Since its formation in 2006, Cannon Logistics has been providing Queensland businesses with a selection of safe, secure and trusted delivery services.

Cannon Logistics has found itself playing a significant role in transforming Queensland’s specialised and refrigerated transport and warehousing industries thanks to its experienced drivers and a management team with 20 years of hands-on experience within the logistics sector.

The family-owned business is located in the Port of Brisbane Corridor at Hemmant and has been in operation since April 2006.

It provides a range of transport and cold and dry storage services to shipping providers, retail supermarkets, foodservice distributors, produce growers and manufacturers.

From its Brisbane depot the company operates 12 single-trailer combinations that support an ever growing business network spread across Queensland’s coast and interior.

Cannon Logistics director Zac Popov says: “In addition, we also service the far north mining towns in Queensland such as Chinchilla, Miles, Middlemount, Bowen and Mackay, and many more towns, for customer-specific contracts up to three times per week.”

The firm has been accredited by the FoodSafe Transport programme, ensuring its customers that their deliveries are safe, secure and hygienic while in transit or storage.

“Our customers can be confident that we understand the rigorous requirements that should be observed by a quality road freight provider,” notes Popov.

“We are also accredited under Basic Fatigue Management with the National Heavy Vehicle Accreditation Scheme (NHVAS) and understand the implications of these laws on your service requirements and how they should be observed for your protection.”

“Both of these programmes are externally audited and we have always passed these audits with good results,” he adds.

Beyond the call of duty

Cannon Logistics offers daily services to a selection of cities and towns across the state, as well as many other locations by arrangement

“We are able to provide a wide range of scheduled and non-scheduled services beyond the normal capacity of the average freight provider,” remarks Popov.

“One of the capabilities valued most by our customers is our logistics consulting service,” he adds. “With around 20 years of hands-on experience in the fields of specialised and refrigerated transport and warehousing we have accumulated a wealth of knowledge of what to do and what never to do.

“We use this to benefit our customers by ensuring that they always receive the very best value for money in all the services and recommendations that we provide.

“We have built our business on total commitment and focus to our customers,” Popov notes. “We have a reputation for delivering outstanding levels of service and committed to our motto: ‘creating efficient logistics solutions’.”

Strong within Cannon Logistics’ ethos is its commitment to customer service. The company does not use subcontractors and uses its own equipment on all jobs it takes on to ensure its customers that they deal with the same driver; should any errors occur during a delivery, the firm makes sure it is rectified through its very own guarantee.

“The Cannon Guarantee is that if we do not keep a scheduled delivery or pickup, due to our management or equipment, then the next service is provided to you at a discounted rate,” explains Popov.

“Our customers enjoy the knowledge that their goods are transported with care and in the environment most suitable to their safe and undamaged arrival.”

The company’s size gives it the freedom to provide flexible service when it comes to carrying out a broad array of tasks, as well as in the monitoring and control of time-sensitive deliveries.

“Having started as a small company we appreciate the ongoing work afforded to us and look forward to being of assistance to any new customers who would like to experience our services,” says Popov.

“We pride ourselves on maintaining a close relationship with our customers and being nimble enough to meet and exceed our customer’s expectations.”

Drivers of innovation

Thanks to its innovative business approach, the company was awarded a Freight Smart Grant in 2011 from the Queensland Transport and Logistics Council worth A$50,000.

It experienced success in utilising the grant funds in a product called IceCOLD Technologies, which it installed into its refrigeration plants.

“This product is a dual-catalyst technology specifically designed to restore lost efficiency caused by oil fouling in refrigeration and air conditioning systems,” says Popov.

“Once the oil fouling is removed the refrigeration begins to work more efficiently and we have seen fuel savings upwards of 18 per cent in our refrigeration units on all static trials that we have undertaken.”

The firm has also invested the funds from the grant into a web-based bookings solution and is keeping its customers abreast with all the latest news and industry information through its online presence and monthly e-newsletters.

Operating in new segments

Due to the impact of the economic downturn on Australian industry, Cannon Logistics has looked to different markets, and is now targeting the booming mining accommodation services sector.

“We saw that this market segment may well need a specialist transport operator that could deal with sensitive freight and operate on a scheduled basis,” says Popov.

With its turnover in the range of $5 to $8 million per year, it is one the companies growing in its segment across Queensland, and is continually on the lookout for further growth opportunities.

“We are currently pursuing further warehousing of dry and cold storage freight for small to medium customers in Brisbane,” notes Popov.

“In addition, we see a future in the cross docking of freight for the smaller suppliers of retail supermarkets and the four major retail players in the market.

“This will mean investing in a larger building, but we can see this being a positive move for our business, and will help us form greater relationships with our current customers as well as our new customers,” he adds.

Cannon Logistics is targeting annual growth of between seven and 10 per cent in turnover, says Popov.

“Potentially, however, we might be able to grow by about 15 per cent per annum for the next three years if we pursue different market segments that we see as value adding to new and existing customers and our business,” he remarks.

With one eye on the needs of its customers, and the other eye on staying ahead of its competitors by embracing new technologies, Cannon Logistics is providing businesses across the Sunshine State with the type of logistical solutions that will help keep the Queensland economy ticking along.

http://cannonlogistics.com.au/

Chalice Gold Mines Ltd is speeding towards taking one of the highest grade open-pit gold plays under Australian company development into commercial production.

Fresh from getting the green light from Eritrea’s government and the 18-year mining agreement for its $131 million high grade gold project (granted November 1), Chalice Gold Mines Limited (ASX: CHN) (TSX: CXN) (“Chalice”) is forging ahead towards commencing project development in 2012.

Over this past month, the Perth-headquartered explorer has delivered a flurry of encouraging results to market, and it looks like the team armed with an outstanding high grade, open pitable project is on course to move rapidly into putting its project together while enjoying further exploration upside along the way.

The project lighting up stock forums is Chalice’s Zara gold project, run in joint venture with ENAMCO (Eritrea National Mining Corporation buying a 30 per cent participating interest and 10 per cent free-carried) in the highly prospective Arabian-Nubian Shield; a project area of 1,370 square kilometres, home to the Koka gold deposit with a JORC Indicated and Inferred Resource of 5 million tonnes at 5.3 grams per tonne gold for 840,000 ounces of contained gold, and plenty more besides.

By the year-end the mining license due to follow the recently approved agreement will be delivered. When this happens, it will be full steam ahead to funding for development modelled at producing 104,000 ounces gold for seven years, starting with 2012 project construction and a 2013 first gold pour.

It’s all about the grade

At around five grams at surface, providing highly attractive options for open pit operations, Koka’s grade takes the cake. Most of the mineralisation is within approximately 180 metres of surface, doing away with any need for a deep pit, and although its 10.4: 1 strip ratio is pretty high, it lowers to a production strip ratio of around 8:1 and all considered offers a veritable wealth of options for making it into a mine.

“It’ll be a low cost producer down at around $340 an ounce. It has simple metallurgy, which is critical, and test work indicates that recovery will be at around 95 per cent,” Chalice chief executive and managing director Doug Jones tells IRJ.

“About half of that gold will come out in a gravity circuit so you’re looking at simple processing: Crush, grind, gravity circuit recovering around half the gold, then the rest which will come out in standard CIL process. It’s a very easy project technically.”

The relative infancy of Eritrea’s mining industry presents some logistical hurdles—many of which are easily countered by the remarkable grades at Zara—and Jones says that the government appreciation for what mineral production may offer to the nation’s economy and export diversification is encouraging.

“It’s early days but we have a good relationship with the people running ENAMCO,” he says.

“A lot of African countries with growing senses of resource nationalism are after greater equity in projects. In Eritrea the bottom line is that they want 40 per cent, 10 per cent of which is free-carried—pretty typical in Africa—but they buy the remaining 30 per cent which is far better than some other countries within the continent.”

The Zara land package made up of six granted contiguous licenses (Zara 1, 2, 3 and 4, Zara North and Zara South) also warrants further interest beyond what is known about Koka. Chalice has run an active drilling programme around the deposit for the last five months, looking at various geophysical and geochemical targets as well as following up on targets identified by previous exploration.

“Koka South is shaping up to be a pretty interesting prospect. It’s got some narrow but very high grade intersections, open to the south and at depth, and it adjoins the Koka deposit to the north,” Jones explains.

“It’s really a continuation of Koka Main, but instead of being a wide 50-60 metre zone, it comes down to one or two metres with a high grade tail on the southern end.”

Chalice hopes that the continuation may redevelop further to the south and turn up another sizable ore body, but regardless, the team is confident that the mineralisation uncovered to date (let alone what may be to come) will be capable of contributing to the mine life of a future operation.

A strong second string

To date there is one mineral operation up and running in Eritrea and that’s Nevsun’s enormous polymetallic VMS Bisha mine which hit commercial output in February 2011. It’s a stellar project, Jones says, and it’s also conveniently located just 10 kilometres north of Chalice’s 550 square kilometre Mogoraib North exploration license; prospective for base metals VMS deposits within the same north-extending rocks that house Bisha.

“During the weathering process in Eritrea, you get intense sulphide oxidation during which the zinc and copper are leached out. The gold remains behind in the oxidised part of the ore body and offers great grades as a result,” Jones says.

“It’s essentially what Bisha is delivering at the moment, and that’ll produce something like one million ounces of gold over the first couple of years of production. It will subsequently become a supergene copper blanket and a sulphide zinc deposit at depth after that, and that’s what we’re looking for at Mogoraib North.”

Numerous high priority conductor targets have resulted from reviewing final data offered by Mogoraib’s airborne VTEM survey. In seeking out massive sulphides, Chalice hopes that its exploration endeavours may also lead to finding oxide gold deposits on top.

“We’re now following up on the geophysical targets with further ground geophysics and geochemistry, and we’ll probably drill there in early 2012,” Jones says.

Meanwhile, as Koka continues to spur Zara rapidly towards development, the next vital step for Chalice is that mining license due in December.

On track & top grade

With government approval, shareholder agreements and the mining agreement for Zara accounted for, Jones estimates that the mining license will arrive in around mid-December. The Chalice team has already compiled the draft and run it by the Ministry of Energy and Mines, and once the license is complete, the company will announce the appointment of the EPC contractor to kick of the project build, and focus on piecing together the necessary funding.

“We’ve been talking with various people over the last few months ranging from sovereign funds to regular banks for debt funding. At this point we’re looking at some combination of debt and equity,” Jones explains.

“We’ll decide on a ratio for that over the next month or two, but we should get all of that in place so that we can move forwards on the ground in the first quarter of next year.”

In keeping with ENAMCO’s 40 per cent holding in Zara (and the 30 per cent it will purchase) Chalice is also due to receive a cash payment totalling around $32 million in January.

The story attracting investor attention revolves around Koka’s grades, but there’s a lot of other multi-project multi-opportunity exposure on offer in this company. When the mining agreement was announced, Chalice shares stayed in the black while markets fell. When the mining license is announced within the coming weeks, the market reception will benchmark the company’s strong financial and operational setting going into a vital development year.

www.chalicegold.com

Perth-based office furniture supplier and manufacture, Access Office Industries, is playing a leading role in the charge to bring high-quality, sustainable and durable products to the Australian workplace.

Access Office Industries, a wholly-owned and -operated wholesale distributor, manufacturer and manufacturer’s representative, is providing businesses across Australia with a broad range of commercial seating and steel storage solutions.

From its base in Perth, the company also offers a range of other industry furniture lines, from library shelving to lockers and auditorium seating.

The firm began operating in September 1992, working in both the retail and wholesale sectors, before turning its focus fully onto the wholesale side of the business.

Despite gloomy economic circumstances in recent years, Access Office has managed to sustain customer demand, expanding the size of its operations and increasing its output.

“We started in a small 200 square metre shop and we moved from there to a 1,000 square metre factory with a small office and just one employee,” says finance director Kim Hamilton. “Then, about 10 years ago, we moved to where we are now based — a 2,000 square metre factory on a large 5,000 square metre plot of land.”

In February 2011, the firm relocated its office to another building in Kenwick and added another warehouse to the one already in use in the Perth suburb.

“We’ve moved from a small warehouse of 1,000 square metres to a larger one and, as we’re growing and we didn’t have enough room in the old offices for the staff that we require to meet the demands of our customers, we have now got a second premises,” Hamilton notes.

The company’s core market is in Western Australia, with customers ranging from those in the mining industry to the public sector, and through one of its specific steel filing storage product ranges it has built a network that spreads across the entire country.

“We provide library shelving on a national scale, which we supply ourselves across the country,” says business development manager Jamie Emory. “We have some people we work with in South Australia and Victoria, a few in New South Wales and Queensland, and we take on some large fit-out jobs in these states.”

Access Office also has in place a contract with the government of Western Australian for steel storage products.

“Throughout the global financial crisis, Kim and [company director] Peter Hamilton, decided that the best strategy was to continue investing in new offices and more staff,” Emory remarks. “We have retained staff and we’re looking for more to join us.”

Sustainable steel

With a positive attitude towards the way it conducts business, Access Office has built a reputation in supplying high-quality steel filing, storage and display solutions.

“Our steel storage range has always been the biggest seller that we have,” says Emory. “We’ve always sold a lot of filing cabinets, but now we’re selling a few more complex products such as tambour-door cupboards, as well as designing some other items and accessories for architects and government contracts.

“Currently we are importing more melamine furniture and expanding the size of our steel storage range,” he adds. “To do this we ended up designing some of our own products on the steel storage side of the business, which we believe suit the demands of the local market.”

Emory says that steel is great for office-based products because of its enduring qualities.

“You get a lot of life out of steel products,” says Emory. “During the GFC, part of the company’s spending strategy was to have our range certified by Good Environmental Choice Australia (GECA) as steel is more of an environmentally-friendly product that can be quite easily recycled.

“Government projects have quite a green slant to them so we had to ensure our products were certified for these,” he adds. “As a company we decided to get ourselves ISO 14001 certified for which we have recently received the documentation.”

Seating assurance

By combining innovation, cutting-edge design and quality customer service, Access Office Industries strives to go that extra step to meet its customers’ expectations.

“Access Office has always been a service-driven company,” notes Emory. “If a customer has a problem with a product we make sure we get to them and rectify it very quickly.

“Quite often, if a customer has had a product for 10 years or even 12 years, we will go and replace it or fix it free of charge.”

Access Office even has a large range of spare keys in stock in case its customers happen to misplace theirs for cabinets and cupboards.

As part of its service-driven approach, Access Office also offers niche products for unique projects, such as its line of auditorium and lecture seating.

“It is a bit of a specialty line for some of our customers, such as universities and colleges,” explains Emory.

The Eclipse range of auditorium seating, offered by the company, provides a wide range of choices for mass seating environments, designed to the highest level of fashion and usability.

Trucking times

As the company continues to grow it has made the decision to bring online a new fleet of trucks to replace its aging fleet.

“We had two aging trucks, so we purchased four new trucks and a large van, which has paid off rather well due to the fact we have taken on some large government contracts and we required more trucking space for these projects,” says Hamilton.

With its new fleet, enlarged office and warehouse space, more staff coming on board and the continuing demand for its broad range of products, it seems Access Office Industries is defying the economic climate and proving that a service-driven approach to business is the way forward within the demanding office furniture industry.

www.accessoffice.com.au

Revolutionising the water pump industry in the Australian market is Grundfos Pumps—a leading entity within a global water industry giant.

Founded in Denmark in 1945, the pumps, pumping systems and water treatment solutions specialist Grundfos has continued to expand its worldwide operations by introducing ever-more innovative and unique products to new markets across the globe.

Grundfos Pumps Pty Ltd has been operating in Australia for more than 30 years and is considered one of the more mature companies within the global Grundfos Group.

“When we established the company, we based it on an existing distributor, which we bought 70 per cent of,” says managing director Steen Holm Jensen. “We are now one of the larger companies within the Grundfos Group and we are working closely with our colleagues across the Asia Pacific region.

“We look at the various solutions and applications that grow across the region and at how we can integrate these into what we offer in the Australian market. Parallel to this, solutions developed in the Australian market are made available to the rest of the Grundfos Group,” notes Holm Jensen.

Interestingly, Grundfos Pumps Pty Ltd is one of the few Grundfos companies around the world that is not entirely owned by the Grundfos Holding Company, with Ray Pank, the original distributor of Grundfos Pumps in Australia, retaining a 30 per cent share in the Australian entity.

Grundfos Pumps works within five different market segments, including the domestic and irrigation markets, the commercial buildings sector, industry, utilities and mining.

“I am confident that through this multi-segmented market approach we will continue to grow with our many partners in the market,” notes Holm Jensen.

“In Australia, mining is perhaps the most unique segment, if you consider the size of that market,” he adds. “Therefore, we decided to look at mining as a separate market segment, and we have created a specific team dedicated to selling pumps and pumping solutions to this industry.”

Supporting sustainability

As a leader in advanced pump solutions, Grundfos has become a trendsetter within the water technology industry and is contributing to the development of global sustainability through its pioneering technologies.

The company is making products and constructing solutions that aim to help its customers save natural resources and reduce the impact of mankind on the climate; with plenty already on its plate in the Australian markets, Grundfos Pumps has found itself revolutionising many areas of the pump sector.

“Today and in the future, our focus is on energy efficiency and energy efficient solutions,” says Holm Jensen.

“This is also the case at a global level throughout the Grundfos Group.

“In Europe, Grundfos was heavily involved in the Energy using Products (EuP) Directive — an EU legislation requiring manufacturers to improve the lifecycle energy efficiency of their products, and reduce their overall environmental impact.

“It is important that similar changes to standards and legislation are made in Australia, and we will be closely following any activities that aim to have an impact on energy efficiency standards.

“Our sustainable focus is one of the key differentiators that make us stand apart from our competitors. I would say that the fact that we are a stable force that is continuing to innovate and provide new solutions, rather than a stagnant player, is a testimony to that,” he notes.

As it leads the drive towards sustainability, the company has been playing a vital role in promoting innovation within Australia’s water industry.

“As environmental standards evolve, we will be well placed to provide energy-efficient solutions to our customers. Already, there are significant savings that can be realised by our customers, such as the huge energy saving potential in upgrading or renovating pump installations in existing commercial and industrial buildings,” says Holm Jensen.

Grundfos is always on the lookout for problems to solve and one of the most common issues across the Australian continent comes in the form of water shortages.

“On the domestic side we have quite a few solutions that can handle rainwater, such as a rainwater switchover device called the PM Rain, which can switch water supply between a rainwater tank and mains water, depending on rainwater availability,” says Holm Jensen. “We have similar, but larger-scale applications, that are available for commercial and industrial buildings as well.”

Global player, local care

Globally, Grundfos has an annual production of more than 16 million pump units, and has representation in more than 55 countries.

Established in 1980, Grundfos Pumps Pty Ltd has, for the past 30 years, provided sustainable, innovative pumping solutions to customers throughout the country from its head office in South Australia and various sales offices in the major cities.

In Australia alone, the company employs more than 160 people, and today generates a turnover of A$130 million.

Written into its constitution is a corporate purpose statement that looks to manage corporate sustainability and ensures responsibility is always at the heart of its operations.

Grundfos Australia is noted for the support it provides it staff and the wide array of career opportunities it offers potential employees in manufacturing, sales, marketing, electrical and mechanical engineering, logistics, technical services and finance and administration.

The company provides members of its workforce with the opportunity to improve their professional skills and develop their business or trade-based acumen.

“We operate a training programme across the whole organisation and part of that involves local training combined with training at the Poul Due Jensen Academy in Denmark,” says Holm Jensen.

“We have recently increased the amount of e-learning and online training we offer so that our staff are able to develop skills wherever they are based.”

In 2010, Grundfos opened a new facility in Ormeau, Queensland, that specialises in water treatment projects and has the aim of becoming a hub for water treatment engineering and assembly activities in Australia, again demonstrating its commitment to social and economic concerns.

Despite the effects of the GFC, Grundfos has continued to perform well, picking up new custom across a country that has a thirst for innovation.

“We were here 30 years ago and we plan to be here for many years to come,” remarks Holm Jensen.

By interacting with its customers, suppliers and other stakeholders, this global company has demonstrated an ability to remain committed to its policy of building relationships on a local level, as it looks to energise its operations in order to meet its ambitious business targets and aims within the realm of sustainability.

www.grundfos.com.au

Exco Resources Ltd. continues to kick every goal it sets and the results speak for themselves

They said that they would do a deal with Swiss mining monolith Xstrata and sell their Cloncurry Copper Project in Northwest Queensland, and that’s just what they did, for $175 million.

They said that they would hit production at the White Dam gold mine 80 kilometres west of Broken Hill, South Australia, and they did that as well.

In fact, if well-funded, multi-project, Perth-headquartered copper and gold explorer/producer Exco Resources Ltd. (ASX: EXS) (“Exco”) says it is going to do something, you can bet that it will only be a matter of time until it does exactly that.

When the Xstrata deal hit newswires in April, later finalised in June, a flurry of articles popped up heralding the ‘New Exco’ fuelled by the tenacity and exploration success of the ‘Old Exco.’

They praised the junior’s masterminding of the Xstrata transaction and the A$220 million bank balance it resulted in; the company’s plans for future discoveries and sales in Cloncurry; how White Dam has generated over $68 million in free cash; and how its Great Australia Royalty and Mt Colin resource offer further streams of future cashflow.

Acting chief executive, Geoff Laing, says that the ‘New Exco’ is the cashed up home to proven models for royalty and sale partnering and dual focuses on exploration and acquisition. If Exco’s track record is any indication, these are all efforts worth paying attention to.

New & noteworthy

In describing the sale of the E1 and Monakoff tenements to Xstrata as “a win-win deal,” Laing explains that Exco provided the European major miner with a source of needed-ore for its Ernest Henry processing facility just eight kilometres away. In actuality, this source of ore came complete with a JORC compliant 52 million tonne resource at just over 0.75 per cent copper.

“The open pit that was feeding [Ernest Henry] has now finished and they’re transitioning to an underground operation. That underground operation will not generate the same quantity of ore as the open pit did, so they had a gap,” he says.

“What we’ve sold to them will certainly assist in filling that gap. It won’t fill it entirely, but it will go some way to assisting between what their processing capacity is and what they’ll generate from underground.”

Exco spent just over $21 million on establishing the resource and going through the project development necessary to reach the point of sale. In return the company received $175 million and generated an eight-fold return on shareholder equity, which resulted in a significant dividend for investors.

“I think shareholders don’t generally expect to get much back from junior mining companies in the way of dividends until operations have been developed, so it has been well received,” Laing says.

“We’ve sold a small tenement area which surrounds where the resources are, but we’ve retained over 3,000 square kilometres of exploration package up in Queensland and we’re focused on unlocking more value from that. The ‘New Exco’ is very much a result of having done this deal with Xstrata—and we’re now in a position where we’ve got cash and we’ve actually done the deal so a president has been set.”

Updates from Cloncurry

Building on the deal, and mindful of how resources within its retained ground might again prove interesting to the Swiss giant and other copper ore processors conveniently close by in Cloncurry, Exco’s exploration strategy now incorporates a proven model and means to sale and royalty partnering. At the company’s tenement holding, in sync with planned exploration, there are plenty of short and long term options for generating cashflow and mirroring the successes of 2011.

“In the short term we’ll certainly be looking to identify resources that may be of interest to third parties.

That would allow us to monetise those resources much earlier on in their growth phase than having to develop them ourselves,” Laing explains.

“We’ll still be exploring in Northwest Queensland, but with a different basis. We’re well-funded now, we certainly don’t need to go to the markets looking for money in the foreseeable future, and we now have a template of what’s been a very successful transaction.”

This initial focus on identifying resources worth developing begins with the central tenement area, stretching up north to Ernest Henry and down to the southern portions and an area named Canteen.

“Within that region we see great potential for resources that could be attractive to third parties.

Geographically, those potential resources would all fit within truckable distances—either up to the Xstrata facility in the north, or to the CopperChem facility at Cloncurry,” Laing explains.

“That’s not to say that if we end up identifying a major resource that is self-sustaining, we wouldn’t look at developing it ourselves.”

That’s where the 1,000 square kilometre Hazel Creek package comes in. Situated to the north, the geology in this area is different to that of Exco’s wider Cloncurry ground; more akin to the E1 tenements, capable of hosting a larger tonnage, lower grade resource.

“That area is probably too far [north] to be able to move the ore to existing processing infrastructure, so our focus up there is a longer term one: Let’s have a look at the resources where we could potentially end up developing the project on our own,” Laing explains.

Lastly, in terms of key areas for activity, is the southern portion home to a large land package where joint ventures with major shareholder Ivanhoe Australia and exploration with Xstrata are underway. In each case the Exco partners are managing the ground, leaving the junior with the time and company resources to concentrate on other projects, and Laing says that these are not the team’s sole potential cashflow generating partnerships in Queensland either.

“We also have an alliance agreement with CopperChem at the Great Australia deposit,” he adds.

“We had a small resource right near the town of Cloncurry. They built a processing facility right next to [it] and we entered into an agreement where they can mine that ore body and we get paid a royalty for the ore.”

In the short-to-medium term, the Great Australia Royalty will likely be a pivotal influence on company margins. If the full 1.7 million tonnes that the royalty applies to is mined, Exco will earn approximately $25 million, at current copper prices, over the next two-to-three years. This agreement, like those with Xstrata and Ivanhoe, are simply a case of staying abreast of developments for Exco—which is just as well, as there’s plenty more for the team to get their teeth into.

Production & upside at White Dam

White Dam, Laing says, has been nothing short of an “exceptional performer” due in no small part to Exco’s joint venture partner, Polymetals Pty Ltd (ASX:PLY) (“Polymetals”). It involves a simple process—mining the ore, loading it onto a dump and irrigating—and continues to deliver higher recoveries than previously predicted.

“Polymetals as the operator have developed the project and they’ve been fantastic,” Laing says.

“They’ve really done a great job in operating it, and certainly we attribute a lot of the success to the way that they’ve managed the project.”

The results—an average $450 ounce gold cost under today’s favourable circa ~$1,300 ounce gold prices—speak for themselves. White Dam has delivered over $68 million in free cash since the first gold pour in April, 2010, and generated more than an eight-fold return for Exco’s shareholders. However, Laing says, as the mine life draws to an end and the current pit will be exhausted by the close of 2011, both Exco and Polymetals are weighing up their options. One has been to bring in a couple of new mine resources with higher copper and higher strip ratios than the current resource, while both parties also continue exploring.

“There’s a reasonable possibility that we will process some newer mine resources, and with Polymetals we’re looking to see whether there are any other resources within the region within a transportable distance to where we’ve built all the infrastructure,” Laing says.

“We’re focused on extracting every last available viable ounce from that region, and also recognising that there are other opportunities out in the marketplace. We’ve got a parallel process of having a look at other projects that we might acquire—that’s an ongoing project following on from White Dam, if we don’t find anything on the exploration side.”

A profitable year ahead

Noting that it’s reasonable to expect Exco to make an acquisition within the coming year, given the company’s focus on running a pipeline of cash generating projects and its well-funded position, Laing also highlights the options available at the Mt Colin deposit back in Cloncurry; where the team increased the resource by 30 per cent in terms of copper inventory to 2 million tonnes at around 2.5 per cent earlier this year.

“Given where the deposit sits, the ore from it would be transportable to one of at least three, if not four processing facilities. It’s a nice high grade resource,” he says.

“We’ll be looking to deal with [it] in the short term-to-medium term while we continue with our exploration plans.”

This resource is ripe for handing over to a third party processor either through a sale or royalty agreement, while the company forges ahead with resource development and other exploration efforts in Cloncurry.

Concurrently, as part of ongoing royalty payments Exco will receive funds from the Great Australia deposit in early 2012; well-timed as the company and its partner make decisions on exploring further at White Dam and Exco eyes potential acquisitions.

“We’re having a look at what we could acquire and certainly having some cash in the bank puts us in a unique position in comparison to a lot of our peers,” Laing affirms.

“Being able to buy another project, we’re certainly going to take advantage of that. Depending on what we find around White Dam, we’ll be very focused on trying to get another project that will replace it in the next 12-18 months.”

Armed with a strong exploration plan, favourable market demand, multinational partners, advantageous funding and plenty of opportunities for worthy acquisitions, Exco is without question in a rather unique position for a junior. The ‘New Exco’ is an upgraded, cashed up version of the ‘Old Exco.’ The exploration focus and experienced technical team is still there, but the Xstrata deal, success at White Dam and various royalty and third party agreements have given this copper and gold group a seriously impressive edge. Look out for future third party transactions, exploration success, future production and that all-important acquisition—this group does it all, does it well, and does exactly what it promises to.

www.excoresources.com.au

When Aviva Corporation gets its teeth into a project, be it gold, base metals or coal, you can bet that its team will get the very best out of every undertaking

When we last spoke with Australian-listed aggressive multi-commodity explorer Aviva Corporation (ASX: AVA) (“AVIVA”) in October 2010, chief executive Lindsay Reed delivered the parting words, “Aviva is one of those attractive exploration companies that really does it all and does it all well.”

This has since proved to be quite the understatement. The past 12 months have seen resource upgrades and recently posted gold intercepts outperform expectations for its projects in West Kenya, where the team has earned a 51 per cent interest spurring swift investment in outstanding assets in under 12 months, and the project is on track for a maiden gold resource at the Kakamega Gold Camp within the first six months of 2012. Highlights from follow-up drilling at Kakamega, released November 3, are impressive. There’s also the Lake District Gold prospect, where results confirm hopes for potential for large gold systems, and the Bumbo advanced base metals deposit where in early September (within just eight months after starting drilling) the team announced a JORC Resource of 1.68 million tonnes at four per cent copper equivalent; stellar results backing AVIVA’s joint venture options to earn up to 75 per cent in the highly prospective ground (held by AVIVA and Lonmin subsidiary, AfriOre International).

“West Kenya has taken most of the focus in the last 11 months since we spoke,” Reed says.

“It’s been very productive since the agreement was formalised in August last year when the Commissioner gave his approval for the joint venture.”

In Botswana, where AVIVA is also listed, the company has a 90 per cent earning in the Mmamantswe coal project; home to an 895 million tonne JORC open cut coal reserve with a strip ratio of just 1:1. While the multitude of opportunities for future discoveries and mine development in West Kenya are priority number one, at Mmamantswe (domestic/export coal road mapping pending) it looks like the team is set to play a vital part in the nation’s future world scale sector, following the EIA report due for completion in November 2011 and presentation to the authorities early next year.

“I think that Botswana is one of the few destinations where India (the great coal demander of the next decade) can go to procure 50 million tonnes per year for 50 years,” Reed notes.

Marching into 2012, we’re going to see a lot more top results from AVIVA’s portfolio and a pressing need to pay attention to the company. Between that extensive multi-commodity West Kenyan ground holding (two continuous licenses cover 2,800 square kilometres of the highly prospective Ndori Greenstone belt) and the existing resource and desirable development potential offered by Mmamantswe, the attraction, put bluntly, is a no brainer.

Top rocks in West Kenya

Back in November last year, AVIVA commenced resource drilling at Bumbo by targeting 1.2 million tonnes.

When the project prospective for base metals, zinc, gold and silver delivered its 1.86 million tonnes initial inferred JORC it was a superb result for AVIVA. The team has targeted gold mineralisation around the resource as well, where drilling is ongoing.

“That was part of the reason why we reached our 51 per cent expenditure milestone so quickly,” Reed says.

“We pledged to spend $3 million over three years [as per the joint venture agreement] and given that Bumbo came up better than expected, we drilled more holes than originally anticipated. The good results at Kakamega meant that we’ve drilled more holes there as well.”

The setting at Kakamega begs belief; a 20 kilometre gold trend with heaps of artisanal workings where, before AVIVA arrived in 2010, just a few holes had been drilled throughout the whole license since the 1950s gold rush subsided. AVIVA has worked systematically through Kakamega’s prospects. The ground team began at Dhahabu where the few previous holes were drilled, then works moved eight kilometres east to Kimingini delivering highlights including 9.00 metres at 12.71 grams per tonne gold from 139 metres (announced November 2011). The team then moved another eight kilometres along trend to Bushiangala (gaining intercepts of 7.00 metres at 8.29 grams per tonne gold from 98 metres) and on to numerous other prospects.

“We were hoping to find large gold systems down in the western end, and the Kakamega area has been a lot more productive than we anticipated. It’s been a great win for us and we’re very happy to keep going there,” Reed says.

At the time of interview, AVIVA had released assay results from 21 of the 88 holes drilled and counting. The weeks leading into the coming year promise to deliver more encouraging assays for both Bumbo and Kakamega, and based on the information provided to date, incoming releases look promising. There’s also Lake District Gold; home to large gold in soil anomalies within which drilling at AVIVA’s Masumbi prospect have all delivered intercepted broad gold mineralisation.

“Like our other projects down there, it’s a work in progress and we still think it has potential for big systems similar to those in Tanzania, but it isn’t as obvious in terms of where to go as Kakamega is. We’re doing a lot of work with ground geophysics, auger rigs, soil sampling to build up targets,” Reed explains.

“We still think that it looks pretty attractive down there. We’ll be sitting down early next year to reappraise all of the results we’ve got from Kakamega and the Lake Zone to decide where to focus our attention and money over the coming 18 months.”

It is clear why AVIVA has earned into 51 per cent of its West Kenyan joint venture so quickly. In ascending to 75 per cent interest, the miner explorer needs to complete a pre-feasibility study (PFS) demonstrating a pre-tax NPV of US$50M, and after reappraising the many results (and abundance of project options) to move forward with, Reed says, the joint venture partners will begin formulating plans about how this will take shape.

Building Botswana’s coal sector

Home to world-scale coal resources, Botswana’s coal road map currently under creation is a matter of interest to many. That includes AVIVA, as it sits on Mmamantswe’s 200 million tonnes export coal and 150 million tonnes domestic coal, where the team plans a 10 million tonne per annum project.

“[The] coal map review underway is what’s really important in Botswana at the moment. About four weeks ago the government announced that they will be extending the time to complete the review, and have a moratorium on issuing new coal licenses during that time,” Reed explains.

“It was originally meant to be lifted in October, but while the review is underway it’s not likely to be lifted until early next year. We’re very supportive of that position.”

Reed stresses that Botswana’s coal sector needs to be developed in a way that underpins a long-term sustainable industry both domestically and in exportation. Like any other advanced explorer/developer in the country, AVIVA’s project outcomes depend on future investments in export rail and domestic power infrastructure.

“A railway line would require 50 million tonnes a year to get up and running, and as such you need to make sure that there’s a suitably credit worthy sector, funded and with robust develop plans,” Reed says.

“Simultaneously you want to make sure not to flood the domestic market just to make the export market, because the domestic market is limited. While we continue with our EIA—which is largely designed around meeting those market ratios—we hope that in the months to come we can play a small but integral part in the nation’s coal sector.”

In earning 90 per cent in Mmamantswe, where there’s still scope to add incrementally to the resource, AVIVA will complete a feasibility study. To date the company and its project partners are awaiting news on infrastructural funding to come before committing to carrying this out, and in the interim remain wholly supportive of Botswana’s efforts to forge a diverse and sustainable sector.

Multiple mine options in 2012

As the West Kenya projects continue to deliver, Reed and the AVIVA team are spoilt for choice.

“The focus for the first half of next year is to get a gold resource out,” he says.

“It might be at Kakamega, the Lake Zone, or both.”

At Bumbo the team will carry out a scoping study, post metallurgical results to market, and seek out opportunities for resource extension via Bumbo itself and the surrounding area.

“The two important aspects of the scoping study will be what the economics are for this project and whether it needs to be bigger,” Reed says.

“And if it does need to be bigger, can we extend it or do we need another deposit. That will give us the metrics for targeting the regional exploration for everything else going on there in base metals.”

AVIVA has two stories under one roof, each exciting in its own right. The West Kenyan developments look likely to propel the team towards resource upgrades, increased ownership and mine development, and Mmamantswe is really just a question of timing. Reed’s statement about doing it all and doing it all well rings true across the team’s gold, base metals and coal activity—and it looks like this highly capable team are in for another year of solid growth and strong performance in 2012.

www.avivacorp.com.au

No matter how big or small the load, Perth’s award winning transport and distribution firm Goldstar Transport will be able to get it from A to B.

Starting with just one truck back in 2001, Goldstar Transport has grown into one of Western Australia’s leading names within the transport and distribution industry.

With more than 80 members of staff on its books and an annual turnover in excess of A$18 million, the firm has found itself playing a driving role in developing the transportation sector across the Wildflower State.

“The main message we have always sent out has been to do each job as safely as it can be done and, following on from that, it’s all about delivering exceptional customer service,” says managing director Sean Carren.

Carren, who has more than 15 years’ experience within transport and distribution, says that the industry across Australia has changed for the better since Goldstar’s formation.

“The industry has become more professional and we have adapted to that by employing good people,” he remarks. “We work in a people business and that is what it is all about.”

Having started life as an owner-driver operation more than a decade ago, Goldstar has grown tremendously and now operates more than 130 pieces of equipment across Western Australia.

Despite operating within a busy marketplace, Carren believes that Goldstar’s focus on the needs of its customers is what sets it apart from its competitors.

“Our speciality is customer service,” he says. “We do what the customer requires and every day our people work out what it is that our customers need; they even try and bring to them the solutions before they know they need them.”

The company offers its customers 24-hour-a-day, seven-days-a-week transport solutions, which have been customised to meet the demands of local, intrastate and interstate heavy haulage and oversize freight.

With such detail put into the design of its customer service mandate, Goldstar has become a trusted partner to many and has excelled by providing a successful urgent delivery service.

Can do, will do

Goldstar caters to the needs of a broad range of industries ranging from construction to the food and beverage sector.

The family-owned business has always had ‘can do attitude’, which has helped it become one of the leading integrated logistics providers based in Western Australia’s transport operational hub in Perth’s Kewdale-Welshpool area.

It has adopted best business practices and ensures it carries out regular benchmarking across the company to meet the demands of its customers.

Goldstar is fully accredited by Main Roads Western Australia, a government agency responsible for the state’s roads and highways, and is today led by a management team with more than 60 years of combined experience.

All of the company’s drivers have been trained to a high standard and ensure that their conduct matches the professional manner its customers expect.

In finding the best possible staff to run its fleet and its office-based operations, Goldstar has worked with recruitment firms such as Skillforce Recruitment, which specialises in filling a broad range of blue collar and white collar roles across a range of industries.

Vehicle vitality

By remaining flexible in its approach towards business, Goldstar has managed to avoid the negative impacts of a global economic crisis, which have caused havoc across many markets.

Carren says the company was able to avert any economic damage by “not putting all our eggs in one basket” and by “staying in front of the pack”.

Having overcome these difficulties, Goldstar has put into place a plan to continue building on its past successes.

“We will continue to build our solid foundation on two pillars—to do good business with good people and to be an employer of choice,” remarks Carren.

“We will capitalise on the current mining expansion in the north-west of Western Australia as well as expanding into the state’s south-west region.”

The company’s ambition and foresight has even led to it becoming the first Australian operator to integrate the new Freighter Autohold model into its fleet, and in 2011 it won a Coca-Cola Amatil Supplier of the Year Award in the transport and logistics section.

Fleet of fancy

Goldstar’s fleet consists of a broad collection of modern heavy haulage vehicles that enable it to transport a huge array of items.

Its fleet includes tautliners and flattops, low loaders and drop decks, oversize loads and extendables, and various road-train combinations.

Recently, the firm has invested heavily in technology and has continued to roll out systems that provide it with the ability to identify targets based on key performance indicators.

As well as providing a wide range of distribution solutions for a wide range of businesses, Goldstar offers its customers a place to store their goods in its dedicated warehouse. The safe and secure facility features electronic inventory controls that enable customers to check on the status of their stored goods.

Customers can store items of any quantity, with both long- or short-term options available, and Goldstar offers a collection service for stored goods.

The company even goes that extra mile by providing a logistical route planning service, which can include going to a customer’s site to discuss their movement requirements.

By remaining committed to the needs of its customers and maintaining the quality of service it has become known for, Goldstar Transport will continue ahead of the pack in Perth’s hectic haulage herd.

www.goldstartransport.com.au

Nuala Gallagher speaks exclusively with Andrew Forrest, founder of Fortescue Metals Group
­­­—the new force in iron ore

In June, AuBJ met with Andrew ‘Twiggy’ Forrest to mark his transition from chief executive of Fortescue Metals Group (ASX: FMG) (“FMG”) to non-executive chairman.

We knew that the Pilbara-focused iron ore producer/world major seaborne trader which Forrest founded and grew into a $20 billion company in just eight years was an astounding story, but despite that, he assured us that the best was yet to come. Some six months later it looks like his plans (or “remarks laced with optimism” as he calls them) have been spot on. FMG has embarked on the biggest single phase project expansion in Australian iron ore history. It has upped its flagship project by 200 per cent from 55 million tonnes to 155 million tonnes.

“Since that interview we’ve made massive discoveries which continue to show the benefit of our huge landholding in the Pilbara,” Forrest confirms.

“Holding that project on track leads me to believe that my comments made last time hold absolutely true.”

FMG’s September quarterly report offers more encouraging updates. The team shipped 12.36 million tonnes of iron ore for the quarter (a 21 per cent increase to last year’s corresponding timeframe) while production costs dropped by 6.5 per cent on the previous quarter. This has now lifted to over five million tonnes per month, well exceeding analyst expectations. It’s no wonder that they now predict company plans to triple output within the next two-to-three years are a wholly attainable feat, and as the masses continue to second guess both Forrest and FMG’s next moves, AuBJ caught up with the man himself to hear more about what we’re really in for.

(Nuala Gallagher “NG”) NG: Ramping up to your outlined production goals looks like a monumental task, even by FMG’s standards. Before we try to comprehend where you’re heading, let’s recap where 2011 has taken the company.

(Andrew Forrest “AF”) AF: We have completed the financing of the project and we’re now well advanced in the execution of the expansion where we expect to have it fully finished and ramped up well within the next two years—around 18 months. If not quicker, it’s a very exciting time. It’ll bring on one of the world’s largest iron ore producers and we’re in great shape.

The highlights for me are really three-fold: Firstly, achieving the 55 million tonnes per annum runrate which as you can see is now closing on or at 60 million tonnes per annum. Secondly, our massive new discoveries are in the world’s best iron ore region, the Pilbara. We’re at around 12 billion tonnes of resources now, yet we aren’t heading off to far flung risky corners of the world. We’re finding billions of tonnes under the nose of the world’s most modern, stable and advanced iron ore logistics—rail, port and community infrastructure. The third thing I’m thrilled about as we close off the year is that the expansion from 55 million tonnes to 155 million tonnes is proceeding on schedule, on budget and going exactly according to plan. These huge projects never go absolutely smoothly, of course, however we are on track because we have excellent management that embraces challenges and looks for inherent opportunities.

NG: The rumour mill seems like it’s grinding into action for 2012. How about possible partnering between FMG and other groups to develop the Anketell Point port?

AF: We welcome any port logistics solution which can expedite that port. In any event once all planning and board reviews are completed, Fortescue will be in a position to proceed at full speed with its own development. I think that of all the entrepreneurial companies around the world, nobody can complete a new port in Australia faster and more efficiently than Fortescue. If people want to add to that value, we’ll be more than delighted to hear from them.

NG: Winning the right to High Court appeal against the Pilbara’s monopolistic logistical access gripes looks like another 2011 triumph set to get a lot of newsflow in the coming year.

AF: A case this big was always going to wind up in High Court. Everything up to this point has called for that and a disciplined way of gathering evidence. I think that having gone through various steps and gathered the necessary evidence, we’re now looking forward to being able to present this case and await a final un-appealable verdict in the High Court.

NG: Then there’s the mining tax, and the clock is ticking towards the implementation date (July 1 2012). I read that a bunch of executives, including yourself, have repeatedly asked that the Australian government make public the assumptions on which they founded the proposed legislation now handed over to government. Are we going to see that take place any time soon?

AF: The tax was negotiated by three of the world’s largest players in order to drive the best outcome for their shareholders. Is it then a tax that applies fairly across the industry? Until Government publish their assumptions, we aren’t going to know if what the three multinationals signed was fair. Our public, transparent and open assumptions, show quite clearly that companies like Fortescue and bigger will pay very little tax in the short-to-medium term, and smaller companies will pay a great deal of this new mining tax. I believe that it’s the first time—certainly in the history of the Western world—that we’ve seen taxation policy that rewards the rich on the basis of their size, and penalises smaller companies on the basis of theirs. It runs counter to the Labour philosophy. It’s a type of Hood Robin tax. Tax the poor to help the rich.

NG: When we last spoke, you said you believe that the most reliable commentator on Chinese demand is China. Since July we’ve seen some more volatile times for the iron ore markets and plenty of speculation about Asian demand as nations work through their stockpiles. Perhaps you can comment on recent market fragility and what is up ahead?

AF: Since we last spoke we’ve had a quarter where China’s growth “collapsed” to 9.1 per cent. I say collapsed because commentators point to it with ridiculous concern, but anywhere else in the world if you had 9.1 per cent annualised growth you’d be toasting your economy with champagne. I think it’s a spectacular growth rate at a time when European economies are at best uncertain. The U.S. is beginning to grow again and China is growing in excess of nine per cent, and that means their underlying economic strength is unquestionable. While there’s always going to be supply-demand imbalances and therefore volatility, the trend is all we should be looking for and with China that means an increasing reliance on seaborne iron ore.

NG: Your comments at the Commonwealth Business Forum about the global psychological approach to Chinese demand and turbulence in the U.S. and Eurozone were interesting. I understand you feel that we ought to be more focused on Asian demand and demand drivers, and less on the current tales of woe we see so much of.

AF: Quite right. There’s much ado about nothing with Greece. If they default or leave the European Union, just get on with it. To have the world’s financial sectors so incredibly focused on what is happening in Greece—such a small global player—is nothing short of extraordinary. The world seems to be seeking out bad news, in terms of its psychology as opposed to looking at the phenomenon taking place across Asia where this part of the world is re-establishing itself as the economic powerhouse it once was. India cops much criticism in the press as well, yet it has domestic consumption potential [that is] the envy of the western world. That’s the macro bottom line. We read these bad news items in the press all of the time, but we forget that these other massive economies are growing. That’s where most of the world’s people are. The world ticked over seven billion people in the past few days, and most of those people are in Asia. That’s where the global growth is occurring, not where the headlines are.

In Copenhagen recently, we’ve witnessed the new elective on a platform of higher welfare and higher taxes. To me, that’s the beginning of the end; where you cease to encourage investment in your economy by signalling broader taxes and also seek to discourage productivity by signalling higher welfare. A new Government that appears bent on providing a greater reward for not being part of a productive workforce, are seriously discouraging the economy in order to win short-term thinking and short-term votes. That’s something which I would say suggests that Europe will unfortunately have to get worse before it gets better, until it starts to reward productivity and hard work. It’s interesting to consider that Europe formerly led the world. Let’s hope the rest of the world doesn’t follow Europe, or the Romans, but take an example of the reward for effort of the developing economies.

NG: How about your new role and your plans to focus more on your philanthropic involvements? Last time you spoke about balancing your dual roles in good causes and FMG.

AF: Proportionately, I’d say around 75 per cent is philanthropic and around 25 per cent is Fortescue, and I think that’s about right. The reason why I became a non-exec chairman is to pursue these other major objectives. I remain the number one ticket holder of the Fortescue fan club.

NG: In July 2011, you said that the future was bright for FMG. The interim months have certainly been successful. Are you prepared to reiterate that outlook for 2012?

AF: We did remark, remarks laced with proper optimism of course, that the future has never looked brighter.

Since that time we’ve made huge discoveries. We’ve completed the financing of the project and we are advancing towards the biggest single expansion in Australia’s iron ore history, while our operations continue to regularly beat their own records. Yet taking an operation up not by 100 per cent, but by 200 per cent in one hit is no small feat yet the team is achieving that smoothly. On completion we will have gone from 55 million tonnes, which is already enormous, to 155 million tonnes. Having that project on track as we come onto the home straight still leads me to believe that my comments made last time hold absolutely true.

AUBJ thanks Forrest and Fortescue Metals Group for their time and assistance in this article and wishes them the best for 2012.

For more information please visit
www.fmgl.com.au
To support GenerationOne and aid in the end to indigenous disadvantage in Australia please visit generationone.org.au

Home to proven gas reserves of 15 trillion cubic feet (tcf), estimated gas of more than 22.5 trillion cubic feet, a government vocal in its plans for developing its hydrocarbons and newly constructed mega LNG facilities confirming the interest of major multinationals, it’s fair to say that Papua New Guinea houses unrivalled, uncapped potential as a new oil and gas frontier.

Opportunities for explorers to open up brand new basins and form elephantine targets on route are rarer than good news from the Eurozone—but with its 16,700 square kilometre 100-per cent owned tenement spanning the onshore and offshore Papuan Fold Belt, and a focus on getting ground drill ready by the end of 2012, Larus Energy Ltd. appears to have bagged just that.

Formed in 2009 specifically to tackle the PNG ground (PPL326), New South Wales-headquartered Larus continues to identify and to advance prospects and leads across the project. Not only is the company armed with the largest, most diverse grantable tenement PNG offers, shaped specifically to cover its frontal thrust; it has a knack for gathering vital existing, historical, unseen and new data at little cost, building a clear picture of the basin for the very first time.

“In actual fact, we think that the entire tenement is going to be prospective,” managing director David Williams says.

“While the sweet spot is the middle, certainly what we’ve seen from our recent seismic is that the western part is also going to be prospective—and while we haven’t done an awful lot of work on the eastern part, there are a couple of leads there already as well.”

Add in Larus’ other frontier project—three wholly-owned blocks totalling 8,300 square kilometres offshore in Australia’s prolific Gippsland Basin—and it’s clear to see what Williams and the team are about: Revisiting highly prospective ground, dismissed years ago through lacking timing, funds or data, and redeveloping both industry interest and mass discovery opportunities along the way.

Picturing PNG

Presenting at The Oil Council’s World Assembly in London, November 17, Williams spoke about Larus’ early interpretation of some 1,000 kilometres of 2D seismic recently completed for the deepwater part of the PNG tenement; a program of work intended to move a world-class anticline exploration target known as the Sunday strong lead into prospect status, and to further inspect two encouraging leads nearby named Rodney and Grange.

“Not only did it take Sunday to prospect status; it also demonstrated that it is at least the size we have previously indicated—about 13 Tcf of gas in place and 148 million barrels of recoverable condensate in place,” Williams says.

“It also demonstrated that the Rodney and Grange leads stand up, moving them to strong lead status, and it revealed a couple of other leads in and around the Sunday prospect. All of those are coming up at around that similar elephant size of Sunday, and it also threw up a string of smaller leads. In aggregate, when you look at all of the leads and prospects that we have seismic over in that part, it aggregates to about 60 Tcf and about 850 million barrels unrisked in place.”

This is the latest addition in a long line of data that Larus has assembled for PPL326, much of which has barely been seen and never compiled and analysed this comprehensively before. Starting with data acquired by the German BGR in 1981, known as the “1981 Sonne data,” then adding the seismic data in and around PPL 326 from Fugro’s 2006-2007 Fugro-Searcher Lahara 2D seismic survey, and the Baramata 2D seismic data acquired by Larus in August, 2011, the explorer has gone to great lengths to piece together vintage data before adding its own ongoing investigations.

The 3,200 kilometres of Sonne data done as a research exercise (and thus never submitted to the Government of PNG) was largely believed to be lost.

“Some people had small parts of it in a rough form only,” Williams explains.

“Our exploration manager knew about it—he had been on the vessel immediately prior to it going off to acquire the data—and after about 18 months he tracked it down and delivered it to us for no charge. It saved us a lot of time and confirmed what we believed had been going on in the area from a geological perspective.”

Fugro’s data, shot on a speculative basis, was inadvertently left unseen by explorers, leaving the basin ripe for discovery today. Upon conduction, Fugro came to an agreement with the Government of PNG whereby buying relevant parts of the data became a bid lodging condition when the authorities performed the 2007 acreage release.

“Given that people would have to pay rather a lot up front before they even knew about the prospectivity of the block—to make a bid beforehand—nobody decided to bid, no one purchased the data and no one looked at it,” Williams says.

“We’ve purchased that data for inside and just outside the tenement, and aside from Fugro as surveyors and processors, no one’s looked at it and it’s again added to our arsenal of information on a semi-regional basis.”

The more recent Baramata 2D seismic tops it all off and marks Larus’ first targeted seismic acquisition for the area. The agglomeration of works, Williams says, delivers a very clear picture of what has taken place and why the area is as prospective as the company believes it to be. The Baramata 2D has taken Larus from a couple of leads within PPL326 right up to 28-30 leads and prospects and led the team down to the eastern part of the ground where it was conducted, revealing a second line of anticline just as the company predicted.

“We expected that it would behave similarly to the highlands, and now that we know it is doing that, we expect several lines of anticlines stacked up behind that major frontal thrust,” Williams explains.

“Also, a little bit surprisingly for us, it threw up a number of shallower leads. Some of them are quite a reasonable size—certainly in the Tcf size—which offers us a number of shallower targets to pursue in addition to the deeper big elephants like Sunday, Rodney and Grange.”

All data considered, it’s no surprise that when asked about Larus’ knack to purloin vital information for free, Williams admits that the matter “has come up before.” What’s more, over in the stretch of PPL326 within the Torres Basin, 10 reported oil seeps and previous government analysis has confirmed that an active hydrocarbon system exists; supporting Larus’ belief that the entire tenement is prospective.

Location, logistics & “luck”

While Larus has got in at the opportune time and picked up a vast tenement that continues to deliver promising indications of elephant-sized commercially extractable hydrocarbons, it is not alone when it comes to a burgeoning industry lean towards PNG. Most notably, multinationals ExxonMobil and Oil Search have forged ahead with their 6.6 million tonne per annum (mtpa) integrated LNG project; the first avenue of commercialisation for PNG’s gas, and come 2014, the first route to market. Larus’ own ground is conveniently located to this project and to InterOil’s existing Napa Napa refinery, not to mention other major oil companies already active within the north-western Papuan Fold such as Santos, Sasol and Talisman. Williams says that the progress made by Exxon and partners confirms international interest, and ticks an essential box against PNG as a destination for large scale project construction.

“While PNG has had known gas for a long time, in previous years they haven’t been able to commercialise it. Yes, they’ve been able to lift gas and strip the condensate out and export that out; but it hasn’t had a means to sell gas domestically,” he affirms.

“It’s very handy for South East Asia and the Asian markets, and now it’s firmly holding the attention of the majors as a positive place to do business. Also, government investment in the PNG LNG facility demonstrates their commitment to get oil and gas reserves commercialised.”

As each of these developments fuel Larus’ own plans for getting PPL326 farmout ready in approximately one year from now, this interest also sheds light on why the company has elected to progress the project to such an extent.

Next up are the works for 2012, Williams says, which include a transition zone and shallow water seismic programme in January/February and an onshore seismic programme booked for the dry season commencing in April. The expectation is that these activities planned will reveal further prospects and leads within the shallow water area and the onshore, and streams of anticline like in the highlands region.

“In reality we could probably farmout the deepwater section now, but we don’t think that would be optimal all-round in the long run. We’re going to learn as much as we can about the likely prospects in the major part of the tenement first,” Williams explains.

“Apart from the fact that the inventory of leads and prospects is going to become enormous, we have to keep pinching ourselves because we have it all 100 per cent.”

During the tail-end of the coming year once the further seismic has been run, Larus will drill some onshore exploration wells—the first hard data to tie into the seismic—and deliver an ever clearer picture of quite how enormous the prospects uncovered are, offering would-be-farmin parties favourable perspective on how to move ahead with development.

Every existing nook and cranny of data has been gathered, rigorously analysed and continually added to.

Each area inspected delivers leads and prospects that only get better with greater detail. And with multinational interest, government support and highly desirable market proximity, what is now a frontier play won’t stay untapped for long. Staunchly committed to seeking out opportunities for multiple discovery, economically robust project development and commercially savvy passage towards production, Larus has itself a gigantic and diverse project in a prime global location for hydrocarbons. But perhaps more tellingly, it has handled this highly prospective land package with technical finesse and capability rarely displayed by a modest-sized explorer, now garnering plenty of overdue attention.

www.larusenergy.com.au

While these are grimy times for the financial markets, oil and gas onlookers had cause for celebration when tenacious Australian conventional/unconventional onshore frontier oil and gas explorer Central Petroleum (ASX: CTP) (“CTP”) announced further oil shows at its Surprise-1 well in the Amadeus Basin in November.

The company, in possession of a 270,000 square kilometres package of acreage in central Australia’s Pedirka, Amadeus, Southern Georgina and Lander Trough Basins in the Northern Territory, South Australia, Western Australia and Queensland, has been quietly posting encouraging results from the Surprise well since late-2010.

When the team announced plans to carry out horizontal drilling at the well—the first time the practise will take place the Company’s central Australian acreage—the news bolstered market interest in the company.

And when it imminently lists on Canada’s Toronto Ventures Stock Exchange (TSX.V) and progresses plans for both a 2012 farmout on its vast landholding and securing a worthy partner on either/or of its oil and gas and coal ground packages, we’re going to hear plenty more.

“This company has possibly made an oil discovery at Surprise-1 and we think that it may be the first commercial scale well that we’ve drilled,” managing director John Heugh says.

“We are developing our knowledge of central Australia to such an extent that there’s an increasing flow of majors and mid-caps beating a path to our door, looking for information, but we don’t want to do a deal for doing a deal’s sake.”

Ongoing market turbulence, Eurozone upsets and working to get the right kit to drill has not deterred CTP.

The short-term focus remains to be on oil discovery and production offering early cashflow. Medium-term interests are gas into mini LNG (liquefied natural gas) for the transport industry, condensates and helium. And these interests—coupled by longer-term sights set on natural gas into GTL (gas-to-liquids), LNG, and piping gas to the Australian eastern coast domestic market—suggest that unlike various other juniors who have sold acreage for next to nothing under financial pressures, when Central Petroleum signs the dotted line, we’re going to see a deal well worth doing.

Pleasant ‘Surprises’ & U.S. interest

For the team in charge of Australia’s biggest exploration spread, like many another junior and mid-cap operating in the nation, 2011 has been tough. However, turning attentions to North America—where the company has been received from New York to Toronto—the decision was made to aim for a TSX.V listing in February, 2012. In July, CTP announced that two of Canada’s leading investment banks have been brought in to manage the listing, CanaccordGenuity and Cormark Securities; well-timed given that ensuing interest in partnering on CTP’s oil and gas ground has stemmed largely from North America.

“The listing on the TSX.V will give us access to a pool of capital that nominally is about five times bigger than that which we can access through the resource sector as a junior company on the Australian Stock Exchange,” Heugh explains.

“The Canadians in particular understand frontier onshore basin plays and they’re very enthusiastic about them. They’re real pioneers and once they have a good story, they tend to market it through North America.”

Recent successes will make it an easily marketable tale to tell, especially when it comes to the Surprise well where the oil shows encountered stemmed from drilling that hit a depth of 2,599 metres. Heugh says that following electric log analysis, the well may host a 17 metre hydrocarbon column, including one section with very high permeabilities up to 420 Millidarcys.

“We aim to case the oil zone off with seven inch casing now that we have run electric logs. There are another five deeper targets below that 2,732 metre casing shoe—five very promising targets indicated by seismic—and the top of a salt zone that we want to drill into at 3,450 metres,” he says.

“We will make decisions about drilling ahead deeper after we have drilled a horizontal wellbore out to about 700 metres from the existing wellbore within the interpreted 17 metres of gross oil column that shows some promise of producibility.”

CTP’s plans to carry out horizontal drilling speak volumes about the team approach at Surprise. While a first in terms of activity in central Australia, horizontal drilling is well known in North America and recent team additions reflect the company’s preparation for this—in place of previous ideas about drilling a sidetrack section ahead of going about vertical completion and production.

Petroleum engineer Dalton Hallgren has been brought in as Chief Operating Officer for CTP’s drilling, and brings in bountiful experience in major shale gas and shale oil plays across the Marcellus, Bakken, Haynesville and Barnett provinces in the U.S. And new exploration manager, Trevor Shortt, has worked everywhere from Australia’s Cooper Basin to the Bakken and the Timor Sea.

Describing the works carried out since December 2010—including full analysis of 25 core plugs from a nine metre core which reveal that the zone may flow at between 500 to 1,000 barrels per day (bpd) depending on the pumping system used—Heugh says that by running horizontal wells off the main well bore, CTP may as much as quadruple potential production.

These plans reveal why CTP has strategically refrained from embarking on a deal commonly seen by juniors in possession of such plentiful and prospective ground at this juncture, and Heugh explains that the attention mounting around the group’s progress is a fundamental part of readying for the right opportunity.

“Unfortunately, a number of junior companies have sold out too cheaply—farmed out vast amounts of exploration acreage for a song at between $12 to $30 an acre which is practically zero—and that’s not what we want to do,” he says.

“We want a deal that values our land, at least initially in smaller increments, at more like $300-$500 per acre.”

And it isn’t only CTP’s oil and gas haul that’s garnering international interest.

Secondary goals for CTP coal

In the Pedirka basin, home to CTP’s coal acreage, market mutterings have taken place since mining multinational Rio Tinto made mining lease applications close by in May, 2010. Previous independent estimates have given JORC exploration target category guidelines in the region of plus-300 billion tonnes above 1,000 metres for CTP’s tenements, and Heugh says that the goal is now to prove by drilling that the company has extensive shallow coal that may be amenable to open cut mining.

“We’ve also done a deal with a local Australian group, Allied Resource Partners, whom in order to earn a small percentage interest in the project have agreed to find funding and technical partners for a 60,000 barrel per day UCG-GTL plant based upon some of the deeper coal in the basin,” Heugh says.

Announced in June, 2011, the US$7.5 billion partnership with Allied Resource Partners Pty Ltd. (“ARP”) was praised by Mining Minister Tom Koutsantonis. Heugh says that with regards to CTP’s designs on possible GTL and UCG (underground coal gasification) projects, there’s clear merit in the company retaining a sizeable interest while allowing a mining specialist group to manage and execute the project—possibly monetised by debt funding after the completion of a bankable feasibility study (BFS).

“We’re looking at UCG-GTL, CTL, coal mining beneficiation and export, and we’re also looking at groups that want to do UCG into fertiliser and ammonium nitrate explosives production from the coal measures,” he explains.

“The coal is shaping up to be a very important resource for us, but because our expertise lies largely in conventional and unconventional hydrocarbons, we want to focus on that and leave coal monetisation and operatorship to other incoming partners.”

Interests in monetising this project stem largely from Asia; and it’s no wonder, as China looks to increase its thermal coal imports from 130 million tonnes per year last year to around 200 million tonnes by 2015, and India—currently importing around 50 million tonnes per annum of steaming coal—needs to increase its imports to 200 million tonnes per annum of steaming coal to keep up with demand.

“Both countries seem to care less about making a profit from coal mining operations, than they care about simply getting the required supplies. That makes our coal perhaps a little more attractive, given the vast tonnages available,” Heugh reflects.

Approaching the (i)deal

It’s a sublime balance; assisting a junior like CTP with acreage too large for its own in-house resources, and providing fair pricing in the process. Astute when it comes to the mistakes made by other juniors who have farmed out good ground too cheaply—but realistic about the need to bring in the right major partner—Heugh and the CTP team have a lot of cards left in their deck. As each one laid on the table continues to reveal favourable options towards production and further exploration, it appears that the TSX.V listing may open the floodgates for North American investors, whose appetite for onshore frontier hydrocarbon plays is markedly more honed than many another.

It is hoped that operational news into 2012 will be largely led by the Surprise-1 well, and despite some slowdown caused by days of weather interference and rig mobilisation issues, the turn of the 2011 year-end remains to be the deadline as the current round of drilling wraps in late-December.

“If the results indicate that horizontal sections are justifiable, depending on how many we drill, it might be through January before we complete, case and drill them, then begin to flow test the well,” Heugh says.
“It’ll really depend on the log evaluation and pressure and fluid samples that we aim to collect fairly soon.”

These results look set to deliver some positive outcomes mere weeks ahead of CTP’s proposed debut on the TSX.V; favourably-timed for the company’s access to such a larger pool of capital. Meanwhile, interest rages on in both this ground and the coal tenements, and Heugh says it is “almost inevitable that [CTP] will do a series of farmouts in the near future.” Since 1998 this determined explorer has agglomerated and retained an outstanding, highly prospective frontier portfolio, and the coming year may well offer ideal investors a fledging chance to take up on longstanding market interest in the company.

www.centralpetroleum.com.au