All images IGO.
BY ELIZABETH FABRI
LESS than a month since the official opening of the Nova project, Independence Group — in the hunt for the next Nova-style deposit — has again increased its footprint in the Fraser Range region through a new Joint Venture deal.
Independence Group (IGO) is on the rise again in FY18.
After bringing its $443 million Nova nickel-copper-cobalt mine into commercial production on 1 July, the mine’s balance sheet is set for a turnaround year as it adds an extra 26,000 tonnes of nickel, 10,000 tonnes of copper and 800t of cobalt to its annual production.
Over the last two years, the company’s focus has been developing Nova. But now the project is up and running — having reached nameplate capacity in September — and IGO is free to focus on the next great discovery.
Through an acquisition and various joint venture agreements, IGO has consolidated more than 12,000sqkm of tenure in the Fraser Range, the largest ground position of any listed company.
The region is appealing because it is widely under-explored, but going by the limited exploration undertaken it is considered highly prospective for nickel, copper, and cobalt sulphide mineralisation.
Fresh out of signing a new joint venture in October, IGO managing director and chief executive Peter Bradford spoke to The Australian Mining Review about his plans for Fraser and direction for the company on the back of Nova’s success.
“With building Nova and ramping it up all behind us now, and the period of cash flow to build Nova done, we’re now looking ahead to a very exciting FY18,” Mr Bradford said.
“This is our first full year of production for Nova so we’ll see the first cash generation there.
“We are also going to have higher than normal cash generation from Tropicana with two of our higher production years in 2018/2019.
“Very quickly, IGO will be transitioning from a net debt balance sheet to net cash going forward.”
Mr Bradford said Nova, the main prize secured out of its $1.8 billion takeover of Sirius Resources in September 2015, was performing well, with a number of drilling campaigns underway ahead of an ore reserve update in December.
“We finish our grade control drilling in December this year and then from January 2018, we’ll be starting to drill some of those extensions around the Nova and Bollinger ore body which would expect to add some years of mine life,” he said.
“In parallel to that, right now we are doing exploration on the surface at Nova looking for continuations of the trend, with the aim of trying to identify repetitions of Nova and Bollinger further along strike.”
On top of brownfields drilling, in FY18 IGO will be doubling its greenfields exploration budget to more than $31 million, which will be largely focused on the substantial ground position it has built up on the Fraser Range around Nova.
Fraser exploration
On 2 October, IGO inked its latest Joint Venture agreement with Rumble Resources to earn a 70 per cent stake in the company’s Fraser Range 500sqkm tenements.
Under the terms of the deal, IGO will be required to spend $1.5 million on exploration across three years.
Mr Bradford said the announcement flowed on from the deals IGO had signed over the last 12 months, including an acquisition of Windward Resources, and Joint Ventures with Orion Gold, Sheffield Resources, and Buxton Resources.
“Over the last 12 months or so, we have pursued a strategy of consolidating the land on the Fraser Range around Nova so we can increase our chances of finding the next Nova or Bollinger on that belt which is prospective for Nova-style discoveries, and underexplored,” Mr Bradford said.
“The reason I say underexplored is because Nova was only discovered back in July 2012, just five years ago, and since then the majority of the land has been held by junior exploration companies who have not been able to access the finance they needed to invest significantly in ongoing exploration on the Fraser range.
“We are actually doing some of the first systematic exploration work on those tenement areas and most of the work we will do this year will be geochemical sampling of bedrock geochemistry, and big geophysical programs including an aerial program using the spectrum technology out of South Africa.”
Mr Bradford said he believed there was opportunity and geological merit to suggest there were further Nova’s to be discovered.
“The big question is whether we’ll discover it or someone else,” he said.
“If someone else discovers it than that is a great outcome and proves that the Fraser range remains fertile, and we will get some benefit and recognition in our stock price because people will realise that straight away there is greater prospects in our land holdings.
“If we discover the next Nova-Bollinger on that Fraser range, that’s going to drive an additional $1 to $2 billion dollars of value for IGO.”
Tropicana
IGO and its JV partner AngloGold Ashanti were also busy increasing production and capacity at the nearby Tropicana gold mine.
IGO (30 per cent) and AngloGold Ashanti (70 per cent) were currently in the final stages of their Long Island study to assess potential to extend life of mine (LoM) through to 2027-2030.
“A large part of the study work is finished,” Mr Bradford said.
“We’re now at the final stage where the internal vetting by AngloGold Ashanti is being done, and we expect to complete the project and obtain the necessary board approvals at the AngloGold level and IGO level in November/December this year.”
The JV partners were also planning to increase production through the introduction of grade streaming and strip mining, plant improvements, and a pre-feasibility study to lift throughput to up to 8.2 million tonnes per annum (mtpa).
“We’ve been successful in increasing throughput from the original nameplate capacity, and by late 2016 had increased that by 30 per cent up to 7.5 mtpa but we’re planning new work and doing the final stages of design and approvals around an additional mill which would lift processing capacity by another 10 per cent to around 8.2mtpa,” Mr Bradford said.
Increasing capacity would cost the JV $25 million, but was expected to deliver a payback in less than 12 months.
On the mining side, IGO and AngloGold have also increased the mining rate from about 50 million tonnes two years ago to above 90 million tonnes in 2017.
“The reason we have done that is to accelerate the exposure of the ore at the bottom of the pits in Tropicana and Havana…which is going to allow us to put the highest grade material, through the processing plant, and stockpile the low grade,” he said.
“This means gold production over the next two years will be some of the highest gold production for the project’s life to date.”
The big picture
Looking ahead, Mr Bradford said the company was well placed to capitalise on increased commodity prices.
“Certainly the market is shifting,” Mr Bradford said.
“There is a lot of interest there; for instance on the nickel side there has been good fundamentals with strong demand and strong demand growth from nickel into stainless steel.
“But layered on top of all that is we have got this emerging story about the importance of base metals in the electric vehicle market, and obviously the two key ones there are nickel and cobalt which are very important to the high performance batteries that are needed for these vehicles.
“Then of course there is copper which is used to move the electricity around.”
Mr Bradford said it was a very exciting phase for IGO across its Nova, Tropicana, Jaguar and (in the short term) Long operations.
With a current mine life out to the June quarter next year, Long’s reserves were almost depleted, but Mr Bradford said he didn’t believe this was the end just yet.
“We still have a continuing exploration program at Long to identify additional mineralisation and we’ve spent $1.5 million in the current financial year towards that,” he said.
“After the June quarter next year, we’ll continue that on a care and maintenance basis and would likely do that for one to two years, and if we’re not successful in that extended period then we’d likely move to closure.”
Jaguar too had some highly prospective new deposits under exploration, Mr Bradford said.
“We have been doing work to look at how we can maximise revenue generation through the process plant, and we have completed a study around the production of a third concentrate stream (gold and silver) at Jaguar which would increase overall revenue and improve operating margins,” he said.
Further ahead, Mr Bradford said he will looking for the next deposit to bring into production.
“We will be looking for the next set of business we need to do to grow the company and to identify that next project for the portfolio – whether that be through organic growth or identifying a project that someone else has discovered and taking it through feasibility study, permitting and development,” he said.
