Reviving Reefton

It’s not quite like the old days when there were nearly 70 companies mining the quartz fields, but Reefton is back as a major New Zealand gold producer now that OceanaGold has got the Globe-Progress mine working again.   BY HUGH DE LACY

From being almost a ghost town a few years ago, Reefton has sprung back into life as OceanaGold takes the next step in its development by listing on the Toronto Stock Exchange (TSX).

Production at the company’s Globe-Progress mine began in April, and by the end of the year between 55,000 and 60,000 ounces of gold will have been recovered. Next year’s output will be closer to 80,000 ounces, and while the present mine’s life is put at just seven years, ongoing exploration should ensure a lifetime significantly greater.

OceanaGold acquired the Reefton tenement in 1992, and it took 12 years to navigate its way through the resource consent process, but by 2005 work had started on the bridge over the Inangahua River and the four-kilometre road to the opencast mine site. By January last year the access road had been completed and the final pre-production work begun on the tailing impoundment, silt ponds and internal tracking.

Brightwater Engineering of Nelson was the main contractor with the electrical work done by South Island firm Aotea Electrical, and the 300,000 to 400,000 tonnes of earthmoving by Marlborough Earthworks. The mining contractor is South Island-based Stracon, which also has interests in South America.

The mine cost nearly $68 million to bring into production. It is now operating with a workforce of 120, most of whom live in the Reefton area. Mining is carried out by a fleet of nine Caterpillar 777 trucks and two O&K excavators, an RH90 and an RH40. They move about 13 million tonnes of overburden a year to recover 1.0-1.2 million tonnes of ore at a strip ratio of nine to one. The $45 million GRD Minproc designed on-site concentrator reduces this to about seven percent of the original bulk, which is then railed for final processing at Oceana’s other South Island site at Macraes in East Otago.

The gold is disseminated finely through the Reefton ore in sulphide minerals so is first crushed and ground by the concentrator to a fine sand, of which 80 percent screens through 100 microns (about three times the thickness of a strand of crossbred wool).

This is followed by the flotation process in which chemicals are added to the slurry and air pumped in. The sulphide minerals attach to the air bubbles, and the resultant froth is recovered and filtered. The moisture level is then reduced to 10 percent, and the resultant filter cake is railed to Macraes in specially-built 13 tonne tarpaulin-covered skips loaded four to the rail wagon.

Five days a week the 200-300 tonnes consignments of concentrate join a coal or general goods train from Greymouth for the journey across the island to Lyttelton, from where they are redirected to Palmerston in Otago. The concentrate is then trucked to the Macraes autoclave, essentially a giant pressure-cooker that turns the sulphides into oxide minerals from which the gold is easily extracted by leaching.

Two pits at Reefton, the Globe-Progress and the General Gordon are presently being worked, and these will eventually join up. Meanwhile, exploration work continues on the Crushington reef to the north and the Supreme-Cumberland to the south, all of which comprise but small part of a tenement 40 kilometres long by about five kilometres wide.

At 2.6 grams per tonne, the concentration of gold at Globe-Progress is about average on a world scale, according to Mark Cadzow, OceanaGold’s vice-president of corporate technical services. This is, however, nearly twice the concentration of the 1.4 grams per tonne lode at Macraes, which has nevertheless produced more than two million ounces over the past 15 years.

“Further exploration of the Reefton tenement is concentrated on areas close to the current infrastructure, and dependent on its success and a few other factors it should certainly ensure the mine continuing beyond its present seven-year life,” Cadzow says. “It’s certainly not limited to a million tonnes a year by the concentration plant: that’s ramped up very well and it’ll handle everything we can produce.”

Oceana was spun off last by its parent company, Perth-based Gold Resource Developments (GRD), whose Minproc subsidiary supplied the Reefton concentration plant. Once the company was independent, Oceana chief executive Steve Orr lost no time in pursuing his goal of making it a regional biggie – the likes of Lihir Gold and Newcrest Mining – by merging with Australian-listed Phillipines gold and copper explorer Climax Mining.

The merger took place towards the end of last year, linking Macraes and Reefton with Climax’s developing Didipio gold and copper porphyry deposit in northern Luzon. This tenement has an ore body of 2.5 million ounces of gold equivalent and is on track to come into production of 220,000 ounces per year by 2009. By then Oceana will be producing 550,000 ounces a year.

Last month Orr in effect re-domiciled Oceana from Melbourne to Toronto by listing it on the TSX. The company is already listed on both the New Zealand and Australian exchanges, and Orr says the shift to Toronto would open the door to the big institutional investors there. Principal among those is the RRSP (Registered Retirement Savings Plan) fund, Canada’s state superannuation scheme, whose ability to invest in foreign-domiciled companies to tightly limited by statute.

“Technically we’re re-domiciling the company to Toronto but not physically,” Orr says. “It gives us exposure to a broader market for the purposes of capital raising and also incenting investment. It’s one more step towards staying with our roots in New Zealand but growing into an international gold company that hopefully New Zealand will be proud of.”

To this end a company called OceanaGold Corporation has been incorporated in Canada, and will acquire OceanaGold Ltd by a scheme of arrangement. The old limited liability company will no longer trade on the Australasian exchanges, but the corporation will list in its place on both. At the same time there will be a consolidation of shares with the issuance of one corporation share for every five limited-company shares. This is aimed at putting the company in the $3-$4 price bracket of its peers.

After the listing in Canada and the subsequent re-listing in Australia and New Zealand, Australian shareholders will get the option of trading the company’s shares on either the TSX or the ASX , and New Zealand shareholders on either the TSX or the NZX. The ASX will trade the security as a chest depository instrument, a kind of proxy for the TSX share.

“Until 2009 when we get Didipio commissioned, all the cash we generate is going to be put back into future project development, but by that time we’ll well and truly be a mid-cap international gold company.  At that point the net cash-flow to the company will be very large: Didipio itself on a net cash-flow basis will be generating close to $1 billion,” Orr says.

This may dwarf Globe-Progress’ current output, but by the same token ensures the town of Reefton’s renaissance will not be short-lived. In its previous heyday around 1870 there were 66 mining companies grinding away at the quartz rock in the hills, while the town itself, originally called Reef Town and nicknamed Quartzopolis, was one of the most vigorous and technologically advanced in the country. In 1888 it became the first town in the country – and perhaps in the Southern Hemisphere – to be lit by electricity.  

Reefton may never again become as big and vibrant a town as it was back then, but Globe-Progress and Oceana have ensured it’ll be a long time before it goes back to hosting only ghosts again.