All images: Heron Resources.
BY REUBEN ADAMS
HERON Resources’ Woodlawn zinc-copper development is on track to begin commissioning in late 2018. Once in production, the high-grade, long-life Woodlawn will be well placed to participate in a zinc market facing a significant supply shortfall. Reuben Adams spoke with Heron Resources chief executive Wayne Taylor.
It must be nice to see Woodlawn in development.
It is – it has been a while coming. We got to a place where we had all the studies done and, as a lot of companies do, found the major hurdle was getting the money to make it happen on the ground. We got that done in September last year, so that was a significant step forward for us.
I joined TriAusMin [former Woodlawn owner, which merged with Heron in 2014] in 2011 after working at Glencore. There were some key attributes to Woodlawn that really made it stand out.
Being a former operation there’s a lot of infrastructure established on site. It was, and still is, a high-grade ore body. I have heard a couple of industry commentators question that ‘grade is king’, but show me anyone who doesn’t prefer a high-grade ore body.
There’s also a lot of exploration upside. We have a plan and reserves for nearly 10 years of operational life, which we only completed to get the project financed. Beyond that we can see plenty of opportunity, not just in the mine but regionally. So we really like the Woodlawn story.
You’ve noted many times that securing finance was a long and arduous process. Was it a relief getting the $240m funding package over the line in July 2017? What other funding arrangements were looked at?
Timing is everything when getting this sort of thing done. It wasn’t an easy process and we are very lucky to have three cornerstone private equity groups [Orion Mine Finance for $129m, Greenstone Resources for $42m, and Castlelake for $33m] who put up the lion’s share of the financing to make it happen.
We had local funds who were giving us very strong indications that they wanted to be involved in the financing, but when it came down to it they were facing a poor return on the resources component of their funds. I’d say the initial financing process was seven months of looking for a debt piece which didn’t materialise from the source we thought it was going to come from. That put us back a little bit.
We, certainly in hindsight, could have accelerated the process but we were chasing a very typical project financing structure. What we have ended up with is a little bit different.
The financing structure is split between debt and equity – does that provide opportunity to pay down that debt quickly?
We would like to. If commodity prices are maintained – and we actually expect them to strengthen further – we should have a pretty rapid pay down on the debt. We also have the ability to refinance it as well.
Once the funding package was locked in, it was like flicking a switch on the construction phase. Any highlights in the build so far?
It’s a highlight every time we start a new activity on site; the earthworks was one, and then we started pouring concrete at the start of February. There’s a bit over 1000 cubic meters of concrete in the ground on foundations now.
We’ve started to receive some of the equipment on site now, so the next major step for us now is the structural steelwork and getting that underway.
You’ve hired former Xstrata Zinc Australia chief operating officer Brian Hearne as mine manager. With a 16 year tenure at Woodlawn from 1978 (40 years ago!) what sort of insider knowledge does he bring to the table?
He pretty much joined Woodlawn straight out of school, starting on the shop floor and in the process plant.
Every so often he’ll come up and remind you about some of the frustrations that they had with the plant onsite at the time, so wherever possible you try to work through those issues and engineer them out.
Veolia is using the existing open pit at Woodlawn for its landfill gas bioreactor. Are there any logistical issues associated with sharing a site?
There are some operational headaches that you have to deal with – none unsurmountable – because you have two companies sharing a site.
It would be great if we had the run of the complete site, but there are also significant benefits in Veolia being there.
They’ve maintained all the infrastructure there, which has given us a real head start. There’s a rehabilitation benefit as well. They are producing a compost which is licensed for mine rehabilitation, so they will be delivering that to us to use for our mine site rehab requirements.
What does the early mining plan look like? Will you be favouring the tailings resource over the underground early on?
It will happen together but we will commission on tailings, principally because it is a more homogenous, low-grade feed source. When you ramp up, trying to improve recoveries, the last thing you want to do is throw away metal from your highest grade sources.
The other benefit of the tailings resource is that the underground can ramp up at a more natural rate, rather than being driven by the need to fill a hungry mill.
We can let the mine progressively ramp up and as we reach more working areas, as the decline gets deeper, we will be able to progressively increase that underground production rate.
If we were to treat just tailings the plant is configured to 1.5mtpa. For hard rock its 1mtpa. If we do a combination of the two, depending on the ratio, you’ll end up with something between 1mtpa and 1.5mtpa. If, for whatever reason, we were to find ourselves in a difficult underground working position we have the ability to fall back to the tailings.
How crucial are in-mine discoveries like Lisa to enhancing project economics and mine life? Do these discoveries allow the company flexibility to change mining and processing strategies?
What we are finding now drilling the G2 and Lisa Lenses will certainly improve the picture.
Our starter case is reserves only and there’s no reserves on the G2 lens. We have also started doing a little bit of drilling on Lisa, a new lens discovery which also isn’t on the reserves. There’s a rig onsite at the moment and the intention there is to prove up some more shallow material we can add to the early stage of the mine plan.
It is clearly where all the blue sky sits. You don’t get too excited about the blue sky in tailings; there is little bit there with about 1.1mt of inferred resources which we do expect it to come into the plan.
The blue sky really sits with the discoveries and further extensions we find in the mine; and there’s so many different areas that we could be targeting.
We currently have a modest budget to keep working on some of the high ranking prospects – and we have some pretty good ground out there with some known deposits.
Any other regional exploration highlights you’d like to talk about?
Peelwood (105km north of Woodlawn) is a recent pickup that has JORC 2004 resources and reserves and – supposedly – a feasibility study done on it.
It’s relatively advanced in the sense that we know that there’s a deposit. We still need to get comfortable with the data and the work that has already been done, because we haven’t had it long.
It allows us, one or two years out, to be quite certain that we have an additional project in the pipeline that is going to contribute to production at Woodlawn.
Where would you like Woodlawn to be this time next year? Do you have a long term vision for the company?
One of the things to focus on is expanding the in-mine footprint – that goes without saying. Also developing a pipeline of regional projects that will help enhance the operation, knowing that if you were to discover a VMS type ore body within about 150km of Woodlawn it should probably go through Woodlawn.
Beyond that, once we have got ourselves producing and have established our credentials we will be looking further afield on the merger and acquisition side of things. The intention is not to be a single asset company, with a focus first-and-foremost on base metal exposure.
There’s a variety of [projects] that we keep a watching brief on. You look in your home patch first, but there are opportunities that exist outside NSW and Australia.
