The relaunch of Westgold as a leading Australian mid-tier gold producer with a strong balance sheet, circa-260,000oz-a-year of current production in a tier-one jurisdiction, and a bank of high-quality growth options, is imminent.

Metals X’s future as a globally significant tin producer and leading Australian copper miner, also with plenty of cash in the bank and a growth pipeline with copper, cobalt and Australia’s largest undeveloped nickel resource on the side, looks similarly assured.

Gold output surged 20% in the September quarter to more than 65,000oz at a cash cost of production of A$1,031/oz (US$780/oz) and AISC of A$1,192/oz (US$900/oz). Production is currently closing on a 300,000ozpa annual run-rate and Westgold has options for incremental expansion out to 450,000ozpa within two years with minimal technical, financial and country risk attached.

“Westgold is positioned as a top-10 domestic gold producer in the world’s best gold jurisdiction with nearly 3 million ounces of JORC reserves, 15Moz of resources, EBITDA margins running at around A$600/oz, no debt and A$110 million of cash in the bank,” Cook said.

“And that’s where Westgold is really just getting started.”

See Golden sons rise in the West.

Equally compelling is the Metals X base metals story, built on high-quality tin reserves at the world-class Renison mine in Tasmania, copper at Nifty and Maroochydore in Western Australia, and nickel, cobalt and scandium at Wingellina in central Australia. While a significant global production overhang continues to press down on nickel prices, Metals X has been working hard behind the scenes to progress Wingellina to a development-ready state (including receipt of environmental approvals in September). The scale of the unique limonite resource has it figuring prominently in the long-term strategic planning of major Korean and Chinese metals groups.

Meanwhile, September quarter production from Renison underlined the enduring profit-making capacity of a mine that has yielded 26 million tonnes of tin at a head grade of 1.4% Sn since 1968 and which continues to be Australia’s only significant tin operation. Equally owned by Metals X and China’s Yunnan Tin, with the former operating, Renison posted 49% higher production, quarter-on-quarter, at 37% lower cash cost (A$11,208/t) and 24% lower AISC (A$17,344/t). Average tin prices were A$24,727/t in the quarter.

Metals X’s 3,500tpa annual share of tin output from Renison is currently generating net cash operating margins of plus-A$10,000/t with the LME tin price above A$28,000/t (US$21,140/t): circa-A$35 million of annual cash flow/$45 million EBITDA with ongoing measures aimed at stripping operating costs below A$17,000/t.

“We anticipate that the free cash-flow number could even be better than that [in the current full year],” said Metals X managing director Warren Hallam.

“We are sitting in the bottom half of the global tin cost curve. Our objective is to get down to the bottom quartile, but we are in a fantastic position because we’ve got a 10-year reserve and 20-year resource at Renison – that’s before we look at the tailings project – our operating margins continue to improve, and when you look at many of the undeveloped tin deposits around the world there aren’t too many that don’t need a [long-term] tin price of A$35,000-to-$50,000/t to be developed.

“Development of those mines will take a minimum of two years, even if they’ve already been through a feasibility and are permitted. But a lot of them are going to take 5-10 years to come along.

“The tin will be needed and that sort of price range is the requisite catalyst for more production.

“We’re already generating lots of cash, and anything else [above current prices] just goes straight to the bottom line.”

The proposed A$200 million Rentails tailings retreatment project, equally funded by the JV partners, could yield an additional 5,000tpa of tin and 2,000tpa of copper at A$16,500/t tin AISC (after copper credit) within 2-3 years.

Metals X and joint venture partner Yunnan Tin are examining expansion options at the Renison tin mine in Tasmania

“We’re completing the updated engineering,” said Hallam. “The last study was done in the 2008-09 boom times so it had a lot of inflationary inputs and we anticipate that capital cost might come down. The opex in that feasibility was only about $12,000/t. You put the capital on top of that, so another $4000/t gives you $16,000/t, but again if you put that against a $28,000/t tin price the margins are extremely attractive.

“We anticipate having that final engineering review completed by Christmas and then the JV needs to consider it in January. I’d expect we’ll be making some commitment over the next six months.”

As well as Rentails and the ongoing cost reduction drive at Renison post the shift back to owner-mining last year, Metals X and Yunnan have the option of a $8-10 million ore sorting project. Testwork has shown that it could enable 20% more ore to be processed through the existing plant, without adjustment to the main plant, with resulting higher metal output.

The “fairly cheap 20% expansion” would effectively increase the concentrator head grade by reducing mill-feed dilution with modern gangue rejection technology, Hallam said.

“We have been operating at Renison for about eight years now continuously and put a very good operating team together, led by highly experienced mine manager Allan King, to manage that asset,” he said.

“With the suspension of some operations in the district there is a large pool of skilled labour available and, post the boom, no shortages or delays with equipment being available. So it’s not just about the tin price, it’s also the operations continuing to improve as well, and we see no reason that won’t continue.”

Metals X’s successful rejuvenation of the mature Renison mine over a decade continues a theme prevalent right back to Cook and company chairman Peter Newton’s restoration of the former WMC-owned Hill 50 gold mine in Western Australia in the 1990s. Intelligent exploration and mine development brought a windfall for investors and that has since become a Metals X pattern in gold and base metals.

“We are renovators and we are looking for assets with high sunk capital, where we can come in and make improvements to really optimise the cash generation, and that’s where we’ve been successful in the past,” said Hallam, who joined the team from WMC back in 2003.

“We started building up the gold business four years ago when everyone had abandoned [the metal].

“We saw 18 months ago that the copper industry was at the bottom and everyone had also abandoned it, so it was time to have a look around and Nifty was one asset that had obvious appeal.”

While the process to prise Nifty and the undeveloped Maroochydore project, 90km from the established operation, away from ASX-listed Aditya Birla and its major shareholder, India’s Hindalco, became protracted, the 100%-owned assets are now also set to produce lots of cash for Metals X courtesy of strong copper prices and renewal measures already underway.

When the company took control of Nifty on August 1 it had effectively landed a 35,000tpa copper producer with infrastructure (including a 2.5Mtpa plant) that would cost more than A$400 million to build now – as much as $200 million to replace – for a tidy net $20 million (including the cash in Aditya).

JORC reserves are at 5.24Mt grading 1.85% copper; resources at 31.1Mt at 1.73%. Maroochydore’s measured, indicated and inferred 48.6Mt at 1% takes the total in-ground inventory for Metals X to more than 1Mt of copper at a grade more the twice the current average being mined around the world.

Surface and underground drilling has already restarted on the shallow (<400m deep) mine at Nifty as the operation is recalibrated to match the potential of an underutilised plant, and strengthening market.

“There is tremendous value to be unlocked at Nifty,” Hallam said.

“The process plant has been running two weeks on, one week off, so there is 30% spare capacity, and we’ll be able to run over nameplate capacity when fully up and running. So there’s about 40% spare capacity in the process plant. It’s all sunk capital. The plant runs well. So it’s all about mining and we’ll be opening that up through lateral development – all the vertical infrastructure is in place, including crushing and conveying plant – and just renewed investment in drilling and general mine upkeep.

“We’re talking about an orebody that’s been mined at 2%-plus. It’s had a very good overcall factor historically and there is no reason why that won’t continue. It’s only got a reserve of 100,000t versus a resource of 540,000t, but that is all to do with drilling density and there hasn’t been much drilling at all over the last four years.”

Capex to effectively debottleneck the underground mine could be as little at $15 million over the next 18 months, a number that pales next to prospective cash generation from higher copper prices and productivity gains.

“Our view is that we’re probably going to get a 20% improvement just on [mine] productivity by refurbishing our mobile equipment back to the right levels of availability, and lifting workforce morale. That’s probably got an 80% fixed cost and 20% variable cost attached to it, so we’re talking about 20% additional tonnes at modest cost.

“Where we are at the moment is that we’re running around US$2.00-2.10/lb and our current aim is to drop that to $1.70-1.75/lb.”

After an inauspicious welcoming price of about US$2.05/lb when Metals X got the keys to Nifty, the lights have certainly come back on with the latest trading around $2.54/lb (US$5,600/t on LME), or A$3.36/lb, compared to Nifty’s AISC of A$2.88/lb. That 50c differential is worth about A$38 million in additional annual cash flow with Nifty at 35,000tpa.

“That’s without the [planned] improvements,” Hallam said. “Nifty is running at 35,000tpa and we expect to get that up to around 42,000t, and continue to move forward from there.

“You’ve got to be lucky sometimes in resources and we’ve been reasonably lucky with the price at the moment – it’s up 20% in the last month.”