ON THE HUSTINGS: Nationals Senator Barnaby Joyce, who is running for the lower-house seat of New England recently vacated by Tony Windsor, dropped in to Diggers & Dealers.

Flanked by fellow Nationals Senator, Fiona Nash and Nationals hopeful for the seat of O’Connor Chub Witham, Joyce was quizzed by the attendant phalanx of journalists on a number of subjects, including the need to bolster the prospecting component of Australia’s mining industry.

Watch Barnaby give his thoughts on the prospects for prospecting here.

Witham is hoping to retain the seat of O’Connor for the Nationals, who won the seat at the last election by ousting long-time Liberal maverick, Wilson Tuckey.

The seat is currently sat in by National MP Tony Crook, who has surprisingly announced his intentions to retire at the 2013 election after just one term in the House of Representatives.

Witham outlined his credentials for the job by saying he has been a regular attendee at Diggers & Dealers throughout his career as a mining geologist.

THE BOURSE WHISPERER: Sheffield Resources (ASX: SFX) has received results from a review of the quality of planned products from the company’s Thunderbird Heavy Mineral Sand deposit located near Derby in the Canning Basin region of Western Australia.

Thunderbird deposit location plan. Source: Company announcement

The review was carried out by mineral sands specialist consultants TZ Minerals International (TZMI) and forms part of a Scoping Study Sheffield currently has underway on Thunderbird.

The Scoping Study is focusing on a coherent high-grade core to the Thunderbird deposit of 517 million tonnes at 10.1 per cent heavy minerals (HM) (Indicated and Inferred) containing 3.6 million tonnes of zircon, 0.8 million tonnes of rutile, 2.2 million tonnes of leucoxene and 15.2 million tonnes of ilmenite (at 7.5 per cent HM cut-off). This zone averages 20 metres thickness.

According to Sheffield TZMI’s Product Assessment has taken into consideration the specifications and scoping level volumes of Thunderbird products, in comparison with other competing products in the marketplace, while assessing likely target markets.

TZMI’s work follows development of processing flowsheets based on metallurgical testwork, and analysis of final products of zircon, primary and secondary ilmenite, rutile and high-titanium leucoxene. This work was conducted by consultants Robbins Metallurgical of Brisbane.

“TZMI’s confirmation of the marketability of the Thunderbird products is another key step for the Thunderbird deposit,” Sheffield Resources managing director Bruce McQuitty said in the company’s announcement to the Australian Securities Exchange.

“Thunderbird is one of the largest and highest grade mineral sands deposits to be discovered in the last decade and zircon and ilmenite are expected to be the most important products by value and volume, respectively.

“This confirmation by a leading mineral sands specialist consultant that the Thunderbird products will achieve wide acceptance in the broadest market sectors is extremely pleasing, and further underpins our confidence in the project.”

Sheffield indicated the Thunderbird Scoping Study to be progressing well.

The company said it would now be extended to incorporate a resource upgrade, aimed at increasing the component of the mineral resource in the Indicated category.

The Study is expected to be completed post the anticipated resource upgrade, which is scheduled for Q4 2013.

Sheffield did, however, explain that it is uncertain if further exploration will result in an increase in Indicated Resources.

The company’s current 2013 drilling program comprises infill and extension drilling at Thunderbird and an initial test of the Argo deposit, located 12 kilometres to the west.

A 15 tonne sample will be composited from the Thunderbird infill drilling for further enhancing metallurgical testwork and to obtain products for market soundings.

Level two environmental survey work to support the environmental approvals process is also in progress.

Interesting news and views from across the Resource Analyst universe.

Wolf Minerals (ASX: WLF, AIM: WLFE)

Wolf Minerals has secured finance and development of the Hemerdon Ball tungsten-tin mine is now underway.

GR Engineering Services has been awarded the fixed term, fixed price contract which should see the 3Mtpa processing plant ‘production ready’ within 24 months.

Wolf Minerals continues to make steady progress towards the redevelopment of the world class Hemerdon Ball tungsten and tin project.

The company has now secured a $212 million funding package and has engaged GR Engineering Services to commence development of a 3 million tonnes per annum processing plant, plus associated infrastructure.

The plant will be delivered as a fixed term (24 months), fixed price (£75 million) contract with first production scheduled for mid-2015.

The $139 million (£85 million) mining contract was also recently awarded to CA Blackwell who are expected to commence pre-strip and mine development by March 2014.

Hemerdon hosts a JORC resource of 401 million tonnes at 0.13 per cent tungsten and 0.02 per cent tin, placing it as the fourth largest (known) tungsten deposit in the world.

A Definitive Feasibility Study (DFS), completed in May 2011, indicated robust economics based on a 3 million tonnes per annum operation over a 9.25 year life of mine.

Production is estimated at approx. 350,000 metric tonne units (mtu) per annum of a 65 per cent tungsten concentrate and a further approx. 450tpa of tin in concentrate at C1 costs of US$105/mtu (after tin credits) versus the current APT price of US$417/mtu.

The current mining Reserves of 26.7 million tonnes at 0.19 per cent tungsten and 0.03 per cent tin are bound only by the constraints of the open pit limits as per the parameters of the granted ‘Planning Permission’.

Significant opportunity exists to extend the mine life should approval for a larger open pit be sought in due course.

Papillon Mining (ASX: PIR)

A world class asset where the gold mid-tiers play
The Fekola project’s 4.21 million ounce resource at 2.38 grams per tonne meets the American Geosciences Institute’s definition of a world class gold deposit (i.e. greater than 3.2 million ounces).

Fekola has a 10 to 12 kilometre strike length in a 25km corridor with thick mineralisation open along strike and at depth.

Papillon has 1,460 square kilometres of tenements within the Birimian gold belt in SW Mali bordering Senegal.

Whilst gold grade of around 2 to 3g/t has been discovered to date recent drill results have shown potential of 4g/t at 75 metres.

The project has ready access to water and is within proximity to established infrastructure (i.e. 50km south of the Millenium Highway with Dakar 700km to the west and Mali’s capital, Bamako, 400km to the east).

Conventional mining and processing
The Fekola project purports to be delivered cost effectively via an open pit mining and conventional gravity gold-CIL processing method.

The PFS supports production of over 300,000 ounces per annum at low C1 cash costs of US$580 per ounce (all-in sustaining costs of US$725/oz) and an initial mine life of 9 years.

Leading with relevant West African experience
Mark Connolly (CEO) has experience in building and operating an initial 100,000 ounce mine in Ghana for Adamus Resources as its CEO, and later as group COO after its sale to Endeavour Mining in November 2011.

We value Connolly’s prior West African experience given Fekola is a start-up in a relatively high risk country.

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

IN THE LOBBY: Western Australia’s mineral and petroleum exploration continued its downward trajectory in the June 2013 quarter, according to the Chamber of Minerals and Energy of Western Australia (CME).

The lobby group outlined the decline it is latest edition of the WA Resources and Economics Report, prepared in conjunction with KPMG.

“While the decline over three quarters in exploration expenditure is likely due to the weak commodity price and high cost environment, every effort should be made to arrest this decline,” CME acting chief executive Nicole Roocke said.

CME is one of many mining groups that has been calling for incentives similar to the Canadian flow-through share scheme, which was part of Prime Minister Kevin Rudd’s original election platform in 2007.

The promise was welcomed at the time after the sector had struggled to receive any joy from previous governments.

CME said it time such a minerals exploration tax credit system was introduced to boost the flagging exploration sector.

“To establish a future pipeline of projects we rely upon increasing the current level of exploration activity here in Western Australia,” Roocke said.

The call for such a scheme has been something of a personal crusade of the Association of Mining and Exploration Companies chief executive Simon Bennison.

AMEC claims research undertaken by the University of Western Australia in 2012 showed that not only were mineral discoveries reducing, they were also getting deeper and harder to find.

Another concerning statistic raised by the study is the loss of equity investment to competitive offshore projects.

It also found that the national mineral inventory is gradually being depleted and the mining industry is becoming unsustainable in the long run.

“The research highlighted that about half of Australia’s non-bulk commodities mines would be exhausted in between seven and 18 years,” Bennison said.

“As it takes, on average, seven years to convert a discovery into an operating mine these trends are alarming.

“There is a desperate need to discover the mines of tomorrow to ensure that future revenue streams from base metals do not dry up.”

The CME report said total mineral and petroleum exploration for the recently-completed quarter declined by 22 per cent to $1.14 billion from the previous quarter.

This followed a four per cent drop in the December quarter, and a drop in total mineral exploration expenditure another 10 per cent in the March quarter to $422 million.

The latest result is the third consecutive quarter mineral exploration has declined.

Compared to the corresponding quarter a year ago, mineral exploration is now 14 per cent lower.

“Notwithstanding the transition underway in many major projects from construction to operational phase the future pipeline of projects relies upon increasing the current level of exploration activity here in Western Australia,” Roocke said.

CME said the issue is one will most likely become one of the key election policies affecting the resources sector leading into the federal election.

AMEC’s proposed solution is a reform initiative it calls the Mineral Exploration Tax Credit (METC) that will allow current eligible losses to be passed back to their Australian share owner in the form of a tax credit through the well-known franking system.

“The METC will stimulate the greenfield exploration sector, which has not seen an increase in actual metres drilled for over a decade, despite one of the strongest periods of growth in the Australian mining industry,” Bennison explained.

“Companies with income from mining activities will be ineligible.

“It will also increase the rate of discovery and lead to the mines of tomorrow and provide future revenue streams for governments.”

Bennison claims the METC system will be a win:win for Australian investors, Australian exploration companies, Australian communities and Australian governments at all levels through additional corporate and personal tax, royalties, state taxes, fees and levies.

He suggested it would also stimulate the Australian economy and ultimately contribute to a reduction of the national debt.

A report on the METC proposal by KPMG, which was commissioned by AMEC, found that a multiplier factor of two (2) in additional exploration activity would conservatively result in:

–    Potential to provide a positive annual tax revenue stream to Government of up to $283 million;

–    Up to 4,356 additional jobs across the whole mining sector;

–    Contributing an additional $2.2 billion in GDP across the mining sector; and

–    With a proposed commencement date of January 2015, the government investments would be around $50 million in 2016/17, $101 million in 2017/18 and $133 million in 2018/19.

“The challenge is for the political parties to have the vision now to create investment strategies and catalysts that are 10-15 years from when these revenue streams are fully achievable,” Bennison said.

“Jobs and other social and economic benefits are achievable in the short term.

“It is essential that all political parties remove any perceptions about the current mining industry, and think about the development of mines for the benefit of future generations.

“The METC will provide one policy solution that will help address the several declining trends in mineral exploration already identified by the University of Western Australia, assist in discovering the mines of tomorrow and contribute to future revenue streams.

“The time is to act now by amending tax laws which will free up tax losses already owned by investors, which can then translate into the mines of tomorrow.”

THE DRILL SERGEANT: Papillon Resources (ASX: PIR) has released the results of a further 102 holes from drilling completed at the company’s Fekola gold project, located in south western Mali, on the border with Senegal.

Fekola project – location map. Source: Company announcement

Papillon said the results have continued to highlight extensions of mineralisation outside of the project’s current Mineral Resource Estimate, which comprises 54.97 million tonnes averaging 2.38 grams per tonne gold for a contained 4.21 million ounces of gold at a lower cut-off grade of 1g/t gold.

Re-entry and extension of previously-drilled holes intersected extensive mineralisation including:

–    75 metres at 4.66g/t gold; and

–    18 metres at 2.81g/t gold.

Shallow, high grade mineralisation intersected along strike to the north of the current MRE area included:

–    4m at 12.34g/t gold; and

–    7m at 5.68g/t gold.

“The results are, once again, outstanding in terms of thickness and grade,” Papillon Resources managing director and CEO Mark Connelly said in the company’s announcement to the Australian Securities Exchange.

“Perhaps the most important aspect of the extended holes, from a mining perspective, is that the new observed data points of thick high-grade intercepts will provide additional information to the resource model in an area that was previously considered to be low-grade or barren.

“The thickness and grade of these intercepts again highlight the significant exploration upside at Fekola and further drilling has the potential to continue to deliver quality ounces for the project.”

Papillon Resources explained the results represented approximately 17,000m of diamond and RC drilling targeting down dip extensions of the Fekola deposit, as well as near surface mineralisation along strike to the north and south of the MRE area.

The results include drilling of six extension holes, which had previously been drilled and intersected zones of mineralisation but did not intersect the expected high grade shoot.

Following reinterpretation of the six holes Papillon considered them to demonstrate potential for a high-grade zone deeper than the end point of previously drilling.

The company decided to re-enter and conduct extension drilling on them and the re-drilling campaign encountered broad zones of high-grade mineralisation.

Shallow RC drilling carried out along strike to the north of the MRE also delivered encouraging results with zones of high-grade mineralisation encountered in the near surface lithology, including 4m at 12.34g/t gold, and 7m at 5.68g/t gold.