A gold deposit grading between 1.9 grams per tonne and 2.2gpt, with 274,000 ounces of that already mined. There remains a near surface target of up to 600,000oz.
Throw in the tailings, which amount to 1 million tonnes at up to 1.7gpt, for possibly a contained 50,000oz, and there you have it - the Buhemba project in Tanzania.
Not a bad little project for a junior. But the Tanzanian government, when it offered Buhemba for tender, received 11 bids.
That’s 11 companies vying for what is a very modest project by world gold standards!
What this tells you is that even modest brownfield projects are in high demand these days, and it is a battle to get your hands on them.
Some analysts have been a bit iffy about brownfields exploration. Last year, for example, Warwick Grigor at Canaccord Genuity was warning his clients of the perils of jumping at just any old gold project. He said a frequent sales pitch is that the former mines were closed in the 1990s due to the low gold price but could make money now. (Buhemba, incidentally, does not come into this category: the mine shut in 2007 not for economic reasons but due to some financial decisions by the then owner.)
Said Grigor: “Be careful. Most of the brownfield developments in the past decade have ended in tears. Companies invariably underestimate the refurbishment capital needed, and the short mine lives (ahead) often create stress for financiers, so the typical funding route is equity finance – and repeated rounds of it.”
But brownfield applies to more than gold, of course. And some of it is clearly successful.
Back in April, BHP Billiton announced a high-grade maiden resource of 4Mt at 3.5% nickel for its Venus discovery near Leinster in Western Australia.
“This discovery demonstrates the success of BHP Billiton’s focused brownfield exploration program,” the company said.
In 2006, two BHP technical people, geoscientist Tom Whiting and minerals economist Richard Schodde, delivered a paper to a mine management conference covering the issue of brownfield development and focusing on a case study of the Kambalda nickel camp.
It was there in 1966 that the former Western Mining Corp made its high-grade massive nickel sulphide discovery.
By 2000, WMC Resources (as the company was by then called) had decided that rising costs and poor nickel prices placed a big question mark over the Kambalda operation, and so began selling its mines there to various juniors. With the advent of the commodities boom over the past decade, and the lack of greenfield discoveries, brownfields developments across all metals became the rage. (Just think tin or tungsten in Australia, so many of emerging projects involving either old mines themselves or mineral fields with a history of extraction of those two minerals.)
But the Whiting-Schodde paper showed graphically what brownfields could mean.
In the first decade of the Kambalda nickel camp, the average size of a discovery was 1.49Mt at 3.34%, for a contained 47,000 tonnes of nickel. In the period 1996-2005 the average discovery was 344,000t at 5.72%, or a contained 19,000 tonnes.
“A key characteristic of brownfields exploration is that, with time, the search space is progressively exhausted, resulting in smaller discoveries and often associated higher cost and lower value,” the authors wrote.
And yet, between 1985 and 1989, 56 million ounces of gold were discovered in Australia, 41 million of which were found after mining had begun on many of the projects concerned.
So it’s a story with two sides. But, if metals prices continue to fall, the enthusiasm for brownfields exploration could evaporate with it. And then will come another boom when brownfields plans will be on again.
Worth fighting for: Brownfield projects have plenty to offer.
This article first appeared in the June edition of Australia's Mining Monthly.