Quarterly Activities Report Quarter Ended 30 September 2018
ASX Announcement 1 November 2018
Highlights:
- Ongoing shift in focus to capitalise on growing demand for vanadium
- Nelly Vanadium Mine transaction closed and development plans underway
- Vanadium Mining transaction closed and exploration campaign being formulated
- Updated study on Pilbara conglomerate gold assets confirming exploration upside
The Board of Hardey Resources Limited (Hardey or the Company) (ASX: HDY) provides the following commentary and Appendix 5B for the Quarter ended 30 September 2018.
VANDADIUM FOCUS
Taking an opportunistic approach, the Board decided it was prudent to capitalise on growing demand for vanadium and strategically acquire Nelly Vanadium Mine (NVM) in Argentina and six highly-prospective assets in Northern Territory and Queensland.
On 3 July 2018, the Company announced it had entered into a share sale agreement with the shareholders of Nelly Vanadium Pty Ltd (NVPL). Under the terms of this agreement, the Company was granted a 40-day option to acquire 100% of the issued capital of NVPL which is a mineral explorer that owns the Nelly Vanadium Mine in San Luis Province in Argentina (“NVPL Acquisition”).
The Company paid NVPL $75,000 in consideration for the grant of an option to acquire 100% of the issued capital in NVPL, exercisable at any time with 40 days following the date of the agreement, during which time the Company will undertake due diligence in relation to NVPL and the NVM.
In addition, on 19 July 2018, the Company entered into a share sale agreement with the major shareholders of Vanadium Mining Pty Ltd (VanMin). Under the terms of this agreement, HDY has been granted a 40-day option (paying a $75,000 premium) to acquire 100% of the issued capital of VanMin, which is a mineral explorer that owns six highly prospective vanadium projects in Queensland and the Northern Territory.
Both transactions closed on 24 August 2018 – refer to “Corporate” section for details.
Nelly Vanadium Mine, San Luis Province, Argentina
Due diligence work on NVM was undertaken by geology firms Condor Prospecting (Argentina) and Xplore Resources (Australia) who worked collaboratively with global mining & engineering group, SRK Consulting. The teams focused on confirming the veracity of legacy information, particularly metallurgy and mining processes. Further, an NVM site visit materialised to follow up on historic studies that imply there is significant exploration upside for vanadium and other economic mineralisation including lead, zinc, copper, gold and silver.
NVM was actively mined by open-pit and galleries between 1949-57 and produced vanadium pentoxide from an onsite processing facility. Within the 53-hectare project area, there are several vanadium-rich polymetallic sheeted vein systems, aligned North-East to South-West, over a mineralised strike zone that is up to 1.5Km in length and a vein width of up to 5.5m wide. However, only one vein was partially-exploited which left most of the deposit intact.
The due diligence teams identified several highly mineralised stockpiles around the historic processing facility and open pit that could readily be utilised as a direct shipping ore vanadium product.
Historical sampling and assay results throughout the historical workings produced grades from the partially mined vein that ranged up to 1.9% V2O5 with a sample length weighted grade average of 0.82% V2O5 in the open pit and underground workings.
NVM has ready access to mains power and water supplies, while nearby towns can provide supporting services and a skilled labour pool. Further, the transportation infrastructure from the mine to key ports is more than adequate with well-formed gravel tracks, a sealed highway and rail network in place.
The regional geology around NVM, which is located 170km from the capital of San Luis province (Figure 1), generally is dominated by Precambrian to Cambrian metamorphic rocks, with granitic intrusions of variable dimensions. This is a lead-vanadium mining district with many historic mines that documented their Pb-V production. The regional target mineral is vanadinite, a lead chloro-vanadate, that is by weight 73.1% Pb and 10.8% V. At NVM, vanadinite occurs within quartz mineralised veins.
BURRAGA PROJECT UPDATE: LATEST DRILLING CAMPAIGN COMPLETED
ASX Announcement 30 October 2018
HIGHLIGHTS
- Two reverse circulation drill-holes completed, amounting to 740m overall, at the Lloyds Copper Mine (LCM) extension within the Burraga Project in NSW – HDY’s primary copper asset
- The geology team’s objective from this campaign was to garner a greater understanding of the ore body and test if it extends at depth and further to the east than previously understood
- All drilling samples have been sent to the laboratory for further analysis, as the results will determine the next component of the drilling program
- Currently, depending on the assay results, the geology team believe incremental infill drilling is necessary to test the size and continuity of the known ore body
- Meanwhile, the Board notes the price of vanadium pentoxide has reached a fiveyear high1, reflective of growing demand from China primarily due to more stringent rebar standards which come into effect on 1 November 20182:
- HDY’s geology teams in Australia and Argentina have continued developing the newly acquired vanadium projects; progress reports will be released shortly
- Lastly, the Board and legal advisors are continuing to work proactively with the ASX to resolve the current inquiry – shareholders will be kept up to date with progress
Hardey Resources Director, Robert McCauley commented: “It is pleasing to have concluded this latest drilling round at our core copper project. The Board looks forward to reviewing the assay results as this will determine the next phase of the drilling program at the Burraga project. Further, our geology teams are ramping up development work on the vanadium projects, given favourable global demand-supply dynamics have propelled the V2O5 price to 5-year highs.”
Hardey Resources Limited’s (ASX: HDY) (“HDY” or “the Company”) Board is pleased to announce it has completed drilling two exploration drill-holes as part of the LCM extension program at the Burraga Project in New South Wales.
LATEST DRILL PROGRAM AT BURRAGA PROJECT
The recent drilling program at the LCM extension within the Burraga Project in NSW comprised of two RC drill-holes, with an aggregate target depth of 740m.
The geology team designed the drill-holes to test high priority targets generated from previous modelling which indicated that lodes remain open at depth and to the east of known mineralisation. The geology team drilled two scissor style drill-holes which are briefly described below and the location shown in Figure 1:
EYMRC034 was collared towards 210 dipping at -80 with the total depth of 400m, which is the deepest RC drill-hole ever undertaken at the LCM extension site; and
EYMRC035 was drilled towards 30 dipping at -80 to a total depth of 340m, with the objective to test for mineralisation at depth and to the north-east of the known ore body at the LCM deposit.
REPORT HIGHLIGHTS POTENTIAL FOR TARGET MINERALISATION ACROSS FOUR PILBARA CONGLOMERATE-HOSTED GOLD PROJECTS
ASX Announcement 6 September 2018
HIGHLIGHTS
- HDY’s new geology consultant completed an updated study on the four Pilbara projects – Cheela, Bellary, Hammersley and Elsie North – which highlighted the potential for subsurface target mineralisation for conglomerate-hosted gold and polymetallic deposits
- Overall, the geology consultant believes there is ample evidence – given widespread occurrences of Hardey Formation and Mount Roe Basalt – to verify material exploration upside for conglomerate hosted-gold mineralisation, especially for the Bellary project which is contiguous to Novo Resources1 (TSX-V: NVO) ground near Tom Price
- Other findings that illustrate the projects’ prospectivity and potential to contain mineralisation include:
- Peers making significant gold mineralisation discoveries in the Pilbara associated with Lower Fortescue Group lithologies – Hardey Formation and Mount Roe Basalt; and
- Favourable setting for conglomerate-hosted gold deposits comparable with similar geological and chronological settings in South Africa and India
- The Board is now reviewing plans to fast-track a high-level exploration program to garner a greater understanding of the underlying conglomerate gold-hosted mineralisation across the four projects
- Further, this updated overview is timely as the Board can confirm it has recently been approached by Australian and international groups interested in the four projects
Hardey Resources Executive Chairman, Terence Clee commented: “While considerable resources have been devoted to closing out the two vanadium transactions, our geology consultants have been conducting reviews on the gold assets. This initial update on Cheela, Bellary, Hammersley and Elsie North is highly encouraging, particularly the prospect of subsurface target mineralisation being apparent. More importantly, recent approaches by Australian and international groups is timely, with the Board seeking to optimise these assets through bringing in prospective strategic partners.”
Hardey Resources Limited’s (ASX: HDY) (“HDY” or “the Company”) Board is pleased to present shareholders an update on its four conglomerate-hosted gold projects in the Pilbara region.
PILBARA CONGLOMERATE-HOSTED GOLD PROJECTS
High profile neighbours
HDY has four conglomerate-hosted gold projects in the Pilbara region that are within the Lower Fortescue Group – Bellary, Elsie North, Hammersley and Cheela. Of these, Bellary and Elsie North are contiguous to high profile NVO’s ground (Figure 1).
STRATEGIC ADVANTAGES FROM RE-OPENING NELLY VANADIUM MINE
ASX Announcement 31 August 2018
HIGHLIGHTS
- One of the key reasons for acquiring Nelly Vanadium Mine (NVM), other than the significant potential upside SRK Consulting highlighted1, is Argentina’s favourable regulations enabling a legacy mining right to be expediated for reactivation compared to other mining countries
- Condor Prospecting2, a specialist geological and mining consultancy, have empirically concluded it takes 3-5 years to transform a greenfield project to a viable mining operation in Argentina (5-7 years in most developed jurisdictions), but potentially less than 12-months to expedite reactivating a legacy mining right
- To demonstrate HDY’s strategic imperative to re-open NVM, the Board has already sent a formal letter to the Director of San Luis’ Mining Department (SLMD) that details the change of ownership and forward plans
- In addition, senior HDY representatives will be travelling to San Luis (from Australia) in early September to expedite the process to re-open NVM on several fronts:
- Meet the SLMD Director and key officials to establish a working rapport;
- Set up a liaison office to assume managing ongoing activities directly with the SLMD, which includes exploration approval and accompanying Environmental Impact Assessment (EIA) the vendor already submitted; and
- Fast-track the process to reactivate the mining right
- Once exploration approval is granted, the geology team can commence verifying the extent of mineralisation within NVM and bulk sample legacy stockpiles:
- Quantifying the stockpiles’ mineral potential is the priority before prospective off-take partners undertake independent metallurgical testing
- Once the mining right reactivation is approved, then the stockpiles can potentially be monetised to facilitate generating early stage cashflow, while the technical team works on feasibility plans for optimal open pit mining operations, with forward planning to accommodate future underground mining operations
- The Board believes NVM delivers HDY a significant comparative advantage in enabling it to potentially jump-start vanadium pentoxide production faster relative to peers with predominantly greenfield assets
Hardey Resources Executive Chairman, Terence Clee commented: “The Board’s immediate core objective is to capitalise on Argentina’s comparatively favourable mining laws to expedite re-opening Nelly Vanadium Mine. Our initial goal, pending the mining right being granted, is approval of the exploration permit. This will enable the geology team to commence work verifying the extent of vanadium mineralisation and potentially monetising the historic stockpiles.”
Hardey Resources Limited’s (ASX: HDY) (“HDY” or “the Company”) Board is pleased to outline to shareholders plans to move swiftly to secure the necessary regulatory approvals to bring NVM back into production as soon as possible.
SIGNIFICANT REGULATORY COMPARATIVE ADVANTAGE
Re-opening NVM creates value
In the Board’s view, based on preliminary geological evidence to date1, re-opening NVM and scaling up vanadium pentoxide (V2O5) production will expedite creating value for shareholders at a materially faster rate, in turn supplementing the future development of HDY’s Australian greenfield assets. Moreover, compared with the typical 3-5 years to transform a greenfield project into a viable mining operation in Argentina (5-7 in most developed countries), the relative timeframe to reactivate NVM’s mining right is potentially under 12-months2.
HDY’s objective is firstly to secure exploration approval, as this will allow:
- Necessary work to start so geological data can be compiled to model, estimate, and report a JORC (2012) code compliant V2O5 mineral resource; and
- Bulk sampling historic stockpiles, with the potential for specimens to be sent to prospective off-take partners.
The second objective is to secure the mining right, so the stockpiles can be monetised, and mining operations allowed to commence (Figure 1).
Ramping up
To reflect the Board’s intent to re-open NVM as quickly as practical, the Board has sent a letter advising the SLMD’s Director about the change of ownership and forward plans. Further, senior HDY representatives are travelling to San Luis in early September and already have a confirmed meeting with SLMD’s Director to establish a working rapport.
HDY will be establishing a liaison office in the San Luis Province to directly manage ongoing contact with the SLMD to progress the exploration approval and mining right. To date, the exploration approval application and accompanying EIA have already been lodged with the relevant authorities. The Board anticipates having greater clarity on the approval timeline after the senior representatives meet with the Director in early September.
There are a considerable number of documents that SLMD requires before the process to reactivate the mining right can commence, which includes:
- Details behind the corporate owner and evidence it is registered as a mining producer;
- Verification that it is the beneficial owner of NVM;
- Confirmation there are no national or provincial tax issues;
- Comprehensive EIA (i.e. that builds on the one submitted at the exploration permit phase);
- Location, coordinates of the mine, maps, roads, and other workings;
- Detailed explanation and supporting information for reactivating the NVM project which includes:
- Plans for new infrastructure; processing facilities; administration/ accommodation buildings; workings and mine development; and tailings storage facility;
- Investment plan and Gantt chart that outlines timeframe for developing the mine infrastructure and then commencing operations.
Clearly, the liaison office will work directly with HDY’s in-country geology team, SLMD and the team at head-office in Sydney. In this way, the Board intends to expedite compiling the necessary documentation thoroughly, so it can be submitted to the regulator as soon as practical.
TERENCE A CLEE
Executive Chairman
Terence Clee holds combined B Com and LLB degrees. He commenced his career as an accountant at KPMG working in corporate audit and corporate tax. Terence co-founded Hemsley Lawyers alongside lawyers from Allens Arthur Robinson and Blake Dawson (now Accurst) and was responsible for the business development and strategic growth of the practice. Terence has experience in the start up and small cap space having advised technology start ups and junior miners on commercialisation, cross border transactions and R & D.
ROBERT McCAULEY
Non Executive Director
Mr McCauley has held senior Board and Management positions in ASX Listed Companies including Commissioners Gold Ltd now Gold Mountain Ltd (ASX:GMN) and has extensive experience in capital raisings, IPO’s, finance, media, corporate advice and acquisitions. Robert was also nominated in 2011 as an industry representative on the ASX equity market review panel reporting to ASIC. Robert holds a BSc degree and is a Member of the Royal Institution of Chartered Surveyors (Aust.UK). He is also a Registered Surveyor, Licensed Surveyor WA and a Chartered Land & Minerals Surveyor. Robert has over 35 years of experience and involvement in infrastructure development including Boddington Gold Mine WA – now Newmont Mining Corporation; North West Shelf Natural Gas Project and the Monasavu Hydro Electric Scheme, Fiji - World Bank Project. Mr McCauley brings to the Board his broad knowledge of corporate and technical skills including assisting the Company to identify and analyse future M&A opportunities.
ROBIN ARMSTRONG
Non Executive Director
Mr Armstrong has extensive corporate experience in listed companies specializing in the small to medium market cap sector. Mr Armstrong provides the board with a well rounded finance background in strategic advice, merger & acquisitions and capital raising.
