Since Greenland gained autonomy over its mineral resource policy from Denmark in a 2009 referendum the country has experienced a sea change in its mining and exploration landscape. As Greenland opened itself to global mining companies it has become host a wealth of mineral projects and exploration programmes. FinnAust Mining (AIM:FAM) has a management team with vast in-country experience and is on the journey to develop its Pituffik project – one of the world’s top-percentile titanium resources in terms of grade.
FinnAust in its current form is a reorganisation of an existing company, jointly owned by Western Areas, one of Australia’s largest nickel producers. While Pituffik is FinnAust’s flagship project, and will be the primary focus in the near future, the company recently obtained an additional two mining projects in Greenland through acquiring Avannaa Resources, a subsidiary of Cairn Energy (LSE:CNE). The Disko project is a nickel-copper-platinum deposit and Kangerluarsuk holds lead-zinc-silver.
FinnAust still holds Finnish assets including a large land holding in a prolific mining area but the company’s managing director Rod McIllree says he has his sights firmly set on Greenland.
“Our focus will continue to be Greenland and the key string to our bow is Pituffik. We are determined to put that into production because what we see there is a multi-decade, technically simple, highly profitable mineral sand project.”
McIllree has been operating in the Greenland mining industry for over a decade, with his team they bring an unrivalled knowledge of the country, the regulations involved in launching mining projects – particularly on environmental issues – and local community issues. Previous to his role at FinnAust McIllree was the managing director of Greenland Minerals and Energy for nine years during which time he worked with regulators to overturn the decades-old ban on Uranium exploitation in Greenland and Denmark. Quite a remarkable achievement in such a short period of time and one, which indicates seriousness when it comes to developments in Greenland
During his time at Greenland Minerals and Energy McIllree and his team worked on developing the Kvanefjeld uranium project. They originally identified the field as being a unique opportunity in 2006 after identifying Kvanefjeld as a globally significant ore body of specialty metals based on access to the high-quality data sets compiled on Greenland’s metal occurrences by the Danish Geological Survey.
McIllree says he and his team learnt a great deal about how best to operate in Greenland, from regulatory engagement through to logistics and supply lines, valuable experience they have applied successfully as they advance this very large titanium occurrence towards exploitation.
“Kvanefjeld was a complicated project however from that complication came a very good understanding of operating best practice, social expectations on sustainability as well as of regulators and logistic issues. All invaluable and relevant and expected to be a force multiplier on something as simple as Pituffik to ensure development is advanced as quickly as possible.
“We realised there were other opportunities in Greenland and we feel we have now put together a unique portfolio of projects that offer significant development exploration potential with limited development or execution risk. Simple projects with little to no environmental impact, low capital costs and a very limited infrastructure footprint.”
Pituffik matches that description to a tee. It is premium grade ilmenite with a high titanium content and low impurities, simple to implement in terms of the mining technique, it is self-renewing and is showing low capital costs thanks to the nature of the ore.
“This is the second world class asset we have uncovered in Greenland during our time there,” says McIllree. “Added to this we feel confident that the two projects we recently acquired from Cairn Energy PLC will, in time, provide a similar growth path offering a unique asymmetric investment opportunity for investors.”
Pituffik was discovered by a group of Danish geologists in 1915 and has undergone sporadic work on the site since then. According to McIllree, FinnAust was the first group to look at the project as a whole. The team completed very detailed aerial and marine based surveys that identified, for the first time, ‘one of the larger occurrences of ilmenite in the world’.
The area is made up of five distinct deposits of primary ilmenite:
FinnAust acquired Pituffik in December 2015 and has continued to expand the known parameters over the last year completing an extensive resource and work programme this year.
The 2016 work programme focused on defining both the grade and volume characteristics of Pituffik through the production of a JORC code-compliant resource. The company completed 260 holes on raised beach targets with all holes showing significant ilmenite horizons. A further 150 offshore vibracore holes were completed, large metallurgical samples were taken for processing, an SRK competent person site visit took place and the environmental baseline study was compiled.
McIllree is pleased with the progress the company has made at Pituffik and is confident of a significant-scale project becoming a reality in the near future.
“The fact that it is very high grade goes a long way to helping us with the barriers that are inherent with developing projects in Greenland. It is an environment that benefits from high grade nature of any ore body and that directly translates to profitability,” the FinnAust MD says.
“This year we did a large sampling programme, offshore drilling, onshore drilling, additional sedimentological studies which SRK will continue with early next year.”
McIllree adds that the major breakthroughs for Pituffik in terms of its economic viability and processing came through the metallurgical work. The deposit holds premium ilmenite, it has low impurity and is non oxidised, FinnAust found that it can produce a saleable concentrate for the sulphate process by a one-step gravity separation – both factors relate directly to capital and operational costs.
“Those two things ultimately translate into simpler processing and process efficiency – it costs less to produce our material than other materials that are oxidised and less amenable to dissolution.
“Those two factors and the fact this is one of the highest grade, if not the highest, ilmenite projects globally. Combined with the fact we don’t have to move too many tonnes to get a tonne of concentrate through gravity because of the grade means we are confident our product will sell easily in the market place,” says McIllree.
Ilmenite prices are on the climb and McIllree expects that prices will revert to a mean of between US$200-260 per tonne over the next 18 months, “Our project is very profitable at current prices and will be even more so at future prices.”
The key titanium component is also coming back from multi-decade lows in terms of pricing which has meant industry-wide underinvestment and a draw down on stock availability. It has resulted in the shutting of mines and a lack of supply in a recovering ilmenite sector. McIllree is positioning Pituffik to capitalise on the benefits of those factors.
The project has a number of key strengths in terms of grade and simplicity and on top of that being located in Greenland it has little exposure to sovereign risk.
“Greenland is a country that, in my mind having operated in Greenland for nearly 12 years, is globally as close to zero sovereign risk as you can get and that is something people will come to appreciate.
“Countries that can offer a solid legal framework and a transparent mining act, which Greenland can, will see more activity. It’s a good place to be, we have strong relationships with everyone from the regulators to the local people and we will operate there for as long as we can.
“It’s highly prospective and Greenland is a country where you spend a dollar and get $1.50 return in exploration and there aren’t many countries where you can do that.”
FinnAust has a highly experienced team of experts and service providers assisting in bringing Pituffik to production. McIllree has selected a group of the highest quality service providers who are critical in pushing the project forward.
“[Dutch dredging firm] Royal IHC have been invaluable, they have one of the best understandings of the dredging space in Europe. They recognised the inherent value of the opportunity very early on and approached us and we have been working very well together, we are very pleased with our relationship with them.
“The Danish Geological Survey [who provide key data and research] is one of the best groups of minerals professionals that I have had the pleasure of working with. They give a very high quality product at a very reasonable price. We will continue to use them for as long as we are able to.
“SRK is a globally-recognised brand name. If you want quality, accurate, high-level advice and assistance then SRK is the go-to group for minerals and mining. We’ve specifically targeted our contractors and consultants for their reputation and work ethic, and quality and calibre of their personnel.
“Niras and Orbicon, two Danish institutions that are very well versed in Greenland. Niras worked specifically on the social impact assessment and that area. Orbicon are the environmental group in Greenland, we have used them previously at Greenland Minerals and Energy.”
March to production
The work programme FinnAust completed in 2016 provided a fundamental basis to push Pituffik to production and 2017 will be focused on gearing the project towards commencing production in 2018. McIllree wants to have sales agreements for the product in place by the end of Q1 2017, if not before, and then use next year to get all the permits in place.
“Next year will be about the mining licence, the permitting and the social and environmental impact statements and to get a resource going which comes out in Q1 2017,” says McIllree.
“The higher level strategy for the company is to create an organisation that pays dividends, is profitable through the Pituffik project and then is able to self-fund exploration on some of these asymmetric exploration opportunities [Disko and Kangerluarsuk].”