A rebound in the uranium spot price next year and the emergence of the Rossing South uranium project in Namibia as a producer from 2014 would help Perth-based Extract Resources emerge as owner of the second largest uranium mine globally. Addressing the second day today of the three-day Paydirt 2010 Africa Downunder Conference, in Perth, Extract’s new CEO, Jonathan Leslie, said new uranium supply required to fill shortfalls from 2015 would precipitate higher U3O8 prices.
“The U3O8 spot price has remained relatively flat in the past 12 months at $40.50 to $54/lb,” Leslie said. “However, current sentiment towards the spot price is for a strong rebound in uranium concentrate prices over a two year horizon to satisfy the new growth in demand. Spot prices of around $70/lb can be expected to provide uranium producers with the right incentive to develop new supplies – bearing in mind that most offtake contracts are based around long-term price trends, not the spot price. The spot price is indicative however and the weighted average already for 15 new projects due to come on line suggests a minimum spot price of $67-$90/lb – a price range equivalent to between 7.5% and 15% of these projects’ projected internal rate of return.”
Leslie said Extract’s advanced Rossing South uranium project in Namibia – which last month announced an enhanced Inferred and Indicated Resource of 367 Mlb of contained uranium ore from two main deposits – now ranked it as the fifth largest uranium deposit in the world. “It is well positioned to become globally, the second largest producing uranium mine – titled Husab – with the potential to produce 15 Mlb/y of concentrate,” he said. “The scoping studies to date suggest low cash costs and attractive economics for Husab with the definitive feasibility study due to commence in the forthcoming December quarter.
“We anticipate at this stage that project development will continue through to the end of 2013 with commissioning and first production underway over 2014-2015.” Leslie said Rossing South’s path to maiden output would benefit from the deposit’s high grades and conventional, low risk open-pit mine development, with testwork to date generating good recoveries from conventional agitated acid leach operations. Internal studies by Extract in March this year suggested a production throughput of 40,000 t/d at a head grade of 487 ppm and production costs of around $23.60/lb. Husab has an estimated capital cost of $704 million and an estimated mine life of 20 plus years.
Chalice Gold Mines says its aspirations to emerge as a new gold player in the world class Arabian Nubian shield – the geological province that underlies much of Eritrea – will take a step forward next year with first start to mine construction on its promising $122 million Koka mine within its Zara project. Chalice’s Managing Director, Dr Doug Jones, said Koka offered estimated total cash costs of $338/oz “from a very clean deposit metallurgically”.
“This will produce a lot of money with a payback of just over two years,” Jones said. “The permitting process has now been underway for a few weeks and the just completed feasibility studies show Koka as a robust and highly viable gold mine in Eritrea.” Koka will be an open-pit mine with average production over an anticipated seven year life of mine of 104,000 oz/y.
“This is an exciting new place to be in Africa’s gold exploration scene with a gold endowment within the Arabian Nubian shield of +20 Moz of gold and numerous deposits and mines dating back to ancient times,” Jones said. “Significantly, the area has had virtually no modern exploration but is now starting to reveal world-class projects such as Centamin’s now producing 14 Moz Sukari mine and Nevsun’s large Bisha gold and base metal mine.
“Koka’s potential is reflected in the expected gold recoveries of 96.2% based on metallurgical test,” Dr Jones said. Koka has a JORC Indicated resource of 5.0 Mt at 5.3 g/t Au with the bulk of the resource at a shallow depth of less than 150 m, and with excellent near-mine and regional exploration upside.
Aggressive suitor, Gryphon Mineral, says the gold bull market has “only just begun” as surging demand at the expense of downward major new discoveries will ensure the bull run continues in the immediate years ahead. Gryphon’s Managing Director, Steve Parsons, said the five-year upward trend in gold is just the start. Gryphon is currently amid a friendly takeover for Mauritanian gold play, Shield Mining.
“World gold production is decreasing year on year and will only go down in the next few years due to less and less discoveries, and within that, very few major new deposits,” Parsons said. “The diminishing number of new reserves is failing to compensate for dying mines. Alarmingly, mining costs are increasing with 50% of global gold production now costing $900/oz,” he said. “The demand for gold will be exacerbated with an easing in worldwide monetary environments. Countries are printing more and more money hand over fist. With the move away from the US dollar and other major currency determinants, global debt and inflationary fears, this will only favour the swing to gold – evidenced by the Central Bank’s position now as a net buyer of gold.”
Parsons said this trend was why Gryphon was focused on western Africa – the “fastest gold growth region in the world. Western Africa is the global hotspot for gold in the future and its gold production is set to rise 30% over the next four years,” he said. “It is already host to huge 10 Moz plus deposits at Obusai, Tarkwa, Syama, Ahafo, Sadiola, Loula, Morilla and Tasiast. West Africa also offers cash costs of around A$400/oz compared to around A$650 in Australia and other places around the world so our plan to build a dominant and strategic landholding in Burkino Fasa and Mauritania.”
Copper producer, Equinox Minerals, has commenced the search for additional acquisition opportunities as financial strength returns to global equities and commodities markets. Chief Geologist, Mike Richards, said the move down the acquisition path came as the company achieved increasing exploration and production success at its flagship Lumwana copper mine in Zambia. “We have set our priorities for the remainder of 2010 moving into 2011 and are now evaluating acquisition opportunities.”
“Copper assets will remain our top priority. However, our search profile is focused on acquiring advanced development or producing assets that also offer some geographic diversification.” The expansion focus follows a successful opening half in calendar 2010 for Equinox which achieved an operating profit of $173.2 million from production of 74,306 t of copper at a cash cost of $1.36/lb.
“Importantly, the Lumwana plant is now operating at its 20 Mt/y nameplate capacity and we expect to put through 300 Mlb by the end of the year for annual 2010 production of 135,000 t of copper at around $1.35/lb.” Lumwana has a Measured and Indicated resource of 358 Mt @ 0.76% Cu contained within its main Malundwe and Chimiwungo deposits and has an estimated mine life of 37 years. “There is outstanding potential for the discovery of more orebodies in the Lumwana region and we will be extending resource drilling to reflect that over 2011.”
Australia’s operators in Africa’s mining sector were encouraged to cement a more inclusive approach in their dealings with their African partners to help deliver an increasingly socially workable environment. Coffey Environments Principal, Ms Danielle Martin, said the first rule now being accepted in inter-country resources alliances was ‘Listen, Learn and Engage.’ The cost of not listening, learning and engaging she said, could range from damage to facilities, mothballing of projects, significant financial impost, loss of future project opportunity, permitting delays and in worst case scenarios, mine closure, violence and even civil war as had been the case at Bouganville in 1988.
“Resource extraction is becoming increasingly complex and is operating in increasingly more challenging physical, social and political environments,” Martin said. “Environmental, social and safety performance is also coming under increased public scrutiny backed by more sophisticated communication, ensuring that the stakes have become much higher for projects that fail to secure adequate community and partner support. Pointedly, the key to sustainable resource development is meaningful engagement that allows winning positions on both sides.
“Australia’s miners and explorers looking to expand in Africa will do well now to recognise that it is in the ‘financial interest’ of a project to ensure local communities are actively invested in the success of an exploration venture or mine.” She said mine developers and the host community needed to align their goals for mutual benefit, including around the key issues of local employment policy, training opportunities, infrastructure development and planning, and financial assistance.