Australia top destination for exploration spending

Australia attracted 17.3% of global exploration funding last year, more than any other country in the world, though spending fell 19% to A$676.3 million from the previous year. Gold was the main target of interest, attracting more than 55% of exploration dollars, and Western Australia was the most popular destination, with A$415 million spent during 2000.

Government officials are rolling out the welcome carpet to foreign companies in hopes of stimulating exploration, which, in real dollar terms, has slumped to levels not seen since the early 1990s. They cite, as incentives, the nation’s mining heritage, political stability, geological diversity and modern infrastructure. Foreign companies are also attracted to Australia’s various programs that provide geoscientific information and data sets in both proven and greenfield mineral provinces.

Officials say interest from major international houses increased during 2000, in part because of bargain prices and the general scarcity of advanced projects elsewhere in the world. While some companies focused on outright acquisitions (notably Rio Tinto‘s [RTP-N] recent takeovers of North Ltd. and Ashton Mining), many opted to form joint ventures with juniors. For example, Platsearch partnered with Inco (N-T) to explore base metal properties in New South Wales, South Australia and Queensland, and Pilbara Mines signed an agreement allowing Inmet Mining (IMN-T) to farm into ground near its Teutonic Bore base metal project in Western Australia.

North American gold companies were also active in 2000, though home-grown Normandy Mining (NDY-T) continues to dominate Australia’s gold sector. About 77% of the company’s 2-million-oz.-plus annual production comes from its four largest mines — Yandal, Kalgoorlie, Tanami and Pajingo — all of which are in Australia. However, the nation’s second-largest gold company is also America’s oldest producer — Homestake Mining (HM-N). The major churned out nearly 900,000 oz. of the yellow metal last year from its Kalgoorlie and Yilgarn operations in Western Australia.

More recently, Homestake paid US$27.6 million to acquire the Cowal gold project in New South Wales from North Gold, a wholly owned subsidiary of Rio Tinto. The project contains reserves of 73 million tons grading 0.035 oz. gold per ton, equivalent to 2.5 million contained ounces. It is the Lachlan fold belt, 250 miles west of Sydney. A feasibility study recommended annual production of 200,000 oz. gold and a mine life of at least 10 years. Homestake believes there is considerable potential to increase reserves, based on numerous holes that bottomed in mineralization.

Diversified miner Teck (TEK-T) is no stranger to Australia, where it operates through subsidiary PacMin. Last year, PacMin’s Tarmoola mine produced 180,000 oz., or 41,000 oz. less than in the previous year, owing to a major waste-stripping phase that began in the second half of the year.

Production began early this year at PacMin’s new, A$40-million Carosue Dam gold mine in Western Australia. The operation is expected to produce 120,000-130,000 oz. gold this year, and, at last report, reserves stood at 15.5 million tonnes grading 2.18 grams gold per tonne, equivalent to 1.1 million contained ounces. An additional 126,000 oz. are contained in 3.5 million tonnes grading 1.1 grams.

Placer Dome (PDG-T) also has a longstanding association with Australia. The major is continuing to find new ounces at its 60%-owned Granny Smith mine, 20 km south of Laverton and about 200 km north of the famous Kalgoorlie gold camp. The remaining 40% is held by Australian-listed Delta Gold.

At the end of 1999, reserves at Granny Smith were deemed sufficient for only two more years. That changed last year, when drilling beneath the Wallaby gold deposit added 2.1 million new ounces, thereby extending the mine life to at least five years.

Wallaby will be the ninth significant deposit mined at Granny Smith since operations began in the early 1990s; it is expected to come on-steam early next year. Annual production is forecast to average 320,000 oz., with cash and total costs pegged at US$160 and US$215 per oz., respectively. Capital costs are estimated at US$90 million, including US$22.2 million for new mining equipment and US$10.8 million for plant upgrades.

Wallaby contains a reserve, minable by open-pit methods, of 18.1 million tonnes grading 3.4 grams gold per tonne (or about 2 million contained ounces) within an overall resource of 58.4 million tonnes grading 2.6 grams (or 5 million oz.). The stripping ratio is expected to be 5.7-1, or 7-1 if prestripping is included. To justify mining of the deeper mineralized zones, a higher gold price would be needed. Last year, Granny Smith produced 412,048 oz. gold at a cash cost of US$207 per oz. and a total cost of US$221 per oz.

While the Archean greenstones of Western Australia’s Eastern Goldfields are a favoured target for gold companies, government geologists say the region is generally underexplored at depth and offers considerable potential for deeper resources. They point out that new geological models and improved understanding of the geological environment have already resulted in new discoveries at existing deposits, including the Paleozoic slate-belt deposits at Bendigo in Victoria. Among the intersections reported here are 13.5 metres of 58.1 grams gold per tonne and 13 metres of 11 grams.

On the base metal front, exploration has focused on the Broken Hill-Olary regions, the Mount Isa province, and the Lachlan fold belt. Massive sulphide deposits in the Yilgarn and Lachlan regions attracted considerable interest during 2000.

Last year’s discovery of the West Musgrave nickel-copper mineralization in the Giles complex of Western Australia has rekindled interest in the Proterozoic mafic-ultramafic complexes in the East Kimberley and elsewhere as potential hosts for Voisey’s Bay-style nickel-copper mineralization. These and other layered intrusions were also the focus of renewed interest in platinum group metals (PGMs) following the increase in prices for these metals.

WMC Resources has identified three main prospects at West Musgrave: Nebo, Babel and Gerar. Drilling at Nebo returned 26.55 metres of 2.45% nickel and 1.78% copper, plus 0.74 gram PGMs per tonne and some gold values, whereas a hole drilled at Babel intersected 148.9 metres of 0.3% nickel, 0.42% copper and 0.29 gram PGMs plus gold.

In addition to gold, PGMs and base metals, other targets of interest in Australia are mineral sands, diamonds, tantalum, magnesium and rare earth oxides.