SPECIAL REPORT: Gold Road Resources could be the next gold junior to make it into the mid tier after its recent moves on the Gruyere project.
Gold Road Resources could be the next gold junior to make it into the mid tier after its recent moves on the Gruyere project.
Gold and lithium are among the metals to watch as Western Australia’s junior miners develop projects and target opportunities for growth in a market emerging from the recent resources price downturn.
As prices of several commodities begin their recovery, and in some cases hit multi-year highs, junior miners are seeking to implement their plans in the hope of stepping up to the next level.
With a record Australian dollar gold price reached at the end of June, and projected lithium price increases driven by growing uptake of batteries for power storage, those metals are well established as the two driving action in the west.
But they are not the only commodities for which local juniors are preparing foundations for future demand growth, with zinc prices having reached five-year highs, and cobalt juniors responding to plans for that metal’s use in technology applications.
There have even been some moves in the uranium space, with three hopefuls targeting to raise around $50 million between them, despite the uranium price failing to build up steam for almost half a decade.
In the deal, Gold Fields will take over management of the project in six months while paying part of the capital costs and an ongoing royalty.
Gruyere, located near Laverton, is intended to be in construction early next year, with completion expected in late 2018 or early 2019.
A recent feasibility study by Gold Road pinned the project’s cost at $507 million, revised up by $52 million thanks to an extension of mine life to 13 years and an improvement in ore reserves to about 3.5 million tonnes.
It follows the sale by Independence Group of its 4 per cent stake in Gold Road in the June quarter after some public speculation it may buy into the project as an extension of its existing operation at Tropicana.
Additionally, Gold Road had raised $73 million in April.
Gold Road managing director Ian Murray told Business News the project would make the company a mid-tier producer, while about 42 per cent of the company’s share register was in the hands of North American funds.
“It’s a big project- the largest undeveloped gold project in Australia,” he said.
“It’s unlike your traditional Australian gold investment... we’ve got 5,000 square kilometres of exploration tenement.
“The North Americans like it because we’ve got long life tenures plus (ounces) in reserve.”
He said the slowing down of the mining boom had enabled the company to assemble a very good in house team to work on the project, while other input costs had also comedown.
And the gold price was around $200 per ounce above the level used in the feasibility study he said, a handy bonus.
“Capital costs did go up from the original $455 million up to the $507 million level, mainly driven off the extended water bore field; we’ve expanded that by 10 to 15 kilometres north and south, (and) the larger accommodation village where we’ve gone from 500 person up to 600 person,” Mr Murray said.
“On a cost-per-ounce basis, the capital cost has stayed flat because we’ve also increased the mine life and the reserve by about 10 per cent.
“We reduced the sustaining capital from $141 million to $77 million and the forecast all-in sustaining costs dropped from $960 per ounce down to $945/oz.”
A final investment decision would be expected by the end of November, he said.
“The early works have kicked off already, that’s with the money we’ve got in the bank,” Mr Murray said.
“Establishing the construction village, access roads, bore fields, communications networks, we’ve committed $18 million for all of that work.”
Already up and running is Blackham Resources, which poured first gold at its Matilda project in October, less than a year after it published a definitive feasibility study.
That followed construction of a new power station, commencement of mining and refurbishment of a gold plant at the site, near Wiluna.
The company also flagged that it might double production capacity from 100,000oz per annum to around 200,000oz.
Capricorn Metals plans to have a definitive feasibility study for its Karlawinda project near Newman ready for mid 2017.
It took control of that project after buying private company Greenmount Resources for $3.9 million in an all-scrip transaction in February, followed by a $12.6 million raising in April.
Egan Street Resources became the third mining-related IPO for WA in September when it was added to the ASX in a listing worth around $6 million, which it plans to use to fund drilling at the Rothsay gold project.
Lithium, which is used in battery applications, has also created a great deal of activity, with three local juniors pursuing projects across WA.
The most recent move was by Pilbara Minerals, which inked an offtake deal with Chinese company Shandong Ruifu Lithium, its second such agreement.
It will supply almost 2 million tonnes of unprocessed lithium in the next two years from its planned Pilgangoora project in the Pilbara, while winning a $US10 million prepayment to fund construction costs.
Around the time of the Pilbara-Shandong news, Altura Mining announced it would make a $41.6 million placement to Chinese company Shaanxi J&R Optimum Energy to help fund its Pilbara lithium project, also called Pilgangoora.
That will give J&R a 19.9 per cent stake in Alutra, earning it a seat on the board, which Altura said would be filled in due course.
The company also raised $23 million in June.
Altura has moved to buy an old accommodation camp from Roy Hill, located 15 minutes from the Pilgangoora mine site.
It plans to produce first Spodumene in the final quarter of 2017.
Neometals, which is commissioning its Mt Marion lithium project, lifted its uptake deal with Chinese company Ganfeng in June from 80,000 tonnes of spodumene concentrate annually to 200,000t.
Venture partner Mineral Resources then upped its stake in the Mt Marion project to 43.1 per cent.
Two former lithium juniors are juniors no longer, after General Mining and Galaxy Resources merged in a deal that was to create a company with a market capitalisation of more than $700 million.
Now operating entirely as Galaxy Resources, the company says it plans to produce concentrate this month after completing wet commissioning of part of its plant.
Further afield, West Perth-based Euro Metals Holdings is seeking to set up the Cinovec lithium/tin project in the Czech Republic.
Recent work to reduce capital costs came up with $US85 million in savings, while Ausenco was appointed lead engineer for a project prefeasibility study.
Euro raised $2.6 million from investment company Rare Earth Minerals in October.
Vimy Resources, headed by former BC Iron boss Mike Young, raised $6.6 million through a share placement for its Mulga Rock project in the September quarter, and additionally secured environmental approvals.
It is now undertaking preliminary site work.
There was a further change to the company's capital structure when private equity player Resource Capital Funds converted a $15 million loan into equity in August.
That took the fund’s shareholding to 29.9 per cent.
RCF also backed a capital raising by uranium hopeful Bannerman Resources, which sought $4 million to fund engineering work to reduce capital costs at another Namibian uranium project, Etango.
Bannerman expects the project to cost $US793 million.
RCF bought 16.7 million shares in Bannerman at 3 cents, subject to approval at a general meeting.
The overall effect of the raising was to dilute RCF’s stake, however, from 38.3 per cent to 32.4 per cent.
Berkeley Energia headed to market in early November to raise up to $US30 million to accelerate construction of the Salamanca mine in Spain.
The company said it started building in August.
Assuming Berkeley is successful, that will represent around $50 million of money flowing into uranium juniors in just the past few months, despite the commodity’s price falling below $US20/lb.
At a level of about $US1.1/lb, zinc prices are around their highest level in five years, although still well below pre-GFC highs of almost twice that level.
Yet there are no obvious projects nearing production, and few in the pipeline.
“(Stockpiles) in London continue to shrink, and that all puts upward pressure on the price,” Mr Dix told Business News.
“There are no new operations coming online in the short term, that naturally (also) puts pressure on the price.”
The company is in the early stages of the Plomosas zinc project in Mexico, which Mr Dix said was a high-grade deposit that was not very price sensitive.
He said the first move would be to firm up resource numbers, with completion of this task expected by year’s end.
In September, Energia Minerals raised $6.1 million for a zinc project in Italy, while in October an Australian subsidiary of Canadian giant Teck said it would buy a stake in the Reward zinc-lead project from Rox Resources for $20.6 million.
That project is in the Northern Territory, with Teck holding a 51 per cent slice and Rox the remaining 49 per cent.
Venturex Resources raised $5 million in the September quarter as it mulls two potential deposits near Port Hedland.