is at lower production rates than what is currently contemplated by Centaurus.

However the company said this may offer an opportunity to commence production early, on a smaller scale, while completing construction of the full-scale wet processing circuit.

“This would enable the company to generate earlier cash flows while deferring some of the capital expenditure associated with wet processing such as the construction of a tailings dam,” the Centaurus announcement said.
 
Having received these positive test work results, Centaurus is eager to investigate the cost of undertaking dry magnetic separation as an option as part of planned Feasibility Study work for the Jambreiro project later this year.

“This demonstrates our commitment to continue to move our projects rapidly towards production and to explore opportunities to bring forward production wherever possible,” Darren Gordon continued.

“These encouraging results could also have positive implications for other projects within our portfolio.”

Centaurus is continuing to undertake wet beneficiation test work on friable ore from Jambreiro with Fundação Gorceix in Ouro Preto.

The company expects that by adopting a flow sheet similar to the dry test work – that is wet low intensity magnetic separation followed by wet medium-to-high intensity magnetic separation – it should possibly achieved similar results from both a grade and recovery perspective.

The Jambreiro iron ore project currently has a JORC compliant Inferred Mineral Resource of 77 million tonnes grading 29.5% iron, with recently completed in-fill drilling expected to upgrade a substantial portion of this resource to Indicated status.

Drilling is continuing on new target areas within the overall Jambreiro project area.

 

THE BOURSE WHISPERER: The strategic partnerships of iron ore developer Centrex Metals with Top 10 China-based steel mills to explore for and develop iron projects on South Australia’s Eyre Peninsula continues to deliver good news with the announcement of a second major resource milestone in under a month.

Centrex has announced that Eyre Iron, its 40:60 joint venture with Chinese steel major Wuhan Iron & Steel Group Co. (WISCO), has confirmed a maiden JORC-Inferred resource of 159 million tonnes at the coastal Carrow prospect northeast of Tumby Bay.

Mineralisation at Carrow has returned magnetite concentrate grades of 66.9% iron with the resource estimate prepared from along a 3.4 kilometre strike length and to a depth of 50 metres below surface.

Eyre Iron, which has five iron prospective tenements on southern Eyre Peninsula between Dutton Bay and Port Lincoln, has been highly active in the area since late last year undertaking an extensive drilling program.
 
The Carrow estimate is the first Centrex-WISCO resource for any of that JV’s tenements.

The news follows a maiden Inferred iron resource estimate of 103Mt grading at 68.5% iron that was announced early in May for the Bungalow deposit.

Bungalow is north of Carrow in the Cowell area and is a Centrex JV with China’s Baotou Iron and Steel Group (Baogang).

Both the WISCO and Baogang JVs are magnetite pursuits and both Chines parties have equity and off-take stakes in Centrex.

“Carrow is just 25 kilometres from the proposed Centrex-WISCO development of a deepwater bulk commodities port at Sheep Hill,” Centrex Metals managing director Jim White said in the company announcement.

“The proposed port is to be a separate JV. The close proximity of the Carrow deposit to the proposed export hub and its favourable coarse grind size are behind the decision to continue the Prefeasibility Study (“PFS”) for the project.

“We are now on track to complete that PFS this year, with environmental and social baseline studies recently completed and process test work, plant and infrastructure designs now being finalised.”

The PFS is based on a 3 million tonne per annum magnetite concentrate circuit.

White said all final options for the processing operation at Carrow are due for completion in September but any decision to proceed, expected late this year, would only be made after completion of the PFS and comparison with other opportunities within the Eyre Iron JV tenements.

Eyre Iron has had six drilling rigs on site undertaking resource definition drilling over five additional targets. The JV has already completed more than 46,000m of mainly diamond drilling across Carrow, Greenpatch, Koppio, Iron Mount and Oolanta prospects with further results announcements expected later this year.

Eyre Iron has also completed a large-scale high resolution airborne magnetic survey over its White Flat, Charlton Gully and Warunda targets on Eyre Peninsula with associated follow up exploration drilling to be undertaken over coming months.

At the Bungalow project in JV with Baogang, the partners have announced a revised higher exploration target of between 530-750 million tonnes, with remaining areas of the deposit currently being drilled as part of a 30,000m Stage 2 program aimed at establishing additional iron ore resources over the Central and Northern Bungalow areas.

The Bungalow project is expected to move to PFS later in the year.

 

THE DRILL SERGEANT: Newly-ASX-listed Potash West has wasted no time in announcing results from its first drilling campaign.

The company recently completed an aircore drilling program on its E70/3100 licence, which is located on the western margin of the prospective Dandaragan Trough some 100 kilometres north of Perth.

The company’s maiden drilling program has come pretty much hot on the heels of its successful $6 million IPO, and recent debut on the ASX, and involved a total of seven widely spaced holes for 534 metres along road verge traverses.

Holes were located to provide stratigraphic information on the prospective Coolyena Group sediments which host potash mineralisation in glauconite rich sediments, known as greensands, elsewhere on the company’s tenure.

Potash West is exploring the Dandaragan Trough to evaluate the commercial potential of the greensand deposits.

These have been examined as a source of potassium several times over a period of nearly 50 years but not pursued due to low Potash prices.

Current prices and technological advances make re-examining the area attractive.

The drilling represents the company’s first stage in the investigation of the Cretaceous stratigraphy of the Dandaragan Trough where Potash West controls over 2,100 square kilometres of tenements.

Lithologies of the Coolyena Group, which host various glauconite rich units, are poorly exposed in E70/3100.

The aim of the program was to test the prospective stratigraphy over wide areas of the tenement and to collect samples for the initial phases of metallurgical testwork.

All seven drill holes penetrated significant thicknesses of Coolyena Group sediments. The
lithologies consist of fine to medium grained sandstones, siltstones and claystones containing varying amounts of glauconite visible in drill chips.

“This is a great start to our program to understand the extent of the glauconite mineralisation in the Dandaragan Trough,” Potash West managing director Patrick McManus said in the company release.

“Substantial thicknesses close to the surface bode well for future mining activities.”
Potas West said it expects potash contents will vary depending on factors such as lithology, depth, elevation and the degree of weathering.

The company has commenced a targeting exercise using high resolution satellite imagery to identify potential high grade, shallow potassium mineralisation.

This will provide a guide to future drilling, in the second half of 2011.

May was an interesting month for gold with the shiniest of commodities demonstrating to the market that it is just as susceptible as its cousins to a sell-off when market conditions change.

Gold reached a high of US$1,575 per ounce at the start of May only to quickly fall off almost seven per cent over the period of three trading days.

SOURCE: Australian Securities Exchange

A subsequent rebound since then didn’t really do much to mitigate market ambiguity concerning the future direction the gold price looks like taking.

The early May price correction, for want of a better term, saw market attitudes towards gold develop a more negative subtext that were slowly appeased as the month drew on.

“The broad-based commodity correction was triggered notably by the implications for asset prices of the end of QE2 in the US and the broader trend of monetary tightening globally, as well as weaker economic data,” Commodity Markets Strategy Group of corporate and investing banking group BNP Parabis said in a recent Metals Market Comment.

“In addition, the US dollar strengthened significantly vs. the Euro at the beginning of May as the Greek debt crisis deepened.

“In our view, these factors will have a short-term impact on the gold price.

“While a decline in global liquidity is without doubt a negative factor for the gold price, the evolution of real rates may be a better gauge when assessing the potential end of the gold price rally.”

The May 2011 issue of ABN AMBRO’s Metal Monthly investment research newsletter complied by VM Group suggested the fall of the gold price in early May could also be attributed to profit taking.

VM Group advocated this could have been caused through market fears that the gold price had actually reached its peak.

“Speculative activity on Comex declined by 14.6% in the three-week period ending 10 May, to 26 Moz (million ounces), led by long liquidation rather than a rise shorts betting against the gold price,” VM Group said.

“ETF investment also declined, with the SPDR product down 1.2 Moz in the three-week period ending 13 May, while non-US-based products added 0.2 Moz.”

VM Group was also not entirely convinced about the perceived strengthening of the US dollar citing it as, ‘”illusory” in that it is only looking healthy when compared to the euro.

“The choice between Eurozone fiscal crises and US versions of the same is rather like choosing between death by fire or death by water,” VM Group said.

“With the end of QE2 in June, the US economy will have to put on much greater speed than it has currently shown itself able to do – or else.”

VM Group identified “or else” to be, in its opinion, a much more likely outcome.

“The US Federal Reserve will be forced to come up with new tricks to help keep the fragile recovery from running into the sands,” VM Group continued.

“It may not be called QE3, but that’s what it will be. Gold may trade sideways in the short-term, as investors are confused about what comes next.

“Longer term however the only direction is up – unless there is some surprisingly good macroeconomic data out of the US in the next few months.”

The combination of expected low interest rates to be maintained by the US Federal Reserve to remain where they are, combined with expectations for inflation has BNP Parabis anticipating real rates to remain negative this year.

“This naturally favours investment in real assets over fixed income instruments,” BNP Parabis said.

“Furthermore, the Eurozone fiscal crisis (and ongoing concerns about the US situation) should continue to support gold safe haven demand for the time being.”

Investor interest may have waned somewhat but the purchase of physical gold has remained relatively strong around the world, in particular Asia.

BNP Parabis pointed to data from the World Gold Council, which highlighted an up-swell in bar and coin demand in the first quarter of this year.

Not surprisingly China and India were leading the pack with Turkey also a major contributor.

Other countries bankrolling the rise in physical gold purchase included Switzerland and Germany.

“Turkish physical gold demand was largely driven by the decline in the gold price in January/February,” PNB Parabis noted.

“Gold consumption in India and China tends to be less sensitive to price variations. Rather, it is more influenced by positive price expectations and inflationary concerns.”

Mexico is another country that has been on the hunt for purchases to augment its gold reserves in this time, buying some 93.33 tonnes of gold in the period February-March 2011.

This resulted in Mexico’s gold holdings as a fraction of total reserves rise from 0.2% to 3%.

“What is of significance here of course is not necessarily the volume of gold bought, at more than 3 Moz, but the trend it signals,” VM Group noted.

“Central banks have been net purchasers to the tune of 3.8 Moz in Q1 2011. In 2010, and excluding purchases by the Bank of International Settlements – but including IMF gold sales – central banks were net purchasers of just 0.5 Moz of gold.”

Whether it is banks or individuals purchasing or investing one thing remains constant and that is the scrutiny the price of gold continues to receive.

 BNP Parabis says it sees the price trend to continue “moderately higher, for the remainder of 2011 with the gold price averaging around the US$1,500 per ounce mark going on to peak at US$1,600 sometime in 2012.

“We retain our gold price forecast first issued on 17 November 2010,” PNB Parabis said.

“Although developments in the gold market so far have been in line with our central scenario, we remain mindful of the potential risks.

“Our economists expect the Fed to start hiking interest rates in mid-2012. Inflation is another key issue when assessing the direction of the gold price.

“We expect inflation to peak this year in the major economies, notably as base effects from increases in commodity prices fade in the second half of the year.”

THE DRILL SERGEANT: Gold and copper exploration play Ausgold announced the latest drilling results it has received from the Dingo ore body, located within the Western Corridor of the Katanning gold discovery in Western Australia.

 The returned results come from the southernmost lines of Ausgold’s first-pass RC drilling program at Dingo.

The company said the results have confirmed the continuation of gold mineralisation to the south and along strike of this ore body.

It also said they indicate that the gold mineralisation at the Dingo deposit remains open along strike in both directions as well as at depth.

Highlights from the drilling program include:

– 11 metres at 4.15 gram per tonne gold from 107m, including 1m at 8.38g/t gold from 108m and 1m at 21.00g/t gold from 113m;

– 20m at 2.69g/t gold from 79m, including 1m at 8.44g/t gold from 90m;

– 20m at 2.42g/t gold from 86m, including 2m at 8.55g/t gold from 98m;

– -22m at 2.30g/t gold from 121m, including 1m at 18.89g/t gold from 129m and 1m at 12.21g/t gold from 132m; and

– 19m at 1.67g/t gold from 105m.

An initial interpretation of these results has led Ausgold to form the opinion gold grades may increase as drilling continues south along this ore body.

“Significantly, these holes also intersected quartz veining, which appears atypical of the mineralisation encountered to date by Ausgold at the Dingo and Jinkas ore bodies,” Ausgold said in its announcement.

“It is the presence of these quartz veins that may explain the high-grade core present within the latest drill results.”

The company has subsequently commenced a follow-up drilling program at Dingo designed to further delineate the southern extension of this ore body.

A series of deep holes will also be completed at Dingo to test the depth continuation of this deposit down to 400 metres.

“This is another set of very positive results from our Katanning gold discovery which clearly indicated that in addition to gold mineralisation at Dingo continuing to the south, there is also a very strong indication that the grades are also increasing heading south,” Ausgold chief executive officer, Benjamin Bell said in the announcement.

“We continue with our drilling on the ground with two drills presently at Olympia and one at Dingo and we expect to be in receipt of two additional RC rigs and one diamond core drill in the coming weeks to further increase our pace on the ground.”

A drilling program is currently underway at Katanning, focusing initially on two key mineralisation structures.

The first is known as the Western Corridor, which hosts the Dingo, Jackson and Lone Tree prospects.

The second is the Eastern Corridor hosting the Olympia, Jinkas, Neighbours and Fraser prospects.

Ausgold plans to drill at least 70 to 80 holes per prospect. The program has been designed to assist the company in determine geology, gold mineralisation and orientation of higher grade lodes, which will allow better targeting of important structures at depth within the mineralised corridors.

“A resource delineation drilling program of the Jinkas ore body comprising over 100,000m of RC drilling will test the continuation of this deposit to depths of 500 metres below the surface and the strike extension of this ore body to 1.5 kilometres is anticipated to commence once the additional RC and diamond core drill rigs arrive on site next month,” Ausgold said.

“Ground geophysical surveys (detailed ground magnetics and induced polarisation) at the Jinkas and Dingo gold deposits are also currently in progress aimed at furthering the Company’s ability to identify high-grade lodes within its extensive tenement package.”