by Wally Graham, Resources Roadhouse
You’ve enjoyed consistent news flow over the past year, culminating in the positive scoping study results for your flagship Kitumba project. You must be happy with your progress? It has been a really important year of achievement for us, at the Mumbwa project in Zambia.
BHP Billiton exited Mumbwa last year and about September we started drilling our first hole into the project.
In the past year we have achieved three major milestones. In February we announced some, truly world-class results, with the most outstanding hole being 230 metres of an average of 4.5 per cent copper.
In June we announced a JORC Resource upgrade to approximately 180 million tonnes at just under 1.2 per cent copper.
Now we have achieved our third major milestone with the release of our recently-completed scoping study.
So, it has been a very busy year, but it has also been a very successful one for the company.
You were originally involved in the project with BHP Billiton? The project commenced life being wholly-owned by BHP Billiton. We farmed in to earn 60 per cent, which we did between 2005 to 2008, by fully-funding and managing the project.
In 2008 BHP Billiton exercised an option to ‘claw back’, which resulted in them fully-funding and operating the project up to 2011.
They spent three years and around $40 million looking for a tier-one deposit.
They gave up the search around August 2011 and we took over. They retain a two per cent Net Smelter Royalty but they have no other ‘back-in’ rights.
Have the results been what you expected after BHP walked away from the project? If anybody had have asked me when BHP Billiton left, ‘what would you like to achieve in the next 12 months?’ I couldn’t have asked for more than what we have.
My wish list would have consisted of world-class copper results, a great Resource upgrade, and a positive scoping study; tick, tick and tick, thank you.
It may have been a different story had they drilled the hole you drilled after they had gone? We will never know, but I can’t help wondering sometimes if they had drilled that hole whether they would still be there looking for the giant deposit we now hope to find.
It’s not an unfamiliar exploration tale for a company to drill close to where a previous explorer may have drilled only to find something exciting? I’m a mining engineer by trade, which means I don’t choose where to drill the holes.
We have a number of experts working with us including non-executive director Derek Carter who people will know from his involvement with the Prominent Hill discovery.
We also employ a great geologist as our principal consultant on the project, a fellow called Tom Whiting, who happens to be the former head of exploration for BHP Billiton.
He’s one of our secret weapons. He has a very good knowledge of the project; he is a real believer in its potential.
So what has the scoping study told you about the project? We know the industry is cautious when it comes to scoping studies, as they are completed to a lower level of accuracy than the more in-depth studies that follow.
However, we can say with confidence we have not found any fatal flaws and we can also say, with the usual scoping study caveat of accuracy, all the economic indicators are very positive; $1.50 per pound is a good cash cost and a sub-US$400 million capex is also very competitive.
The project compares favourably with our peers and I can’t think of too many other early copper projects with our scale of potentially being able to produce 50,000 tonnes ramping up to 70,000 tonnes of contained metal.
It also has a healthy Mine Life of around 14 years? It has, and beyond that the upside can come from a bigger Resource from drilling we currently have underway of step out holes we think have the potential to grow the current Resource from a bigger open pit providing longer mine life.
Another potential upside is the underground element of the project. We haven’t done any underground work yet but looking at the current modelling we know there is copper mineralisation below the 400 metre mark with potentially more to be discovered.
So either an underground extension or an underground project could possibly extend the mine life or deliver improved economics.
Obviously the Kitumba project is getting most of the attention at this stage. What else does the Mumbwa project have in store for you? We have three business objectives at Mumbwa: one is to take Kitumba and push it through the project development pipeline of pre-feasibility and feasibility studies along the path to production.
The second priority is to drill the Resource out, not only for increased confidence but also some step out holes with the aim of potentially increasing the size of the deposit and the size of the JORC-compliant Resource.
The third objective is to find new discoveries, greenfield if you like, on these leases. There are plenty of untested targets BHP Billiton left behind that did not fit their scale criteria.
Is your plan to get Kitumba up and running to generate cash flow in order to fund this greenfield exploration? We completed a capital raising recently, resulting in a healthy bank balance of just over $40 million.
We can afford to spend some of that on greenfield exploration straight away, but it is the lowest of our current priorities.
What are you hoping to find at Kitumba? The BHP Billiton dream is still alive. There just maybe a tier-one deposit here that BHP Billiton left behind.
I’m not saying there is definitely a tier-one deposit here. I’m just saying it’s far too early to conclude there is not.
The beauty for our shareholders is that it doesn’t really matter if there is one or not, we get to have our cake and eat it too.
The scoping study shows us there is already very god potential for an economic mine to be had here.
Your shareholders have plenty to be happy about in terms of your share price performance compared to some of your peers? We’re always working on what we can do to enhance value and grow our share price.
There are eight different firms writing research on us as we speak with valuations varying from around $1.30 through to over $2.00.
According to the recently released Gresham Group 150 for financial year ending June 2012 we were the fifth best performing stock on the ASX for companies of any size for share price appreciation and the eighth best stock for market cap appreciation.
Would you say that is an indication of the consistency of the news flow you have released throughout the year? We pride ourselves on high-quality and regular communication with the market, which has been underlined by the fact we have had some really good news to tell.
I think the combination of great results and delivery of tangible progress at Mumbwa, along with the fact Blackthorn owns 39.9 per cent of the soon to be commissioned Perkoa silver lead and zinc project with JV partner Glencore, which is beginning to be recognised by the investment community.
We are very excited about the future.
