Southern Nights discovery. Image: Peel Mining.
BY ELIZABETH FABRI
IN the outback town of Cobar rising commodity prices are restoring confidence at existing operations, as fresh exploration signals a break away from the region’s reliance on base metals towards a gold-focused future.
It’s been boom-and-bust for Cobar since first copper was discovered in the region in 1869.
The town has witnessed great successes (at peak sporting a population of 10,000) followed by incredible lows when commodity cycles took a dive.
Just two years ago this was the case when one of the town’s major employers, CBH Resources’ Endeavor mine, made almost half of its workforce (116 people) redundant as a result of the declining zinc and lead prices.
It was a tough pill to swallow for the 5000-person town, and while not comparable to Ashanti Gold’s closure of the CSA mine between 1997 and 1999, sentiment was down— again.
Then there was news that Glencore, the current owner of the CSA mine, had intentions to sell the $US400 million project in an attempt to reduce its debt pile; creating an additional layer of uncertainty.
The verdict was still out on whether Glencore will make the decision to sell the CSA mine, but overall things were beginning to get brighter for Cobar as commodity prices climbed.
In early 2017, production began ramping up again at Endeavor mine, restoring jobs that were lost, and a swarm of junior to mid-tier miners were now pouring capital into new and established projects in the region.
And as commodity prices improve further, with copper fetching $US7270 per tonne in January, gold sitting at $US1342 an ounce, and zinc hitting 10-year highs at $US3423 a tonne, more green shoots were expected.
The next step will be safeguarding the region against a future downturn, and the solution looks to be diversification beyond base metals to other commodities such as gold and silver.
Aurelia Metals is the owner of the Hera-Nymagee project and soon to be owner of Peak Mines.
Managing director and chief executive Jim Simpson said because Cobar has been base metal dominant throughout its history, it has been stung by the fluctuation of base metal prices.
However, Mr Simpson said the region was beginning to see a shift towards gold, and his company was in a strong position to take advantage.
In November, Aurelia Metals entered a binding agreement with New Gold to purchase the Peak mines for $US58 million which will close in the first quarter of 2018.
The Peak mines are in close proximity to its Hera-Nymagee project, which collectively contain a mix of gold and base metals including copper, lead and zinc.
“The leases adjoin the Hera/Nymagee leases which now span over 100km along the strike length of the Cobar Basin establishing Aurelia Metals with a strong foothold in the prospective Cobar Basin,” Mr Simpson said.
“The key plan for Peak is to convert the extensive current resource base into ore reserves thereby increasing the life of the operation from its existing three year mine life.”
Nearby, the $US87.1 million Nyngan scandium project was also in development, and is aiming for production in the first half of 2019, while Peel Mining was fast advancing exploration at its Mallee Bull and Wagga Tank projects.
Peel Mining managing director Rob Tyson said Mallee Bull, a JV with CBH Resources comprising the highly prospective polymetallic discovery and historic May-Day gold-base metal deposit, was its most advanced project.
“We are currently undertaking a feasibility study into development options,” Mr Tyson said.
“It has been an iterative process and we are hoping to complete the study by end of March.
“The project needs a considerable amount of exploration still, to define mineable reserves, so we are likely to pursue a staged exploration-focused development to enable deeper, cheaper underground diamond drilling.”
Since late 2017, Peel Mining shares have risen considerably, increasing from $0.23 a share in early October to $0.56 a share mid-January on the back of positive drilling results at the high-grade Southern Nights discovery within the Wagga Tank polymetallic project.
Gold miner St Barbara has also shown interest in the stock, purchasing an additional $1.5 million worth of Peel shares in November to increase its stake in the company from 9.6 per cent to about 10.8 per cent.
The region’s existing mines were also showing promise.
In November last year, CSA mine staff held a community consultation which gave an overview of the aging project’s mine operating plan (MOP) for 2018-2020.
It confirmed over the next three years, it planned to mine at a rate of between 1.25 and 1.3 million tonnes per annum (mtpa) of copper ore, which could be sustained beyond its MOP until at least 2026.
The company was in the process of ramping up exploration at CSA, spending about $6 million in 2017 and an estimated $10 million in 2018.
Endeavor was also “recruiting strongly and the life of mine is extending,” Ms Shephard said.
“There are new areas in the Shire with good drilling results pointing to a strong mining future for the shire.”
“Cobar is a transient town – always has been,” Cobar Shire Corporate and Economic Development director Angela Shepherd said.
“The mining industry is hugely important to the Cobar Shire with more than 40 per cent of the workforce employed directly in the mines, according to ABS figures.
“Our biggest challenge, for all industries, is to attract and retain a workforce.”
Due to the region’s remote position (710km from Sydney and 301km from Dubbo) there were still issues hanging over the town.
The first was Air Link’s decision in December to terminate its public transport air services between Cobar and Dubbo following the conclusion of working arrangements with local stakeholders.
The air services provider, which had been operating air services between the towns since August 2015, said there were “no current plans to recommence services to Cobar”.
The news sent shockwaves through the town, which in the past has struggled to attract professional workers due to its isolation.
“This is a large blow for the community,” Ms Shephard said.
“We have been fortunate to have a Regular Passenger Transport (RPT) service, however with Rex (Airlink) pulling out it places stress not only on the mining industry but also on the rest of the community, such as our ability to attract and retain doctors.
“It has been one of our advantages over other towns, that we had a Sydney air service at least four days a week.
“An air service reduces our isolation for business and personal needs of the workforce.
“However, we have had similar hiccups in the past and once again we will work together to find a new operator for our town.”
Ms Shephard said while the airport would still be used by charters, it was imperative that a new regular passenger transport operator would link to the town.
“The Council is working with the mining companies to secure another provider,” she said.
“This may take some time as any new provider will need to secure landing and leaving time slots at Sydney.
“I believe there is a good sense of cooperation by everyone as we are all keen to see this happen.”
Other issues facing the region were the availability and cost of power and water.
“We are located a long way from a river with the Bogan 130km away,” Ms Shephard said.
“Cobar relies on water supplies from Burrendong Dam, via an open 70km channel; the water is stored in weir pools before being piped 130km to Cobar.
“There are large losses from the system.
“Expansion of the industry will require larger water licenses and access to more water.”
Ms Shephard said the NSW Government was currently investing in this infrastructure, however the mining operations around Nymagee were not connected to the pipeline and instead relied on underground water, which was scarce in some parts.
“In addition, we all know that power supplies are limited and the cost is rising significantly,” she said.
“Cobar is located a long way from power generation sources, and while the Nyngan solar farm has changed that in part, Cobar needs an alternative power supply to be available closer to home – possibly on site for new mines that are not on the grid.
“There is very limited power networks in the Nymagee area and Hera mine actually have their own source.”
Aurelia Metals’ Mr Simpson said the decline in services over the years has also been one of the biggest challenges.
“This makes it harder for mining companies to attract key personnel,” Mr Simpson said.
Image: Aurelia Metals.
A bright outlook
Mr Simpson said the outlook for Cobar looked positive, and Aurelia Metals “will certainly look at any opportunity that presents itself”.
“There has been some very positive exploration in the Cobar region in recent years with some good prospects of new mines starting from this successful exploration,” he said.
“I believe that this will continue.”
Ms Shephard agreed, claiming the Cobar mining industry “has a very strong future, as long as international prices don’t collapse”.
She anticipated the majority of the aging mines in the region (if not all) to still be producing in the medium term.
“They are continuing to invest in exploration with strong results showing and development plans are being made,” she said.
“I don’t believe anyone knows the extent of resources in the ground still and it is incredible how they are still discovering mineral deposits so narrowly missed by previous mining operations.
“The geology of the shire is quite amazing.”
Looking ahead, Ms Shephard said it was also important for the companies exploring the region to actively invest in its social fabric.
One of the most topical issues at present was the town’s push for a Cobar Miners Memorial to commemorate the 172 miners that have lost their lives in the shire over the years.
“Fundraising efforts are continuing, a design has been approved, a DA approved by Council, and all the research completed,” Ms Shephard said.
“The aim is to have it constructed by our 150th anniversary in 2019/2020.”
Cobar Miners Memorial Committee chairman, long-time Cobar resident and former miner Barry Knight said the committee needed $380,000 to build the memorial, and currently had $112,000 in the bank.
“In October last year as part of Cobar’s annual Festival of The Miners Ghost we held our first memorial service to honour those who lost their lives ‘A Night To Remember Our Lost Miners’ which was attended by 250 people of which 50 were from out of town and travelled to Cobar just for the service,” Mr Knight said.
“All the mining companies have been very supportive to date, and the Cobar community are right behind me on this project.”