0b40c78c198eb4138c786b.pdf
METALLICA MINERALS LIMITED
ANNUAL REPORT 2015
CORPORATE DIRECTORY
DIRECTORS
Mr Barry J Casson (Non-Executive Chairman) Mr Andrew L Gillies (Non-Executive Director) Dr Shu Wu (Non-Executive Director)
Mr Shu Zhang (Alternate Director to Dr Shu Wu)
CHIEF EXECUTIVE OFFICER
Mr Simon J Slesarewich
CHIEF FINANCIAL OFFICER & COMPANY SECRETARY
Mr John K Haley
PRINCIPAL REGISTERED OFFICE IN AUSTRALIA
Ground Floor, 71 Lytton Road East Brisbane QLD 4169
+ 61 7 3249 3000
[email protected]
WEBSITE
www.metallicaminerals.com.au
SHARE REGISTRY
Link Market Services
Level 15, 324 Queen Street
Brisbane QLD 4000
+61 73320 2200
AUDITOR
BDO Australia
Level 10, 12 Creek Street
Brisbane QLD 4000
LEGAL
HopgoodGanim
Level 8, Waterfront Place 1 Eagle Street
Brisbane QLD 4001
STOCK EXCHANGE LISTING
ASX: MLM
AUSTRALIAN BUSINESS NUMBER
ABN: 45 076 696 092
SUBSIDIARY COMPANIES
NORNICO Pty Ltd ACN 065 384 045
Oresome Australia Pty Ltd ACN 071 762 484
Oresome Bauxite Pty Ltd ACN 606 362 252
Lucky Break Operations Pty Ltd ACN 126 272 580
Phoenix Lime Pty Ltd ACN 096 355 761
Greenvale Operations Pty Ltd ACN 139 136 708
Scandium Pty Ltd ACN 138 608 894
Touchstone Resources Pty Ltd ACN 126 306 018
CONTENTS
2015 Achievements & 2016 Goals 1
Chairman & CEO's Letter 2
Project Generation 4
Cape York HMS & Bauxite Project 6
Urquhart Point HMS Project 8
Urquhart Point Bauxite Project 9
Cape York Regional HMS & Bauxite Exploration 11
Esmeralda Graphite Project 12
Lucky Break Nickel Laterite Project 14
SCONI Nickel-Cobalt-Scandium Project 15
Limestone & Lime Projects 16
Cape Flattery Silica Sands Project 17
Director & Management Profiles 20
Tenement Tables 23
Resource Tables 27
Top Twenty Shareholders 37
2015 2016
achievements goals
➤ $500,000 sale of Ootann Limestone Project
➤ $370,000 sale of Star Limestone Project
➤ $450,000 Nickel Royalty received for Dingo Dam Mining Lease, a further $200,000 to be received in October
➤ Mining Lease Application lodged for Urquhart Point Bauxite Project
➤ 7.5Mt Inferred Bauxite JORC Resource at Urquhart Point Bauxite Project, Direct Shipping Bauxite (DSB) also confirmed
➤ $7.5M received from Joint Venture Partner to progress the Cape York Heavy Mineral Sands (HMS) and Bauxite Projects
➤ Sold remaining shareholding in MetroMining for $2M
➤ Completed corporate raising of $500,000
➤ $579,000 R&D tax refund received
➤ Completed fabrication of 110tphr HMS processing plant - currently being transported to Brisbane
➤ Further advance Urquhart Point Bauxite Project
and gain approvals for a modest 1.5-2Mtpa Direct Shipping Bauxite (DSB) operation
➤ Continue to review low temperature bauxite opportunities located in the Pacific Basin
➤ Identify and evaluate other value-adding projects
➤ Complete drilling program at Esmeralda Graphite project near Croydon
➤ Review plans for development of the Urquhart Point HMS project
➤ Continue to realise value from non-core assets
➤ Progress negotiations for joint venture partners for the SCONI nickel-cobalt-scandium project
➤ Investigate commercial opportunities on Metallica's Scandium Intellectual Property
CHAIRMAN & CEO'S LETTER
BARRY CASSON & SIMON SLESAREWICH
Dear Metallica Shareholder
The past year saw Metallica replicate the cost cutting and reduced expenditure by Australia's mining industry large and small, as subdued commodity and equities markets persisted in the resources sector.
Your Board elected to use this 'market downtime' to rework just how Metallica should emerge for the longer term from this negative environment.
We ran leaner and meaner, cut Director, management, administration and external costs, with more savings to come and in particular we looked critically at how to renew the Company, how to seek value from non-core assets and critically review which projects could now genuinely be commercialised.
Review outcomes include a timely renewal of the Board, through a change to its Chair and a new CEO replacing the long held position of Managing Director.
We pay tribute to founding Managing Director, Andrew Gillies, and the robust stewardship of now retired Chair, David Barwick, for guiding Metallica from its ASX listing in 2004 through many challenging times and yet delivering a legacy of advanced development assets.
Importantly, Metallica has not had to pursue a fire sale of assets or revert to a seemingly common approach in the sector's 'survival at any expense'.
Metallica's upside includes our projects near Weipa in Queensland, our unique graphite project, also in Queensland, and completing the successful staged disposal of our limestone assets.
Our SCONI (scandium, cobalt and nickel) project northwest of Townsville retains global appeal but requires wider and increased use of scandium and a return of market sentiment.
Full project details are included in the following pages.
As your new Chair, I have the value and knowledge of five years on your Board, and we retain the skill set of Andrew Gillies as a Non-Executive Director. As the new CEO, Simon Slesarewich brings a new and complimentary skill set of achievement as an experienced project developer and operator.
So what is Metallica's future?
Resources companies making the transition from explorer and project developer into a producer require by convention, different and proven skill sets.
As your new Chair and CEO, Simon and I plan to respect the project gains of the past but also bring a fresh set of eyes, ideas and approach and deliver the necessary project financing, mergers, acquisitions and offtake agreements to achieve growth.
Project development is not easy. It is not for the inexperienced. In Simon we have the project development skills.
Metallica will only move on those projects which have real scale, attract good management, financially robust partners, and are in an in-demand commodity that allows for profitably sufficient for riding out the cyclic ups and downs of commodity interests. We will not be short-sighted or single minded in our due diligence.
We will retain an open mind not bound by any specific commodity or jurisdiction. Our deliberations will be based simply on whether a new opportunity brings value to shareholders and in particular will deliver reliable and timely cashflow.
Mineral sand prices (particularly titanium minerals rutile and ilmenite) have continued to decline in 2015 and the Joint Venture and your Company are monitoring this and periodically reviewing options while continuing to progress the development of the Urquhart Point HMS project on a more cautious step-by-step or staged approach.
We need game-changers. In the short-term, that is likely to be bauxite, but as we mentioned above, new value-adding opportunities that may be outside our historic project focus, will get serious attention from your Board and management.
Oddly enough, the current negative equities market sentiment around resources is presenting projects and opportunities at well below conventional values and Metallica enters this arena with an open mind.
Graphite may be a second string to our game- changer aspirations but again, that depends on drilling success in Q4 targeting high purity graphite at our re-emergent Esmeralda graphite project near Croydon in Queensland.
Why bauxite as an early lead?
Metallica is the owner and JV developer of substantial bauxite rich tenements south and north of Rio Tinto's existing Weipa bauxite mining and export operations, and we control vast tracts of bauxite rich tenements along the entire western Cape York Peninsula.
This gives us unique, direct and cost competitive sea routes into the established and emerging bauxite markets of Asia and the sub-Continent - better defined as the Pacific Basin.
Bauxite remained buoyant through 2015 as a bulk commodity with strong fundamentals.
Our geographically advantaged Cape York bauxite is largely of Direct Shipping Bauxite (DSB) quality that can cost-competitively support substantial Free On Board (FOB) volumes of good grade into well-established sea routes at a time when there is a forecast shortfall in global bauxite supply.
Bauxite fundamentals look strong and we see upside for Metallica and future partners in prioritising development of our bauxite in the near and medium-term.
Emerging global data also points to increasing bauxite volume demand, sustained pricing and shortfalls in 2016, particularly in China and India.
New refineries and smelters are being developed independent of direct links to any particular bauxite mine, thus spurring a seaborne market that was not available historically.
Our bauxite objective is to achieve sales of 5-7Mtpa within 3-5 years. We have set some criteria. Bauxite projects must contain low temperature bauxite, be within the Pacific Basin to ensure access to China, be producing or near producing assets and be able to trade through the cycle.
First stop will be our planned Urquhart Point bauxite operation where we expect to gain approval for a modest 1.5-2Mtpa DSB operation by late in calendar year 2016, assuming that a full EIS is not required.
Due diligence is underway on possible bauxite acquisitions and we are assessing projects held by alumina and aluminium producers - not the natural owners of bauxite mines. Metallica sees bauxite as an exciting and rewarding sector. However, we shall
remain disciplined and ensure that any acquisition adds value to shareholders and meets our stated criteria.
Indonesian bans on raw bauxite exports remain in place - creating a ~40Mtpa hole in global markets which Australia is best placed to fill.
China needs to import more than 75Mtpa of bauxite in the next 5 years - with new sources of supply needed. That is Metallica's target for this specific commodity but it may eventually also be in parallel with other opportunities in other mineral commodities as they present.
For example, we have the potentially game changing Esmeralda graphite in granite project in Queensland and we look forward to reporting to you the results from the upcoming drilling program.
We first drilled Esmeralda in 2006, proving it as a large and potentially high grade deposit.
Esmeralda is a unique hydrothermal graphite system similar to the world leading but narrow vein small Sri Lankan graphite mines.
Graphite is attracting high interest for its long-term fundamentals in servicing emerging high end technologies reliant on high quality and high purity graphite.
Esmeralda is a good example of an opportunity with the potential to significantly re-rate Metallica.
So that is where Metallica is headed.
Metallica's new direction is exciting, realistic and designed to ensure Metallica has a future measured initially in bauxite production, development and potentially graphite but also being open to other commodities and projects if they present at value- adding price points and market demand.
Thank you for your loyalty.
Market pressures have sapped the junior resources end but that underpins why we have reviewed, redesigned and refocused your Company and we invite you to stay with us on our shared journey.
Metallica's bauxite production would enter markets with an expected 68Mtpa shortfall by 2040 with low temperature bauxite of the Metallica style and favoured by China, under-supplied in the short, medium and long-term.
BARRY CASSON
Chairman
SIMON SLESAREWICH
Chief Executive Officer
PROJECT GENERATION
The Company has commenced the identification of potential new value adding projects and is currently carrying out preliminary due diligence on several projects in a select number of commodity groups.
The current market environment has resulted in many opportunities for companies with available funding and/ or funding support and management teams that add value by revitalising and moving advanced but typically dormant or underdeveloped projects forward.
The appointment of Mr. Simon Slesarewich as the Company's CEO will allow the Company to target larger, more advanced projects using Simon's engineering background, operational and project development experience.
As noted in the Chairman and CEO letter, Metallica will only consider projects which have:
» real scale,
» can attract good management,
» established and financially robust partners, and
» are in an in-demand commodity that allows for profitably sufficient to ride out the cyclic ups and downs of commodities.
The Company will not be bound by any specific commodity or jurisdiction, but continues to believe
additional bauxite projects are a high priority commodity of interest. However, we shall remain disciplined and ensure that any acquisition adds value to shareholders and meets our stated criteria.
Bauxite remained buoyant through 2015 as a bulk commodity with strong current and forecast fundamentals.
Emerging global data points to increasing bauxite volume demand, sustained pricing and shortfalls in under 12 months, particularly in China and India.
For Metallica, bauxite projects should preferably contain low temperature bauxite, be located within the Pacific Basin to ensure more advantageous access to China, be producing or near producing assets and be able to trade through the cycle.
It is planned that the Urquhart Point Bauxite Project (held in a 50/50 Joint Venture) will be progressed toward approval for a modest 1.5-2Mtpa DSB operation
by late in calendar year 2016, assuming that a full Environmental Impact Study ('EIS') is not required.
Due diligence is also underway on possible bauxite acquisitions and Metallica is assessing projects, including some held by alumina and aluminium producers.
Our bauxite objective is to achieve sales of 5-7Mtpa within 3-5 years.
CAPE YORK
HMS AND BAUXITE PROJECT
|
AREA
|
1,797 Ha Mining Leases and Mining Lease Applications and 1,257km2 Exploration Tenure
|
|
COMMODITY
|
HMS (Zircon, Rutile, Titanium minerals) and Bauxite (Bx)
|
|
HOLDING
|
MLM 50% (Joint Venture) with Ozore Resources Pty Ltd holding 50%
|
The Cape York Heavy Mineral Sands (HMS) and Bauxite Project is located on the west coast of Queensland's Cape York Peninsular, and is now held 50% by Metallica Minerals' wholly owned subsidiary, Oresome Australia Pty Ltd, with a 50% interest held by a Private Chinese investor Ozore Resources Pty
Ltd, pursuant to the Cape York HMS and Bauxite Joint Venture entered into in August 2014.
In accordance with the Joint Venture Agreement, Ozore has now provided A$7.5M to develop the Urquhart Point Project and to explore other tenements held within the Cape York region. Since formation, the JV
has expended over $7M on progressing the Urquhart Point HMS Project as well as the regional mineral sand and bauxite exploration programs, with the majority
of the funds applied to the manufacturing of the HMS processing plant which has recently been completed in South Africa and is currently being shipped to Brisbane.
The project has three separate components;
» Urquhart Point HMS Project
» Urquhart Point Bauxite Project
» Cape York Regional HMS & Bauxite Exploration
Looking east above the Urquhart Point ML & proposed HMS mining area across the Embley River Weipa Port and Township
FIGURE 1: Cape York HMS and Bauxite Project Areas
URQUHART POINT
HMS PROJECT
The Urquhart Point Heavy Mineral Sand (HMS) project is located 3km south west of Weipa. The JV envisages a simple dry mining (
In October 2014 a Plant Supply Contract was executed with Consulmet Pty Ltd. The contract was a turnkey contract to supply and commission the HMS concentrator plant. The fabrication and construction of the modularised processing plant has been completed in South Africa and is currently being shipped to Brisbane.
Onsite civil works at Urquhart Point have been completed in preparation for the arrival, construction and commissioning of the plant.
The JV is currently reviewing plans for the project's completion due to the currently lower than anticipated Australian dollar prices for mineral sands, particularly rutile and ilmenite.
Civil works completed in preparation for the HMS processing plant with haul road from the initial mining area
Hydrex Tank
Cup
Spirals Unit
Water Reticulation
Administration and future Ranger Station
Trommel Screen
Trommel Screen Feed Conveyor
Isometric view
Ore Feed Bin
URQUHART POINT HMS PLANT GENERAL ARRANGEMENT CONA001 - A000 - GA001
FIGURE 2: 3D CAD image Urquhart HMS plant design
URQUHART
BAUXITE PROJECT
The Urquhart Bauxite Project is situated adjacent to the HMS project and is some 5km southwest of Weipa
2
Available alumina (AAl) and reactive silica (RSi) were selectively sampled for intervals below a 15% SiO or
on Queensland's Cape York Peninsula. Western Cape
above 48% Al O
threshold at Area A. This represents
2 3
York is world-renowned for its extensive deposits of
high-quality, export grade pisolitic bauxite.
the lower half of the bauxite horizon defined in Area A.
2
In comparison, Area B has generally higher SiO
and
The Joint Venture has lodged a Mining Lease Application
a much smaller and less continuous lower bauxite
(MLA) 100044 comprising 1,378Ha covering the
2
domain as defined on a 15% SiO
or above 48%
Urquhart Bauxite Resource (Area A and Area B) and an
Al O
threshold. It has similar chemistry but currently
infrastructure mining lease application MLA 100049 over 23
the potential north jetty barge option area.
The maiden aircore drilling program was completed in
no available AAl and RSi assay results to conclusively
determine the overall quality of Area B.
Estimates for the lower bauxite horizon as a higher
December 2014. The program consisted of 85 holes
using an aircore drill rig. The holes were drilled in two
grade subset of the 45% Al O
2 3
are provided in Table 2 and
resource in Table 1 effective cut-off
target areas Area A and Area B on a nominal 320 x
at an
grade of 15% SiO . This includes available AAl and
320m grid pattern.
RSi information
2
for Area A of: Area A Inferred 4.0Mt @
The Area A drill program comprised 23 holes for a total of 167.5m, with an average depth of 7.3m. High grade pisolitic bauxite was encountered in 21 of these holes.
The Area B drill program comprised 62 holes for a total of 305m with an average depth of 4.9m of which 7 holes were 160m spaced infill drill holes and 3 were duplicate holes.
2 3 2
53.3% Al O , 13.0% SiO , 40.6% AAl, 4.9% RSi.
The JV holds extensive regional HMS and bauxite tenements along the 300km sandy coastal belt between Weipa and the tip of Cape York Peninsula.
TABLE 1: Urquhart DSB Resource statement
details at 45% Al O
cut-off
2 3
|
Area
|
DSB (in-situ)
|
|
Kt
|
Al O %
2 3
|
SiO %
2
|
Kt^
|
|
A
|
5,121
|
52.0
|
15.0
|
3,769
|
|
B
|
2,366
|
48.8
|
19.0
|
1,505
|
|
Total
|
7,487
|
51.0
|
16.3
|
5,274
|
The areas are adjacent to the boundry of Rio Tinto's
mining lease covering the South of the Embley bauxite project.
The drilling results coupled with the completed geological modelling confirm that the majority of the Urquhart bauxite resource is suitable for Direct Shipping Bauxite (DSB). The potential production of DSB allows for the expedited permitting and
development of a relatively simple mining-truck-barge
operation with low capital and operating costs.
|
Area DSB (in-situ)
|
|
|
|
Kt
|
Al O %
2 3
|
SiO %
2
|
AAl%
|
RSi%
|
The Weipa type bauxite is of high quality export grade with high alumina content (>50% Al O ) that is sought
TABLE 2: Urquhart DSB Resource statement for the lower Bauxite profile
2 3
after in the seaborne market.
|
A
|
3,987
|
53.3
|
13.0
|
40.6
|
4.9
|
|
B
|
777
|
52.7
|
13.2
|
|
Total
|
4,764
|
53.2
|
13.0
|
In May 2015, the Joint Venture announced a maiden JORC 2012 compliant bauxite Resource estimate for the Urquhart Bauxite Project. The 2015 Resource estimate for the Urquhart Bauxite Project (for both
Areas A and B) at the 45% Al O
cut-off for DSB is:
2 3
Inferred 7.5Mt @ 51.0% Al O , 16.3% SiO .
2 3 2
Additional details by area are provided in Tables 1 and 2.
Tonnages are a subset of those reported in Table 1
^ Recovered tonnage (tonnes x yield) for the same DSB cut-off grade and DSB in-situ dry tonnage
10
METALLICA MINERALS
2015 ANNUAL REPORT