Issue 2, November 2011 · 2010. 1. 1. · Issue 2 November 2011 HEAD OFFICE 34 Churchill Avenue Subiaco, Western Australia 6008 PO Box 1258, Subiaco Western Australia 6904 AUSTRALIA

RESOURCES RISING STARS 1

The shale gas

A Noble gestureThe ramp-up to 150,000ozpais about to start

Northern StarHot gold stock set to sizzle on huge production increase

Southern Cross’ five-star opportunityOutstanding results fuel comparisons with Sandfire

No MOD conMOD Resources off the blocks with two major exploration deals

Issue 2, November 2011

TNG: Owning the technology and the resource is emerging as a winning combination for vanadium group

Some say it’s America’s economic saviour. But will it happen in Australia - and can investors cash-in?

explosion

Integra is producing gold at the rate of 100,000 ounces a year at its Randalls Project near Kalgoorlie.

The financial strength of its business was underlined by the recent announcement that its cash costs were just $450 an ounce following a process facility upgrade in July – making Integra one of the lowest- cost producers in Australia.

This outstanding result enabled Integra to record a cash operating profit of $19.9 million for the September 2011 Quarter.

And the good times seem set to roll on. Integra has JORC reserves of 480,000oz, giving it a minimum project life of six years. With trial underground mining about to begin, this could comfortably be extended to 10 years or more.

This is before taking into account Integra’s exploration potential. The company has a highly enviable exploration record, making two discoveries in three years, and continues to generate outstanding results from its projects around Kalgoorlie.

These results highlight the potential for not only further production increases at Randalls, but also for Integra to develop a second stand alone operation in the area, further growing its output and profits.

But most importantly, Integra’s results highlight its commitment to creating wealth for shareholders.

Join the gold boom by making Integra Mining part of your portfolio

www.integramining.com.au

Issue 2November 2011

HEAD OFFICE34 Churchill AvenueSubiaco, Western Australia 6008

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DisclaimerResources Rising Stars is published by Read Corporate. While every effort is made to provide an accurate summary of the financial position and affairs of each company referred to in the editorial, these reports should be viewed in conjunction with the full ASX releases made by the companies. Read Corporate, its Directors and Officers take no responsibility or liability for loss suffered as a result of relying on the information contained herein. Read Corporate provides no advice on dealing in securities and is not a financial adviser. Professional advice should be sought before making investment decisions.

In this issue...Alcyone Resources 4With production and cash flow ramping up, Alcyone is the only ASX-listed silver stock currently in production. Now it’s looking to its next phase of growth, with aggressive drilling programs underway at its Texas Silver & Polymetallic Project in SE Queensland.

Noble Mineral Resources 6The emerging Ghanaian gold miner is preparing to pour its first gold. Production is set to ramp up to 150,000oz a year and there is exploration potential galore.

The Shale Gas Revolution 8New technology has led to an abundance of so-called shale gas in the US, causing gas prices to plummet and generating environmental uproar in the process. Now the question is: will Australia be the next shale gas hotspot.

Sultan Corporation 13The Perth-based junior has outlined an ambitious vision to become a mid-tier base metal miner in Europe, starting with the recent acquisition of the prized Bogdan copper project in Poland - next to one of the world’s biggest copper mines.

Talisman Mining 14The WA explorer is compiling growing evidence that its tenements have the potential to host a world-class copper-gold deposit similar to that of its neighbour Sandfire Resources.

Unhedged 17A consensus is emerging: Europe is set for a prolonged period of painful adjustment, but this won’t damage the strong outlook for commodities.

MOD Resources 18A copper-silver exploration project in the heart of Botswana’s hot Kalahari Copper Belt and a deal to farm into NZ’s biggest undeveloped gold deposit will please shareholders, including James Packer and Andrew Forrest.

Southern Cross Goldfields 20It may be early days, but already the Copper Bore base metals project is being compared with Sandfire Resource’s DeGrussa project and Independence’s Jaguar deposit.

Globe Metals & Mining 22The discovery of speciality metals in Africa is more evidence that you make your own luck in the mining game. And growing demand for these products means Globe’s timing could hardly be better.Northern Star Resources 24Less than 18 months ago it was just a corporate shell. Now Bill Beament’s gold miner is producing at 80,000ozpa and has a clear plan to lift this to 200,000ozpa.

Cortona Resources 26After winning approval from the NSW Government to develop its 50,000oz a year Dargues Reef gold mine in NSW, Cortona has one final hurdle to overcome before it joins the ranks of Australia’s mid-tier gold miners.

Breakaway Resources 28With an enviable ground position surrounding the Eloise copper mine in the Cloncurry region of North Qeensland, Breakaway is in the box seat to add to its tally of copper-gold discoveries...and monetise them.

TNG Limited 30With prices and demand for the strategic metal vanadium tipped to soar, Perth-based TNG could be about to cash in through the commercialisation of its revolutionary new processing technology and the development of one of Australia’s biggest vanadium deposits.


To be considered for editorial

coverage in Resources Rising

Stars magazine please contact

the Editor

[email protected]

Integra is producing gold at the rate of 100,000 ounces a year at its Randalls Project near Kalgoorlie.

The financial strength of its business was underlined by the recent announcement that its cash costs were just $450 an ounce following a process facility upgrade in July – making Integra one of the lowest- cost producers in Australia.

This outstanding result enabled Integra to record a cash operating profit of $19.9 million for the September 2011 Quarter.

And the good times seem set to roll on. Integra has JORC reserves of 480,000oz, giving it a minimum project life of six years. With trial underground mining about to begin, this could comfortably be extended to 10 years or more.

This is before taking into account Integra’s exploration potential. The company has a highly enviable exploration record, making two discoveries in three years, and continues to generate outstanding results from its projects around Kalgoorlie.

These results highlight the potential for not only further production increases at Randalls, but also for Integra to develop a second stand alone operation in the area, further growing its output and profits.

But most importantly, Integra’s results highlight its commitment to creating wealth for shareholders.

Join the gold boom by making Integra Mining part of your portfolio

www.integramining.com.au

4 RESOURCES RISING STARS

A small team of experienced WA mining professionals has been able to breathe new

life into the Texas silver project in south-east Queensland, making Alcyone Resources the only ASX-listed silver stock currently in production.There’s a new buzz in Texas: Texas,

Queensland that is. The “naturally resourceful” town, located near the Dumaresq River in the heart of sheep and cattle country less than an hour’s flight south-east of Brisbane, is once again also a mining town following the re-commissioning of the nearby Twin Hills silver mine.Last month, the Company behind the

reincarnation of Twin Hills, Alcyone Resources, hosted a group of brokers, analysts and media, as well as members of the local community to visit the site and see first-hand trucks once again rolling in and out of the Twin Hills open pit – not to mention a silver bullion pour on site. The response from locals has generally

been enthusiastic, with the start-up of mining heralding jobs, opportunities and significantly increased activity for local businesses in the town.

The Twin Hills heap leach silver mine was originally operated by Macmin Silver between March 2007 and July 2009, recovering about 500,000oz of silver when the price was fluctuating between $9 and $20/oz.Macmin was forced into administration

after experiencing heap leach processing

issues – primarily the result of not crushing the ore finely enough to liberate the silver and using an electro-winning circuit which failed to pull enough silver out of the processing circuit – and ultimately falling victim to the global financial crisis.Enter a group of WA mining executives

led by Andrew King – a mining engineer with a 35-year long CV spanning numerous commodities. Spotting a rare opportunity to re-launch a pure silver mine on the ASX, King and the Alcyone Team

undertook a recapitalisation of Macmin at 1.0c a share, renaming the Company (perhaps not inappropriately) after the brightest star in the Pleiades, in the constellation Taurus. For those lucky enough to invest back

then, the share market performance of Alcyone Resources so far has been nothing short of stellar. Two further capital raisings followed last year – a $3.7 million raising at 2.5c in April 2010 and a $16.6 million raising at 3.5c in December

– enabling Alcyone to refurbish the 1Mtpa Twin Hills and start production, sparking a surge in its share price to a high of 14c earlier this year. Initial production has come from re-

irrigating the silver-rich heaps which were left behind by the previous operator, generating production to date of around 270,000oz. Open pit mining started in October, providing a primary source of feed to the mill and paving the way for production to ramp up further.

Critically, the revamped processing plant – which comprises an upgraded crushing plant (primary, secondary and quad rolls crusher) and new Merrill Crowe silver recovery circuit capable of producing silver bullion on site – has been performing at or above expectations, demonstrating that the silver recovery issues experienced previously have been well and truly overcome.King says the overall plant is already close

to operating at its nameplate capacity of 1 million tonnes a year, with silver production running at around 70,000oz a month during the early commissioning phase on low grade ore.“With mining now underway and the

subsequent introduction of higher grade fresh ore, we expect to hit steady-state production by the end of the year at an annualised run rate of 1.5 – 2.0 million ounces a year,” he says. “We should then be in a position to start reporting stabilised cash operating costs from the first quarter of next year.

With production and exploration ramping up and growing cash flow to drive growth...

Alcyone finds its silver lining

“With mining now underway.. we expect to hit steady-state production by the end of the year at an annualised run rate of 1.5 – 2.0 million ounces a year.”

Alcyone Resources MD Andrew King

Mining is once again underway at Texas

New primary and secondary crusher working efficiently


“However, we’re confident, at this stage, that our published forecast cash costs of around $15/oz will be very achievable. That makes this a very robust operation, even if you take a fairly conservative view of the silver price.”Alcyone’s timing could not have been

better. Silver prices touched record highs of over US$48/oz earlier this year, driven by a combination of surging investment demand due to its “safe haven” status (like gold) and growing industrial demand from use in products like mobile phones, plasmas and solar panels.Within the precious metals sector, silver

has been an outperformer with the gold/silver ratio narrowing in favour of silver; silver bulls point to the potential for further price increases amidst global financial turmoil.

At a silver price of around A$30-32/oz (at press time), the Twin Hills operation is expected to generate operating cash flows in the order of A$22-30 million a year.King says the Company intends to invest

a significant portion of this cash back into the project, with the first priority being to grow the current heap leach silver resource inventory of 15.1 million ounces to a level that will support a 7-10 year mine life.“The mine life is currently around five

years, underpinned solely by Twin Hills

with the Mt Gunyan deposit, located 4km to the north-east, to be the next cab off the rank in terms of production.“If we are able to get the mine life out

to 10 years that would bring a lot of other opportunities into play, such as the possibility of increasing plant throughput to lift production and bring forward cash flow. That could have a big positive impact on the NPV of the Project.”Equally, King says Alcyone has the

flexibility to adjust its mining and production strategy to changes in the silver price, if required – although the forecast cash operating cost of $15/oz is likely to withstand most price scenarios.With the production box now ticked,

Alcyone hasn’t wasted any time on exploration with 2 drilling rigs already active between now and the end of the year testing a host of targets and further geophysical work underway. Success with these rigs and geophysics would see the Company look to add additional drills to accelerate the potential delivery of additional resources.

Another key to the Company’s approach at Texas has been to bring a fresh set of eyes to exploration of the 275 sq kmtenement package, beginning with a complete review of all historical exploration data, major geophysical

programs and a re-synthesis of geological thinking about the area’s potential.“We have a lot of exciting heap leach

silver targets and we intend to aggressively drill these over the coming months,” says King. “These include Mt Gunyan South East and South West, Tomcat, Hawker, the Western Tectonic Zone. “The area also has significant base metal

potential and the opportunity to aggregate some smaller copper and zinc deposits and start a small base metal operation. We also don’t believe that the potential for a Tier One base metal system at depth has been adequately tested, and this will be one of the items on our agenda in the coming months and years.”

Silver bullion being poured on site at Twin Hills

Drilling is underway aiming to extend mine life to 7-10 years

2011 broker research:Bell Potter – 27 September

Calibre Investments – 1 August

ALCYONE SNAPSHOT

Stock Exchange ListingsASX: AYN

Issued shares1,321M

Market capitalisation$120M at 9c

Refined silver bullion bars produced at the Perth Mint


Noble Mineral Resources acquired the mothballed

Bibiani Gold Project in Ghana from the mine’s bankers in December 2009. And now the Company is about to see the fruits of its hard labour. It has to be one of the most stunning turnaround stories in the resources sector in recent times. In December 2009, Noble agreed to buy the near-two million-ounce Bibiani Gold Project from Investec, the specialist South Africa-based resources bank. It paid the grand sum of USD$2 for the Ghanaian registered Company and assets at Bibiani Gold Mine. As part of the deal, Noble inherited the USD$32 million in debt advanced by Investec in relation to the project and a further USD$22 million in creditors generated by the previous owners. The creditors have been paid either in full or the debt is currently being serviced by Noble. At the time of the purchase, Bibiani was in a somewhat dilapidated state of repair. Production had ceased in early December 2008, with the process plant lying idle and deteriorating along with all mining and drilling coming to a halt at that time. But

almost three years later, Noble is about to pour its first gold at Bibiani. With production set to ramp up to 150,000ozpa

or more next year at an average cash cost of $600-$650/oz , the Company is ontrack to become a substantial mid-tier West African gold producer with robust cash flow, a strong resource inventory and enormous exploration opportunities

at Bibiani and elsewhere on the Ashanti Gold Belt. BGF Equities analyst Reg Spencer summed up the significance of Noble’s emerging production profile in a recent note. “Noble’s earnings potential is not getting the recognition it deserves,” he says. But he points out that while the company is “under-appreciated” by the market, he expects the stock to be re-rated in the same way as Perseus and Adamus were as they commissioned their gold projects in Ghana. At the time of writing, Noble had $34 million cash and gold production was approximately three months away.Bibiani boasts a JORC-compliant resource base of 1.98 million ounces (32.98Mt at 1.87gpt), including 790,000 oz (12Mt at 2.05gpt) in reserves. This figure is based solely on the Main Pit, meaning all the drilling intersections announced recently at the series of new satellite deposits are currently excluded from the official resource estimate. Given that Noble has undertaken a substantial resource drilling program across these satellite deposits over the past eight months with excellent results to date, this represents significant upside for the project and Noble shareholders. At the time of going to press, Noble was in the throes of calculating a revised resource and reserve estimate which will significantly increase the resource base. The Company is ready to commence mining and processing once EPA approval, which is in the very final stage, is received. This upgrade is expected to be the start of a growing exploration story for Noble which will be driven initially by the Bibiani satellite deposits – Walsh, Strauss, Aheman, Grasshopper, Elizabeth, Big,

Cashflow, exploration success much more than a Noble gesture

The refurbished processing plant at Bibiani

“Bibiani is the company-maker. The project gets a tick in every single box. Most of the surrounding ground has hardly been touched with modern exploration. At current prices, our cash margins will average

about $1000/oz.” - Noble MD Wayne Norris


Mug and South Hill – followed by the Main Pit West Wall and at depth at the main Pit. Further potential exists with Noble’s other exploration projects at Cape Three Points, Brotet and Tumentu located on the prolific Ashanti Gold Belt.

Bibiani already has sufficient reserves to underpin a 6.5-year mine life, with the total resource inventory pointing to the strong likelihood of 10-plus years. The current focus is on the Walsh and Strauss deposits, where recent drilling results suggest the mineralisation may be continuous and therefore could form the basis of a Super Pit-style development. Noble believes it can source at least three years of ore supply from all of these satellite pits. This figure could increase significantly, with a recent detailed structural review expected to result in the identification of more exploration targets and ongoing resource definition programs. Noble is also targeting further resources and reserves at the Bibiani Main Pit, where drilling of the North, South and Western

Wall area is already underway. Success with these programs will be particularly valuable as waste material planned to be removed as part of the Main Pit cutback could be partially ore, providing an enormous boost to the economics of this operation. It is a reflection of the quality of Bibiani that Noble, which was proceeding with its Cape Three Points (CTP) Brotet and Tumentu projects at the time of the acquisition, has been forced to put these prospects on the back burner. CTP and Brotet are located within the southern extension of the Ashanti Gold Belt and include the Satin trend, Satin mine plus the parallel Morrison trend in CTP. Shallow drilling has already generated some promising results on the Northern CTP Prospects. Tumentu, which is located on the western side of the Ashanti Gold Belt in Ghana and 21km north of Adamus Resources’ Salman-Anwia project and directly South of Golden Star Resources’ Bogosu Gold Project, is considered to be elephant country with little or no exploration. “Bibiani is the company-maker,” says Norris. “The project gets a tick in every single box. It will have a very large mill capacity, a substantial reserve and resource base to feed it and enormous exploration potential. “Most of the surrounding ground has hardly been touched with modern exploration. At current prices, our cash margins will average about $1000/oz, giving us strong cashflow which we can

then use to exploit the full exploration potential at Bibiani and our other exploration targets. “We will also then be in a position to push ahead with the enormous opportunities we have at CTP Brotet and Tumentu. And we will have the firepower to make other acquisitions if we believe they will create value.”

2011 broker research:Gold Oz - June

Stock Analysis - August, Price Target: 73c

BGF Equities - October, Price Target: $1

Bibiani set to make Noble a shining light in the Ghanaian gold industry

Extensive drilling program underway

NOBLE MINERAL RESOURCES SNAPSHOT

Stock Exchange Listings

ASX: NMG

Issued shares522.3M

Market capitalisation$321M at 61.5c


The industry that turned the world’s biggest energy market on its head is

coming to Australia. The rise of shale gas in the United States revolutionised the country’s energy sector, sparking a multi-billion-dollar land grab among the world’s major oil and gas companies and swamping the market with so much gas that prices plummeted. Now the industry is on its way here, with the first signs starting to emerge that Australia is on the radar of the same oil majors that spent big in the US.Australia has been eyed as one of the most prospective places on the planet for shale gas, offering huge opportunities for Australian companies and investors alike. While the industry here faces numerous challenges before it can replicate the success of the US – Australian investors have so far been reluctant to embrace the sector to date as a result - the potential of shale gas in Australia is mind-boggling.A study by the US Energy Information Administration, released in February, estimated that the key shale gas regions of Australia combined could host up to 1,400 trillion cubic feet of gas. To put that number into context, the huge Gorgon liquefied natural gas project being developed at a cost of $43 billion off the coast of Western Australia – a project that will last for decades, and generate hundreds of billions of dollars in revenue – is based on a reserve of around 40 trillion cubic feet. The gas fields of South Australia’s Cooper Basin, which has met the bulk of the gas needs of eastern Australia for the past forty years, has so far used just six trillion cubic feet of gas over its life.

America’s shale gas revolutiongathering steam Down Under

How technology paved way for hot new energy craze

The US shale gas revolution found its start in the early 2000s, when advances in a number of established oil and

gas techniques opened up the potential of the industry. While shale rocks throughout the US

had been known to contain oil and gas for decades, they were always ignored as a source due to the difficulty in extracting the valuable materials from the shale.Conventional gas fields, such as those

that have driven WA’s LNG industry to date, occur in more porous rocks such as sandstone. Once tapped by a well, pressure in the rocks pushes gas freely into and up the well.In contrast, the far fewer pores in shale

makes it all but impossible for the gas to flow through the rock.Two key technical breakthroughs have

changed the profitability and desirability of shale. First, modern oil and gas drillers are today much better at directional drill-ing, where wells are angled with preci-sion to penetrate specific layers of rock. When used in shale drilling, the wells can be angled to cut horizontally through the layers of shale. That increases the amount of well that is exposed to the gas-bearing rock. Whereas a traditional vertical well could

end up with just a few metres of so-called “pay zone”, a horizontal well running through a shale can deliver over 1km of producing area.

The other key technological progress that has allowed the shale gas revolution is also arguably the most controversial: hydraulic fracturing, or ‘fraccing’.In the fraccing process, a mixture of

water, sand and chemicals is pumped down the well under extreme pressure into the shale. The force of the mixture sends cracks through the shale, which are then lubricated by the chemicals and held open by the sand. Crucially, these cracks then allow the gas that was previously trapped in the tightly compacted shale to flow through the rock and into and up the well.The contentious aspect of fraccing is the

chemicals added to the water. In particu-lar, many farmers and landowners at the surface are concerned the toxic chemicals could contaminate the groundwater aqui-fers they utilise.The prospect of chemicals and gases

moving from shale into aquifers is slim to none, as they are often separated by hundreds of metres of impermeable rock. The risk of contamination lies in the well itself, when it passes through those aqui-fers on its way to the deeper shale.To avoid the well becoming a conduit for

contamination of the aquifers, companies use layers of steel tubing and a high-tech form of cement to separate the well from the surrounding rock. While the process is not failsafe, it has been used for decades and those in the industry believe such risks are minimal.


The massive potential resources identified will never be fully defined and developed, but a company need only prove up and exploit a tiny amount of that potential to get its hands on a significant, major project. Increasingly, there are more and more Australian companies looking to do just that. To date, the likes of Beach Energy, Santos and Drillsearch have begun actively exploring for shale gas in South Australia, while AWE, New Standard Energy and Buru Energy have emerged at the forefront of shale gas exploration in WA. Slowly but surely those companies are starting to attract some high profile international partners. Beach has a memorandum of understanding in place with Japanese conglomerate Itochu to explore a potential shale gas-fed liquefied natural gas development, Buru has an ongoing partnership with Japan’s Mitsubishi and, in recent months, Drillsearch and New Standard

have secured joint ventures with global majors BG Group and ConocoPhillips resepectively. England’s BG will spend up to $130 million over five years exploring Drillsearch’s shale gas prospects and ConocoPhillips will outlay as much as $109 million on exploration over New Standard’s acreage in the Canning Basin in northern Western Australia. The process that led to New Standard’s deal with ConocoPhillips was the second time in less than a year that New Standard had looked for a joint venture partner. New Standard managing director Sam Willis said the level of foreign interest in the company’s acreage rose significantly second time around, with more than a dozen companies – including several “household names” of the oil and gas business – taking a close look at the acreage. “There was a shift in the space of six months among a lot of North American

companies who were very US-centric when we first spoke to them,” Willis says. “What is very evident right now is that appetite [for shale gas] has spread globally and there are a lot of eyes on Australia.”Reg Nelson, a doyen of the Australian oil and gas industry and the managing director of Adelaide-based Beach, was one of the first to make a bullish call on Australia’s shale gas potential. Having noticed the growth in shale gas in the US four years ago, Nelson and his team began scouring Australia for the most prospective shale gas acreage. Fortuitously, Beach’s search led it back to the Cooper Basin, where it was already a significant conventional oil and gas producer and one of the largest acreage holders. Beach sold its exposure in the then-booming coal seam gas industry and has since pumped the proceeds into its shale gas hunt. Nelson has persistently battled criticism and skepticism over the strategy

Huge advances in drilling techniques have underpinned development of previously dormant gasfields.


but it finally appears his efforts are starting to pay off. The past year has been a difficult one for share markets, yet in the past 12 months Beach has more than doubled from less than 60c a share to as high as $1.25. Nelson attributes the surge in Beach’s share price to an increased investor awareness of, and interest in, the shale gas potential of the Cooper Basin. That interest really began to pick up in July, when Beach announced the results from its first shale gas exploration well. The well reported strong gas flows, proving the Beach model and paving the way for the company to book an initial 2 trillion cubic feet shale gas resource.Nelson has heard plenty of criticisms about the challenges facing shale gas in Australia, but says he becomes more and more confident about the sector’s future each day. “We’re slowly ticking all the boxes, we’ve been working methodically and with a hell of a lot of research and scientific effort to make sure it works properly, and it’s paying dividends,” he says. While Beach’s improving share price suggests a market that is slowly waking up to Australia’s shale gas potential, numerous skeptics remain. Citi analyst Mark Greenwood is one who is concerned about the economics of Beach’s shale gas efforts, recently estimating that Beach would require a price of around $7 per unit to break even. Greenwood believes Australian shale gas projects will be at least 50 per cent more expensive than those of the US, in part due to Australia’s higher labour costs and the remote location of Australia’s fields. One of the chief concerns leveled at the sector is whether the gas will be able to find a suitably priced market if and when it is found. There is good reason to be concerned: in the US, the huge volumes of shale gas identified in recent years have driven down gas prices from more than $US12 a unit to around $US4 a unit. Gas prices on the east coast of Australia are already low, sitting at around $4 a unit, raising the question of whether shale gas in Australia will be economic. The Australian shale gas companies have all given strong consideration to the Conservationists are already gearing up for a fight with the industry


question of markets. Sydney-based AWE decided to start its shale gas efforts in WA in recognition of the substantially higher gas prices there (currently around $10 a unit), and the likes of New Standard and Buru are looking to link their projects in the Kimberley into domestic gas pipelines.Beach and the other Cooper Basin players don’t have that luxury, but Nelson notes that gas prices on the east coast are widely forecast to rise in coming years. Many of the key gas contracts on the east coast are set to expire leading up to 2017, when liquefied natural gas exports from Queensland’s coal seam gas fields are set to begin. The huge US energy market means the shale gas industry there has been a domestic. In contrast, Australia’s domestic gas market is dramatically smaller, far too small to absorb the vast amounts of shale gas being targeted. Shale gas in Australia looks set to be inextricably linked to LNG, which will open up the shale gas producers to the gas-hungry markets of Asia. Beach and Adelaide’s Santos, which are joint venture partners in the basin’s mainstay Moomba operations, have already agreed to sell some of their gas in the Cooper into Santos’ under-construction Gladstone LNG project in Queensland. That will be a mostly conventional gas to start with, but it opens the prospect of directing shale gas from the Cooper to Gladstone over time. Similarly, Drillsearch’s joint venture with BG open up the prospect of feeding shale gas up to BG’s own LNG project at Gladstone. One of the more serious problems the sector faces in Australia is convincing the public about the environmental impact of shale gas. The industry in the US has met strong resistance from pockets of local farmers concerned about the impact of fraccing on their land and particularly their groundwater supplies. Online video showing landowners setting light to water coming out of a tap has done a huge amount of damage to the industry’s reputation. Unsurprisingly, those active in the sector believe the risks from shale gas drilling and fraccing have been overstated. While

they are adamant that shale gas drilling can be and is being done safely, they also note they are working in areas with little conflicting use at surface. The coal seam gas industry in Queensland and New South Wales has become embroiled in conflict with a huge number of farmers concerned about the impact on their land and water supplies. In the arid lands of the Cooper and northern WA, however, such intense agriculture just doesn’t exist.

Plenty of challenges remain, but those at the forefront of Australia’s growing shale gas industry are reminding investors that the coal seam gas industry in Australia faced many of the same difficulties and skepticism.

Shale gas exploration is still in its infancy in Australia

Kingsrose Mining Limited• Operatingahighgradegoldandsilvermine

• CashoperatingcostsoflessthanUS$150/ozgold(aftersilvercredits)

• Forecastannualproductionratesof45,000ozofgoldand500,000ozofsilver

• RecentdiscoveryofTalangSanto-Potential2ndhighgrademine

• Experiencedtechnicalandmanagementteaminplace

• HighlyprospectivegeologicalsettingontheTrans-Sumatranfault(RimofFire)

• Established15regionalexplorationtargetswithmultiplemineralizedveinsalreadyidentified

• 12drillrigsonsiteconductingaggressiveexplorationprogramme

• 4thGenerationContractofWorkcoveringover100squarekminarea

Level 2, 12-14 Thelma Street West Perth WA 6009Telephone: +618 9486 1149 Facsimile: +618 9486 1151

www.kingsrosemining.com.au

ACN 112 389 910


Kingsrose Mining Limited• Operatingahighgradegoldandsilvermine

• CashoperatingcostsoflessthanUS$150/ozgold(aftersilvercredits)

• Forecastannualproductionratesof45,000ozofgoldand500,000ozofsilver

• RecentdiscoveryofTalangSanto-Potential2ndhighgrademine

• Experiencedtechnicalandmanagementteaminplace

• HighlyprospectivegeologicalsettingontheTrans-Sumatranfault(RimofFire)

• Established15regionalexplorationtargetswithmultiplemineralizedveinsalreadyidentified

• 12drillrigsonsiteconductingaggressiveexplorationprogramme

• 4thGenerationContractofWorkcoveringover100squarekminarea

Level 2, 12-14 Thelma Street West Perth WA 6009Telephone: +618 9486 1149 Facsimile: +618 9486 1151

www.kingsrosemining.com.au

ACN 112 389 910


Sultan of European swing

Mike Ralston is a man on a mission. The energetic Zimbabwean-born mining executive took over the reins at Sultan Corporation earlier this year and has outlined a vision to rapidly transform the Perth-based junior into a mid-tier base metal miner operating in Europe. Ralston already knows a thing or two

about building companies. He was previously part of the executive team at Kangaroo Resources, an Indonesian coal producer listed on the ASX which moved quickly from a $5 million shell to become a $500 million mid-tier miner backed by Indonesian coal giant Bayan Resources. However, vision, commitment and hard

work are one thing; Ralston needs real projects to realise his vision. That’s where his Chairman, the former Western Mining executive Derek Lenartowicz, and fellow director, Milos Bosnjakovic, come in. Both have extensive networks in Central

Europe and the ability to identify and secure quality base metal assets in the region. Ralston says this is a key competitive advantage, as it is one of the few places left in the world where quality mining assets can be secured for low entry prices.Plus, it’s a region that offers security

of tenure, established mining laws, proximity to a sizeable market nearby, an experienced workforce, significant existing infrastructure and low capital and operating costs – a rare combination in the competitive global mining industry. “Both Derek and Milos will be spending

a lot their time in Europe for us from now on and both have been heavily incentivised to identify and secure quality projects to help us realise our vision,” says Ralston.Sultan will not be coming off a standing

start either. The Company is already conducting a feasibility study on the Monty base metal project in Montenegro, which it acquired for just €100,000 and which now has a JORC resource of 9.2Mt grading 3 per cent zinc, 2.8 per cent lead, 0.5 per cent copper and 20gpt silver, with plenty of upside still available.

Ralston estimates that Monty could be brought into production during 2013, initially as a 250,000tpa operation ramping up to 400,000tpa for a capital cost of around $25 million, generating operating cash flows of $25-30 million a year thereafter for a mine life that will probably exceed ten years once further drilling confirms additional resources. Then in September came a deal that

grabbed the headlines for Sultan – the acquisition of the Bogdan base metals project in Poland. Bogdan is a 40sqkm tenement located immediately adjacent to the world-class copper production complex owned and operated by KGHM Polska Miedz S.A. – the largest producer of copper in Europe and third largest producer of silver in the world. KGHM has delivered over 25 million

tonnes of copper from this area over the past 40 years and produced 507,000t of copper last year. Its resources are reported at 1,160 billion tonnes grading 2.08 per cent copper and 59gpt silver, for a total of 24.11Mt of contained copper and 68,748t of silver. “Our tenement sits next to a world-

class asset and most of the metals that have come from this giant producer have

come from operations located on the same regional feeder fault that extends through Bogdan,” says Ralston. “We are understandably very excited by this acquisition.”One historic drill hole on the tenement

returned intercepts of lead and silver, indicating that the same style of mineralisation may extend into the Bogdan project. The acquisition terms comprise a $100,000 option fee, a $300,000 exploration commitment and staged cash payments totalling $1.2 million for 85% of Bogdan.Sultan is already preparing its drilling

program, which should be underway early next year. At the same time, the Company is aiming to add several other advanced and near-production projects to its European portfolio, giving its base metals consolidation an even spread of production, feasibility and exploration assets. Add to this a potential large-scale gold

exploration opportunity near 3Moz McPhillamy’s Project in NSW where drilling is underway and it’s not hard to see why Sultan is rapidly finding its way onto the watch-lists of junior resource brokers around Australia.

It’s not every day that junior Australian resource company is able to pick up an exploration project immediately adjacent to one of the world’s biggest copper mines. However, Sultan Corporation’s recent Bogdan acquisition in Poland could be just the first of a string of eye-catching deals in Central Europe.

Drilling at the Monty Project in Montenegro: quality mining assets can still be secured for low entry prices in Europe


Those in the minerals exploration business will readily tell you that there are only

three ways of making a discov-ery: sheer luck, pure science or a combination of the two. At Talisman Mining, the metals men, as David Attenborough might call them, are opting for the method they know best and the one they have used to great effect in the past – the scientific approach. Of course, they would never say no to a visit from Mother Luck. And as all honest ge-ologists would admit, if only to the mirror, there has never been a discovery in which luck has not played some form of helping hand. However, Talisman is not relying on luck and is instead banking on a highly systematic approach to establishing the whereabouts of world-class copper-gold deposits at projects in WA’s Bryah Basin, located 150km north-east of Meekatharra. The Company, which is run by the former management team at the highly success-ful Jubilee Mining, has built a bank of evidence which leads it to believe that it is within striking distance of a copper-gold discovery not dissimilar to the world-class find of its neighbour Sandfire Resources. It is now in the throes of attempting to home in on these deposits, aided by a $40 million war chest, by gathering further geological clues and evidence in what amounts to a sophisticated version of “warm, hot, hotter”. In the process, the company is offering investors an expo-sure to a highly leveraged exploration play. To put the potential size of the prize for shareholders in context, it is worth remembering that Sandfire shares were trading at around 5c before the discovery of the DeGrussa deposit. Today they are around $7. Much of the key to Talisman’s grow-ing confidence in its discovery prospects

stems from its flagship Springfield Project in the Bryah Basin, where it has now identified five stratigraphic VMS horizons. These are geological structures considered to be prospective for mineralised systems similar to Sandfire’s DeGrussa high grade

copper-gold discovery. Drilling at several prospects at Springfield, including Homer and Monty, has intersected minerals such as chalcopyrite which are associated with these types of copper-gold deposits. These target horizons have been outlined over a combined length of 35 to 40km. As part of its persistent and systematic geological detective work, Talisman has drilled some targets along these horizons, generating results which have strengthened its conviction that economic deposits potentially lie within its borders. At the Monty prospect, it recorded a highly promising hit of 0.3m at 7.6 per cent copper. A prospective horizon of at least 1.6km has been outlined there and drill targets are being lined up. At the Homer prospect, preliminary 3D interpretative geological modeling has con-firmed an analogous setting to Sandfire’s DeGrussa deposit. Again, initial drilling has provided some tantalising results, including 6m at 0.09 per cent copper. At the time of writing, an extensive 150-hole reconnaissance aircore drilling program was getting underway. Also featuring in the company’s suite of Bryah Basin opportunities is the Halloween Project,

Talisman’s systematic detectives closing in on their most-wanted

“Over the past two years our investment in patient and system-atic exploration has allowed us to

accumulate a wealth of strong geo-logical evidence underpinning our

belief that our Bryah Basin land holding is highly prospective for

world-class copper-gold deposits.” – Talisman MD Gary Lethridge

Talisman prides itself on a systematic approach to exploration


located 16.5km west of Springfield and just 11.5km along strike from DeGrussa. Results from a recent soil sampling pro-gram are pending and will be used to plan a drilling program due to start shortly.“We are now at that point in an explorer’s evolution that has historically been heav-ily sought after by investors,” Talisman Managing Director Gary Lethridge says. “We have done the patient, grinding but absolutely vital preliminary work and in the new year we will be embarking on extensive targeted drilling programs at Springfield which stand to generate intensive news flow over the first half of next year.

“Over the past two years our investment in patient and systematic exploration has allowed us to accumulate a wealth of strong geological evidence underpin-ning our belief that our Bryah Basin land holding is highly prospective for world-class copper-gold deposits such as that next door at Sandfire. We are about to commence an integrated targeting process derived from this geological data which is planned to deliver validated drill targets for next year, enabling most of our exploration at Springfield to transition

from reconnaissance to a more targeted approach.” Talisman is also diversifying its explora-tion focus with the pursuit of large-scale gold projects with the potential to host +one million-ounce gold deposits. This strategy led to the acquisition this year of the Muddawerrie and Livingstone gold projects in WA. Muddawerrie is located 100km from Meekatharra in WA’s rich Archaean green-stone belt which hosts so many of the great gold discoveries. At the time of go-ing to press, Talisman had just completed a 2000m drilling program designed to test several high-priority prospects along two mineralised shear zones. Previous historic shallow drilling from Muddawerrie has intersected gold mineralisation, providing Talisman with strong encouragement. At the Livingstone Project, 25km north-west of Muddawerrie, Talisman holds 208sqkm on the western edge of the Bryah Basin. Talisman’s primary interest at Livingstone lies around a major 31km trans-basin shear zone which has demonstrated high-grade gold mineralisation from historic drilling such as 6m at 5.3gpt and 7m at 4.75gpt. A two-hole diamond drilling program is planned to commence shortly. In addition to its strategy of fostering evolving exploration stories in the Bryah Basin, Talisman is hunting in the geolo-gist’s equivalent of elephant country with its 1816sqkm Gascoyne Iron-Oxide-Copper-Gold (IOCG) and Nickel-Copper-PGE project in WA. This houses two key

prospects: Shelby, where a deep diamond drilling program was underway at the time of writing following up earlier drilling which points to a potential IOCG system, and the Milgun Project, where preliminary exploration data is being assessed with a view to identifying priority areas for follow up work. “Shelby represents an exciting explora-tion opportunity which was identified based upon high-order conceptual geologi-cal detective work by Peter Langworthy and his exploration team and then pegged,” Lethridge says. “Our ability to generate opportunities such as Shelby and then advance them is a core part of our business model. But these sorts of oppor-tunities must be undertaken in a measured manner parallel to our main focus, which is the Springfield Project.” In the exploration business, the detective work is far from elementary. But if the old adage about the more clues, the more likely a solution, is correct, Talisman must be getting closer and closer to its most wanted.

Aggressive drilling programs are planned for Springfield

Examining the core

Early results are encouraging

TALISMAN MININGSNAPSHOT

Stock Exchange ListingsASX: TLM

Issued shares

131.5M

Market capitalisationA$65M at 50c


located 16.5km west of Springfield and just 11.5km along strike from DeGrussa. Results from a recent soil sampling pro-gram are pending and will be used to plan a drilling program due to start shortly.“We are now at that point in an explorer’s evolution that has historically been heav-ily sought after by investors,” Talisman Managing Director Gary Lethridge says. “We have done the patient, grinding but absolutely vital preliminary work and in the new year we will be embarking on extensive targeted drilling programs at Springfield which stand to generate intensive news flow over the first half of next year.

“Over the past two years our investment in patient and systematic exploration has allowed us to accumulate a wealth of strong geological evidence underpin-ning our belief that our Bryah Basin land holding is highly prospective for world-class copper-gold deposits such as that next door at Sandfire. We are about to commence an integrated targeting process derived from this geological data which is planned to deliver validated drill targets for next year, enabling most of our exploration at Springfield to transition

from reconnaissance to a more targeted approach.” Talisman is also diversifying its explora-tion focus with the pursuit of large-scale gold projects with the potential to host +one million-ounce gold deposits. This strategy led to the acquisition this year of the Muddawerrie and Livingstone gold projects in WA. Muddawerrie is located 100km from Meekatharra in WA’s rich Archaean green-stone belt which hosts so many of the great gold discoveries. At the time of go-ing to press, Talisman had just completed a 2000m drilling program designed to test several high-priority prospects along two mineralised shear zones. Previous historic shallow drilling from Muddawerrie has intersected gold mineralisation, providing Talisman with strong encouragement. At the Livingstone Project, 25km north-west of Muddawerrie, Talisman holds 208sqkm on the western edge of the Bryah Basin. Talisman’s primary interest at Livingstone lies around a major 31km trans-basin shear zone which has demonstrated high-grade gold mineralisation from historic drilling such as 6m at 5.3gpt and 7m at 4.75gpt. A two-hole diamond drilling program is planned to commence shortly. In addition to its strategy of fostering evolving exploration stories in the Bryah Basin, Talisman is hunting in the geolo-gist’s equivalent of elephant country with its 1816sqkm Gascoyne Iron-Oxide-Copper-Gold (IOCG) and Nickel-Copper-PGE project in WA. This houses two key

prospects: Shelby, where a deep diamond drilling program was underway at the time of writing following up earlier drilling which points to a potential IOCG system, and the Milgun Project, where preliminary exploration data is being assessed with a view to identifying priority areas for follow up work. “Shelby represents an exciting explora-tion opportunity which was identified based upon high-order conceptual geologi-cal detective work by Peter Langworthy and his exploration team and then pegged,” Lethridge says. “Our ability to generate opportunities such as Shelby and then advance them is a core part of our business model. But these sorts of oppor-tunities must be undertaken in a measured manner parallel to our main focus, which is the Springfield Project.” In the exploration business, the detective work is far from elementary. But if the old adage about the more clues, the more likely a solution, is correct, Talisman must be getting closer and closer to its most wanted.

Aggressive drilling programs are planned for Springfield

Examining the core

Early results are encouraging

TALISMAN MININGSNAPSHOT

Stock Exchange ListingsASX: TLM

Issued shares

131.5M

Market capitalisationA$65M at 50c

Investors, contrary to the evidence of substantial share price falls over the past few months,

have not lost faith in resource companies or in underlying demand for commodities. They have, however, lost faith in governments.

Europe in particular has emerged as the bogeyman dragging down global markets because of political indecision and the lack of a long-term solution to its debt problems.

Austerity, which has already led to civil unrest in Greece, is not a solution in itself for a region which appears to have forgotten how to encourage economic growth. Without a combination of tight government spending controls and encouragement of private sector growth Europe risks a decade in the wilderness.

Do the problems of Europe mean that the rest of the world will grind to a halt? No, is the one-word answer because zero growth is simply not an option for countries emerging from centuries of poverty, determined to develop a consumer-oriented middle class similar to the western world, and that translates into strong future commodity demand.

China and India, the leaders of the emerging world, have no intention of allowing themselves to be de-railed by Europe, where a lazy, cafe lifestyle has been promoted as a form of industry for the past 30 years. Germany, despite its role as the European powerhouse, is walking into its own nightmare having adopted policies which ban the development of new coal-fired power stations as nuclear power stations are shut-

down and not replaced. At a recent mining conference in Sydney, the looming German crisis was spelled out by one of the world’s top mining industry consultants. Bernard Guarnera, chairman of Behre Dolbear, predicted a German power shortage in the next few years. “It’s going to be interesting to see what happens in Germany where they don’t want coal and they don’t want nuclear,” Guarnera said. “I think the answer is going to be power shortages, and power shortages in the near future.”

Guarnera painted a remarkably rosy picture of future resource demand, especially for coal and other forms of fuel. “The story, of course, is China. It is still moving 20 million people a year from rural areas to urban areas,” Guarnera said. “To meet the needs of those 20 million people moving into urban areas, China has to build, in gigawatts, a power grid equivalent to the entire power grid of Britain, each year, for the next 15 years. Stop and think about that. Not only about the amount of coal that is going to be consumed, but look at the other commodities as well. Where will the copper come from? Where will the iron ore come from? Where will the aluminium come from?”

Two weeks after those comments, the copper price rebounded by a remarkable 6 per cent in a single session, almost as if commodity traders realised they had over-reacted to the problems of Europe.

Guarnera’s pointed questions are important because they go to the heart of what’s happening today, a short-term period of adjustment for commodities and resource

companies as Europe adjusts to its gloomy future, and more particularly, as European banks are forced to wind back their heavy exposure to the commodities business.

Goldman Sachs, one of the world’s leading investment banks, has factored lower copper, iron ore and other commodity prices into its spread sheets to arrive at the conclusion that prices might be down “but (it is) by no means despair”.

UBS, the sometimes troubled Swiss banking giant, is even more optimistic about the downturn being short-lived, attributing the recent price corrections to the “unwinding” of the “short U.S. dollar, long commodity, carry trade”. De-coded, UBS believes that investors who had loaded up on commodities, and short-sold the U.S. dollar, have been busy reversing their positions, a process which could last until early 2012. As those big positions held by institutional funds and wealthy individual investors are reversed, the scene will be set for a sustained rally with the favoured resource exposures being thermal coal, iron ore and gold.

The challenge for investors is that getting to the brighter future seen by Goldman and UBS will require surviving the negative effects of Europe’s painful adjustment from the position of a world leader to the long-term status as the sick man of the global economy.

Commodities set to survive bumpy journey but pain will linger for Europe



Public companies revel in pointing to the big names on their share registers. It’s a vote of

confidence from the successful, a stamp of credibility awarded by those who have been there and done it and so their opinion counts. Their presence also benefits other shareholders - as those in one emerging resources company can already testify.

There are no bigger names in the investment business than James Packer and Andrew Forrest. Their presence on any share register says one of two things: either they believe in the company’s existing assets or they are confident the company will soon accumulate projects that will generate them a substantial return.

So at MOD Resources, which boasts not only Packer and Forrest but also the likes of Multiplex’s Tim Roberts and businessman John Poynton as shareholders, the heat has been on. As a biotech, the company’s shares were trading at just 3 cents in December. But a $2.8m capital raising to which these and a handful

of other experienced investors contributed marked the beginning of a new era for the company.

They have invested on the promise that MOD will acquire, explore and develop resource projects around the world. But implicit in their support is that MOD’s brief is not to accumulate a portfolio of 250,000oz gold projects and the like, but instead to establish an asset base of world-class deposits and development prospects which stand to generate substantial returns – by their standards.

Leading this charge is mining industry veteran and former Sandfire Resources Chairman Miles Kennedy, who has taken on the role of Chairman. Simon Lee, another highly respected mining industry executive with a host of public company successes such as Samantha Gold and Equigold to his name, is a Non-executive Director. They have hand-picked a team of well-regarded technical specialists to complete the offering, ensuring MOD

has mountains of enviable track records, extensive experience of a corporate and technical nature and, of course, some deep pockets in the background should they be required.

After months of combing the globe for potential acquisitions, MOD revealed in March this year that it had agreed to acquire the Botswana Copper Project in the Kalahari Copper Belt of north-west Botswana. As well as being housed in one of the world’s geological hotspots, the Botswana Copper Project sits immediately adjacent to the large Boseto and Ghanzi copper-silver discoveries made by fellow ASX-listed company Discovery Metals and Canada’s Hana Mining.

Discovery has reported a JORC resource of 111.5 million tonnes at 1.4 per cent copper and 17.6gpt silver for Boseto while Hana has reported an indicated resource estimate of 762 million pounds of copper and 16 million ounces of silver for Ghanzi. Hana has also announced total inferred resources of 5.6 billion pounds of copper and 85.4 million ounces of silver.

MOD’s confidence in the immense potential of the Botswana Copper Project was immediately strengthened by the results from the initial round of drilling, which identified a significant new zone of copper-silver mineralisation.

Grades of up to 3.87 per cent copper and 106gpt silver were recorded at the Corner K prospect. The results are even more pertinent in light of MOD’s belief that Corner K is a 5km extension of the Gaia open pit target identified by Discovery on the adjoining lease.

The results were the first from MOD’s maiden 12,000m drilling program at the Botswana Copper Project, with Kennedy noting they confirmed the company’s belief that its ground has the potential to host large copper-silver deposits similar to Boseto and Ghanzi.

“These results underline our belief that the Kalahari Copper Belt is an emerging copper-silver province with great potential in a country widely acknowledged as

Ambitious MOD marches to the big boys’ tune in the quest for growth

“With Sams Creek and the Botswana Copper Project,

MOD has two projects with outstanding exploration

potential. And that’s what MOD is about – identifying

substantial opportunities, not merely grinding out a hand-

to-mouth existence.”

- MOD Chairman Miles Kennedy

Drilling at Botswana Copper Project


the best mining jurisdiction in Africa,” Kennedy says.

Evidence that Discovery’s Gaia open pit target extends into MOD’s ground will also undoubtedly make MOD a focus of the growing corporate speculation that is washing through the Kalahari Copper Belt.

The talk has already fuelled reports that OZ Minerals is considering a bid for Discovery and possibly Hana as part of a wider strategy to snatch control of the Belt while other industry majors have also expressed an interest in the area.

While the combination of copper and

Africa is sure to make even MOD’s major shareholders sit up and take notice, MOD has also succeeded in securing a significant gold project, this time a little closer to

home. Under its deal with OceanaGold Corporation, MOD can earn an 80 per cent stake in Sams Creek, New Zealand’s largest undeveloped gold project.

Sams Creek already boasts a JORC resource of 770,000oz based on 13.5 million tonnes at 1.78gpt. But the key attraction for MOD and its shareholders is that this estimate is based on just 10 per cent of the 6km strike length.

There is also a host of well-defined drill targets outside this Main Zone. MOD will earn its stake by funding an extensive exploration program. And it is wasting no

time, with the drilling program set to start this month.

The future for MOD at Sams Creek appears extremely bright. But there is also

a significant historical element to the deal, with Kennedy returning to NZ 23 years after founding Macraes Mining. And there is a further twist, with Macraes now part of OceanaGold, NZ’s biggest gold mining company.

Kennedy says there is immense opportunity to grow the resource base at Sams Creek, meaning it fits perfectly into the MOD strategy.

“With Sams Creek and the Botswana Copper Project, MOD has two projects with outstanding exploration potential,” he says.

“And that’s what MOD is about – identifying substantial opportunities, not merely grinding out a hand-to-mouth existence. There are plenty of public companies offering investors that sort of profile. MOD isn’t one of them.”

The world’s big mining companies are said to be watching progress in the Kalahari Copper Belt with close interest

Initial drilling at Botswana has returned highly promising results for MOD

MOD RESOURCESSNAPSHOT

Stock Exchange ListingsASX: MOD

Issued shares376.7M

Market capitalisation$71.6M at 19c


It’s a game investors have been playing around Aus-tralia for more than two years now. Loosely known

as “Pick the Next Sandfire”, the objective is to identify early-stage drilling results which point to the potential discovery of a deposit similar to Sandfire Re-sources’ rich DeGrussa copper-gold find in WA. The size of the prize means there is no shortage of those who are ready and willing to keep scouring in the hope that next time they will be on board, rather than just staring at the runaway share price graphs over their breakfast.The early-movers in this search party have started turning their attention to Southern Cross Goldfields (ASX: SXG), encouraged by the initial drilling results that the company is generating at its Copper Bore base metals project in Western Australia. No one is disputing that it is early days at Copper Bore. But that is the point. Already, those eager to draw parallels with the Jaguar deposit (now owned by Independence Group after its takeover of Jabiru Metals) and Sandfire are noting that Southern Cross’ share price (~7.5c at the time of going to press) is similar to that of Sandfire when it stumbled across DeGrussa. Over the following 18 months, the stock soared to $7.Copper Bore is one of several gold and base metals projects held by the company 200km north of Southern Cross , located roughly two-thirds of the way between Perth and Kalgoorlie. The growing enthusiasm stems from the intersections of volcanogenic massive sulphide (VMS) mineralisation in three separate zones at Copper Bore. Armed with the knowledge that Jaguar and DeGrussa are also VMS systems, informed

observers have taken note of the fact that the results point to the existence of a VMS field at Copper Bore. VMS fields are much-loved by investors and explorers alike because deposits historically occur in clusters, raising the prospect of numerous discoveries.

These hopes have been strengthened by the recent results from the Southern Gossan prospect, with a massive sulphide intersection of 2m at 2 per cent copper, 2gpt gold, 4.3 per cent zinc, 32.6gpt silver and 0.2 per cent lead. This hole was drilled 20m north and 60m up-plunge of the previous hole, which returned 5m at 2 per cent copper, 1.9gpt gold, 7.1 per cent zinc, 25.4gpt silver and 0.4 per cent lead. Other results at Southern Gossan include 8m at

8.25 per cent copper and 4.29gpt gold and 7m at 5.05 per cent copper and 2.05gpt gold.The high-tenor gold and silver-enriched massive sulphide mineralisation has now been intersected 100m along strike and 150m deep at Southern Gossan. The growing potential has also been highlighted by a down-hole electro-magnetic survey which, when combined with historical mapping and drilling, shows the host horizon runs to the north and south. As a point of reference, the main zone at the Jaguar deposit is 200m long and 400m down dip at an average width of 3m with very similar grades to those intersected at Southern Gossan. However, mineralisation at Southern Gossan starts at surface compared with 250m deep at Jaguar.Southern Gossan is at the southern end of the 10km-long VMS horizon. Base metals mineralisation has now been confirmed at multiple locations along this horizon, including at the Copper Bore prospect itself, which lies at the northern end of the 10km strike, and at Kims Bore, which is around the 5km mark.Southern Cross Managing Director Glenn Jardine emphasises that it is early days at Copper Bore and cautions against “feverish extrapolations”. However, he also admits that there is healthy dose of excitement over what could well be a company-making discovery. “The results so far have been outstanding and clearly there is enormous potential,” Jardine says. “We are planning a comprehensive exploration program including mapping, EM surveys and drilling because we believe that the results already justify this level of attention. Beyond that, we are in the hands of Mother Nature.”While the upside at Copper Bore is undoubtedly attractive, investors will draw much comfort from knowing

“The results so far have been outstanding and clearly there is enormous potential. We are planning a comprehensive exploration program including mapping, EM surveys and drilling because we believe that the results already justify this level of attention.”

- Southern Cross MD Glenn Jardine

Attention turns to Southern Cross Goldfields as west’s next rising star


that Southern Cross has not got all its exploration eggs in one project. Also in the Southern Cross region, the company is making rapid progress with its feasibility study on establishing a gold production hub at its Marda Gold Project. Guidance from the feasibility study is due within weeks. It will be based on a 400,000 tonne-a-year operation delivering 30,000ozpa at cash costs targeted between A$750 and A$800/oz.Southern Cross has JORC resources of about 600,000oz in the Marda region and there is scope to grow this significantly given the Company’s extensive tenement package (4000sqkm) and the results of its drilling programs this year. It aims to grow its potential production base in stages to 50,000ozpa and then 100,000ozpa by infill drilling at its existing deposits and greenfields exploration success. Jardine is also eyeing the potential for further regional gold consolidation, saying there are numerous deposits and exploration opportunities held in many hands. This provides Southern Cross and other companies in the region with the opportunity to consolidate and build a substantial resources inventory and production base. The company has completed four regional gold transactions in the past 12 months. “The Marda production hub has the potential to generate solid cashflow of $50 million a year in gross revenue at current gold prices at the initial base case of 30,000ozpa,” he says. “This will underpin further exploration and consolidation efforts in the region. The drilling results achieved at our existing gold projects and at Copper Bore confirm our belief that the region has been underexplored and that the potential for additional discoveries is high.”

SOUTHERN CROSS GOLDFIELDS SNAPSHOT

Stock Exchange ListingsASX: SXG

Issued shares215M

Market capitalisation$15M at 7c

Early results at Southern Gossan are being likened to those of the Jaguar deposit


It was serendipity that led Globe Metals & Mining to focus its exploration activities

on a group of speciality met-als that are little known but widely used in all types of cutting-edge technology.

When Managing Director Mark Sumich and his brother David started Globe Metals & Mining in 2005, they were on the hunt for uranium in Africa to make their fortune. What they found instead was niobium, a micro-alloy that when added to molten steel helps to lighten and strengthen speciality steels and cut corro-sion. These steels are used in the construc-tion, automotive, aerospace and oil and gas industries. It is also used in camera lenses, coatings on computer screen glass and cutting tools.

“It was through chance and explora-tion,” Sumich says. “In the middle of 2005 our view was that uranium was going to have a strong (price) run, so we went ex-ploring for uranium at our Kanyika project in Malawi. We found some but not enough to make it economic. But what we did find was niobium.

“We knew nothing about niobium and not many people did, but we knew we were onto something good.”

The timing of switch in strategy to spe-ciality metals could not have been better. Niobium was already enjoying a long-term increase in demand, with compound con-sumption growth of 10 per cent in the 10 years since 2000. The price reflected this, rising from US$12 a kilogram in 2000 to US$32 a kilogram in 2010. And the trajec-tory does not seem to be changing, with steel production continuing to boom. The steel industry consumes 90 per cent of the 60,000 tonnes of niobium produced each year and market demand is expected

to grow at around 10 per cent a year with interest in higher quality steel continuing to rise, particularly from China. Therefore, the long-term price forecast for niobium is US$45 a kilogram.

Globe’s suite of speciality metals looks likely to increase with two other explora-tion projects in Malawi and Mozambique, where early drilling has identified other in-demand metals such as fluorite, rare earth and tantalum.

“All of the speciality metals are used in advanced technologies and green tech-nologies and the demand for them is more and more,” Sumich says.

However, securing a buyer for these metals is quite different to bulk com-modities and precious metals, such as gold and iron ore, which are traded in an open market. Speciality metal producers seek

out buyers and then negotiate directly with their customers to create a bespoke product that suits their needs. It means a long lead time to getting the metals into production, but this more fiddly process

does have its benefits.“You build defendable technology and

barriers to entry to the market, so there

“All of the speciality metals are used in ad-vanced technologies and green technologies and the demand for them is more and more... Nio-bium is about steel, and steel is about China for the customers and the financing”

– Globe MD Mark Sumich

Globe’s African campaign results in a specialty metals bonanza


are benefits to all this effort,” Sumich says.While it was difficult to drum up inter-

est in Australia, Globe knew that its key customers lay overseas. And the biggest market for its niche products, particularly niobium, is China.

“Niobium is about steel, and steel is about China for the customers and the financing,” Sumich says.

In April this year, the company wel-comed a new major shareholder onto its register. The Chinese state-owned enter-prise, East China Mineral Exploration and Development Bureau (ECE), is a major exploration, development and mining group based in Nanjing. ECE took a 52.8 per cent stake in the company and this strategic partnership gives the company

access to Chinese capital markets, partners and end users.

“This deal offers us lots of strategic advantages, one of which is it gives us the opportunity to partner up with a customer who has existing capability (in the use of niobium) and will compress the time it will take to develop a flow sheet for produc-tion,” Sumich says.

The deal also means Globe has $44 million in cash to spend on its explora-tion activities and take advantage of any appealing acquisitions that may come on the radar. The money will also be used to bring its Kanyika project in Malawi into production. Kanyika and is currently undergoing a definitive feasibility study, due for completion in the third quarter

of 2012. Its current resource is 60 million tonnes of 2,900 parts per million (ppm) of niobium oxide. Scheduled to commence production in 2014, this includes 21 mil-lion tonnes of ore at 4,100ppm. Kanyika is expected to have an initial production of 3,000 tonnes a year, which represents between three and four per cent of global output.

Globe also has two other key projects in advanced exploration; the Machinga rare earth project in Malawi and the Mount Muambe rare earth and fluorite project in Mozambique. Rare earth doesn’t refer to unoccupied waterfront land in Australia’s capital cities, but a collection of 17 chemi-cal elements. The current market size is 115,000 tonnes a year and this is forecast to grow by 60 per cent by 2015 with demand driven by the increase in advanced and environmental technologies such as hybrid cars, wind turbines and electron-ics. The current market size is around six million tonnes a year with China consum-ing more than 50 per cent of that. Fluorite provides flux in steel and is also used in manufacturing ceramics, opalescent glass, enamels and cooking utensils. It is one of the 14 raw materials defined as ‘critical’ by a European Union expert group.

The company’s Mount Muambe fluorite and rare earth project in Mozambique recently generated strong drilling results for both fluorite and rare earths, with near surface grades of between 26 and 41 per cent fluorite from the targeted drill holes . Globe owns 20 per cent of the project but is earning up to 90 per cent through its drilling program. Globe is also earning 80 per cent of the Machinga project.

2011 broker research:

Resource Capital Research – 2 June

Resource Capital Research – 22 February

GLOBE METALS & MINING SNAPSHOT

Stock Exchange ListingsASX: GBE

Issued shares222.9M

Market capitalisation$37M at 16.5c

Sunset at Kanyika


Northern Star Resources, the gold miner which has shot from a corporate shell

to a sharemarket darling over the past year, has embarked on its next chapter of growth with a strategy to increase production from 80,000 ounces a year to 200,000oz.

The plan will see the already highly profitable Northern Star become one of Australia’s leading gold producers based on its existing Paulsens gold mine near Paraburdoo in WA and the establishment of a second production centre at its Ashburton project immediately to the east.

The clear step-by-step strategy devised by Managing Director Bill Beament is divided into two stages. Under Stage One, the Paulsens plant will be upgraded from 350,000 tonnes a year to 450,000 tonnes, lifting production to +100,000ozpa. This expanded plant will be fed from a combination of the open pit development

and high-grade underground sources at Paulsens, which are currently classed as either unmined resource blocks or remnant ore. This is expected to provide at least three to four years’ ore feed.

While this is taking place, Northern Star will undertake further reserve drilling and modelling at its neighbouring Ashburton Project. This strategy involves splitting Ashburton into two projects, the free-milling project, which has oxide-transitional resources of 92,000oz, and the Ashburton Sulphide Project, which has sulphide resources of 576,000oz.

The Ashburton Free-Milling Project will supply the expanded Paulsens mill after

the initial four years. To ensure there is ample feed, Northern Star has already started a $20 million exploration program. At the same time, it will commence work on Stage Two of the growth strategy by

undertaking studies on the Ashburton Sulphide Project. Initial indications point to a stand-alone operation producing 100,00ozpa.

Northern Star is embarking on this two-staged growth strategy having recently unveiled a maiden pre-tax profit of $20 million for the year to June 30, 2011. The result came after paying $40 million for

the acquisition of Paulsens and outlaying a further $10 million in capital expenditure to significantly increase mine life. Earnings before interest, tax, depreciation and amortisation (EBITDA) came in at $67 million. The company has also declared that it is well on track to hit or exceed its published target of producing 75,000oz and generating $40 million in free cashflow this calendar year.

Beament’s aggressive growth strategy for Paulsens is being consistently underpinned by the flow of outstanding exploration results. These continue to extend the known limits of the Voyager One lode, which has produced all the ore mined at Paulsens under Northern Star’s ownership. Recent hits have been spectacular, with results such as 18.8m at 62.7gpt, including 0.85m at 773gpt, and 6.4m at 120.2gpt, including 2m at 345.4gpt. Northern Star has also discovered the Voyager 2 lode, which has generated a host of high-grade intersections.

The recent drill results from Voyager One and all the intersections from Voyager 2 will form part of a resource

upgrade due in the new year. Northern Star will also publish a revised outlook strategy. This will contain increased mine life, production and cashflow forecasts for Paulsens. These upgraded targets will be in addition to the Stage One and Stage Two expansion plans and do not take into account the prospect of ongoing exploration success at Paulsens and its surrounds, meaning the Northern Star growth story still has a long way to run.

Sharemarket darling Northern Star unveils plan to produce 200,000ozpa

Outstanding production and exploration results have put a shine on Northern Star

The Paulsens underground mine


After winning approval to mine from the NSW Government,

Cortona Resources has just one final hurdle to overcome before pressing the “go” button on what is expected to be a highly profitable gold mine with strong growth potential just 60km from the nation’s capital.Peter van der Borgh should know a thing

or two about commitment. In 2005, the English-born geologist sold his house to buy the North Monger gold project near Kalgoorlie, which later underpinned the $3.5 million IPO of WA-based gold company Cortona Resources the following year.As Cortona prepares to join the ranks of

Australian gold producers sometime in the next 12-18 months, the quietly spoken but fiercely determined Manchester United fan is convinced that his courageous investment will soon pay off in spades – richly rewarding all shareholders in the process. After initially doing some work at North

Monger, Cortona changed tack in mid-2007, acquiring the 700sqkm Majors Creek Gold Project in New South Wales in a company-transforming deal with Moly Mines Ltd. Located near Braidwood some 60km

from Canberra, Majors Creek was once one of Australia’s largest alluvial gold mining regions, producing around 1.2 million ounces in the nineteenth and early twentieth centuries. Peter van der Borgh has a keen sense of

the region’s history, having worked with the Braidwood Museum to acquire and restore a gold escort wagon which was infamously held up in 1865 by a group of local bushrangers, including Ben Hall and the Clarke brothers.

However, the jewel in the Majors Creek crown – the proposed Dargues Reef underground mine – will be anything but old-fashioned. Over the past three years, Cortona has worked tirelessly to design a state-of-the-art operation drawing on the very latest technology to ensure the project is friendly to the environment and the local community.

Based on a high-grade resource of 327,000oz at 6.3gpt and 142,000oz of silver, Dargues Reef will have a tiny footprint, comprising a small but highly efficient underground mine feeding a nearby processing facility.The mine is scheduled to produce around

50,000oz a year over an initial six-year period at a forecast C1 cash unit operating cost of A$697/oz (including a 10 per cent contingency).At a gold price of A$1,600, it is estimated

to generate free cash flow of around $150 million, generate 100 jobs during the construction phase and around 80 long-term jobs during operations, many of which will be taken up by local workers. Deutsche Bank has been mandated to

provide a $37 million financing package to underpin the Project’s estimated capital

cost and key contracts for construction of the 330,000tpa processing plant and mining have already been effectively let, subject to final approvals. Following an arduous approvals process,

in early September Dargues Reef became the first significant new gold mine in NSW to receive development approval in more than seven years. “After three years of public meetings

and community consultation, we’ve done an enormous amount of work at the front end of this project to ensure that all community concerns have been addressed,” van der Borgh told Resources Rising Stars. “This included adopting public comment

at the earliest opportunity about an underground rather than an open pit operation, having no waste dumps, removing cyanide from the processing equation and addressing concerns about noise and water. The final proposal incorporates input from the Company, local communities and a range of government agencies that we can all be proud of.”The project has also been endorsed by

the Federal Department of Sustainability, Environment, Water, Population and Communities as posing no risk to listed species.

“The project has passed every environmental

standard set by the NSW and Federal governments and is well positioned to prove it poses no harm to communities or the

environment”

-Cortona MD Peter van der Borgh

Cortona’s persistence set to pay off for dogged MD and his shareholders

Visible gold in diamond drill core, Dargues Reef


Dargues Reef will have a “partial” processing plant which will produce a gold concentrate rather than gold bars. The metallurgy of the ore is such that half of the gold can be recovered by gravity methods, with the balance extracted by conventional flotation to produce a sulphide concentrate that will be shipped off site to the London Victoria mine near Parkes, some 400km away, for further treatment.“This means that the tailings will be safe

and pose no toxic threat, and the whole lot will be retained on site in a facility built to the specifications of the NSW Dams Safety Committee,” says van der Borgh.“This is a fully bio-degradable process

which has been successfully and safely used all over Australia and all over NSW at other operations like Cadia Ridgeway, Northparkes, Cobar and Broken Hill.”

Other measures implemented by Cortona include state-of-the-art noise mitigating features in the processing plant, a modified operating plan which excludes crushing activities at night, and an agreement with the local council to upgrade access roads.Cortona has also invested vast resources

in conducting extensive groundwater modelling which has confirmed that

water usage by the mine will not impact on water supplies for the local or regional community. “The studies have shown that the water

used will be a fraction of that used for irrigation in the Araluen Valley, and that there will be no impact on the water table beyond 2.5km of the mine. A compensatory water release program is also in place to ensure no loss to downstream flows.”Despite all of this, Cortona still has one

final hurdle to overcome. After receiving its State and Federal Government approval, two merits appeals were launched last month in the NSW Land and Environment Court against the approval from the independent NSW Planning Assessment Commission and subsequent grant by the NSW Planning Minister.“Of course that was a hugely frustrating

moment, particularly as our project has undergone rigorous scrutiny from both the State and Federal Governments. “It’s disappointing that ratepayers’ money

could be wasted challenging a substantial body of science by independent experts that confirms the water supply is perfectly safe and there will be no impact on communities in the region.“Despite this temporary setback, the

project haspassed every environmental standard set by the NSW and Federal governments and is well positioned to prove it poses no harm to communities or the environment. We are also ready to move ahead quickly because we have agreements for construction, mining and most other site works already in place.”Anlaysts expect that clearing this final

hurdle will trigger a substantial re-rating of Cortona shares. Perth broker Hartleys

values the stock at 34c a share with a 37c price target. All of this attributes minimal value to the

substantial exploration upside at Dargues Reef and in the surrounding tenement package, where van der Borgh is confident new discoveries will be made, adding substantially to the current resource inventory.

2011 broker research:Hartleys - 8 September 2011

(Target: 37c)

Diamond drilling underway at Dargues Reef, NSW

CORTONA RESOURCES SNAPSHOT

Stock Exchange ListingsASX: CRC

Issued shares221M

Market capitalisation$26.5M at 12c

Regional exploration drilling within the 700sqkm Majors Creek Project


With two drilling successes already this year and a host of

copper-gold targets still to test in North Queensland, Breakaway Resources could find itself in the box-seat to monetise any new discoveries thanks to its proximity to the recently re-commissioned Eloise Copper Mine. If “Mining Boom Mk. II” has slowed

slightly in recent months following recent market turmoil, no one in the Cloncurry District seems to know about it. Drilling rigs, accommodation and services are still at a premium; and there appears no let-up in sight, as a swag of aggressive juniors compete for people and equipment with the likes of Xstrata, BHP and Ivanhoe Australia.And for those juniors that are successful

in breaking through the log-jam and delineating and monetising their deposits, the rewards can be enormous. Just look at Exco Resources, which earlier this year sold its prized Cloncurry copper asset to Xstrata, the dominant miner in the Mt Isa region, for a tidy $175 million.

“The Cloncurry region is without question one of Australia’s exploration hot-spots and we’re fortunate enough to be right at the epicentre of all this activity, with our tenements surrounding an operating copper mine which is operated by our second-biggest shareholder and in which we have a beneficial interest,” says

Breakaway’s Managing Director, David Hutton.After a successful 2011 drilling campaign

which has already yielded two successes

at its flagship Eloise Exploration Project in North Queensland, Hutton has a new energy in his voice as he outlines his Company’s vision for the coming year. Breakaway repositioned itself as a “mid-

tier” exploration company in 2006 after striking a deal to buy LionOre Australia’s nickel assets in WA and completing a large capital raising at the time to pursue a dual commodity exploration push – nickel in WA and copper-gold in Queensland. However, the global financial crisis forced

it to seriously wind back exploration activities on all fronts, with the Eloise Exploration Project suffering most. But if Hutton’s 20 years in the exploration

game have taught him anything, it is that circumstances can also quite quickly move back in your favour. The former MIM and

LionOre Australia exploration executive knew that the winds might be shifting in a more favourable direction late last year, when FMR Investments announced they were about to restart mining at Eloise. The Eloise mine is capable of churning

out around 20,000tpa of copper metal from a 700,000tpa mill and processing facility fed by the 1km deep underground mine. With a 480sqkm tenement package surrounding the mine, any new discoveries could find a natural home at Eloise – whose owners Hutton describes as “aggressive mining guys”. “The remarkable thing is that our

tenements contained a host of attractive targets, many with known surface copper mineralisation and drill intercepts, and yet there had been little historic exploration – despite their proximity to an operating mine,” says Hutton. “Even the immediate Eloise mine corridor outside of the mine itself has seen very little drilling.”Breakaway owns 100 per cent of these

tenements, with the exception of a small portion of the project surrounding the previously discovered Altia silver-lead-zinc deposit which is subject to a joint venture

with BHP Billiton.The Company launched a major new

exploration push at the Eloise Exploration Project in July 2011, initially with 5,000m of Reverse Circulation drilling being undertaken at four priority targets – Surprise Ridge, Roberts Creek, Sandy Creek and Coral Reef. “We’ve hit mineralisation so far at all

Breakaway’s Cloncurry copper-gold push gathers rapid momentum

“The Cloncurry region is...one of Australia’s exploration hot-spots and we’re fortunate enough to be right at the epicentre of all this activity, with our tenements surrounding an operating copper mine which is operated by our second-biggest shareholder.”

- Breakaway MD David Hutton


four and two of the four – Sandy Creek and Surprise Ridge – demonstrate clear economic potential, so we think that’s a pretty good strike rate.”Hutton says Sandy Creek is the standout

so far, with drilling have already defined continuous copper-gold mineralisation over a 600m strike length and to a vertical depth of 120m – including intercepts like 10m @ 2.0 per cent copper, 0.47gpt gold including 3m @ 3.0 per cent copper, 0.92gpt gold and 3m @ 3.68 per cent copper and 0.57gpt gold. “The mineralisation has strong similarities

to the Eloise mine and, while it’s very early days, there seems to be potential for near-surface open pittable mineralisation and a

plunging high-grade core that may extend at depth, like Eloise.”The mineralisation at Sandy Creek

remains open along strike and down-dip, with further results expected by mid-November. Further drilling to test the prospect’s depth potential will also commence at the same time.“Subject of course to drilling success, we

believe there is good potential to generate an economic resource at Sandy Creek quite quickly because of its proximity to the Eloise Copper Mine,” says Hutton. “If we are successful, that would be a great outcome, particularly considering we only started drilling mid-year.”And there could be plenty more where

Sandy Creek has come from. High-grade polymetallic mineralisation has been intersected at Surprise Ridge which requires further testing to establish strike extent. Beyond that, a major review of the Eloise

tenement package has identified a series of mouth-watering targets such as Eloise South West and North, Fairstar, Boralis and Capricorn.And then there’s Altia. Breakaway

struck a $10 million joint venture with BHP Billiton two years ago under which the world’s largest mining company is conducting deep drilling hunting for extensions to the existing 7.5Moz silver resource. Its target is a 100Moz monster that could

potentially one day supplement its ageing Cannington silver-lead mine – where declining silver grades were reflected in lower silver production in its recent September Quarterly Report. Initial drilling last year led to a re-think of

the deposit’s geological model, and a new round of drilling was underway at press time. Success would see Breakaway retain 30 per cent ownership of a Tier One asset.But for now Breakaway is keeping its

feet firmly on the ground: “With the potential divestment of our WA nickel assets, we have the potential to really ramp up exploration in North Queensland next year and generate one or more copper-gold resources in close proximity to the Eloise mine that could be quickly developed and monetised,” says Hutton. “It’s a simple model but one that

could generate huge returns for our shareholders.”

ABOVE, BELOW, LEFT: Drilling and collecting samples at the Sandy Creek copper-

gold project in Queensland

BREAKAWAY RESOURCES SNAPSHOT


ASX: BRW

Issued shares

365.5M

Market capitalisation

$22M at 6c

2011 broker research:Patersons Securities – February 2011

Minelife – February 2011


Investors in rejuvenated resource company TNG Limited are not just back-ing the development pros-

pects of a large-scale vanadium resource; they are betting on a new processing technology which could change the global landscape for the strategic metal. When junior resource company TNG

told the market in May last year that it had jointly developed a new hydrometallurgical process for vanadium deposits with Perth metallurgical consultants METS, it barely raised a whimper on the market. TNG had maintained a relatively low

profile since 2008, when it fell victim to falling commodity prices during the GFC – forcing it to abandon a large drilling program and feasibility study on the Manbarrum Zinc Project in Western Australia.However, while exploration activity was

wound back across the board, TNG did keep a low-key work program ticking over at Mount Peake, where it had discovered a large magnetite deposit near surface, located north of Alice Springs in the Northern Territory which hosts the valuable strategic metals vanadium and titanium, as well as iron.TNG’s interest in the Mount Peake

resource was sparked not just by the large scale of the deposit (a JORC resource

recently boosted to 160Mt, plus a 500-700Mt Exploration Target), but also its proximity to key power and transport infrastructure (rail, road and gas pipeline)

which, if combined with a suitable processing route, could catapult it to the forefront of new vanadium projects globally.

And there lies the rub. Vanadium projects in Australia haven’t had a great track record, with the headlines dominated by chequered history of the Windimurra vanadium project in WA, which struggled historically with ownership changes, volatile prices and high capital and operating costs associated with its conventional pyrometallurgical processing route.

“That’s why the process we’ve developed

jointly with METS is so exciting,” says TNG’s Managing Director, Paul Burton. “It’s the first time that hydrometallurgy has been used to extract commercial grades of all three valuable metals contained within this style of deposit – vanadium, titanium and iron.“That means you get a far greater return

by being able to recover all the metals, with hydrometallurgy offering much lower capital and operating costs than conventional technologies. That’s the essence of the breakthrough.”In simplistic terms, the process uses a

combination of acid leaching, solvent extraction and chemical stripping to selectively recover the valuable metals – rather than the alternative of energy-intensive roasting.While it still remains to be commercially

proven through a pilot plant testwork program, TNG and METS have moved quickly to protect their technology, lodging an international patent application for what has been christened the TIVAN™ Process.Successful bench-scale testwork was

undertaken last year on Mount Peake drill core and approximately 1 tonne of representative diamond core samples have been extracted from drilling this year to be used in an upcoming pilot testwork process to prove the process commercially. This could create other exciting future

growth opportunities for TNG, as the process has the potential to be applied to other titanomagnetite vanadium deposits globally.If all goes to plan with the testwork,

TNG should be ready to deliver results of the current Pre-Feasibility Study in November this year. The studies are being managed by global engineering firm Sinclair Knight Mertz.This builds on a Scoping Study completed

by Snowden Mining Consultants and released earlier in the year which outlined a project capable of generating net cash flows after capital of over A$148 million a year over a 24-year mine life, based on

TNG sees growth in owning both the resource and the technology

“It’s the first time that hydrometallurgy has been used to extract commercial grades of all three valuable metals contained within this style of deposit – vanadium, titanium and iron...That means you get a far greater return...”

- TNG MD Paul Burton

Examining core at the Mount Peake vanadium deposit, NT


production starting at 2Mtpa and ramping up to 5Mtpa after three years.So impressive were these numbers that

TNG also decided to evaluate the potential for further processing of the proposed V2O5 (vanadium pentoxide) product to produce highly valuable ferro-vanadium (FeV), a downstream product which sells for 3-4 times the price.The supplementary Scoping Study for

FeV indicated that, with this expanded operation, net cash flow would jump by around 50 per cent to around A$226 million a year.These are impressive numbers for a

junior resource company with a market capitalisation of around $25 million. They could be even more impressive if you are bullish on the prospects for vanadium – a strategic metal which is primarily used as a strengthening additive in steel production and high technology metals, and the outlook for Titanium is also very positive. A key new growth area for vanadium is its

use in batteries for electric/hybrid cars and for grid-scale mass energy storage. Many analysts predict that demand will continue to grow with high prices persisting over the coming decade. At press time, vanadium pentoxide was trading at approximately US$8/lb, with ferro-vanadium trading at around US$30/lb.Not surprisingly given the scale and

potential of Mount Peake and the interest which is being generated in the TIVAN Process, TNG has been finding its way onto the radar screens of investors – and potential partners – around the world.

This culminated in August with the Company signing a strategic partnership with the leading Chinese group ECE. The deal comprises a $13.4 million cash injection at 11c a share which will give the Chinese group a 30 per cent stake, plus a $2 million short-term loan facility to underpin the pilot plant testwork program.Burton says the agreement also

encompasses technical collaboration between the groups and a potential joint venture over TNG’s copper exploration projects in the Northern Territory.

UK-based broking firm Old Park Lane was one of the first brokers to spot the emerging opportunity at TNG, putting a 27c price target on the stock in July this year. “We believe there is material upside if TNG is successful in developing the project according to current plans, and we have been highly successful in our valuation,” says Old Park Lane analyst Phil Swinfen.And with a delightful sense of British

understatement, Swinfen concludes: “We acknowledge that key news flow on metallurgical testwork or infrastructure may cause our target to be breached rapidly.”

2011 broker research:Old Park Lane Capital (UK) – 13 October (Target: 27c) Hardman & Co (UK) – 14 March

TNG LIMITED SNAPSHOT


ASX : TNG

Issued shares

285M

Market capitalisation

A$27.3m at $0.09

The Mount Peake deposit

Above: Forecast vanadium pentoxide and ferro-vanadium prices through to 2015 (source: Roskill)

Below: Forecast vanadium consump-tion through to 2015 (source: Roskill)

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Issue 2, November 2011 · 2010. 1. 1. · Issue 2 November 2011 HEAD OFFICE 34 Churchill Avenue Subiaco, Western Australia 6008 PO Box 1258, Subiaco Western Australia 6904 AUSTRALIA