THE ambitious diversification and rebranding of CopperChem to Round Oak has been no small task.
The unlisted subsidiary of Washington H. Soul Pattinson and Company (WHSP) is in the process of establishing itself as an emerging base and precious metals producer, off the back of a series of acquisitions that have expanded its interests past its copper-producing roots to include zinc and gold.
In the Past 12 months, the company’s portfolio has grown to include the Jaguar copper-zinc operation in WA, Cloncurry and White Dam gold operations in Queensland and South Australia respectively, and the Stockman and Barbara projects in Victoria and Queensland.
In 2018, revenue for the company was at $18.7m, up from $18.4m in the previous year.
In the first half of FY19, the new incarnation of the company generated a total revenue of $64.38M which did not cover operating costs, and cost WHSP $22.7m in lost consolidated revenue.
WHSP said that the losses were the result of the significant start-up costs “associated with the development of various projects, including the Wallace and Barbara gold projects and the Mount Colin and Stockman copper assets,” as well as the Jaguar mine reducing its production to focus on the development of the Triumph resource.
WHSP valued its subsidiary at $198m, claiming a $43m, 28.1pc growth in asset value over the year.
The company said that its re-branding strategy was part of a targeted move to diversify its interests, and to pay homage to its heritage.
“The new company name provides a link back to where our company started at its Great Australia Mine,” the company said.
The Great Australia mine was located on the Round Oak station in northwest Queensland, and is a part of the Cloncurry operations, forecast to reach production in 2019.
Queensland
Round Oak’s Queensland operations consist of 24 exploration tenements and 11 mining leases, with two projects, the Australia Operations (which includes Cloncurry), and the Mt Colin underground mine becoming operational in 2018.
The company commissioned new gold processing facilities at its Cloncurry operation in the second half of 2018.
The facility upgrade included the integration of crushing and grinding circuits, with the new gold processing facilities to process ore from Round Oak’s Australia Operation portfolio of satellite open pit gold mines, which will feed the processing plant for the first two to three years.
Wallace South was the first pit to be restarted, and began operations in June 2018 and, in December 2018, the company produced and processed the first gold from the pit.
Wallace South is expected to produce between 30,000 and 35,000oz in 2019.
The Mt Colin mine commenced activity in July 2018, with portal access being established from the existing open pit.
The project was impacted by the floods in northern Queensland, however, the company says it is still on track to reach production in the first half of 2019.
The once-operational Mt Colin would employ about 70 people, and ore from the mine would be treated at Glencore’s Ernest Henry operation.
The Barbara open pit development commenced in February, and has an expected mine life of two years.
First ore is expected to be produced at the beginning of FY20, with ore to be processed at Glencore’s Mt Isa operations.
The operation would employ about 40-50 people, to be bussed in from Mt Isa, as with the Mt Colin operation.
Round Oak said that it is continuing exploration in north-west Queensland on a number of prospective targets in the hope of identifying additional satellite copper resources at a feasible transporting distance from the Cloncurry processing facility.
Round Oak came under scrutiny from the Department of Environment and Science (DES) over concerns about the Great Australia Operations legacy groundwater quality.
Round Oak said that it had continued de-watering the impacted groundwater system, and had successfully closed out an Environmental Protection Order for ground water quality during 2018, and that it “implemented monitoring and management actions in response to an unplanned water releaser that occurred at its Mt Colin operations”.
WA
The $73.2m acquisition of the Jaguar zinc-copper operation from IGO in May 2018 was part of the company’s diversification strategy that followed on from its $47m purchase of IGO’s Stockman copper-zinc project in Victoria.
Round Oak was still CopperChem when it purchased the Jaguar operation, and at $73.2m, the company would appear to have purchased it at well under market value.
RBC Capital Markets analyst Paul Hissy said that the deal came in well below the estimated $150m value.
In the latter half of 2018, ore production was reduced at the Bentley underground mine, with the company citing a shift of focus toward “completing capital development to open up additional mining fronts and enable higher production rates in FY20”.
The company is also looking at the Triumph resource at Jaguar and is undertaking an evaluation to determine the project’s potential to extend the Jaguar mine life beyond its current four-year expectancy.
Victoria
The Stockman copper-zinc project, acquired in 2017, has continued to progress through the approval and permissions phase.
In July 2018, the project was granted its infrastructure mining licence that covered its tailings dam, and proved a critical milestone that allowed Round Oak to progress toward the work plan, which was submitted in the second half of 2018.
The Stockman mine has a somewhat tainted legacy with the East Gippsland community.
After falling into receivership in the late 90s, Benambra Copper left taxpayers to foot the $6.9m rehabilitation bill for the old tailings dam.
This resulted in a government exclusion zone to stop use by future miners, with the decision being reversed in 2017 by then resources minister, Tim Pallas, which facilitated the purchase.
The company said that it will continue to explore and increase the mineral resource at Stockman throughout 2019, and that as it continues to test new targets, it is yielding positive early results.
