C O M P A N Y O V E R V I E W
IN PARTNERSHIP WITH:
RIDING the cycles Written by John O’Hanlon Produced by Andy Turner
Independence Group’s strategy to develop a diverse portfolio
Peter Bradford CEO
Independence Group’s strategy to develop a diverse portfolio of assets positions it well to ride out the inevitable fluctuations in world commodities markets
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n another article we discussed with Peter Bradford, MD and CEO of Independence Group (IGO), the significance of the company’s newest asset, the world class, low cost Nova nickel mine which will come on stream later this year. The ability to fund this important development, though, has derived largely from the strategy the company has apursued in the 14 years since its establishment and listing on the ASX in 2002. The Tropicana phenomenon By the time of its IPO the company
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had secured a 12,500 square kilometre exploration tenement on what is now known as the Tropicana gold belt (though at the time it was not known for its gold potential), at the western edge of the Great Victoria Desert. Subsequent exploration and development was undertaken by AngloGold Ashanti, which farmed in to the project in the same year, IGO retaining a 30 percent interest. AngloGold discovered the Tropicana deposit in 2005 and the partners gave mine development the go-ahead in 2010 based on a feasibility study
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based on mining the Tropicana and Havana deposits, and treatment of 5.8 million tonnes per annum (mtpa) of ore to deliver average gold production of 330,000 to 350,000 ounces per
annum over a ten year mine life. By 2012, gold resources in the deposit had grown to 7.89 million ounces, establishing Tropicana as fourth
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AUSTRALIA INTRODUCES A DIVERSIFIED MINING
Headquartered in Western Australia in a state-of-the-art workshop complex of 55,000m3 and with company owned branches throughout Australia.
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Murray Engineering is one of the largest and most diversified mining services providers in Australia. It is headquartered in Western Australia with branch locations throughout the country. Its products and services are used from the face to the factory above and below ground and exported to 5 continents of the world.
One of the foundations of its business is in Mechanical Maintenance. Full mobile machine rebuilds are undertaken where the machine is disassembled into its individual parts and then rebuilt to conform with the latest manufacturer’s specification often in as little as 6 weeks turnaround. To minimise not having the use of a production machine whilst undergoing a rebuild, Murray Engineering will hire a machine from its rental fleet to augment their clients’ production. Long term site-based maintenance and repair contracts are undertaken for mobile machinery with KPI’s undertaken for the client so as to guarantee machine availability, machine operating cost and agreed maintenance manning. Shane Dunn, Mechanical Manager for Murray Engineering explains: “We have the advantage of 26 years of maintenance data on one of the largest underground mining mobile machinery fleets in the world. Risk sharing is facilitated through having such an enormous pool of historical data”. The Electrical Division assembles, installs and maintains a vast array of Electrical Components to suit mining applications and includes a range from electrical distribution panels to 60 tonne transportable switchrooms. “With decades of experience with mining applications worldwide, we often tackle those applications which clients place in the too hard basket. St Barbara approached us to lower a single stage 1400 metre suspended HV cable so as not to disrupt production. Notwithstanding the forces associated with 26 tonnes of suspended cable, the job was completed on time and budget without incident” cites Craig Shales, Electrical Manager. The diversity of services provides clients with a unique availability of single sourcing. A recent pump station project in Asia necessitated the installation of wireless communications between dewatering pumps and controllers which was automatically activated by face-mounted water level and temperature monitors. The pump controllers were housed in a fully enclosed fabricated station. All was completed in house by the Automation, Fabrication and Electrical divisions of Murray Engineering. Murray Engineering continues to expand due to its worldwide scale and diversity of services.
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Annual
$500 million revenue largest gold mine in Australia. First ore was sent to the crushing circuit in August 2013, first gold was poured on 26 September, ahead of schedule and on budget, and the processing plant successfully achieved its ramp-up target of 95 percent plant availability at a throughput rate of 5.8 mtpa within six months. For IGO, Tropicana has been, and continues to be a fun ride, says Bradford. “Once the startup and first production were behind us we started to unlock additional value in the project. One opportunity is ongoing exploration along the Tropicana belt for the next Tropicana, so watch this space because we think it may be there. Another is by “drilling at depth
beneath the existing Tropicana pits, most of which bottom out on the lack of drill information, where we expect to be able to significantly expand the known resources through this drilling.” Additionally, there’s room to optimise production. Work to expand plant’s nameplate capacity from 5.8 mtpa to more than 7 mtpa is coming to its final stages, he says. “The joint venture partners recognised that major items of equipment like the crushers, the high pressure grinding rolls and the ball mills all had spare capacity, this allowed us to expand capacity by working through the bottlenecks in the materials handling of the crushing circuit and
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slurry circuits, upgrading conveyors and pumps.� All that remains is to complete the additional capacity in the carbonin-leach circuit, to bring residence time back to design levels, so that recovery levels are maintained at the higher throughput rate. Tropicana is remote and that has meant that, till now, some 1,500 road trains a year have
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been needed to fuel its plant and vehicles. To derisk delivery of fuel and decouple the risk of fluctuating oil prices, in mid-2014 the joint venture partners committed to a A$140 million gas project. The Eastern Goldfields Pipeline, constructed and operated by APA Group was commissioned in February this year cutting the number of road train movements down to
less than 500. “Changing to gas will reduce operating costs over the life of the project,” says Bradford. “We are in the process of transitioning the power house from diesel operation to gas, and we expect to finish that work by mid-year.” The joint venture works on a simple basis, with IGO writing a monthly cheque for its 30 percent share of capital and operating
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Barminco is an international leader in mechanised hard rock underground mining, delivering world best standards and productivities.
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Nova Project bolsters Barminco’s already impressive track record Australian based Barminco is a specialist hard rock underground mining contractor and one of Independence Group’s closest partners. The company has been delivering its production, development, drilling and support services to Australian and international mining sites since it began operations in 1989, underpinned by values of safety, excellence and integrity. In 2007 Barminco established African Underground Mining Services, a joint venture, to facilitate the expansion of its service offering into West Africa. ser Barminco’s track record is unrivalled in terms of safety, speed of delivery and output, often exceeding expectation and agreed terms with development records set on a number of the company’s projects. Chief Executive Officer Peter Stokes comments: “Once we establish ourselves with mining companies we stay for the long haul and build deep, innovative partnerships, which is what is happening with Independence Group. We have been with them ever since they took over the Nova Project back in January 2015.”
Stokes adds. “This is very much a variable rate contract as opposed to fixed, meaning the productivity is up to us to deliver and we will ensure that both parties are rewarded. There is a real mutual incentive.” Barminco has also been busy above ground, building a batch plant and investing in local infrastructure to help address the challenges caused by the sites remote location. It is also working with Independence Group to employ local people and support the micro-economy of the area. The focus for this partnership moving forward is to maximise the success of Nova. Stokes says, “The real focus for both companies is to make sure that Nova is successful and keeps beating targets.” By continuing to commit to a zero harm safety approach, operate with integrity and invest in excellence by driving continuous improvement through innovation and new technologies, Barminco is well-placed to support many underground projects and grow its portfolio.
Barminco has been involved in the development of the world class Nova nickel reserve in Western Australia from the very beginning, initially with Sirius Resources. Drawing on its state-of-the-art mobile equipment fleet and experienced teams, the project is several hundred metres ahead of expectation. Barminco has carried out all of the capital development work and is now moving full ca speed into production which is expected to start by the end of the year. “The key to this work has been high speed development and making sure we do it safely,”
Peter Stokes - Barminco CEO
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MINING
costs and receiving 30 percent of that month’s gold production. With gold prices on the upturn that means Tropicana contributed around 45 percent of IGO’s A$499 million revenues in the 2015 financial year, its first year of full production. Spread betting Australia is enjoying good gold prices, and like other Australian gold producers, IGO is enjoying good margins from its share of gold production at Tropicana. At the same time base metals prices have been weaker. IGO is diversified and has irons in both fires: “Nickel and gold are somewhat counter-cyclical,” says Bradford. “Over the last twelve months nickel prices have come down by around 30 percent and as a result of that,
worldwide it is estimated that 50 percent of the nickel industry is losing money on a cash basis. It is a miserable time for the metal. However our Nova project combines high grade with low cost structures, therefore even at current low nickel prices we will achieve an average 40 percent cash margin on the project, which is outstanding. But this is at the bottom of the nickel market and with the commodity expected to be in a supply deficit this year we expect prices to start rebounding” When the company acquired the Long deposit from BHP Billiton 14 years ago it was perceived to be at the end of its life, with only a few months of reserves in front of it. It has been a remarkable achievement, through a combination of investment and exploration, to keep it producing. Long has yielded more than 100 tonnes of
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“The lifeblood of any mining company is its pipeline” – Peter Bradford, MD & CEO
nickel since being acquired by IGO and the Company has been able to consistently replace production with new reserves. This is an underground mine, the ore being removed by trucks, stockpiled and then moved to BHP’s nearby concentrator for processing. More recently, in 2011, IGO purchased the Jaguar copper and zinc mine 300 kilometres north of Kalgoorlie and close to the small town of Leonora. Today this operation, together with Long, gives IGO the other half of its revenues. Both mines continue to generate positive free cash flow margins, despite current low copper and nickel pricing. Both these assets are wholly owned and operated by IGO. Jaguar is mined using a fleet
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of R1700 Caterpillar Load Haul Dump (LHD) trucks, 60 tonne Caterpillar trucks and other equipment. Ore is processed at the nearby Jaguar concentrator which produces both zinc and copper concentrates, the latter having silver and gold in it too. The concentrates are trucked to the port of Geraldton where they are shipped to IGO’s customers. This year the business will be transformed by the advent of the Nova nickel mine. Instead of being split evenly between Long and Jaguar, and Tropicana respectively, more than 50 percent of future combined revenues will come from Nova. This is not to deny the continuing significance of Jaguar and Long:
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what it will mean though is that from 2017 onward we will see IGO emerge as a truly diversified, mid-tier mining company. “Gold, nickel and copper are all cyclical commodities. For single commodity companies: it’s fun at the top of the market with good operating margins being made but not much fun at the bottom! At the bottom of the market tough choices have to be made about what costs you continue to wear, and that can result in capability that is needed long term in the business having to be retrenched because you can’t fund it at that time. Some discretionary expenditures vital to long term growth, such as exploration, have to be reduced. Our strategy is to be diversified, with a mix of commodities in the portfolio, currently gold and base metals, so the risk to the business due to single commodity fluctuations in any one year is reduced.” Natural hedging between the metals
means IGO is really unlikely to have all of the commodities it produces at the bottom of the market at the same time. In turn that ensures the regular cash flow required to keep capability within the company and to keep the focus on those long term growth projects that he always has his eye on. People and places Bradford said he also wants IGO to continue to play its part in developing talent for the company and the industry at large. “We support scholarship programmes for degrees students and we have a programme of vacation work while they are studying to give them access to the industry.” The company also runs a graduate programme, taking people on two year internships and introducing them to varied aspects of the business and aiming to turn out fully functioning professionals. Close to its operations IGO supports
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“By drilling at depth under the existing Tropicana pits, most of which bottom out on the lack of drill information, where we expect to be able to significantly expand the known resources” – Peter Bradford, MD & CEO
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Peter Bradford MD & CEO
Mr. Bradford is a senior mining industry executive with many years’ experience in gold and base metals mining operations, exploration and development within Australia and internationally. Mr. Bradford graduated as a metallurgist at the Western Australian School of Mines and commenced his career with various gold, nickel and mineral sands operations in Western Australia and lead the development and early operational phases of a number of projects. Internationally, Mr. Bradford has worked extensively in Africa, including Ghana and the DRC in a number of senior and chief executive roles for Australian, London and North American listed companies, providing leadership in the development of strategy and growth for many of these companies. Mr. Bradford a fellow of the AusIMM and a member of the Society of Mining Engineers and a member of the AMEC Council.
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Delivering mining efficiency Since 2008, Deswik has been partnering with clients like IGO to deliver efficiency-focused solutions to the mining industry through our software, consulting, and training offerings. Our customized, solution-driven consulting flows through innovation to our software providing our customers with additional benefits when they choose to work with Deswik.
CUSTOMER DRIVEN INNOVATION In May 2015, Stephen Rowles and Luke Waller from Independence Group NL began work at the new Nova Project in Western Australia. Tasked with setting up best-of-breed systems for the survey department, they worked with Deswik (whose solutions were already in use by the planning team) to extend the Deswik.CAD platform to meet the site’s needs and simplify the typical surveying processes.
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the community by funding leadership programmes in the schools and communities around its mining operations. We are also committed to building capacity and providing opportunities for the traditional owners in the areas we operate “At Nova, for example, we are putting in place a targeted training programme to improve the job skills of indigenous employees who may not have had the opportunity to do formal work before. They can then apply for jobs at the project. We want to have a lasting impact and leave a legacy so we’d like to help individuals and groups to form businesses. We have been working to support two different contracting initiatives that
provide opportunities for indigenous groups at Nova and Jaguar.” Peter Bradford’s eyes are constantly looking outward to identify the next big project, a future Tropicana or Nova. “The lifeblood of any mining company is its pipeline,” he declares. “We continue to be very active on the exploration side to discover the projects of the future.” One area of interest is the large tract between Nova and Tropicana, an underexplored geological province that has delivered two of Australia’s best gold and base metal discoveries in the last 10 to 15 years. “We are uniquely placed for investment and exploration of that province.” In another part of Australia
“Gold, nickel and copper are all cyclical commodities: for single commodity companies, it’s fun at the top of the market with good operating margins being made but not much fun at the bottom!” – Peter Bradford, MD & CEO
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Hardie Finance Corporation Pty Ltd the landlord of Perth’s premier non-CBD office and retail complex at 85 South Perth Esplanade, South Perth is very proud to have the highly successful and leading diversified mining company, Independence Group, as its major office tenant. Independence Group is joined by a number of other successful, mining and financial companies occupying the A grade office facilities with its spectacular views of the City of Perth and the Swan River.
Hardie Finance Corporation Pty Ltd Level 5, 85 South Perth Esplanade, South Perth WA 6151 Telephone: +61 (08) 9367 9333 Facsimile: +61 (08) 9367 9555 Email: info@southshoreshoppingcentre.com.au Website: www.southshoreshoppingcentre.com.au
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Registered
2000
listed
2002
altogether, 400 kilometres northwest of Alice Springs IGO in a joint venture with ABM Resources with licences covering what Bradford describes as a 400 kilometre long, major continental-sized structure that can be discerned from space. Initial drilling at the Bumblebee deposit has given promising results with gold, copper silver, lead zinc and cobalt. As he says, that is quite a suite, that will emphatically seal IGO’s diversity credentials. But, as he also points out, “this is just the first drilling on the first prospect on what is a prospective 400 kilometre long belt and many additional prospects have already been identified.�
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KEEPING faith with nickel
Independence Group’s Nova Project on the Fraser Rang Australia is a world class nickel mine comparable with C Voisey’s Bay – and it is coming on stream at just the righ
Written by John O’Hanlon
ge in Western Canada’s ht time
Independence Group’s Nova Project on the Fraser Range in Western Australia is a world class nickel mine comparable with Canada’s Voisey’s Bay – and it is coming on stream at just the right time
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ith nickel prices languishing below $10,000 a tonne compared to the end of 2010 when this key base metal was selling for nearly three times as much, you might wonder why anyone would be excited about a new nickel project. It’s hardly necessary to review factors like China’s growth slowdown and the fact of over-supply for the last three years, however nickel remains a vital commodity for industry. Some 2.0 million tonnes of nickel are produced and sold
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globally every year, of which 65 percent is consumed in the manufacture of stainless steel. Another twelve percent is used in super alloys and non-ferrous alloys. Peter Bradford, Independence Group’s Managing Director and CEO, who is driving forward with the development of the world class Nova nickel Project in Western Australia, is convinced that there are benefits building a mine at the bottom of the market, particularly when that project can be brought in at lower cost and can return a profit even at current
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prices. The minerals markets are cyclical by nature, and a mine with an initial ten year life like the Nova project, will certainly live through at least one peak and one trough. Thanks to a combination of smart design, canny contracting and a programme of cost optimisation, when it comes into production towards the end of this year Nova will have an operating margin of 40% even at current depressed nickel prices. The mine is slated to ship an average
of 26,000 tonnes of nickel a year once it ramps up to full production next year, plus 850 tonnes of cobalt and 11,500 tonnes of copper. Perth-based, Independence Group (IGO) was formed in 2000 initially with a focus on gold. Soon after it diversified with the acquisition of the Long nickel mine in Kambalda, Western Australia that it acquired from BHP Billiton in 2002. Independence also has a revenue stream from its 30 percent interest in the Tropicana
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“Given the remoteness of the site, we invested in robust infrastructure” – Peter Bradford, MD & CEO
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gold project which it pegged at the time of its IPO in January 2002 and developed in partnership with AngloGold Ashanti. IGO then acquired the Jaguar copper and zinc mine near the town of Leonora in 2011. “These are all great assets,” affirms Bradford who was appointed to lead the group early in 2014. “When I joined IGO, I immediately recognised that we needed growth assets, so we set about a strategy of identifying the best available prospects. That resulted in our entering discussions with Sirius Resources and acquiring the Nova project in September 2015. We are now focused on bringing
that transaction to account and progressing construction at Nova and bringing it into production.” Fast track to production Progress has been fast by any standards, when it’s considered that the deposit was only discovered in July 2012, only got its mining lease in August 2014 and, yet will be producing first concentrates by the end of December this year. This is a remarkable achievement for an underground mine, with all the infrastructure and construction work entailed in an operation that relies on a combination of sub-level stoping with
“This is the first discovery of its type in this new belt in Western Australia, and the first discovery of this style of mineralisation in the whole of Australia” – Peter Bradford, MD & CEO
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paste fill (derived largely from tailings) and longhole echelon retreat methods. “Our rapid progress is attributable in part to the location of the orebody. From an underground mining perspective Nova is quite shallow, with the 1,000 metre long orebody positioned about 200 metres from surface down to a maximum of 500 metres,” he points out. “It is a large flat-lying
orebody somewhat in the shape of a banana!” Had it been deeper, shaft access may have been considered but given the proximity to surface the orebody is being accessed by declines which have been dug to accommodate the 60-tonne trucks that will bring out the ore. Thanks to being
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able to get the best contractor and the best contractor team to do the development work the pace of the development work has been better than planned with over five kilometres of development completed as at the end of May 2016, he says. “Our feasibility study projected progress rates of 50 metres a week on a single heading underground and we have been achieving 70-90 metres per week. The rock conditions are good so we have not needed to immediately install the mass of ground support originally anticipated. We have been very fortunate in being able get what we believe are the best in class contractors in Western Australia.” Underground development is the province of Barminco while GR Engineering Services has been building the processing plant and associated infrastructure under
a lump sum EPC contract. The ore will be processed in a plant with 1.5 million tonnes per annum (mtpa) capacity, comprising an open circuit SAG mill and a ball mill before separation into nickel and copper concentrates. All the copper concentrate and half the nickel concentrate will be shipped out through the port of Esperance, 380 roadkilometres to the south, the remainder of the nickel concentrate will be delivered to BHP Billiton’s Kamblada site 294 roadkilometres to the north. The site is remote, located on the Eyre highway 150 kilometres east from the small settlement of Norseman. “Given the remoteness of the site, we invested in robust infrastructure,” says Bradford. “We built a 35 kilometre sealed road to the Eyre Highway and a two kilometre sealed airstrip to make sure we can reliably bring our employees in and
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“There are a lot of benefits to building a project at the bottom of the cycle” – Peter Bradford, MD & CEO
out on a fly-in-fly-out basis.” They are accommodated in a 492-person camp designed and built by Kerman Contracting in the space of just eight months last year, he adds. For the moment Perth is the primary source of people but one of his priorities is to focus back on the region. Population centers like Norseman, Esperance and Kalgoorlie have many skilled people with a great deal of mining experience and he believes smaller drive in-drive-out or fly-in-fly-out operations from those towns would be cost effective. “With lower commodity prices, there’s
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been a pullback in employment in the region, so there are skilled people available and we’d like to give them an opportunity. There are a lot of benefits to building a project at the bottom of the cycle,” he adds. “The best time to build is at the bottom of the market. All the materials and expertise needed to build the project are readily available. If we had tried to build this project five years ago we’d have been waiting in a queue
at the factory to have components built and all the best people and contractors would be tied up.” Long term sustainability The Nova site has no mains services. To provide the project with reliable water supply and management and waste water treatment, Tristar Water of Perth was brought in. Power supply was more complex. The power provider, a joint venture between
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Zenith Pacific and Solea of Germany, is providing a state of the art hybrid generating station under a buildown-operate-maintain contract that means IGO will bear no capital cost. The first phase of a 20 MW diesel-fired plant was commissioned at the end of March. The second phase is expected to come on stream in October, and at the same time work will commence work on a 7MW electro voltaic solar plant. The use of solar power will save 8,000 tonnes of CO2 a year as well as more than three million litres of diesel and the associated road trains to bring it to site. In all, the power component of the Nova nickel mine will set the
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standard for future remote hybrid power stations. This is the first time a project of this nature in Australia has been commercially viable and not reliant on subsidies or grants. Christmas this year will be a significant milestone for Independence Group as it celebrates first production from Nova, and as the deposit’s full name is Nova-Bollinger there’s no prize for guessing how Peter Bradford, his teams and contractors will toast it. But the mine’s slated ten year life is far from the end of the story. The Long nickel deposit was all but exhausted on acquisition but is still productive more than a decade later,
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which should tell the world that IGO know how to optimise an asset. “We believe the prospects for extending Nova’s life are very good,” Bradford says. “That is one of the attributes that attracted us to the project. This is the first discovery of its type in this new belt in Western Australia, and the first discovery of this style of mineralisation in the whole of Australia. It has features in common with Canadian deposits like Thompson, Raglan and Voisey’s Bay. We have opportunities to extend the mineralisation immediately around Nova, and also to look for additional occurrences further afield on the Fraser Range-Tropicana belt. This underexplored province has delivered two of Australia’s best gold and base metals discoveries in the last 10-15 years and we believe that there are more discoveries waiting to be made” So expect IGO to be very active on all these fronts.
“By drilling at depth under the existing Tropicana pits, most of which bottom out on the lack of drill information, where we expect to be able to significantly expand the known resources” – Peter Bradford, MD & CEO
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PO Box 496, South Perth, Western Australia, Australia, 6951 Tel. +61 8 9238 8300 Fax +61 8 9238 8399 www.igo.com.au