[ NOTE: 1. The article below is a good summary of TAM's troubles during the last six months.
2. Denis Waddell, Executive Chairman, said it very clearly: “What it really came down to was the design, construction and engineering,” and “Targets were set and simply not achieved.”
3. A recent ASX announcement has indicated that the troubles are being fixed and that mining is expected to recommence by mid-April 2007. ]
¤ ¤ ¤
Tanami Gets Stuck In The Desert
By Our Man In Oz / December 12, 2006 /
www.minesite.com
If you think the resources boom is all good news then you haven’t spoken to Denis Waddell lately. He’s a boom victim, and so is the company he runs, the small Australian goldminer, Tanami Gold.
Over the past six months, the very time Denis should have been cracking the bubbly after 12 years exploring the wilderness that is the Tanami Desert of central Australia, he has been frantically trying to complete the construction of the Coyote gold project, and then get it to perform as promised. On both counts, timely completion and successful operation, he has struck out, forced at one stage to consider a merger with the rival Monarch Gold, and now working with a rectification engineer to make good the Coyote plant. “It’s been an awful experience,” Waddell told Minesite in his home town of Perth. “It’s just so disappointing for the company, its staff and shareholders. Everything that has gone wrong can be fixed, but none of it should have happened in the first place.”
Waddell’s lament goes to the heart of the problems being created by the skills and equipment shortage in boom-happy Australia. Some skills, especially mining engineers and geophysical professionals are unavailable at any price. Some equipment is on 12 months, and more, back order. Even rubber tyres for mining equipment is being rationed by the only two major makers of the biggest tyres, Michelin and Bridgestone. “If you’re a small company, like us, you just get blown away by the big miners who can simply toss money at whatever and whoever they want,” Waddell said. “We end up with the B or C team.”
Being pushed to the back of the queue has cut deep at Tanami. It has been forced to top up its cash balance with calls on the capital market, including an ambitious A19 cents a share call on contributing shares at the end of October when the fully paid shares were trading at around A17 cents, and which have since dropped to around A14 cents. Needless to say very few shareholders paid the call with Tanami announcing yesterday that it had suffered a 95 per cent shortfall with payment received for 3.99 million shares to raise A$759,930.09 and with 81.1 million shares heading for forfeiture sale.
It should have been so much better for Tanami. In theory, Coyote should today be producing at an annualised 70,000 ounces a year. Instead it is producing at a trickle. In a sense, that’s all most investors need to know. But, for the technically minded Waddell has a detailed explanation, but it comes with a warning: it is technical. Essentially, and before we go deep technical, a gravity recovery circuit has failed to remove as much gold as planned, the surplus gold has gone to a vat leach circuit causing longer leach time which has delayed gold recoveries. “What it really came down to was the design, construction and engineering,” Waddell said. “Targets were set and simply not achieved.”
“We started mining in May with aim being to have ore on the stockpile in late June, early July when the front-end of the processing plant should have been completed. Originally, it was the whole plant to be completed by then, but we settled on the front end.” All up, the construction delay is around five months, though as Waddell said: “even now, we’re not really complete.” Perhaps more important than the slow build are the design problems. “The metallurgy is very good in the orebody, and we were advised that we would only have to grind to 15 microns to get mid to high 90 per cent recovery of gold. With that advice we opted for a smaller mill with less grinding, and also to reduce capital expenditure, to have a smaller carbon-in-leach plant, and include a vat leach circuit which, on paper, would be a lot cheaper.
“In reality the design had deficiencies. The process means it is important to remove the fines before they go into the vats otherwise they block up, and we were assumed that classification cyclone units would separate the fines from the coarse fraction … and gold recovery would be very simple. Well, that could not have been further from the truth.” Does that mean, Minesite asks, that it goes back the original plant design? “Yep, and as a result of the fines going into the vats they’re not percolating which means we have to undertake modifications to the plant to overcome that.” Is it an insurance job? “No, it’s not.” Is it fixable? “Yes, it’s definitely fixable.” How long? “We’ve got Como Engineering (a plant specialist) working on two scenarios and costings. Basically, I think what we want to do is remove the vats. The original engineers say they can fix it, but it’s just adding to the problem.” When will you decide? “We’re just costing the alternatives.”
Complicating Waddell’s job is that the current run of mine ore comes from a heavily oxidised cap which sits atop the deeper, higher-grade, ore. “Once we get to 80 or 90 metres we hit the rich ore and that’s really what this project’s all about. The open pit is really just a box cut. We only need throughput of 130,000 to 150,000 tonnes of ore a year. We need to decide what’s the best configuration to handle the different stages of the mine.” If all goes well, fingers crossed, Waddell is confident that the current problems can be fixed in “three-to-four months”.
While working through his process plant and slow construction problems Waddell has also spent time looking at a possible merger between Tanami and Monarch Gold, a business being developed under the guidance of former Consolidated Minerals boss, Michael Kiernan. “We looked closely,” Waddell said. “The aim was to strengthen the balance sheet and combine technical expertise. We reviewed each other’s projects, with a lot of goodwill, and we decided that it was best to remain separate.” Minesite chimes in: Does that mean you’re confident of shareholder support to remain independent? “Yes, we’ve got a lot of upport from our major shareholders, and on balance, we went through the alternatives and we think both companies are better focussing on what they have on their plates. Monarch’s got a lot, and so have we.”