It is only two years since Sirius Resources project geologist Markus Staubmann started his career but already he can claim something for which many in his field strive their whole lives.
With responsibilities that would not have been afforded him at a larger company, Staubmann, 27, has played an integral part in Sirius’s Nova nickel-copper discovery, off the Eyre Highway in Western Australia’s south.
And what a discovery it has been: Nova has almost single-handedly restored investor interest in the junior exploration sector and ensured that Sirius ended 2012 as one of the best-performing stocks on the Australian Securities Exchange. Its market value soared from a mere $9 million to $481 million in less than six months.
“It’s beyond my wildest dreams to think that I’d be the project geo out here managing a seven-rig drill-out on a project such as this,” Staubmann tells the Financial Review via satellite phone from the?site.
“Since July I haven’t had a whole lot of time to think about it; it’s been pretty busy. But it’s always there in the back of my head that this is a once-in-a-lifetime opportunity.”
If it had not been for a twist of fate, Staubmann would have been embarking on his career as an anonymous face in a big company.
He graduated from the University of Tasmania’s Centre of Excellence in Ore Deposits, known as CODES, at the top of his class in 2010 and was promptly offered a job with Anglo American. Then, a month before he was due to start, a letter came telling him that the position was no longer available because the miner was cutting costs.
It was Staubmann’s mentor at CODES, Jeff Foster, a Sirius director, who suggested he work under Sirius chief executive and veteran geologist Mark Bennett, telling him: “You won’t get paid much but you’ll learn a lot.” He started with the company in January 2011.
“I took this job knowing full well that I could probably go chasing bigger money somewhere else but it was the opportunity to be involved at a project level right from the get-go that drew me to Sirius,” Staubmann says.
“The pay they were offering was still pretty good when you’re coming from being a uni student.”
Staubmann worked on a range of projects in the WA goldfields in his first 12 months at Sirius. During that time Fraser Range, which contains Nova, was not a high priority.
The company acquired a 70 per cent stake in the project from its major shareholder, legendary prospector Mark Creasy, in late 2010. To begin with, it was pushed along in the background while the company focused on lower-risk gold exploration that was more palatable to investors.
But over one weekend in July last year, that all changed.
Sirius had identified several large geochemical anomalies indicating the possible presence of mineralisation at Fraser Range. But the company had less than $1?million left in the bank and, as Bennett says, 99 out of 100 anomalies of that size turn out to be nothing more exciting than graphite.
On a whim, the decision was made to drill one of the anomalies, known as The Eye. If nothing was turned up in the first few holes, that would be it: the project would be dropped from the Sirius portfolio.
Late on Friday, July 20, the drilling crew reached the target depth at Nova and saw a bit of what they thought was nickel-copper sulphide mineralisation. But it got too dark to carry on. It wasn’t until the next day that the Nova discovery was confirmed.
“I was in Perth and I got the call from Mark [Bennett] on the Sunday night as he was travelling back in from site,” Staubmann recalls.
“He said he had some pretty special samples that he wanted to take around to Creasy’s warehouse and zap them with the XRF gun [X-ray fluorescence, a tool used in mineral analysis].
“I went round, we zapped them with the XRF and it was happy days from there.”
When Sirius came out of a trading halt and announced the discovery the following Thursday, the stock shot from 5.7¢ to 45¢. It reached as high as $3.27 in November but has come back to $2.18.
Coming at a time when the nickel price has been in the doldrums, the share price performance has been a source of bewilderment for investors with only a superficial understanding of mining and geology.
But those better versed have latched onto the similarities between Nova and the large nickel camps that major Canadian mining companies Inco and Falconbridge were founded on. Inco and Falconbridge were bought by Vale and Xstrata respectively in multibillion-dollar deals last decade.
“The Canadian companies were built on these type of deposits,” one early backer of Sirius, who requests not to be named, says. “They threw off enough money to build top-10 companies in that country.”
Unlike the nickel deposits found in the Kambalda district or those mined by Western Areas at Forrestania, the Canadian deposits contain nickel in association with copper and cobalt.
The presence of these by-products typically helps to bring down production costs to within the first quartile for the industry, ensuring the mines are profitable at practically any point in the price cycle.
There are plenty of hurdles to clear before Sirius can even claim a mine at Nova, let alone one of a quality comparable to Vale’s Thompson operation in Manitoba or Xstrata’s Raglan operation in Quebec. But the company is wasting no time moving towards its goal and may challenge that other WA exploration success story of recent years, Sandfire Resources, for the quickest time from discovery to production.
Sandfire broke all sorts of industry records when it brought its DeGrussa copper-gold mine near Meekatharra into production in February, less than three years after the deposit was found.
Sirius raised $44 million in a share placement at the start of December. Those funds are expected to see the company through to the completion of a definitive feasibility study and a decision to mine at the end of 2013.
Based on that schedule, first production from Nova could occur in early 2016.
While there is no disputing that DeGrussa is a fabulous deposit and should make Sandfire a lot of money, at its current size it lacks the scale to attract the interest of the majors.
If the Fraser Range project develops into a lookalike of the Canadian nickel camps, scale is unlikely to be an issue.
But any suitors that may want to take Sirius out will need Creasy’s blessing to do so.
“Now that we’ve got something that other people might covet, it’s pretty good having him there watching our backs,” Bennett says. “He’s certainly not someone who’s in need of a quick quid or would just be wanting to take the money and run. He wants to see this achieve its full potential as much as we do.”
Creasy holds about 21 per cent of Sirius and also owns 30 per cent of Fraser Range, for which he is free-carried until the completion of the study. He also owns about 28 million options in the company.
SIR Price at posting:
$2.27 Sentiment: ST Buy Disclosure: Held
