Kingsroses Long-Shot: Sardinias Abundant Tailings And Deep-Level Mineralisation By Our Man in Oz, in Sardinia
Plenty of people know how to pan for gold. Peter Cook knows how to pan for lead. And with the price of lead sitting at comfortably above US$1.00 a pound, his theatrical demonstration of lead-panning, using a plastic plate on a beach in Sardinia, is timely, to say the least. Indeed, it puts one in mind of the alchemists fabled old trick of turning lead into gold. Peter is one of Australias better known and more outspoken geologists and mining company directors. On the beach, he was wearing his Kingsrose Mining hat. Kingsrose has been taking a keen interest in Sardinia lately, working with assorted layers of government on the Italian island to clean-up an environmental mess left by previous generations of miners, and perhaps to help re-create a valuable industry for the struggling Sardinian economy. There is plenty of work to do before the plan becomes action, but there is also plenty of opportunity, because the south-west corner of Sardinia, centred on the town of Iglesias, is one of Europes most richly-mineralised areas. Sardinia has been mined for centuries, and possibly even for millennia, all the way back to the Phoenicians. Once-upon-a-time it boasted rich deposits of zinc, lead, copper and other associated metals, including silver, and as a result scores of old mine workings with ancient headframes cover the countryside. Empty villages attached to once world-class mineral processing centres serve as a stark reminder that this was for centuries a hugely prosperous region.
The lead panning was an after-lunch demonstration for a small tour group Kingsrose invited to view what it sees as a twofold opportunity. The first opportunity involves playing a key role in the on-going environmental clean up, by re-processing old and leaky base metal tailings dams. The second involves extracting the last of the metals in the dams, in what would effectively be a large-scale processing operation without the hassle of mining any the ore. The mining was done years ago, leaving up to 90 million tonnes of accessible tailings assaying up to an eye-catching 10% zinc, although the grades more generally come in at a range of between 1.7% to 2.5% per cent. Because the ore is on the surface, a 2% average would very likely create a profitable business, but thats only a back-of-the-envelope estimate, and much more site testing and data analysis required before approval is given to proceed.
Down on the tailings-littered beach, after a delicious lunch of local specialities and a few bottles of refreshing rose, Peter crouched over a red-stained and sluggishly moving stream, less than 300 metres from a public beach, to perform his panning trick. Onto his plate went a handful of randomly-scooped soil. After a few deft swirls a line of black minerals could be clearly seen around the rim. No assay was required to determine that they were heavy, and almost certainly a cocktail of lead, zinc, and some of the nasties which come from mining base metals and all destined, over time, to end up in the Mediterranean. In some cases rusting processing plants sit with metres of the coast, with tailings running directly into the sea no doubt raising the level of heavy metals in popular water sport areas.
In theory, what Kingsrose has been invited to look at by the Sardinian authorities is part of a wider environmental restoration project. That much is easy to see, as Minesites Man in Sardinia did see, on Monday 11th October, as the second and final leg of a tour of the Kingsroses operations (see also, Deep in the Jungles of Sumatra xxxxxxxxx). In reality there is also a need to align the interests of government with the interests of Kingsrose, and that might not be as easy as all that, given that this small Australian mining company also has a golden-tiger by the tail in Sumatra. Because, as if the cocktail of Sardinian mineralised waste that Kingsrose is contemplating getting to work on isnt a big enough challenge on its own, the combined interests of the government, unions, and environmentalists will surely make it all the more daunting.
Getting multiple interest groups to see that the man-made mess in Sardinia can become a business will almost certainly prove to be a heavy lift for Kingsrose on its own, which is why there is the sound of China music in the background. Unlike delicate Europeans who prefer to dance around the edge of a problem, the Chinese have the money, markets, and determination to make a deal happen - if theres something in it for them. And that something is almost certainly not in an interest in a tailings retreatment operation, however historic and scenically located.
What the Chinese can sniff, but arent yet talking about, is another aspect of ancient mining regions. The oldtimers not only took the highest grade ore, but their methods also often left a halo of ore around the mined deposits which could be profitable today. Whats more they left enormous amounts of ore at depth. Despite most of the mines being killed off by a combination of low metal prices, over-staffing and in some cases, rising water levels, deep test holes have been drilled in several locations. One of those went down 1,000 metres, and returned spectacular assays, such as 4.15 metres at 8.5% lead and 23.5% zinc, inside a wider zone of 14.1 metres assaying 2.7% lead and 10.5% zinc.
There is a country mile, and then some, to be travelled before Sardinians will wrap their minds around a possible return to conventional mining by anyone. The tailings are a reminder of what old-school mining did to their environment, and they have no way of grasping that modern techniques are infinitely cleaner. Any re-start of mining will be a crawl-walk-run process, starting with a clean-up at the tailings to prove beyond reasonable doubt that the past damage can be repaired. Then will come the need to de-socialise mining, another tricky hoop to pass through, because mining in the region in its final days became a job-creation exercise rather than an exercise in wealth creation. Individual mines employed thousands of workers and even more administrators, in a structure which would have brought a smile to the dial of a Whitehall mandarin.
Work on the Sardinian project, which has been dubbed SARINC, and which is 85 per cent owned by Kingsrose and 15 per cent by a local partner, officially started in March when trial drilling of tailings dams got underway. By last month testing had been carried out on 25 dams, and resource modelling and metallurgical test work is now underway. Kingsrose has not published assays on tonnage levels but the best estimate is that the most accessible tailings dams contain between 70 and 90 million tonnes grading between 1.7% and 2.5% zinc, plus 0.4% and 0.6% lead. No silver assays have been undertaken because the European authorities regard the entire exercise as an environmental clean-up operation, and silver is not treated as a pollutant. Investors, of course, may be rather more interested, given silvers current price of around US$23 an ounce.
To a casual outside visitor such as Minesites Man in Oz, the SARINC project is a no-brainer. In one bold step the environment gets a spruce up and the health of locals, which has suffered for decades from excess lead in the land and water, is improved. Thats before you get to the matter of genuine job creation in a region with 30 per cent unemployment (60 per for young people), and the development of a new industry (tailings) which could lead to the return of an old industry (deep mining).
Unfortunately, no-brainers to a man from Oz are not necessarily no-brainers to his European cousins. SARINC is a fascinating project, but for investors its a long shot in the companys asset portfolio, especially when its made to stand shoulder-to-shoulder with the Way Linggo gold mine in Sumatra, a place where mining is welcome, the locals are keen to work, and the gold costs just US$147 per ounce to dig up. When it comes to capital allocation Sumatran gold is light years ahead of Sardinian zinc a sort of parable in a bottle as regards the relative attractions of doing business in Asia as against Europe.
KRM Price at posting:
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