walkabout marches on · 2017. 4. 11. · at the time of the acquisition, very lit-tle exploration...

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April 2017 VOLUME 1. ISSUE 248 $11.95

ISSN 1445-3436

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Walkabout marches on

• Australian Graphite Conference preview

• Queensland focus

• Specialty metals spotlight

Registered by Australia Post PP 643938/0071. No pages or articles in this publication may be reproduced in any form without the consent of the publisher. This includes photographs either taken by Paydirt Media staff or provided by other parties

CONTENTS

PAYDIRT (ISSN 1445-3436)Published byPaydirt Media Pty Ltd.A.C.N. 063 985 133

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Editorial: Editor: Dominic PiperDeputy editor: Mark AndrewsJournalists: Michael Washbourne, Jonathon Daly Art director: Marian NoonanContributors: Keith Goode (Sydney), Brendan Ryan (Johannesburg), Ross Louthean

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Cover image: Walkabout executive director Allan Mulligan on site at Lindi Jumbo, Tanzania

7 NEWSSouth African-based columnist Brendan Ryan reports on the deals being done in the country’s downtrodden platinum sec-tor, with Sibanye leading the charge. As producers struggle with thin or non-existent profit margins and dollar platinum prices remain depressed, Ryan believes there is clearly more M&A action to come

COVERAs the graphite sector has matured some-what, players in the space have formulated their own unique strategies to distinguish themselves from the pack. Michael Wash-bourne visited Tanzania to find out which path Walkabout is taking with its Lindi Jumbo project and found the company was well on track to deliver a high-grade pro-ject, producing a premium graphite product within a quick timeframe

GRAPHITE PREVIEWPaydirt hosted the inaugural Australian Graphite Conference in 2016 and its suc-cess means a second coming of the event will take place this month at the Novotel Langley Hotel, Perth. While some compa-nies have stagnated, others have forged ahead with detailed studies on projects that could potentially see the light of day soon. We take a look at the companies moving and shaking in a sector still intriguing many

QUEENSLANDThe massive Carmichael coal mine in Queensland is close to receiving a green light to construction. However, environmen-talists have not given up the fight to have the project, proposed to be built by India’s Adani Group, scrapped. Led by former na-tional Greens leader Bob Brown the Stop Adani Alliance has emerged to derail plans for Australia’s biggest coal mine. Mark Andrews reports

AMERICASOceanaGold Corp and Alicanto Minerals are making waves in parts of the Americas not many other ASX-listed entities would be familiar with. Through the acquisition of the Haile gold mine, South Carolina, OceanaGold gained exposure to the US, while Alicanto has courted Barrick Gold’s company in Guyana at the Arakaka project. Dominic Piper visited both projects and provides a prelude to features in upcoming editions of Paydirt and Gold Mining Journal

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Walkabout tears along graphite track

COVER

AUSTRALIA’S PAYDIRT APRIL 2017 PAGE 21

“We knew we were entering the [graph-ite] sector quite late, compared to others, and therefore we knew from the outset we would need to differentiate the project and ourselves somewhat,” Mulligan told Paydirt.

Walkabout’s acquisition of the Lindi Jumbo project, about 200km east of Mt-wara in Tanzania, came several months after the graphite sector bubbled and a host of ASX-listed hopefuls entered the space.

Replicating what the likes of Syrah Resources Ltd, Magnis Resources Ltd, Kibaran Resources Ltd and another rela-tive newcomer, Graphex Mining Ltd, had done in the preceding months and years meant Walkabout faced an uphill battle to catch up to its peers, if at all.

At the time of the acquisition, very lit-tle exploration work had been carried out on the Lindi Jumbo property. However,

Walkabout could take heart from the pro-gress made by Magnis at the neighbour-ing Nachu project.

The probability of finding graphite on its tenements was always high for Walk-about, given Lindi Jumbo’s proximity to

Nachu and Graphex’s Chilalo project, but nothing could be guaranteed until the first drilling campaign in September 2015 confirmed its presence.

“We had no doubt and the preliminary report had indicated there was graphite on our ground,” Mulligan said.

“We received some chip sample re-sults from surface and among them were some 30-40% results that indicated to us there was an opportunity to find a higher-grade deposit.”

With Mulligan, technical director An-drew Cunningham and consulting ge-ologist Rickard Taljaard on the ground to oversee the programme, Walkabout struck a high-grade zone within the first two holes drilled.

What followed next was the implemen-tation of a three-pronged strategy to fast-track production, which would underpin the company’s rapid progress over the next 16 months.

“Once we hit the high-grade zone, we decided not to spread the programme over the original planned area and to fo-cus on that particular zone as far as we could identify it,” Mulligan said.

Allan Mulligan has never been afraid to walk a different path. So, when he injected a graphite project into Walkabout Resources Ltd

in late 2014, the chances of it following a familiar and traditional route to development were slim at best.

Lindi Jumbo is in the same Tanzanian graphite province as Nachu (Magnis Resources) and Chilalo (Graphex Mining)

Walkabout executive director Allan Mulligan


“Being on site and being able to see the high-grade chips directly and trans-ferring that to instant decisions on site, as opposed to waiting for assays, unlocked that strategy of being able to high-grade the deposit and keep it to a modest size.

“When we went to infill and upgrade drilling we knew exactly what we were looking for and structurally where it should go, so we were able to focus on delineating three or four discreet high-grade zones that will actually provide a very high mill [head-grade] feed and give the project a huge advantage in its early years.”

Most graphite companies have typi-cally built up large resources at their pro-jects, but Mulligan knew that approach would only see Walkabout fall further behind in the race to become a producer.

A simple strategy was proposed – de-velop the project around a high-grade, premium product that could be one of the first to market. To achieve that, the company had to constrain the initial mine development to something that was both manageable and reasonable in size.

“By far the most significant risk as-sociated with this project is the market, but that is something associated with all graphite projects,” Mulligan said. “We wanted to bullet-proof this project against that risk through executing a three-tier strategy of grade, product and time.”

Completion of the drilling programme led to a maiden inferred resource of 15.3mt @ 10.1% TGC for 1.542mt con-tained flake graphite in January 2016. A scoping study was to be released mid-year, but ASIC changes to reporting reg-ulations dictated a higher resource clas-sification was required before the results of the study could be made public.

It turned out to be a blessing in disguise for Walkabout, which after punching more holes into the project, announced an upgraded resource of 29.8mt @ 10.9% TGC for 3.25mt contained graph-ite, including a higher-grade domain of 4.7mt @ 22.8% TGC for 1.073mt con-tained graphite.

“We ended up with a 165% larger re-source, a higher grade and the entire scoping study and DFS calculated or modelled on measured and indicated re-sources only,” Mulligan said.

“In terms of the drilling, the entire measured, indicated and inferred re-source of 29mt has been defined off 3,500m of drilling, whereas some of our peers have done up to 20,000m. It’s not necessary to do that, in our view.

“When you compare our quarterly cash flow expenditures against our peer group, we are the cheapest by a long way for the last two and a half years and The proposed locations for the pit (top), process plant (middle) and tailings dam (bottom)

COVER


we have now reached the same position with respect to project development, but we’ve been able to do it cheaper because we’re fast-tracking.”

The scoping study was finally released to the market in January, just one month prior to the publication of a robust DFS, based on production of 40,000 tpa of four different graphite concentrates.

According to the DFS, Lindi Jumbo can be developed for an upfront capex of just $US38.7 million (plus $US5.6 mil-lion sustaining capital), making it one of the lowest capital intensive projects in

Walkabout’s peer group.Other key highlights of the study in-

clude a pre-tax NPV of $US323 million with IRR of 97%, average annual free cash flow of $US35.8 million, payback within 22 months, average annual EBIT-DA of $US47.7 million and LOM revenue of $US1.26 billion, based on a 20-year mine life.

The mining plan is based around a high-grade plant feed of 17% TGC during the first three years of produc-tion and at least 16% TGC over the remaining 17 years of mine

life, with on-mine cash costs of $US292/t in concentrate proposed for delivery at the mine gate.

High-end markets are the target ben-eficiary of Walkabout’s products, with 8,000 tpa of super jumbo (+500 microns) and 14,000 tpa of jumbo (+300 microns) likely to be suitable for the expandable natural flake markets.

Walkabout’s DFS trigged a share price lift to 13c in mid-February before coming

“When you compare our quarterly cash flow expenditures against our peer

group, we are the cheapest by a long way…

Walkabout has built up a resource of 29.8mt @ 10.9% TGC for 3.25mt contained graphite, including a higher-grade domain of

4.7mt @ 22.8% TGC for 1.073mt, at Lindi Jumbo

Walkabout chairman Trevor Benson is interviewed on site by marketing and public relations consultant Thomas Murrell,

who also sits on the company’s board

Cunningham has become a key member of the Walkabout executive team

Technical director Andrew Cunningham explains the flow of mineralisation from the Lindi Jumbo discovery hole

off to just below 10c at the time of print.

“Historically we have struggled to get recogni-tion in the market for our deposit and for our strat-egy, while other compa-nies have market caps and valuations that have leapt way ahead of ours,” Mulligan said.

“However, the graphite market on the ASX is currently under stress and we think investors are smartening up and realising many of these projects are not going to necessarily be successful.”

Mulligan has always had the best in-terests of shareholders at heart since he vended Walkabout, then a private com-pany, into struggling ASX-listed Nimrodel Resources in 2011. He cited a $50,000 capital raising at 0.001c/share in 2015 as the low point in the company’s history and has spent much of the past two years

striving to restore investor confidence through Lindi

Jumbo’s development.Perhaps the best example of Mul-

ligan’s com-mitment to shareholders and the pro-ject was his

COVER

“If we can procure just some of the funding required for this

early start, then we can procure some of the long-lead items and shorten our

potential timeline considerably.

Consulting geologist Rickard Taljaard

PAGE 24 APRIL 2017 AUSTRALIA’S PAYDIRT

selfless decision to step down as man-aging director of Walkabout just weeks after the DFS was completed to allow non-executive chairman Trevor Benson to take the lead management role with the company.

Mulligan remains an executive director and will spend more time in Africa over the next year to focus solely on project development, with Benson driving the fi-nancing and marketing strategies.

“The key for us is not to stall during fundraising,” Mulligan said. “When we look at our peers, many of their projects have stalled during fundraising and this indicates that there is some price uncer-tainty in the marketplace, both on the funding side and on the operational side.

“In our view, that funding uncertainty means it is becoming more and more dif-ficult for companies to procure their de-velopment funds, even with off-takes, or partial off-takes, in place.”

Benson, an investment banker who has held senior roles at The Wood Group and UBS Australia, spent most of March meeting with potential project financiers in the eastern states, Asia and London.

Speaking to Paydirt from London, Benson said he was growing more confi-dent “by the day” of securing that funding from “intrigued” investors.

Walkabout directors – Murrell, Cunningham, Mulligan and Benson – will shoulder most of the workload as the company pursues development of Lindi Jumbo


A population relocation plan was being completed at the time of print


“They’re definitely interested and they want to know more about Walkabout,” Benson said.

“I think some of the small-cap funds, when they get an opportunity, will want to come on board because it doesn’t have the liquidity or size at the moment to get into the market.”

Walkabout’s plan is to develop Lindi Jumbo in parallel to securing project funding rather than complete both se-quentially as is typically the case for most resources companies.

Early development moves have al-ready been made with ADP Marine and Modular, a Cape Town-based metallurgi-cal specialist which is majority-owned by Lycopodium Ltd, named as the preferred partner/supplier for the design, deliv-ery and construction of the flotation plant and other key infrastructure.

A Tanzanian mining contractor has also been appointed, subject to final negotiation of an operating agree-ment, as well as a local camp and ac-commodation services provider, un-der the same terms and conditions.

“If we can procure just some of the funding required for this early start, then we can procure some of the long-lead items and shorten our potential timeline considerably,” Mul-ligan said.

Walkabout was in the throes of completing its population relocation plans at the time of print, while also

awaiting approval of an environment im-pact assessment before it can submit a mining licence application.

Directors typically shouldered man-agement responsibilities under Mulli-gan’s tenure, with the mining engineer’s “running lean” ethos set to continue even though he is no longer at the helm.

“When you develop a specific project strategy, it’s key that strategy is main-tained by all of the participants in the pro-cess chain,” Mulligan said. “If we stepped back and handed the project over to a project manager or a consulting compa-ny, there’s a high risk they would lose that strategy, or it would be diluted or watered down, and you end up with increasing costs and lower efficiencies.

“During the last drilling campaign, An-drew Cunningham, Rickard Taljaard and myself spent six weeks on site and that close attention to detail is now driving the rest of the project development, including the metallurgical test work.

“These things come from experience. If you’ve built mines and you’ve devel-oped mining projects, you learn that the philosophy behind the early stage set-up, or the project charter, is key to its suc-cess. And, that it must be maintained throughout the process.”

Thomas Murrell, whose background is in marketing and public relations, re-mains the only non-executive director on the four-person board.

Benson, who has acted as a corpo-rate adviser to Chinese state-owned enterprises, said his own impres-sions of Walkabout, which has a market cap of about $12 million, had changed significantly since his ar-rival.

“I made sure I did my due diligence and not only did I find the people in-volved to be extremely professional and highly technically capable, they had discovered this very high-grade graphite project in the graphite cen-tre of the world in Tanzania,” Benson said.

“From early on, I could see this was going to be a good opportuni-ty to get involved in what is still an unknown company for all the right

COVER

Finance specialist Benson has taken the reins of Walkabout from founding director and mining engineer Mulligan

Lindi Jumbo’s premium product is likely to attract interest from the expandable graphite markets


reasons. When I came on board, it didn’t have a DFS, it didn’t have a scoping study, it didn’t have a measured and in-dicated resource, but due diligence gave me a good indication it was possible and the high-grade resource potential had enormous upside.

“I think it also hit a sweet spot in po-tentially being able to take a company that I have confidence in to China to look for potential off-take part-ners.”

Walkabout has prom-ised to be “aggressive” in its pursuit of project fi-nance, with a stated aim of locking down at least a portion of the funding by the end of this month, keeping the company on track to produce first con-centrate from Lindi Jumbo in early 2018.

With several graphite hopefuls turning to the battery-grade spherical markets for off-take and financial support, Walka-bout intends to focus on other opportu-nities in the sector which are now being neglected.

“We are targeting a substitute product market, we are targeting the expanda-bles market and any other traditional uses that have and will be growing in de-velopment,” Mulligan said.

“Graphite is being used in so many more applications and we think the focus on one application by the industry miss-es a lot of the other opportunities being created out there.

“Being one of the lowest cost produc-ers means that we have the highest flex-ibility to market our product into a range of different price and value scenarios without spending a lot of money on high risk, chemical and mechanical upgrades which can often reduce your yield.”

Some have referred to Walkabout as a “disrupter” to the graphite industry because of its tendency to do things dif-ferently, particularly through its bid to de-velop a smaller mine and not head down the battery minerals path.

If Mulligan is concerned what others think about him and his company, there is no hint of that peeking out from beyond his steely gaze.

“We don’t follow the rest of the sector, in terms of strat-egy,” Mulligan said.

“We have the opportunity to be one of the first to mar-ket, of a very premium prod-uct and of very low cost, as a result of the grade. This is where our key differentiators are important because, from our perspective, the Lindi

Jumbo deposit represents the lowest technical and financial risk profile of any of our peer group.”

– Michael Washbourne

“Graphite is being used in so many more applications and we

think the focus on one application by the industry misses a lot of the other opportunities being created out there.

Walkabout has developed strong ties with the land owners and local community groups in Tanzania

walkabout marches on · 2017. 4. 11. · at the time of the acquisition, very lit-tle exploration...

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