MAGNETITE-copper producer IMX Resources has a clearer and more profitable direction under its new managing director, Neil Meadows. After officially coming on board in late November last year, Mr Meadows set to work evaluating IMX’s assets and creating a plan to make the company profitable once again. As a result, the IMX board is already anticipating a cash flow positive June 2012 quarter from its
51 per cent-owned flagship Cairn Hill magnetite-copper direct shipping ore mine, 55km southeast of Coober Pedy in South Australia. China’s Taifeng Yuangchuang International Development Company holds the remaining 49 per cent stake in Cairn Hill. IMX’s wholly-owned subsidiary Termite Resources operates the mine for the joint venture.
An initial item on Mr Meadows’ list was to address issues at Cairn Hill mine, which had stopped being profitable. “[After starting with IMX], I quickly came to the realisation that some decisions had been made
previously that had rendered the operation cash flow negative,” Mr Meadows said.
“The first thing that we wanted to do was turn that around so that the cash flow from Cairn Hill was seen to be supporting the development of IMX into a decent-sized company,” he added.
One of the early decisions Mr Meadows made regarding Cairn Hill was to slow down the rapid pre-stripping that had been going on at the two pits under phase one of the operation.
Phase one of the mine has an in-pit magnetite-copper resource of 7.9 million tonnes grading 50.5 per cent iron ore and 0.30 per cent copper, while phase two has a resource of 8.4mt grading 46.7 per cent iron ore.
About four weeks after Mr Meadows joined IMX, he made another crucial decision: to cut the overall mining rate from 600,000 bank cubic metres (BCM) a month to 300,000BCM a month.
“The aim there was to reduce the operating cost,” he said. The mine’s cash cost target is $80 per tonne of free on board ore. “The company had [previously] formed the view that what constituted phase two of Cairn Hill was a certainty and that was why they were doing the rapid pre-stripping of the pit.
“But phase two, at this stage, is still less than a certainty so we’ve taken the view that we need to batten down the hatches and get Cairn Hill back to being cash positive.” In addition to reducing costs at Cairn Hill, Mr Meadows has sought out the best market and price for the mine’s magnetite-copper ore. “We’ve achieved all that. We’ve now got an improvement in the iron and copper prices from six months ago, and we’ve worked hard with our various customers and with gaining an understanding that there is actually an undersupply of this style of material into [the types of processing] plants that can actually pull copper out of magnetite slurries,” he said.
“We’ve also gone from selling inconsistent grades of material into the Chinese market. Between myself and the general manager in Adelaide, we’ve had a four or five trips to China in the last three or four months to cultivate the market, and have done a lot more homework into the real value and use of the material.”
Cairn Hill has about four years remaining on the mine life at a production capacity of 1.7mt per annum.
At the time of writing, IMX was in advanced negotiations stages with new customers having copper and gold recovery-capable processing plants.“We are achieving prices now that are 30 to 40 per cent above what they were at the low point six months ago and, by reducing costs and increasing revenues, we have rebuilt the margin back into the operation.” Mr Meadows said the company was anticipating annual earnings from Cairn Hill of about $45 million (before interest and tax, and before distribution to the JV parties). Plans for 2012 and beyond According to Mr Meadows, IMX will be strengthening its involvement
with TSX-listed company Continental Nickel during 2012.
At the time of writing, IMX had a 53 per cent beneficial interest in the Nachingwea nickel-copper project in Tanzania, which is operated through a JV with Continental Nickel.
IMX has a portion of indirect ownership of Nachingwea through its 37.2 per cent shareholding in Continental Nickel. As well as the indirect stake, IMX has a 25 per cent direct claim on the actual project. Continental holds the remaining 75 per cent controlling interest in Nachingwea.
Exploration at Nachingwea has revealed the Ntake Hill deposit, which has a measured resource of 1.66mt grading 1.71 per cent nickel and 0.29 per cent copper. The indicated resource is 11.12mt grading 1.14 per cent nickel and 0.25 per cent copper, while the inferred resource sits at 45.04mt grading 0.3 per cent nickel and 0.07 per cent copper.
The JV has plans to bring the deposit into production by 2015. Initial production is estimated at 15,000tpa, potentially increasing to 20,000tpa.
“Whenever I get an opportunity to speak to an analyst, or our board or investors, I describe Ntake Hill as the jewel in the crown,” Mr Meadows said.
“You don’t find many decent-sized, clean nickel sulphide deposits in the world these days.”Mr Meadows added that when he described the asset’s economics to nickel experts, they were impressed. The Nachingwea project area encompasses about 64,000 square kilometres of ground that is held unde licence or application for licence. The project area is close to road, power and port infrastructure. “The second project that rates pretty highly for IMX is the Mt Woods magnetite project [in South Australia],” Mr Meadows said.
The project is believed to be prospective for magnetite and its main deposit, Snaefell, is 12km southwest of Cairn Hill. A JORC-compliant resource was calculated for Snaefell in 2004: at 569mt grading 27 per cent iron ore, it is the largest single iron ore resource in IMX’s portfolio. Snaefell has been defined across 2.7km of strike, and remains open along strike and at depth.
“What we’ll be aiming to do this year is expand our knowledge of that deposit, get sufficient metallurgical core samples to get a large metallurgic work program under way and, essentially, we’ll endeavour to build a project off the one resource we’ve got at Snaefell,” Mr Meadows said. “There are also three exploration targets, which add up to about another 400mt [of iron ore] at the moment.” Mr Meadows believes that with exploration targets and resources combined there is potentially close to 1 billion tonnes of ore at Mt Woods. IMX also has a JV with OZ Minerals, which is spending a minimum of $20 million for a 51 per cent interest in non-iron ore minerals in the project area.
OZ is exploring for copper and gold at Mt Woods, which is close to its Prominent Hill copper mine. Mr Meadows said that IMX would be using the positive cash flow from Cairn Hill to fund feasibility studies
at Ntake Hill and Mt Woods, and bring both of those operations into production.
By Lorna Seatter