Miners set for new lease of life in minerals
By BARRY FitzGERALD
It's a long way short of a boom, but there is no doubting that the Victorian mining industry is back on the growth curve, even if low commodity prices and an indifferent equities market aren't helping the cause.
The gold industry is again leading the way, with new mine developments worth more than $70 million either under way or under consideration, mainly in the Bendigo region.
Given the right gold price and sharemarket conditions, that figure could easily climb well beyond the $100 million mark because one thing that Victoria is not short of is gold in the ground.
Victoria was built on gold, with more than 74 million ounces produced between the early gold rush days of the 1850s and 1915. That ranks the Victorian fields among the world's greatest.
But precious little has been produced in the intervening years. Not because of doubts about prospectivity - the Government estimates at least an additional six million ounces has been proved up - but because of a range of issues, not the least of which was long-running Government indifference and continuing land-access issues.
Other issues working against the rebirth of a vibrant Victorian gold industry include the geological complexity of most of the gold deposits, making their modern-day development more difficult to finance.
Add in a cumbersome and what was a generally anti-mining planning and approval process, and it was little wonder that the boom in Australian gold production that kicked off in the early 1980s left Victoria in its wake.
But the past 10 years have given new hope to the miners that they are, in fact, welcome in the state.
In a process that started under the former Labor Government, and which the Kennett Government has pursued with gusto, the miners are finding Victoria has its attractions.
The more welcoming environment is reflected in the fourfold increase in the mining industry's lifeblood - exploration expenditure. In line with the broad slump in commodity prices, exploration in Victoria has eased off in recent months.
But the $10.5 million spent in the June quarter (annualised $42million) still ranks the undertaking as a major industry, with the added benefit of much of it being spent in depressed rural communities.
What's more, the expenditure was down only 6 per cent on the previous corresponding period compared with the 19 per cent crash in the Australia-wide minerals exploration effort.
The executive director of the Victorian Chamber of Mines, Chris Fraser, said the Victorian resilience was largely due to a mineral sands exploration rush in the state's north-west.
The rush in the Murray Basin, with Mildura at its centre, has given the mining industry a real buzz as it has the potential to underpin the development of a world-class mineral sands industry.
The hard work in the Murray Basin was done more than 5million years ago when ocean wave action on ancient shoreline beaches concentrated the heavy minerals rutile, ilmenite and zircon.
Today those heavy minerals are used as feedstocks in the manufacture of titanium oxide pigments used in paints, as well as the ceramics industry and high-strength alloy steels.
Exploration for the now buried beach sands, with an emphasis on coarse-grained strands, has attracted many newcomers to the state, including the established Western Australian, New South Wales and Queensland mineral sands producers.
Vacant exploration ground is scarce and it seems likely that, at the very least, Victoria will have at least a couple of medium-sized operations in production before too long.
Enthusiasm for the full potential of the Murray Basin rush has been checked somewhat by the false hopes that surrounded the 1985 discovery of the huge WIM 150 deposit of CRA, now Rio Tinto, near Horsham.
Rio Tinto spent more than $60million in exploration and development work but the fine-grained nature of the sands and weakening prices for titanium dioxide products at the time saw the company put the project on ice. The company has since been encouraged by the Government to hang on to the deposit but cut back its broader tenement position, allowing other groups to take up the running in the hunt for the more commercially acceptable coarse-grained strand lines in the region.
Early success in the Murray Basin hunt has gone to RGC near Ouyen and the Wemen deposit of Aberfoyle (now owned by Western Metals) and the Japanese-controlled RZM, 25 kilometres south-west of Robinvale, is advancing plans for a development that would yield annual revenues of $20million for at least nine years.
The Murray Basin excitement, and the likely project developments that flow from it, have been ample reward for the Kennett Government's Victorian initiative for minerals and petroleum (VIMP) program, recently extended until 2001 with an additional $7 million expenditure.
Launched in 1994, the program represents a $25.5 million commitment by the Government to geological mapping and geophysical surveys to provide state-of-the-art information on both known and emerging mineral provinces to would-be explorers.
Mineral sands has not been its only success. Gold and base metal targets in the state's east have been highlighted by the work and with the latest extension of the program, the state's petroleum data base will be brought into the age of digital access.
While the potential discoveries that program yields unfold, several companies are planning to bring on the new gold developments that will strengthen the industry's backbone.
Bendigo Mining recently started work on the five-kilometre decline or tunnel under Bendigo city in its $35 million ''New Bendigo'' project. New interpretations suggest the potential for ''ribbons'' of mineralisation containing more than 10million ounces of gold below old workings.
General Oriental, the company of the late Anglo-French billionaire financier Sir James Goldsmith, is a big backer of the project through its support of last year's fundraising by company for the project, as is Mr Kerry Packer.
The tunnelling will take about 30months and represents the first large-scale underground exploration/development program since the last gold was produced from the Bendigo field in 1954.
Success in the work raises the prospect of the Bendigo goldfield being returned to production, not for 10 years but more like 50 years. Limited production could be possible within three years. The company currently employs 47 people and has used the services of 11 local contractors.
At the group's recent annual meeting, the chairman, Mr Peter Philip, told shareholders that the current weakness in US dollar gold prices held no fears for the company.
''Higher grades and orebody widths which will enable productive mechanised mining are necessary for successful low-cost gold production. Bendigo appears to be one of the few gold fields with these characteristics,'' he said.
Across at the Fosterville gold mine, 20 kilometres north-east of Bendigo, Perseverance Corporation continues to plan a $30 million expansion of the project. It has the reserve base to hit the button but needs to secure financing, a task made somewhat easier by gold's recovery to around the $A480 an ounce level due to the lower US exchange rate.
Fosterville is currently producing gold at an annual rate of 40,000 ounces a year from the treatment of oxide reserves, with the group's expansion plans based on the development of the much larger sulphide reserve outlined to date of 360,900 ounces of gold.
The proposed BIOX bacterial oxidation plant for the sulphide project would increase production from Fosterville to an annual rate of more than 90,000 ounces.
At that rate the operation would rank alongside the Stawell gold mine as the biggest in the state. Now owned by a joint venture between the Melbourne-based Mining Project Investors and the US-based Pittston group, Stawell was previously a WMC operation.
Since acquiring the mine in 1992, the MPI/Pittston partnership has managed to put the operation on a more stable footing by reducing costs and increasing the reserve base.
Like the Bendigo goldfield, the old Ballarat goldfield is now under the control of a single company, Ballarat Goldfields, following its acquisition of the 265-square-kilometre Ballarat West project.
Taken with the group's Ballarat East project, the group now controls all the major reef and alluvial mines in the Ballarat area. Historic production from both fields was seven million ounces of alluvial gold and two million ounces of reef gold.
The acquisition by Ballarat Goldfields means that, for the first time, the gold potential of the entire field can be assessed on an integrated basis, leading to the expectation that new exploration opportunities will be generated.
The group's main aim remains gaining access to an inferred resource of about a million ounces of gold (3.3 million tonnes at a grade of 9.5 grams of gold a tonne) at a depth of 350 metres below the city.
The group's Woolshed Gully decline was stopped about one-third short of its target after slow progress caused by difficult ground conditions put a squeeze on the group's cash resources, since replenished in a deal with the Rothschild group of companies.
The new funding has allowed the company to begin exploration/development along the completed section of the decline, which is now in stable and competent ground, while reviewing the longer-term options on the inferred resource position at depth.
The company is also seeking an early cashflow from an initial development on the Maryborough goldfield, owned by its merger partner, the exploration company Highlake Resources.
The merged group represents a new force in the Victorian scene with its control of five gold fields - Ballarat East, Ballarat West, Maryborough, Berringa and Dunolly-Moliagul.
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