Permaculture Mining

This story features GOLDEN CROSS RESOURCES LIMITED, and other companies. For more info SHARE ANALYSIS: GCR

By Greg Peel

Australians have become great recyclers over the past couple of decades, helping to do their bit to spare the over-exploitation of natural resources by dutifully placing their glass, paper, metal and plastic waste in the appropriate bin.

Australians have also become adept at challenging the modern methods of Big Farming, returning to a more ancient and efficient exploitation of ecological relationships and cycles that sees animals and vegetables living harmoniously and nothing wasted, right down to the chook-poo. Such practices are loosely known as permaculture.

Australian mining companies, on the other hand, have rarely won awards for their efficient and harmonious exploitation of the country’s natural resources. For over a century it’s been more a case of dig a big hole, take what you want, and leave the rest behind in an ugly pile to create a blot on the landscape.

Slowly the concepts of recycling and efficient use of all by-products are creeping into the mining industry. The reason for this is twofold. Firstly, the focus on environmental issues and resource over-exploitation in the twenty-first century has forced mining companies to address the efficient disposal of their supposedly unwanted by-products. Secondly, the emergence of new economies, particularly China, has made the price of absolutely everything expensive or, looked at another way, commercially valuable.

A case in point has been the recent explosion in value of natural gas and coal seam methane resources. Oil producers once flared off the natural gas invariably trapped in a well above the actual oil because it was only the oil they wanted from a commercial perspective. Apart from the carbon dioxide ramifications of such wanton flaring, natural gas has since been recognised as a cleaner fuel source in its own right. As oil resources diminish across the globe, Australia’s natural gas reserves have become the focus of global attention.

So too has the methane invariably trapped in differing volumes in coal reserves, sparking the sudden local coal seam methane industry. While coal miners may have been looking at a costly need to address the methane once casually released into the atmosphere now that mandated carbon reduction is closer to reality, the fact that this CSM can be converted into liquid natural gas means CSM is actually a valuable resource in its own right.

Imagine if we’d cottoned on to all this decades ago.

But what can we say of the humble metal miner? The earth’s metallic elements are not found in conveniently discrete and homogenous lumps at various points under the surface, they are found in the form of oxides and sulphides and what have you which are dispersed amongst other supposedly worthless lumps of rock in varying concentrations. There is a little bit of everything everywhere, but geologists spend their lives looking for places where ancient geological activity has provided a point of excessive concentration of elements, such that the mining of such a site is commercially viable.

And even then, miners dig up and process huge amounts of rock just to extract elements in concentrations of less than 1%. The other 99% is by-product of one form or another, and often considered worthless, or at the very least not worth trying to exploit further.

Golden Cross Resources ((GCR)) is taking a different approach, refining the concept of exploiting every possible product and by-product from its Copper Hill copper-gold mine which lies between Orange and Parkes in NSW, not far from Newcrest’s ((NCM)) Cadia-Ridgeway copper-gold project. Copper Hill is the most advanced among a suite of Golden Cross-owned Australian sites, with an in-ground resource estimated to contain 421,000 tonnes of copper and 1.2m ounces of gold for a mine life of near twenty years.

Golden Cross is first to admit Copper Hill is a low-grade resource. However, in a twist on normal practices Golden Cross sees copper sulphide not primarily as a source of copper, but also as a source of sulphur.

In a press release last month, Golden Cross outlined its project as follows [Warning: science content]:

“Maximising the return from the existing resource is possible if all sulphides can be floated, roasted and converted into acid soluble copper and free gold within an iron oxide-rich roaster calcine. Cathode copper can be produced by solvent extraction from the calcine followed by electro-winning (SX-EW) with the gold leached by cyanide, recovered by carbon-in-leach (CIL) and smelted to gold bullion. Roaster exhaust sulphur dioxide will be captured to produce sulphuric acid for copper leaching with the excess available for sale. The residual iron oxide calcine should find a ready market in the steel-making industry.”

In other words, Copper Hill will produce copper and gold but it will also produce sulphur for its own re-use and for commercial sale, and even the residual iron will find a market place. Based on assumed prices of copper at US$2.70/lb, gold at US$800/oz and sulphur at US$30/t, an Aussie dollar at US$0.85 and a 10% risk discount, Australian Mine Design & Development calculates Copper Hill to have a discounted cash flow valuation of $360m. At current levels, copper is trading at around US$3.15/lb, gold at US$1125/oz and sulphur at US$100/t. No assumption has been made for iron sales.

It’s not rocket science, it’s not a patented process, and Golden Cross has no specific first-mover advantage on such a system. It is merely efficient mine exploitation which, by virtue of high prices for all elements, makes a run-of-the-mill copper-gold project that much more valuable. And it is a process that should prove sufficiently environmentally friendly to attract carbon credits under such a scheme. As Golden Cross notes:

“There are environmentally positive aspects emerging from the proposed process. The flotation of all sulphides to feed the roaster brings the environmental benefit of cleaner tailings. The roasting process is autogenous and self-sustaining using the sulphides as fuel.The sulphur dioxide exhaust, essential for acid production, will be captured to the maximum extent possible. The roasting process generates considerable heat which may be used for power generation as is done at Olympic Dam and elsewhere. Carbon credits should be obtainable.”

Golden Cross has formed a strategic alliance with HQ Mining Resources – a company which shares common shareholders with the Beijing-based CUMIC mining and mineral investment company. HQ will provide access to capital and mining and processing equipment from China. The China National Automation Control System Corp (CACS) has reviewed the Copper Hill site and data and estimates a $5.8m cost for a Bankable Feasibility Study at a standard acceptable to Chinese banks. CACS has the capacity to take all the copper produced at Copper Hill.

Golden Cross has secured funding for further exploration of the Copper Hill site, and boasts other exploration sites in over a dozen Australian locations, as well as in Canada and Panama.

Golden Cross has a market capitalisation of around $25m, a 40% free float and a share price of near two cents.

Green mining? Who’d have thought?

Click to view our Glossary of Financial Terms