EXPLORATION ROUNDUP — Kiwis push for revival of mineral exploration — Conference opens window on New Zealand

Auckland, New Zealand — Exploration and mining are welcome in New Zealand as long as companies are prepared to meet high environmental standards and be good corporate citizens, government officials told delegates during a recent mining conference in this seaport city.

“New Zealand’s existing mines set high standards and are models for the world,” said Deputy-Secretary Leith Comer, speaking on behalf of the country’s minister of energy, Max Bradford. “But there is an anti-mining segment that has focused on the legacy of pioneer mining practices. The government is prepared to do its bit to create a viable industry. However, it is up to the industry to achieve a more positive public opinion of mining and to make sure there is little room for criticism.”

The value of New Zealand’s current mineral production is about NZ$1 billion annually (NZ$1 equals US$0.62). Government officials point out that gold exports in 1996 brought in NZ$250 million, more than double the value of the country’s highly touted wine industry. “The government is well aware of mining’s contribution to the economy,” Comer said.

Nonetheless, ministry officials would like to see an increase in exploration spending in the South Pacific nation, as these are at low levels relative to the boom of late 1970s and early 1980s when a number of international majors were exploring gold and other mineral projects.

As a result of the previous burst of exploration activity, three gold mines — Macraes, Martha and Golden Cross — were developed and are still operating today. While Golden Cross is scheduled to be closed shortly, the operators of Martha and Macraes are planning expansion programs (though the Macraes expansion has been scaled back because of the slump in gold prices).

Macraes, New Zealand’s largest gold mine, is wholly owned and operated by Macraes Mining (listed on both Australia’s and New Zealand’s stock exchanges). The open-pit mine has operated successfully for six years and currently produces about 120,000 oz. gold annually. The mine is in the Otago district in the South Island, a historic gold camp and farming region that is widely regarded as more conducive to exploration and development than the more populous North Island.

Normandy Mining (NDY-T), Australia’s largest gold producer, holds a 67% interest in the Martha open-pit mine in the town of Wahai on the North Island. This historic mine is in the highly prospective Cormandel region, not far from Southern Cross.

“It is a great mine and one of our better assets,” said Normandy President Robert Champion de Crespigny. “It has produced 5.7 million oz. gold throughout its operating history.”

Martha currently turns out about 83,000 oz. gold annually and is poised to reach 120,000 oz. per year once expansion plans are approved (see separate story on page 1). Normandy also is examining other mineral prospects in New Zealand, including ground adjoining Martha. Epithermal gold deposits similar to Martha are the primary target.

Wanted: explorers

“New Zealand has the geology; it now needs the explorers,” de Crespigny told local business reporters at a press conference. “And the environment is no longer an issue. People in their 40s are now taking over senior positions [of mining companies], and they are trained to care for the environment.” But de Crespigny added that the industry will not “go ahead” in New Zealand without a partnership with the government and the people. “New Zealand is undersold. It now has models in Martha and Macraes that have to be marketed overseas.”

As might be expected, operators such as Normandy and Macraes account for much of the exploration spending in New Zealand. And mining representatives, as well as government officials, concede that the low gold prices will curtail the rate of spending in the years ahead.

Increased reserves

Patrick O’Conner, chief executive officer of Macraes, told delegates that his company’s investment in exploration was repaid with increases in reserves and resources at the Macraes property. The company spent NZ$20 million on 253,843 metres of drilling during the 36 months from the start of 1994 to the end of 1996.

“As a result of this drilling, 3.5 million oz. of gold resource have been discovered along 6 km of strike of the Macraes shear zone,” O’Connor said.

“This equates to a finding cost of about NZ$5.70 per resource ounce.” Consulting geologist Geoff Price told delegates that the perception of New Zealand as an exploration destinatation is changing. “Previous pessimism is turning to optimism, and there is increasing interest,” he said. “This is a result of Australia becoming more difficult for exploration due to native title and other issues, Indonesia losing its appeal as a result of the Busang scam, and other countries becoming less attractive. For the counter-cyclical investor, New Zealand currently presents good opportunities.”

Price also said the country’s political stability and absence of corruption are finding favor with foreign companies. And he pointed out that the country’s “green” environmental policies are not much different from those imposed in North America and in many other parts of the world. “Three hardrock mines have shown that it is possible to operate a mine in New Zealand’s regulatory environment. This has dispelled some of the fears [that] overseas companies had developed from the stories of anti-mining sentiment, which mainly came from the Cormandel.”

Price told delegates that New Zealand is now viewed as more prospective for gold than in the past. Epithermal gold-silver deposits, such as Martha and Golden Cross, are the main target of companies exploring in the North Island. Companies active in the Otago district are seeking mesothermal gold deposits similar to Macraes, which is believed to have potential for a resource of 10 million oz.

On a less positive note, Price noted that there has been a “mixed reaction” to mining legislation introduced in 1991. “The new legislation is regarded [by some] as cumbersome, in particular applications for resource consents [permits]. A large number of resource consents may be required, and these could take up to a year to be granted. The requirement for different consents is time-consuming and expensive, especially as the requirements vary between different councils.”

Greater access

Companies also are concerned that the current legislation provides for landowners (including government departments) and occupiers to control access to Crown owned minerals. Access for exploration is gained by commercial agreements obtained through negotiation. “Some explorers feel that this has made access more difficult than previously, as landowners can veto access to Crown minerals,” said Price. He added that explorers are not happy that one-third of New Zealand is controlled by the Department of Conservation, which is not seen as being “favorably disposed” toward exploration and mining.

Evelyn Cole of Crown Minerals, a division of the Ministry of Commerce, told delegates that new initiatives to enhance the investment climate in the minerals sector are being considered. These would be aimed at clarifying permit allocation and operating rules, reducing compliance costs, and minimizing regulations and barriers to investment. She urged companies to make their views known to the government.

Government officials did hear some complaints about the lack of access to mineral lands, which one delegate said turned “elephant country into a game reserve.” On a more positive note, companies are finding that lands ceded to, or claimed by, Maori (aboriginal citizens) are not excluded from resource development. “The Maori will not be a stumbling block to resource development,” Comer said.

This view was echoed by Te T. White, a consultant on Maori economic development. “Maori are clearly shifting from grievance to the development mode,” he said. “The years of relative economic obscurity appear to have whetted their appetite for positive growth and economic independence. The Maori should be viewed as potential allies.”

While New Zealand has only a handful of juniors
exploring mineral prospects, those actively working projects say the overall attitude toward exploration is much improved over a decade ago.

“It was not uncommon even five years ago to encounter resistance,” said Peter Atkinson, president of Heritage Gold, a junior exploring gold prospects in the Cormandel, including a number of past producers. “But now, with several mines operating in the region, attitudes have changed and it is easier to get consents.”

The Otago region on the South Island is a favored exploration destination, and several companies are looking for mesothermal gold deposits similar to Macraes. “This area is underexplored,” said Geoff Price. “And it offers good potential for new discoveries.”

Reefton district

Another area being explored is the historic Reefton goldbelt, on the western side of the South Island, which produced more than 2 million oz. gold between 1870 and 1951. Macraes Mining is actively exploring its Reefton gold project in this area. At last report, the project had a resource of about 1.1 million contained oz. gold, with reserves for the Globe-Progress area estimated at 5.6 million tonnes at 2.47 grams. Macraes has numerous other gold exploration projects in the country, including the Puhipuhi deposit, previously explored by Homestake Mining as a lookalike to the McLaughlin gold deposit in California.

Summit Resources, an Australian junior, is exploring the Carrick gold field in Central Otago, where small-scale historic mining took place from 1864 to 1921. The junior’s work to date has outlined a 1,500-metre-long zone of low-grade (average grade: 1 gram) gold mineralization over an average thickness of 14 metres.

New Zealand also has numerous placer mines along the west coast of the South Island, where about 8.5 million oz. gold have been mined since the 1860s.

The country also has numerous mines producing industrial minerals, as well as ironsands and coal deposits.

Among the new coal deposits undergoing development is the Greymouth deposit on the western side of the South Island. The operators propose to market and produce a high-volatile, bituminous-type coal with low ash (6%) and sulphur (0.4%). Of the three separate minable seam groups, the thick Main seam (77% of the total resource) will be mined by hydraulic mining technology. About 1.6 million marketable tonnes per year over a 20-year mine life were chosen as a practical planning horizon for economic evaluation purposes.