Mastering advanced-stage exploration projects in Queensland

In 1556, a book named De Re Metallica (‘On the Nature of Metals’ or ‘All about Metals’) was published. This book opened the works of German scientist by the name of Georgius Agricola, now known as the “father of mineralogy,” to the world and for the next 250 years it was hailed to be the definitive text on mining. The text was translated by Herbert C. Hoover, a mining engineer working in Western Australia and later the 31st President of the U.S.A., and today it is one of those pieces of mining history that are famed throughout the world. As with many great works, De Re Metallica’s impact has continued on, eventually leading one Queensland-based miner to take on the moniker.

That company is Metallica Minerals—an ASX-listed (MLM) junior with major interests in nickel-cobalt, coal and bauxite, founded in 1997 and later listed in 2004.

“Metallica’s development strategy has always been on establishing and evaluating mineral resources or deposits which have a high probability of becoming a profitable mine,” the company says.

“While we have [already] enhanced our resources portfolio, particular nickel-cobalt, coal and bauxite – we have also made significant new discoveries to enhance our portfolio such as our scandium (Kokomo & Lucknow) and recent tungsten discoveries (Junction Bore).”

This issue IRJ spoke with Metallica’s CEO/Managing Director, Andrew Gillies, about how the company’s strategy and niche in the mining industry —securing advanced-stage exploration projects, preferably with known significant mineralisation —has allowed it to amass a truly exciting portfolio.

The Metallica Way works

Gillies says that Metallica’s business strategy has been to enhance the likelihood of success by implementing a two stage process. Step one begins with acquiring quality mining projects where a change in economic conditions has allowed the project to become more favourable.

“This could be due to new infrastructure, technology and/or markets which have enhanced the economic viability of previously identified mineral deposits (resources or mineralisation),” he explains.

“In the optimal case the previously identified mineralisation will have a resource that has already undergone extensive drilling. The exploration industry has consistently shown that it is often better not to be the first explorer to test a mineral prospect or grassroots exploration target.”

With this in mind, Gillies says, entering a project when it is further along in its exploration history has been the moment where Metallica really concentrates its work. By selecting projects with previous exploration work offering known resources, quantified resources or projects in high exploration areas, it certainly offers the company a secure, yet exciting, balance for project entry and adding value.

“Metallica adds value to projects by further evaluation with the intention of attracting established mining companies or minerals end-users as partners to further fund evaluation, feasibility and development and or ‘spin off’ established projects so it has its own management team and funding capability,” Gillies continues.

“In 2009, Metallica supported two Initial Public Offers— Cape Alumina Limited (ASX – CBX), bauxite company (MLM 30 per cent) and MetroCoal Limited (ASX – MTE) a coal focused company (MLM – 56 per cent) and remaining the largest shareholder of both companies. Alternatively a project might be sold (cash, share equity +/- royalty) as we did with our first coal portfolio in 2008 for approximate value of $25 Million.”

Of course, the proof to Metallica’s pioneering and developed approach to mining is in the company’s portfolio.

Metallica’s key projects

Put simply, the Metallica portfolio is teaming with diversified resource projects and major investments, expected to move into production within the next three to five years. Amidst these is NORINCO, the North Queensland Nickel–Cobalt Project, which contains five deposits known as Bell Creek, Minnamoolka, Kokomo, Greenvale and Lucknow. The current combined Measured–Indicated and Inferred Resource estimate for these five deposits is approximately 76.3Mt @ 0.80 per cent Ni and 0.06 per cent Co—estimates gathered by more than 2,945 RC and diamond drill holes completed by Metallica since 2004.

“There was a major increase in the Ni-Co resource with the acquisition of the Greenvale Mine site from Straits Resources in December 2009,” Gillies recalls.

“Metallica is currently undertaking a scoping study into establishing a modest size Ni-Co-Sc processing operation of 180,000 tpa in size (NORNICO stage 1), at the former Greenvale Nickel mine site.”

The company is doing this by using high grade nickel and cobalt feed (more than 1.6 per cent nickel, for example) which is being sourced from Greenvale for the most part, then blended with cobalt and scandium-rich nickel laterite ore from Lucknow, which is six kilometres away. Gillies says that in the years to come this will also come from the Kokomo deposits, some 55 kilometres away.

“Acid supply for the project would be sourced from Townsville. Limestone-lime could be supplied from Phoenix Lime (MLM 100 per cent owned) Ootann project and its other limestone deposits close to NORNICO,” he says, shedding light on how a future operation might come together.

“The former Greenvale minesite is an excellent location to establish a Ni-Co ore processing facility as it is within a previously disturbed (and rehabilitated) large mining area, has remnant zones of high grade nickel, it is close to the Greenvale township, sealed roads, and existing infrastructure, water and limestone supplies.”

Providing further feasibility studies go to plan, Metallica plans for NORINCO state one annual production at approximately 2,900 tonnes of nickel, 200 tonnes of cobalt and over 5,000 tonnes of scandium. This comprises the first of Metallica’s two stages in its development strategy for the project. Gillies says that in a number of years, following NORINCO stage one and other feasibility studies, the project could be scaled up to something the order of a 700,000 tonnes to 1Mtpa operation (NORNICO Stage 2) with its own acid generation and power plant, and production of over 10,000t Ni metal with substantial cobalt (and potentially Scandium) credits. If Metallica’s current successes in discovering scandium at the Lucknow and Kokomo nickel cobalt deposits are anything to go on —its best drill intercept to date is 27m @ 882g/t Sc —the mining operation Gillies envisages for years to come looks all the more possible.

Metallica’s work continues

As IRJ went to press, Metallica was finalising its nickel—cobalt—scandium resources over at Greenvale and Lucknow, and its NORNICO Stage 1 Scoping Study, due for release this month. Between NORINCO and its cash ASX Listed investments (MetroCoal, Cape Alumina, Planet Metals, Orion Metals) Metallica certainly has a lot of irons in the fire. What’s more, with a current market cap of around $30 million (not including NORINCO) and a very clear strategy for major growth, the perfect project development strategy is in place to pay the necessary attention and expertise to each part of the company portfolio. This is how multi-commodity companies ought to look: strongly-focused on their chosen development tactics, financially well-placed and with well divested assets any miner would happily snap up. Without a doubt, any results announced this month will only further enforce the company’s potential and unfaltering commitment to delivering value to its shareholders. Here stands one seriously substantial portfolio—owned by the ideal company to bring its key project into production and grow its cash assets in the next few years.

www.metallicaminerals.com.au