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“Revitalising Mining Operations:Revitalising Mining Operations: Making the Most of What You Have”

6 August 20106 August 2010

What We Will Talk About Today:

1 140 years of mining history @ Cobar

– What went well … and why!What went well … and why!

– What didn’t … and why!

2 The critical ingredients for success

3 Revitalising Northparkes – applying the critical ingredients

Why History?

The Principle of Uniformitarianism in reverse:

“The present is the key to th t ( d t th f t )"the past (and to the future)"

“Those who cannotJames Hutton (1726-97)

Those who cannotremember (or learn from) thepast are condemned to repeat it”repeat it

George Santayana (1863-1952)

Reflecting on 140 Years of rich mining history:history:

Successes:• Great Cobar 1871-86

Failures:• Great Cobar 1886-1892

• Cobar Goldfield 1987-1900

• Great Cobar 1893-1905


• Great Cobar 1906-19191The Great Cobar 1893-1905

• New Occidental 1936-48

Great Cobar 1906-1919


e Three

• Peak 1992-2002

CSA 1999

• CSA 1965-1998

El 1983 20013

Periods

• CSA 1999-

• Cobar Goldfield 2002-

• Elura 1983-20013

• Failures defined by low financial returns

Lessons from the First Period:











• Peak 1992-2002

CSA 1999

• CSA 1965-1998

El 1983 2001• CSA 1999-


• Elura 1983-2001


Great Cobar1871-86

1

1871-86

Start of thegreatadventure…

C b C Mi ( 1874)

• High grade near-surface oxide copper (8-12% Cu)

Cobar Copper Mine (ca 1874)

• Simple mining method

• Abundant labourAbundant labour

• Ore easily smelted (in South Australia!)

Although:

• Remote & isolated (no rail and poor roads)

• No reliable water supply

Great Cobar1886-92

1

1886-92

The copper minesppstumble …• Lower grade sulfide ore (4-6% Great Cobar Copper Mine ca late 1880sg (

Cu) at increasing depths

• Dwindling supplies of fire wood

Great Cobar Copper Mine ca late 1880s

for smelting (cost of transporting coal was prohibitive)

• Collapse in copper price• Collapse in copper price following the Societe des Metaux’s failed attempt to corner pthe copper market

• Lack of capital – multiple p pcompeting mining concerns

Cobar Goldfield1887-1900

1

1887-1900

Discovery ofygold offsetsdecline in coppermining….

• High grade near surface oxide ore bodies (>10g/t Au)

Fort Burke Hill Mine ca 1896

• Easily mined by pits and shallow shafts

• Gold readily extracted by gravity (stampers) and cyanideGold readily extracted by gravity (stampers) and cyanide

• Abundant labour from nearby dormant copper mines

Great Cobar1893-1905

1

1893-1905

The Syndicateypulls ittogether….

Great Cobar ca 1895

• New water-jacketed blast furnaces capable of treating larger volumes of orevolumes of ore

• Furnaces fired from coal from the Syndicate’s coal mines in Lithgow (using the new Cobar rail head)Lithgow (using the new Cobar rail head)

• Strong and amiable relations with its workforce – paying above the set wage to reduce industrial disputationthe set wage to reduce industrial disputation

Great Cobar1893-1905

1

1893-1905

And grows thegbusiness…

• Copper matte transported to Lithgow for further smelting and refining

Water-jacketed furnaces + matte copper ca 1898smelting and refining

• Claimed gold and silver credits in copper ingotscredits in copper ingots

• Began purchasing nearby leases (Chesney and Cobarleases (Chesney and Cobar Gold) to provide smelter feed

Cobar Gold Field1900-13

1

1900-13

The gold miners reach an impasse…g p

Cobar Gold Mine (1902)

• Deeper supergene and sulfide zones not amenable to cyanide leaching – copper oxides/sulfides preferentially complex with cyanide (New Occidental the exception)

• New expensive processing plants fail to deliver improved recoveries

The Great Cobar1906-19

1

1906-19

The grand vision unveiled …g

Great Cobar Mine (1908)

• Australia’s Greatest Copper Mine - basic ores from the Great Cobar blended with siliceous gold-copper ores from the Cobar Goldfield at 500,000 tons/annum


1

1906-19

and dismally fails…y

• Poorly designed and constructed plant – plant operated at only 70% of design (copied fromoperated at only 70% of design (copied from an American design that was apparently equally unsuccessful)

Great Cobar Mine (1908)• Declining copper grades (2-

3% Cu))

• More siliceous ore with depth at the Great Cobar

• Labour unrest

• Lack of competent labour

Great Cobar Mine (1920s)

Lack of competent labour

• Declining copper price


1

1906-19

“In my opinion, the

Great Cobar Mine (1913)

General Manager has failed to appreciate the importance of pselecting the best men possible to supplement his effortssupplement his effortsand to depute to them the responsibility for the proper control of the departments, under his supervision”under his supervision

Mr Pellow-Harvey, Board Member, Great Cobar Ltd 1913Great Cobar Ltd 1913

And so ends the first Period of mining at CobarCobar …

Lessons from the Second Period:






• Great Cobar 1906-1919Great Cobar 1893-1905




• Peak 1992-2002

CSA 1999

• CSA 1965-1998

El 1983 2001• CSA 1999-


• Elura 1983-2001


New Occidental1936-48

2

1936-48

Start of the second boom…Start of the second boom…

• High grade ore body (12-13g/t Au)New Occidental Mine (1936)

• Innovative mining method (cut and fill changing to shrinkage stoping) to achieve 100ktpa

• Mining efficiencies increased from 1.2 tons to 4 tons/man shift from 1936 to 1940

• Well designed processing circuit (fine grind + sulfide flotation + cyanide leach)


2

1936-48NOGM

Cut & fill stoping:

• 30m high stopes

• Back-filled

• Mining on top of wastewaste

Shrinkage stoping:

• 50-80m lifts

• No back-fill

• Mining on broken ore

NOGM Cross Section (1949)


2

1936-48

Good use of newtechnology…

On the ore in a shrink stope (1940s)

Sulfide flotation (1940s)

Ball mills (1940s)

Bells at the base of a shrink stope (1940s)

NOGM1948-57

2

1948-57

A di i ti dA disappointing end …New Occidental Mine (1950s)

• Changed mining method from shrinkage stoping to long hole openChanged mining method from shrinkage stoping to long hole open stopes to further improve access to ore:

• 90m high stopes with increased oversize and wall rock dilution

• Declining grades with depth (10 g/t Au)

• Union disputation over manning on new crusher

• Shortage of labour post World War II

• Costs increased from �9.9.2/oz to �20.8.6/oz from 1949 to 1952

• Labour costs increased from �255,323 / 500 men to �257,041 / 270 men

• Increased transport and concentrate treatment costs

New Occidental Gold Mines1955-57 – A grand recovery plan emerges

2

1955-57 – A grand recovery plan emerges

Post WWII, Cu price allowed to increase from �95/t to �160/t but Au price l k d i t �35/locked in at �35/oz

• Decision to refocus the business on large-scale (1Mtpa) Cu-Au mining operations – down-dip extensions of known ore bodiesoperations down dip extensions of known ore bodies

New Occidental Gold Mines1955-57

2

1955-57

The grand plan unrealised …g p

• Commitment to a major exploration program

• No further development of the New Occidental and New Cobar mines

• Reduced maintenance of plant and equipment

However:

• Insufficient retained earnings to internally fund the new project

• Existing business unsustainable due to lack of investment in maintenance and new mine levelsmaintenance and new mine levels

• Calls for Federal and State Government funding rejected

• No outside interest• No outside interest

Lessons from the Third Period:






• Great Cobar 1906-1919Great Cobar 1893-1905




• Peak 1992-2002

CSA 1999

• CSA 1965-1998

El 1983 20013 • CSA 1999-


• Elura 1983-20013


CSA Mine1965-98

3

1965-98

Hard work, but little profit to show for it!• Modest ore grades

• Poor ore body knowledge:

• 60% of predicted head grade for the first 20 years (1.7% Cu vs 3% Cu Plan)

• Cut and fill mining, ultimately replaced by long hole open stoping

• 70-80% of design capacity

• Industrial turmoil (23% production lost in 1972 alone)

• Focus on achieving 1 Mtpa production rate to survive

Ulti t l th i ti f l t l i• Ultimately the victim of low metal prices

However:

• QTS Zone at CSA and Peak discovered

Elura Mine1983-2001

3

1983-2001

Another examplepof profitlessgrowth …

• Modest ore gradesg

• Poor ore body knowledge:

• Early mining blocks found to contain significant waste

• Saved for a period by unpredicted high grade zone of silver enrichment

• Industrial turmoil

• Issues with mine stability – rate of back-filling

• Ultimately the victim of poor corporate currency hedging

Peak Gold Mines1992-2002

3

1992-2002

A great little oregbody (and mine)…

• High grade ore body (3.6Mt @ 7.1g/t Au grew to 5.2Mtpa @ 7.6g/t Au)

• Strong ore body knowledge focus (upfront and ongoing)

• Effective labour relations:

• Non-union work force with direct employee relations

• High levels of employee engagement, training and personal development

• Effective mining method (Avoca-style long hole open stoping):

• Maximised reserve recovery and improved stability/reduced dilution

W ll d i d i i it ith hi h t l i• Well-designed processing circuit with high metal recoveries

• Focus on exploration and reserve replenishment

CSA1999-Onwards

3

1999-Onwards

Another way toyskin the cat …

• Selective mining of high-grade core of the QTS zone

• Initial reserve of 2.8Mt @ 6.2% Cu

• Production rate reduced to 500ktpa (but exceeded)

• Focus on minimising dilution, maximising grade and metal production

• Reduced workforce:

• 267 people to 130 people

F l i h t• Focus on reserve replenishment

Cobar Goldfield2002-Onwards

3

2002-Onwards

Realising thegoriginal vision …

• High level of ore body knowledge

• High grade resources

• Multiple ore sources for blendingblending

• Stronger copper and gold pricesp

• Established infrastructure and business systems

Cobar Goldfield looking south (2002)

140 Years of Mining History …

Ingredients for Success

1. Good quality ore body

2. Strong metal prices

3. Access to capital

4 High level of ore body knowledge (geology geomechanics4. High level of ore body knowledge (geology, geomechanics, geometallurgy, impurities & contaminants)

5. Identifying the value pathways (bigger is not always better)5. Identifying the value pathways (bigger is not always better)

6. Willingness to test new technology (but not bet the house on it)

7 Making the most of your people7. Making the most of your people

8. Long-term focus on exploration Factors in your controlyour control

Cobar

• Discovered in 1870 when well sinkers were taken to a well by an Aboriginal tracker … then Sidwell Kruge identified the copper g g ppoxides in specimens collected from the well.

Northparkes

• Discovered by RAB drilling approximately 100 years later – whilst searching for VHMS deposits

E22E22 E27

E48

E26E26

We both mineminecopper and gold …g

And share a commoncrustallineamentlineament…

And we both have Terence Plowrightsculpturessculptures …

Miners’ monument (Cobar) Sir Henry Parkes (Parkes)Miners monument (Cobar) Sir Henry Parkes (Parkes)

But there are some important differences!

• Its greener and closer to Sydney

• Our ore bodies are larger but lower grade (although they have the same strong sub-vertical plunge as Cobar ore bodies)

Witho t block ca e mining the ore bodies co ld not be economicall• Without block cave mining the ore bodies could not be economically recovered

• High bornite/chalcopyrite ratios – yielding attractive high grade cleanHigh bornite/chalcopyrite ratios yielding attractive high grade clean concentrates

• Low NAP/NAG ores (low pyrite but contains carbonate)

• In a mining downturn we can turn our hand to farming

Block Caving – suited to our ore bodies

Advantages:� Cheap mining method ($5/t)� Cheap mining method ($5/t)� High production rates (6Mtpa)� Energy efficient� Reduced manning (60ktpa/person)� A rock factory

Disadvantages:� High up front capital cost� Slo constr ction� Slow construction� Needs massive sub-vertical ore

bodies

ExtractionLevel

� Requires high degree of technical competency

� Difficult to steer – when they go wrong they go horribly wrong

Northparkes’ Ingredients for Success

1. Good quality ore body

2 Strong metal prices�?2. Strong metal prices

3. Access to capital

?�

4. High level of ore body knowledge (geology, geomechanics, geometallurgy, impurities & contaminants)contaminants)

5. Identifying the value pathways (bigger is not always better)better)

6. Willingness to test new technology (but not bet the house on it)house on it)

7. Making the most of your people

8 Long term foc s on e ploration8. Long-term focus on exploration Factors in our control

We start with a 14+ year mining inventory…

E26 L1 Mt Cu % Au g/t

Actual 25.5 1.40 0.43

S


Actual 1.3 0.62 0.30

Reserve 59 3 0 92 0 37S NReserve 59.3 0.92 0.37

Hoisting Shaft

MainDecline

E26L1

E48

9800 Level

Access Decline

L1L1

ConveyorDeclines9450 Level

L2 L2N

E26 L2N Mt Cu % Au g/t

Actual 6.9 0.71 0.21


Actual 13.3 1.36 0.58

37

Reserve 10.2 0.69 0.19Resource 6.4 0.91 0.28

Ore Body Knowledge critical to making the most of what we havethe most of what we have …

and a source of opportunity.pp y

• Understanding grade - tonnage distributions and the opportunity to g g g pp yapply declining shut-off policies, especially leveraging existing mine/concentrator infrastructure

• Understanding the spatial distribution of mineralisation and rock mass characteristics

• Accurately predicting rock strength caveability (including rate of• Accurately predicting rock strength, caveability (including rate of caveability), fragmentation and natural and induced stresses

• Accurately predicting concentrator throughputs, metal recoveries, Accurately predicting concentrator throughputs, metal recoveries, concentrate qualities

Extracting value out of existing operations

Hoisting Shaft

E26

Lift 1

Lift 2 3D View of E26 orebody and

40

Lift 2 3D View of E26 orebody and underground workings

A major commitment to Ore Body Knowledge

NS

PlanViewView

CrossSection

Understanding our key value drivers ...

• Accessing high grade ore as early as possible

• Leveraging off existing infrastructure reduces capital shortens• Leveraging off existing infrastructure – reduces capital, shortens schedules

• Maximising the value of our mining method and mine layoutg g y

• Optimising the scale of our business (the optimal balance of capex, opex, metal production and mine life)

• Understanding the value of new technology

People our other enabler ...

• Establishing an exciting vision for our business

• Achieving alignment and engagement• Achieving alignment and engagement

• Maintaining organisational flexibility and nimbleness

• Building capability:• Building capability:

• Leadership and team skills

• Safety competencies• Safety competencies

“Hidden Value - Getting Extraordinary Results out of OrdinaryHidden Value Getting Extraordinary Results out of OrdinaryPeople” (Charles O’Reilly)

• “There is no ‘talent shortage’ in companies that have NOT created toxic work environments”

• Competitive advantage comes NOT from strategy but from ti d ti d d lexecution – and execution depends on people

Finally, make work fun and balanced …

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