Hegarty takes a golden path

Owen Hegarty

A decade usually brings a lot of changes to the mining industry.

In many ways, however, the past 10 years have taken the multi-commodity Golden Grove mine in the Mid West region of Western Australia full circle.

When zinc, one of the key commodities mined at Golden Grove, shot through $US3000 a tonne during August it was the first time that the base metal’s value had risen through that mark in a decade.

Golden Grove was owned by the Owen Hegarty-led Oxiana back then, a company that would merge with Zinifex to create OZ Minerals in 2008.

After Golden Grove again changed hands, with MMG acquiring the operation in 2009, it has this year been reunited with Hegarty when the equity fund he chairs, EMR Capital, bought the site.

EMR completed a $US210 million acquisition of Golden Grove from MMG in February, returning Hegarty to the operation at a time when zinc prices were entering a region not seen since he was last in charge.

While zinc prices may not be in the $US4000 a tonne realm they reached a decade ago, and Golden Grove isn’t producing the 135,000 tonnes of the base metal it did back then, the site finds itself heading in a new direction under the latest ownership.

Hegarty told Australian Mining that EMR made some notable changes at Golden Grove after acquiring the site.

A key change, Hegarty said, was to Golden Grove’s management structure, with MMG previously directing operations from its east coast base in Melbourne.

EMR, instead, appointed a new team based at the Golden Grove site to manage activities. The equity fund also appointed a new contractor, Byrnecut, to operate the mine.

Operational restructure

Hegarty said EMR had to replace a lot of management and personnel following the acquisition of Golden Grove.

“A lot of senior people went with MMG, so we had to replace them all,” Hegarty said.

“We have changed the arrangement there with a lot of the contractors and we introduced Byrnecut – they are now the main contractor. Everyone reports into the one contractor for underground, development and mining.

“We have signed everyone on to a different roster. So, we are starting to get better productivity and focus – it’s all about safety, volume, quality and costs.”

EMR has also launched a couple of new projects at Golden Grove that were previously overlooked by MMG, which was more focused on the development of its Las Bambas mine in Peru and the Dugald River project in Queensland.

“We released the brakes on a couple of expenditure projects, not big money projects but the sort of things that (MMG) management put the brakes on – any capital was going to Dugald River or Las Bambas,” Hegarty said.

“We did our due diligence so we knew there were projects there that would not only be very good economically, but also good for the people there to see that we are prepared to do that.”

Hegarty said, with these projects, people who consider Golden Grove to be a late stage project should think again.

“It’s not (late stage) to the extent that we will increase the resources quite substantially because we are committed to development and exploration,” he said.

Golden Grove

 

Time for a change

Hegarty has more than 40 years’ experience in the global mining industry, including 25 years with Rio Tinto, where he was managing director of its copper and gold businesses between 1989-1994.

He was also, until recently, the vice chairman of leading Western Australian iron ore miner Fortescue Metals Group.

After his tenure with Oxiana, which he guided from exploration company into a $6 billion producer, and then OZ, Hegarty decided to take a different approach to mining by founding EMR in 2011 alongside current CEO Jason Cheng.

EMR consists of two mining funds, worth a combined $1.3 billion. Golden Grove sits in one of the funds, while the other consists of a geographically diverse range of assets, including Capricorn Copper in Queensland, the Martabe gold mine in Indonesia and the West Cumbria Mining coking coal operation in the United Kingdom.

Hegarty said Capricorn Copper was a typical example of the type of project EMR targeted with its funds.

Mining resumed at Capricorn, formerly known as Mount Gordon, earlier this year, with EMR expecting to produce and sell its first concentrates from the operation in October.

“What we want to do there is get that critical mass going – get it up to 35,000 tonnes (of copper) per annum. (We are) looking at 50,000 tonnes with an expansion and we are in the process of extending the orebody now,” Hegarty said.

He said it would then be crucial for EMR to add value to Capricorn Copper to make it attractive for prospective buyers.

“It actually has a really good package of ground but you may want to add other packages to it to make it a lot different from just the old Mount Gordon,” Hegarty said.

“It can’t just be a 35,000-tonne producer – it has to be a 35,000-tonne operation with an expansion, and with multiple other opportunities to grow the business.

“That’s what the next owner, the longer-term owner, wants – something that’s viable, particularly if they are coming in offshore.”

What’s next? 

EMR’s latest acquisition was in Zambia, where it agreed to pay Vale and African Rainbow Minerals $US97.1 million in cash for an 80 per cent share in the Lubambe copper mine.

The acquisition reflected EMR’s confidence in the project as a long-life copper producer located in the prolific Zambian mining region known as the Copperbelt.

EMR expects the Lubambe acquisition to offer growth potential for the fund, while also enhancing the value and depth of its copper portfolio.

The Zambian acquisition also extended EMR’s geographical reach even further, something that EMR has been open to since it was formed.

Hegarty said EMR’s country strategy was common for the Australian companies which look abroad for new acquisitions.

“You have to firstly go where the orebodies are. Secondly, we won’t go to the places that you wouldn’t go if there is a safety or security issue,” Hegarty said.

“In mining, the next broad agenda is to do with the country’s regulatory stability – you don’t want to go places where they change their mind every five minutes.”

Sound advice from an Australian mining stalwart.

Owen Hegarty will join a panel of experts at the International Mining and Resources Conference (IMARC) in Melbourne from October 30 – November 2 to discuss creating value through collaboration, the hard word on value.

This article also appears in the October edition of Australian Mining.

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