Carbine Resources is aiming to fix a legacy from the past and make a dollar in the process, writes Barry FitzGerald in his weekly Garimpeiro column.

The historic Mount Morgan gold and copper mine, inland from Rockhampton in Queensland, was truly one of Australia’s premier mines.

Between 1882 and 1980, the mine produced more than 8.5 million ounces of gold and 400,000 tonnes of copper from its rich ores — so rich in fact that profits from the mine helped William Knox D’Arcy fund oil exploration in Iran which lead to the formation of the Anglo-Persian Oil Co (now BP).

But apart from its rich mining history, Mount Morgan also left behind an environmental legacy of acid mine drainage which to this day pollutes a 20km stretch of the Dee River.

ASX junior Carbine Resources (ASX:CRB) has a dual purpose plan to tackle the acid drainage problem by re-treating the tailings accumulated at the site over its 100 years of operation, while also turning a dollar.

Carbine Resources shares over the past year. Source:
Carbine Resources shares over the past year. Source:

Carbine has spent $11.2 million since 2015 advancing the project.

But as its managing director Tony James frankly admits, it badly misjudged how long it would take to secure all of the required government approvals.

A feasibility study in to the redevelopment with a green bent was completed in December last year and James, a highly-rated can-do mining engineer from Western Australia, thought the required approvals would be in the bag within three to six months.

The delays have seen Carbine shares mark time throughout the year. The stock last traded at 6.7c, giving Carbine a market cap of $14 million.

‘A game of snakes and ladders’

“When you take on a project like this you know you are going to have the challenge of getting things approved. It can be a game of snakes and ladders as you step through the approvals process,’’ James said.

“But we have spent $11.2 million on this project and I can see the light at the end of the tunnel. We are nearly there. We are committed to this project and we are going to keep at it.’’

On the strength of the feasibility study, the delay in final government approvals will be worth the wait.

The “base’’ case pointed to an $85 million project with annual production of 30,000 ounces of gold, 3800 tonnes of copper sulphate and 214,000 tonnes of pyrite (its main use is in the production of sulphuric acid).

The feasibility study suggested the three-income stream would give rise to a robust project, with all-in sustaining costs of production of $549 an ounce of gold (after by-products).

In line for a market upgrade

On that basis – commodity prices have moved and a successful pilot plant trial will lead to project enhancements – Carbine will be in line for a market upgrade once the government approvals come though.

James said Carbine had outlined 40 million tonnes of tailings which come with an average gold grade of 1.2 grams a tonne — higher still if the copper and pyrite (it is to be sent to China for processing) is giving a gold equivalent value.

“It could make a lot of money. This a long-term project. This is 10, 20, 30 years of tailings retreatment generating $20 million to $40 million of free cash annually once the capital is paid back (about two years).

“To me, this is about fixing up something that is legacy from the past, getting the project back to its rightful status in the Australian mining industry, and then going forward, and building something new,’’ James said.

The locals are cheering Carbine on. Unemployment in the town is approaching 30 per cent and James reckons the locals are passionate about getting the job creating project up and running. The benefits of Carbine being in town have already started to flow.

At a recent community meeting on the project James handed over a cheque for $5,000 to a local school for much needed art supplies. He got a standing ovation.