The ‘Grade is King’ epitome for hard-coking coal Bathurst Resources and its Buller Project
We’ve covered many coal miners at IRJ, but we’ve had our eyes on getting to grips with this one for quite some time. Bathurst Resources Limited, of Perth, Western Australia, has a flagship hard-coking coal project in New Zealand which is, without a doubt, one of the most high quality and unique projects around today.

The company was founded around five years ago and listed on the Australian Stock Exchange in January 2008.

“[We] started with some small operations in the Appalachians in September 2008 just in time to catch the full brunt of the G.F.C. But what it clearly allowed us to do was to realise the opportunity in coal—and it goes back to the old saying ‘Grade is King’—we realised very quickly that thermal coal in the Appalachians whilst a good business model, was not going to be a company-maker in that current environment,” Hamish Bohannan, Managing Director at Bathurst recalls.

“We then started looking for projects we could put our expertise to that had high quality and good value. We were very fortunate to come across L&M’s project in New Zealand which is clearly a premium hard-coking coal.”

This project, named Buller, is a project that deserves further investigation.

The Buller attraction

When Bathurst came to looking at Buller, according to Steve O’Dea, Executive General Manager, it was “the right fit for the company in that it’s not a huge operation, but it’s too big for a miner player.”

“I think the one thing that really jumped out at us was that the infrastructure there in New Zealand is fantastic—this in on the South island located on a plateau adjacent to good road and rail and good port opportunities. To find a high quality resource in an area with excellent infrastructure today is a rare combination,” Bohannan says.

L&M acquired the permits for Buller in 2005 whilst searching for coal and calcine gas projects in New Zealand. Bathurst approached the company, which today retains a stake in the project.

“Part of the [acquisition] strategy was involving the owners and convincing them that Bathurst Resources could take this project and turn it into a real mine,” O’Dea says.

“Bathurst Resources signed the agreement at the beginning of the year and paid a deposit on the project in May, giving us exclusivity to it. Then [we] set about completing the Definitive Feasibility Study [D.F.S] on it.”

In fact, Bohannan was busy finishing up the D.F.S as we spoke, and O’Dea explains that once it is complete and the correct payments have been made, control of Buller will be transferred 100 per cent to Bathurst. “The D.F.S has gone according to plan,” Bohannan says. “The results have come through as we expected them so we’re very pleased.”

Bohannan says that through the D.F.S, Bathurst felt it important to secure the value in the hard-coking coal and at the same time allow minesite opportunities to be put in place on this plateau in New Zealand.

“One of the big things for us was that by putting a wash plant in we plan to secure the premium product and it allows us to get the coal off the plateau in a minimum impact way by providing a pipeline to the base,” he explains.

“The alternatives, of course, are trucking or conveying or aerial ropeway, but by using a pipeline it really is minimum impact and fits very well with the [product].”

Of the discrete deposits within the Buller permit, one of the most advanced is Escarpment, and Bathurst conducted the feasibility study to firstly, upgrade the geological resource to measured and indicated status, and secondly, to do the mine plan and turn it into a reserve. Once completed, this step will further mark Buller out to be a truly unique project with huge promise for future high grade production.

Buller: A standout project

If there is one aspect of Buller which both O’Dea and Bohannan cannot stress enough, it’s that the project really does live up to the old ‘grade is king’ mining industry adage.

“In this particular case we have a very high quality hard-coking coal which has some characteristics that are particularly attractive to steelmakers and coke producers globally, but primarily in Asia, China, Korea and Japan. We’ve had interest from as far away as Brazil,” O’Dea says.
“The primary assets are low-ash, low-phosphorous and high fluidity and these particular elements allow you to use small amounts of our coal, blend with lower quality coal and get a total good quality —so you can upgrade other coking-coals and soft coking-coals with this particular coal. It’s a top tier blending coal that every steelmaker wants in their arsenal so that they can sweeten up any blend that they need.”

As reports surface on Bathurst’s beginning to ‘people build’ Buller, Bohannan highlights his interest in securing local services and points out that no one will know the ground and area better than those it is home to.

“I’ve always been a firm believer in using local resources. This is New Zealand coal and it should give returns back to the New Zealand people. It’s all about returning the opportunities to the community,” he says.

“We’re not quite in the full recruitment stage, we’re really recruiting the managements team at the moment and we’re very pleased to be attracting some strong input from New Zealander’s so that’s going very well.”

In the next six months Bathurst will be working with the local community to begin actively building up its workforce for Buller, and it doesn’t look like there will be any shortage of candidates if the locale and current goings-on at the project are any indication.

“This is not a greenfields, middle-of-nowhere mine start-up,” O’Dea says. “We’re in a historic mine province where they’ve been mining coal for 150 years and as such there’s infrastructure in place.”

Infrastructure and established industry which will be more important than ever as Bathurst continues to hit its strategic goals aimed at bringing Buller into production by the fourth quarter of next year.

“The first hurdle that we’ve really just completed was establishing a JORC compliant resource. Whilst there are a lot of [drill] holes through the exploration leases drilled by the state-owned company and L&M before us, they weren’t necessarily JORC compliant so one thing we’ve very rapidly done is jump in with the drill rig,” Bohannan says.

“We’ve established a JORC resource, standing at the moment, at around 42 million tonnes. The next biggest issue was the D.F.S, and that’s all but complete, then the next hurdles are, of course, the environmental and regulatory hurdles for getting environmental consent.”

The future

The environmental approvals process was initiated by L&M in October, 2008, and Bohannan says that Bathurst has submitted its application which looks to be drawing to a conclusion in the near future.

“We look forward to starting construction before Christmas this year and start earth-moving by August next year so that we are producing coal by the end of 2011,” he adds.

Of course, Bohannan also points out quite how fortunate Bathurst feels to be able to work on Buller because ultimately, it is the high grade and existing infrastructure that will facilitate all of the different work going on at the project today.

“It is a unique opportunity —it’s exceptionally high quality, in a country with no political risk, obviously there’s also exceptionally high environmental work standards required but this is well within the domain that we’re used to operating in,” he says.

“Just having such high-quality coal within a country with great infrastructure is a great opportunity and the returns to shareholders should follow through from that.”

At a project where the grade and location alone are enough to garner great attention, then the management team and company in place are a perfect fit to bring the project online, it surely can’t get much better. Buller is one such project and Bathurst one such company, and although they are tricky success stories to come by today, when we do it’s more than worth the wait.

www.bathurstresources.com