February 2013

New tech not sexy

Investors repelled by unproven technologies at Mines and Money London

By Anna Reitman

Photo courtesy of Dimitry B via Flickr Creative Commons

Miners testing new technologies are facing a chilly reception from investors. At the Mines and Money conference in London, held last December, participants picked out gold miners in particular for criticism. Many speakers noted that share prices have not held up to the huge gains in the price of gold and called for capital controls.

Speaking on the investment panel at the conference, Steven Poulton, director of Altus Capital, said that after a strong management team, simplicity in the geology of a project is the next favoured qualifying condition for his firm’s consideration.

Over the last five years, Poulton later explained, there has been increased investment into typically lower grade projects predicated on the use of new technology, but the promised results have largely not materialized. “We are very supportive of using the latest technologies to deliver higher returns faster, but if you are unable to fully understand the technical or metallurgical features of the project, it is something that can kill the whole investment,” he said. “The ex­plo­ration and development phases of a project carry enough risk.”

And there is reason for investors to be wary: a study of 43 failed mining projects by Chris Twigge-Molecey, senior adviser at Hatch, showed that half were adopting major new technologies. “If you look behind that number, there was a lack of proper project phasing,” he said. “And one of the reasons that new technologies were not successful is because there was not enough time spent on the test work, the pilot plants and the preparatory work before going to commercial scale – basically skipping steps or ignoring inconvenient information.”

Poulton is very wary of iron oxide copper-gold (IOCG) deposits – largely polymetallic ore bodies likely to contain a blend of low grades – that require heavy investment in technology to make them economically feasible. BHP Billiton’s Olympic Dam IOCG deposit is considered one of the world’s best uranium resources but has been sidelined as a result of huge costs.

BHP declined requests for an interview, but statements confirm the miner is now taking a cautious approach to new technology. “The company will only pursue proven mature technology that can add demonstrable value to our business,” a spokesperson said.

Majors like BHP must carefully balance their long-term innovation goals and the appeasement of technophobic investors. Peter Kondos, director of Barrick’s strategic technology solutions group, confirmed that controlling capital expense is the current theme in mining. “Majors are affected [by the investment climate] and bringing on new technologies is challenging these days,” he noted. “But if the new technology is about introducing efficiency, or a better way to do things, that is a different story. For example, we are developing a new gold leaching technology to access and process double refractory ore bodies in Nevada that the conventional gold cyanidation process cannot handle. First gold from this new process will be produced in 2014.” [See: “Thiosulphate going commercial”]

But Barrick can carry more weight than most, and smaller innovators looking to bring major new technologies online are left knocking on a lot of doors.

Orbite Aluminae, for example, is developing technology for the environmentally neutral production of smelter-grade alumina and rare earths from aluminous clay, bauxite and other feedstocks without generating any tailings or toxic red mud residue.

In December, Orbite raised $30 million through private placements and a convertible debenture offering to push forward in proving the company’s concept.

“As a cleantech company that is now in the middle of commissioning our first high-purity alumina plant, it has been a challenge for us to find the right investors, with most of our supporters to date being North American mining funds,” said Marc Johnson, Orbite’s vice-president of corporate development.

The company’s pilot plant in Cap-Chat, Quebec, operated until March 2012, and beginning in June 2012, was converted into a commercial high-purity alumina plant. Johnson expects commissioning of this plant to be completed during the first quarter of 2013 and for commercial production to be announced by the beginning of the second. The next phase will be funding and initiating construction of a smelter-grade alumina plant by year-end.

“Being an innovator has its drawbacks,” Johnson added. “Before jumping in, many institutional investors want to see projects de-risked, which really means seeing a fully operational plant.”

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