South Australia- Riding the Boom
7/12/2007 By: Geoff Muers
South Australia: Riding the BoomOne state outside of Western Australia which is optimistic about the future of the mining industry, is South Australia, where minerals projects currently being developed or planned, are anticipated to amount to a 100% increase in export earnings over the next seven years, and that is just the start according to Executive Director of Primary Industries and Resources (PIRSA) Paul Heithersay.
Annual exploration spending in the state has increased 800% in the last five years to around $260m, and judging by the record number of attendees at the packed SA Exploration conference last Friday, the enthusiasm is showing no signs of abating.
Last week we had the pleasure of accompanying the Sydney Mining Club on a tour of a number of projects, jointly arranged with volunteers of the local Historical Aircraft Restoration Society (HARS). Sponsored and hosted by a number of mining companies, we visited a number of projects throughout the state.
First day was a visit to projects comfortably located within driving distance of Adelaide, all which enjoy good proximity to infrastructure, without the need to build camps and fly-in workers. There is a clear cost advantage here compared to more remote operations.
First stop on the tour was Australian Zircon’s (AZC) newly commissioned Mindarie project located a couple of hours drive north-east of Adelaide. Delivered on time and budget, the $80m operation plans to extract up to 40ktpa of zircon and other products.
The official opening, originally scheduled to coincide with our visit, had to be postponed at the last minute, however the site is already operational, employing dozens of local workers.
Hillgrove Resources- Kanmantoo Copper Project
Hillgrove Resources (HGO) are planning to re-develop the Kanmantoo copper mine where a resource of
[email protected]%Cu and 0.2g/t Au has been established around the pit previously operated by CRA in the 1970’s.
Located close to the town, the mine appears somewhat environmentally constrained, with full feasibility due for completion in coming months. The operation plans to mine around 2mtpa initially, producing up to 20ktpa of copper and 6koz of gold plus silver.
Hillgrove’s current market capitalisation almost entirely consists of their 39% stake in Eastern Star Gas (EAS), which may prove a ready source of funds provided a buyer can be found. Exploration potential in the region appears good, and mostly not followed up due to concentration on the open pit resource.
Terramin Australia (TZN) – Angas Zinc Mine
With all the industry talk of budget blow-outs and delays, another South Australian mine currently on track is Terramin’s Angas mine, near the town of Strathalbyn in the Adelaide Hills. Strict environmental controls, including double lining of the tailings dam, ensure minimal impact on the close neighbours.
The decline is underway, with construction at full belt towards first concentrate production in 2008. The mine aims to produce around 30ktpa of zinc, 10ktpa of lead and 400kozpa of silver. Unusually, the mine will produce a copper-lead concentrate, and enjoy high payability for the 5g/t gold in concentrate expected.
The relatively low-cost operation should provide welcome cashflows as Terramin looks to develop the huge Tala Hamza resource in Algeria.
The next day we strapped in, army-style, aboard two WWII Dakotas for the 2.5hr flight to our next mine. Meticulously restored and maintained by retired pilots and associates at Albion Park in NSW, the planes are available for groups at low cost for special events.
Dominion Mining (DOM) – Challenger Gold Mine
We flew to the remote Challenger mine near the WA border, where Perth-based Dominion mining (DOM) has taken many in the industry by surprise over the last year or so with the performance of the high-grade underground operation.
We soon found out why, with the underground conditions very favourable and with no water, stable ground, very little roof support is required, except in the immediate ore blasting zone and even then mainly for psychological reasons we are told.
The thick, high grade ore is quartz-rich, blasts easily with no dilution and positive grade reconciliation. In the hinge zone we visited, grade is up to one ounce per tonne (annual average almost 10g/t ore feed) with 60% of the gold reporting to gravity circuits.
The relatively small, 75tph processing facility delivers over 100kozpa, with potential to produce up to 150kozpa with minor alteration to facilities.
New ore zones are being discovered, with the resources of 1moz likely to grow significantly, potentially towards 2moz.
What impressed many on the trip was the enthusiasm of the staff, and their excitement about their work. No doubt they have shares in the business, and with a cash cost below $350/oz, last years profit of $52 million could well be exceeded in coming years.
Oxiana (OXR) – Prominent Hill copper/gold mine
Construction is in full swing at Oxiana’s Prominent Hill mine, with accommodation for 1,000 people to grow to 1,300 or more for the peak construction phase commencing early in the new year.
First ore has apparently been uncovered in the pit ahead of schedule, with the foundations for the huge gyratory crusher and SAG/Ball mills currently being prepared.
First production is scheduled for later in 2008, which should be in time to take advantage of high prices for gold and copper.
We inspected some of the drill core, which is being recovered from deep drilling (up to 2km) below the current open pit limit. Recent intersections of well over 100m at >1.5%Cu and 0.5g/tAu are likely to be repeated as a substantial underground resource evolves.
Current reserves are
[email protected]% Cu and 0.58g/t Au, and in our view another 100mt won’t be a significant challenge, with the large amount of bornite and chalcocite ensuring low-cost processing and high-grade concentrates.
Either side of the pit, thick economic zones are reported, which may extend the life of the open cut whilst a concurrent UG operation is examined.
BHP Billiton – Olympic Dam
Last-minute schedule changes meant we were unable to make it on the ground at Olympic Dam, however a lot is gleaned from flying over the massive site.
A small (compared to what they are planning) open cut is being constructed, and we could see the scale of the pattern drilling undertaken to justify a $5 billion expansion of operations.
Why go anywhere else? You may ask, when you have one of the largest resources of uranium, copper and gold in the world and billions of dollars in existing infrastructure at your disposal.
Marathon Resources (MTN) – Mt Gee
Staying at the Arkaroola resort near Leigh Creek you get a feel for the challenges that lie ahead for Marathon (MTN) in developing the large Mt Gee uranium deposit (43mt@630ppm U308).
The terrain is steep and spectacular, where many pioneering geologists including Sir Douglas Mawson cut their teeth in the surrounding hills.
The area was extensively drilled in the 1970’s by Exoil in the vicinity historical uranium mining. The deposit is situated in a Class A environmental zone, and therefore subject to the Federal Government’s EPBC Act, however is well outside the National Park to the south.
MTN is making a determined effort to address concerns, with an environmental manager on-site and a large number of staff overseeing drilling operations with two rigs active when we visited.
The company is considering establishing a processing plant out on the plain near the Beverley mine and is examining options for locating a decline, as it progresses feasibility work.
The deposit is situated in close proximity to the Four mile deposit of Heathgate resources and Alliance Resources (AGS), and the area is becoming a uranium district with further exploration success and expansion of mining areas likely in the region.
Alliance Resources (AGS) – Four Mile
The first thing you notice about Beverley uranium mine is the small, inconspicuous size of the site. From the air, the most obvious surface expression is the airstrip.
For a facility producing up to $200 million worth of uranium every year, the operation seems quite simple: pump a slightly acidic solution into the ground, run it through a series of small ponds and tanks, and recover the metal in powdered form ready for export.
Four Mile is the name of the deposit located near the foothills, and 25% owned by ASX listed Alliance Resources (AGS). With resources depleting at nearby Beverley, privately owned Heathgate Resources (Quasar) appears keen to bring Four Mile into production ASAP.
A field leach trial is planned to commence soon on the eastern prospect, to determine the best way to process the ore. An existing resource of 15,000t of contained uranium has been established at Four Mile West, with a resource estimate due in coming months on the eastern part of the deposit.
The overall area is quite prospective, and more high-grade deposits may be found in time.