On the Ground – Lady Annie copper mine

On the Ground  – Lady Annie copper mine

Hong Kong-listed resources house CST Mining vice-chairman Owen Hegarty stopped by to invite Resources Roadhouse to check out how rapidly the company was advancing the reborn Lady Annie copper mine outside Mt Isa in Queensland.

First off a brief history.

The Global Financial Crisis of 2008 hit many mining operations hard. Few more so than the Lady Annie copper mine.

A lot of people and a lot of banks were very nervous about this time as they considered how they were going to survive.

All favours and debts were called in, which basically resulted in the Lady Annie mine, operated at the time by CopperCo, being closed down and put in the hands of receivers.

On 6 February 2009, a subsidiary of Perth-based entrepreneur Tony Sage’s Cape Lambert purchased CopperCo’s secured debt from Macquarie Bank Limited and LinQ Capital Limited.

Sage attempted to IPO a company called Q Copper as a vehicle for Lady Annie. Unfortunately for him his timing was off and a market downturn at the end of 2009 meant he was unable to get the IPO across the line.

A second attempt with a revised prospectus in January 2010 met with another market slump and shared a similar fate.

“Five minutes after that failure was when I rang him and said, ‘we’ve got the money, we’re interested in copper, by coincidence, and we’re very happy to take it off your hands’.”, Hegarty told Resources Roadhouse.

“Within a couple of weeks we were able to put a deal together and it came from Cape Lambert across to CST Mining.

“It was a bit of a coincidence that we were looking for copper assets, he had just failed to get it up in the IPO, and we were able to deal.”

As former head of copper/gold play Oxiana, which he turned into OZ minerals with Zinifex, Hegarty was familiar with Lady Annie’s history as an oxide ore body with sulphide potential.

The region surrounding Lady Annie has seen a lot of rough mining activity for the best part of 50 to 70 years consisting underground workings, open pits and so on but the first serious attack on the whole area was launched by CopperCo, which worked to bring all the different ore bodies in together.

“And the people who did it,” Hegarty exclaimed, listing off names synonymous with copper mining and the Lady Annie project.

“Brian Rear, Milan Jerkovic, Barry Deans, Brian Wyatt; The full team is as good as it gets on the whole planet – there’s nothing that group doesn’t know about heap leach solvent extraction electrowinning (SX-EW).

“The examples being Giralambone (NSW), Whim Creek (WA), Nifty (WA), and now Lady Annie (QLD).

“That’s a better track record than most people around the planet and was one of the reasons that I was very confident about getting involved in Lady Annie because I knew that with people like Barry Deans, Brian Wyatt and Brian Rear, the whole team, the technical work would have been very well done and the plant will work.”

Lady Annie is a heap leach SX-EW operation with a capacity of 30,000 tonnes per annum, which is producing LME Grade A copper cathode through one central processing plant from ore mined from multiple pits.

As of October 2010 Measured, Indicated and Inferred Resources at Lady Annie totalled 65.16 million tonnes at 0.71% copper for 460,000 tonnes of copper.

Before the ink was dry on contract to acquire the project CST Mining had achieved its first production from the mine by November 2010 with first spots sales realised in December.

In a move to increase resources and extend the life of the mine the company has earmarked a massive $US20 to $US25 million dollar drilling program for 2011, which will comprise 95,000m of reverse circulation (RC) drilling, 28,200m diamond drilling and 28,500m of rotary air blast (RAB) drilling for a staggering total of 155,000m.

“We have three drill rigs on site at the moment and we are just holding our breath waiting for another two, with the sixth one due in July,” CST Lady Annie Operations exploration manager Jay Klopper told Resources Roadhouse.

“Last year we drilled close to 44,000 metres of RC and Diamond. The diamond drilling was focused mainly on metallurgical test work and resource extension.

“Not so much the resource conversion but stepping out trying to find new areas that we can step into and start working on this year to come up with new resources to add to the resource base.”

“We did a very big airborne magnetic survey, which was very detailed. It took us about two and a half months to do 24,000 line kilometres and it is a fantastic data set.”

The potential Klopper and his exploration team hope to unlock could very well lie in the large ground tenure the company holds around Mt Isa that has never been explored systematically in the modern sense.

CST Mining holds 1640 square kilometres of granted tenure with a further 1600sqkm currently under application.

A lot of tenure the company does have under its control at the moment had previously been in the hands of a consortium of companies.

“Their focus in the last 10-15 years has been on Lady Annie and Mt Kelly just trying to get the oxide resources up and running,” Klopper said.

The Mt Kelly area contains a number of historic mine workings that produced small quantities of high-grade copper oxide ore, and the Mt Clarke, Flying Horse, Mt Kelly Workings and Swagman deposits.

The Lady Annie and Lady Brenda deposits are located within the Lady Annie Area, approximately 18km northwest of the Mt Kelly process plant.

Another target of particular interest is the Anthill deposit located 40km south of the central processing plant within the Buckley River area.

In 2010 some 10,600m of RC drilling was carried out at Anthill with the aim of moving it towards a mineable resource.

This program was successful bringing Anthill from a pre-2010, mostly inferred resource, of 3Mt oxide at 1.1% copper for 33.4,000 tonnes copper metal to a 2010 re-estimate of 4.8Mt at 0.76% copper oxide, global estimate, mostly inferred for 36,400 tonnes copper metal.

The company is certain this is a pretty good indication that regional exploration is the key to expanding the project.

“There has been very little regional, systematic exploration in that time,” Klopper continued.

“There is a massive historical data set out there, which has never been revisited. So we are in the position to go out and assimilate all that data and put it together with a well-funded budget.

“In all we have three key objectives. The first objective is our Life of Mine. Currently LOM is around three and a half to four years.

“We want to get that to eight years, or eight years plus, in the oxide mine.”

The other opportunities presenting themselves are in the form of transitional material and sulphide.

Klopper explained that transitional material has always, historically, been bridesmaid to oxide because it has been perceived as difficult to treat.

“But with new ideas and new people it is now seen as an opportunity,” he said.

“There is sulphide sitting underneath all of our pits and also under the regional tenure. It has never been systematically explored.

“There are probably half a dozen deep drill holes into the sulphide outside the current mining areas.”

The plan for 2011 is to pursue this sulphide mineralisation at Lady Annie as well as other target areas at Mt Kelly, Anthill and McLeod Hill.

The company is confident the sulphide resources at these locations could underpin a 10 to 20 year plus LOM.

“Each one of our pits has significant sulphide potential and that’s one of our priorities at the moment, looking at that potential.”

Resources Roadhouse travelled to Lady Annie as a guest of CST Mining