Mining companies are existing comfortably with booming commodity prices, but Diggers and Dealers delegates were issued a dire warning this week that not enough drilling was occurring in Western Australia to replace existing orebodies.
Mining companies are existing comfortably with booming commodity prices, but Diggers and Dealers delegates were issued a dire warning this week that not enough drilling was occurring in Western Australia to replace existing orebodies.
At the conference in Kalgoorlie, miners showed they are enjoying the luxury of high prices for almost all commodities, reflected by plans most presenters had for either production expansions or start-up mining developments, most scheduled to come on line in the next three years.
However, a very small percentage of new production in gold, nickel, copper and iron ore earmarked for WA is the result of greenfields exploration.
As a consequence, Diggers and Dealers chairman Brian Hurley warned the mining industry was coming under stress.
“It is easy to overlook that mining an orebody can only be done once,” Mr Hurley said. “I have my doubts we are replacing existing orebodies. The reason we have to be concerned is not only that my livelihood depends on it.”
Mr Hurley is the chairman of Perth-based explorer Oropa Ltd, which has exploration targets in Indonesia and India.
He said greenfields exploration had fallen from two thirds of the $321 million Australia-wide total exploration expenditure in the June 1997 quarter to one third of $270 million in the March 2005 quarter.
Mr Hurley described explorers as the mining industry’s “unloved, illegitimate child” and the victim of “short termism” that had made potential investors risk averse.
“In this climate, if you are trying to raise money the first question you are asked is ‘do you have a resource?’” he said.
Brownfields exploration – that undertaken around existing deposits – at best added longevity to a mine but failed almost always to result in a large discovery.
Despite being a problem the industry can control, no presenters bar Aztec Resources’ chairman Ian Burston apologised for not spending more on greenfields targets.
Aztec announced the results of its bankable feasibility study on the former BHP Koolan Island iron ore project, 130 kilometres north of Derby, which the company hopes to bring into production early in 2006.
Mr Burston said the capital cost of the proposed four-million-tonne-per-annum project was expected to be more than $100 million and would generate operating profits of $583 million in its first nine years.
Placer Dome, which produces 850,000 ounces of gold a year in WA, will spend $20 million on exploration this year but none on greenfields drilling.
The Canadian company is exploring around minesites near Kalgoorlie and at Granny Smith near Laverton to extend operational longevity.
Another Canadian-based miner LionOre, is aiming to more than double nickel production to 80,000 tonnes a year in 2008 by ramping up output at existing mines in WA and in Africa – not on the back of new discoveries.
Low-cost producer Newcrest Mining is about to bring Australia’s largest gold project at a revitalised Telfer, 400km east of Port Hedland, into full production of an estimated 800,000 ounces and 55,000 tonnes of copper a year.
The company spent $50 million exploration in 2005, more than half on greenfields targets in Indonesia, New South Wales and Queensland, not in WA.
Newcrest general manager corporate affairs Peter Reeve said Telfer had suffered a $200 million budget overrun and commissioning delays due to labour shortages.
Placer general executive manager Australia, Joc O’Rourke, also noted the negative cost impact of labour and material shortages.
Australian exploration personnel may have all moved to Mongolia, according to Ivanhoe Mines chairman Robert Friedland.
Mr Friedland outlined the monster 26 million ounce gold and 59 billion pounds copper Oyu Tolgoi project, 80km from the Chinese border, at which 570km of core has been drilled, much of it by Australian drillers.
Troy Resources, having just opened its new Lords gold mine at Sandstone, and De Grey Mining, which is drilling polymetallic deposits at Turner River and Beyondie in WA with award-winning results, were the two outstanding exploration presen-tations of the first day of Diggers and Dealers.
Both WA companies have discovered and continue to explore greenfields targets.
• WA Business News will offer a full coverage of Diggers and Dealers in next week’s edition.
