May You Not Live In Interesting Times

/in /by

ROADHOUSE REGULAR: Back to the future or forward to the past – what does the future bring, and how to approach it?

As you may well know, there is an old curse, purported to be Chinese, but with no definite Chinese source, ‘May you live in interesting times’.

And what interesting times the past year or so has brought to the junior resources industry, on top of the slide that started in early 2011.

However, have we seen the worst of the market for junior resources?

Anecdotal evidence and conversations I have had with people shows at least a glimmer of optimism.

Any interest though is largely in the more advanced or quality projects – there is still more winnowing of the chaff to come, which, all things said and done may not be too much of a bad thing.

Overall, we may expect some more ‘bouncing along the bottom’ for a while, which has been happening now since early 2013, when the worst of the decline in the small resources index finished.

Following this we bounced around between 2000 and 2500 until mid-last year, followed by an extremely interesting last six months of 2014, with the index plummeting down to its nadir of 1370 in mid-December.

Over the following six months it recovered to 1860, however has retreated to 1670, following falls in US denominated base metals prices.

 

So, why should there be any cause for optimism? There are a number of reasons.

With the falls in the Australian dollar, Australian denominated metal prices are generally quite healthy, with, for instance gold near all-time AUD-denominated highs.

When this is coupled with expected falls in operating and capital costs, we can see increased margins on Australian projects, hence making some companies more attractive investment propositions.

Also, there has been significant recent M&A activity, including the announced (but not yet completed) $1.8 billion Sirius-Independence Group merger, and the US$550 million sale of Barrick’s Lake Cowal operation to Evolution Mining.

This sort of activity generally marks the bottom of the cycle.

There are people who would have made a fair bit out of some deals, and they will therefore be looking for new opportunities to put their cash into.

Brokers are actually seeing junior resources, indicating a renewal of interest in the sector – there was a period there where it was almost impossible for companies to get a meeting.

However, don’t expect a sudden boom as per the mid-2000’s China driven mining boom.

Any recovery will be slow and steady, and for the time being at least, investment will be driven by quality.

Unfortunately it is still hard to get money for grassroots exploration (with some exceptions, such as projects in the Fraser Range) – it is the more advanced, and hence partially de-risked projects that are getting the attention.

Also, conventional capital markets for development are still tight, so any project that does require a big lick of capital to build a mine down the track may still find it hard to get traction.

Companies now are looking at different and innovative funding strategies, which I have seen in a number of those that I have covered recently, particularly if the proposed operation has a reasonably modest capital requirement.

The words above take me back to some of last year’s columns explaining what I actually do, and what I look for in a company. These haven’t changed.

The two key points I look for in a company are:
A. Good board and management; and
B. A technically and potentially financially robust project.

Point (A) is vital – bad management can destroy the best project.

Another key here is having personnel that have experience relevant to the stage the project is at.

For example, I like to see, where a company moves say from exploration to development, personnel changes that bring in people with the necessary development experience.

The second part covers a broad range of aspects, including project stage and what commodity is being looked for. I am often asked what commodity or commodities do I favour.

My general answer is any, as long as any project I am looking at stacks up – I am agnostic when it comes to commodities.

However we do see short term gains in commodity ‘bubbles’, where euphoria kicks in, and money can be made in ‘mining the market’.

For quality investments good due diligence does need to be done on the company and projects.

Factors to consider depend upon the stage of the project, commodity being looked for, and ultimately the investors’ risk profile.

A different set of criteria will be applied when looking at a grassroots project than one with a published resource for example, and for bulk commodity projects (basically infrastructure plays) and gold projects.

An investor with a high appetite to risk may look at early stage exploration, whereas this would not be suitable for an investor with a lower appetite for risk.

Due diligence on an advanced project may include DCF modelling to give an idea of the potential returns a project may make (and whether in fact it has a good chance of proceeding).

This modelling may only be to a scoping study level of accuracy (+-40%), but will give a reasonable idea of how a project stacks up.

This is also where the financial robustness of a project can be judged – I like to see the ability for a project to absorb at least 20 per cent adverse movements in key parameters, including metal prices, exchange rates, grades/recoveries and costs.

The investment risk factors play out into the potential rewards – below is a favourite graph of mine, showing value (share price) vs project stage and risk profile for a junior.

This does show that the best returns are made on the initial discovery, at the higher risk end of the company’s life.

Source: Casey Research Website – Extracted June 29, 2015

The final point here is to take a portfolio approach to investment for risk mitigation.

It is better to have $1,000 in each of ten projects than $10,000 in one.

Also, it is worthwhile to spread the risk over at least a few commodities and project stages.

In summary, a number of factors are pointing towards a gradual recovery in the sector, after a fairly dismal four years.

Good due diligence however does still need to be carried out on any investment decision, with quality being the key. Last, but not least, take a portfolio approach to investment.

Mark Gordon – Senior Resource Analyst Breakaway Research

This article originally appeared in

Sheffield Resources prepares to launch Thunderbird DFS

/in , , /by

THE INSIDE STORY: A recent Pre-Feasibility Study on its Thunderbird mineral sands project, pretty much told Sheffield Resources (ASX: SFX) what it has long suspected.

The PFS confirmed Thunderbird to be a world class project with an anticipated mine-life of 32 years producing high-quality zircon and ilmenite products, boasting robust mine-to-port-to-market logistics.

It was based on a Mining Inventory from the northern central portion of the Thunderbird Mineral Resource of 580 million tonnes at 11.7% heavy minerals (HM), with in-situ grades of 0.94 per cent zircon, 0.29 per cent HiTi leucoxene, 0.29 per cent leucoxene and 3.32 per cent ilmenite from Measured and Indicated Resources.

Kicking off the 32 year run is anticipated for 2018 with forecast life of mine (LOM) revenue of $9.5 billion and LOM operating cash flow of $4.3 billion ($163 million per annum for first 10 years of production).

Average LOM annual EBITDA has come in at $120 million ($148 million per annum for first 10 years of production).

The study predicted pre-production capital expenditure of $367 million, plus $26 million of contingency, however some wriggle room has been identified to these costs.

The capital payback period is expected to be only 3.6 years, which when taken into consideration of a 32 life-of-mine run, is pretty good in anybody’s money.

Average annual production is projected to be 114,000 tonnes zircon, 439,000 tonnes ilmenite, and 30,000 tonnes of HiTi84 leucoxene.

“The main thing to come out of the Pre-Feasibility Study is that we have been able to firm-up the project’s parameters,” Sheffield Resources managing director Bruce McQuitty told The Resources Roadhouse.

“That includes our logistics chain for the products, so we now have a robust mine-to-market solution by identifying aspects people tend to overlook.”

A PFS tells a company more about a project than just digging up its value and selling it.

It explains how that is to be achieved by highlighting finer details such as how many trucks are required to shift products, how many kilometres of roads will need to be upgraded to take them and, most importantly identifying a port from which to export.

 

Sheffield is currently in negotiation with the Shire of Derby and the Department of Transport for access to the bulk-handling facility at the Derby Wharf, which would provide the ability, as a miner of bulk products, to get its products to market, which in the end is a very important part of what mining companies do.

Timing is also an essential element to any project and to be in the development and construction phase at present, given the lower scales of associated costs, is advantageous for the company.

“It certainly is, although having said that we didn’t factor in current prices to our PFS,”McQuitty said.

“We had to use estimates and quotes provided to us, so as we move into the Definitive Feasibility Study we expect we will see some more competitive pricings to work into our cost estimates.”

A project as large as Thunderbird is anticipated to be produces big numbers because it is going to be a big project with a very long mine life and anticipate big paybacks.

The company received some negative feedback in regards to costs in the PFS, particularly those for development capital compared to its Scoping Study, however, McQuitty remains confident when held up against mineral sands projects of similar scale, it does fall into line, especially when you take into consideration those projects were built during a boom time.

“We’re looking at building something of similar size in a time when materials and labour costs have become cheaper and waiting times have shortened,” McQuitty said pointedly.

“We will pick our timing for the development of the project in relation to the market forecasts.

“Currently we are receiving advice that suggests widening supply and demand gaps for both our principal products of ilmenite and zircon around 2018-2019.

“So at this stage our development schedule and targeted first year of production sit in very well with the timing of those predicted supply gaps.”

 

As impressive as the PFS results were they still require some fine tuning before Sheffield moves into its Definitive Study.

The update is to focus on three areas in particular, the first being a Resource update (due to come out at time of writing) that will form the basis for updated mining studies and mine scheduling.

The second is working on an option to upgrade the produced ilmenite to gain a better price on the market.

Sheffield believes it can produce a higher-grade ilmenite fetching around US$199 per tonne versus the US$155 per tonne that ran in the study for the non-upgraded, raw, ilmenite.

Thirdly, the company believes there is scope to greatly improve both operating and capital costs for the project.

“We are working on those three aspects and we expect that PFS update to be ready by the second half on this year,” McQuitty explained.

“We are confident Thunderbird is a project that deserves mining and we have been progressing the permitting in regards to Native Title and Off-take Agreements in conjunction with this Pre-Feasibility work.

“We are also still exploring it to some degree.

“We have completed three Resource upgrades on the project, including the maiden Resource, so we are looking at the fourth Resource for Thunderbird and we are still to close it off.

“What’s important now is for us to firm-up the high-grade zone in the up-dip region, because that is where we will be mining in the initial years during the payback period.”

It is important to recognise the important role zircon plays in the Thunderbird project.

As it stands currently, 64 per cent of the project revenues come from zircon, which sets it apart from other mineral sands projects whose principal revenue driver is ilmenite or ilmenite plus rutile with zircon as a by-product.

Thunderbird is a zircon project first with ilmenite-HiTi leucoxene playing a supporting by-product role.

“There aren’t too many other large zircon projects out there in the development pipeline that look as though they are going to come on stream in the near future,” McQuitty said.

“There doesn’t appear to be too many new discoveries being made that we can see, or are aware of, so Thunderbird is really the next one to be incubated and delivered into the production pipeline in two to three years’ time.

Although Sheffield’s focus is squarely on Thunderbird it caught the market’s attention recently with the identification of 12 substantial new nickel and gold targets on its Fraser Range project.

The tenements are within the northern foreland region of the Tropicana Belt adjacent to the Fraser Complex approximately 240 kilometres south of the Tropicana gold mine and 30km northwest of Sirius Resources’ (ASX:SIR) Nova/Bollinger deposit.

Sheffield has identified five new nickel targets, only one of has been drilled, as gold was the principal focus of previous explorers as well as seven gold targets, which were defined by previous explorers targeting Tropicana style gold mineralisation.

“The early stage exploration over these tenements provides some well-defined nickel and gold targets demanding follow up work,” McQuitty said.

“We have some very attractive targets there in the Fraser Range and, depending on availability of funds, we would very much like to continue to explore those”

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

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

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

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

DIRECTORS
Will Burbury, Bruce McQuitty, David Archer

MAJOR SHAREHOLDERS
Will Burbury            5.9%
Bruce McQuitty        5.9%
David Archer        5.7%
Top 20             43%

Blackham poised for gold in 2016

/in /by

THE INSIDE STORY: Let’s start with a quick quiz. How many current developing gold producers are fully-funded through to production with their own processing plant?

In May, Blackham Resources (ASX: BLK) announced a $38.5 million funding package with Orion Mine Finance, a US$2 billion resources fund out of New York.

The funding will support the development of Blackham’s 100 per cent-owned Matilda gold project through to production, which is expected to commence in Quarter 2, 2016.

The funding package consists of a $2.5 million equity private placement, a $6 million non-amortising loan facility, and a $30 million project facility loan.

Apart from the funding the parties also struck a gold offtake agreement, under which Blackham will sell 55 per cent of the gold produced from Matilda to Orion up to the point it has delivered 275,000 ounces of gold.

“The funding package with Orion is a significant deal for us as it means we can continue our regional exploration work to extend the Matilda mine life while we complete our Definitive Feasibility Study,” Blackham Resources managing director Bryan Dixon told The Resources Roadhouse.

“Basically the Orion financing provides something a lot of companies would give an arm for – a fully-funded solution to bring the Matilda gold project into production.”

The Matilda gold project is located near the town of Wiluna in the Northern Yilgarn region of Western Australia.

The project has a Resource of 4.4 million tonnes at 3.3 grams per tonne gold for 4.7 million ounces of gold.

All the resources are situated within a 20 kilometre radius of the company’s 1.3 million tonnes per annum Wiluna processing facility, which it plans to recommission as it pushes towards its Q2, 2016 production target.

The Wiluna plant consists of two milling circuits, one configured for open pit – ore and one for harder – underground ore, which when combined are capable of producing around 100,000 ounces of gold per annum.

“Historically this project has produced over four million ounces of gold – we think it is good for another million ounces giving it another 10 years of mine life,” Dixon said.

“Of the combined 44 million tonnes at 3.3 grams per tonne gold for 4.7 million ounces of gold Resource, 48 per cent sits in the Indicated Resource category.

“We have confidence in the geology around the Resources and believe we have the right mix of open pit and high-grade underground Resources feeding the Wiluna plant.”

 

Blackham’s strategy since its acquisition of the Wiluna plant in 2014 has been to build a substantial Resource by combining both underground and open pit sources to overcome hurdles previous owners had to contend with.

“Where the Wiluna plant struggled over recent history is being able to feed it,” Dixon explained.

“The underground mine can only deliver 0.5 million tonnes per annum and the mill is capable of generating 1.3 million tonnes per annum with the soft dirt out of the Matilda mine.

“So you need the open pits to make this a sustainable mining story.”

Blackham is concentrating its efforts on free-milling gold targets and resources within open pit or shallow underground depths, close to the Wiluna plant and infrastructure that are capable of being brought on stream in the early years of the current mine plan.

To that end, Blackham has identified a number of targets within the Matilda projects 20km radius, which it has pared down to three ore bodies to commence operations – the Matilda mine and the Galaxy and Golden Age deposits.

The company recently upgraded the Resource at the Matilda mine to 12.5 million tonnes at 1.8g/t for 713,000 ounces of gold with a Measured and Indicated Resource totalling 7.26 million tonnes at 1.8g/t for 424,000 ounces of gold.

The Galaxy and Gold Age deposits are high-grade quartz reefs with ore that will complement that from the Matilda mine in terms of feedstock for the Wiluna plant.

Galaxy is located just 13km from the Wiluna plant and currently boasts a Resource of 550,000 tonnes at 2.9g/t gold for 51,000 ounces.

Its mineral inventory includes an 80 per cent Indicated Resource level at a 3.3g/t diluted head grade and has delivered gravity and leach recoveries of 96 per cent.

 

Blackham recently received Department of Mines and Petroleum approval to re-enter the Wiluna underground mine, which is the access to the Golden Age deposit.

Golden Age is another high-grade free milling reef with historic production of 160,000 ounces of gold at nine grams per tonne.

It has a remaining resource of 0.6 million tonnes at 6.7g/t for 125,000 ounces of gold.

Blackham is carrying out a sizeable program of drilling in and around the Matilda mine area, which includes Galaxy and Gold Age.

“The Matilda mine is the base load, which provides us with a sustainable mine plan we expect will turn Wiluna into a very profitable operation,” Dixon said.

“We’ve got 80 per cent of our feed coming out the open pits. We’ve been working on those open pits over the past three years, which has provided us with a good lead-up time to really understand what we are dealing with.

“Having a diluted head grade of 1.9 grams per tonne open-pittable ore feeding the mill will be the base-line solution and then we can look at introducing ore from the high-grade quartz reefs between Galaxy and Golden Age to really spike that grade and get the average mill-feed grade up.”

What Blackham has been able to do at Wiluna is silence any doubters who may not have been convinced there is enough free-milling ore available at Wiluna to sustain the operation.

Having determined Resources of 22 million tonnes at 1.9 grams per tonne for 1.4 million ounces, the company is keen to establish 500,000 to 600,000 ounces into the mine plan, as it works to complete its DFS by September.

The great advantage of the Wiluna plant acquisition is the considerable affect it has on keeping the project’s capex outlay extremely low.

“We have $30 million in a project facility that will come in once the feasibility study has been completed and that will fund us through to production, which we anticipate to be around June 2016,” Dixon said.

“We will spend $32 million over the next 12 months – the current mine plan is estimated to give us back around $150 million – at today’s gold price.

“So we are risking $32 million in order to make $150 million over the first four years of operation.

“All in sustaining costs come in at around $1,100 per ounce, which means we could pay off the capex within nine months.”

Blackham is busy working through the DFS in order to convert its current Resources to a Reserve, which it anticipates getting up to 600,000 ounces by the time the feasibility study is completed.

“There are five million tonnes at 2.8 grams per tonne gold for 450,000 ounces – four million tonnes of that is coming out of the open pits, average 1.9 grams per tonne,” Dixon said.

“Previous operators did not have a lot of open-pittable ore to chase, which meant they were not able to establish mine lives of any significant length.

“That’s the comparative advantage of what we are doing at Wiluna.”

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

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

Ph: +61 8 9322 6418+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

MAJOR SHAREHOLDERS
Citicorp Nominees     13.2%
Orion Mine Finance     12.5%
Polo Resources         10.4%

Gold’s investor relevance remains as strong as ever Part 1

/in /by

GAVIN WENDT: Gold has performed an enormously valuable role as a store of value for thousands of years, throughout most of the world’s civilisations.

Unlike currencies, which can wax and wane dramatically in value – and collapse altogether – gold’s value remains intrinsic and remarkably consistent over time.

Hence, it has provided an enduring role as an insurance policy in investors’ portfolios.

Gold has however had its relevance questioned over the past half-century, commencing with US President Richard Nixon’s move in 1971 away from the previous Bretton Woods system of having the US currency backed by gold.

Nixon implemented a regime based on a freely-floating fiat currency that remains in place today.

As financial systems have evolved over recent decades, gold has increasingly been perceived as somewhat of an ancient relic – not only by investors but also by governments.

If we cast our minds back to 1997 some of us will recall the actions of the Australian government via the RBA, which sold two-thirds of Australia’s gold reserves at prices around $300/oz or lower – in the midst of the Asian economic crisis.

The official version of events went that since gold was no longer important to the international monetary system, the central bank no longer needed to hold it as an asset against its liabilities.

What a mistake that was.

I love the chart above because it demonstrates that despite perceptions of gold being an arcane relic, it has performed exceptionally well over the last 15-year period, particularly against the high-flying Dow Jones and NASDAQ Indices.

Even today gold continues to defy the skeptics, demonstrating robust price support as we’ve previously predicted around the $1,200/oz mark.

There a couple of really interesting observations worth making with respect to the gold sector.

The first aspect that we’ll address relates to an analyst report from Canadian brokerage GMP that points to declining profit margins among the world’s heavyweight and mid-tier gold miners.

In its latest mid-year report, GMP outlines the fact that despite some seemingly effective cost-cutting by the world’s major gold producers, profit margins have nevertheless continued to decline.

Their analysis is based on All-In-Sustaining Costs (AISC) and that these costs are still too high.

There is a belief that gold miners have entered into cost reductions that could potentially be regarded more as ‘window dressing’ to keep individual and institutional holders happy, rather than meaningful sustainable initiatives.

These include cutting back and deferring capital program (such as new mine developments and expansions); selling off less economic or loss-making mines to smaller companies that might be more flexible in their approach; mining to higher grades (and thus debilitating longer-term resource and reserve levels); and cutting back on exploration expenditures (which like cutting capital programs can impact on the longer term future for the companies concerned).

Many of these are ‘soft’ options that are not so easy to maintain over the longer-term – hence gold producers are hoping for an improvement in gold prices that will allow for these measures to be reversed over time.

GMP has subtitled its analysis ‘Cost optimizations can only go so far…’ and notes that although costs did indeed come down during 2013 and remain below 2013 levels in their forecasts for the current year, they seem to have levelled out.

For senior producers the AISC on average have declined 8% from $1,035/oz in 2013 to the 2015 fore-cast of $958/oz, while mid-tier producers are seeing AISC down from $963/oz to $900 /oz – a fall of 7%.

Meanwhile the gold price has fallen 16% from 2013 to GMP’s forecast $1225/oz for 2015.

The big question therefore is how much more the miners can do to further cut costs, if at all – and whether these new cost structures are sufficient to operate in the current environment.

GMP’s analysis also shows estimates of AISC moving marginally higher for 2015 compared to 2014 – which suggests that although margins have been falling, costs are beginning to rise again.

Another interesting point with respect to GMP’s analysis is that higher-cost producers appear to have been less successful in cutting costs than lower-cost miners, with higher-cost miners seeing coast reductions of around 4% from 2013 to 2015, whilst the lower-cost sector has managed cost reductions of 10% over the same period.

Some respite has been accorded to non-US producers by US dollar strength against most other currencies (especially the A$) and significant falls in crude oil prices.

However for much of the industry margins remain under pressure, which again casts a shadow over the industry’s supply-side.

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

 

This article originally appeared in  

Gold’s investor relevance remains as strong as ever Part 2

/in /by

GAVIN WENDT: The second important gold discussion point relates to gold withdrawal data from the Shanghai Gold Exchange (SGE).

The latest figures for the week ending June 14 showed withdrawals of just over 46 tonnes – which represents a particularly strong figure for this time of year.

The primary deduction therefore is that Chinese gold demand, despite headlines to the contrary, appears to be alive and well.

Data also shows that half-year Chinese gold demand (as represented by SGE withdrawals) is comfortably headed for a new record at well over 1,100 tonnes.

SGE gold withdrawals have thus already reached 1,061 tonnes, which is well ahead of the half-year figures for 2013 (which was the previous record year).

During 2013 full-year SGE withdrawals totalled around 2,200 tonnes, whilst in 2014 they reached a little over 2,100 tonnes.

China continues to be the main driver of global gold demand, accounting for around two-thirds of global newly-mined gold production, which combined with India’s resurgent gold demand this year, will see the two gold-consumption giants ensuring the continuation of the flow of physical gold from west to east.

At the same time we’ve seen many international gold heavyweights looking to exit large, non-core domestic gold projects as they retreat to their North American or Southern African bases to lick their wounds.

This has presented once-in-a-lifetime corporate acquisition opportunity for cashed-up domestic gold companies, keen to expand their production profiles.

Companies like Northern Star (ASX: NST), Evolution Mining (ASX: EVN) and Metals X (ASX: MLX) are amongst the key gold sector players involved in strategic takeover activity over recent months, along with hugely successful advanced exploration play Gold Road Resources (ASX: GOR).

All of these companies have been top sharemarket performers, generating returns of between 40% and 75% over the past 12 months.

Summary

The gold sector continues to see strong Asian gold demand, with an ongoing transfer of gold from West to East.

China is keen to see its yuan as a de factor world currency, which means a gold-backed currency.

At the same time China is also keen to diversify its foreign reserves away from the current US$ focus.

In the US, a rise in interest rates won’t (despite popular rhetoric) be negative for gold.

Simultaneously, we will see supply-side headwinds in terms of declining reserves for the world’s top producers, which further underwrites my confidence in gold’s near and longer-term prospects.

I maintain my $1,200 gold support level for 2015/16, with the potential for prices to edge higher towards $1,300 over the next couple of years.

With the A$ expected to remain subdued compared to the US$, A$ gold prices will remain robust and operating costs will remain in check, providing robust operating margins for domestic gold producers – reinforcing the potential for above-average returns for investors.

 

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

 

This article originally appeared in  

Australian Uranium Conference 2015

/in /by

THE CONFERENCE CALLER: With just one week to go, the countdown is on until the 2015 Australian Uranium Conference officially gets underway at the Hyatt Regency, Perth.

The conference will kick off next Wednesday with the Western Australia Minister for Mines & Petroleum Bill Marmion delivering the opening address.

A solid program on Day one will feature analyst updates on the uranium market and its participants, as well as presentations from high profile uranium company CEOs including Vimy Resources managing director, Mike Young and keynote speaker Adam Christopher from Tradetech.

Delegates are encouraged to return on Day two for keynote speaker Daniel Zavattiero from the Minerals Council of Australia as he discusses China’s plans to quadruple its nuclear energy output by 2020 as a key part of its carbon emission reduction plans.

If China does reach its 2020 nuclear energy goal, it would require approximately 8,000 tonnes of uranium a year – with Australia being the obvious ‘natural supplier’ to China.

Also on Day two Karen Andrews, Parliamentary Secretary to the Minister for Industry and Science will deliver the Federal Government’s Address.

Click here for more information on the Uranium Conference and to download the program.

What the Analysts Say

/in /by

WHAT THE ANALYSTS SAY: This week our team of experts run the ruler over Adriden Limited (ASX: ADV) and Diatreme Resources (ASX: DRX).

Website: www.breakawayresearch.com

Company: Ardiden Limited (ASX: ADV)

Metallurgical beneficiation testwork completed on samples from the recent drilling campaign at the 100 per cent-owned Manitouwadge graphite project:

Up to 80% of graphite classified as premium jumbo and large flake;

Total Graphitic Carbon (TGC) grades of up to 95.6% for jumbo flake and 93.7% for large flake from simple, low cost gravity and flotation concentration;

Subsequent caustic bake purification testwork on jumbo flake has returned grades of greater than 99.95% TGC, comparable to high purity, high value synthetic graphite;

Bulk sample being prepared to provide representative samples to prospective customers and for further testwork samples; and

Potentially ideally placed to take advantage of the anticipated increasing demand (and prices) for the premium larger flake and higher purity products.

Ardiden has completed an initial 10 hole, 833 metre diamond drilling and metallurgical testwork program on its Manitouwadge graphite project, located in Ontario, Canada.

The project covers 17 staked claims for 3,400 hectares located 30 kilmetres NE of the town of Manitouwadge, and was acquired earlier this year for a total consideration of C$159,000 and a 2% gross production royalty.

The project is readily accessible along logging roads and is within 50km of both the Trans‐Canada Highway and Railway in a historic mining district.

A number of other graphite projects are located in the region, including Zenyatta Venture’s Albany deposit, approx. 100km from the Manitouwadge project.

Previous work has included airborne and ground electromagnetic (EM) surveying by Noranda, which identified six conductors up to 1.6km in strike length during exploration for massive sulphide base metal mineralisation.

Ardiden and the vendor carried out trenching over some zones and preliminary metallurgical testwork on the trench samples as part of the due diligence.

Recent drilling intersected downhole intervals of up to 9.7m (approx. 5m true width), containing up to 4.06% TGC, and averaging around 2% TGC in the limited strike length tested.

These results confirm the presence of mineralisation at depth, and although these grades are relatively low compared to most companies in our universe of ASX and TSX listed graphite explorers and developers, they are comparable with other Canadian projects, including Zenyatta Ventures’ Albany (45.2 million tonnes at 3.14% TGC, $87m capitalisation) and Northern Graphite’s Bissett Creek projects (93.8 million tonnes at 1.72% TGC, $27m capitalisation).

Website: www.beerandco.com.au

Company: Diatreme Resources (ASX: DRX)

In March 2012, Diatreme announced the results of its Pre‐Feasibility Study on the Cyclone mineral sands deposit, with a pay‐back period of 2.1 years.

While DRX had announced, in August 2010, a MoU with the largest end user of zircon in China, there were four key assurances required, and three have now been delivered, with the final, environmental clearance for an access road, now in train.

Diatreme is now re‐engaging with potential off‐take partners and financiers.

A formal commitment to project construction can be expected late in 2015, with first product in early 2017.

Diatreme is farming down its interest in Tick Hill, which is a former gold mine.

The company also has an application over Cape Bedford.

Cyclone Definitive Feasibility Study by September, 2015

Diatreme has been granted the Mining Lease for the Cyclone project.

To complete its DFS, DRX needs to complete all its final permitting, with the major outstanding issue being environmental approval for the access road.

Diatreme is also undertaking a value engineering study to finesse capital and operating cost estimates.

Beer & Co expect that the capex of $146 million should be reduced, as should the annual opex of $80 million.

Drilling to start at Tick Hill

Tick Hill was mined by a subsidiary of MIM from 1991 to 1995, producing 513,333 ounces from 705,000 tonnes of ore, at a recovered grade of 22.6 grams per tonne.

Diatreme holds three granted Mining Licences over the area.

With its JV partner, Superior Resources (SPQ.ASX) Diatreme will start a program of 60 air‐core holes in late June, with the first 35 holes being in the tailings dam.

Cape Bedford: Silica and Valuable Heavy Mineral Sands

Diatreme has an application over Cape Bedford, which surrounds the existing Cape Slattery silica sands that is being mined by Mitsubishi, and is a much larger area.

The mineralisation appears to continue into Diatreme’s area.

Diatreme has draft agreements with the Traditional Owners.

 

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.

Peel Mining charges up Mallee Bull

/in , , /by

THE INSIDE STORY: How do you surpass making a significant copper discovery? By making a potentially even-more-significant zinc-lead-silver-gold discovery, sitting on top of it.

Copper-focused exploration play Peel Mining (ASX: PEX) came to prominence in 2012 when it announced the discovery of the Mallee Bull copper deposit, located within the Cobar Superbasin in central New South Wales.

Mallee Bull is part of the company’s Gilgunnia project (EL7461), a tenement holding of around 80 square kilometres, located about 100 kilometres south of Cobar in NSW. The project also hosts the May Day gold-base metal deposit (ML1361).

Peel Mining says it operates on a pretty simple philosophy: one that is difficult not to agree with for a junior explorer – to drill as often as it possibly can as this to be the best way to make discoveries.

This philosophy lead to the discovery of the Mallee Bull copper deposit, which lies adjacent to the historic 4-Mile Goldfield, after its initial identification as a coincident EM and magnetic geophysical anomaly in March 2011.

 

The company received early encouragement when subsequent preliminary RC and diamond drilling encountered silver-lead-zinc mineralisation.

Further drilling intersected a massive and stringer/breccia sulphide zone with strong copper-silver-gold-lead-zinc-cobalt values characteristic of major Cobar-style deposits.

This drew the attention of CBH Resources, a wholly-owned subsidiary of Tokyo-based Toho Zinc Co Ltd, and in May 2012 a binding Heads of Agreement was struck covering EL7461 and ML1361, which included the Mallee Bull deposit.

Under the agreement, CBH earned the right to a 50% interest in the project over a three-year period via staged $8.33 million expenditure on exploration and contribution to previous exploration costs incurred by Peel.

In March 2014, CBH Resources paid its final Farm-in payment in relation to the agreement, to earn its 50% interest, after which the two companies formed a 50:50 Joint Venture.

Drilling carried out during CBH Resources’ earn-in period confirmed Mallee Bull to be a deposit of some note, returning what were some of the best copper results reported anywhere in the world in 2012/13, including:

MBDD009
69 metres at 3.48 per cent copper, 34 grams per tonne silver, 0.14g/t gold from 533m;

MBDD009W1
53m @ 4.08 per cent copper, 42g/t silver, 0.22g/t gold from 470m; and

MBDD009W2W1
84m at 4.42 per cent copper, 38g/t silver, 0.14g/t gold from 575m.

The impressive nature of the results enabled the JV to establish a Resource for Mallee Bull of:
3.92 million tonnes at 2.7% copper equivalent (2.3% copper. 32g/t silver, 0.3g/t gold) for  about 107 thousand tonnes of copper equivalent (90,000t copper, 3.97Moz silver, 43,000oz gold).

“CBH Resources farmed-in about a year after our initial discovery and Mallee Bull has, in my opinion turned into one of the best copper discoveries in Australia in recent times,” Peel Mining managing director Rob Tyson told The Resources Roadhouse.

“The main mineralised system at Mallee Bull is copper-rich and very high-grade – some of the mineralised intervals we hit a couple of years ago were amongst the highest grades reported anywhere in the world.

 

“We pushed the deposit to a high-grade copper Resource and have completed an in-house scoping study – but more recently we have gone back to exploration in order to add to what we have already achieved at the deposit.

“That has culminated in some high-grade zinc, lead, silver and gold mineralisation.”

Peel has announced some outstanding results from drilling carried out on what has been designated as the T1 target.

T1 is one of two strong chargeable IP areas Peel identified using a new form of testing survey – Orion 3D DCIP.

The Orion 3D survey defined T1 as a shallow (approximately 150m below surface), strong chargeable and low resistivity geophysical response.

It is also located in an area that had been subjected to hardly any previous drilling.

Initially, four holes MBRC013, MBRC016, MBRC017 and MBRC018 were drilled to test the T1 target.

MBRC013, MBRC016 and MBRC017 all intersected zinc-lead-silver mineralisation predominantly occurring as stringer sulphides.

MBRC016 provided a highlight of:
7m at 6.1 per cent zinc, 3.4 per cent lead, 76g/t silver and 0.25g/t gold from 131m.

MBRC018 returned an intersection of sphalerite-galena-pyrite rich massive sulphide mineralisation from 106m of:
10m at 15.8 per cent zinc, 7.6 per cent lead, 322g/t silver and 1.28g/t gold.

These results alone were enough to rouse the market from its Rip Van-Winklesque dozing, however Peel had more to come and quickly followed up with:

MBRC024
12m at 20.3 per cent zinc, 14.81 per cent lead, 308g/t silver and 1.59g/t gold from 83m, including 7m at 31.44 per cent zinc, 19.37 per cent lead, 440g/t silver, 2.53g/t gold from 83m;

MBRC023
6m at 10.57 per cent zinc, 4.81 per cent lead, 53g/t silver and 0.39g/t gold from 121m, including 2m at 26.65 per cent zinc, 11.88 per cent lead, 121g/t silver, 0.69g/t gold from 122m;

MBRC021
6m at 10.30 per cent zinc, 4.98 per cent lead, 159g/t silver, 0.76g/t gold from 95m, including 2m at 27.7 per cent zinc, 13.4 per cent lead, 430g/t silver, 1.9g/t gold from 96m;

MBRC019
4m at 8.21 per cent zinc, 3.35 per cent lead, 113g/t silver, 1.02g/t gold from 88m, including 2m at 14.11 per cent zinc, 5.7 per cent lead, 194g/t silver, 1.93g/t gold from 89m; and

MBRC028
7m at 21.39 per cent zinc, 12.74 per cent lead, 203g/t silver and 0.58g/t gold from 71m, including 5m at 29.54 per cent zinc, 17.52 per cent lead, 280g/t silver, 0.80g/t gold from 71m.

The question most likely to be asked is why this target wasn’t drilled earlier?

The reason is because sphalerite, galena and pyrite in combination are generally poor EM conductors, which made the zinc-lead-rich mineralisation Peel has intersected effectively invisible to previously completed EM surveys.

“We had a suspicion the mineralisation existed, but unfortunately we ran out of budget to test this area in previous rounds of drilling,” Tyson explained.

“The Orion 3D survey really lit this area up and the T1 target emerged as the most obvious to hit first.

“T1 is shallow, starting around 80 metres below surface with very strong chargeability, it remains open to both the north and the south and to date we have only drilled about 60 metres of 300 metres of strike.

“We have also only drilled around 60 metres of the gravity anomaly there that also measures around 300 metres.

“The shallow nature of the target did surprise us as previous EM work hadn’t given any indication that this was sitting there.”

The nature of the mineralisation, being of such high-grade, encouraged Peel to carry out a close-spaced drilling program, which it considered to be the best way to get an understanding of the deposit’s geometry.

Peel completed a total of 21 RC drillholes (MBRC013, MBRC016 to MBRC035) to test T1 with all drillholes intersecting zinc-lead-silver mineralisation to varying degrees, and others encountering sphalerite-galena-pyrite rich massive sulphide mineralisation, to within 50m of surface.

Peel plans to complete follow-up drilling at T1 when all relevant approvals are in.

Peel Mining Limited (ASX: PEX)
… The Short Story

HEAD OFFICE
U1/34 Kings Park Road
West Perth WA 6005

Ph: 08 9382 3955
Fax: 089388 1025

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

DIRECTORS
Rob Tyson, Simon Hadfield, Graham Hardie

MAJOR SHAREHOLDERS
Hampton Hill Mining and assoc        17.15%
Point Nominees Pty Ltd            11.64%
Ariki Investments Pty Ltd        8.72%

What the Analysts Say

/in /by

WHAT THE ANALYSTS SAY: Company’s under the microscpoe this week include IronClad Mining and Energia Minerals.

Website: www.breakawayresearch.com

Company: IronClad Mining Limited (ASX: RTR)

Ironclad Mining is an ASX-listed junior exploration company concentrating on projects in the Gawler Craton of South Australia.

The company’s key focus is on the Jumbuck gold project, located around the operating Challenger gold mine of Kingsgate Consolidated (ASX: KCN).

Holdings also include the Wilcherry Hill project, originally primarily held for iron ore, but also prospective for a range of base and precious metals, including gold, lead, zinc, silver and tin.

With the Ironclad-Trafford merger now complete, Ironclad is recommencing exploration on its highly-prospective Jumbuck gold project, located over the under-explored Archaean Christie Domain of the Gawler Craton of South Australia.

The Christie Domain has similarities to the Fraser-Albany Orogen of Western Australia, host to Tropicana and Nova-Bollinger.

Previous regional sampling over the project area, which surrounds Kingsgate’s one million ounce Challenger gold mine, identified +300 gold-in-calcrete anomalies, of which +250 are yet to be followed up.

Follow-up work on around 50 anomalies has generated potentially economic gold grades in drilling at eight anomalies and one JORC-compliant resource; although further work is required on all of these prospects.

Work has also identified prospectivity for magmatic nickel/copper mineralisation, potentially similar to that at Sirius Resources’ (ASX: SIR) Nova-Bollinger deposit.

Should economic gold resources be delineated and dependent upon the operating status at Challenger at the time, there are potential ore treatment synergies with the Challenger mill, given that Ironclad is in an exploration JV with Kingsgate over part of the Jumbuck area.

 

Website: www.beerandco.com.au

Company: Energia Minerals (ASX: EMX)

Energia sold its Carley Bore uranium project to Paladin Energy (ASX: PDN) in June 2015 for 45 million PDN shares plus $1.6 million cash.

In 2014, EMX purchased Mining Leases at Gorno in northern Italy. Gorno has an Exploration Target of 6 million tonnes to 10 million tonnes at 7 per cent to 10 per cent zinc plus lead.

Gorno has been mined previously, and the mine is fully developed for a quick re‐start, subject to a processing plant being constructed.

EMX has applications over uranium at Val Vedello and Novazza, and over zinc at Perdil and Salafossa – all in northern Italy.

EMX sells its Carley Bore project to PDN for scrip plus cash

Carley Bore, an ISL uranium project in Western Australia, was Energia’s foundation project.

EMX announced the results of its scoping study in April 2014. To progress further, would have required extra cash, some $1.5 million, and production was expected only in 2019.

EMX is now able to raise cash by selling its PDN shares, hopefully at a better price than at present as PDN shares are expected to rise with the uranium price.

EMX gets more zinc

In June 2015, EMX announced that it had applied for exploration permits covering two zinc‐lead mines that were operating in northern Italy in the 1980s.

Predil (or Raibl) has a long production history and was closed in 1991 by ENI, having produced 30 million tonnes of ore grading 5 per cent zinc plus 1.2 per cent lead.

Salafossa was operated from 1964 to 1986, producing 10.95 million tonnes of ore grading 5 per cent zinc plus 1 per cent lead.

EMX will use some of the cash received from the sale of Carley Bore to drill these areas as soon as permits are granted.

EMX’s portfolio is now simpler and stronger, with a lower cash call in the near term, greater zinc exposure and still retaining exposure to expected higher uranium prices.


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 funded and incentivised for exploration thrust

/in /by

THE INSIDE STORY: Earlier this year, Cassini Resources (ASX: CZI) caught the market’s attention by releasing an announcement containing a phrase almost extinct to the industry lexicon, ‘Successful Raising’.

Another outrageous aspect of the announcement was the amount raised – just over $7.1 million – which again was something to give industry watchers something to talk about.

To give the raising just that extra element of consequence it received great support from two of the company’s contractors, in mining and civil construction company MACA Ltd (ASX: MLD), which took up a 13.51 per cent holding and Perth-based engineering, consulting and contracting company GR Engineering Services Limited (ASX.GNG), which stumped up to take a 6.76 per cent interest.

“In this market to get that quantum of capital raising away was a great result for us,” Cassini Resources managing director Richard Bevan told The Resources Roadhouse.

“To have MACA Mining and GR Engineering come onto the share register as cornerstone investors is a good endorsement of the project.

“They are both leaders in their respective fields of expertise and in terms of being able to leverage off their experience as we move through the process is a positive.

“It’s always good to be able to tell the market the Board has a healthy stake in a company, but for the mining contracting companies to have a healthy amount of ‘skin in the game’ is also a ringing endorsement of what a company is trying to achieve.”

Since trumping a number of rivals for the 100 per cent acquisition of the West Musgrave project from BHP Billiton (ASX: BHP) in 2014, Cassini has been a regular blip on the ‘what are they up to now?’ radar screens of resource analysts.

The reason for this is simple: the company has a potentially world-class project, located in a relatively underexplored region of Western Australia, which is prospective for nickel-copper-PGE sulphide deposits.

The project’s main prospect is the Nebo‐Babel prospect, which was discovered in 2000.

Now that is important – not just the discovery itself, but when it was made, some 15 years ago – 12 years before Cassini even listed on the Australian Securities Exchange.

Anybody with an elementary grasp of mathematics will be able to work out Cassini was not the company that made the initial discovery, which means it was not able to enjoy similar heady celebrations experienced by Sirius Resources (ASX: SIR) when it made its Fraser Range reference point discovery of the Nova deposit.

What Cassini has been able to celebrate, however, is that as a junior exploration play it did not need to spend the greater-than $100 million dollars that was spent by previous owners making the discovery and bringing the project to the much-closer-to-development stage it is currently at.

Cassini has been doing as much as it can to rapidly advance the project, which has culminated in the establishment of a Mineral Resource estimate for Nebo-Babel 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.

The earlier exploration programs of the major focussed on development of a large scale, low grade open pit mining operation, but Cassini is targeting a lower tonnage, higher grade operation.

This development model requires significantly lower capital expenditure, which the company considers should be capable of being delivered in a shorter timeframe.

Cassini says this strategy is supported by Nebo-Babel being situated close to surface as a flat, shallow dipping ore body, with higher-grade nickel mineralisation sitting at the top of the ore body, which enables low strip open pit mining and copper by-product credits.

A recent Scoping Study looking at the potential development of the Nebo-Babel nickel-copper deposits considered two preferred scenarios.

 

These were either moving straight to production of four million tonnes per annum (4Mtpa Case) or kicking off at 1.5 million tonnes per annum ramping up to 4Mtpa (Stage Case).

The favourable Nebo-Babel geometry provides for low strip open pit mining and significant by-product credits (copper) help costs.

The study assumed an initial mine life of 15 years with the Stage Case estimated pre-production capital costs of $319.4 million for the start-up production upgrading to 4tpa, for an additional $201.6 million, funded through forecast cashflows.

The 4Mtpa Case has estimated capital costs of $521 million, including a contingency of nearly $90 million.

 

Cassini has also made considerable progress at the greenfield copper project, Succoth, located just 13 kilometres north-east of Nebo-Babel, where the company believes a mine development opportunity exists in conjunction with Nebo-Babel via shared processing and mine infrastructure.

The Succoth ore body is also low-lying – around 20 metres depth – and has been confirmed by drilling carried out by Cassini to have potential to become a very large copper and PGE resource.

Advancing the Succoth deposit was given a boost with Cassini being a successful applicant in the latest round of the co-funded drilling Exploration Incentive Scheme (EIS) of the WA government.

Investigative geological interpretation work carried out at Succoth has identified the potential for a nickel-rich sulphide body to exist at depth, beyond its already documented potential to be a large, bulk tonnage, mostly disseminated copper mineralisation open pit deposit.

Cassini has constructed a new Succoth geological model, which suggests the existing disseminated copper mineralisation may be associated with a nickel-rich magmatic sulphide system.

This theory gained legs after some narrow zones of massive and matrix nickel sulphides were encountered by previous drilling, which included:

0.46m at 1.76 per cent nickel, 0.16 per cent copper from 225.8m; and
0.6m at 1.39 per cent nickel, 0.95 per cent copper from 227.7m.

These nickel zones have not been followed up at depth

The Succoth story gained momentum after Cassini identified a new conductor (400m by 100m) when examining reprocessed down-hole EM data sourced from two historical holes, WMN4075 and WMN4139.

The top of the plate has been modelled at 475m below surface with a closest intercept in WMN4075 of 36m at 0.96 per cent copper, which the company has outlined to be separate from the actual conductor.

Of great interest to the company is the knowledge it has not been subjected to previous drilling.

The anticipation for success for the new anomaly lies in its location below a zone of disseminated copper mineralisation where it follows a trend of other EM conductors within the Succoth mineralised envelope, plunging moderately to the southeast, where it remains open at depth.

As a greenfield find, the anomaly has provided Cassini with another dimension, moving it from a development story to being a dual-strategy company as it works to develop the West Musgrave project while also concentrating on the exploration upside the project possesses.

“Exploration potential is something investors look at companies such as ours, and we have that potential in spades – if you’ll pardon the pun,” Bevan said.

“Most importantly that potential exists within our current project area.

“Part of the legacy we inherited from the BHP Billiton days was around a dozen exploration targets with known mineralisation.

“Succoth is one such target, along with around six to eight others, which have all produced potentially economic grade intercepts of nickel and copper, all located within ten kilometres of Nebo-Babel.”

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%