Assets for Sale

Asset disposals are in the news following the Barrick-Randgold and Newmont-Goldcorp deals. Other recent mining developments have included potential new mines in Zimbabwe and Romania, and a positive feasibility study in Mexico.

Jan 22, 2019
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Asset disposals are likely to be centre stage over the coming months. The amalgamation of Barrick Gold Corp. and Randgold Resources Ltd will see the sale of assets as the new CEO, Mark Bristow, seeks to reduce costs and improve operating efficiencies. Similarly, Newmont Mining Corp.'s US$10 billion acquisition of Goldcorp Inc. is expected to involve divestitures valued at US$1.0-1.5 billion over the next two years as the enlarged company targets a steady-state gold production of 6.0-7.0 Moz/y.

Asset disposals are also imminent from MX Gold Corp., which has signed binding agreements to sell its remaining mining assets to Cameo Cobalt Corp. The company is selling the wholly owned FortyTwo Metals Inc. (which owns the Max molybdenum mine and mill), and the Willa gold property (also in British Columbia). MX Gold is subject to a cease-trade order as it failed to file a technical report on its previously owned Magistral joint venture interest and the Max property. MX Gold said it intends to file an application to resume trading after the transaction closes.

Of more immediate interest to equipment manufacturers and service providers, Vast Resources Plc has announced plans to start production from the Heritage diamond project in Zimbabwe's Marange diamond field. The company entered into a joint venture on the property with Red Mercury Ltd in 2018, and the board intends to raise £3.0 million from share sales to secure funding for the mining operation. Additionally, Vast said it will need additional capital to develop its Baita Plai polymetallic mine in Romania.

Horizonte Minerals Plc announced last week that the Brazilian Pará State Environmental Agency had approved a construction license for its Araguaia ferronickel processing plant and associated infrastructure. A recent preliminary economic assessment for the second-stage expansion of the Araguaia mine indicated a net present value, discounted at 8%, of US$741 million.

Positive feasibility studies announced last week included one by LeaGold Mining Corp., whose Los Filos gold mine in Mexico has a net present value, discounted at 5%, of US$565 million. The study was based on a proven and probable reserve of 111.3 Mt grading 1.23 g/t Au and containing 4.5 Moz of gold. The study used a gold price of US$1,250/oz, and LeaGold expects to recover 3.3 Moz of gold over a mine life of 10 years at an all-in sustaining cost of US$795/oz. The study envisaged capital expenditures of US$180 million to develop the Bermejal underground area and build a new 4,000 t/day carbon-in-leach processing facility to complement the existing heap leach facilities.

Uranium Energy Corp. has completed an updated estimate for its Reno Creek project in Wyoming. The work was designed to consolidate resources after completion of the acquisition of the adjacent North Reno Creek property in May 2018. The company is working on a conceptual mining plan to support a revised preliminary feasibility study. Reno Creek now hosts measured and indicated resources of 32 Mt grading an average 0.041% U3O8, representing 26 Mlb of contained U3O8.

Mining services contractor Ausdrill Ltd has secured A$171 million of contracts in Western Australia. The company's recently acquired Barminco Holdings Ltd has been awarded a A$113 million, three-year contract by Regis Resources Ltd for the expansion of its open pit Rosemont gold mine to an underground operation. Barminco also secured a 14-month contract from Western Areas Ltd for rehabilitation and development work at the new Odysseus mine, part of the Cosmos nickel project. Meanwhile, Ausdrill has been awarded two exploration-drilling contracts; one from Consolidated Minerals Ltd for the Woodie Woodie manganese mine, and one from Bellevue Gold Ltd for the Bellevue gold project.

Several financings have been announced recently for mine development. Fireweed Zinc Ltd is raising up to C$5 million from a private placement, and Teck Resources Ltd. is participating to increase its stake in the company from 4.7% to 9.9%. Fireweed will use the funds for exploration and development of its Macmillan Pass zinc-lead-silver property in Canada's Yukon territory. A mid-2018 preliminary economic assessment of the Macmillan Pass project estimated a net present value of C$448 million, discounted at 8%.

Titan Mining Corp. has secured a secured-credit facility of US$18.7 million from a company controlled by its executive chairman Richard Warke. Half of the funds will be used for exploration of the Empire State zinc project in New York state. The company plans to complete an updated mineral resource estimate and development plan for the #2D zone.

Atlantic Gold Corp. is investing C$9 million in Velocity Minerals Ltd to secure a 39.2% interest. The companies will work together to advance Velocity's 70%-owned Rozino gold project in Bulgaria through a feasibility study ahead of construction and commissioning. A preliminary economic assessment of Rozino in September 2018 defined a net present value of C$129.2 million, discounted at 5%.

Announcements last week that represent early-stage business opportunities include Pacific American Coal Ltd's JORC-compliant resource estimate at its Elko coking coal project in British Columbia. The company announced that resources had increased about 18% from a 2015 estimate to 303.2 Mt, mainly due to finding three new high-quality coal seams via drilling in 2018. Pacific American has secured permits to conduct exploration and drilling this summer.

A scoping study for Pure Minerals Ltd's proposed battery materials refinery in Townsville has justified further work towards commercial development of the project. The scoping study assessed the feasibility of constructing a battery materials refinery that will process nickel-cobalt ore, sourced from third parties, to produce battery-grade nickel and cobalt sulphate. Total capex came in at US$297 million, and an annual operating cost of US$77 million.

Highland Copper Co. has secured the key permits it needs to begin construction at its Copperwood copper project in Michigan. The Michigan Department of Environmental Quality granted amendments to the company's mining permit to reflect changes to the mine plan and facilities outlined in a June 2018 updated feasibility study. Highland Copper said it is continuing work to improve project economics, including mine design, infrastructure planning and financing options. The June 2018 study gave the project a net present value, discounted at 8%, of US$116.8 million.

Lithium Power International Ltd has outlined a maiden reserve estimate at its Maricunga lithium project in Chile of 742,000 t of lithium carbonate equivalent. This will support over 20 years of production at 20,000 t/y of lithium carbonate.

GBM Resources Ltd has increased its resource estimate for the Mount Coolon gold project in Queensland, Australia, by 66% to 963,000 oz. This follows the inclusion of the JORC-compliant resource estimates for the Twin Hills gold deposits (acquired from Minjar Gold Ltd last September). The Mount Coolon deposits, including Koala, Glen Eva and Eugenia, plus the Twin Hills deposits, which includes 309 and Lone Sister, have significant exploration upside, GBM said last week.

Source: All material is taken from S&P Global Market Intelligence's Metals & Mining database.

Chris Hinde

Chief Commentator, Mining Beacon

Previously editorial director of Mining Journal, and more recently head of S&P Global Market Intelligence's metals and mining team, Chris is now Mining Beacon's editor-in-chief and lead commentator. He posts two blogs every week, one on Monday reviewing market conditions over the prior week, and a second on Thursday looking at issues on the global mining scene. There is also a quarterly blog on business opportunities in the sector.

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