112 ASIA Seeds of distrust

ResouRce JouRnal
JULY 2012 Volume 4 Issue 7
www.irjonline.com

THE INTERNATIONAL

IN THIS ISSUE

ExclusivE intErviEw with MaplEcroft’s JaMEs sMithEr

wEst africa Mining

Mongolia and KazaKhstan

JULY 2012

The International Resource Journal 113

asia

112
harassment, imprisonment and duplicity. being detained by Pakistan’s military.

Seeds of distrust
Noordin Mengal is an activist in pursuit of independence for Balochistan, a mineral rich province in southwestern Pakistan bordering Iran and Afghanistan.
the acRiMonious Relationship between leadership in Balochistan and Pakistan’s ruling establishment in Punjab province and government centre, Islamabad, goes back for generations. Mengal claims that members of his family, many who occupied various senior roles in the Balochistan government since the province was absorbed into Pakistan in 1948, have faced

Moreover, the human rights situation in Balochistan is becoming increasingly violent as abuses intensify. Academics, politicians and other civil society leaders have been found murdered with evidence of torture after

Amnesty International has urged the Pakistan government to investigate these crimes against Baloch civilians, particularly as the human rights violations take place against a backdrop of political unrest and Pakistan army operations in the province.

114 ASIA Seeds of distrust

The situation has also prompted a US Republican-led House Committee earlier this year to nation amid vehement opposition from Pakistan. Why is everybody so interested in this underdeveloped region, one of the poorest in South Asia? Mengal explains it is because of the region’s natural resources and strategic geopolitical location. IRJ talks to Mengal to gain greater insight into the underlying mechanisms that feed distrust between a region, its government and neighbours, and how those mechanisms underpin opposition to natural resource development. MenGal: If anyone has meddled into anyone’s affairs or violated any country’s sovereignty, it is Pakistan itself. We were an independent state iRJ: Can you tell me a bit more about your role in bringing attention to the challenges facing Balochistan? that was forcibly occupied on March 27, 1948. Before then, the proposal that Balochistan join Pakistan on the basis of Islam was rejected in both upper and lower houses and nine months nooRdin MenGal: My role has been primarily to create awareness about the worsening human rights situation in Balochistan, not just the human rights violations being carried out by Pakistan’s military but also the sinister role it is playing in causing terrorism by promoting and abetting radical elements in the region as the military’s own strategic assets, to ultimately reap the rewards of the unrest. Pakistan is currently and independence. Pakistan, and Punjab in particular, have no right to deal with anybody with regards to our natural resources or decide our fate. Human rights are not an internal matter. Ironically, when the Shah of Iran, who also oppressed after we gained our independent status, we were forcibly occupied by the Punjabis and incorporated into what is today known as Pakistan. Now we iRJ: The Pakistan government has said that the US House Committee’s encouragement of an independent Balochistan is meddling into affairs that the US does not understand, how do you respond to that? Baloch since 1948. We have highlighted these issues at the UN Human Rights Council, in Geneva, the European Parliament, British Parliament, at universities, whatever forum is available to us.

JULY 2012

The International Resource Journal 115

the Baloch in Iranian-occupied Balochistan, ing direct air support to Pakistan in the military operation against the Balochs in 1970s, no Pakistani saw it as foreign interference, but when someone speaks out for the rights of the downtrodden Baloch, Pakistan calls it interference in its internal affairs.

All state institutions, including the parliament, judiciary and presidency, are subservient to the military. The incumbent so-called democratically elected civilian government is an epitome of politically impotent administrations that is at the mercy of the Pakistani army. The military holds the levers of power and are the declared rulers of Pakistan since the country’s unfortunate creation.

iRJ: The most recent Constitutional amendments in Pakistan have given the authority over natural resource development to the provincial governments, does this not give Balochistan enough control over which companies it does business with?

Pakistan has occupied our land and has been systematically carrying out the social, political, cultural, physical and economic genocide of the Baloch nation. Companies need to know that any deal they make on Balochistan’s natural resources with this government is not meant to last. Every successive government reverses the

MenGal: The Baloch remain disempowered and dispossessed. If we look at the human rights situation, there is an oppressive military operation ongoing and the powerless chief minister of Balochistan says he does not have the mandate to change this and says that the Frontier Corps has established a parallel government. Recently when a senior provincial minister, Sadiq Umrani, held the FC responsible for disappearances and extrajudicial killings, his younger brother was abducted to silence him. If the provincial government cannot safeguard itself, what do they have authority over?

decisions of its predecessor, it’s a failed state and many factors indicate that it clearly has no future. The basic problem is that the future of the Baloch people is not secure within Pakistan. No matter how good a deal might sound, we simply won’t buy it anymore. We have constantly been deceived by the Pakistanis since the past 64 years. We just want them to leave us alone. Companies that cut a deal with the central government over Balochistan’s resources need to realise that there are no guarantees to them for as long as there is no peace and stability. Any

116 ASIA Seeds of distrust

PHOTO COURTESY OF BALOCHVOICE.COM

attempt to indulge will be seen with strong negativity by the population. They will also be seen as exploiters adding to our miseries. Such companies may get the deal on the condition that they remain silent on the oppressive policies of the state against the Baloch, as have the Chinese. Why do you think Pakistan is more pleased with China’s political establishment? Why is it happier to let MCC [China Metallurgical Group Corporation] work on the projects? If you look at Reko Diq, Pakistan wouldn’t be in favour of the westernbased Tethyan Copper [Antofagasta and Barrick Gold joint venture], they would be more comfortable with the Chinese because they are content with Pakistan carrying out atrocities against the Baloch as they themselves are the immoral masters of plundering and have no problem with others

adopting the same illegal methods. There is an old relationship there, Pakistan has been the concubine of China, that is how I would put it.

iRJ: Companies that develop natural resources often bring much-needed development such as schools, hospitals and infrastructure, would Balo-

MenGal: We have heard the word “development” most of our lives. There is a difference between development and exploitation. When Pakistan says it wants to bring development, what they really mean is they want to exploit. A prime examated by a state-run company. Gas was discovered in 1952 and today there are only a couple of dis-

JULY 2012

The International Resource Journal 117

tricts in Balochistan that have access to gas. The capital [of Balochistan], Quetta, received gas in 1986, 34 years after it was discovered, and that too only after a military garrison was stationed ciary with all its major cities receiving household and commercial gasiby 1964. It is the Punjabi military that has been given the most priority, Balochistan consumes 12 per cent of its own production though it is the largest province accounting for 47 percent of Pakistan’s total land mass What did the Baloch people gain from the gas? What have the people of the district that pumps gas to the whole of Pakistan gained? They still burn wood. All the dividends from the sale of Baloch gas are usurped by Punjab. There is no shining precedent of the Baloch

frastructure, the state’s version of development is constructing massive military garrisons, paramilitary bases, naval bases, air bases, several hundred checkposts, illegal detention and interrogation facilities and nuclear testing sites in Balochistan with US and European taxpayers’ money and revenue generated from our land. Their other sham developments have been to construct roads for billions to inaccessible areas and penetrate into our system to facilitate the mobilisation and stationing of troops in order to forcibly tap oil and gas and establish garrisons to further subjugate the Baloch and promote fundamentalists and the construction of madrassahs, to counter the secular Baloch movement and build a breeding ground and safe haven for radical mullahs. Another crime they committed in the name of development was the nuclear tests conducted on

The military has already been working directly on the Chamalang coals mines, said to be one of

our land on 28 May 1998, which has caused countless diseases among the inhabitants of Chaghai due to the radiation. When my uncle’s government,

get a hold of Reko-Diq by backing D. Samar Mubarakmand. In 2009, when the provincial secretary for mines and minerals opposed granting an exploration lease for the Chamalang mines to military, he was critically injured in an assassination attempt soon

which wasn’t even consulted, protested against the tests on Baloch soil, his government was systematically toppled on June 15 1998. The time for reconciliation is over, now our demands are for nothing short of independence. We have absolutely no future in Pakistan.

Instead of schools, hospitals and basic in-

118 ASIA Seeds of distrust

iRJ: Some would point to a lack of skilled labour among the Baloch population to work on these projects as part of the problem, for example, the deep sea port in Gwadar on the Arabian Sea, a highly strategic asset and one that could boost the economy of the region considerably. What do you say to companies that require skills and expertise to handle mega-projects like this?

drilling, would that give them an unquestionable right to explore North Sea oil or the Hibernia oil

The Baloch fear that the port will cause a

encouraged by the government to migrate to Balochistan for employment and will be used to create a demographic imbalance and convert the Baloch into a minority in their own homeland,

MenGal: I would say hold your horses, the Baloch require more than skills and technical expertise, they need empowerment and the freedom to decide their fate. Just like other projects, outsiders have come, the staff and labour is from other parts of Pakistan, locals are not allowed access to schools and hospitals, which are reserved just for employees, and no efforts have been made to set up training facilities, polytechnic institutes or vocational centres so that locals attain the required skills. Gwadar port was a project pushed for many years by the Baloch but the project was taken over by the Pakistan establishment and then they painted an absurd picture that Baloch nationalists oppose development. It is the Pakistani establishment that is not only a threat to the Baloch national identity but also an impediment to peace, stability, security and “genuine” development in the region. If the French had better skills for deep sea

given the Baloch’s small population – less than 10 million compared to Punjab’s 91 million. China’s political establishment has collaborated with Pakistan’s government in the con-

too have contributed to our plight and alienation. We would have welcomed the building of a port but China did not take the Baloch national interest into consideration, they did not take the

announced and dealt with Punjab and its civilmilitary establishment directly. Before Gwadar port’s construction, those people who had land [in the area] had their

cheaply by force. However, most of the land was allotted to military generals who subsequently sold them in the open market, to fellow Punjabis and Muhajirs and earned billions.

JULY 2012

The International Resource Journal 119

As long as it is occupied territory and as long as people and we opposed it because we knew ers and they would be given the right to vote and elect non-Balochs had we allowed Pakistan to operate freely in Gwadar. we don’t have our rights and are facing the situation that we are, we would oppose not just multinationals but also anyone else in Pakistan coming in to extract our natural resources. Pakistan is stealing revenue from our own soil that is then being used to fund actions against us. Baloch national iRJ: What message do you want to send companies that are thinking of setting up shop? assets, including Gwadar, Sui, Reko-diq and Chamalang coal, have all been to exploit and expropriate the Baloch of their wealth and advance PakiMenGal: It is not the time. They need to understand our concern and insecurity. At this point, they will be fuelling human rights violations against the Baloch and would be similar to the case of blood diamonds. They would strengthen the hands of the oppressor and would also be indirectly funding radical elements patronized by the Pakistani ISI[Inter-services intelligence agency] who are a menace for regional and global peace and security. They should not try to benstan’s sinister agendas against the Baloch nation. The Baloch are struggling for the protection of their national identity, for their survival. That is what is at stake for us. For as long as Balochistan remains occupied and Punjab’s hegemony continues, the Baloch will be in the grip of the Stone Age. The issue of natural resources is one the Baloch are deeply sensitive about. It must be noted that it was this bone of contention that

must not collaborate with oppressive and corrupt regimes in carrying out crimes against humanity. Multinational companies should not see our predicament as an opportunity to make a buck. They can wait and we expect them to act more responsibly. We will be willing to talk to them when the situation is conducive for business.

situation. No one wants that. Now, there is the Iran-Pakistan pipeline being constructed without the Baloch nation’s consent. The Baloch will not sit as silent spectators as they are trampled upon and there will undoubtedly be strong political resistance to allow it through our homeland.

120 SECTION

Seeds of distrust

a BRieF histoRy
1666
Mir Ahmed Khan of Kambarani tribe start Ahmedzai dynasty
1749-1794 Reign of Nasir Khan and region

independence. Pakistan recognises Kalat’s sovereignty and congratulates Baloch.

named Balochistan

1948

In opposition to decision of Balochi legislature, Pakistan forces Kalat to be ruled by an agent of the Pakistani state. Troops enter the capital and forcibly incorporate Balochistan into Pakistan. Balochi nationalist defence continues under Abdul Karim Khan until 1950. He spends 16 of his remaining 22 years in Pakistani prisons on charges of sedition

1839 1854

British incursion Nasir Khan’s successors defeated by British and treaty formed with Khan of Kalat to defend territories from Central Asian or Iranian invasions

1860s -70s Growing British interest to pre-

empt potential advance of Russia. A period known as the “Great Game”.

1905

Demarcation of boundary between British India-Iran and British IndiaAfghanistan effectively divides Balochistan among three states – British India, Iran and Afghanistan

1952

Pakistan’s first oil field discovered near Sui Balochistan Union States established

1934

Armed struggle for liberation and unification of Balochistan begins under Magsi, head of Baloch national movement

1955

Princely states in Balochistan (Kalat, Kharan, Las Bela, Makran) abolished

1958 1962

Second uprising and retaliatory military operation Third uprising and military operation, which ended when

1947

Pakistan becomes heir to British rule, Kalat state [Princely state of Balochistan] proclaims

JULY 2012

The International Resource Journal 121

Pakistan’s army took an oath on the Quran not to harm rebels and their 90-year old leader while promising amnesty and to accept demands. Imprisonments and executions followed.

1993 - 1997 BHP negotiates Chaghai Hills

Exploration Joint Venture Agreement (CHEJVA) with Balochistan province and discovers significant coppergold deposits near Reko Diq

1995

National Mineral Policy Saindak copper-gold project trial production begins with operations handed over to Pakistani statebacked company Saindak Metals. Bureaucratic squabbling delays the project.

1970 1971 1972

Within Pakistan, Balochistan province established East Pakistan breaks away, Bangladesh created First elections won by Nationalist Party led by Sardar Attaulah Mengal, first chief minister of Balochistan

1998

Nuclear tests were carried out despite protests of ruling nationalist party in bal headed by Akhtar Mengal leading to the dissolution of the legislature in 18 days

1973 – 1977 Large scale Baloch rebellion led by

Marri and Mengal tribes suppressed by Pakistani forces with the help of the Shah of Iran

1999 2000

General Pervez Musharraf takes power in bloodless coup Tethyan Copper Co. established after project taken over from BHP and China approached by Musharraf to fund Gwadar deep water port Septuagenarian Baloch leader Nawab Marri imprisoned, but released a year and a half later

1978

General Zia ul Haq comes into power through coup, withdraws troops from Balochistan and releases Baloch leaders of Nationalist Party from prison. Baloch leaders Marri and Mengal go into self-imposed exile.

122 ASIA Seeds of distrust

2002

-Implementation of National Mineral Policy and formulation of Balochistan Mineral Rules -China Metallurgical Group Corporation (MCC) gets 10-year lease. 50 per cent of proceeds retained by MCC, 48 per cent by Pakistan’s government and 2 per cent by Balochistan’s government

-Thousands of Baloch flee villages attacked by Pakistani fighter jets and helicopter gun-ships. Largescale, government-organised kidnappings and disappearances followed. -Pakistani army kills Baloch leader Nawab Akbar Khan Bugti, Balochistan National Party resigns from parliament in protest BNP president -Akhtar Mengal imprisoned in Karachi, released in 2008 soon after Pakistan Peoples Party comes into power and drops charges

2004 2005 2006

Car bomb kills three Chinese engineers on their way to Gwadar. Gwadar port completed on schedule -Antofagasta and Barrick Gold form a joint venture acquiring 100 per cent of Tethyan Copper Co. -Chamalang coal mine agreement signed by Pro-government/ establishment Baloch Senator Mir Mohabbat Khan Marri, elders of Luni Pakhtun tribe and Government of Balochistan

2007 2010

PSA International of Singapore gets 40-year contract to run Gwadar port -18th amendment to the constitution signed into law by President Asif Ali Zardari grants greater provincial rights of exploration and production of natural resources, including oil, gas, metals and minerals

JULY 2012

The International Resource Journal 123

-Baloch nationalist leader and head of the Marri tribe Nawab Khair Baksh Marri resists sharing coal reserves in tribal domain with rival Pakhtun tribe and provincial government. Claims that Khan Marri was not empowered to sign the accord as a competent authority.

2012

-US Congressman Dana Rohrabacher, who chairs the US House of Foreign Affairs Subcommittee on Oversight and Investigations, calls upon Pakistan to recognise the Baloch right to self determination -Pakistani media reports that Balochistan chief minister Aslam Raisani stated the provincial government itself would run the Reko Diq copper-gold project in Chaghai and had allocated Rs7 billion ($73.6 million) as well as announced infrastructure reforms for Gwadar port access

2011

-MCC gets lease extension for Saindak for another five years from 2012. The lease was granted one year ahead of schedule and renegotiated terms would see MCC receive 45 per cent of mine proceeds, bumping Balochistan’s stake up 5 per cent. -Tethyan files arbitration proceedings with the International Chamber of Commerce (ICC) in London after the Balochistan government rejected its mininglease application

124 ASIA

Pawn or potential queen?

JULY 2012

The International Resource Journal 125

asia

aFGhanistan:

Pawn or potential queen?
It took decades for an agreement to get reached on the Turkmenistan, Afghanistan, Pakistan and India (TAPI) gas pipeline but commitment to bring the project to life in the spirit of what is written on paper is going to be a tougher test yet. Regional actors such as China, Iran, Russian and Pakistan may not see TAPI tting their strategy in the region and therefore may work to engineer its collapse against a backdrop of geostrategic competition, writes Javed Noorani.

124

126 ASIA

Pawn or potential queen?

Wilson International Centre for Scholars says that Pakistan’s rather static oil, hydroelectric power and gas reserves have raised serious concerns as to the sustainability of the current economic expansion, as well as future economic growth. The gap between Pakistan’s energy use and the country’s ability to produce energy has widened in an alarming way in recent years.

Games and players
The politick around the region’s gas reserves in general and the TAPI pipeline in particular have
JAVED NOORANI

both local and global actors gate-crashing to shop for the commodity and vie for associated projects.

the tapi Gas pipeline is an ambitious project which is set to connect the religiously and ethnically diverse geographies of South Asia with Central Asia, propelling them into gas-fuelled economies. At one end of the pipeline is Turkmenistan, a former Cold War era Soviet bloc still heavily prominent place within the NATO strategic discourse. As NATO continues its transition from a Cold War military alliance, energy security is playing an increasingly important role. NATO states, being the most developed countries with strong industrial bases, would continue to have the largproject is emerging regional power, India, an attractive market for gas. Pakistan is undergoing economic expansion and to continue this trajectory, it requires sufest demand for oil and gas to sustain their economic engines. Saudi, a traditional oil supplier to NATO countries, still has 20 trillion barrel of oil. NATO states, which consume 43 per cent of total oil and 42 per cent of gas production, have been raised due to availability amid rising global demand for energy. Robert Looney in his essay for the Woodrow will undoubtedly continue to receive oil from the Middle East but a sense of energy security also dictates its shopping excursion into the huge

JULY 2012

The International Resource Journal 127

The country’s reserves appear to run the gamut of mineral types. The north has proven fields of coal, oil, gas, gold, copper, precious and semi-precious gems; the border with Pakistan in the east is likewise dotted with troves of emerald, ruby, aquamarine, kunzite, quartz, marble and lithium. The central provinces enjoy iron, chromites and lithium (the latter a mineral with a significant new potential market, due to its use in highend batteries); while the southwest has potentially significant oil, gas, gold, uranium and onyx deposits. The southern part of the country, meanwhile, is said to have copper and gold veins that run for

dozens of kilometres, estimated to be worth some USD 200-400 billion at today’s market prices. There are also gold- and nickel-bearing areas sprinkled across the hinterland. Source: Integrity Watch Afghanistan Integrity Watch Afghanistan (IWA) was created in October 2005 and established itself as an independent civil society organisation in 2006 with the aim of evolving into a reference actor committed to understanding, analysing and acting in the interests of transparency,

Caspian gas reserves to keep alternative energy sources. However, the Caspian region is still seen

exports - such as a deal to supply 30 billion cubic feet of gas to China, some to Iran and export to Kazakhstan though Russia - Turkmenistan has

The four Caucasus and Central Asian states, namely Azerbaijan, Kazakhstan, Turkmenistan and Uzbekistan, produced 4.7 trillion cubic feet of gas, representing four per cent of the world’s total production in 2010. The Russian federation possesses 24 per cent of the gas reserves and largely dominates the gas market in the Caspian region to maintain its hegemony and thus use it as a diplomatic tool. Despite over-committing itself to various gas

committed itself to pipeline some gas to European Union too. Not surprisingly, the US and European Union support Turkmenistan’s policy of multiple export routes. China, India, Pakistan and Iran are locked into energy competition due to their industrial needs. China and India have growing economies which make energy an important element of their strategic imaginations. Pakistan’s energy needs are increasing by 10-12 per cent annually.

128 ASIA

Pawn or potential queen?

Companies developing Afghanistan’s resources: China’s MCC at Aynak copper mine Kilo Goldmines and Indian-led steel company consortium at Hajigak iron ore deposit China National Petroleum at Amu Darya oil and gas basin Western-backed consortium led by Kulczyk Investments and facilitated by JP Morgan developing gold project in Baghlan province

Chinese assurance to the country? It is hard to imagine that it would otherwise invest so much money in a pipeline that still does not have a con-

if India, the other buyer Iran is trying to attract, opts out of the project under heavy US pressure underpinned by the Indo-US nuclear deal. This leaves China, which has already made

shadow of the US-led Western isolation of Iran. Dr. Christian Lin, visiting scholar at SAIS Centre For Transatlantic Relations, The John Hopkins University, writing about China’s silk road strategy in Afghanistan-Pakistan, states that China has

Isolated Iran is the third largest importer of gas despite and has the second largest gas reserves. Now, cash-strapped, it urgently needs

invested over US$25 billion in the last decades

projects such as onshore Azadagan and Yadavarn and offshore South Pars, with the clear

programme as the country’s political establishment seeks regional power status. As a result, the country’s leadership has desperately been trying to showcase Iran, Pakistan and India (IPI ) gas pipeline as a more economical and viable alternative to TAPI. Iran has already completed over 80 per cent of the work on the IPI pipeline running through its territory and has even offered

intention of increasing its oil and gas supply with

piped gas imports from Iran. So, if Pakistan agrees to the Iran-Pakistan gas pipeline project, then it ef-

Check and block
TAPI is promoted by the US to stop IPI and potentially IPC [Iran Pakistan China pipeline] if China is looped in as an end consumer for Iranian gas. This, along

the (IPI) pipeline underpinned by Russian and

with other economic sanctions, may synergise to

JULY 2012

The International Resource Journal 129

ReGional status
The regional aspiration of India and its Pakistan has been eyeball to eyeball with India over territorial disputes for six decades, prompting an arms race which takes important resources away from the countries impoverished citizens even as it stays armed to the teeth. Meanwhile, Afghanistan is in the firm grip of political instability and insecurity but will be a key facilitator for the pipeline through 730km of its territory. Turkmenistan has 21.2 trillion cubic feet of recoverable gas and India offers the Turkmen gas a sustainable market and an opportunity to loosen Russia’s monopoly grip. energy needs magnify the importance of sustained supply of gas for its large industrial consumptions.

throttle the Iranian nuclear program and engineer the collapse of the Iranian regime internally. And desperately been trying to cling to China and is ready to twist itself to keep its friendship intact to monopoly over Caspian gas while ensuring sustained energy for US investment in India - considered a strategic partner in a new world order. survive and sustain. It is possible that Pakistan’s heightened needs for energy security and its isolation by the US will push the country closer to IP gas pipeline the polarisation of the international structure itself. Recent US and Pakistani disputes over NATO attacks on Pakistani army posts at the border of Afghanistan often lead to suspension of transit facilities to NATO trucks transporting goods through Pakistan for international military forces. There have been consistent voices in the US Congress against partnership with Pakistan in which may eventually become Iran-Pakistan-China (IPC) pipeline. Iran joining Pakistan and China will effectively lead China to navigate around India and thus, not only complete the triangle but allow Iran to emerge as an actor with greater strength to threaten the world with a blockade in the Strait of Hormuz. It is a powerful bargaining chip. China’s energy needs are driven by its rapid

130 ASIA

Pawn or potential queen?

economic growth. “The principle concern over energy security in China is the perception that the Chinese economy is highly dependent on a stable supply of energy and cannot tolerate the slightest interruption or shortfall,” writes Zha Daojiong, an associate professor of international relations and chair of the Department of International Political Economy at Renmin University of China.
Saudi Arabia 4%

natuRal Gas pRoVed
Nigeria 3% Venezuela 3% United Arab Emirates 3% US 4%

world’s natural resources, this situation is intensifying. China has put its stamp in Sudan against the wishes of Western countries and it has so far turned a deaf ear to international concerns over Iran’s nuclear programme.

Central Asia 7%

Quatar 13%

about China’s indifference and stated that China has appeared even more reluctant than Russia to take action against Iran on its shrouded nuclear program. development of TAPI. Afghanistan is not secure that China has blocked their efforts to target freightforwarding companies based in Hong Kong that reship goods, including prohibited weaponry, to Iran, according to media reports. As such, US efforts to promote TAPI based on its geo-strategies will be met with suspicion by global superpower China. which could be used as an argument by some of the countries participating in the project to withdraw altogether. The Iranian political establishment may magnify insecurity in Afghanistan to expedite this withdrawal of participating countries in TAPI and open itself to sell its own gas or be a transit country.

TAPI checkmate?
The odds in the current scenario are against the

There is suspicion of Iranian agents active in the areas of Afghanistan demarcated for TAPI

JULY 2012

The International Resource Journal 131

d ReseRVes (2009)
Source: BP Statistical Review of World Energy 2010

Africa, Asia and Latin America, may not like its main cording to US self-interest. China may play to stop India its rival from accessing gas through TAPI. It will be able to buy extra gas from Turkmenistan to address its energy insecurity cost-effectively and supply some of it to its xingjaing province, with

Russian Federation 24%

some rebellious Muslim population thus stabilising the region through industrialisation and connecting it to the Silk Road. To this end, Kashgar, part of xingjaing, is one of those areas where a Special Economic Zone is being established. Pakistan, in the light of its long term interest and fear of dependence on Afghanistan, may opt

Iran 16%

for the Iranian pipeline to have access to reliable gas supply and earn some money in transit. Besides this, the Iran-Pakistan gas pipeline will give the two countries cover to suppress the people of Balochistan, who have roots in and

pipelines. Sources in Afghanistan’s south have on numerous occasions reported that senior members of Sepah Passdaran (The Iranian Revolutionary Guards) have visited some provinces along planned pipeline routes. There has been evidence of Iranian weapons seized by international militaries based in Afghanistan, though it ed countries are ubiquitous. China, in its aggressive campaign to reach

disputes with both countries. TAPI will collapse in such a situation where all the major regional actors excluding India team up together against it. Such an event will rob Afghanistan of the chance for the project to contribute to the country’s stability through investment.

At stake
Afghan hydrocarbon experts from the 1980s pointed out that Afghanistan’s northern geology

132 ASIA

Pawn or potential queen?

inteRnational eneRGy outlook 2011
China and India together will consume 31 per cent of the world’s energy in 2035, up from 21 per cent in 2008. By 2035, China’s projected energy consumption is 68 per cent higher than US energy consumption. Global energy consumption grows 53 per

cent between 2008 and 2035, representing an average annual growth rate of 1.6 per cent Sidebox: A Soviet survey of gas in Afghanistan compiled the following deposits of gas in the country. However it needs to be borne in mind that the figures show only the minimum reserve potential. The proven gas deposits in Afghanistan

S.No 1 2 3 4 5 6

Kind of Energy Gas Gas Gas Gas Gas Gas

Region Aqcha Umalik (Char Bolak ) Elikrabt (Aqcha) Shakhi Bel and Shamala Andkhoy Ashraf and Darwaz Qader Shakhmala

Quality Billion Cubic Feet 300 500 500 500 1000 500

Engineer Sadiq Niazi)

Tajik basin was subjected to intense seismic Turkmenistan. There is every likelihood that Afghanistan’s gas reserves will compare and even rival Turkmenistan’s resources. The United States Geological Survey (USGS) carried out two surveys to identify the mineral resources of Afghanistan with the second identifying 12 potential sites. The Afghansurveys using latest technologies to peep into underground formations. Reliable sources following the survey, shared on condition of anonymity, say that the early sign from the seismic survey show presence of huge gas deposits in Afghanistan. Another source said that Afghanistan could have better reserves than

JULY 2012

The International Resource Journal 133

Turkmenistan. No doubt, the discovery of the gas in Afghan-Tajik Basin will rekindle hopes of stability and security once again. Some sources, on condition of anonymity, said that the USGS had estimated gas reserves in Afghanistan’s north to be 25 trillion cubic feet. Moreover, the country may be home to reserves in Katawaz basin in the southeast. With these kinds of deposits, Afghanistan can turn into a regional gas-bazaar and qualify to join the elite gas suppliers club. Chevron’s interest in the Afghan-Tajik basin and China’s National Petroleum Company’s eye-catching contractual terms in favour of the Afghanistan government for the Amu Darya oil deposits in the north of the country are clear signals that there is more to

by Canadian energy economist John Foster writing in the Energy Security Journal.

Pawn’s promotion?
Pinning so much hope in TAPI without understanding the regional giants which will at all costs seek to secure their interest is a giant misstep and a potential tragedy for Afghanistan. Though tries at the moment, the shifting geopolitics may take regional actors away from the project. A more prudent path for Afghanistan would be to explore its own gas to supply to its households and industries and encourage indigenous investment. Gas can also be used for electricity generation and presents tremendous export potential.

invest in a mere 87 million barrels of oil. Some sources say Tajikistan has already been using diplomatic channels to bid for Afghan gas. Failure of TAPI will amount to US failure in Afghanistan. One of the reasons for the US to put boots on the ground was to ensure the TAPI pipeline was made possible; US-based Unocal was competing with Bridas, a Brazil-based oil

Afghanistan than building its own mines and understanding its neighbours’ strategies, which is critical to avoid being trapped into their game plans.

to Congress and said that such a pipeline was not possible unless an internationally recognised government was put in place in Kabul, as stated

Metals Exploratio Full steaM ahea

134

With construction activity gearing up for full swing, Metals Expl next step is to announce project nancing to get its Runruno go in the north Philippines into production

asia

on ad

loration’s old mine

136 ASIA

Metals Exploration

JULY 2012

The International Resource Journal 137

“ is project is on the cusp of being developed, there have been very few new programmes that have actually been nanced so we are a stand out and we are going to kick that goal” – Ian Holzberger
Metals exploRation is going full steam ahead into the construction phase of development, “Because we are using biological leaching the process becomes hydrometallurgical…lab work suggests it will work for us to recover that moly, but pushed until a full funding package is in place, which Ian Holzberger, chairman and project director at Metals Exploration, expects to announce in the coming weeks. “As soon as the drawdown is available on because it is a novel process, we don’t want to compromise the main game, which is gold,” he says. Biox, the biological leaching process technology that Metals Exploration will be using at its plant, is the intellectual property of a subsidiary of South African miner Gold Fields into full construction and the trigger on that is really the construction of the processing plant, which is ready to go and we have already started construction for the plant pad,” Holzberger says. Feasibility and optimisation studies show an average annual production of 96,700 ounces (oz) of gold over an initial mine life of 10.3 years at an average operating cost of $477/oz while the internal rate of return is expected to be 42 per cent at a $1,500/oz gold price. The area is also home to some 25 million pounds (Mlb) of molybdenum, which Holzberger explains could be a future credit story though the company’s key focus is getting gold into producprovement in the local area, adds Holzberger. “While there are roads and power already available, it needs to be upgraded and part of our development plan is leveraging off that to improve it. This will cut our costs but also it will improve local conditions so it is a double win for us,” he says. Although Leighton is the primary contractor on site tasked with building the processing plant, most additional contractors are from the Philippines. and is one of the many partners the company is working with as it upgrades basic infrastructures in its operating region.

Improvement partners
-

138 ASIA

Metals Exploration

METALS ExPLORATION BAGGED THREE OF THE MOST COVETED AWARDS IN THE MINING INDUSTRY INCLUDING 2011 PRESIDENTIAL MINE

GEOLOGICAL, EXPLORATION AND DRILLING SUPPLIES
GXD was established in the Philippines to provide services to the Construction, Geological, Exploration and Mining industries. Since the conception of the company we have emphasized delivering quality and reliable services and materials to the industry. All the products and services that we provide have been the best available in the market and supplied directly to our clients from the manufacturer with the necessary backup the industry demands.

GEOLOGICAL, EXPLORATION & DRILLING SUPPLIES AFP-RSBS Industrial Park, KM-12, East Service Road cor C-5, Taguig City, 1630 Philippines Ph : 63 2 866 1033 | Fax : 63 2 866 1036

www.gxdsupply.com

JULY 2012

The International Resource Journal 139

“This project is on the cusp of being developed, there have been very few new programmes

stand out and we are going to kick that goal,” Holzberger says.

Broker’s view
At its most recent AGM, the company lost one of its non-executive directors, Jonathan Beardsworth, who did not stand for re-election. Though this was unexpected, observers note that it may not be too surprising since Beardsworth had a

ERAL INDUSTRY ENVIRONMENTAL AWARD

their managing director in Asia. John Meyer, analyst at Fairfax noted that

“We like to work with indigenous contractors that have the capacity and skill, so the benefits are captured into the local and extended area rather than using offshore contractors,” Holzberger adds. Over and above that, Metals Exploration uses several consulting groups as well such as Australian-based GHD Consulting. Though it is likely that there will be further permitting which will be required, major permits and licences have been approved, which has become one of the main concerns for operations that are only beginning in the Philippines as the

Beardsworth’s commitments left little time for other roles. “The current challenge for Metals Exploration

future and expect the team to be in the UK in the next few weeks to report on the mine development and exploration progress.” Meyer adds that further exploration in the area shows additional bulk mining opportunities with good grades and near surface tonnage.

www.MetalsexploRation.coM

news in ReView
clontaRF in talks on peRu oil and Gas opeRations iRJ - June 13 - UK-based oil and gas explorer Clontarf is in talks with a number of joint venture and strategic partners over its 100 per cent owned exploration blocks in Peru. One of the blocks in question - Block 188 - lies

which has a resource of 16 trillion cubic feet and 880 million barrels of oil (mmbbl). Block 188 includes the Panguana well which was drilled to a depth of 2,750m striking oil with 37api by Phillips Petroleum in 1999. The company believed that Panguana’s Green Sandstone structure held 31mmbbl of oil. Once a partner is secured, Clontarf plans to re-enter the structure with an appraisal well to

to early development. “Block 188 now looks much nearer to development than we previously thought. Investor attention had been on Ghana, where [Clontarf] is cus is now on Peru. The securing of a JV or strategic partner on either Block 188 or 183 could lead

AUGUST 2011

The African Business Journal 141

Emerging and frontier jurisdictions
current depressed lows. The market cap remains at just £7m, which seems too low for an oil and gas company that could be close to advancing a sizeable asset,” said Jason Robertson, analyst at Optiva Securities.

pRiVate equity Bets on oil exploRation technoloGy iRJ – June 12 – and technology investment company JMI Equity have agreed to buy software group Paradigm for around $1 billion. Paradigm, whose analytical technology is targeted at oil and gas explorers and producers, was last bought by US investment group Fox Paine for around $100 million in 2002.

strong tailwinds in the coming years as energy companies look to drill in more challenging locations,” said Apax senior partner Ian Jones. Apax was advised by Bank of America Merrill Lynch and Simmons & Co; Paradigm was advised

by UBS and Royal Bank of Canada.

142 SECTION

Title

news in ReView

By the middle of 2013, the miner aims to triple its current Pilbara production capacity of 55 million tonnes.

said the offer had come “from one of the Russian state companies”, but would not specify whether it was Rosneft or Gazprom. The equal joint venture with Russian oli-

Bp consideRs oFFeR FoR Russian JV stake iRJ - June 1 - BP will be pursuing a potential sale of its shareholding in TNK-BP after receiving unsolicited indications of interest. The company added that there is no guarantee a transaction will take place. The Financial Times said a sale could fetch up to $30 billion and cited an unnamed source who

garch consortium Alfa Access Renova, led by tuated by Fridman’s recent resignation as chief executive of TNK-BP. TNK-BP was formed in 2003 as the result of the merger of the oil and gas assets of the two partners. It is vertically integrated with a diversi-

AUGUST 2011

The African Business Journal 143

Emerging and frontier jurisdictions
sia and Ukraine and international interests in Brazil, Venezuela and Vietnam. of the UK…Today’s deal between EnQuest and KUFPEC, bringing up to £300m of foreign investment into the North Sea, proves that the UK kuwait to inVest $500M in uk noRth sea oil Field iRJ - May 30 - Enquest will farm out a 35 per opments to Kuwait Foreign Petroleum Exploration Company (KUFPEC) for a total investment of $500 million in cash. anGloGold takes Full owneRship oF BRazilian Mine FoR $220M iRJ - May 29 - AngloGold Ashanti is set to acquire UK North Sea. Alma was previously abandoned because of high water content of output. First production is anticipated in the fourth quarter of 2013, with peak gross production of over 20,000 the remaining 50 per cent stake in Mineracao Serra Grande in Brazil from Kinross for $220 million. The transaction will be funded from existing cash reserves and debt facilities. To date, the Serra Grande mine has promillion barrels of oil. According to the Financial Times, Amjad Bseisu, chief executive of EnQuest, said the talks began last year with partners over investing in the $1bn project but were held up until tax breaks duced 3.4 million ounces (Moz) of gold. Last year, the mine produced 134,000 ounces of gold at a cash cost of $767 per ounce. Over the past four years, more than 1Moz of mineral resources have been added. continental shelf remains an attractive prospect. The Government will continue working with the industry in the North Sea to get the most of what is a huge national asset.”

Commenting on the deal, chief secretary to the Treasury, Danny Alexander, said: “This is good news for North East Scotland and the whole

gives us greater exposure to Brazil, where we’ve

as well as our reserve and resource base,” Mark

144 SECTION

Title

news in ReView
Cutifani, AngloGold Ashanti’s chief executive, said. “We see long-term, lower risk, potential from Serra Grande, which is a key component of our strategy to grow the contribution from the Americas.” The operation comprises three underground mines and one open pit mine as well as a processing plant.

codelco chieF ResiGnation May sMooth anGlo dispute iRJ - May 25 - The resignation of Diego Hernández, chief executive of Codelco, could be positive for negotiations over the ownership of the Anglo Sur copper division in Chile. Hernández cited “personal reasons” for his departure and there were rumours that he had not been aligned with the rest of the company’s board. Finance director Thomas Keller will take on the chief executive role. The move comes as Codelco and Anglo American agreed to restart talks over the ownership of assets in Chile, including Anglo’s Los Bronces mine. “Codelco’s previous stance taken very publically by their CEO was not particularly helpful given the scale of investment being made by Anglo into Los Bronces. Codelco need to grow their copper production but so do Anglo and there should be some middle ground in discussions,” said John Meyer, analyst at Fairfax. Los Bronces capex is $2.8 billion with production expected to be at 278,000 tonnes of copper per year and full production anticipated in the third quarter this year. Codelco had tried to exercise an option to purchase 49 per cent of the Anglo Sur division, which includes the Los Bronces mine, but the move was blocked by Anglo American in an increasingly bitter dispute between the two mining giants.

AUGUST 2011

The African Business Journal 145

Emerging and frontier jurisdictions
ability of raw materials from Indonesia appear to have subsided for the moment,” said Leon Westgate, analyst at Standard Bank in a note. The announcement in May sent Japan and China scrambling to secure alternative supplies of raw materials, particularly bauxite and nickel ore. Indonesia is also the world’s top exporter of tin.

GlencoRe take MaJoRity contRol oF dRc coppeR Mine iRJ – May 22 - Commodities trader Glencore said today that it has taken majority control of its oRe expoRt appRoVals MoVinG in indonesia iRJ - May 23 Mutanda copper mine in Democratic Republic of Congo by paying $340 million to acquire a further 24.49 per cent in Samref Overseas, a holding company above Mutanda, and another 1 per of three approvals needed to export ore, reports Standard Bank. On May 6, Indonesia banned exports of 14 raw minerals with an exception for miners that plan to build local processing facilities. However, a tax rate of 20 per cent will be applied to ore shipments. “It will be interesting to see how long it takes before exports resume properly. For the moment however, some of the concerns regarding availstep towards achieving Glencore’s previously announced intention to merge the Mutanda and Kansuki mining operations,” Glencore told Reuters. Mutanda and Kansuki combined will produce 160,000 tonnes per year of copper cathodes and cent in Samref Congo, a second holding company, taking its whole equity interest in Mutanda Mining to 60 per cent.

al export approvals start with reports suggesting

146 SECTION

Title

news in ReView
ing agreement, which is for seven years at a borhalf of 2013. Glencore’s plans have led it to also acquire around $140 million of shareholder debts as part of the deal. The announcement comes in the midst of the much anticipated $90 billion “GlenStrata merger of equals”. According to the Financial Times commodities note, long only funds have been spotted buyadding that the technical mining and processing plant have been subject to in-depth review by SRK per cent on May 24 when some 36 per cent of shares come off lock-up. The implication is that index linked tracker funds will be buying the Swiss trader as it gains a greater weighting in the FTSE, putting the company in a good position to see the merger voted through. Consulting. Maiden run of mine production is expected at around 8 thousand carats (kcts) supplemented by tailings reprocessing that is expected to produce around 15kcts in 2012 and 30kcts in 2013. Lace will reach full production by mid-2014 producing 300kcts from both tailing and run of mine producidc Backs diaMondcoRp’s lace Mine with $33.6M loan iRJ - May 21 - DiamondCorp has signed a term sheet with South African state-backed Industrial Development Corporation (IDC) for a $33.6 million loan to develop the Lace Mine in Free State province. tion, according to Northland Capital Partners. DiamondCorp owns 74 per cent of the Lace diamond mine with the remaining 26 per cent held by the company’s Black Economic Empowerment (BEE) partners. DiamondCorp CEO, Paul Loudon said: “The key driver for management in seeking funding for rowing cost of 11 per cent, will be in place by the end of July 2012. “The mine plan shows a deeper level of mining and longer development time – this is positively offset by block cave economics with longer block cave life and higher grades providing for

AUGUST 2011

The African Business Journal 147

Emerging and frontier jurisdictions
nsl BecoMes FiRst FoReiGn iRon oRe pRoduceR in india iRJ – May 18 – Perth-based commodity company

the Indian domestic market, marking its transition into a producer. It is now the only foreign company to own and operate iron ore mines in India. NSL managing director Cedric Goode said

company has had to overcome many challenges. “Our journey is only just commencing as we tive for shareholders of the company. Therefore, we are delighted that we and our [BEE] partners ing proposal from the IDC to provide over 98 per cent of the estimated capital required to establish a block cave development on the 47 level at the mondCorp’s transition from developer to producer and we welcome the support of the IDC in funding this potentially long-life diamond mine in the Free State Province.” progress through completing phases 1 and 2, to utilising our experience and actual performance to lift NSL to its desired 1.5 million tonne per annum (Mt/y) target by the end of 2014,” he continued. “This target being possible through bolt-on wet and dry separation plants to increase output, together with sourcing additional ore feed through strategic acquisitions and supply agreements.” The company is currently constructing and commissioning the Phase 1 Kurnool iron ore dry separation plant, which will be capable of producing up to 58 per cent Fe grade ore.

148 SECTION

Title

news in ReView
NSL expects to begin gradually ramping up production and sales tonnages towards Phase 1’s target production capacity of 200,000 tonnes per annum (t/y) in the third quarter. The dry separation circuit is expected to unPhase 2 of the project will comprise the

and 62 per cent Fe. This plant is intended to double capacity to 400,000t/y and is scheduled for completion in

“With the increase in funds being allocated to infrastructure projects, Indian domestic steel production is expected to increase from 77Mt to 200Mt by 2020,” Goode added. “The company looks forward to making its contribution as part of this growth.” opens an extensive new play fairway within the Group’s offshore acreage in Blocks 1, 3 and 4, to FiFth consecutiVe tanzania Gas discoVeRy iRJ – May 17 consecutive Tanzania gas discovery with the Mzia-1 exploration well located in Block 1, offcovery within the deeper cretaceous section and complement the now proven Tertiary fairway. Preliminary evaluation of the results indicates 55m of natural gas pay in good quality sands. An extensive logging programme has been completed, including the acquisition of pressure data and gas samples.

AUGUST 2011

The African Business Journal 149

Emerging and frontier jurisdictions
der evaluation. Prior to drilling Mzia-1, BG had estimated mean total gross recoverable resources approaching seven trillion cubic feet of gas from the four previous discoveries drilled in Tanzania. Mzia-1 is approximately 45km offshore southern Tanzania in a water depth of 1,639m. It is some 23km from the Jodari-1 discovery and is part of the 2012 three-to-four well exploration programme. Following the imminent completion of operations at Mzia, the Deepsea Metro-1 will relocate to Block 3 for the drilling of the next exploration prospect, Papa-1. BG Group as operator has a 60 per cent interest in Blocks 1, 3 and 4 offshore Tanzania, with Ophir Energy holding 40 per cent.

of adjacent cretaceous prospects, which could form part of a future Mzia hub. These prospects are expected to be tested in a future appraisal

of data from this new well and 3D seismic. The new resources proven by Mzia and the potential of adjacent prospects are currently un-

150 LATIN AMERICA

What went wrong with YPF

150 what went w
A risk management perspective of Argentina’s nationalisation of resources Repsol’s forced divestment of its YPF subsidiary by the Argentine government is a perfect example of the kinds of factors which lead to forced nationalisation, writes Jorge Vrljicak, Buenos Aires-based analyst for Westside Consultants.
ypF’s FoRced nationalisation is a backlash against its 1992 privatisation because the market reform Meanwhile, there are still simmering tensions over the image of “Spanish Conquistadors”, who In essence the end result is not very different from BP’s Gulf oil spill case - the corporation has only itself to blame for the outcome. Many would grab and remit to Madrid anything they can lay their hands on. This particular factor led to the unfortunate 2008 nationalisation of Argentina’s airline, analysts tend to consider Argentina’s action as arbitrary and a product of ‘resource nationalism’, comparing it to Venezuela or Russia. However, those same analysts forget Norway’s nationalisation of oil in 1972, among other cases. That is not to say that a nationalistic component is not a factor but Argentina’s history is well known. YPF and the oil issue were at the centre of 70 years of political storms in the country even prior to the start of the 1990 privatisation pro-

JULY 2012

The International Resource Journal 151

latin aMeRica

wRonG with ypF
Aerolineas Argentinas, owned by Spanish Marsans Group, which was also privatised in the ‘90s. servedly rich in a short period of time. It is true that the government didn’t have, nor -

Government fault
No doubt it was the government which made the

does it now have, an energy master plan. However, for anyone concerned, the thorns in the paw of the lion are obvious - namely energy self-suf-

obligations and goals for bidders outside of paying royalties. In addition, the government allowed leveraged buy-outs, which led to asset stripping cepted as a bidder though it had no prior experience in upstream operations. political. It was all a game of leverage as Spain YPF throwing into question the legitimacy of the bidding process itself, with some factions pointing out and government satisfaction. All this was irresponsible for Repsol to ignore and disregard. There was never a satisfactory

152 LATIN AMERICA

What went wrong with YPF

showed YPF’s production declining 60 per cent, petroleum and gas reserves down to one third of peak levels, imports up by 100 per cent from

about upstream discovery and development –

But the real shame was that the one thing that the company should have had expertise in, the

down from their peak - nobody was very happy. But the real damage came when it became widely known that Repsol intended to repatriate

downstream sector, was left neglected. Storage capacity, for example, was not properly attended to which left supply vulnerable to -

its stake. Until that moment, Repsol had time and dialogue with the government. In short, Repsol didn’t serve its customers properly. Which is why when Argentine president Cristina Fernandez declared the government’s intention to renationalise, no one shed a tear for the Spanish parent. If anything, there was some concern that the cure was no better than the illness and may negatively impact foreign direct investment into the country. Though this seems unlikely as oil majors compete to pick up YPF operations and the Argentine government sends clear signals that it is willing to talk.

tions. Gas-oil during planting and harvest seasons became scarce causing inconveniences to farmers. Tourist seasons and long weekends proved to be a challenge for car travellers in search of petrol. The manufacturing industry consistently complained about the petroleum and gas industry due to its continued fuel shortages. Moreover, households have priority for fuel delivery during shortages, making matters worse for manufacturers. Storage facilities should have included tank

tank capacity at service stations. Doubling capacity at those points to account for two weeks

Expectations management
Was it possible for Repsol to better manage and hedge its risks? Yes. The company had plenty of chances and no restrictions making its mistakes conspicuously worse. There was little evidence that Repsol cared

of consumption would have mitigated the risks of frequent strike action by truckers. Marketing innovation was non-existent other than for petrol itself. Repsol was reluctant to create or participate in a possible futures market, a move that would have been welcomed by consumers and

JULY 2012

The International Resource Journal 153

reduced YPF’s exposure to commodity price risk. On top of that, human resources were not valued nor were employees promoted properly. Segregation of YPF staff from Repsol was painfully obvious, even as the parent needed the best of local ingenuity to run its operations. That local

condition. It was absolutely dysfunctional. A parallel can be drawn to a similar case of water distribution and sewage services run by Aguas Argentinas - a consortium led by Suez, Aguas de Barcelona, Vivendi and AWG Group - which lost its contracts for mismanagement under similar circumstances.

helped Repsol’s endeavour in Alaska, among

Still, it remains to be seen whether this nationalisation leads to a decrease in foreign

The company’s interaction with local communities, including provincial governments and municipalities, was also defective. One wonders what sort of rationale was behind expensive company initiatives such as promoting football clubs when investment was better spent in communities to boost jobs and fund schools and hospitals. westsideconsultants.coM which provide satisfactory services, could ever be put in such odious position.

Ripple e ect?
Lack of allocated capital and sloppy management for the biggest Argentine oil and gas company was bound to lead to problems. Risk management presupposes essentially two things: that there should be enough capital to foot the bill for a viable functional project and that another tranche of equity should be available for possible volatility. -

154 LATIN AMERICA

Leni Gas and Oil

the tRinidad option
154

Leni Gas and Oil is setting o from Spain for greener pastures in Trinida

JULY 2012

The International Resource Journal 155

latin aMeRica

m ad

n

WORKOVER AT AYOLUENGO

156 LATIN AMERICA

Leni Gas and Oil

GOUDRON WELL IN TRINIDAD

JULY 2012

The International Resource Journal 157

london-headquaRteRed leni Gas and Oil (LGO) velops those reserves with new technologies and investment. Its strategic assets are the Ayoluen-

international areas and on top of that, there is no obvious follow-on business,” says Ritson.

by interest from multiple bidders when the asset went on sale. Ritson downplays the impact of

the country, and it has interests in the Caribbean island nation of Trinidad. But the company’s asset base is about to change, explains Neil Ritson, chief executive at LGO, as it divests the Spanish assets to further

the eurozone crisis in the company’s divestment decision, saying that he has not seen interest for European primary production assets wane; though raising capital to develop them will likely

Out of the submitted proposals, one bidder was given exclusivity until the end of May to

Switching plays
First developed by Chevron in the 1960s, the lipped about any further details as discussions are ongoing, but he does add that should talks was acquired by LGO, a move that doubled production which peaking at over 300 barrels of oil stall, other bidders are waiting on the sidelines. “We should conclude something in the third quarter, but if the current market does not suphave over 100 million barrels (mmbbls) original oil in place. Unfortunately, the economics showed that between 300 to 400 per cent increase was necessary to create the necessary internal cash for us every month,” Ritson says. port the kind of price we want then we will keep

Trinidad opportunity
The operational cost structure, explains Ritson, is not particularly favourable. “Equipment needs to be imported across Europe, there is no indigenous service sector, while labour, equipment and transportation costs are on the high end compared to the US or other So why sell now? In the continuing turbulence of capital markets – particularly for small caps with high capital expenditure projects – LGO wants to take advantage of what the company’s management believes is an early mover advantage for the redevelopment of the onshore Trinidad oil play.

158 LATIN AMERICA

Leni Gas and Oil

ICACOS FIELD WELL

In November, the £10 million market cap producer raised £1.5 million for working capital purposes, which adds to a £5 million line of equity to draw down from as well as a revenue base from an annual 65 thousand barrels of oil (mbbls) across its operations. The company’s aim at this point, explains Ritson, is to stay out

of the capital markets altogether and this will mean using its asset base in order to pursue growth opportunities. In 2008, LGO acquired a 50 per cent in-

western Trinidad operated by local oil and gas company, Primera. Current daily production for

JULY 2012

The International Resource Journal 159

Baropex is an independent advisory firm with a great track record in helping oil and gas companies, private investors and financial institutions making the right decision on investment in and evaluation of petroleum assets.
We work hard to ensure that our clients get the best out of their investment by using our worldwide experience, knowledge of several languages and cultures and an integrated approach in reservoir management and asset evaluation.

Contact us:
10 Fenchurch Avenue London EC3M 5BN United Kingdom Tel: + 44 (0) 208 613 1051 Email: info@baropex.co.uk

www.baropex.co.uk

widely available products and techniques to deal This led to further acquisitions in undeveloped areas of the Cedros Peninsula close to the nearby East Venezuelan Basin. But the big step for LGO in Trinidad has been with such challenges, explains Ritson. At Goudron, LGO has started moving rigs to ducing at about 50 bopd, through Ritson points out that there are perhaps 100 useable wells in developed by Texaco in the 1950s through until 1986 when the lease expired. Texaco left in part because its focus moved away from Trinidad, but also because of technical challenges from unconsolidated reservoirs and wells that tended to sand diesel because of how remote the region is… the oil is a low sulphur, high API crude, of very good ago is not quite so complicated today and there are quality,” Ritson says. total and oil quality is high. “You could put the product straight into your

160 LATIN AMERICA

Leni Gas and Oil

non-coRe opeRations
Area 4, Southern Offshore Malta (10 per cent interest, a legacy asset) High potential exploration play in highly prospective oil and gas basin in proximity to Tunisian and Libyan active petroleum basins. Major seismic interpretation executed on the 5700km2 production sharing contract (PSC) area. Identified four prospects and five leads with gross mean 2P STOIIP of 5 billion barrels and recoverable reserves of 1.5 billion barrels. PSC signed with the Maltese Government to drill well on Area 4 to depth of 2500m. Currently targeting high chance of success drilling locations with new seismic acquired in 2011. Area 4 is the only block not contested among Malta’s neighbours.
AYOLUENGO WELL IN NATIONAL PARK

Industrial base
Meanwhile, Trinidad is home to the largest oil dustry to support operations, both as a convenient supplier, but also buyer of product. ply at the moment and that is something the government is keen to address, it is looking to attract inward investment from companies such as ourselves to raise production levels. They are currently importing crude in order to meet

GulF oF Mexico
Multiple leases in the shallow Gulf of Mexico (7.25 per cent interest) Total 2010 production net to LGO’s interest was 6,617 barrels of oil and 37.8 million standard cubic feet of gas (12,913 barrels of oil equivalent). Additional potential exists at Eugene Island to recomplete existing wells or to sidetrack wells to undepleted zones. LGO and its partners are actively studying these options.

produced indigenously,” he says.

JULY 2012

The International Resource Journal 161

“Trinidad’s re nery exports processed re ned products and it is de cient in crude supply at the moment and that is something the government is keen to address, it is looking to attract inward investment from companies such as ourselves to raise production levels.”

In total, Ritson estimates that there are well wildlife sanctuary, and it is these environmentally sensitive concerns that LGO addresses with its corporate social responsibility programmes. The over 200 million barrels of oil in place across its Trinidadian assets and reserves of over 20 million bbls. “In a different market, developing our asthis is nothing new for LGO. “The country has been producing oil for 100 years, so we don’t have some of the other issues sets would have happened much more quickly, recession is really just a lack of forward movement. It is not an easy time, but the opportunity is there, we have oil in the ground and a major in other regions. Our issues are around good housekeeping, not spilling oil, not contaminating water supplies or allowing chemicals to leak, and not unduly affecting the wildlife, concerns of that type,” Ritson says. www.leniGasandoil.coM sustained downturn in the oil price seems unlikely,” he adds.

162 LATIN AMERICA

Cabral Resources

Ca

st

16

JULY 2012

The International Resource Journal 163

latin aMeRica

tRike when iRon is hot
Hot on the heels of signing agreements with the Bahia state government, Cabral Resources has begun a maiden resource drilling programme at its Brazilian magnetite tenements.

abral Resources

62

164 LATIN AMERICA

Cabral Resources

caBRal ResouRces’ initial assessment at its tenement portfolio in the central eastern coastal Bahia state in Brazil indicate a potential target of 331 to 644 million tonnes (Mt) of high grade, coarse grained magnetite iron ore. And the explorer’s maiden 3km diamond drilling campaign at Morro do Gergelim initi-

tenement portfolio with a debut JORC resource

The initial campaign target is driven by Cabral’s promises to shareholders that capital raising initiatives, which added A$25 million to the company’s coffers in February 2011, would fund exploration activities on the company’s initial 12 tenements. Since that time, explains Michael Bogue, managing director and chief executive of Cabral, the company has grown the portfolio substantially and it now includes high grade hematite direct shipping ore (DSO) targets, which could generate

“Bahia is really underexplored, it is one of the poorer states in Brazil and the government is very progressive in looking at ways to create development and opportunities in the region for economic prosperity and employment. That is one of the reasons why this project has such a good infrastructure story,” says Bogue.

JULY 2012

The International Resource Journal 165

166 LATIN AMERICA

Cabral Resources

“Bahia is really underexplored, it is one of the poorer states in Brazil and the government is very progressive in looking at ways to create development and opportunities in the region for economic prosperity and employment.”
On the ground
Cabral signed agreements with the state’s government in March this year for up to 15 million tonnes per year (Mt/y) on the FIOL rail line, due for completion in 2013 and at Porto Sul, due for completion in 2014. The rail and port infrastructure build is set to boost not only the iron ore sector, but also the agricultural sector. Cabral’s closest neighbour is LSE-listed Eurasian Natural Resources Corporation, which has spent upwards of US$1 billion buying underdeveloped iron ore projects in the region and looking to access the same infrastructure. The $25 million capital raising enabled Cabral to acquire a “starter pack” of tenements in Bahia state and acquire and consolidate more over time as well as embark on the JORC drilling campaign while getting the exploration team established on the ground. With $13 million left in the bank to see those activities through, Bogue expects that the company will not need to go back to equity markets until the middle of next year. signed with Bahia State, Cabral employs local people where it can. As the project progresses, Bogue expects that engagement in the region will increase as well. when compared with deposits in Western Australia. “Iron ore liberation grind sizes [in Western Australia] are down to 32 microns or below, whereas we are estimating that ours [in Lagoa Real group] will come in at 75+ microns. There will be a big operating cost advantage for us in that respect,” he notes. The other two groups, Itaquarai and Canabrava, are the hematite DSO and itabiritic ores and Cabral is systematically working its way through that portfolio, prioritising each of the tenements in anticipation of identifying promising drill targets. The Lagoa Real group of tenements contain coarse-grained, crystallised magnetite ore. Bogue

Local and global partners

JULY 2012

The International Resource Journal 167

Excelling in Environmental Consulting

www.5aconsultoria.com.br phone: 55-71-3033-8680 | contato@5aconsultoria.com.br Salvador/Bahia/Brazil

CONSULTORES & ASSOCIADOS

“In our region, we have subsistence farming and we are very conscious of having a good relationship with local landowners. We employ them in

network” for offtake agreements, joint venture partners, infrastructure solutions, rolling stock and locomotives and project funding alternatives. That contact network is fomented by James

with communities in terms of having open sessions and keeping regular dialogue. Locals understand the mining industry well, some operations in the area have been running for 70 years…and as we move to construction and operating phases we will certainly look to training and technology for local talent in order to achieve our objectives as well as those of the state government,” he says. In terms of overseas partners, Cabral has formed a “unique and established Chinese contact

Li, who is employed by Cabral. A metallurgist by background, Li has strong relationships with steel

banks and other state-owned enterprises that can be tapped into towards developing the project. China is not only a partner, but also a target customer. “We will be looking to our Chinese friends for project partnerships and infrastructure solutions, so it makes sense to look at offtake agreements

168 LATIN AMERICA

Cabral Resources

austRalian-lataM inVestMent in the spotliGht
IRJ - May 22 - Australia’s trading relationship with a number of Latin American partners is being showcased at the inaugural Paydirt 2012 LatinAmerica DownUnder resources conference in Sydney. Brisbane-based Xstrata Copper said an expansion of its copper projects in Latin America will be fundamental to achieving 60 per cent growth in annual copper output within three years and would underpin the current $7 billion commitment to achieve such a target. The company is currently producing 900,000 tonnes per year (t/y) but are looking to boost that nearer to 1.5 million t/y, according to Charlie Sartain, Xstrata Copper chief executive. “This is an ambitious programme a strong growth pipeline but new projects now under construction or development in Peru and Chile and to some extent, Argentina, will help to progressively deliver this objective,” he said. Xstrata saw operating profit of $3.9 billion in 2011 with its South American operations contributing 68 per cent of that margin. “The next major phase will take in the current $90 billion Xstrata-Glencore merger,” he added. Also on display was Peru’s stock exchange in Lima, which merged with stock markets in Chile and Colombia in 2011. Australia’s equities markets and resources players were encouraged to dual list as a way to tap additional sources of funds for new mining ventures in Latin America. Peruvian stock exchange boss, Francis Stenning, pointed out that Torontolisted players were dominant on the Lima Stock Exchange with Canadian juniors dually listed raising some $273 million globally. In one of the lesser known LatAm stories, Nicaragua made a play to attract investment, which saw a 90 per cent surge to $968 million in 2011 when compared to the year previous. Mining investment is the third largest sector in capturing foreign direct investment. Javier Chamorro, executive director of PRONicaragua, a lobby group that promotes investment in the country, said: “Foreign direct investment is now 13 per cent of GDP, the highest rate in Latin America, so Australian mining entities coming into our market have a secure investment, operational, geological and socially positive environment in which to make fresh plays,” he said. He also hinted that a bilateral agreement would benefit both countries just as Nicaragua’s agreements with major trading partners the EU and US do.

JULY 2012

The International Resource Journal 169

“In short, we are a well-placed emerging iron ore producer with a portfolio of highly prospective iron ore tenements located close to third party rail and port infrastructure where we have a Protocol of Intentions agreement for allocations signed.”
as well. One of the great things about having a metallurgist on the team is that we can match the metallurgical characteristics of our ore with the right mills, and that is a very important and distinguish-

TEN YEARS MEASURING THE AMAZON

The Topographic is a company specializing in topographic services, your headquarters is in Belém- Pará – Brazil, with large experience in the market, the Topographic comes growing in your activities, providing quality, safety and low operating cost for your clients. With high technical and management capacity performed by quali ed professionals, the Topographic has an objective and bold view, always focused on customer satisfaction. The search for contentment and gratefulness of your clients is the difference at the Topographic Company, continuously looking for new technologies associated with the quali cation of your employees. paulosady1@hotmail.com | topographicbr@hotmail.com www.topographic.com.br

“In short, we are a well-placed emerging iron in total these partners will be very useful when it comes to the big dollar requirements to get these iron ore projects off the ground,” Bogue notes. ore producer with a portfolio of highly prospective iron ore tenements located close to third party rail and port infrastructure where we have a Protocol of Intentions agreement for allocations

Model business
A pre-scoping study commissioned through ProMet Engineers in Australia shows a capex in the US$2 billion range as a high-end estimate, based on a 15Mt/y allocation of magnetite concentrate ore as a product. However, that could get lowered depending on the blend of products being used considering the potential to produce less capital

signed. Not to mention a healthy cash balance to continue our exploration efforts for the foreseeable future. We believe Cabral’s business model

in the period ahead” Bogue adds.

caBRalResouRces.coM.au

170 SUSTAINABILITY NEWS IN REVIEW

170
Unprecedented levels of civil society representatives have ooded into Brazil for Rio+20, the majority of which are from the developing world for the rst time.
iRJ takes a look at global developments pushing sustainability into the headlines. (MMSD) initiative.

Susta
-

news

view of the progress the mining sector has made since companies joined NGOs in calling for the Mining, Minerals and Sustainable Development

“The 2002 MMSD report was a game-changutives committed to act to maximise their sec-

Large miners lead way on sustainability
IRJ - June 8 - The world’s biggest mining companies have made major improvements in environmental policies though as a whole the industry continues

tor’s contribution to sustainable development, and they adopted the MMSD agenda as a robust and credible way to do this. Ten years on, however, the results are mixed and new challenges have emerged.” -

Buxton, author of a report from the International Institute for Environment and Development.

ments are reasserting control over their natural resources, they lack the capacity to ensure that

JULY 2012

The International Resource Journal 171

s in ReView
mining contributes to sustainable development. Buxton’s report also states that the International Council on Mining and Metals – an umbrella organisation of leading companies such as Rio Tinto and Anglo American - has succeeded in implementing many of MMSD’s recommendations for industry. But complementary measures proposed for governments, the small scale mining sector and communities have not matched this success.

ainability
dumping toxic water in the rainforest. indigenous groups in Ecuador and approximately 70 farmer communities who want Chevron to pay the judgment imposed by an Ecuador trial court

Ecuador’s court of appeals in January. In total, the long-standing case spans 19 years. Canadian lawyer Alan Lenczner, who will be representing the Amazon communities, said the

Ecuadorian coalition hits Chevron with $18bn lawsuit in Canada

Ontario is targeting Chevron and various subsidiar-

including the country’s largest offshore drilling lawsuit in Canada seeking to enforce Chevron’s compliance with an $18 billion clean up fee for project and new investments in oil sands in Alberta. Chevron has virtually no oil assets in Ecuador.

172 SUSTAINABILITY NEWS IN REVIEW

“I am honoured to have been asked by the indigenous people of Ecuador to correct a historic injustice visited upon them by Chevron,” said Lenczner, who visited Ecuador and reviewed the extensive trial and appellate records of the case, which exceed 250,000 pages. “Chevron fought for nine years to move the trial from the United States to Ecuador, and then had a full opportunity for eight years to defend itself in Ecuador,” Lenczner added. “This is a legitimate judgment and I believe Canadian courts will recognise it and enforce it as such.” In response to the media reports, Chevron said that the Ecuador judgment is a product of bribery, fraud, is illegitimate and that the

company will vigorously defend against any enforcement action. “Chevron is defending itself against false allegations that it is responsible for alleged environmental and social harms in the Oriente region of Ecuador. Chevron never conducted oil production operations in Ecuador, and its subsidiary Texaco Petroleum (TexPet) fully remediated its share of environmental impacts arising from oil production operations, before leaving Ecuador in 1992,

all agencies of the Ecuadorian government responsible for oversight, TexPet received a complete release from Ecuador’s national, provincial, and municipal governments that

JULY 2012

The International Resource Journal 173

extinguished all claims before Chevron ac-

the bank’s annual meeting taking place in London May 18 to 19 amid criticisms of its high level

evidence exonerates Chevron and proves that

of fossil fuel investment. The announcement outlines new funding

to human health or the environment,” the oil major said in a released statement. The Amazon Defense Coalition says that Chevron is using the “fraud” charge as a ruse to try to block enforcement of the judgment and to distract attention from the overwhelming evidence of its historic misconduct. The Ecuadorian state-backed NGO noted that Chevron’s

for projects worth up to €25 billion over the next three years that reduce energy waste and greenhouse gas emissions. The bank is aiming to provide €4.5 to €6.5 billion out of its own coffers. The EBRD was founded in response to the collapse of the Berlin Wall and is owned by 63 countries as well as the European Union and the European Investment Bank. It supports projects in 29 countries from Central Europe to Central Asia.

when compared to BP’s disaster in the Mexican Gulf in 2010. BP estimated the accidental leak of 4.9 million barrels of crude oil would cost the oil major $37.3 billion. By comparison, Chevron intentionally dumped 16 billion gallons of toxic produced water in Ecuador containing far more crude oil that was spilled in the Gulf, as well as heavy metals and other drilling chemicals, and faces less than half of BP’s costs to clean it up.

And as government budgets get slashed across Europe in the middle of ongoing currency

tor has an important role to play. “A lot of the very capital intensive measures on climate mitigation are being postponed because of constraints from governments…[previously] it was all about governments and public

EBRD launches next €25bn phase of sustainable energy investment
IRJ - May 18 - The European Bank for Reconstruction and Development (EBRD) launched the next phase of its Sustainable Energy Initiative (SEI) at

sector well, you know what is happening to budgets...so the emphasis that is given to the private sector is very important,” he said. Since its inception, SEI has adopted a business model that drives investment at commercially viable projects at market rates.

174

SUSTAINABILITY NEWS IN REVIEW

tion target and in 2011 became carbon negative (-6.1Mt). SEI business volume is at €8.8 billion with an estimated 46.9Mt/y of carbon emission reduction across 464 projects since 2006. dog CEE Bankwatch Network because over €3 billion, or 48 per cent, of the bank’s energy loans and equity between 2006 and 2011 had gone to fossil fuel sources and coal, which will continue to remain an important part of EBRD members’ energy mix. Tanaka pointed out that SEI is a large part of the bank’s work. “What we have achieved in these six years is roughly [the equivalent of] making Serbia carbon

neutral,” said Tanaka, adding that SEI is “not a side activity with a little green door to show the EBRD cares about climate…it is almost one-third of what we do”. Renewable energy investment in projects such as wind farms will stay a priority going forward and as the EBRD begins operations in the Middle East and North Africa regions, a more compelling argument could get made for solar energy.

continue to look at. Case studies presented at lion long-term loan to Russian steelmaker Novolipetsk Steel Works (NLMK). The loan was used to construct a 150MW combined heat and power plant which will utilise waste gases from blast

JULY 2012

The International Resource Journal 175

furnaces. It is expected to cut energy consumption 15 per cent by 2015. Carbon markets, on the other hand, have dropped down the agenda. “The market mechanism was supposed to send a carbon price signal, at this stage it is not…we obviously feel we need to try and continue supporting this approach because it is an approach that does have a benefit, but at this point we may be at the low end of the cycle on it,” he said. Speaking at the opening session of the board ister, congratulated the EBRD on its work. “The EBRD can help expand new markets and leverage private investment and with many

of the bank’s shareholders dealing with large onstrate it is delivering maximum value,” he said.

million and invested over €9 billion in 380 projects of which 29 per cent were sustainable energy initiatives.

176

US, CANADA AND AUSTRALIA METALS AND MINING Riversdale Resources

176

RiVeRsda

Alaskan coal p

JULY 2012

The International Resource Journal 177

us, canada and austRalia Metals and MininG

play

ale ResouRces

178 US, CANADA AND AUSTRALIA METALS AND MINING

Riversdale Resources

JULY 2012

The International Resource Journal 179

After their success in Mozambique coal, the Riversdale team is intent on realising another triumph - this time in Alaska.
RiVeRsdale ResouRces’ philosophy is the same as the last time IRJ caught up with the team, which saw its original operation, Riversdale Mining, acquired by Rio Tinto for A$4 billion.

180 US, CANADA AND AUSTRALIA METALS AND MINING

Riversdale Resources

Summing up that philosophy is Steve Mallyon, managing director: “Go hard or go home”. The

2004, $1,000 invested in Riversdale Mining grew to $82,500 when it was acquired by Rio Tinto in 2011. Still, Alaska and Mozambique seem like quite different prospects. “It is a different operating environment,” says Mallyon. “But to some extent all of the systems, people and protocols are identical to what we had in the original Riversdale Mining. And once again, it is a multi-seam, coking coal basin that we are pursuing.” He admits there is one big difference, an intentional one. That is the availability of infrastructure in Alaska, something that was woefully missing in Mozambique and an aspect of the project that the Riversdale team admit was the toughest, and most expensive, in their African experience. By contrast, the Chickaloon project in Alaska has a long history of coal mining and had been mined from 1913 to 1922, when the US Navy focused on high quality coking coal for their Pa-

“We feel the company is in a strong position to advance the project for the next couple of years with existing funds and we are unlikely to be in a position where we are beholden to any market to try and get additional money.” - Anthony Martin, chief nancial o cer

1960s and a small development project undertaken by a private group in the 1980s in the area, we opment. The Riversdale model has not changed,

known coal domains with good quality coal, but the difference here is that we were sensitive about access to related infrastructure,” Mallyon says.

Port, rail, road
That includes the deep water Port MacKenzie, which is well-placed as a delivery point to natural

service the mines. Operations ceased when pe-

markets for the product in Japan, South Korea and Taiwan. There is all-year round shipping and

discoveries in California and later in Alaska. “As a result of that work, as well as additional work by a number of US-based companies in the

the port is located about 120km from Chickaloon on Glenn highway. The Glenn highway runs through the centre of

JULY 2012

The International Resource Journal 181

Weatherford slimline logging services help you extract more value from coal, minerals and unconventional hydrocarbon resources
Weatherford has a full suite of specialized tools and experienced logging personnel to acquire high-quality logging data from small-diameter holes in subterranean mines and vertical to high-angle boreholes. Our market-leading slimline logging services are a cost-effective alternative to core sampling. You get data in a fraction of the time without transport costs and lab delays, as we process, analyze and present
© 2012 Weath erford. All rights r eserved. Incorporates . proprietary and patented Weatherford technology

Change to Affordable On-site Data

quality log images include advanced density, neutron and gamma ray measurements.

Technologies

Applications

Borehole diameters

Drilling

Put our 30-plus years of mining experience and Tactical Technology™ to work for you. Contact your Weatherford logging services representative or visit us at weatherford.com/slimline.
Wireline services Cased-hole Openhole Slimline

Evaluation

The change will do you good

SM

Completion

Production

Intervention

weatherford.com

182 US, CANADA AND AUSTRALIA METALS AND MINING

Riversdale Resources

the state and through Anchorage, the biggest city in Alaska with a population of about 300,000 and connects with Chickaloon. Riversdale believes the Port Authority is targeting between 2 and 3 million tonnes per year (Mt/y) of coal exports from existing infrastructure and rail and dock upgrades are being considered for the future. The Chickaloon region’s coal is bounded by two river systems, the Chickaloon and King rivers, and the land is amenable to a number of open pit and underground development. Riversdale has acquired about 40.5km2 of land in the Matanuska valley, leased from the Alaska Mental Health Trust (AMHT), which was awarded the land as part of

legislation in order to generate funds to support mental health programmes. Riversdale has a 10-year lease with extension by production and exclusive rights to coal in a US$3million deal. In addition, royalties are payable to AMHT with no additional state royalties payable, though this does not reduce Riversdale’s requirements to comply with the Department of Natural Resources or other regulations. “The relationship with AMHT is a unique arrangement and from our perspective a very satisfying one. Every dollar that we spend in acquiring the land lease and in paying royalties

JULY 2012

The International Resource Journal 183

coming from the community are around the environment, as a number of people use the area for

environmental work has commenced to address issues such as potential impacts on surface and tural resources, vegetation, soil, wetlands, recreational activities, wildlife and social impacts. Mallyon notes, however, that the lease has been effectively dedicated for mining since the 1920s. “It is an exciting exploration environment because Alaska has really developed on the back of the oil and gas industry. There are a number of sedimentary basins across Alaska from the south of Anchorage to the northwest slope where looks to us to be quite underfunded. We are not the major oil producing centre is. Coal has been widely overlooked by the oil majors, yet groups targeting between 20 and 25 year production life, so the royalty base will grow as we develop it and such as BHB Billiton have developed a sizeable resource on the northwest slope. Our plan over the next year or two is to investigate a number of Mallyon explains. The area is also home to a small population at Chickaloon village, with about 350 landholders and about half that for people living in the area. In addition there is a native community living nearby. At this stage, the company is involved in a community engagement programme, giving presentations at local councils as well as sponsoring community events. The main concerns coking coal opportunities throughout Alaska, as well as accumulate a larger footprint in the valley we are in,” says Mallyon.

Quality coal
The company’s president in Alaska is associated with the original Riversdale team, Russell Dann. He was a former Regional Director of the Department of Employment, Economic Development

184 US, CANADA AND AUSTRALIA METALS AND MINING

Riversdale Resources

including two coal zones of between 6 and 9
Comprehensive Geologic Services

metres wide. “A key element for coking coal is that it has

Geologic Consulting Geologic Staffing Geological Engineering Reporting (including 43-101) Logistics/Operation Coordination Remote Site Management GIS Services Permitting Assistance Community Engagement Claims Staking Claims Administration Equipment Rental
Dedicated to responsible development of Alaska’s resources.
11401 Olive Lane, Anchorage, Alaska 907-522-4664 www.alaskaearthsciences.com

resource could be a low volatile bituminous coal and the indications we have for ash at the moment are relatively low but we may need to wash that coal. We don’t have enough information at this point in time within the Chickaloon coal lease itself and that is the purpose of the forthcoming drilling campaign…We would like to drill holes into sections right through that full thickness of the coal seams and understand exactly how thick those seams are and how the quality

and Innovation in the Queensland Government’s Mining and Energy agency and, prior to that, was the Latin America, Philippine and USA exploration ed – part of the former Hanson Plc group) . “There are a series of igneous intrusions in the area and that appears to be the primary reason

varies between them,” Dann says.

Global and local partners
As the company moves towards development, Dann explains that Riversdale is trying to combine teams of local Alaskan knowledge and experience with the more global technical capability of groups it has worked with in the past.

we take some of the historical coking coal analyses

Riversdale is working with Anchorage-based Alaska Earth Sciences to tap into the group’s coal

for coking coal, we are very happy with those results. It certainly gives us the indication and encouragement that we have the potential for a very good quality coking coal,” Dann says.

expertise and experience in community engagement. Overseeing the environmental programme is

has also contracted SRK Consulting for the water

JULY 2012

The International Resource Journal 185

quality work and SLR International Corp for the meteorological and air quality work. Geological services group McElroy Bryan is

the geophysical company, Fugro will be starting an airborne geophysical programme later this month. Exploration mapping is expected to be completed by the end of this year and coal quality results are expected by the end of 2014. A scoping study is planned for completion by the end of 2014, while a feasibility study and development decision is anticipated by the end of 2016.

“It is a di erent operating environment. But to some extent all of the systems, people and protocols are identical to what we had in the original Riversdale Mining. And once again, it is a multi-seam, coking coal basin that we are pursuing.” - Steve Mallyon, managing director

try and get additional money,” Martin notes.

Raising capital
Having just completed an A$20 million capital raising effort with institutional and high net worth investors out of Europe, Asia and Australia, Riversdale believes it is in a strong position to proceed with work on the ground in Alaska, but also to potentially look at additional opportunities for the company in Australia and North America, says Anthony Martin,

Though he says that it is still early days to talk about capital expenditure of the project, Martin adds that compared to other potential coal developments globally, due to the proximity of rail and port infrastructure and potentially a

based on historical coal quality and yield results, capex may “comparatively sit quite well in the coal development world”.

“The current intention is to look at an IPO during 2013 as the next capital raising effort, but that is dependent on markets at the time. We feel the company is in a strong position to advance the project for the next couple of years with existing funds and we are unlikely to be in a position where we are beholden to any market to

186 US, CANADA AND AUSTRALIA METALS AND MINING

New Millennium Iron

New Millennium

1

JULY 2012

The International Resource Journal 187

us, canada and austRalia Metals and MininG

m Iron iRon will
ough it is still a “small” junior miner, New Millennium Iron has heavyweight backing, huge resources and big production goals.

186

188 US, CANADA AND AUSTRALIA METALS AND MINING

New Millennium Iron

Big Span Steel on site. Image c/o www.nmliron.com

FRoM its BeGinninGs as a capital pool company in 2003, New Millennium Iron has grown into an emerging producer controlling one of the largest iron ore resources in the world – the Millennium range, a 210km long taconite belt in eastern Canada. The company’s direct shipping ore (DSO) project in partnership with Indian steelmaking cause of its smaller scale and relatively lower

capital costs. When the DSO project goes into production by the end of the year, New Millennium will become an operating company with

In 2013, the company is targeting 2 million tonnes (Mt) in production, ramping up to full capacity of 4.2 million tonnes per year (Mt/y) in 2014. Tata Steel Europe, which has plants in the UK and Netherlands, has committed to

JULY 2012

The International Resource Journal 189

www.sauvageau.qc.ca
1.866.SAUVAGEAU.728.8243

Across Quebec, one near you
From its very beginnings, Location Sauvageau distinguished itself with its product line, its ability to provide you with the right vehicle and the quality of its service. Over the years, we have become the rental specialists for work vehicles in Quebec. More and more professionals, businesses and municipalities turn to us. They know they can count on us to meet their transport needs.

521 Côte Joyeuse, St-Raymond, Québec, Canada, G3L 4A9 www.sauvageau.qc.ca

190 US, CANADA AND AUSTRALIA METALS AND MINING

New Millennium Iron

JULY 2012

The International Resource Journal 191

ARE YOU THINKING OF INSTALLING A PIPELINE SYSTEM?

BEI Professionals can provide services in the following areas:

Proudly supplying NML with our leading pelletizing plant technology.

Sustainable use of Earth's natural resources
www.outotec.com

192 US, CANADA AND AUSTRALIA METALS AND MINING

New Millennium Iron

“We have this resource which will last for upwards of a century and the world’s iron ore resources are being depleted at a considerable rate”

100 per cent of the offtake at market prices from the joint venture company, Tata Steel Minerals Canada (Tata Steel 80 per cent: New Millennium 20 per cent).

historic iron ore producing region of Northern Quebec and Labrador and had been previously operational until the market lost its appetite for lower quality ore being produced by the operation.

JULY 2012

The International Resource Journal 193

Dean Journeaux, chief executive of New Millennium, gets his share of questions on this point – what makes him think he can do better today? “The operator closed down the mine in 1982 because for one, the market was bad, but also, the product was not treated, not upgraded, running around 58 or 59 per cent iron. We are upgrading the run of mine ore grade to a 64.5 per cent iron, in other words, we are

meeting today’s market requirements for quality, and of course, the price of iron ore has gone up quite a bit since 1982,” Journeaux says.

C$300 million of the capital costs, with New Millennium responsible for 20 per cent of the excess.

Human Resources
The DSO project is just the beginning for the

194 US, CANADA AND AUSTRALIA METALS AND MINING

New Millennium Iron

LabMag iron ore deposit. Image c/o www.nmliron.com

Indian steelmaker in Canada, and it will be using the experience as a tester before considering

develop either one or both properties, with New Millennium free to decide what to do should Tata not go ahead.

comes with estimated capital costs of between $4.4 and $5 billion dollars for each of the two deposits targeted for development. A $50 million feasibility study, expected to be completed by the end of the year, is underway for Mag in Western Labrador. Tata has an option to

LabMag is located about 30km northwest of the town of Schefferville, Quebec. About 1,800 First Nations people live in the surrounding area, a sizeable population that Journeaux says can go far in meeting the projects’ human resources needs in the future – the plant operators, truck drivers, mechanics, electricians

JULY 2012

The International Resource Journal 195

COLERAINE MINERALS RESEARCH LABORATORY David Hendrickson - Director Minerals Research dhendric@nrri.umn.edu | 218-245-4204

Serving the Mining Industry with State of the Art Research Laboratory Facilities in:
Mineral Processing HPGR, Crushing, Grinding, Classification, Flotation Bench Scale and Pilot Scale facilities Pyrometallurgy Blast Furnace Pellet Production and Testing Sinter Pot Simulator Pot Grate Simulator DRI Pellet Production and Testing Midrex and HYL DRI Testing Bench Scale and Pilot Scale Facilities Concetrator Modeling Center CFD Modeling Center Advanced Analytical Laboratory Economic Geology Group

196 US, CANADA AND AUSTRALIA METALS AND MINING

New Millennium Iron

DSO Project - Existing pits and dumps Image c/o www.nmliron.com

and other supervisory, management and administrative personnel who will be required to maintain operations. On the DSO project, the JV, Tata Steel Miner-

“I get asked if I am worried about the future labour supply considering the global skills shortage and I guess we are, but on the other hand, we have this tremendous asset in the surrounding communities and if we can encourage people through educa-

with First Nations groups. Apart from employment, the company is providing training and has donated $50,000 to run a bursary programme at the region’s secondary schools.

tion and through other means, we hope it will bring them into the employment pool,” says Journeaux. For now, the company estimates that at least 1,000 people will be needed to operate each of

JULY 2012

The International Resource Journal 197

it mote S Re

es

Quality of Daily Life in Remote Sites
For more than 40 years, Sodexo has been providing Quality of Daily Life Solutions for Remote Sites across Canada. Working in partnership with Aboriginal communities Sodexo operates and maintains your remote site while providing genuine long term benefits to the local communities in which we serve. Designing, Managing, and Delivering Integrated Camp Management Solutions • Engineering – HVAC • Camp Maintenance • Project Management • Catering • Retail Brands • Convenience Stores • Housekeeping • Laundry Services • Logistics

For more information on how Sodexo Remote Sites can provide a complete on-site service solution for your remote site, contact Jerome Texier, Vice President Sodexo Remote Sites at 514-866-7070 ext. 249 or email Jerome at Jerome.Texier@sodexo.com.

198 US, CANADA AND AUSTRALIA METALS AND MINING

New Millennium Iron

“I get asked if I am wo labour supply conside shortage and I guess w hand, we have this tre surrounding commun
the deposits while facilities at Schefferville are

Taconite technology
LabMag is owned 80 per cent by New Millennium and 20 per cent by Naskapi Nation of Kawawachikamach through an initial investment, one of

company. Production is expected by the end of 2016, ramping up in 2017 for full production at 22Mt/y, of which 17Mt/y will be pellets and 5Mt/y will be pellet feed. The company expects to have grades of 69 per cent in the concentrate and slightly lower for the pellets. Journeaux explains that the operation will ous silica levels for blast furnace use as well as

JULY 2012

laBMaG contains:

The International Resource Journal 199

3,545Mt proven and probable reserves at a grade of 29.6 per cent Fe 1,045Mt of measured and indicated resources at an average grade of 29.5 per cent Fe 1,151Mt of inferred resources at an average grade of 29.3 per cent Fe

orried about the future ering the global skills we are, but on the other emendous asset in the nities”
a low gangue direct reduction grade pellet. That, he explains, means the company can tailor the product to the demands of the steel industry. The Taconite project will be an open pit mining operation with a crushing plant, grinding and magnetic separation facilities with concentrate transported either by rail or in slurry form via 600km ferroduct to Port of Sept-Iles.

kéMaG contains:
2,141Mt of proven and probable reserves at an average grade of 31.3 per cent Fe 307Mt of measured and indicated resources at an average grade of 31.3 per cent Fe 1,014Mt of inferred resources at an average grade of 31.2 per cent Fe

lac Ritchie contains:
3,330Mt of indicated resources at an average grade of 30.3 per cent Fe 1,437Mt of inferred resources at an average grade of 30.9 per cent Fe

Lavalin as the study manager for the feasibility study and has also contracted specialist German tung as its primary metallurgical process consultant while Midland Research Centre, in Minnesota, provides crushing, blending and characterisation work of samples. Journeaux explains that the process to mine and process Taconite was developed in Minnesota because the US state is home to the massive Mesabi iron range. Aside from

dso pRoJect contains:
64.1Mt of proven and probable mineral reserves at an average grade of 58.8 per cent Fe 21.0Mt of measured and indicated mineral resources at an average grade of 59.2 per cent Fe 10.3Mt of inferred resources at an average grade of 58.3 per cent Fe Between 25 and 30 million tonnes of historical resources that are not currently in compliance with NI 43-101

200 US, CANADA AND AUSTRALIA METALS AND MINING

New Millennium Iron

THE BROADEST PRODUCT LINE IN THE MINING INDUSTRY
Wherever there’s mining in Quebec, you’ll find Cat® products hard at work – drilling and digging, loading and hauling, grading and dozing. A Hewitt Equipment Limited branch will be there for you, providing unmatched support, expert service and integrated solutions, among which you will find our large offer of power systems. Superior products. World class service. One source. WHEREVER THERE’S MINING, WE’RE THERE.

HEWITT EQUIPMENT LIMITED 5001, Trans-Canada Highway Pointe-Claire, Québec, Canada, H9R 1B8

Tel: 514.630.3100 Toll free: 800.363.6785 www.hewitt.ca mining.cat.com

MAC 50-12 Pub Energy & Mining Spring.indd 1

12-06-06 3:59 PM

Midland Research Centre, other Minnesotabased specialists have been brought on board. Barr Engineering will be doing work on the concentrator and the company uses the University of Minnesota Coleraine Minerals Research laboratory facility. As with the DSO project, Tata Steel Europe is expected to be a major offtake customer for the Taconite project as well, taking at least half of the product. The rest will be left for the open market. For that product to reach Asian markets, however, the Port of Sept Iles will need an upgrade for a deep water dock capable of handling ships

with 360,000 to 400,000 tonnes of capacity. This last February, those development plans received a boost when the Government of

million, or 25 per cent of the project costs, towards construction. “[The deep water dock] is under detailed planning right now…we need those larger vessels to lower freight costs so this is an important factor in our development plan,” he says.

Strategic board
In furthering that development plan towards production, New Millennium’s board represents

MAC 50-12

JULY 2012

The International Resource Journal 201

EFFICIENCY & EXPERTISE
A subsidiary within the Municipal Group of Companies, Greyrock is a full service civil/mining contractor based in Labrador. Our history is firmly embedded in the mining industry of Eastern Canada, and, as an organization, we have been operating in the region for well over 50 years. Thanks to our experience and knowledge, we provide a vast range of service capabilities, including: · Mine design/construction · Open pit mining and stripping · Mine closure/reclamation · Rail/road construction · Crushing and screening · Drilling/blasting · Mine support services · Plant construction · Hauling (ore/waste) · Tailings construction

In addition to strict safety and environmental practices, we are dedicated to working with aboriginal groups to promote sustainable and socially responsible development — specifically through our cross cultural partnership, Innu Municipal. To learn more about our team, please visit www.municipalgroup.ca or call 709-944-2995.

“We were trying to nd somebody with good business sense, experience and who understands the area in which we operate, looking down the list [Rick Hillier’s] name certainly popped”
a broad range of backgrounds with experience in mining, accounting, business and marketing, geology, strategy and most recently, commanding the Canadian Armed Forces. General (Ret.) Rick Hillier, former Chief of the Defence Staff, the highest rank of the Canadian Forces, joined New Millennium’s board in 2011. If that seems surprising, consider this, what iron ore project couldn’t use a leader with a steady resolve who doesn’t waver under pressure? “He’s managed large groups of people and facilities, the logistics side, but a good part of the decision was that he is a Newfoundlander. ness sense, experience and who understands

INNU MUNICIPAL

202 US, CANADA AND AUSTRALIA METALS AND MINING

New Millennium Iron

“New Millennium is a company on the TSX have these very large it becoming another which had eight or s at one time in di ere
the area in which we operate, looking down the list [Rick Hillier’s] name certainly popped,” Journeaux says.
Integrity and Innovation. One Source.
From prefeasibility, permitting and engineering, through development, to closure and reclamation, Allnorth is the One Source for your mining project needs.

is a welcome boost in furthering the company’s vision to develop the Millennium Iron range into a world class mining operation. “New Millennium is a small junior mining company on the TSx Exchange but we have these very large deposits and we see it becoming another Mesabi iron range, which had eight or so mining operations at one time in different pits. We have this resource which will last for upwards of a century and the world’s iron ore resources are being depleted at a considerable rate, and also other factors,

BRITISH COLUMBIA

ALBERTA

SASKATCHEWAN

NOVA SCOTIA

NEWFOUNDLAND & LABRADOR

declining grades, quality. We have a brand new operation where we will be able to put

JULY 2012

The International Resource Journal 203

a small junior mining X Exchange but we e deposits and we see r Mesabi iron range, so mining operations ent pits”
out the highest quality products and all of this purports for a strong future for New Millennium and we hope that one day we will rank in the larger mining companies in the world, certainly in iron ore,” Journeaux says.

www.nMliRon.coM

Forg FoR

204

us, canada and austRalia Metals and MininG

ge Resources RGinG ahead
With much of the pre-development legwork already completed at its recently acquired agship Balla Balla project in Western Australia, Forge Resources has begun marketing a magnetite iron ore product as the company seeks to secure project nancing.

4

206 US, CANADA AND AUSTRALIA METALS AND MINING

Forge Resources

Balla Balla is a large-scale, JORC compliant titanium-vanadium-magnetite resource close to the

tonnes per year (Mt/y) of shipping capacity at Port Hedland. James explains that Forge bought the Balla

granted mining tenements. Major approvals such as environment, native title, water access and condi-

Balla project from Atlas Iron for A$39.5 million, which was over $100 million less than Atlas Iron paid approximately 18 month prior to acquire

feasibility study (DFS) was completed in early 2010.

Aurox Resources, which then owned the project. Atlas kept the 10Mt/y Port Hedland capacity for

robust as a magnetite only project. However what is attractive about Balla Balla is the additional vanadium and titanium contained within the resource, which we view as an embedded option for the company,” says Matthew James, managing director of Forge. Initially, the vanadium which is contained within the magnetite concentrate that will be sold to steel mills, most likely in China, will act as a free credit for those mills that have the technology to separate the vanadium, he explains. “This vanadium credit allows steel mills to lower their net cost of production. In addition we will be getting a titanium revenue stream from an ilmenite by-product produced alongside the magnetite. In the longer term we aim to extract the full value of both the titanium and the vanadium,” says James.

its own DSO hematite iron ore operations. “Without the Port Hedland capacity we knew an alternative transport route would be required to get to export. We were already looking at trans-shipping as an option, which we think is feasible particularly as a trans-shipment operator is already in northern Western Australia. In places like South America and Indonesia there is quite a bit of this being done, where the material is barged from the coast to a ship anchored offshore” says James. A back up plan includes negotiating capacity at Anketell Port since the Balla Balla project is situated just 100km east of the area and Forge has been short-listed for consideration, but the company’s main focus is on trans-shipment. “Our primary plan is the trans-shipment op-

Missing link
However there is one missing link, which is the original studies were built on access to 10 million

mine that we are evaluating for trans-shipment.

side of the operation and on the land side we

JULY 2012

The International Resource Journal 207

pRoJect in the pipeline
Eucla Mineral Sands project in Western Australia Three contiguous granted exploration licences, 218.8km2 Maiden resource of 470Mt at 4.6 per cent heavy minerals = 21.5Mt of contained heavy mineral Farm-in agreement signed with a commitment to spend A$2 million to earn 50.1 per cent and ability to go to 100 per cent with continued farm-in or JV with vendors “We have two years to spend about $1 million with what remains of the farm-in agreement to attain 50.1 per cent. It is important to note that the McClaren deposit, which is the resource we have defined, is a fairly small area within the tenements. It is ilmenite-rich but the zirconium levels are fairly low at around one per cent. We are ideally looking for an area to contain a higher level of zirconium, ideally four or five per cent. Based on the geology, we are quite confident it is there, it is just a matter of finding it,” –Matthew James, managing director, Forge Resources.

208 US, CANADA AND AUSTRALIA METALS AND MINING

Forge Resources

Beyond just data acquisition.
A professional team with extensive global experience Located in Sydney ensuring easy access to global mineral projects Specialists in Induced Polarisation and Electromagnetics Pre IPO - cost effective data Greenfields exploration Resource Definition

P +61 2 8920 3252 l M +61 448 493 717 Suite 203, 283 Alfred Street, North Sydney NSW 2060 info@fendergeophysics.com.au www.fendergeophysics.com.au

HARVEST EXPLORATION PTY LTD

ABN:68003069501

“Covering all of your mineral exploration bases”

Harvest Exploration Pty Ltd is a geological and mineral resources consultancy that has been successfully operating in Australia for almost 30 years.

The Firm encompasses:

We provide high level services in the following areas:

JULY 2012

The International Resource Journal 209

“The DFS shows the project is very financially robust as a magnetite only project. However what is attractive about Balla Balla is the additional vanadium and titanium contained within the resource, which we view as an embedded option for the company”
are doing detailed studies on environment as well as engineering in terms of infrastructure requirements.” he adds. capital and operating costs, currently approximately $40 per tonne of 58 percent Fe magnetite concentrate, can be reduced all around.

Calculating costs
Working with GR Engineering Services as well as other supporting engineers and specialists in the mining industry, Forge is anticipating the release of a revised DFS report in August which details the company’s views on revised capex

In a recent capital raising effort, Forge raised $50 million in a combined debt and equity package to purchase 100 per cent ownership of Balla Balla. Todd Capital came in as a strong unincorporated joint venture partner, contributing $10 million towards the purchase for a subsequent 25 per cent ownership of the project as well

Currently, capex is at $1.3 billion, but James

as contributing towards the equity component, raised at $0.5/share, to become a 19.9 percent

and Forge is aiming to see that number come down closer to $1 billion. Some of that reduction will come from removing the costs of a slurry pipeline intended to carry product to Port Hedland and associated port infrastructure requirements which accounted for $310 million of the original

shareholder in the company. “As Forge is the project manager we will be developing a close relationship with Todd Capital in the development of the Balla Balla project. After the purchase of this asset, Forge is left with $10 million for working capital, which we are using for the work to get us through to

expenditures on a transhipment option, he notes,

210 US, CANADA AND AUSTRALIA METALS AND MINING

Forge Resources

new south wales pRospects
Wymah, 100 per cent owned, Tungsten, tin and molybdenum Mayfield, 46.55 per cent owned, Mineral resources containing 94,800 ounces gold, 1.3 million ounces silver, 17,250 tonnes copper and 29,900 tonnes zince Michelago, 100 per cent owned, Volcanogenetic massive sulphides – base metals Captains Flat, 49 per cent reducing to 25 per cent owned, Volcanogenetic massive sulphides – base metals Mayfield North, 100 per cent owned, Granite hosted copper/gold with potential for Cadia-Ridgeway or Intrusive Related Gold (IRG) deposits

JULY 2012

The International Resource Journal 211

Towards this end, Forge has received a letter of interest from National Australia Bank in relation to project funding and the company aims to complete this step by the end of 2012. “One of the key aspects why Forge is a good investment opportunity is the track record of the management team, for example, our chairman has a strong track record of identifying and

On board and o take
Apart from an extensive history in the resource banking and development sector, chairman Nick Curtis has seen two companies through from tens of millions to billions in market cap on the ASx – Sino Gold and later, Lynas Corporation. James himself is an alumnus of Lynas as is Forge’s non-executive director, Harold Wang, an experienced resources expert who has worked across China’s ferrous and non-ferrous sector as well as in Australia. Prior to Lynas, James worked at McKinsey & Company and Deutsche Bank, both in London.
Trim Bleed Scale Ink/s 95 mm width x 121 mm height 0 mm width x 0 mm height Artwork @ 100% of actual size CMYK
FA DD CSM AM/D QA HH if req

45 per cent Fe content, 0.62 per cent vanadium oxide and 13.8 per cent titanium oxide. There are historical offtake agreements equating to 10Mt/y with two Chinese steel mills with which Forge has started initial discussions in a bid to revive the contracts. ect, a company-making asset and in a relatively short time-frame can be put into production

be a three-year schedule starting with 6Mt/y production and ramping up to 10Mt/y a year later. Mineral reserve estimates shows proven and probable reserves of 229 million tonnes (Mt) with FoRGeResouRces.coM.au pany,” he adds.

-

212 US, CANADA AND AUSTRALIA METALS AND MINING

Navarre Minerals

GoinG BiG FoR G

Navarre Minerals

JULY 2012

The International Resource Journal 213

us, canada and austRalia Metals and MininG

Gold

Australian-based explorer Navarre Minerals has achieved early exploration success at its Tandarra Gold Prospect situated just 40km from the historic Bendigo Gold eld in Victoria.

212

214 US, CANADA AND AUSTRALIA METALS AND MINING

Navarre Minerals

JULY 2012

The International Resource Journal 215

naVaRRe MineRals has of a major drilling programme and though results are still coming in, early indications show cause for optimism - RC and diamond drilling have proven over 850m of strike with continuous gold mineralisation and 10 assays have greater than 20 grams per tonne (g/t) of gold contained intersected over the full 2,500m of strike. A maiden mineral resource

This goes a long way to help the company prove up the economic potential of a mining operation targeting high-grade pods of gold contained within broad zones of gold bearing quartz. It helps that the area’s geology and

which produced over 22 million ounces (Moz) of gold over its lifetime.

Taking cover
McDermott explains that the terrain on which the company is exploring is concealed under a shallow cover of sands and clays. In fact, most of the 75Moz’s of gold mined historically in Victoria has been found in areas where basement rocks were exposed to the surface and these veins were followed underground.

of reef and are RC drilling testing three of those at this stage so there is plenty of work to do. One of those lines, the Tomorrow Anticline, contains a level of gold between one and three grams per tonne with patches of high grade. The results so far are in line with all of our models and we are ous gold mineralisation with our RC drilling from ing,” says Geoff McDermott, managing director and chief executive at Navarre.

mining potential and the company is well-funded to carry out the A$4.2 million programme of geophysics, air-core, RC and diamond drilling after raising $3.7 million last year.

216 US, CANADA AND AUSTRALIA METALS AND MINING

Navarre Minerals

Currently, Navarre is planning a bulk sam-

kinGston
At-surface, oxide gold mineralisation with shallow high-grade gold intercepts to follow up 100% owned with dominant position along prospective Landsborough Fault Historic mining over 1,000 metres of strike to 75 metres deep – high-grade gold, silver and lead mined Active mining jurisdiction – Stawell Gold Mines operation 30 kilometres away Navarre Minerals recently conducted a small diamond drilling program ( 3 holes) the first hole had the following results ; 16.9m at 5.5g Au/t from 65.7m down-hole in DDK001, including 3.1m @ 29.5g Au/t on hangingwall of quartz lode structure. There was visible gold in quartz observed in drill hole DDK001 between 65.7m and 65.9m down-hole. Quartz lode structure was intersected in next two diamond holes with geological logging and assaying to come.

ple with some 15 to 20 tonnes of material left after drilling. The company’s board owns 25 per cent of the stock with another nine per cent of the company owned by Crocodile Gold as part of a legacy asset when it acquired the Australian assets of Canadian miner Northgate Minerals. “We are strong believers in Victoria and hope that one day it will return to its golden heyday. Hopefully Tandarra is the start of a new rush,” explains McDermott. A recent farm-in arrangement has been nego-

over by Singaporean LionGold - for an area immediately south of the Tandarra prospect since mineralisation continues north and south of Navarre’s existing tenements. For $900,000, Navarre can earn-in 75 per cent of the Raydarra Project. Moreover, Crocodile Gold is the company’s neighbour at another of its projects, Kingston, where it had a good drill intersection around an

BallaRat south
Gravity ridge may control gold mineralisation Possible conceptual “Stawell basalt dome” gold target Gravity lines planned to model depth

old mining prospect.

Great neighbourhood
McDermott adds that Navarre’s projects are located in one of the best addresses in the world. Victoria is a small state with excellent infrastructure. Tandarra is ideally located near the city of

JULY 2012

The International Resource Journal 217

218 US, CANADA AND AUSTRALIA METALS AND MINING

Navarre Minerals

Bendigo, which has a history of mining among its population of about 100,000 people. “There is access to water, people, power which passes through the western side of our tenement, there is a highway that goes straight past and a daily train service out of Melbourne… we are well situated. And we don’t have a town or

city sitting over top of our project so open pit mining is an option,” McDermott says. Aside from Tandarra and Kingston, Navarre is also exploring for base metals at its Black Range property, which is a copper-zinc-gold 100 per cent owned prospect with similar geology to Tasmania’s Mount Read Volcanics – host to large

JULY 2012

The International Resource Journal 219

“We are strong believers in Victoria and hope that one day it will return to its golden heyday. Hopefully Tandarra is the start of a new rush.”
As an experienced geologist and senior company executive with over 20 years of experience and specialised expertise in Victoria, McDermott adds that he is intimately familiar with both successful and unsuccessful exploration techniques for the region. “I have served a long apprenticeship working for other companies in Victoria and now I am using my accumulated knowledge to give Navarre every chance of attaining exploration success. We have made a virgin gold discovery at Tandarra and are working hard using science and technology to look under cover targeting a multideposits such as Mount Lyell and Rosebery. The region has been under-explored due to poor outcrop and shallow cover. “The techniques we used to explore under shallow cover in Tandarra can be applied to the Black Range prospect. The Victorian government is keen to promote exploration in this area,” McDermott says. www.naVaRRe.coM.au million ounce resource,” he says.

220 The Resource Channel

220

rev pro

JULY 2012

The International Resource Journal 221

special suppleMent

e Resource Channel’s view of Australian mining rojects in 2012

222 The Resource Channel

In contrast to the oil and gas sector, the mining sector in Australia is showing con icting signs, writes Jody Elliott, director at e Resource Channel
at least ten major LNG/CSG projects are now under construction in Australia and generating

cies - particularly in the base metals sector both in Western Australia and Queensland and in the steel industry in New South Wales. Data coming from the exploration sector also paints a mixed picture. Whilst Australian Bureau ploration expenditure for 2011, closer analysis shows that expenditure in the iron ore sector

mining industry is slightly different. Weaker commodity prices, the high Australian dollar and higher input prices, including labour costs, appear to be having a negative impact in parts of the industry and a level of caution is evident throughout. National economic indicators outside the resources sector remain sluggish and there is still a great deal of uncertainty on the international front especially in Europe. This is having some ment freezes, project delays and even redundan-

rose 32.9 per cent while exploration for Nickel and Cobalt fell 33 per cent.

In the Bureau of Resources and Energy Economics’ latest release dated March 2012 they predict; Australia’s resources and energy commodity export earnings are forecast to grow over the medium term to reach a record A$225 billion dollars in 2016-17 Despite projections of lower commodity prices over the medium term this is to be offset by substantially greater export volumes

JULY 2012

The International Resource Journal 223

Between now and 2016-17 export volumes are forecast to increase for iron ore (62 per cent), metallurgical coal (47 per cent), thermal coal (65 per cent), copper ores and concentrate (77 per cent) and alumina (29 per cent).

on major projects mainly in Western Australia and Queensland that are either underway or showing strong progress towards this goal. This list is not in any way exhaustive, particularly when you consider there are 456 projects in the Australian resource sector in the construction pipeline with 272 of those already committed

According to the Bureau’s Professor Grafton, the increase in Australia’s export volumes for

and/or under construction. These range from major expansions like BHP Billiton’s Iron Ore to

industry to increase production and expand infrastructure over the medium term. That said, and despite signs of a more tempered outlook and reduced commodity prices, the iron ore, coal and gold sectors continue to expand at lightning speed. It is particularly in these commodity sectors where we see the volume of projects generating literally thousands of employment opportunities. Our 2012 mining project summary focuses cation to increase capacity. Even with caution evident in some commodities, the employment demand is expected to peak at 150,000 new entrants by the end of 2013 for construction alone.

-

The following is an overview of a select few of the major and more interesting mining projects either underway, or due to commence shortly in both Western Australia and Queensland.

224 The Resource Channel

westeRn austRalia

Rio tinto expansion
Marandoo, which will extend its mine life operators: Rio Tinto cost: A$15+ billion location: Pilbara timeframe: 2012 - 2017 employment: Requires over 6,000 employees in the next 5 years status: In the Pilbara, initially three of Rio Tinto’s mines are expanding: pated in 2013. Capacity at Cape Lambert port will also expand from 80 to 183 Mt/y by 2015. Works include the construction of a Brockman 4 is expected to almost double its current capacity of 22 to 40 Mt per year (Mt/y) by 2013. Western Turner Syncline will expand from the 6 Mt/y road haulage operation it is today to a 15 Mt/y overland conveyor operation by 2013. Nammuldi is earmarked for future expanand on-shore works. new 1.8 km jetty and four berth wharf. Importantly, these are all on the western side of the rail line and so will have minimal impact on existing operations on the eastern side. The building of the new jetty and wharf requires a dredging by 16 years to 2030 at the current mining rate of 15 Mt/y. Hope Downs 4; a new open cut mine with an annual capacity of 15 million -

expected in the second half of 2011.

In addition, they will achieve growth through sustaining existing mines and bringing on new mines such as:

JULY 2012

The International Resource Journal 225

Rio tinto expansion suppoRt:
NRW; awarded earthworks at the Cape Lambert Port B expansion project, civil works for the Primary Crusher at the Western Turner Syncline project and the construction of the Boolgeeda airstrip at the Western Turner Brockman project. Brierty; has been awarded a $55m construction contract for the development of infrastructure at Wickham in the Pilbara. It’s the first major contract awarded for the company’s new joint venture with Ngarluma Yindjibarndi Foundational (NYFL), Brierty NYFL, established in December. The Wickham Town Expansion Phase 2 project will create a new Wickham South subdivision and includes 212 new dwellings, 25 residential lots, the installation of 198 new high quality fly in/fly out (FIFO) accommodation units, the construction of a new 1,600m square town administration and training centre for both the company and community, as well as the new public recreational parks.

FoRtescue Raises $490M FoR pilBaRa iRon oRe expansion plans
IRJ - June 8 - Fortescue has secured $490 million in corporate senior debt facilities to top up funding for its iron ore expansion plans in the Pilbara region of Australia. The credit facilities, backed by European Export Credit Agencies, will be drawn over the next 12 to 18 months. Fortescue’s CFO Stephen Pearce said that the long-term corporate financing strategy will extend the company’s debt maturity profile at attractive rates and that “the success of Fortescue’s capital raising initiatives continues to demonstrate the company’s ability to diversify funding sources from a range of local and international capital markets”.

226 The Resource Channel

westeRn austRalia

Roy hill iRon oRe pRoJect
operators: Hancock Prospecting Location: Chichester Ranges Timeframe: Construction between mid-2011 –

low phosphorous ore bodies in Australia outside the control of the majors and is located 105km north-east of Newman in the Pilbara region of Western Australia.

The project will consist of: planned for 2014 Cost: Reported to be approx. A$7 billion Employment: During construction, the workforce will peak at 3,500 people (with a total of 10,000 expected over the life of construction) and it will have an operational manning of over 1,600 personnel. Status: The Roy Hill project will be a world-class iron ore mine. The deposit is the last of the large Stockpiling and train loading; A 370km standard gauge, single line, dedicated heavy-haul railway from the mine site to Port Hedland; Mining operation for 55Mt/y hematite iron ore; Crushing, screening and processing lump

JULY 2012

The International Resource Journal 227

Roy hill suppoRt:
Brookfield Multiplex Engineering & Infrastructure; is appointed the preferred contractor for the design, procurement and construction of the $1.2 billion Process Plant and Mine Material Handling Facilities at the mine site. Clough Forge; awarded an Early Contractor Involvement (ECI) contract for the Port Materials Handling Facilities. ISS Facility Services Australia; provision of camp management services, including catering, accommodation and transportation services. Ausco Modular; will build the accommodation. BGC Contracting; won construction contracts to build the aerodrome, airport roads, and village roads and is expected to generate 4,000 jobs during the construction phase. Macmahon & John Holland Group; building a 340 kilometre rail line from the Roy Hill mine through to Port Hedland.

Port facility located at Port Hedland for receiving, stockpiling, screening; Exporting 55Mt/y (wet) of direct shipped hematite iron ore as lump and

228 The Resource Channel

westeRn austRalia

sino iRon pRoJect
operators: Location: 85km south of Karratha Timeframe: First production expected in late 2012 with a 25-year mine life Cost: US$30 billion Employment: More than 4,000 construction jobs and 600 operational jobs. With commissioning erational recruitment efforts. Status: In the mine-pit, individual load tests have liner and cranes. Second magnetic separation piping and electrical installation is complete. The main 1 conveyor belt has been installed. The power distribution system is ready to be energised. The major components of the second crusher have also been installed. e-house is ready to be energised; water cooling and air compressor systems have been installed and pump station installation is underway. At the power station, gas turbines 3 and 4 have

Stockpile construction is complete in the concentrator area with ongoing punch list clearance. The third group of mills has been delivered to site and positioned. Mechanical and piping installation of the Line 1 AG mill is nearly complete. The been completed for steam turbines 1 and 2. Hydro tests have been carried out on the desalination, return water and concentrate slurry pipeinstallation for Line 1 is complete excluding the lines, which are now ready for integrated comand stationary commissioning is progressing on

JULY 2012

The International Resource Journal 229

missioning. Main substation electrical testing has been completed and is ready to be energised. Major port assets including four barges, two tugs

At the desalination plant, pressure testing and bubble tests have been completed on the east train and endurance testing has been completed on all three intake pumps. Loop checking is

their kind in WA waters) have arrived. In the port area, piping and electrical installation has been completed for building 1 of the dewatering plant and individual equipment testing is underway. Conveyor structure and mechanical installation has been completed at the stockyard and belt installation is progressing. Hydro tests have been carried out on the concentrate thickeners and power distribution systems have been installed throughout the area.

ongoing. Mechanical, electrical and instrumentation installation in the west train is progressing and mechanical installation for the west train pre-treatment is nearing completion. Civil work has been completed for all workshops in the mining infrastructure area and steel structure erection is underway.

230 The Resource Channel

westeRn austRalia

southeRn seawateR desalination plant staGe 2
operators: Southern Seawater Alliance (SSWA) Location: Binningup, south of Perth Timeframe: 18 month construction, expected to be commissioned by 2014 Cost: A$955 million Employment: 600 jobs during construction, local workforce only (no camp facilities) Status: A Spanish-led consortium, Southern Seawater Alliance (SSWA) will build a second desalination plant with 100 gigalitre per year (GL/year) maximum capacity plant for the Water Corpora-

become fully operational ahead of schedule in sioning. The SSWA is led by Spanish companies, Tecnicas Reunidas and Valoriza Agua. Its partners are construction company, AJ Lucas and engineering consultancy Worley Parsons. Tecnicas Reunidas and Valoriza Agua have extensive major desalination experience and are international multidiscipline construction companies. These two companies will operate and maintain the full plant, which will be owned by the Water Corporation, for 25 years. SSWA plant support:

JULY 2012

The International Resource Journal 231

AusGroup subsidiary, AGC Industries has received a Letter of Award valued at approximately $30 million by Southern Seawater Alliance for the construction to expand the second seawater desalination plant to its 100 GL/y capacity, scheduled to be completed by the end of 2012. The scope of work for AGC will cover struc-

tural, mechanical and piping installation work of the main facility as well as fabrication of the secondary steelwork. ABB – Australia, Automation and Power Technologies. Siemens

GVk plays down austRalian enViRonMent MinisteR’s stopped clock
IRJ - June 6 - GVK Power and Infrastructure, the Indian group developing the Alpha Queensland coal project, has said “it is committed to norms and confident of a positive outcome” in response to Australian environment minister Tony Burke’s publicly stated concerns over granting of mine and rail permits. Burke said to media that he “stopping the clock on the process which has been given to us by the Queensland government” because of remaining ecological concerns over the $10 billion Alpha coal and rail project, which GVK co-owns in the Galilee basin with Gina Rinehart, the billionaire and

mining heiress. GVK said that, “Minister Burke advising that he is “stopping the clock” by no means is to be interpreted that the project will not proceed, nor is it an indication of the Federal Government’s decision.” The Indian coal producer added that requests from federal departments to clarify existing information “is not at all unusual in the process” of acquiring permits. Analysts quoted in the media have implied that the move by the Australian government is political in nature though the delay is also widely viewed as a blow to the Alpha project against a backdrop of competition from other energy companies and coal shortages in India.

232 The Resource Channel

westeRn austRalia

Bhp Billiton, iRon oRe expansion pRoJects
operators: BHP Billiton Location: Pilbara Timeframe: Construction has commenced,

associated with its expansion projects. The project, which is expected to be reviewed for full approval in the fourth quarter of calendar year 2012, has an embedded option to expand by a further 100 Mt per year. The funds approved will enable the company to progress feasibility studies and the procurement of long lead time

Cost: Reported to be approx. A$7 billion Employment: Exact numbers unknown, but is in the thousands for construction and operational. Status: BHP produces most of its iron ore through seven mines at three big mining hubs in the central and east Pilbara known as MAC, Newman and Yandi. To expand to 220 Mt it will build another, Jimblebar, and to move to 350 Mt it will open up four more mines: Jinidi, Marillana 1 and 2 and Southern Flank. Since our last update, BHP Billiton has also bought out the equipment and operators of its contractor, HWE and moved to an owner-operator model.

items. It will also allow for dredging to begin, subject to the necessary regulatory approvals. In parallel with this work, engineering studies are underway to match mine and rail expansions to the expanded port capacity.

ment would include the proposed construction of a 4km jetty, a four-berth wharf, 32 kilometres of dredged departure channel and landside infrastructure, including stockyards and a rail spur.

BHP Billiton announced in February 2012, the approval of US$917 million (BHP Billiton share $779 million) in pre-commitment funding for the construction of a 100 Mt/y outer harbour facility

JULY 2012

The International Resource Journal 233

Bhp Billiton iRon oRe expansion suppoRt:
Monadelphous; has secured a significant number of contracts for major works, including structural, mechanical and piping works for the expansion project. Joint venture partners, RCR Tomlinson and Laing O’Rourke; will design and construct primary and secondary crushing facilities, including overland conveyors. FAST; a joint venture between Fluor Australia and SKM will develop and deliver iron ore projects to meet the global market demand forecast for BHP Billiton’s Iron Ore business. John Holland Group. Macmahon Holdings; awarded in August 2011 the contract for predevelopment work adjacent to current operations at BHP Billiton Iron Ore’s Wheelarra Mine to construct haul roads and run of mine. United Group Resources; awarded an $A165 million contract for the fabrication and on-site installation of structural steel and mechanical equipment associated with transfer stations, conveyors and shuttles. AGC; awarded an A$100m contract for

the structural, mechanical, piping and heavy haulage at the company’s Yandi operation. The scope of work includes construction of an Ore Handling Plant, stockpile and conveyor systems; fabrication of 2,000t of conveyor components; and transportation of 43 structural modules - ranging from 100 to 300t - from Port Hedland to the Yandi mine site, located 140km northwest of Newman in Western Australia’s Pilbara region. RCR Tomlinson; has been awarded a contract to provide power generation works for BHP Billiton Iron Ore’s Yarnima Combined Cycle Power Station in Newman, Western Australia. The scope of works includes the design, manufacture and supply of three Heat Recovery Steam Generators (HRSGs) and associated equipment. Due for completion in the second quarter of 2013, the contract is valued at approximately $30 million.

234 The Resource Channel

westeRn austRalia

oakaJee poRt and Rail
operators: OPR was established in September 2007 to pursue a joint venture between Murchison Metals and Mitsubishi Development, each of which has a 50 per cent stake in OPR.Murchison Metals. The project is now owned 100 per cent by Mitsubishi. Location: Mid west region of Western Australia Timeframe: The project timetable from construc-

One village will be located at the port site and the others along the rail line. The portside construction village will comprise 1,100 rooms. The rail villages will vary in size from 150 to 760 rooms. All villages will be managed by the successful contractors in accordance with strategies determined by OPR. The total number of accommodation rooms will be determined bearing in mind project management manning, workforce rosters and visitor contingencies. Once the port and rail are operational, the villages

ship, takes the project out to 2014. Cost: A$3 billion + Employment: OPR expects to employ about 250 personnel, who will live in the region. During construction, OPR expects the number of port and rail construction workers to reach a peak of around 2600, comprising approximately 900 port area workers and just over 1,700 rail workers, 19 - 24 months into the construction period of three years. All construction workers will be employed by the successful construction contractors. They will be accommodated in single rooms with private ensuite facilities in up to seven construction villages.

will be decommissioned. Status: Oakajee Port and Rail (OPR) will deliver a rail and port network business to transport iron ore from Western Australia’s mid-west region to customers across the globe.

Back in 2009, OPR and the Western Australian State Government signed an exclusive State Development Agreement for the development of the multi-billion dollar deepwater port at Oakajee, 25 km north of Geraldton and integrated rail network to service iron ore miners and other port users in the mid-west region.

JULY 2012

The International Resource Journal 235

The port will cater for the world’s largest ore carriers and the railway network will service the growing number of mining projects in the region.

In 2010, Oakajee Port and Rail (OPR) delivered a draft Bankable Feasibility Study (BFS) to the Government of Western Australia, which demonstrates strong technical feasibility for the development of the Oakajee port and rail project.

Draft Implementation Agreements for the port and rail have also been delivered to the State. Both parties have substantially progressed the terms of these agreements and will continue to work together to progress outstanding matters.

On 20 February 2012, Mitsubishi Development (MDP), wholly owned by Mitsubishi Corp – Ja-

the purchase of Murchison Metals Ltd’s 50 per cent stake in OPR, increasing its interest in the project to 100 per cent. dent peer reviews, including value engineering

Project planning, evaluation, engineering and regulatory approvals are well advanced. Indepen-

design as the optimal solution to meet the government’s scoping requirements.

236 The Resource Channel

westeRn austRalia

kaRaRa iRon oRe pRoJect
operators: Gindalbie Metals and AnSteel (one of China’s leading steel and iron ore companies) Location: The operations, located 225km inland from Geraldton in the mid-west region is the result of an A$2.57 billion project which has been in development since early 2009 and is currently

by 3km long and has been so far been drilled to a depth of 300m. Karara’s open pit will be similar in size to the Kalgoorlie super pit once complete with a processing plant for operations and maintainability. Dry stacked tailings - only one in Australia to use this world leading technology. The cant investment in water recycling capacity

Timeframe: Approaching commissioning, due September 2012 Employment: Karara Mining will require a permanent workforce of approximately 600 on a longterm basis once in full production. Status: Karara Mining is fast approaching commissioning in September this year for our 8Mt/y magnetite operations and already underway with feasibility for 16Mt/y expansion.

at Karara, allowing the project to reduce its water consumption by about one-third.

Commitment to training and education including our University Scholarship Programme which is open to students in site local communities who al level in a mining company.

World-class magnetite deposit and multiple hematite deposits with 30Mt/y potential for a mine life in excess of 30 years. First major magnetite operation “opening the mid-west” 2,400Mt ore body covers an area 800m wide

JULY 2012

The International Resource Journal 237

kaRaRa iRon oRe pRoJect suppoRt:
Brierty; awarded $150-million, threeand-a-half year contract to provide hematite mining and associated services, plus authorisation to procure key plant and facilities. Downer EDI; awarded the mining operation contract in February 2012, generating 120 jobs. Valued at approximately $570 million over six years, the contract is on the largest single operation contracts for the project and will include the provision of drill and blast, and load and haul services.

driven by oil and gas processing and heavy industrial projects. Released today by the Australian Industry Group and Australian Constructors Association (ACA), the construction outlook survey also predicts a further rise of 13.8 per cent in 2013. Engineering construction turnover is set to rise by 17.1 per cent this year and 15.4 in the next, while the total value of commercial construction is expected to rise by 6.1 per cent and then 7.2. However, this growth could be offset by an expected continuance of skill shortages. Around 70 per cent of businesses predict they’ll find it difficult to hire skilled staff over the next six months. Australian Industry Group chief executive Innes Willox said that engineering construction in the mining sector is “bursting at the seams, with skill shortages widely anticipated and rising expectations of shortages of raw materials and equipment.”

skills shoRtaGe could stall austRalia’s MininG constRuction sectoR
IRJ – May 17 – Demand for miningrelated construction in Australia is poised to surge over the next two years but could be held back by a lack of skilled workers, according to a survey. It forecasts a 14.7 per cent rise in the total value of engineering and commercial construction this year,

238 The Resource Channel

westeRn austRalia

FMG expansion pRoJect
operators: Fortescue Metals Location: Pilbara Cost: $360 million Timeframe: 18 months, operational by mid-013 Employment: Unknown, but expected to be in excess of 600 Status: The existing integrated mine, rail and port supply chain was constructed in less than two years and Fortescue’s board has recently approved an US$8.4 billion expansion to their Pilbara operations. Expansions plans are on schedule for completion in mid-2013. operations: located approximately 260km from Port Hedland. Christmas Creek is 50km to the east of Cloudbreak Cloudbreak is a 40Mt/y mining operation, Christmas Creek is currently operating at approximately 18Mt/y. The 40t axle load railway is the heaviest haul in the world with up to seven trains a day transport iron ore from the mines to Herb Elliott Port in Port Hedland

The port was designed with expansion in mind, to allow construction to take place without interfering with daily operations

Development highlights:

Fortescue is undergoing a transformative expansion from a 55Mt/y operation to a 155Mt/y powerhouse by June 2013. The 155Mt/y expansion involves additional infrastructure at Herb Elliott Port, 120km of mainline rail duplication, a new 130km rail spur from Solomon to the mainline, a 60Mt/y mine at Solomon and Chichester Hub development to take its combined production capacity to 90Mt/y (plus 5Mt/y from a 50/50 BC Iron Joint Venture). The Solomon Project is 120km to the west of the Chichester Hub, more than 3,000Mt have been discovered here and early ore is expected later this year, with full production on target for July 2013. Solomon is the largest iron ore start-up in Australia, showcasing innovation to execute in record time and at a lower capital cost/tonne

JULY 2012

The International Resource Journal 239

FoRtescue FMG expansion suppoRt:
Decmil; will construct a 200 person rail camp, including accommodation rooms and associated facilities, at the site south of Port Hedland as part of Fortescue Metals Group’s T155 Rail Expansion Programme. Construction has a forecast completion date of second quarter of calendar year 2012. Worley Parsons RCR Tomlinson AGC Construction Industries Australia Brierty

ration than any of its competitors The company is evaluating early production of pect a full scale project to be its next development step. A maiden resource of 625 Mt has been depected to grow and both Nyidinghu and Western Hub will rival the Chichester Hub in production capacity. Fortescue is investigating a ‘two port, three hub’ strategy that would take production to 355Mt/y which could potentially include a new Pilbara port.

Leighton Contractors; received formal notification as preferred contractor for Fortescue Metals mining and operations at the Solomon iron ore project. Leighton Contractors and Fortescue have reached agreement within a limited notice to proceed (LNP) to facilitate the continuation of negotiations regarding the five-year mining and operations contract. The LNP also provides for pre-mobilisation activities and early services for the project, including works for operational readiness and full mine management. A decision by Fortescue on contract award is expected sometime in June 2012.

240 The Resource Channel

queensland

alpha coal & keVin’s coRneR pRoJects
operators: Hancock Prospecting Location: Galilee Basin Timeframe: The Test Pit for Alpha Coal has been completed and construction is due to commence

long-standing interest in the development of the Galilee Basin, with the parent company having held coal exploration permits and investigated the Alpha region since the 1970s.

Kevin’s Corner Coal Project is adjacent to Hancock’s Alpha Coal Project and both Projects will utilise the proposed multi-user rail and port facili-

Cost: A$7.5 billion Employment: 2,500 construction jobs and 1,600 permanent jobs Status: Hancock Coal (HCPL), a wholly owned subsidiary of Hancock Prospecting, has as its centrepiece, the development of an extensive thermal coal deposit in Queensland’s Galilee Basin, about 400km inland from the coast. The project will include the construction of approximately 495km of rail, port facilities, mine infrastructure, process plant and workforce village. Adjacent to Alpha Coal, the Kevin’s Corner Project is a recognised thermal coal deposit within the Galilee Basin. This deposit contains very large resources of thermal coal in a premium location of the Basin. Hancock Galilee (HGPL), a subsidiary of Hancock Prospecting, has a

ties. This is designed so that at a future point, it will have the potential to transport, load and ship capacity greater than the combined production level of both the Kevin’s Corner and Alpha Coal Projects. Similarly to the Alpha Coal Project, the Kevin’s Corner deposit also lies within the late Permian Colinlea and Bandanna Formations consisting of four main thermal coal seams suitable for the global export market. The coal seams dip gently from east to west varying in thickness from 5 to 8m, enabling high production open-cut mining and underground longwall mining. Exploration to date has concentrated on the coal reserves with the best export marketability, with the resources to be further upgraded following additional drilling to the west. With the comple-

JULY 2012

The International Resource Journal 241

alpha coal and keVin’s coRneR pRoJect suppoRt:
WorleyParsons and Ausenco; awarded contract to manage the delivery of Hancock Coal’s $7.5 billion Alpha Coal Project in Queensland. WorleyParsons and Ausenco will provide programme management services to the project in a 50 per cent joint venture throughout the next four years.

tion of the 2009 drilling programmeme, the Kevin’s Corner Project was upgraded to approxi-

increase to indicated and measured resources (that now includes approximately 500 drill holes). The Alpha Coal and Kevin’s Corner combined resource is currently 7,900Mt of JORC compliant coal with ongoing drilling expected to increase this further. The Kevin’s Corner Coal Project will have a capacity of 30 Mt/y via open-cut and underground longwall operations. The operation has a scheduled mine life of approximately 30 plus years.

The Project is expected to commence construc-

2014 dependent on gaining relevant approvals.

The Kevin’s Corner Coal Project is anticipated to employ thousands of people throughout its productive (30 year plus) life. The construction workforce is anticipated to peak at approximately 2,500 people.

242 The Resource Channel

queensland

the china FiRst pRoJect
operators: Warratah Coal Location: 38km north-west of Alpha (160km to the west of Emerald) Cost: A$8 billion Timeframe: Construction to commence late

schedule for completion in mid-2013. operations: The Galilee Coal Project includes mine, rail and port components. Waratah Coal plans to build a railway from the mine site to the Port at Abbot Point and utilise proposed new port facilities and infrastructure within the Abbot Point State Development Area (APSDA) for the loading and export of coal.

Employment: The Galilee Coal Project will require approximately 3,500 workers during the construction period (excluding construction of port facilities), and an estimated 1,860 during operations (excluding contractors). Approximately 360 staff will work and reside in or near Bowen during operations. The remaining 1,500 workers will be located at the mine site. At least 28 senior managers will reside permanently in Alpha. Waratah Coal is currently discussing the desired population of Alpha with the The Galilee Coal Project includes open cut and undergrounding mining. Maximum production is expected to include 56 Mt of run-of-mine coal to produce 40 Mt of product coal annually. Maxiwho will reside in Alpha. Status: The existing integrated mine, rail and port supply chain was constructed in less than two years and Fortescue’s board has recently approved an US$8.4 billion expansion to their Pilbara operations. Expansions plans are on Although additional work may be required on the EIS, Waratah Coal aims to have the required govmum production is envisaged within a 5 to 10 year period. Production is expected to continue for at least 25 years. The railway line comprises some 468km and will traverse the Barcaldine, Isaac and Whitsunday Regional Council areas. Construction is scheduled to occur over a three-year period commencing late 2012.

JULY 2012

The International Resource Journal 243

Gillard said the project was a fantastic opportunity for the area and a “remarkable time” in Australia comprising large economic growth, low

ernment approvals for the project in mid-2012, ahead of the planned commencement of construction activities in late 2012.

unemployment and low inflation. “We can be confident about the Australian economy because there are so many investments like this one in the pipeline,” she said, citing the total value of investments to exceed $450 billion. She expressed optimistic sentiment that, despite the crisis in Europe causing the Australian share market to plummet two per cent today, Australia continues to grow and has a bright economic future ahead.

china FiRst pRoJect suppoRt:
The Metallurgical Corporation of China (MCC); has been engaged to undertake the engineering, procurement, construction and management of the project.

austRalian pM opens a$34 Billion lnG pRoJect
IRJ - May 21 – Prime minister Julia Gillard has officially opened an A$34 billion liquefied natural gas (LNG) project in northern Australian port city Darwin. The Ichthys project, belonging to Japanese oil and gas company Inpex, is set to bring thousands of jobs and many valuable contracts to the Northern Territory.

Inpex chairman Naoki Kuroda said the Itcthys LNG project would benefit the people of both Australia and Japan, bringing social and economic development to the Northern Territory and a long-term supply of cleaner energy to millions of Japanese homes and businesses. “The Ichthys LNG project will strengthen the ties between Australia and Japan, while securing Darwin’s place as an emerging hub of oil and gas activity in the region,” he said.

244 The Resource Channel

queensland

Bhp Billiton caVal RidGe pRoJect, queensland
operators: The Project is a 50-50 joint venture between BHP Billiton and Mitsubishi Development Pty Ltd, managed by BMA. Location: Bowen Basin, 16km south of Moranbah and 160km south west of Mackay Timeframe: First production expected in 2014 Employment: 1,200 construction and 500 operational jobs Status: The Caval Ridge project includes the

northern section of the Bowen Basin which will produce high quality hard coking coal. The project was approved for construction by BHP Billiton in late 2011. Limited work packages are open for tender. BHP Billiton BMA has commenced recruitment for the operational workforce. The operation will have a life of 30 years and will be an open cut dragline and truck shovel operation.

JULY 2012

The International Resource Journal 245

Bhp Billiton caVal RidGe suppoRt:
Bechtel; appointed project manager and is responsible for developing the operation. Work includes development of a new coal mine and coal handling and preparation plant.

“Thanks to the extensive investigation by TEMCO employees of these options, and the flexibility provided by several stakeholders, significant cost reduction opportunities have been identified, primarily in the areas of workforce efficiency, power supply flexibility, ore blending and freight optimisation. “These changes should allow TEMCO to return to a globally competitive

Bhp RestaRts teMco ManGanese opeRations in tasMania
IRJ - May 22 - BHP Billiton has restarted operations at its manganese alloy facility in Tasmania, Australia. Ran by TEMCO, part of the manganese joint venture between BHP and Anglo American, the plant was suspended for 90 days due to operating losses. BHP conducted a successful review of its economic viability and is now planning for the facility’s safe and full restart. Bryan Quinn, BHP Billiton Manganese Australia Asset president, said: “Extensive stakeholder consultation and assessment of all options for TEMCO has been undertaken over the last three months.

position.” BHP Billiton Manganese president Tom Schutte said a key change will be separating the operations of the TEMCO alloying facility and the GEMCO mine in the Northern Territory. “This separation introduces the ability to blend in other ore sources, which will improve operating performance while also allowing us to consider the strategic fit of the TEMCO operation inside BHP Billiton’s portfolio,” he said. BHP will implement a reduced organisational structure for the restart that will be achieved through natural attrition – an employment freeze and redeployment within the company.

246 The Resource Channel

queensland

Bhp Billiton daunia pRoJect
The Daunia Mine involves: operators: BHP Billiton Mitsubishi Alliance (BMA) Location: 150km south-west of Mackay Timeframe: Following regulatory and owner approvals in March 2011, construction activities at the Daunia Mine commenced in mid-2011. Construction of the mine is expected to take approximately two years. First coal is expected in 2013 and full production of up to 4.5 Mt/y is expected to start in 2014. Employment: 450 construction and 300 operational jobs Status: The Daunia Mine is an open-cut coal mine to be operated via an excavator and truck One new open-cut coal mine A new Coal Handling and Preparation Plant (CHPP) Infrastructure associated with the new operations and facilities including a conveyor, haul roads and an overpass across the Norwich Park rail line, linking mining areas to the treatment plant Purchase and construction of new mining equipment.

Bhp Billiton daunia pRoJect suppoRt:
Bechtel has been appointed to provide engineering, procurement, construction and management services.

to support BMA’s growth options. The mine is located in the northern section of the Bowen Basin approximately 18 kilometres southwest of Coppabella. It will produce up to 4.5Mt/y of semihard coking coal and pulverised coal injection (PCI) coal for the export market.

JULY 2012

The International Resource Journal 247

248 The Resource Channel

queensland

wandoan coal pRoJect
operators: The project is being delivered by xstrata Coal Queensland and funded through a joint venture between xstrata Coal Queensland (75 per cent ownership), ICRA (Itochu) (12.5 per cent ownership) and Sumisho Coal Australia (12.5 per cent ownership). Location: Wandoan (immediately west of the township) Timeframe: Two to three year construction period Employment: 1,300 jobs required to build the mine infrastructure which will generate up to 210 further jobs in the local region each year. Once the mine is operational, 754 permanent jobs and 90 contractor maintenance jobs will also be created on fect that will generate 150 to 200 permanent jobs in the local region. A number of entry level jobs for school-leavers, including apprenticeships and traineeships will be created among the long term jobs on the mine site once the mine is operational. The xstrata QMEA Education Partnership between xstrata Coal, Queensland Department of Education

and the Queensland Minerals and Energy Academy will provide A$720,000 over three years for funding, equipment, curricula enrichment and school industry liaison to Wandoan State School, and Taroom State School and Miles High School. Status: Awaiting state and federal government approvals. The Wandoan Coal Project has been established to investigate the possibility of opening an open-cut thermal coal mine immediately west of the Wandoan township. The mine would include an open-cut coal mine, a coal handling and preparation plant and support facilities. With an expected life of more than 30 years, the mine would produce thermal coal which would be crushed, sized and washed before being transported by rail to port facilities on the Queensland coast and exported around the world, or used here in Australia. It is anticipated that about 30 million run-of-mine tonnes (t) of coal would be mined at Wandoan each year. As at May 2012,

from the Queensland Government to allow them to proceed with the development of the proposed mine. After the Mining Lease and Environ-

mental Authority are granted by the Queensland

JULY 2012

The International Resource Journal 249

Bhp pRessuRed to expand olyMpic daM
IRJ – May 28 – Australia’s resources minister Martin Ferguson is putting pressure on mining major BHP Billiton to expand the Olympic Dam project, according to Fairfax analyst John Meyer. There is speculation that rising costs in the country and a less certain environment for uranium and copper demand could cause BHP to defer the A$20 billion dollar investment it is considering for the next Olympic Dam expansion. Meyer added that the mine has already suffered two catastrophic fires in its processing plant on commissioning and requires substantial investment to meet its required economies of scale. “No wonder BHP might want to push this particular white elephant further out,” he said. Expansion of Olympic Dam would involve

creating a large open mine to tap an ore body that begins around 400 metres deep, as well as a 270km electricity transmission line, 400km pipeline, large desalination plant, 105km railway link from Pimba to the mine. It would increase the amount of ore mined at Olympic Dam from 12 million tonnes per year (Mt/y) to 72Mt/y; copper concentrate production from 600,000tpy to 2.4Mt/y; uranium oxide from 4,500tpy to 19,000tpy; gold bullion from 100,000oz to 800,000; and silver from 800,000oz to 2.9 million.

250 The Resource Channel

queensland

pRoJect BooMeRanG
operators: East West Line Parks Location: Comprises a new 3,370km trans Australian railway from Port Hedland, Western Australia

2010/11. Three-year construction schedule to

trains run in 2015/16. Employment: Expected to generate up to 35,000 jobs in the Northern Territory and South Australia during construction.

as well as 6 or more steel smelters on both coasts (12 or more in total), associated port facilities and infrastructure to support the project. Cost: US$45 billion Timeframe: 3.5 year construction period. Project design and feasibility study commences in

Status: East West Line Parks is building one of Australia’s largest infrastructure projects - a transcontinental multi-user rail infrastructure corridor and steel manufacturing complex which they claim will revolutionise global steel manufacturing. Poised to be one of the biggest

JULY 2012

The International Resource Journal 251

construction challenges in the nation’s history, Project Iron Boomerang will link the Pilbara iron ore mines in Western Australia with the Bowen Basin coal mines in north Queensland via a 3,300km rail line. The infrastructure, services and resource linkages will support and fuel two Steel Precincts, one on each coast, which will manufacture slab steel for export.

The purpose built transcontinental railway line will link Australia’s two great ore bodies for steelmaking, iron ore from the west coast and metallurgical coal from the east coast. The transcontinental railway will be dedicated to carrying

aBout the authoR
Jody Elliott is the founder and director of The Resource Channel, the leading, award-winning employment news and job board website for the Australian resource sector covering mining, oil and gas, and construction. She has 15 years in management roles with major resource sector employers and is a regular speaker at conferences and in the media. Please forward your feedback or enquiries to info@theresourcechannel.com.au

Steel Precincts.

The project’s primary objective is to service and facilitate the production of slab steel in Austra-

quantities of seaborne iron ore and coal consumed in the world’s steel production cycle.

The Leading Logistics Network

1st: We are the 1st intergrated logistics network in Africa 24: The number of port & rail concessions 43: The number of African countries where we are present 250: The number of subsidiaries in Africa 250: Million Euros investments per year 2 010: Million Euros turnover per year 6 000: Transport vehicles used in Africa 22 000: The number of people employed in Africa 3 500 000: Containers handled per year 6 500 000: Tons of freight handled per year 8 000 000: Square metres of warehousing space and yards

A Partner with a strong and integrated network

SDV South Africa Pty Ltd. 24 Covora Street, Jet Park Project Business Development - Caroline Brownson, Tel: +27 11 398 5000