Thunderbird PFS results drive Sheffield Resources straight into BFS

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THE INSIDE STORY: Sheffield Resources’ (ASX: SFX) 100 per cent-owned Thunderbird mineral sands project possesses a number of very prominent attributes.

Located on the Dampier Peninsula, about 60 kilometres west of Derby, and 25km north of the sealed Great Northern Highway joining Derby and Broome, Thunderbird is the first major mineral sands discovery in the Canning Basin region of Western Australia.

Since its discovery, Sheffield has worked up the project to become one of the largest mineral sands deposits to be discovered in the last 30 years.

Thunderbird boasts a total Mineral Resource of 3.2 billion tonnes at 6.9 per cent heavy minerals (HM) across all three Measured, Indicated and Inferred categories at 3 per cent HM cut-off.

The Resource contains 18.5 million tonnes of zircon, 61.8 million tonnes of ilmenite, 6.9 million tonnes of leucoxene, and 5.9 million tonnes of HiTi leucoxene.

A recently-completed Prefeasibility Study (PFS) update concluded the project’s current Mineral Resource can support an initial 40 year mine life with substantial room opportunity to increase this in the future.

The project will eventually ramp-up to an 18 million tonnes per annum throughput, at which time it will become one of the world’s largest dry mining mineral sands operations.

Zircon is the key value driver of the project making up 59 per cent of forecast revenue, with the remainder generated from substantial amounts of high grade sulphate ilmenite and HiTi leucoxene.

Over 50 per cent of the world’s zircon supply is used in the production of ceramics, including tiles, sanitary ware and tableware.

Zircon is also used in refractories and foundry applications.

Globally, zircon demand reached an estimated 1.1 million tonnes in 2014.

Zircon prices trebled during 2011 to peak around US$2,400 to $2,600 per tonne, but since then they have come back to around the US$1,050 per tonne mark, however industry boffins do anticipate the longer-term outlook for zircon prices to be positive, due to increasing demand and a limited pool of new projects in development.

Key outcomes to emerge from the recent PFS update include a 26 per cent reduction ($96.6M) in pre-production capital expenditure to $271 million, a 13 per cent increase in annual EBITDA to $135 million, improvement of capital payback to 3.4 years and a 25 per cent increase in mine life to the initial 40 years mentioned above.

The PFS update was based on a conventional dozer trap mineral sand mining operation involving an initial 12 million tonnes per annum throughput, increasing to the much-anticipated 18 million tonnes per annum in year eight, and a low risk, conventional processing flow sheet with all infrastructure located on site.

The results of the PFS update attracted a lot of attention for the company and also the attention of highly credentialed mining executive Bruce McFadzean, who joined the company as Managing Director in November.

McFadzean brings to the company more than 35 years’ experience in the global resources industry, having led the financing, development and operation of several new mines around the world.

Across his journey, he has spent 15 years with BHP Billiton and Rio Tinto in a variety of positions and four years as managing director of Western Australia gold miner Catalpa Resources.

It was during his time at Catalpa, McFadzean oversaw the construction and operation of the Edna May gold mine, the acquisition of 30 per cent of the Cracow gold mine and the company’s eventual merger into Evolution Mining (ASX:EVN), after which Catalpa’s market capitalisation grew from $10 million to $1.2 billion.

“Accepting the appointment was an easy decision as I believe the Thunderbird project presents such a wonderful opportunity,” McFadzean told The Resources Roadhouse.

“The results from the PFS update were very hard to ignore as they confirmed what I considered the Thunderbird project to be – a strategic, high margin, zircon-rich asset located in one of the world’s most stable mining jurisdictions.”

The PFS update demonstrated Thunderbird to be a project requiring a modest capital expenditure that will eventually generate strong EBITDA margins over a very long mine life.

Sheffield took meticulous care in running the study using proven, cost-effective conventional mining and processing techniques, which determined Thunderbird will generate a highly marketable suite of products.

The primary zircon is of premium quality whilst the upgraded ilmenite demonstrates characteristics that are superior to other sulphate ilmenites in the market, meaning it should become a preferred feedstock. 

The quality of the zircon found a cheer squad in leading global mineral sands consulting group TZMI, which confirmed Thunderbird’s primary zircon and LTR ilmenite to be high quality products that will very likely receive strong market support.

Collectively, these products represent 81 per cent of the project’s total projected revenue and the company has already had some interest registered in these products by leading marketing specialists and industry groups. 

“Although we have received some strong interest in relation to Thunderbird’s products, we have, at this stage, chosen not to commit to offtake agreements until after completion of the Bankable Feasibility Study (BFS),” McFadzean said.

Just after the release of the PFS update, Sheffield announced an Access Agreement with the Shire of Derby-West Kimberley over the bulk handling facility at the Derby Wharf, confirming Sheffield as the preferred proponent and providing exclusive access to the bulk handling facility.

The agreement allows Sheffield exclusive access during the BFS to complete all work required to submit a development application and to complete terms of a sublease agreement by June 2017.

The company considers securing port capacity to be a major step towards development of the Thunderbird project as efficient and unconstrained access to export infrastructure is essential to establishing a cost effective mine-to-port logistics chain for its products.

The Derby wharf is well suited to the export of mineral sands products.

The PFS established that final products will be transported in bulk form by quad road trains from the mine site to the Derby wharf for storage and export.

Bulk ilmenite, zircon and HiTi88 products will be off-loaded at the port export facility to then be conveyed to a ship loader for transhipment via barge.

As a company that likes to keep things moving at a steady pace, Sheffield recently announced its intentions to raise up to $5 million through a placement of up to 11.4 million shares at an issue price of 44 cents per share to domestic and international institutional, sophisticated and professional investors.

This was supported by an offer to eligible shareholders to participate in a Share Purchase Plan (SPP) to raise up to $2 million.

Sheffield has earmarked the funds raised for the BFS at Thunderbird, to accelerate offtake and financing negotiations, to undertake regional exploration at the Dampier Mineral Sands project and the company’s Red Bull nickel project in the Fraser Range and for general working capital purposes.

“This capital raising will strengthen our balance sheet, which will ensure we can deliver on some very significant upcoming milestones we will have to achieve on the way to finalising the Bankable Feasibility Study in late 2016,” McFadzean explained.

“We are already well-advanced into this exciting phase, which is to include a number of catalysts including permitting, grant of the mining lease, a maiden reserve for the Thunderbird deposit and key offtake and financing negotiations.”

Sheffield Resources Limited (ASX: SFX)
…The Short Story

HEAD OFFICE
Level 1, 57 Havelock Street
West Perth WA 6005

Ph: + 61 8 6424 8440
Fax:   +61 8 9321 1710

Email: info@sheffieldresources.com.au
Website: www.sheffieldresources.com.au

DIRECTORS and MANAGEMENT
Will Burbury, Bruce McFadzean, Bruce McQuitty, David Archer

PFS de-risks Matilda Gold Project

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THE INSIDE STORY: As it moves closer to becoming the next Australian gold producer Blackham Resources (ASX: BLK) rarely has time to stand still.

The company recently finalised a Pre-Feasibility Study into its 100 per cent-owned Matilda gold project, located near Wiluna in Western Australia.

Although impressive, the PFS results were quickly outdated with Blackham well advanced into a Definitive Feasibility Study (DFS), for which a number of drilling programs that are likely to increase the current Resource base have been completed.

In just nine months, the PFS increased the mineable Resource at the Matilda project by over one million tonnes from the Scoping Study, while confirming the project’s robust economics including a low capital requirement, short timeframe to production, fast payback and operating costs.

The Matilda project is benefitting from the current market forces with all associated cost reductions resulting in a low capex due to substantial plant and infrastructure already at site and relatively minor plant refurbishments required to re-start the project.

The PFS added an additional year to the mine life forecast in the Scoping Study and converted Inferred Resources into Indicated Resources and Scoping Mineral Inventory into Reserves.

“The de-risking of the Matilda gold project as a result of the PFS is something that should not be overlooked,” Blackham Resources managing director Bryan Dixon told The Resources Roadhouse.

“Not only did it come back with a mining inventory of six million tonnes at 2.8 grams per tonne for 540,000 ounces of gold, it also presented us with another pleasing figure in the extremely low capex of $28 million.

“What that means is that, at today’s prices, we only need to spend $28 million over five months building the project, which will then make over $200 million in cash flow over the next five years.

“It has emerged as being a very capital-efficient project, which should produce high returns for our shareholders.

“It has a Net Present Value (NPV) of $124 million and an Initial Rate of Return (IIR) of 105 per cent.

“The only way a gold project is capable of hitting those sort of numbers is to be doing what we are doing, which is leveraging off a brownfields asset with an existing plant in-situ.”

Blackham scored well from drilling associated with the DFS from Golden Age and Matilda and more recently from two other targets within the project area, Galaxy and Williamson.

An RC drill program of 26 holes carried out at Galaxy included holes GARC0065, GARC0066, and GARC0067, which returned impressive oxide intercepts of 12m at 4.57g/t gold, 4m at 7.93g/t gold, and 10m at 2.54g/t gold, respectively.

An additional small, three-hole diamond program was also completed in order to provide further geological confidence and metallurgical samples.

This program identified further high-grade mineralisation within the optimised pit shell, with holes GLDD0005 and GLDD0006 (10m at 4.52g/t gold from 82m; and 5m at 6.33g/t gold from 18.5m) confirming mineralisation continuity at depth, and along strike.

“Galaxy came out of the recent Pre-Feasibility Study as a high-grade shallow deposit suitable for open pit mining with good metallurgical recoveries,” Dixon said.

“The latest DFS associated drilling has given us greater confidence within the Galaxy pit while also identifying further high-grade mineralisation outside the PFS pit design.”

The Galaxy and Golden Age deposits are ranked as early targets in Blackham’s mine plan as both are high-grade, free milling quartz reefs located in close proximity of the Wiluna gold plant.

The first round of drilling completed at the Williamson deposit also paid dividends, hitting a new shallow high-grade zone of oxide mineralisation.

Blackham completed a program of 19 RC holes, which it claims has discovered a new zone of mineralisation along the western (footwall) flank of Williamson.

Results from the new high-grade footwall zone discovered in the Williamson pit include:

WMRC0012
2 metres at 95.14 grams per tonne gold from 33m;

WMDD0002
1.45m at 5.73g/t from 70m;

Interpretation of the drilling results determined the shallow newly-discovered lode extends into the PFS pit design, which the company considers is likely to improve the pit’s economics.

The drilling also infilled the southern extensions of the resource to a spacing that is likely to support an Indicated resource classification.

Five diamond core (DD) holes were also completed to provide geotechnical and metallurgical samples for the current Definitive Feasibility Study (DFS).

Blackham expects these results to expand and add further confidence to the free milling, open pit mining inventory prior to the planned recommissioning of the Wiluna gold plant in 2016.

As a bulk-tonnage gold deposit Blackham considers Williamson to possess a number of geological similarities to others in the Yilgarn region, such as the Thunderbox deposit of Saracen Mineral Holdings (ASX: SAR) and the Gruyere deposit of Gold Road Resources (ASX: GOR).

“The gold mineralisation at Williamson is associated with disseminated pyrite and arsenopyrite and sulphide-bearing quartz veinlets within monzogranite dykes and sheared monzogranite – dolerite contacts,” Dixon explained.

“High-grade pods are noted along the monzogranite contacts, and visible gold has been seen in historical drill core.

“Although the overall grade of the Williamson resource is modest at 6.3 million tonnes at 1.7 grams per tonne for 350,000 ounces, the relative large tonnage of the deposit is typical of this style of mineralisation.

“For us, that makes it an attractive exploration and development target that ensures a sustainable base load mine plan for the Wiluna gold plant.”

The results of the PFS confirm mining and processing parameters are very similar to the results of the Scoping Study.

From this Blackham has gained a sound understanding of the technical and operational aspects of the project that has further de-risked the development of the Matilda gold project.

“The PFS has confirmed the robust cash flows the Matilda gold project is capable of generating, its capital efficient nature and that it can be bought into production rapidly,” Dixon said.

“Since finalising the PFS Resource, we have enjoyed significant exploration success and we plan to keep growing the mine life through aggressive drilling programs.”

The progress Blackham has already been able to achieve with the Matilda DFS gives gold industry watchers something to anticipate over the holidays.

The drilling programs and resource, metallurgical, environmental and engineering studies the company has underway are expected to enable it to completion of the DFS in a condensed timeframe, which would further de-risk the project and increasing confidence levels.

Blackham has agreed an early drawn down of $7 million on its $30 million undrawn debt facility with Orion Mine Finance to fast track Matilda towards production.

The funds will be used for ordering long lead items, initial plant and infrastructure refurbishment, additional drilling aiming at extending the reserves and mine life inventory and completion of the Definitive Feasibility Study by January 2016.

“Blackham is pleased to have agreed with Orion the early drawdown of funds under the debt facility,” Dixon said.

“A lot of the DFS work programs have been completed and the early drawdown of these funds allows the team to look beyond the studies and begin the first stages of development work.

“Starting the refurbishment of the plant and infrastructure will allow a more orderly progression into gold production planned for the middle of next year.”

Blackham Resources Limited (ASX: BLK)
… The Short Story

HEAD OFFICE
Level 2, 38 Richardson St.
West Perth WA 6005

Ph: +61 8 9322 6418
Fax: +61 8 9322 6398

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

DIRECTORS
Paul Murphy, Bryan Dixon, Alan Thom, Greg Miles, Peter Rozenauers

What the Analysts Say

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WHAT THE ANALYSTS SAY: This week our team of experts run their eyes over Orion Gold.

Website: www.breakawayresearch.com

Orion Gold (ASX: ORN)

Orion has secured an option to acquire 73.3 per cent of the historic Prieska copper mine, located some 270 kilometres south-west of Kimberley in the Northern Cape Province of South Africa through the acquisition of Agama Exploration and Mining Pty Ltd, a private South African company.

Prieska, which is a Proterozoic volcanogenic-hosted massive sulphide (VMS) deposit, produced some 430,000 tonnes of copper and one million tonnes of zinc from 47 million tonnes of ore from 1971 to 1991, and was considered one of the 30 largest VMS deposits known globally.

Historical mining was limited to underground, sulphide ore, with most of the mine infrastructure currently in place to access the dip and strike potential demonstrated in historic drilling.

This includes an 8.8 metre diameter, 1,024m deep concrete lined vertical shaft and three separate ramp declines.

Dependent upon their condition, these could provide significant capital advantages should the project be developed.

In addition there is significant regional infrastructure including water, power bitumen roads, rail connection to a deep-water port and an airstrip at the mine site. Included in the Agama package is the Marydale gold project, located some 60km north-west of Prieska.

Drilling by the vendors has intersected up to 50.4m at 2.68 grams per tonne gold from near surface, in what Orion interprets as a structurally complex epithermal system.

Importantly, the South African acquisition includes new order prospecting rights, with the vendors, Agama, already having in place the Black Economic Empowerment (BEE) 26.7 per cent holding required by law – this is a key advantage when considering South African projects.

In addition the Prieska asset includes a fully funded ZAR17.3 million (approx. A$1.7 million) environmental trust.

The company is currently at an advanced stage of carrying out due diligence, with the $8 million option exercisable before July 31, 2016, with a total of $165,000 in monthly option payments required to maintain the option.

The due diligence process will be helped by the existence of an extensive mine data package and access to professionals with significant previous experience at Prieska.

Prieska, dependent upon the results of the due diligence and subsequent feasibility studies, provides a cheap entry into a large scale, near development base metal opportunity to take advantage of the next upturn in the resources cycle.

Results from Marydale are also very encouraging, and provide additional upside, leveraging on Orion’s epithermal exploration expertise.

Orion has also recently commenced RC drilling at its 100 per cent Connors Arc epithermal gold-silver project, located in Central Queensland.

The project is located in a geological and structural setting similar to other epithermal systems in Queensland, including Cracow and Mount Carlton, and in a region well served by infrastructure.

Previous work, including drilling, mapping and geochemical sampling has confirmed the prospectivity and scale of the system, and delineated a number of prospects that are being tested as part of the current program.

Work during 2015 has concentrated on further defining the epithermal systems and drill targets, and has included mapping, geochemical sampling and detailed ground magnetics.

In addition to refining drill targets, this work has also expanded the key Veinglorious and Aurora Flats prospects and located a new epithermal breccia target named Chough.

The work at Veinglorious has included spectral characterisation of drill samples from the 2014-2015 drill program to determine the level in the epithermal system.

This work has concluded that the drilling intersected shallow, low temperature parts of the system, above that where significant mineralisation would be expected, and thus provides a vector to mineralisation.

A common feature of epithermal systems is that gold and silver mineralisation is deposited in a defined vertical range in response to changing fluid conditions.

This is commonly in the order of a few 100s of metres, with the veining above and below this generally barren or weakly mineralised.

Exploration over epithermal projects can take patience, however Orion has taken a considered and technically rigorous approach to exploration

Disclaimer: The above is intended as a guide only. The Roadhouse accepts no responsibility for investments made from this advice, successful or otherwise.

The views, opinions or recommendations of this article do not in any way reflect the views, opinions, recommendations, of The Resources Roadhouse.

The Roadhouse makes no representation or warranty with respect to the accuracy, completeness or currency of the content. The content is for educational purposes only and does not constitute financial advice. Independent advice should be obtained from an Australian financial services licensee before making investment decisions.

Dr Larry Hulbert – Corazon Mining

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ONE OFF THE WOOD: Corazon Mining (ASX: CZN) has joined forces with Canadian mafic-ultramafic rock whisperer Dr Larry Hulbert, who’s experience is providing the company with more than 40 years of personal and technical knowledge of the Lynn Lake nickel region.

Larry Hulbert is one of Canada’s leading experts on the mineralisation and metallogeny of mafic-ultramafic rocks and he is now heading up Corazon’s data capture and search for new deposits.

Larry, it could be fair to say your history in the Canadian industry means you are extremely well-known over there, but you may have to bring us Antipodeans up to speed.

I started my nickel mining career around 1972 when I arrived as a young mining geologist, working underground at the ”N-Deposit” nickel mine at Lynn Lake. I was there for around a year and a half, and they must have seen some potential in me because they hoisted me up above ground to be part of their surface exploration team.

I was interested in doing some graduate studies, so they encouraged me to do my thesis on the South Plug, which is part of Corazon’s  Fraser Lake complex; we always believed, right from the discovery of Lynn Lake that the Fraser Lake body had much more nickel potential than the A Plug.

I completed my Master’s Degree at Lynn Lake, launching my nickel career, and from there I went on to complete my Doctorate in South Africa.

After that I was fortunate to attain the position as a research scientist with the Geological Survey of Canada. I became the ‘go-to guy’ in Canada for nickel-copper-platinum deposits.

It was a very prestigious job that allowed me to travel the world looking at different deposits, gaining a different perspective from the Canadian deposits.

There is probably no other person on the planet who knows more about the Lynn Lake project. Could you tell us a bit more about your involvement with the area?

I did a couple of small stints, while I was with the government, in the Lynn Lake area – I still found it fascinating after all those years – and I felt the same when I went back there in the 80s that it still held incredible potential that nobody really knew anything about – there was very little ever written about Lynn Lake.

The owners at the time, Sherritt Gordon Mines, were a great company to work for, but they weren’t interested in academic research, they were all about production.

As a result, nothing ever got written up about Lynn Lake and from my time up there with the Geological Survey and others, I saw it all from a totally different perspective.

I believed then, as now, that this is one of the great nickel camps of Canada.

So even back then, in the 1980s, you were developing quite a vast, personal knowledge bank of the Lynn Lake region?

What I considered, when I worked at the Geological Survey, as well as after I had left, I somehow thought it was my responsibility to be the custodian of the knowledge of the data.

I knew airborne surveys were done up there that nobody else was really aware of. I knew of ground surveys. I had always kept track because I knew that one day I would be back there, because I had unfinished business to complete.

When I did my Master’s Degree, I know I did a really good job mapping the area, but I didn’t have the technology that is available today, which has now helped us put a whole different complexion on the area.

Is that what you have been able to do since teaming up with Corazon?

Corazon has given me the opportunity to touch base with a lot of my old contacts who did surveys in Lynn Lake after Sherritt Gordon shut down their operation.

Recently I had the chance to visit what I like to call the Lynn Lake Archive, which is just outside of Sudbury in Canada, where there is a wealth of old mining records and drilling logs – for instance, we’ve got a digital data base of 4,000 drill logs, but we have found 9,000 logs in the filing cabinets.

We have found a whole lot of additional information.

So you have found an Aladdin’s Cave of data which, although it had been recorded, hadn’t been recorded as being recorded?

It was all on paper, in a variety of sources, but it had never been compiled into one consistent data base, or as one consistent geographic projection.

Corazon is allowing you, for the first time ever, to put together all the information since the 1970s, plus all the other information that has been recorded about Lynn Lake and long since forgotten. Is that what you have always wanted?

The true wealth, for my mind, of information is what Sherritt Gordon had and the more recent surveys conducted from around 2003 through to 2012.

Pulling that together and making sense of it all has been as much a detective story as it has been a geological story.

I knew a lot of this information was available. If you had to express its total worth in present day dollars – the ground surveys alone would be worth almost one million dollars, the airborne surveys around two million.

So all this information existed that nobody knew about and you also existed on the same existential plane. How did Corazon find you, or did you find them?

In 2012 I was doing the exact same thing (as what I’m doing for Corazon) for another company in Western Canada and the mining engineer told Corazon that if they were interested in Lynn Lake they should have a talk with me.

After a couple of year’s skyping, Corazon managing director Brett Smith and I finally met properly for the first time at PDAC earlier this year.

We got talking about Lynn Lake and the old guys I know who are still around with plenty of knowledge to share.

Brett suggested we do a VTEM survey and I said – if my memory serves me right there was already one completed.

I looked into it and sure enough, within half an hour, I had dug out a $250,000 survey – and it has been like that throughout the program, resurrecting surveys that some groups did that others don’t know about, which has resulted in us compiling some remarkable data.

The really pleasing thing about the whole process is that some of the old data – from way back in the 1960s – is handing it to our geophysicists and hearing them say it’s as good as anything that can be produced today, which would cost a small fortune.

It sounds to me that you couldn’t be any happier with the way this has all evolved?

I have a soft spot in my heart for Lynn Lake – this was a beautiful area when I began my career there in the 70s.

It’s been very good to me and I would love nothing more than to see this area rejuvenated – and it deserves it.

I believe, and the old timers from Sherritt Gordon believe, the Fraser Lake body is there and we’re going to find it.

Alloy Resources looking for buckets of gold at Horse Well

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THE INSIDE STORY: It’s no secret that there hasn’t been much joy for the junior end of Resources Town over the past few years.

However, there has been a sniff of optimism in the air of late, especially for junior gold exploration companies such as Alloy Resources (ASX: AYR) with the behaviour of the Australian dollar gold price, providing a more receptive economic climate for the development of smaller worthwhile projects.

Alloy Resource’s Horse Well gold project is located in the Warburton Mineral Field of Western Australia, approximately 85 kilometres northeast of the town of Wiluna.

The Horse Well portion of the greenstone belt has only had focussed exploration along the southern part, where the company and previous explorers have identified JORC gold resources in near surface deposits to date.

Alloy’s 100 per cent-owned gold resource at Horse Well currently stands at just under 1.05, million tonnes at 2.91 grams per tonne gold for 98,700 ounces.

“Our company is a classic style junior explorer,” Alloy Resources managing director Andrew Viner told The Resources Roadhouse.

“Our primary asset is the 1,000 square kilometre Horse Well gold project where we have around 60 strike kilometres of the Milrose Greenstone Belt.

“It is basically the northern arm of the Yandal Belt, which also hosts the Jundee mine of Northern Star Resources.

“We currently have a small Inferred Mineral Resource at Horse Well of 75,000 ounces of gold sitting in the middle of the project.

“We see huge potential for a multi-million ounce gold discovery in this area.”

Viner said one reason the Horse Well project has remained a virtually un-explored entity for so long is that the northern half of the project area lies in a sand covered region that did not provide earlier explorers with the usual straight forward approach of conducting rock chip or soil sampling.

“The beneficial method we adopted in our early exploration efforts at Horse Well was to carry out some very good quality aeromagnetic surveys,” Viner explained.

“We also went back and looked at a little bit of historical aircore drilling.

“That was about three years ago, but we quickly determined that the northern area had potential to be a very exciting location, as it demonstrated early on to possess the classic structural framework of Yilgarn Archean gold systems.

“When we looked at the old aircore drilling it showed a huge amount of alteration around the edge of an intrusive granite body.

“We thought then that we could have something similar to the famous Granny Smith-style mineralisation mined in the Laverton district in the 1990’s.”

The attractive nature of smaller neighbouring projects to feed hungry gold processing plants has resulted in a recent frenzied-at-times buying spree by middle tier companies such as Norther Star Resources (ASX: NST) and Metals X (ASX: MLX).

Another company enjoying its position as a middle tier developer/producer is Doray Minerals (ASX: DRM), which has had recent success breathing new life into the Deflector gold project following its takeover of Mutiny Gold.

The results of Alloy’s early exploration ventures had not gone totally unnoticed, so a couple of years ago, when it advertised that it was looking for a Joint Venture partner to start giving the Horse Well project the attention it warranted, one of the first companies to knock on its door was Doray Minerals.

May 2014 the JV was struck, under which Doray can earn up to 60 per cent of the project by way of spending $2 million within two years.

Doray has shown much interest in developing the project, having already spent $1.75 million to date, with an additional $0.25 million to be spent by 22 May 2016 to earn the initial 60 per cent of the project.

“Once we decided to look for Joint Venture partners, Doray Minerals jumped at the opportunity to come on board,” Viner said.

“They have subsequently gone on to make some great gold discoveries at the Horse Well project over the past 18 months.”

The JV’s main focus at Horse Well is on the Dusk til Dawn prospect, located at the extreme northern end of the Archaean Yilgarn Craton, close to the onlap of the Proterozoic Earaheedy Basin.

Dusk til Dawn sits on the western edge of a granitoid body, in a similar setting to the Granny Smith gold deposit.

Doray declared Dusk til Dawn to hold potential for a new greenfields gold discovery in late 2014, after it hit a number of encouraging drill intersections up to 65 metres at 2.6 grams per tonne gold, including 13m at 8.17g/t gold.

A subsequent program of RC drilling this year intersected thick zones of gold mineralisation, confirming Dusk ‘til Dawn as a new greenfields gold discovery.

Assay results received from the 2015 drilling program included:

DDRC014
16m at 7.2g/t gold from 109 metres downhole (mdh), including 6m at 16.3g/t gold from 116mdh;

DDRC015
44m at 1.4g/t gold from 122mdh, including 3m at 6.2g/t gold from 150mdh;

DDRC011
31m at 1.2g/t gold from 153mdh;

DDRC012
24m at 1.6g/t gold from 190mdh, including 4m at 4g/t gold from 200mdh;

DDCR016
28m at 1.5g/t gold from 148mdh;

DDRC017
14m at 2g/t gold from 41mdh, including 4m at 4.4g/t gold from 46mdh; and

DDRC018
14m at 1.5g/t gold from 33mdh, and 9m at 2.1g/t gold from 98mdh, including 2m at 4.9g/t gold from 103mdh.

“We are participating in a significant new gold discovery in Western Australia,” Viner said.

“We have just reached the stage, over the past couple of years, where Doray has completed a two million dollar farm-in to the project, giving it 60 per cent of the project.

“This should be completed by Christmas this year.

“The exciting aspect of the JV agreement, is a further $2 million investment from Doray next year, which will accelerate our exploration.

“I’m very pleased to be able to say that Alloy will be contributing its 40 per cent to the exploration expenditure over the next 12 months.”

Buoyed by the success of this drilling the JV is now chasing down a number of additional earlier‐stage targets within the northern end of the broader Horse Well project area.

A program of aircore drilling is currently underway testing for a potential footwall zone at Dusk ‘til Dawn and additional ‘look‐alike’ conceptual targets.

A further target, the Django prospect (formerly the T‐06 target) that has returned anomalous gold results from two lines of aircore drilling, 1.6km apart carried out by Doray last year, is also receiving attention.

“This program is due to be completed in the early part of December, so we anticipate results either side of Christmas and it is very likely that we will get a lot of new anomalies and new mineralised trends,” Viner said.

“The drilling we have carried out to date has confirmed Horse Well as a major new gold discovery.

“The JVs approach has proven to be highly effective and it is evident from the results we have achieved this part of the project has extensive gold mineralisation.

“Further regional drilling is likely to enhance the overall prospectivity and potential of the area.”

Alloy Resources Limited (ASX: AYR)
…The Short Story

HEAD OFFICE
Suite 6, 7 The Esplanade
Mount Pleasant WA 6153

Ph: +61 (8) 9316 9100
Fax: +61 (8) 9315 5475

Email: info@alloyres.com.au
Website: www.alloyres.com.au

DIRECTORS and MANAGEMENT
Andrew Viner, Kevin Hart, Andre Marschke

MAJOR SHAREHOLDERS
Manafield Holdings 5.88%
Wilson Walter S + MA 4.40%
Western Discovery 4.30%

Cassini Resources confirms X17 zinc discovery

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THE DRILL SERGEANT: Cassini Resources (ASX: CZI) declared rock chip assay results from the company’s West Arunta project, also known as X17, in Western Australia have verified portable XRF zinc results.

Cassini recently claimed the discovery of a new zinc province at West Arunta, located near Lake McKay and 20 kilometres from the community of Kiwirrkurra, near the WA – Northern Territory border.

The announcement followed the identification of zinc-lead soil anomalies and associated gossan outcrops.

Cassini has followed up to report that rock chip assay results have verified the portable XRF zinc results announced in the company’s discovery announcement.

Gossanous samples returned concentrations of up 0.5 per cent zinc and 0.1 per cent lead.

The assays have also returned anomalous levels of pathfinder elements such as cadmium, barium, nickel, cobalt and thallium,” Cassini Resources declared in its ASX announcment.

“Zinc is readily leached in weathered near surface zones and therefore gossan outcrops usually contain low zinc concentrations compared to the primary mineralised zones below.

“The zinc concentrations from gossans at X17 are highly anomalous when compared to background concentrations in the project area.

“The rock chip results mimic those found in gossan outcrops of large zinc deposits in the Mt Isa District, in Queensland.”

The company is working up programs for submission for heritage and environmental approval.

Cassini intends carrying out a RC drill program at each of the three prospects already identified at the X17 project –  mineralised gossans Iapetus, Enceladus and Rhea – which it considers to be ‘drill ready’ targets to test for economic primary zinc-lead mineralisation.

These will be the first cabs off the rank for the commencement of the company’s 2016 field season.

While all this is going on the company will also run a geochemical soil and lag sampling program, infilling and extending the previous survey along the prospective Dione Horizon.

Cassini anticipates this closer spacing will identify more subtle expressions of mineralisation to be followed by additional drill testing.

A reconnaissance-style RAB or air core drill program will follow the geochemical sampling with the aim of exploring parts of the Dione Horizon that are under thicker sand cover and testing new geochemical anomalies.

Email: admin@cassiniresources.com.au

Website: www.cassiniresources.com.au

Red, White and Blue – or perhaps just Red will do.

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THE CONFERENCE CALLER: At the end of another resources conference season, the question to be answered is no longer ‘Are we there yet?’, rather, ‘Who do we believe can lead us out of the mire?’

Leading off at the recent Brisbane Mining 2015 Conference, Westpac Institutional Bank director of Economics Justin Smirk took the gathered crowd on a journey back in time.

“I have been though the booms, the rise, the bust – I remember the denials when the boom first started that it would be anything other than wonderful,” he said as he opened his presentation.

“And I also remember the heads in the sand when it peaked and everyone said it was going to go on forever.”

It has been seven years since the effluent hit the fan (2008 for the mathematically challenged) and when it did happen, Smirk reminded us, expert commentary decided it would take the world economic community a good seven to eight years after the Global Financial Crisis (GFC) to show signs of recovery.

Their thinking it was based on research around at the time that said such calamities usually take seven to eight years to recover.

These predictions weren’t from the chronicles of Nostradamus, but were supposedly built on statistics from previous global banking crises, which did actually occur it’s just that when the good times roll we somehow manage to block them from personal anecdotal histories.

Of course, the impatient types amongst us have been trying to hasten the recovery, declaring at Christmases 2009 through to now that next year will definitely be the year we bounce back.

There are green shoots everywhere, we’ve been told, which come February have failed to take root leaving us waiting and wondering when the light we could see at the end of the tunnel wasn’t just a torch beam being reflected back at us by some ghoulish Ghost Train-like presence to taunt us.

While not totally predicting the end to all our woes, Smirk did suggest there was some relief ahead.

“The US is growing again,” he said

“We’re seven years now – the US is recovering.

 “It has low levels of income and investment, it is a very fragile economy, but it is on a road to recovery nonetheless.

“Spending is occurring and investment is happening at a modest pace.

“Jobs are being created and the unemployment rate is falling.

“More importantly, the ratio of those working to total population is rising – that gives us a point of where the recovery is – it is a US-led global recovery.”

If Santa Claus had have been in the room there would have been a very long line of investors, mining company directors and financiers all willing to patiently sit on his knee to reveal the contents of their respective wish-lists, which would no doubt have been to, ‘please make Justin’s predictions closer to being right on the money than a touch off target’.

A global economic revival led by the United States may very well be on the cards, however it didn’t take long for the biggest kid in the emerging economy playground to take centre stage.

“The Chinese economy is relatively weak – if you call six per cent growth weak,” Smirk ventured

“A lot of countries around the world would love to have half of that growth.”

Smirk declared the Chinese economy was not about to collapse and disputed media reports that might suggest the opposite saying that quite often the fourth estate runs ahead of reality.

“Yes, the Chinese economy is slowing down,” he acknowledged.

“It is not responding the same way in which is used to and they have to find a new growth mechanism base domestically, but it is not about to disappear.

“It still has a base built on urbanisation, industrialisation, productivity growth and income growth that every developing economy goes through.”

Smirk wasn’t the only one of the Conference presenters to highlight the effect the Chinese could have on the future.

CRU consultant Dr Allan Trench looked at the possible ups and downs of a number of commodities, however it was his outlook on gold that caught our attention.

“Predicting the gold price is one of the hardest things to ever try to do, and is the quickest way to lose any credibility as an economist,” Trench admitted.

“I think I can speak as an economist when I say there are only three things that could possibly happen to the gold price: it can either go up, stay the same or go down.”

Trench outlined a couple of possible scenarios that could results in either good or bad news for the shiniest of base metals.

He said the consensus US-centric view is that as interest rates are lifted by the Federal Reserve it tends to be a bad result for gold.

However, there is also the Chinese-consumerism view, which he said hardly ever rates a mention in discussions regarding gold’s outlook.

“The Peoples’ Bank of China have been adding to its reserves at the rate of around 100 tonnes per annum,” he said.

“China is the number one gold producer in the world and in terms of consumption goes it is neck and neck with India – sometimes India wins, sometimes China wins.”

Trench said one possible scenario for the future gold price is that China could end up doing for the gold price what it did for the iron ore price in the past decade.

He suggested the gold price could find itself playing a highly-positive role should Chinese consumerism really develop a stronger interest, which has been happening to some degree.

“I do think the Chinese consumer scenario is very real,” he said.

“In any other commodity, other than gold, would you ever hear a market dialogue that doesn’t include a discussion of China?

“And yet in gold, all you hear about is US interest rates – nothing else – and China is the number one consumer of gold, the number one producer, and has the fastest growing consumer in the world.

“I think there is a potential Chinese consumption story for gold.”

What the Analysts Say

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WHAT THE ANALYSTS SAY: This week our team of experts run their eyes over Thundelarra limited and Doray Minerals.

Website: www.breakawayresearch.com

Thundelarra Limited (ASX: THX)

Ongoing work by Thundelarra continues to confirm the prospectivity of its key projects, with recent drilling returning positive results at several projects.

In addition to copper intersections in drilling at Red Bore and Allamber, the company has intersected what could be significant graphite at its Sophie Downs project near Hall’s Creek – this is currently being assayed.

The company has made a strategic move in its planned acquisition of Red Dragon Mines NL, which holds a number of prospective gold properties in Western Australia.

The projects have a number of walk up drill targets that will be tested, conditional upon shareholder approval of the acquisition.

Another potentially significant development is the possibility of Panoramic’s Savannah North nickel mineralisation extending into the Keller Creek JV tenement, in which Thundelarra has a 20 per cent free carried interest.

Thundelarra Limited (ASX: THX) is an active explorer with a diverse portfolio of advanced exploration properties, with the flagship being the Doolgunna project, located adjacent to Sandfire’s DeGrussa volcanic-hosted massive sulphide (VHMS) copper-gold operation, which had a pre-mining resource of 13.4 million tonnes at 4.7 per cent copper and 1.9 grams per tonne gold.

Work by the company at Doolgunna has outlined high-grade copper in structurally controlled pipes down to 94 metres depth (and still open), which are interpreted as being offshoots from a larger body at depth; the main exploration target.

The company is also actively exploring its Allamber project, with this area, located over the Pine Creek Orogen in the Northern Territory, being prospective for a range of skarn-hosted base and precious metals, as well as uranium, for which a resource of 1.4 million tonnes at 304ppm uranium has been defined, and which is still open.

Other prospective holdings include the uranium prospective Ngalia Basin project and a number of tenements in the East Kimberley region of Western Australia.

Website: www.gmpsecutirties.com

Doray Minerals (ASX: DRM)

Recent high-grade drilling results show potential to extend the known resource by up to 100 metres.

100m is a significant distance in a high-grade underground mine.

Importantly however, the drilling confirms mineralisation north of the dolerite Dyke, an area previously thought to be barren of mineralisation.

So potential for additional ore in this consequently relatively under explored area is greater than previously thought.

The results also support the determination of a northerly plunge to the Wilber mineralisation.

This should aid targeting additional exploration.

Doray is well set with a strong exploration budget and technical knowhow for additional positive exploration news flow this year.

DRM is maintaining its sustained drill program at Andy Well.

A third underground rig is being mobilised to site to facilitate concurrent resource-extension drilling at Wilbur, Judy and Suzie.

DRM is also conducting aircore drilling to the south of the Andy Well deposit with another program in the New Year to the north.

RC programs farther afield but within the Andy Well mining lease are due to commence in late-November and continue into the New Year.
 
Latest results come from underground drilling to the north of the Wilber Lode Ore Reserve boundary.

High-grade gold mineralisation intersected at Wilber North;
Results of 3.7m at 13.4g/t gold (estimated true width 1.2m) and 1.0m at 10.8g/t gold (estimated true width 0.2m) extend Wilber Lode 50-100m north of previous drilling;
Intersections extend the northern high-grade gold pod at Wilber Deeps;
Follow-up drilling underway.

Disclaimer: The above is intended as a guide only. The Roadhouse accepts no responsibility for investments made from this advice, successful or otherwise.

The views, opinions or recommendations of this article do not in any way reflect the views, opinions, recommendations, of The Resources Roadhouse.

The Roadhouse makes no representation or warranty with respect to the accuracy, completeness or currency of the content. The content is for educational purposes only and does not constitute financial advice. Independent advice should be obtained from an Australian financial services licensee before making investment decisions.

Cassini embraces that ‘Zincing’ feeling

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THE INSIDE STORY: Cassini Resources (ASX: CZI) has claimed discovery of a potential new zinc-lead province at the company’s West Arunta project (X17) in Western Australia.

The X17 Project is located near Lake McKay, 20 kilometres from the community of Kiwirrkurra near the Western Australia – Northern Territory border.

Cassini acquired 75 per cent of the project in 2013, increasing that to 100 per cent in July 2015.

The X17 discovery was based on analysis of soil and lag geochemical data and the subsequent identification of gossan outcrops during field reconnaissance the company carried out in late October 2015.

The discovery provides Cassini with a well-earned ‘multi-commodity’ merit badge as it is a respectable companion to the company’s West Musgrave project, where it has established a Mineral Resource estimate for the Nebo-Babel deposit of 203 million tonnes at 0.41 per cent nickel and 0.42 per cent copper ((0.3% nickel cut-off grade) containing 832,000 tonnes of nickel and 853,000 tonnes of copper, with a healthy portion of the in-pit Resource sitting in the Indicated category.

Cassini believes its new zinc-lead discovery has the right to be categorised as ‘significant’ based on the outcomes of work it has completed so far, including:

The X17 project was generated as part of a continental-scale targeting study by the company, focused on frontier terranes in Western Australia;

X17 is considered to be a highly-prospective, large-scale conceptual target within the Centralian Superbasin, an area considered to be greatly under explored;

It occurs at the intersection of several fundamental lithosphere-scale structures;

Confirmation of X17’s prospectivity was demonstrated by a broad-spaced soil sampling program identifying discrete zinc soil anomalism of up to 10 times background, with supporting anomalism in lead, copper and silver;

Coincident lag samples show highly anomalous zinc of up to 0.2 per cent;

Importantly, coincident cadmium anomalism present in the lag is recognised as a signature of sphalerite, the primary source of zinc mineralisation;

Recent field reconnaissance identified several outcropping gossans as the likely source of each soil and lag anomaly;

Lag and gossan anomalism was verified in the field with portable XRF results of up to 0.6 per cent zinc, 0.2 per cent lead, 0.4 per cent nickel and 0.05 per cent copper.

“The results from X17 have given us something else, along with the Nebo-Babel prospect, to be extremely excited about,” Cassini Resources managing director Richard Bevan told The Resources Roadhouse.

“We have been slowly progressing this project in the background for the past 12 months, making sure we gave it the benefit of our usual strategies and specifics, while we focussed on our West Musgrave project.

“But the turning point has been the identification of the gossans which we believe is direct evidence of primary zinc mineralisation beneath the weathered zone.

“These zinc and lead concentrations are highly anomalous for the weathered rock due to zinc mineralisation usually being leached away.

“We truly believe we have potentially found a new zinc-lead province, which we feel we will be able to progress through to discovery in a cost effective and timely manner without requiring additional funding.”

The backbone of the discovery is the identification of three new zinc – lead prospects at X17, which have been called Enceladus, Iapetus and Rhea.

All three anomalies are interpreted to lie on a single continuous stratigraphic horizon, referred to as the Dione Horizon.

The Dione Horizon came to Cassini’s attention as a possible distinctive stratigraphic horizon from re-processing of public aeromagnetic data.

It was identified within a lower section of the Bitter Springs Formation and is characterised at least partly by a subtle magnetic anomaly, which stood out in contrast to the rest of the Amadeus sediments in the area which are essentially non-magnetic.

Cassini interpreted this to suggest this magnetic anomaly may represent a concentration of pyrite positioned in an outer halo around the zinc mineralisation.

The Enceladus prospect has the highest zinc and cadmium in soil and lag results but it is under a healthy coverage of sand, presenting only minor gossanous sub-crop.

What is worth taking note of is that although Enceladus’ surface mineralisation is limited, the soil anomaly extends over an impressive 3.5 kilometres.

The Iapetus prospect lies immediately east of Enceladus and is considered by Cassini to possibly be part of the same system but dislocated by a cross-cutting fault.

This prospect has a soil anomaly striking over 1.6km, associated with a prominent gossanous outcrop that stretches over 700m strike.

The Rhea prospect presents as a strong coincident lead and copper anomaly, which measures in as the largest soil anomaly of the three at over 5km of strike.

Rhea also features a discontinuous gossan striking over 500m with highly elevated nickel (up to 0.4% in oxidised shale) as well as zinc and lead showing up in the pXRF data.

“The three highly-zinc anomalous lag samples, which subsequently became the prospects already mentioned, clearly represented a different population to the remainder of the data,” Bevan said

“More importantly, these three also emerged as the strongest cadmium anomalous samples in the data set, demonstrating a ranking of cadmium enrichment exactly the same as the rank order of zinc enrichment.

“The technical significance is that cadmium is typically concentrated in sphalerite, the primary ore mineral for zinc and therefore these three zinc-cadmium lag samples are considered to have the direct geochemical signature of sphalerite mineralisation.”

With the success it has already achieved at its West Musgrave project, Cassini has established itself as an exploration play with a wealth of considerable experience and knowledge within the company’s Board and management team.

This is why the company has already established a forward-looking program to evaluate several exploration fronts.

The Iapetus, Enceladus and Rhea targets have already been well defined by current sampling and mapping.

These targets are now drill ready and are set to be tested by a reconnaissance-style drill program designed to test for economic primary mineralisation beneath the gossans.

To clear the way for the drilling program, Cassini is busy preparing all necessary heritage and environmental approvals as soon as possible.

“Because the current geochemical sample spacing is too broad to identify more subtle exposures of mineralisation or any specific drill targets not associated with subcropping gossan, we will need to carry out an infill geochemical sampling program along the prospective target horizon,” Bevan explained.

“To ensure we have a smooth transition into that drill program, a works program for heritage approval is currently being prepared.”

Cassini is also casting a glance over a magnetic anomaly that has been identified north of Enceladus in the interpreted syncline position of the Dione horizon, which the company believes to be an ideal setting for sedimentary zinc mineralisation.

This conceptual target is known as Mimas and has been earmarked by Cassini as an exploration priority.

Like the Enceladus prospect, Mimas too is extensively sand covered with no bedrock exposure therefore it requires high-resolution geophysics to assist reconnaissance drill targeting.

“It is a similar geological setting to the Teena deposit, which was recently discovered by Teck in the Northern Territory,” Bevan said.

“Our thoughts are that the magnetic anomaly could represent pyritic horizons that typically surround sedimentary zinc mineralisation.”

Cassini Resources Limited (CZI)
…The Short Story

HEAD OFFICE
10 Richardson Street
West Perth WA 6005

Phone: +61 8 6164 8900
Fax: +61 8 6164 8999

Email: admin@cassiniresources.com.au
Web: www.cassiniresources.com.au

DIRECTORS and MANAGEMENT
Mike Young, Richard Bevan, Dr Jon Hronsky, Phil Warren, Greg Miles

MAJOR SHAREHOLDERS
MACA Limited 13.51%
GR Engineering Services Limited 6.76%

Neometals fully-funded for Mt Marion construction

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THE INSIDE STORY: Lithium hydroxide is fast becoming the battery maker’s commodity of choice and emerging producer Neometals (ASX: NMT) is keeping pace with development of the company’s Mt Marion lithium project in Western Australia.

For those who aren’t up to speed – lithium batteries are used in a host of modern-day gadgetry, including computers, cars and, dominate the mobile phone market.

The reason is simple. Lithium batteries are light, compact, quickly rechargeable, and long-lasting.

Lithium battery production is expected to almost triple over the next five to seven years.

The most common lithium compound used in lithium batteries is lithium carbonate, however this is quickly being replaced by lithium hydroxide in heavy duty applications like renewable energy storage and electric cars.

“Are lithium-ion batteries going to be replaced?” Neometals managing director Chris Reed rhetorically asked The Resources Roadhouse.

“Probably, but most likely by more lithium intensive batteries like solid-state lithium-sulfate and lithium metal batteries in 10 to 15 years’ time.”

Cutting costs have become front and centre to the collective psyche of the mining industry.

As commodity prices fell, companies took greater care spending their cash, leading to some superb research and development work, resulting in considerable improvement in the area of refinement.

One such advancement is the ELi Process, developed by Reed Advanced Materials Minerals (RAM), a subsidiary of Neometals.

RAM is owned 70:30 by Neometals and its partner, leading mining services provider Mineral Resources (ASX: MIN).

“The traditional process to produce lithium hydroxide is to causticise lithium carbonate, the ELi Process produces lithium hydroxide directly from lithium oxide or hard-rock lithum concentrates, removing a process step,” Reed explained.

Neometals proved up the ELi Process using a semi-pilot scale demonstration plant conducted by specialist chlor-alkali laboratory Process Technology Optimisation in Buffalo, USA.

The plant achieved 200 hours of operation at 80 per cent efficiency to demonstrate the technology’s reproducibility of purification and electrolysis of lithium chloride solutions, and the suitability and durability of the ion exchange membrane for commercial operation.

Basically, the ELi Process turns the lithium oxide into a lithium chloride solution which if fed into a traditional Chlor-alkali cell, becomes lithium hydroxide (like sodium chloride becomes sodium hydroxide in Chlor-alkali process).

The chlorine and hydrogen gas are combined to produce hydrochloric acid, which is used to produce the lithium chloride.

The process retains the flexiblity to produce battery-grade lithium carbonate by injecting carbon dioxide gas into the liquid hydroxide solution forming insoluble lithium carbonate.

A Pre-feasibily Study projected operating costs for the battery-grade lithium hydroxide in US Dollar terms at $3,900 per tonne, which stacks up well against recent median prices for battery-grade lithium of US$8,250 per tonne.

Neometals, through its subsidiary RAM, holds a granted Australian patent for the lithium hydroxide process, with other patents filed or under examination in the United States, Argentina, Canada, Chile, China, Japan, Malaysia and South Korea.

Australia already hosts the world’s largest supplier of lithium, the Greenbushes lithium project, as well as a number of hard rock lithium deposits in various stages of development that are ideal feedstock for the patented ELi Process, which is agnostic as to the source of feedstock.

Neometals believes the ELi Process has the potential to consolidate hard-rock lithium’s position as a major feedstock for lithium production to the world.

It also believes its Mt Marion lithium project, located approximately 40km south west of Kalgoorlie, Western Australia a “globally significant lithium deposit” that will become a major contributor to the global lithium market.

A recent updated Resource estimate compiled by Snowden for the project came back with Indicated and Inferred Mineral Resources of 23.24 million tonnes at 1.39 per cent lithium oxide (Li2O) and 1.43 per cent iron oxide (Fe2O3), at a cut-off grade of 0 per cent Li2O.

“The new estimate confirms the Mt Marion lithium project to be right up there amongst the world’s largest and highest-grade deposits,” Reed said.

“We expect in time to increase the mining inventory and potential processing rates for the project with the completion of a new drilling program and mining study running in parallel with the construction phase.”

Under a deal struck with Mineral Resources in October 2009, Neometals retained 100 per cent ownership of the project while MIN would fund all development costs and build, own and operate the processing facilities in order to earn a 40 per cent share of net profit.

This was revisited in 2011 so that instead of MIN having a right to 40 per cent profit from sales, it now has a direct 30 per cent ownership of the project.

“The build, own and operate deal with Mineral Resources is important as it totally removes any financial risk in regards to the construction of the plant facilities for Neometals,” Reed said.

“There is no construction funding or working capital required up to commissioning from Neometals because it is all being funded by Mineral Resources under a Build-Own-Operate model.”

In September, Neometals and MIN struck an offtake and equity investment agreement with major Chinese lithium player, Jiangxi Gangfeng Lithium Co.

Under this deal Ganfeng will come in with an initial 25 per cent shareholding in RIM, bringing Neometals share down to 45 per cent and MIN retaining 30 per cent.

The deal also swelled NeoMetals coffers with a payment from Ganfeng to the tune of US$19.75 million.

This enabled NeoMetals to announce the formal commencement of construction of the Mt Marion treatment plant, which is due to come on stream in mid-2016 and will produce more than 200,000 tonnes per annum of chemical grade spodumene concentrate. 

The nuances of the deal seem to have eluded market experts, however what it does is effectively underwrite a life of mine offtake to Ganfeng.

The deal provides Ganfeng with a long-term offtake for 100 per cent of the spodumene produced from Mt Marion at benchmarked market prices subject to an agreed price floor.

“The upside of this deal is not well understood,” Reed said.

“The prospective cashflow Neometals is set to earn from its lithium business from 2016-17 are beyond significant.”

Neometals and MIN will both be able to claim their equity share of total mine production after the third year of production, which is dedicated to Ganfeng.

Should Neometals elect to do so, it would have access to feedstock for a value added lithium hydroxide processing facility utilising its patented ELi Process technology.

This is possible as the deal involving Ganfeng only encompasses the Mt Marion mine and concentration plant.

The 70:30 agreement between Neometals and MIN for on-processing of lithium concentrate using the ELi Process technology remains unchanged, which means the two companies will be able to process their share of the future Mt Marion production using whatever facility they may eventually develop together.

“This has been an overnight success – five years in the making,” Reed said.

“The ELi Process technology we can use to downstream some Mt Marion ore – we can use ore from other projects, it is capable of processing it all.

“The window for increasing hard-rock lithium feedstocks is open and we are well and truly ready to jump through to become a significant world market producer.”

NeoMetals Limited (ASX: NMT)
…The Short Story

HEAD OFFICE
Level 1, 627 Murray Street 
West Perth WA 6005

Phone: +61 8 9322 1182
Fax: +61 8 9321 0556

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

DIRECTORS and MANAGEMENT
David Reed, Steven Cole, Christopher Reed 

MAJOR SHAREHOLDERS
Melaid Holding Inc 7.86%
David Reed 5.35%