Saturday 22nd October 2016

Resource Clips

Posts tagged ‘BHP Billiton Ltd (BHP)’

Equitas Resources appoints advisers for its new Brazil gold producer

May 2nd, 2016

by Greg Klein | May 2, 2016

Days after acquiring a Brazilian gold operation, Equitas Resources TSXV:EQT announced a new advisory board to help develop the project further. Last week the company announced its takeover of Alta Floresta Gold and a large portfolio including a modest gold operation. The Cajueiro project’s Baldo zone produces approximately one kilogram of gold a month, an amount Equitas hopes to improve through greater recovery.

Equitas Resources appoints advisers for its new Brazil gold producer

A sample from the Cajueiro operation offers
evidence of additional near-surface gold potential.

Michael Bennett and Jon Coates comprise the new advisory board.

Bennett has spent 23 of his 30-year geologist career in South America, where he’s credited with three gold discoveries, Cajueiro and Coringa in Brazil, as well as Puquio North in Bolivia. A Brazilian resident who speaks Portuguese and Spanish, Bennett also serves as general manager for Brazil Manganese and a director and officer of Equitas subsidiary Alta Floresta Gold Mineracao.

Coates’ 36-year career encompasses mining geology and business development on five continents. He spent much of that time with BHP Billiton NYSE:BHP, where he held positions including regional manager Latin America, VP of business development China and chief geoscientist, exploration. Until recently he acted as executive geoscience adviser for the Saudi Arabian mining company Ma’aden.

In addition, Equitas announced filing an updated 43-101 technical report that recalculates data from a 2013 resource estimate, providing new numbers for four zones of sulphides and oxides. Sulphides now total 214,100 gold ounces indicated and 203,500 ounces inferred. Oxides total 78,400 ounces inferred.

An upcoming program of drilling, bulk sampling and trenching will seek additional oxide resources at Baldo.

Sulphides for Cajueiro’s four zones show:

Crente zone

  • indicated: 8.64 million tonnes averaging 0.771 g/t for 214,100 gold ounces

  • inferred: 5.83 million tonnes averaging 0.628 g/t for 117,700 ounces

Baldo zone

  • inferred: 1.32 million tonnes averaging 0.777 g/t for 33,000 ounces

Matrincha zone

  • inferred: 1.6 million tonnes averaging 0.797 g/t for 40,900 ounces

Marines zone

  • inferred: 785,000 tonnes averaging 0.472 g/t for 11,900 ounces

Total sulphides

  • indicated: 8.64 million tonnes averaging 0.771 g/t for 214,100 gold ounces

  • inferred: 9.53 million tonnes averaging 0.664 g/t for 203,500 ounces

Oxides for the four zones show:

Crente zone

  • inferred: 381,000 tonnes averaging 1.482 g/t for 18,200 ounces

Baldo zone

  • inferred: 309,000 tonnes averaging 3.029 g/t for 30,100 ounces

Matrincha zone

  • inferred: 155,000 tonnes averaging 2.717 g/t for 13,500 ounces

Marines zone

  • inferred: 529,000 tonnes averaging 0.977 g/t for 16,600 ounces

Total oxides

  • inferred: 1.37 million tonnes averaging 1.775 g/t for 78,400 ounces

Equitas sees near-surface oxide expansion potential in all four zones, as well as exploration potential in five other anomalies.

Read more about Equitas Resources.

Pay as you go

April 28th, 2016

New gold producer Equitas Resources sees revenue for incremental expansion

by Greg Klein

New gold producer Equitas Resources sees revenue for incremental expansion

Equitas Resources meets Alta Floresta during due diligence in Brazil.


Negotiations with minority shareholders dragged out longer than expected but on April 27 Equitas Resources TSXV:EQT officially made the transition from Labrador nickel explorer to Brazil gold producer. On closing its acquisition of Alta Floresta Gold, Equitas now takes over a modest gold operation with the intention of increasing production—and cash flow—incrementally. Should all go to plan, that would bring a step-by-step payback for each new stage of the operation, as well as funding for further exploration.

That certainly contrasts with the traditional exploration model, with which investors can be quick to show impatience. Equitas experienced that first hand after just one season of drilling its Garland project, despite its compelling nickel-cobalt-copper story south of Voisey’s Bay.

New gold producer Equitas Resources sees revenue for incremental expansion

In operation since June, the Cajueiro project holds potential
for greater recovery, as well as expansion of near-surface oxides.

Looking for alternative financing, then-president/now-chairperson Kyler Hardy learned about Alta Floresta’s Cajueiro project through a friend in the company. Hardy not only liked its potential. He also recognized a good fit between the two companies’ teams.

Alta Floresta brings to Equitas its 100% interest in six gold properties with four production licences, part of a portfolio covering more than 184,410 hectares in Brazil’s central states of Mato Grosso and Para. The flagship Cajueiro project’s Baldo zone has been in operation since June, producing around a kilogram of gold a month. That amounts to recovery of only about 30% to 35%, achieved by running alluvium and saprolite through a sluice box.

Equitas hopes to see considerable improvement within months by installing a gravity plant, then about 85% recovery with carbon-in-leach processing that could begin early next year. Full open pit production would be a longer-term goal.

We expect the payback for each stage in less than a year, much less for the gravity plant. We’re derisking it that way, by building in stages.—Chris Harris, president/CEO
of Equitas Resources

The plan is to “develop the project in stages and each stage has to pay for itself,” explains new president/CEO Chris Harris. “We expect the payback for each stage in less than a year, much less for the gravity plant. We’re derisking it that way, by building in stages. That could also provide cash flow for a sustaining exploration program which we hope would then beget further development.”

Of course these are perilous times for Brazil, now undergoing serious recession, a wide-ranging corruption scandal and impeachment proceedings against President Dilma Rousseff. Compounding the problems are their effect on the Brazilian real, which contrasts with currently high gold prices. “But what that’s doing to our project is creating huge cost compression,” Harris says. “That benefits both capex and opex.” The company has already selected a nearly new gravity plant in the region for purchase. Its price has sunk to less than half of what he projected last year.

Exploration will focus on near-surface oxides, where Equitas sees the greatest potential for resource expansion and low-cost extraction.

Except for one property slightly north, the entire portfolio sits on the Juruena gold belt, which has historic estimates of seven to 10 million ounces of artisanal output. Straddling the border between Para and Mato Grosso states, the 39,053-hectare Cajueiro property’s near-term agenda could include bulk sampling and trenching, as well as diamond and rotary air blast drilling. Exploration will focus on near-surface oxides, where Equitas sees the greatest potential for resource expansion and low-cost extraction.

A just-filed 43-101 technical report recalculates data from a 2013 resource estimate to allow for different gold price and opex numbers. The new study bases a cutoff of 0.25 grams per tonne on a near-surface deposit that can be processed by cyanidation or gravity processing. The report provides separate numbers for four zones of sulphides and oxides.

Total sulphide zones:

  • indicated: 8.64 million tonnes averaging 0.771 g/t for 214,100 gold ounces

  • inferred: 9.53 million tonnes averaging 0.664 g/t for 203,500 ounces

Total oxide zones:

  • inferred: 1.37 million tonnes averaging 1.775 g/t for 78,400 ounces

All four zones show near-surface oxide expansion potential, Equitas states. Five other anomalies offer additional encouragement.

The project has road access to the city of Alta Floresta, 95 kilometres north. A hydro dam now under development should bring electricity within two years, if not sooner.

The arrangement combines talent from both companies. Harris casts a close eye on the accounts, having 30 years’ experience in energy, commodity trading and mining finance with companies like Ernst & Young, CIBC, Enron UK and BHP Billiton NYSE:BHP.

Hardy, through 16 years as a resource sector entrepreneur and executive, demonstrates a facility for operating remote, logistically complex exploration projects. Director Alan Carter, who also sits on the board of Eric Friedland’s Peregrine Diamonds TSX:PGD, brings 30 years’ exploration experience with the likes of Rio Tinto NYSE:RIO, BHP, and ECI Exploration and Mining, among others.

Equitas Resources closes acquisition of Brazilian gold operation

Cajueiro’s alluvial lure suggests
expansion potential to Equitas.

Co-director David Hodge also serves as president of Zimtu Capital TSXV:ZC, a project generator that supports several juniors with acquisitions and advisory services. VP of exploration Everett Makela began his career with Inco, eventually retiring as Vale’s (NYSE:VALE) principal geologist for North America. His international experience includes Brazil.

Mike Bennett, a local resident and director of Equitas subsidiary Alta Floresta Mineração, has spent 23 of his 30 exploration years in South America where he took part in three gold discoveries, Puquio North in Bolivia, as well as Coringa and Cajueiro in Brazil.

Also residing locally, Portuguese/English-fluent Richard Crew acts as operations consultant for Alta Floresta Mineração. His 30 years of experience includes positions as operations manager and COO for numerous companies worldwide. Another nearby resident, project manager and exploration geologist Elvis Alves knows the community as well as the minerology.

The deal has Equitas issuing 103.65 million shares to former Alta Floresta shareholders and 5.28 million options, exercisable at $0.15 for three years, to former Alta Floresta option holders. A 1.75% NSR applies to licences acquired two years ago from a former minority shareholder of Alta Floresta.‎

Earlier this month Equitas closed the final tranche of a private placement that totalled $1.5 million from 30 million units. Insiders bought 10.4 million units.

“We’ll be talking about implementing the gravity plant very shortly,” Harris says. “We’ll also be talking about starting our drilling plan, the drill results and possibly a revised 43-101. We’ll have a steady news flow.”

Another overwhelming election victory for the Saskatchewan Party

April 4th, 2016

by Greg Klein | April 4, 2016

Updated results:

  • Saskatchewan Party 51 seats, 62.63% of the popular vote
  • New Democratic Party 10 seats, 30.36%

Pollsters must be as happy as Saskatchewan Party supporters to see Brad Wall’s group win a predicted third consecutive landslide. The results might suggest a continued status quo for a province that’s held second place for two years in the Fraser Institute’s most important index of mining jurisdictions globally. Saskatchewan has stayed in the top six for the last five years.

Another overwhelming election victory for the Saskatchewan Party

Mining-friendly Saskatchewan once
again carried Brad Wall to victory.
Photo: Saskatchewan Party

The province’s Athabasca Basin region hosts the world’s highest uranium grades, while potash resources farther south also rank among the world’s most important. According to the Saskatchewan Party, the province’s mineral sales rose more than 90% from $4.4 billion in 2007 to an estimated $8.3 billion in 2015.

During the campaign, the party credited itself with promoting the province’s uranium to China and India. The latter country resumed imports last year after Ottawa lifted a previous ban on sales to that country.

Wall has said he’d support federal legislation that would allow foreign companies to hold a majority stake in Canadian uranium mines. But in 2010, his party successfully lobbied Ottawa to block BHP Billiton’s (NYSE:BHP) attempted takeover of Potash Corp of Saskatchewan TSX:POT.

Wall opposes resource revenue-sharing for natives, saying “that money belongs to everyone equally.” But the opposition NDP hasn’t supported such a policy either.

Meanwhile there’s speculation that the supposedly “arch-conservative” Wall might avoid new taxes by launching a post-election deficit budget for a province hit hard by the oil downturn. There are also rumours, according to the National Post, that he’s studying French.

Could that mean an enthusiasm for the French cuisine of Swift Current? An effort to incorporate existentialism into Saskatchewanian political discourse? Or, as the NP wonders, does Wall harbour federal ambitions?

Diversifying opportunity

January 15th, 2016

Equitas Resources looks to Brazil gold production as well as Labrador nickel exploration

by Greg Klein

“How do we add value in such a difficult resource market?” A problem vexing many ambitious explorers, for Equitas Resources TSXV:EQT “it kept coming back to cash flow, cash flow, cash flow,” says president Kyler Hardy. But another question followed: “How do we get that and not abandon our vision” of a Voisey’s Bay-type nickel discovery in Labrador?

The answer may lie in a small-scale gold producer with considerable expansion potential. Under a binding letter agreement announced January 15, Equitas would acquire Alta Floresta Gold, a privately traded British Columbia company with interests in six Brazilian gold properties, one already undergoing modest production. The parties see opportunity to ramp up output to complement an aggressive drill program 30 kilometres south of Voisey’s.

Equitas Resources looks to Brazil gold production as well as Labrador nickel exploration

The takeover target has an approximately 60% stake in Alta Floresta Gold Mineracao Ltd, which holds the six properties, five with production licences, covering over 184,410 hectares in western Brazil’s Mato Grosso state and Para state to the north. Straddling the border of both states is the 44,768-hectare flagship Cajueiro project.

Its Baldo zone now churns out about 100 gold ounces a month, Hardy says. Modest to be sure, but “you look at some of the legends of the business, they built massive companies off of small cash flows. Placer Dome was founded off a very similar project in Papua New Guinea.”

While not necessarily envisioning similar grandeur, the parties have a three-part plan for Cajueiro, where a 2013 resource estimate defined four zones as follows:

Crente zone, 0.5 grams per tonne cutoff

  • indicated: 4.53 million tonnes averaging 1.2 g/t for 168,000 gold-equivalent ounces

  • inferred: 3.02 million tonnes averaging 1 g/t for 100,300 ounces

Crente zone, 0.3 g/t cutoff

  • indicated: 7.4 million tonnes averaging 0.9 g/t for 203,000 ounces

  • inferred: 5.26 million tonnes averaging 0.8 g/t for 127,400 ounces

Baldo zone, 0.3 g/t cutoff

  • inferred: 1.41 million tonnes averaging 1.3 g/t for 61,100 ounces

Matrincha zone, 0.3 g/t cutoff

  • inferred: 1.56 million tonnes averaging 1.1 g/t for 52,900 ounces

Marines zone, 0.3 g/t cutoff

  • inferred: 1.17 million tonnes averaging 0.7 g/t for 27,200 ounces

All four zones have potential near-surface oxide expansion, Equitas stated, while five additional anomalies offer additional encouragement.

A three-phase plan for Cajueiro would begin with installing a small gravity plant to process Baldo’s saprolite mineralization. In production only since June, the alluvial operation currently languishes at about 35% recovery. Phase II would call for a carbon-in-leach plant between the Baldo and Crente zones, less than one kilometre apart. Initial metallurgical tests suggest gravity separation and cyanide leaching could push recovery above 85%. Phase III would use operating cash flow to ramp up Cajueiro into open pit production.

Hardy foresees a fast-paced timeline, with the CIL plant in place within six months and commissioning complete over another two months. The gear has already been sourced with “everything we need within 50 kilometres of us,” he says. The weak Brazilian real helps lighten costs.

Also on the agenda are 12 to 20 shallow drill holes for an updated resource. The 43-101 will also provide figures for production and costs. A PEA would follow within months.

Infrastructure’s good, Hardy points out, with road connections to nearby towns where staff live, rendering a camp unnecessary. The Juruena belt has a longstanding mining history and good community relations, he adds.

The deal would bring together a strong management team from both companies. Key Equitas figures would stay on—Hardy as chairperson, Zimtu Capital TSXC:ZC president Dave Hodge as director and Voisey’s veteran Everett Makela as VP of Exploration. Joining them would be president/CEO/director Chris Harris, with 29 years’ experience in mining finance, energy and commodities. New director Alan Carter’s 30-year career includes service with Rio Tinto NYE:RIO, BHP Billiton NYE:BHP and Peregrine Diamonds TSX:PGD. Technical adviser Michael Bennett’s CV shows 24 years’ experience in South America, where he’s credited with three gold discoveries.

While the new plan puts the Garland nickel project on hold pending revenue from Brazil, Equitas still has aggressive drilling in store for Labrador.

The share swap would leave Alta Floresta Gold as a wholly owned subsidiary of Equitas, with the latter being held approximately 50% by Alta’s former shareholders. Among other requirements, Equitas must raise $2.5 million. That could come at least partly through a private placement but possibly through a debenture or equipment financing as well, Hardy says. Prior to closing, Alta Floresta Gold “will use commercially reasonable efforts” to increase its stake in Alta Floresta Gold Mineracao from 60% to 100%.

The parties hope to sign a definitive agreement by January 31 and close by February 19 or soon afterwards.

“I’m excited,” enthuses Hardy. “It’s a cash-flow opportunity for the company and we’re gonna rock this.”

Canada undeterred by diamond downturn: Paul Zimnisky

November 24th, 2015

by Greg Klein | November 24, 2015

The world’s third-largest diamond producer by value, Canada has two new mines under development and a busy exploration scene despite the gems’ price slump. Speaking to Mining Weekly Online, diamond authority Paul Zimnisky said this country appears to be the jurisdiction best-positioned to navigate the turbulence.

Canada undeterred by diamond downturn: Paul Zimnisky

Dominion Diamond’s majority-held Ekati mine endured
lower value per carat this year but is anticipated to increase
volume as the Misery main pipe comes online.

“Looking at the Northwest Territories’ Ekati and Diavik mines, for instance, they are still quite profitable projects, even in a weaker price environment,” he told deputy editor Henry Lazenby. “I think Dominion Diamond [TSX:DDC], which owns 89% of Ekati and 40% of Diavik, could generate almost $250 million in free cash flow next year and almost double that the following year, using what I would consider a conservative diamond price. The company’s market cap is only $750 million.”

On November 19, Dominion reported fiscal Q3 2016 sales of $145 million, down from $222.3 million the same period last year. The company attributed the drop to a “cautious market,” lower-value production from Ekati and an approximately 8% decline in rough prices this year. Still, Ekati’s Misery main pipe remains on schedule for fiscal Q1 2017 production.

Zimnisky also noted Canada’s two mines-to-be, the De Beers/Mountain Province Diamonds TSX:MPV Gahcho Kué joint venture in the NWT and Stornoway Diamond’s (TSX:SWY) Renard project in Quebec, stand fully financed despite the investment climate. Additionally, Kennady Diamonds TSXV:KDI closed a $48.12-million private placement last month, funding its Kennady North project to the end of 2017—“which, Zimnisky noted, was impressive relative to the company’s $130-million market capitalization.”

He added that Canada’s share of global output by value could increase from about 15% now to 25% by 2018, thanks to new mines in development and exploration activity on a number of fronts.

Despite the slump, diamonds continue to out-perform other minerals, Zimnisky pointed out. “If they aren’t already, I would expect the Rios and BHPs of the world to start actively looking at diamonds again as a way to diversify their portfolios,” he told Mining Weekly.

See an overview of Canadian diamond mines in operation or under development.

Sotheby’s sets new records as the Blue Moon diamond gets $48.4 million

November 11th, 2015

by Greg Klein | November 11, 2015

The Blue Moon netted less than the seller’s highest hopes but still set “a new record price for any gemstone and per carat,” Sotheby’s Geneva showroom heard. And, one day after Christie’s auctioned a pink diamond for $28.5 million, the anonymous buyer sparked speculation. In each case the purchaser was described only as being from Hong Kong, Reuters reported. He, she or they promptly named the first Sweet Josephine and the second Blue Moon of Josephine.

Blue Moon diamond sets new records with $48.4-million price

The Blue Moon before and after: A master cutter hacked
away more than half the size to nearly double the value.

The blue’s price fell in the mid-range of an anticipated $35 million to $55 million. Christie’s pink got over half a million more than its highest anticipated price and nearly tripled the auctioneer’s past pink record of $10.77 million set in 2009. But in 2010, Sotheby’s sold a 24.78-carat pink for $46 million.

The 12.03-carat, internally flawless Blue Moon, described as one of the world’s rarest gems, features a fancy vivid hue that the Gemological Institute of America said “might be so unique as to be indescribable.”

Dug up in January 2014 at South Africa’s fabled Cullinan mine, the Blue Moon’s 29.6-carat rough original sold the following month for $25.6 million. The stone underwent five months of scrutiny by a team of experts before a design was chosen, then three months of artistry by a master cutter.

Cullinan was a 1902 discovery so rich that it threatened De Beers’ hegemony until the giant took over the mine in 1914. Petra Diamonds has operated it since 2008. Cullinan boasts of being the only reliably conflict-free source of blue diamonds.

Sotheby’s sets new records as Blue Moon diamond gets $48.4 million

Ultraviolet light exposes the Blue Moon of
Josephine’s red phosphorescence, “another
extremely rare and fascinating feature of
this diamond,” Sotheby’s noted.

It’s also known for its progeny of other stones of exceptional quality and size. At 3,106 carats, the mine’s namesake Cullinan diamond was the largest rough gem ever recovered. Cut into two magnificent pieces, the Great Star of Africa and the Second Star of Africa, the stone provided the two largest diamonds in the British crown jewels.

Since 1904 the mine has produced nearly 800 stones greater than 100 carats and over a quarter of the world’s diamonds above 400 carats.

Although Canadian rough generally fetches sums well above the global average, the prices and sizes are dwarfed by the most ostentatious bling. Last September Birks offered for sale a $3.69-million, 15.1-carat stone that it called the “largest diamond ever mined in Canada.” That gem originated as a 55.07-carat rough from the Rio Tinto NYE:RIO/Dominion Diamond TSX:DDC Diavik joint venture in the Northwest Territories. But in 2011 BHP Billiton NYE:BHP auctioned the Ekati mine’s 78-carat rough Ekati Spirit for $6.1 million. Dominion, now the mine’s majority owner, calls that stone Ekati’s most significant find. The mine has also coughed up a 182-carat rough that fell short of gem quality.

Diamonds haven’t been the only luxuries attracting the super rich in recent days. On November 9 Christie’s sold Modigliani’s Reclining Nude to a Chinese billionaire couple for $170.4 million, “the second-highest price ever achieved at auction for a work of art,” the Guardian reported. Another Christie’s art auction the following night brought an additional $331.8 million, according to the Wall Street Journal. Two days later Sotheby’s was to put more art under the hammer, including an Andy Warhol silkscreen and a Cy Twombly painting with pre-sale estimates of $40 million and over $60 million respectively.

Read about Christie’s Sweet Josephine auction.

See an infographic: Six of the world’s most famous diamonds.

Some Robert Friedland riffs

July 29th, 2015

The “miner’s miner” talks commodities, jurisdictions, markets and majors

by Greg Klein

A “miner’s miner” was how Rick Rule introduced Robert Friedland. The founder and executive chairperson of Ivanhoe Mines TSX:IVN also serves as executive chair of the Sprott-Stansberry Natural Resource Symposium in Vancouver, where he delivered the opening day’s keynote speech on July 28. That was the original plan, anyway. Instead, a relaxed-looking Friedland eschewed a script to sit back and, in response to questions posed by Rule, discuss commodities, jurisdictional risk, markets and the problem with the majors.

Friedland’s favourite metals? They’re currently copper, platinum, palladium and zinc—stuff for which he sees bright futures and, not surprisingly, the stuff he’s currently pursuing. He also likes diamonds but considers himself “an agnostic on gold.”

The “miner’s miner” talks commodities, jurisdictions, markets and majors

A community group poses on Ivanhoe’s Platreef
project, expected for 2019 production.

“Copper is the metal if you believe in human advancement,” Friedland says. “Gold is the opposite.” Meanwhile this market has either hit bottom “or it’s the end of the world.” He says he’s never seen such a severe devaluation, with stocks “priced for Armageddon.”

He’s cynical of the prognosis industry. The media report obituaries for all commodities, disregarding the bullish case that Friedland sees for some metals. JP Morgan, he points out, couldn’t predict oil’s fall. Goldman Sachs’ forecasts come from “just two guys, they don’t really know, they go to the bathroom about as often as the rest of us.”

As for his own forecasts, Friedland sees economic recovery and growth, as well as specific mining opportunities because “you can’t have economic growth without copper.” He notes recovery in Europe and describes the U.S. undergoing a “slow, gentle, lousy recovery,” but a definite recovery just the same.

He considers the collapse of Chinese equity markets to be an issue separate from the country’s underlying economy. “It’s definitely not 1929 in China,” Friedland emphasizes. Run by a powerful boss, the country’s “command economy” continues to grow. Chinese hold huge personal savings. With a currency stronger than the U.S. dollar, the country now has its own de facto reserve currency.

Even if China’s economy grows 3% to 4% a year, “it’s still an enormous disruption.”

Getting back to commodities, he argues that Saudis killed the Alberta oilsands and devastated U.S. shale “but no one can do that to copper.” Friedland dismisses some copper miners as “little old ladies waiting to die,” saying some grades fall so low that companies are “practically mining air.”

Serious debt prevents most majors from building big copper mines, Friedland contends. Yet his Oyu Tolgoi discovery, “the world’s highest-grade copper mine,” will undergo major expansion following last May’s agreement between operator Rio Tinto NYE:RIO and the Mongolian government.

The long, painful process of building Oyu Tolgoi “was like a woman giving birth to a 20-kilogram baby.” But it’s high grades, not jurisdictions, that attract Friedland. In fact he sees jurisdictional risk everywhere.

But the Democratic Republic of Congo inspires him to say, “If I were a dry cleaner I’d work there.” Just the same, a deal announced in May with the Zijin Mining Group on Ivanhoe’s Kamoa copper discovery would help “defuse” jurisdictional risk thanks to China’s “very good relations” with the DRC. Once again Friedland finds very high grades—the world’s largest undeveloped high-grade copper discovery—as well as the cost benefits of a country with cheaper currency.

Ivanhoe’s other DRC project, the past-producing Kipushi mine, boasts world-class zinc grades as well as copper. As an additive for agricultural fertilizer, zinc has “an absolutely brilliant future,” Friedland says.

More high grades in South Africa’s Bushveld complex are complemented by the “ever-depreciating rand.” Friedland expects Ivanhoe’s majority-held Platreef to begin production by 2019, making it among the world’s largest platinum-palladium mines, as well as a producer of nickel, copper, gold and rhodium.

While other South African miners struggle with very deep, highly labour-intensive operations, Platreef will be shallower and mechanized. “No one has to lift more than a pencil.”

As a self-made success, Friedland denigrates those who run some of the world’s biggest companies. Pointing to the iron ore wars, he says the big players seem committed to “destroying each other through a war of attrition”

He says the people who run major miners “are just driving the bus.” Heads of companies like Anglo American and BHP Billiton NYE:BHP don’t hold significant stock positions in their companies, he claims. While majors struggled through the adversity of the last few years, boards blamed CEOs and fired them. Their replacements, Friedland insists, are “risk-averse.”

As for the guy who first hit the big time over 20 years ago at Voisey’s Bay, “I made my own money.”

The Sprott-Stansberry Vancouver Natural Resource Symposium continues to July 31.

Western Potash slashes costs

July 2nd, 2015

Update: $80-million investment puts Milestone on the road to potash production

by Greg Klein

Update: On July 6 Western Potash announced an $80-million strategic investment from private equity firm Beijing Tairui Innovation Capital Management. Read more.


Showing a dramatic cut in capital and operating costs, Western Potash TSX:WPX revived its Milestone potash project with a preliminary economic assessment announced July 2. Taking advantage of improvements in horizontal drilling and selective mining, the company now proposes an initially smaller but upwardly scalable approach to solution mining for the southern Saskatchewan property. With an offtake agreement already in place and amid a backdrop of potash M&A activity, Western expects the new plan to attract a wider range of investor interest.

To be sure, the new PEA proposes a more modest project than originally envisioned. A December 2012 feasibility study projected 40 years of production, but at a capex of $2.44 billion. The following summer saw the Uralkali/Belaruskali breakup, ending a cartel-like partnership that kept prices around $450 a tonne. Obviously Milestone needed a re-think.

Western Potash slashes capex and opex with a new plan for Milestone

By providing a key ingredient for fertilizer, Western Potash’s
Milestone project could help feed a hungry world.

That came with a scoping study for a downsized but scalable pilot project. The new calculations assume a potash price of US$315 per tonne FOB Vancouver. Capex now comes to $80.6 million, opex to $80 per tonne and transportation costs to $70 per tonne (all prices Canadian, except where noted). Using a 10% discount rate, the PEA calculates a net present value of $56.7 million and a 25.2% internal rate of return after taxes and royalty.

Those streamlined numbers result from a different approach to solution mining. The new plan calls for simultaneous operation of three caverns. They’d be injected with a sodium chloride-saturated brine that would dissolve potassium chloride. Once brought to surface, it would be recovered through a simplified process that wouldn’t produce salt tailings. The result would be about 145,600 tonnes of standard grade muriate of potash (potassium chloride) per year over a 12-year lifespan.

“We looked around the world at what others were doing, not just in potash but in soluble salts and soda ash, and what other processes were being done,” project director Richard Lock tells “One of the key advantages was the advance of directional drilling. We could use that to establish the cavern and then focus only on selective mining or secondary mining. Instead of the conventional process of opening up a primary cavern and taking out both KCl [potassium chloride] and NaCl [sodium chloride], we just take out the KCl.”

“Obviously when you don’t have to bring the NaCl to surface and separate it from the solution, you have a major capital cost saving. That’s the real critical issue here—that by taking basically half the process plant away you get that major capital cost saving.”

With 25 years’ experience in mine development, Lock adds, “When we apply those technologies to the Saskatchewan resource it’s in some ways easier than other projects I’ve done around the world.”

Lock began his career with De Beers in South Africa before working with Rio Tinto NYE:RIO to take the Northwest Territories’ Diavik diamond mine into production. Lock also finished an Alberta oilsands project for Canadian Natural Resources and served as project director for Arizona’s Resolution project, an engineering marvel that could become North America’s largest copper mine.

Western’s 100%-owned Milestone has two continental railways cutting through its 35,420 hectares and a deal with the city of Regina, 30 kilometres away, to supply the mine with treated waste water.

Milestone’s PEA comes with a new resource using a 15.8% KCl cutoff to show:

  • measured: 7.17 million tonnes averaging 39.5% KCl

  • indicated: 11.56 million tonnes averaging 39% KCl

  • inferred: 1.77 million tonnes averaging 39% KCl

“We’d be starting with a small facility to prove up the technology,” Lock explains. “There’s no question there’ll be some fine-tuning of our methodology and processes as we develop these three test caverns, but we’re very confident that we can apply this technology to Saskatchewan. The endgame isn’t 150,000 tonnes, it’s a million tonnes plus. So once we’ve demonstrated this mining methodology we hope to quickly expand to a full-scale million-tonne-plus facility.”

The endgame isn’t 150,000 tonnes, it’s a million tonnes plus. So once we’ve demonstrated this mining methodology we hope to quickly expand to a full-scale million-tonne-plus facility.—Richard Lock, project director
for Western Potash

He sees the pilot project happening without a feasibility study. “Depending on raising the funds, we’d go straight into engineering and construction.”

Still in effect is a June 2013 offtake agreement with a joint venture of Benewood Holdings and China BlueChemical, the latter a majority-owned subsidiary of China National Offshore Oil Corp, China’s largest offshore oil and gas producer. With a 19.9% interest in Western, the JV has agreed to buy or designate a buyer to purchase the lesser of either 30% of Milestone’s production or one million tonnes of potash annually.

“Obviously we’ve shared everything we’ve done with them and they’re very excited by what this could mean,” Lock says.

The PEA comes amid heightened potash M&A activity, with the world’s largest producer, PotashCorp of Saskatchewan TSX:POT, trying to woo Germany’s K+S AG with a reported US$8.5-billion offer. A few weeks earlier Israel Chemicals Ltd NYE:ICL scooped up TSX-listed explorer Allana Potash for $137 million.

Milestone’s neighbours consist of K+S, BHP Billiton NYE:BHP, Vale NYE:VALE and a JV of Rio and North Atlantic Potash.

As for the revamped project, “We’re very confident we’ll be attractive to some mining investors who are looking for a good entry into the potash space,” Lock says. “I think this really opens up the field of investors to those who can see the game-changing advantage of what we’re proposing.”


Update: On July 6 Western Potash announced an $80-million strategic investment from private equity firm Beijing Tairui Innovation Capital Management. Read more.

Disclaimer: Western Potash Corp is a client of OnPage Media Corp, the publisher of The principals of OnPage Media may hold shares in Western Potash.

BHP, Australian government respond to Fortescue’s call for iron ore inquiry

May 19th, 2015

by Greg Klein | May 19, 2015

With a new website launched May 17, Fortescue Metals Group renewed its call for an Australian government inquiry into iron ore giants Rio Tinto NYE:RIO and BHP Billiton NYE:BHP. A strident critic of the two companies, Fortescue chairperson Andrew Forrest accuses them of ramping up low-cost production to lower prices and drive competitors out of business. As higher-cost mines close and government loses revenue, Fortescue says the Australian economy loses about AU$1 billion for every $1 dollar drop in iron ore’s price. That price fell to a decade low of $46.70 a tonne in April, before climbing to about $61 last week, according to figures provided by Reuters on May 18.

The budget papers reveal $90 billion in economic activity has been lost to the Australian economy as a result of the fall in the iron ore price.—Nev Power, CEO of
Fortescue Metals Group

The news agency quoted BHP CEO Andrew Mackenzie calling such an inquiry “an amazing gift to our major competitor, Brazil.” The country is headquarters for Vale NYE:VALE, the third member of iron ore’s Big Three. At least one Australian senator backs the proposed inquiry.

While Rio and BHP deny allegations, Fortescue CEO Nev Power wants their bosses grilled over statements that he says suggest otherwise. Fortescue’s May 17 statement quoted BHP iron ore CEO Jimmy Wilson saying, “Demand side in this business still remains good but what we’re doing is we’re oversupplying at the moment and we’ll oversupply in the medium term.”

Wilson was also quoted, “Do we see value in us pulling back our volume with the objective of increasing the price? The answer to that is absolutely no.”

As for Rio CEO Sam Walsh, Fortescue dug up this quote from last June: “A lot of my friendly competitors are going to disappear.”

Australian Prime Minister Tony Abbott said any inquiry couldn’t become “a witch hunt, it can’t be directed against any particular company or companies,” according to

Saying the market was “working well,” Abbott maintained his country’s resource sector “has become very, very successful and prosperous, it’s very good for all Australians and it has done all that because of the initiative and the creativity of business, of private business, of private individuals and the last thing we want to do is to crack down on people’s creativity.”

But Fortescue’s Power argued, “The budget papers reveal $90 billion in economic activity has been lost to the Australian economy as a result of the fall in the iron ore price.”

Update: On May 21 Australia’s finance minister announced the government would not hold an inquiry into iron ore prices.

Quebec’s distinction

May 8th, 2015

Both interventionist and capitalist, the province’s mining-friendly policies defy ideology

by Greg Klein

Quebec’s provincial government might buy rail and port facilities that serve Bloom Lake, as well as invest taxpayers’ money in the iron ore mine. Economy Minister Jacques Daoust didn’t commit to anything, but Bloomberg reported he’s open to the idea. Even that shows Quebec’s distinctive approach to mining, a strategy that eludes political stereotypes but suggests long-term vision based on confidence that commodities markets will improve.

Making that confidence all the more remarkable is the iron ore collapse which shut down so much Labrador Trough activity. Rio Tinto NYE:RIO so far shows no sign of relenting on its price-slashing tactics, although Axis of Iron fellow travellers BHP Billiton NYE:BHP and Vale NYE:VALE are reportedly backing off.

Both interventionist and capitalist, the province’s mining-friendly policies defy ideology

But not after driving prices down and mines out of business. Some of the casualties have littered both the Quebec and Newfoundland sides of the Trough. Last year Labrador Iron Mines TSX:LIM didn’t bother resuming seasonal operations at Schefferfield. Later that year Cliffs Natural Resources announced impending closures of its Wabush and Bloom Lake mines. Then the Iron Ore Company of Canada announced plans to lay off part of its Labrador City workforce, in keeping with majority-owner Rio’s cost-cutting craze. But at least the mine’s surviving, as is ArcelorMittal’s Mont-Wright operation, although that company has alluded to some kind of future “restructuring.”

Cliffs’ exit from eastern Canada will “end the flawed expansion that has cost Cliffs and its shareholders billions of dollars,” president/CEO Lourenco Goncalves said in January. Handed the job after activist hedge fund Casablanca Capital gained control of Cliffs’ board, Goncalves takes a dim view of other operations as well.

“I can’t wait to get out of Australia,” the Sydney Morning Herald quoted him last month. “As soon as I get to the end of life of mine in Australia, I’m out of there … I can’t wait to get out of the seaborne trade and let the Australians take that horrible business on their own hands.”

Yet Bloom Lake, with “its high-quality ore,” still has hope, Goncalves suggested back in January. But “the potential investment is not achievable within a time frame acceptable to Cliffs.” Talks with Investissement Québec had already been underway for several months, he stated.

A government-run investment and financing agency, Investissement Québec’s subsidiary Ressources Québec has taken positions that include, for example, nearly $600,000 in an April private placement with Quest Rare Minerals TSX:QRM. A $3-million injection into Matamec Explorations TSXV:MAT last January brought Ressources Québec a 28% interest and joint venture partnership in the Kipawa rare earths deposit.

A much bigger Investissement Québec outlay was the $50-million stake in an estimated $118-million plan to increase Gaz Métro’s liquefied natural gas production. The government sees Plan Nord synergies, with the LNG fuelling transportation and operations in remote areas.

Quebec government investment is hardly new, although the previous Parti Québécois government shelved some resource-friendly policies.

I am not in a subsidy mode, I am in a partnership mode.—Quebec Economy Minister Jacques Daoust, quoted in
the Montreal Gazette

Now a branch of Ressources Québec but dating back to 1965, SOQUEM Inc has participated in over 350 Quebec exploration projects. Among its success stories is Renard, where Stornoway Diamond TSX:SWY plans 2017 production. In 2011 the company issued shares to acquire the 50% held by a SOQUEM subsidiary.

Outside of equity investments, Quebec last month announced $1.3 billion in government spending for Plan Nord over five years, part of an envisioned $50 billion to come from public and private sources for infrastructure and project development over 20 years.

It’s not a program to put off, the province maintains. As Energy and Natural Resources Minister Pierre Arcand told Canadian Press in December, Quebec “cannot wait until there is a mining boom and everything becomes uncontrollable.”

Quebec’s Bloom Lake investment, should it happen, could reach 20% of the operation, Bloomberg reported. “We’re trying to ensure the survival of the mine,” the news agency quoted Daoust. “If the last 20% is a problem, I will fix it.”

Last month the Montreal Gazette quoted him, “In a [typical] mining project, the bill is at least $1 billion. The problem you have in a mining project is financing the last 10%. If we invest $100 million in a mining project worth $1 billion we’re okay and we can close the deal…. We can go up to $200 million, but normally we should not invest more than 10 or 15%.”

Daoust added, “The kind of return we would get is the same as for any other shareholder. I am not in a subsidy mode, I am in a partnership mode.”

Government ownership of Bloom Lake’s rail link and port facilities, however, could lower the mine’s operating costs by as much as $20 a ton, he told Bloomberg.

Regardless, policies like these have helped raise the province’s once-faltering reputation. As a mining jurisdiction the province leaped from 18th place globally to number six on the Fraser Institute’s Investment Attractiveness Index, part of the annual survey of mining companies released in February.

Quebec’s policies aren’t without controversy, though. Following the April announcement of a scaled-down Plan Nord, the Parti Québécois opposition noted that Ressources Québec planned to guarantee a $100-million mortgage for the Nunavik nickel mine, held by Jilin Jien Nickel Industry Co. As reported by the Nunatsiaq News, the opposition pointed out that Quebec Premier Philippe Couillard formerly held a board position with project operator Canadian Royalties, which was acquired by Jilin Jien in 2010.

And there’s further controversy from another angle. In December Strateco Resources TSX:RSC launched a nearly $190-million lawsuit after Quebec refused to issue an exploration permit for the company’s Matoush uranium project. With a moratorium on uranium activity now in place, the province is considering an outright ban.