Deeper Drilling Needed to Detect Gas Opportunities

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THE CONFERENCE CALLER: Opening the RIU Good Oil Conference in Perth, Argonaut executive director Kevin Johnson told delegates his company hopes to create more opportunities for gas power in Western Australia. By Apanda Anyuon

The stimulus behind Johnson’s optimism stems from the success enjoyed by the US shale gas industry.

Providing a brief history lesson, Johnson explained how the US Shale revolution in 2006 had not produced any oil, but after drilling activity commenced in 2007, predominantly in the US portion of the Bakken formation, things turned around.

In 2012 the US completed over 45,000 oil and gas wells and by the end of the year, had released an overall production of more than 1.5 million barrels per day (mbd) of crude oil.

This compares against under 4,000 wells completed in the rest of the world.

Johnson said Argonaut plans to bring about changes to the gas and oil industry in Western Australia.

“The real opportunity is industry relocation,” he said.

“The huge opportunity in western Australia is to build in areas which are close to Perth and people who know what they are doing and it’s going to be a massive gas supply and I think that’s the opportunity that’s been missed.”

Johnson believes the Perth Basin requires new thinking and technology.

In Western Australia, more than 360 wells have been drilled in the Basin’s history.

Three-quarters of these wells are concentrated in the North Perth Basin, with only 51 offshore.
 
“There’s a change underway in the sector and it’s a change that probably a lot of people have not seen because a lot of people gave up on this companies, a year or so ago,” he continued.

The drilling of wells peaked in 2008, with completion of 152 wells but since then the exploration activity has steadily declined.

In 2015, a field extension to the south of Perth was confirmed but is yet to be tested.

There have only been nineteen wells drilled in the Dongara area however all were terminated because of the Dongara sand, which has demonstrated poor white reservoir quality, and problems with cross faults.

“There’s a lot of new technology out there,” Johnson said.

“You have got to be aware of this and you have got to be following this because it can change and it’s changing at the right time for this industry.”

As to why it’s happening, Johnson said, “it’s all about drilling at depths and we have proven that in the last few wells that have been drilled and we have set out to drill the Perth basin gas for the origin weight.

He stressed the need to implement new technologies and how that can be used to help with drilling more wells.

He said that, in Australia, there are a few rigs that can drill deeper than 2,500 metres.

The task now was set out to drill deeper wells to bring more gas into production.

Risk Advisor Optimistic on Sector’s Ability to Face New Challenges

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THE CONFERENCE CALLER: BDO risk advisory partner Andrew Hillbeck told the opening day audience at the RIU Good Oil Conference in Perth that we are seeing a new generation of complex risks come to the forefront for oil and gas companies. By Jack Baker

Hillbeck, who has 20 years’ experience in risk management and expertise in the natural resource sector, outlined what he believed are the fresh challenges facing the industry.
 
Hillbeck spoke of the recent geopolitical trends companies had to take to take into account.
 
“The oil and gas sector crosses borders … we are entering a new era of geopolitical risk,” he said.

“The risk of populist and nationalistic agenda, have taken many business leaders by surprise, adapting to the new era will require balancing business models and supply chains with opportunities to mitigate risks.
 
“Demographic and cultural factors behind Brexit, Trump and even at a local level, the thought of a WAxit (Western Australia exit) will influence macroeconomic trends.

“Events in one geography will ripple through to impact other geography in the sector.

“Traditional business-flows around the world are likely to be impacted by stronger levels of nationalism.”
 
Hillbeck referenced Aon Risk Solutions executive director Sarah Taylor’s comments on political risk in the sector, saying the changing global landscape, driven by trade protectionism, populist policies and sanctions, is likely to have a significant impact on emerging and frontier markets.

According to BDO’s 2017 global risk report, cost management has been the biggest challenge facing the natural resource sectors globally.

Hillbeck said after spending the last 10 years looking for cost recoveries and cost savings in companies’ contracts and joint ventures in the sector, that this is a consistent theme for Australian-based organisations.
 
“Whilst oil prices in 2017 have improved marginally from 2016, cost management activities and initiatives since late 2014 seem to be taking effect,” he said.

“So, I expect the risk to reduce, however, it will never go away.”

With the exception of Karoons’ sale to Origin in the September quarter of 2014 the average company cash balance has been steadily declining since June 2013 to just over ten million at march 2017.
 
“All the cash flow indicators do not represent a recovery but I look forward and I have seen the preliminary data to the next ASX quarterly cash update that is released in the coming weeks,” Hillbeck said.

Consumers are far more concerned today with environmental impact of organisations and their behaviour.

Speaking on bribery and corruption in the natural resources sector, Hillbeck noted recent overseas legislation, largely centred on payment to government officials that extends beyond US and UK-based entities.
 
“Non-compliance can result in substantial penalties including jail sentences and fines,” he said.

“Also, organisations implicated may face compromised reputations, damaged public confidence and subsequent loss to important markets and contracts.”

Hillbeck provided the example of a recent announcement from an American mutual fund that it had sold all its shares in Petrofac due to ongoing investigations into the company by the UK Serious Fraud Office.
 
Oil and gas companies consistently feature in organisations being investigated for bribery and corruption.
 
“While once considered the cost of doing business when looking for inroads into new and emerging markets, the legislation has shown it can put you out of business,” Hillbeck said.
 
Hillbeck touched lastly on cyber-risk in the sector, explaining that cyber attacks are increasing, expected to increase further and continually catch businesses unaware, particularly those who believe it will not happen to them.
 
“To mitigate against cyber-risk, it’s critical that your organisation become more cyber-resilient, there’s some simple things to consider,” he insisted.

“Needing to know the value of your assets and your data, where they are, who has access to them, who is responsible for protecting them, how well protected they are and is the level of protection within your risk appetite, when you have been breached and most critically, what to do when you have been breached.”

While elaborating on these new challenges in the sector, Hillbeck noted that corporate culture was vitally important to risk management.

In his experience coming into the sector, he said he was astonished at the security culture of natural resource companies and this is reflected on their risk culture.

The responsibility from risk management, he said, starts at the top, and businesses have to be sure that their management aligns with their culture.

Independence Group Celebrates Nova Opening

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OUT AND ABOUT: The Roadhouse flew out as a guest of Independence Group (ASX: IGO) to help the company celebrate the official opening of its Nova nickel-copper-cobalt operation.

We were in good company, which included Western Australia minister of mines and petroleum Bill Johnston who applauded the company for getting the operation up and running as quickly as it has.

“On behalf of the McGowan Government, I congratulate all Independence Group staff, project partners, stakeholders and the Ngadju people, on the official opening of Nova,” Johnston said.
 
“Production commencing at Nova is excellent news for the mining sector, especially as this is the first mine of its scale in the highly prospective Fraser Range.”

Johnston’s sentiments were echoed by Independence Group managing director and CEO Peter Bradford, who declared the opening of the Nova operation to be, “an outstanding achievement” that Nova reached commercial production only five years after its discovery and is expected to reach nameplate capacity twelve months earlier than expected in the bankable feasibility study.

“Nova is IGO’s flagship asset and…is a truly world-class project,” Bradford told the gathered throng.

“It has been rapidly progressed to commercial production within five years of its discovery in July 2012.

“Five years to complete Resource definition drilling, feasibility studies, permitting, financing, and construction and development is a rare achievement and underlies the quality of the Nova orebody.

“This fantastic deposit could have lain in the ground, undiscovered and undeveloped, and we would not be here today for this official opening without the collective contributions of all those people who have dreamed of what could be and have made it happen.

“To make it happen has required a combination of daring, sacrifice, commitment, persistence, and collaborative effort.”

Bradford acknowledged the varied contributions behind the development of Nova from its discovery through to production, including:

“Mark Creasey for his foresight in securing the original land position on the Fraser Range, and for the systematic work that his people did – and have continued to do,” he said.

“Mark Bennett and the Sirius team for their persistence to drill that discovery hole and for the accelerated Resource definition, feasibility study, and permitting to bring Nova to a decision to mine.”

Independence Group has invested $456 million of capital in the construction and development of Nova, and has now commenced the operational phase, which is just a touch beyond the project’s January 2015 uninflated budget estimate of $443 million.

Production at Nova for this financial year – the company’s first full year of production – at the mid-point of guidance, is expected to be about 25000 tonnes of nickel, 11000 tonnes of copper, and 925 tonnes of cobalt in concentrates, at a cash cost of $2.20 per payable pound of nickel.

That makes Nova the lowest cost nickel operation in Australia over the coming year.

“Nova is our flagship asset and represents the type of operation that IGO wants in its portfolio,” Bradford said.

“A quality asset that is high margin, with scale and a long mining life, which anchors our presence in the Fraser Range where we are actively exploring to find the next Nova.”

Triangle Energy and Norwest Energy Enjoying Time in Dongara

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CONFERENCE CALLER: Triangle Energy (ASX: TEG) director Darren Bromley outlined the company’s recent progress to the RIU Good Oil Conference in Perth.

After completing the sale of its Indonesian oil & gas asset to Indonesian company PT Enso Asia, Triangle Energy has taken its market cap from around $3 million to around $22 million.

Triangle Energy recently completed a Share Purchase Agreement with Roc Oil Company for the purchase of its 42.5 per cent Participating Interest in and Operatorship of the Cliff Head Oil Field and associated production facilities, located in the offshore Perth Basin, Western Australia.

“Triangle Energy now controls 78.75 per cent of the Cliff Head and we see a great opportunity to progress exploration of nearby appraisal targets and the larger offshore Perth Basin while maintaining strong cash flow from our current production,” Bromley said.

Bromley added that the Cliff Head acquisition combines well with the company’s 30 per cent farm-in interest in the TP/15 Joint Venture with Norwest Energy (ASX: NWE) to drill the neighbouring 160mmbl Xanadu-1 prospect as it provides Triangle immediate exposure to exploration upside along with additional strong exploration targets within the Cliff Head Oil Field.

Triangle’s 78.75 per cent interest in Cliff Head has come relatively cheaply, costing approximately $5.7 million.

Triangle estimates annual revenue from Cliff Head crude oil production at around $30.4 million, of which the company has rights to $23 million based on US$53 per barrel and $0.795 AUD/USD exchange rate.

Triangle acquired an initial 57.5 per cent interest in the Cliff Head Oil Field in June 2016 from AWE Limited (ASX: AWE).

Bromley indicated the Cliff Head facilities are the only offshore and operating onshore infrastructure in the Perth Basin, adding that they are therefore important for any development in the surrounding area.

“Cliff Head’s onshore Arrowsmith Stabilisation Plant is the only operating crude oil plant in the Perth Basin and is vital infrastructure in the development of exploration success by any explorer in the area,” he continued.

“The Cliff Head Oil Field currently produces approximately 1,204 barrels of oil per day (bopd) gross through the Arrowsmith facility, which has a processing capacity of up to 15,000 bopd, so is more than capable of processing third party crude.

“The acquisition of Cliff Head provides Triangle with a cash flow generating operation, strong production rates, exploration opportunities and the capacity to service third party crude in the highly-prospective and underexplored Perth Basin.”

Triangle’s JV partner Norwest Energy is making strong progress with the drilling of the TP/15 Xanadu-1 prospect, also located near Dongara in WA.

The Joint Venture contributions towards drilling costs and subsequent interests include:

Triangle Energy to contribute 40 per cent of the costs to earn a 30 per cent interest;

3C Group to contribute 40 per cent of the costs to earn a 30 per cent interest;

Whitebark Energy Ltd to contribute 20 per cent of the costs to earn a 15 per cent interest; and

Norwest Energy free-carried for a 25 per cent interest.

The JV considers Xanadu-1 to be a significant well for the northern Perth Basin.

Norwest has previously announced the Xanadu prospect having an unrisked recoverable resource of 160 million barrels.

The primary target for the Xanadu-1 well is the Permian Dongara Sandstone, with secondary targets in the Irwin River Coal Measures and the High Cliff Sandstone.

It is situated in very shallow water immediately adjacent to the coast, and is being drilled from onshore by way of a deviated well.

Xanadu is structurally similar to Triangle’s Cliff Head Oil Field and the potential oil will come from the same source, and will fit seamlessly into the Arrowsmith processing plant.

“We have made excellent progress to date at Xnadu-1, and we are ahead of budget and time,” Norwest Energy chief executive officer Shelley Robertson told the conference.

“We are expecting the primary and secondary targets to be intersected by the end of the week, so it is pretty exciting times.

“We have a challenging bit of drilling ahead of us, but everything has gone to plan so far, so there is no reason to suspect it will be any different going forward.

“At TP/15 we have a new work program commencing in May 2018 and the results at Xanadu will help to define the forward planning on that work program.

“Our JV partners are all fully committed to ongoing exploration on TP/15 as there is huge exploration potential on this new shore block and drilling Xanadu 1 is really just the beginning of this program with such a dynamic and committed Joint Venture.”

WA Budget Raises Gold Royalties Anger

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IN THE LOBBY: Western Australia Treasurer Ben Wyatt provided a nasty shock for gold miners as he handed down his first state budget.

Leading up to the budget, Premier Mark McGowan claimed more than $5 billion in revenue has been lost since February’s pre-election financial statement, which showed a $3 billion deficit and $33.2 billion in debt for 2016/17.

Debt, he said, was forecast to eclipse $41 billion in 2019/20.

One avenue the government has decided upon will be the raising of royalty rates for gold miners from the current 2.5 per cent to 3.75 per cent.

The Treasurer said the measure is expected to raise $392 million over the forward estimates.

The royalty rise comes at an inopportune time for gold producers as they are just starting to make some headway with the gold price currently enjoying a positive run.

The measure is to take the form of a tiered royalty rate for gold that will be introduced from 1 January 2018, whereby an increased rate of 3.75 per cent will apply on the full royalty rate when the price is above $1,200 per ounce.

When the gold price is $1,200 per ounce or less, the current 2.5 per cent rate will apply.

In addition, from 1 July 2018, the WA government will remove the current exemption for the first 2,500 ounces of gold production for miners who produce more than that amount in a financial year.

The government claims the rise brings WA closer into line with other states, such as Queensland where the gold royalty rate is 5 per cent and New South Wales it stands at 4 per cent.

The next producers that could find themselves in the treasury firing line are former state Nationals Leader Brendan Grills’ mates in iron ore, which currently get hit with a higher 7.5 per cent royalty rate.

His suggestion that the bigger end of town producers should be hit with a $5 per tonne penalty, instead of the current 1960s-struck 25 cents per tonne deal will strain their necks looking over both shoulders to avoid attack.

The response from the Association of Mining and Exploration Companies (AMEC) was as swift as it was predictable with the lobby group acting chief executive officer Graham Short declaring the measure as being, “a short sighted, baffling cash grab that will have serious and unintended consequences as it will cost Western Australia in jobs and investment.”

“The decision to increase the gold royalty rate was based on a flawed Mineral Royalty Rate Review undertaken for the Barnett Government which used an inaccurate methodology and pre-2014 financial data.

“Benchmarking against other Australian jurisdictions is misleading, as 70 per cent of Australian gold is produced in Western Australia, compared to only six per cent in Queensland, and 13 per cent in New South Wales.

“The royalty increase represents a 50 per cent hike in a major business input cost for the gold industry.

“This is significant and cannot be easily met without consequences. It will be paid for in jobs, investment and mineral exploration activities.

“The perplexing issue is that the majority of the revenue raised will go out the backdoor to other Australian States and Territories through the GST re-distribution process, whilst the jobs will be lost in WA.”

Singing from the same song-sheet, Chamber of Minerals and Energy of Western Australia (CME) acting chief executive Nicole Roocke said the decision would have a devastating impact on the State’s gold sector, which may be forced to close mines and cut jobs.

“To introduce such austere measures at a time when the gold sector is just experiencing an improvement in production and sales is unjustified, especially when the majority of royalties raised from this increase will eventually be redistributed to other states through GST after four years,” Roocke said.

“Gold companies are a significant contributor to WA Government by way of royalties and account for about $238 million, or 5 per cent, of total resources industry royalties.

“The gold sector employs 25,000 people – around 23 per cent of the total WA mining industry workforce – and many of these jobs may now be put at risk due to this royalty increase.

“The Government should be encouraging investment in the sector, given its positive flow-on effect in job creation and economic growth, not hampering it with higher royalties and taxes.”

Rooke pointed to the Labor Party’s previous comments on the matter, saying it was disappointing the party is on the record in saying that any increase to gold royalties would have a negative impact due to the marginal nature of the industry.

“Gold companies, who have only recently started expanding and constructing new mines, will feel betrayed by this decision and concerned about the future of the industry,” she continued.

“CME will be strongly opposing this increase in gold royalties on behalf of our members as it will have long-term consequences for the resources industry and the WA economy as a whole.”

Investment Returning to Junior Exploration Sector

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THE CONFERENCE CALLER: Queensland Government resources investment commissioner Todd Harrington opened the Brisbane Mining 2017 conference this week by acknowledging the recent tough times endured by the resources sector.

“It’s been a pretty rough five years, or more, for investors and the mining community,” Harrington told delegates.

But he was emphatic in declaring the industry, particularly the junior end of town, was getting back on its collective – steel-capped feet.

“About a year and a half ago we saw a meaningful rebound in the coal space and then foreign exchange,” he continued.

“A whole series of other sequences have kicked back in that has brought us out of being a dire straits sector to being the sector to be getting a lot of positive attention, and rightly so.”

Harrington said that when investors look to put their money to work they are clearly looking for the most favourable resource destination, which made investing in the Australian resources sector a smart thing to consider.

“The Australian advantage is our very favourable foreign exchange position,” he explained.

The Australian dollar – in US Dollar terms – has been hovering around the 75 cents to 80 cents mark over the past 12 months.

In 2010 when we cracked US$300 per tonne for our coal we were at dollar parity, so US$300 was basically AUD$300 

When the coal price recently hit that US$300 spike again, the Australian dollar was at 75 cents, basically generating revenues of over $400 per tonne.

“We have a natural hedge – call it a benefit – for our producers here that sees us stand in front of some of our competitors that are equal in jurisdiction and opportunity,” Harrington said.

So, with this increased sentiment for the industry, what does Harrington say are the commodities that investors are chasing?

“Go back a year ago, and it was all about lithium, cobalt, and gold was hot to trot about a year ago,” he said.

“These days we are receiving a lot more zinc enquiries, copper is hot and bauxite is very much in favour.”

The renewed interest in the junior resources sector, for both the traditional and newly favoured commodities, is hardly surprising given its long-term relationship with the Australian investment community.

As with all such relationships, there has been plenty of ups and downs, however the recent second – perhaps third – honeymoon phase most probably has plenty to do with the fact that Australian investors understand the junior resources sector.

According to Lanstead Fund director Andrew Sparke there are currently some 730 resources companies listed on the Australian Securities Exchange.

Metals and mining companies have the biggest representation on the board taking up some 30 per cent of the space.

“It’s good to see the sentiment is turning and I think we are certainly heading into a better resource cycle which is great to see,” Sparke said when taking his turn at the podium.

“I think we will start to see some more longer-term money start to come to this sector, once the current cycle starts to mature even further.”

 

Junior Exploration Rise Supported by Global Commodity Demand

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THE CONFERENCE CALLER: The recent rise in activity for junior resource companies is directly proportional to the rise in investment cash flowing towards the sector.

Austex Mining executive director Rob Murdoch provided the wakeup call for the second day audience at Brisbane mining 2017 with results of research that showed there to be, on average, around $700 million every quarter available for the junior resource market.

“That’s what the financial capital world will put up for projects, and of course companies have to fight for that money,” Murdoch said.

Murdoch explained that due to a spike in the average share price for junior resource companies back in 2016, companies could raise cash more readily

This resulted in an increase in Q2 this year where companies have been able to raise about $800 million.

The momentum has kicked on into Q3 with some substantial raisings currently underway.

This has led to an increase in exploration spending this year with companies committing to spend around the $400 million mark.

“The estimates companies make are amazingly accurate so they have a pretty good judge, overall, of what they are going to spend over the next quarter,” Murdoch said.

Murdoch’s rise in exploration thesis garnered some support in the late afternoon session when CRU Group associate consultant Dr Allan Trench declared we are currently seeing, “the return of the exploration IPO and the majors even are talking about exploration – something that hasn’t been on the agenda for the past five years”

“There is definitely a rising tide out there in the exploration world,”

Trench supported this ideal with facts and figures indicating a rise – albeit small – in market growth, in terms of overall GDP.

“Only 12 months ago we were talking about the new mediocre,” he said.

“It may not feel like it, but things are actually outperforming expectations by a few fractions of a per cent in terms of global GDP growth this year versus last.

“That’s part of what is driving the actual uptick in what we’re seeing and what we’re forecasting going forward.

China, he said, has borne the responsibility of setting metal consumption rates, but now the rest of the world is beginning to pull its weight in that area.

Price growth and volume growth in terms of billions of dollars in value from 2016 to 2017 has been substantial.

Trench said that’s why, hopefully, and we are already seeing it, company share prices should be on the rise for those exposed to the right commodity.

Zinc is a $37 billion market and prices have recently jumped up to the $3000 per tonne mark.

The current outlook for zinc is that the world will continue to require production as demand outstrips supply.

Trench described the copper market as being “Interesting”, due mainly to the lack of global stocks taking it into the realms of “a real scarcity”.

“There may be hidden stocks that are coming out, people do all sorts of tricks with stocks, of course – hold metal off exchanges – but nevertheless, copper is looking very exciting.”

Apart from the graphite and lithium that goes into an electric car it also requires four times the copper of regular cars.

Trench said it appears analysts have “got it right” and the uptick in the market is happening declaring there to be, “a large uptick still to come”.

Nickel isn’t as scarce as the likes of copper at present and as such, the market isn’t as capricious as it can be.

“Nickel has been amazingly boring,” Trench said.

“Nickel is usually exceptionally volatile, but it has been relatively boring.”

Trench explained that gold had become one of the toughest commodities to forecast.

He provided three reasons for this difficulty being that analysts were uncertain whether the current pricing for gold was a US Interest Rates Story, a China-Demand Side Story, or a Global Uncertainties Story.

Trench demonstrated that CRU has gold remaining relatively flat in US dollar terms.

“To put that into context – the Australian dollar gold price is around $1650 per ounce – approx.  US$1300,” he continued.

“The median cost of production on an all in sustaining cost basis in Australia is around $1100

“So, there is a five hundred dollar margin there.

“If gold prices stay where they are right now, in Australian dollar terms, people are making a great deal of money in gold.”

Aeris Resources Takes to Tritton with Renewed Exploration Vigour

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THE INSIDE STORY: Aeris Resources (ASX: AIS) is currently working through a two year, $7.5 million strategic greenfields exploration program at the company’s 100 per cent-owned Tritton Copper Operations in New South Wales.

Aeris Resources commenced the program in July 2016, which is exploring for deeper/concealed mineralised systems within the known Tritton and Kurrajong stratigraphic corridors.

By using new high power electromagnetic (EM) geophysical techniques, Aeris anticipates identifying conductive bodies to depths of 500 metres below surface.

Results will augment Aeris’ current standing as an established copper producer and developer with multiple mines and a 1.8 million tonnes per annum processing plant.

In FY2017 the Tritton copper operations produced 23,404 tonnes of copper and in FY2018 is expected to yield 27,000 tonnes of copper from ore sourced from the Tritton and Murrawombie underground mines.

Undertaking recent work at Murrawombie, Aeris proved the adage that sometimes things need to get harder before they get better.

The company encountered more difficult than expected ground conditions in the upper levels of the mine, which impacted on forecast stope production.

This led to a rethink resulting in a decision to change to a bottom-up mining method and continue decline development in FY2017. 

Although this did result in lower than anticipated production during the year, it also provided the opportunity for Aeris to undertake additional grade control drilling, delivering some exciting results.

Grade control drilling identified a large high-grade zone in the mine’s 102 stopes, enabling the company to change its mining methodology from an originally planned bulk mining method through the whole orebody to a combination of low dilution, open stopes in the high-grade zone.

This also had the added benefit of lowering costs via sub-level caving mining for the lower grade areas of the orebody.

The first stopes under the new mining method were commenced during the fourth quarter FY2017 and the mine will ramp-up to full production during FY2018.

Other work to be completed as part of the greenfields exploration program involved high power electromagnetic (EM) geophysics technology, utilising moving loop EM technology which can penetrate 400 to 500 metres below surface, compared to the 200-metre depth range of equipment previously used on the tenement package.

An ongoing Moving Loop Transient EM (MLTEM) survey program is underway to detect for large Tritton-sized orebodies (+10 million tonnes).

Known deposits within the Tritton tenement package are directly detectable via EM methods, such as those completed within the tenement package during the mid-1990s that led to the discovery of the Tritton deposit.

The MLTEM survey has identified a sulphide rich component of the Kurrajong prospect, modelling EM conductors that extend to 500 metres, providing further confidence the technique is successful in detecting conductive bodies to depths much greater than previous EM methods.

The survey has detected three new EM conductors, and confirmed the already known Kurrajong prospect.

Aeris intends running a fixed loop EM (FLEM) survey over each EM conductor to refine the modelled plate spatial location and dimensions further to assist with prospect ranking and drill targeting.

“The work carried out so far has really only scratched the surface of what we hope the revitalised greenfields exploration program will achieve across our Tritton tenement package,” Aeris executive chairman Andre Labuschagne told the Resources Roadhouse.

“What we have seen to date, however, has been extremely encouraging and has strengthened our confidence in the prospectivity of this region.

“We will look to build on this early success in the coming year.

“Also on the greenfields exploration front, we have the very exciting IOCG anomaly to follow-up in FY2018 at the Torrens Joint Venture Project (Aeris 70%) in the highly prospective Stuart Shelf region of South Australia.

“The Torrens anomaly has a larger footprint than Olympic Dam.”

Aeris’ confidence is well-placed, especially with the copper price receiving a substantial upward re-rating during the first half of 2017, as the broader market took to a positive outlook on the supply/demand fundamentals for copper.

Market commentary has continued to support this position with many analysts forecasting the copper market to move into a deficit position before the end of the decade.

Aeris Resources Limited (ASX: AIS)
…The Short Story

HEAD OFFICE
Suite 2.2, Level 2, HQ South Tower,
520 Wickham Street,
Fortitude Valley, Brisbane QLD 4006

Ph: +61 7 3034 6200

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

DIRECTORS
André Labuschagne, Alastair Morrison, Michele Muscillo, Marcus Derwin

Ruby, Ruby…Ruby Will You Be Mined

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THE INSIDE STORY: Mustang Resources (ASX: MUS) stands out from the regular pack of ASX-listed mining companies, simply due to its choice of focus commodity…rubies.

Mustang Resources is developing the Montepuez ruby project in Mozambique, which is producing world-class rubies expected to generate strong cashflow through rough ruby sales.

Mustang recently ramped up ruby recoveries at Montepuez, increasing the project’s ruby inventory by over 70 per cent to approximately 120,000 carats.

Mustang is confident the enlarged ruby inventory will enable it to achieve a 200,000- carat inventory, which the company expects to demonstrate the cashflow potential of the Montepuez ruby project.

This confidence allowed Mustang to revise its sales strategy for the Montepuez gem-ruby inventory, and to announce plans to complete an auction/tender to bulk rough buyers of the anticipated 200,000 carats targeted for October 2017.

The change in strategy resulted from discussions Mustang held with key ruby buyers, and was inspired by the success enjoyed by its neighbour, AIM-listed ruby market leader Gemfields (AIM: GEM).

Gemfields’ Mozambique rough ruby auctions have set a benchmark yielding total sales of US$280 million from eight auctions over three years, which Mustang is eager to replicate.

The decision is a notable strategic shift, as it manoeuvres the company from selling its rubies in both the cut and polished and rough forms to selling them all as rough stones.

Mustang believes the new strategy will not only generate substantial cashflow, it, importantly, can ensure the company avoids entering into any competition with their rough ruby customers who will most likely have high-profiles in the cut and polished ruby market.

A contributing factor to the recent ruby recovery ramp up was the recent commissioning of the upgraded Montepuez processing plant.

The upgraded plant is designed to achieve a feed/throughput rate of 250 tonnes per hour and Mustang’s initial plans are to operate the plant for one seven-hour shift a day.

This would be sufficient for the company to achieve or exceed its daily total processing target, which represents a 580 per cent increase in the throughput rates recorded before the $1 million plant upgrade was undertaken.

It also demonstrates scope for further substantial increases in processing rates by operating additional shifts in the future.

Mustang’s ramp up in ruby inventory was boosted by the acquisition of a 65 per cent interest in Mining Licence 8245L from Regius Resources Group, located three kilometres from the Montepuez plant.

The processing of gravels from initial bulk sampling at the new licence is already yielding high-quality secondary rubies.

Initial manual test pitting by Mustang across a broader area of 8245L generated strong results, with 11.75 carats (9.45ct ruby and 2.3ct corundum) recovered from 2,726 kilograms of gravel.

“Licence 8245L is highly strategic because it borders our existing Montepuez licence areas on one side, and Gemfields’ lucrative ruby project on the other,” Mustang Resources managing director Christiaan Jordaan told The Resources Roadhouse.

“Just as importantly, it lies along the south-east, north-west ruby mineralisation trend, which also transects the adjacent Gemfields licences.”

In the recently-completed June quarter, Mustang processed, 5,692 cubic metres (8,823 tonnes) from an initial bulk sample from its current focus area to the south east of the processing plant, delivering 4,445.3cts of rubies, including consistent recovery of high-quality stones larger than 3cts – classified as Special/Premium Stones.

Processing of 4.5 tonnes of gravel from test pits through Bushman Jigs yielded 10.7cts of rubies.

Mustang is mapping the full size of the secondary ruby deposit/s in this key target area and beyond.

From its 80 per cent-owned Caula graphite project, along strike from Syrah Resources’ (ASX: SYR) Balama project in Mozambique, Mustang received strong results from initial beneficiation testwork conducted on both oxide and fresh samples.

Mustang interpreted the results to confirm Caula as a Tier 1 graphite project.

“Caula hosts extensive high-grade graphite mineralisation and our preliminary metallurgical testing demonstrates it also has over 55 per cent large and jumbo Flakes in the fresh ore,” Jordaan said.

“These results highlight Caula’s potential to be a low-cost graphite supplier to the lithium battery and expandable graphite industries.”

Caula’s high head grade indicates a smaller process plant (lower CAPEX) could generate similar products to other lower grade deposits in the region.

Mustang Resources Limited (ASX: MUS)
…The Short Story

HEAD OFFICE
Level 10
20 Martin Place
Sydney NSW 2000

Ph: +61 2 9239 3119

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

DIRECTORS
Christiaan Jordaan, Ian Daymond, Cobus van Wyk, Peter Spiers

Sliver City Minerals Drill Ready at Copper Blow

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THE INSIDE STORY: Silver City Minerals (ASX: SCI) is generating a good deal of excitement around the company’s historic Copper Blow copper project, located 20 kilometres south of Broken Hill in New South Wales.

The Copper Blow project is a Joint Venture between Silver City (75%) and CBH Resources (CBH; 25%), which owns and operates the Rasp Mine and sulphide flotation facility at Broken Hill. 

Mining commenced at Copper Blow in 1887 producing 715 tonnes of copper ore at grades up to 13 per cent copper during that initial phase.

Drilling carried out by previous owners over 60 years from 1949, included around fifty-three holes testing a zone measuring one kilometre in strike.

Silver City recently completed a review of historic Copper Blow drilling as part of a broader review of its southern tenements, which identified a series of diamond drill holes completed between 1982 and 1994, six of which were drilled to depths of greater than 250 metres, encountering high-grade copper mineralisation.

The review unearthed diamond and RC holes at Copper Blow that returned high-grade copper and gold results over estimated true widths of 15 metres, including:

11.8 metres at 6.7 per cent copper, 1.92 grams per tonne gold and 13.7g/t silver;

19.8m at 1.8 per cent copper, including 3m at 4.6 per cent copper;

15m at 2.7 per cent copper, 0.53g/t gold and 3.7g/t silver; and

2.1m at 3.2 per cent copper, 0.65g/t gold, 5g/t silver and 0.038 per cent cobalt.

As good as these results were, Silver City was unable to locate any evidence of systematic follow-up exploration of these holes by previous explorers to ascertain the existence of steeply plunging, high-grade deposits.

Its appetite whetted by the historic drilling results, Silver City collected sixteen Copper Blow rock chip samples from over a strike length of one kilometre to gain a better understanding of the trace element assemblage of the copper-rich mineralisation.

The samples were analysed for 36 elements with results showing them to be oxidized with abundant copper carbonate minerals, including malachite.

They were also highly elevated in copper, returning results like those encountered by the historic drilling in deeper sulphide zones.

Copper results ranged from 0.01 per cent to 6.89 per cent with an average of 2.6 per cent, which Silver City interpreted to suggest several anomalous trace elements may hold economic potential.

These include gold (to 1.84g/t), silver (to 12.6g/t), cobalt (to 749ppm), lanthanum (a rare earth element to 590ppm) and molybdenum (to 198ppm).

The company concluded potential exists for other economic elements associated with copper – especially gold, silver and cobalt – and that the signature of these elements is typical of IOCG deposits.

It didn’t take long for Silver City to start planning a 2,600m drilling program, consisting of two groups of drill holes.

The first will assess the southern group (south of Stenhouse shaft) and will comprise combined RC and diamond holes designed to outline plunging bodies of copper-rich mineralisation near existing high-grade intersections.

North of the Stenhouse shaft four reverse circulation percussion holes will assess an area of broad copper mineralisation within the strongest magnetic anomaly in the area.

“The initial drilling program at Copper Blow will test a mineralised strike length of approximately 750 metres to vertical depths of between 50 and 200 metres,” Silver City Minerals managing director Chris Torrey told The Resources Roadhouse.

“This zone lies at the southwestern end of a highly-prospective, poorly explored and poorly outcropping magnetic horizon, which extends for four kilometres.

“We are also currently planning an exploration program for the horizon to the northeast of Copper Blow, which is likely to include Rotary Airblast (RAB) drilling and ground geophysical surveys.”

Silver City is undertaking a placement of new shares to sophisticated investors for a total value of $428,000, as well as conducting a Share Purchase Plan to existing eligible shareholders to raise a maximum of $250,000.

The anticipated $0.7 million to be raised has been earmarked to fund the high impact drilling program on the high-grade Copper Blow project.

“We believe Copper Blow is an exciting exploration program and the high-grade historical results of up to 6.7 per cent copper over 11.8 metres underpins the confidence we have in the project,” Torrey said.

Silver City Minerals Limited (ASX: SCI)
…The Short Story

HEAD OFFICE
Level 1
80 Chandos Street
St Leonards NSW 2065

Ph: +61 2 9437 1737
Email: info@silvercityminerals.com.au
Web: www.silvercityminerals.com.au

DIRECTORS
Bob Besley, Christopher Torrey, Gregory Jones, Ian Plimer, Josh Puckridge