Barry FitzGerald

Rio’s iron ore boss is bemoaning the community’s lack of trust in miners, saying the industry must be more “inclusive and progressive". But his words jar with its refusal to discuss its WA copper find. And Orion’s growing resource sees it shaping up as a robust base metals producer.    

A special thanks to Rio Tinto’s iron ore boss Chris Salisbury for providing a much-needed laugh for the exploration industry in what has been a tough year.

Speaking at the recent St Barbara’s Day memorial lunch put on by the WA Mining Club, the 30-year Rio veteran solemnly declared that the mining industry has a trust problem.

"In an industry that is built on the goodwill and trust of governments and communities, we need to positively engage with our neighbours and the broader community to tell our story better," he said.

He went on. “When you put all these things together, and as much as it pains me to say it, many people don't trust our industry.

"Across many parts of the population in Australia, people are not aware of the contribution we make. They think we are not giving back as much as we should, or can.

"They think we don't care about the environment, and don't know how hard we actually work to minimise our impact.

"They think – and here I have to agree with them – that we need to be a more diverse, inclusive and progressive industry."

It was hackneyed stuff from the mining leader. But why has it caused laughs around the WA exploration industry?

No prizes for guessing that many in the audience saw the ironic humour in what Salisbury was saying given Rio’s decision to say just about nothing on its Winu copper discovery in WA’s Paterson province.

The late 2017 discovery prompted Rio to go on one of the biggest pegging rushes the country has ever seen, and it is the one that is encouraging enough for Rio to seek approvals to put in an airstrip and upgrade 400km of roads to improve access to the remote location.

It is also the one where satellite imagery and photos from low-flying planes have shown Winu to be a hive of activity.

The activity in the 12 months to October 12 cost Rio $9m, according to its recently lodged Form 5 (annual operations report) with the Mines Department. The expenditure included 12 diamond holes for 6,664m and 18 RC holes for 3,270m.

So Rio clearly thinks it is on to something special. But it continues to remain coy on what it is on to, saying only that the exploration is at an early stage and that there is a “lot more work to be completed to assess the potential or otherwise in the region”.

All that is frustrating as all get out for the broader exploration industry in WA. As Rio has secured all the ground it can to protect its intellectual property on the regional significance of Winu, the industry can’t fathom why Rio doesn’t release some drilling results.

Assuming they are as special as the rumours suggest, it would be a fillip for the entire industry. But Rio has not budged, which is why Salisbury’s St Bab’s Day reference to goodwill, trust, engagement and “telling our story better” fuelled the belly laughter.

To be fair to Salisbury, he probably knows little about what the exploration boys and girls have found at Winu. And his comments were narrowly focused on the industry needing to get better at selling the message of what an important contributor it is to society.

It was an important message for sure. Still, in the absence of Rio saying anything on Winu, many at the luncheon could only but laugh.

Orion Minerals

Orion Minerals (ORN) has continued to strengthen its credentials to start being taken seriously as a near-term mid-cap base metals producer.

The market is not on board yet, as is reflected in Orion’s (ORN) 2c share price for a market cap of $40m.

The reason for that is simple enough. Orion needs to arrange the $A300-$330m in peak funding required to get its Prieska zinc-copper project in South Africa’s Northern Cape province into production.

Towards that end, Orion has just released an upgraded resource estimate and scoping study for Prieska which together point to a robust project producing 70,000-80,000t of zinc and 22,000t of copper annually.

In the context of the ASX, such scale would be a welcome addition to what it a pretty skinny list of base metals producers outside of the mining majors.

As busy as 2018 was for Orion, the new year will be even busier. A bankable feasibility study is due for completion in the second quarter.

Assuming it lands with a case as robust as that indicated in the scoping study, construction at Prieska could start in the second half of the year, with first production to follow some 28 months later.

All that assumes the grant of a mining permit in the second quarter next year as expected, and of course, the financing package.

It can be assumed that the release of the BFS will fire up the financing talks, with South African financing types no doubt taking the lead.

While base metal prices haven’t been the greatest in the back half of 2018, the expectation is that the unwinding of the US-China trade war in 2019 will see prices shake off the current nervousness to better match the clear strong underlying demand.

And despite the widespread Australian perspective that South Africa is a tough place for miners, the country’s overhaul of its mining laws has actually made the country more welcoming for juniors like Orion wanting to build new operations and create jobs.

Having said that, Prieska is not exactly a new mine. The since departed AngloVaal mined more than 47m tonnes of zinc-copper mineralisation there from 1971 to 1991.

It called it quits because it had mined the original reserve (Orion has outlined a 28.7mt mineral resource grading 3.77% zinc and 1.16% copper in the lower reaches of the underground operation), and because metal prices at the time were not supportive.

Prieska has a lot more to give. And like the previous AngloVaal operation, its second wind is set to be a rewarding one, with the scoping study estimating 43% all-in sustaining margins, and an estimated $A130m in annual after-tax free cash flow after steady state production is reached.

Those figures are based on reasonable price assumptions and go to the point that while financing for the project could be seen as a big ask for a company of Orion’s size, it should be very doable.

 

 

 

 



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