We visited Hellyer whilst campaign 5 was underway (about 10 days into the campaign).
The Mill at Hellyer is a massive Zn, Pb, Cu concentrate plant with Ag and Au credits (1.5mtpa). It doesn't have a gold circuit.
BSM bought the Mill and mining tenement off Intec in Q1 2009 for $4m cash and a $2.50 t royalty, capped at $5m. In addition BSM paid over environmental bonds of circa $1m and had the mining lease extended for 21 years.
The low price was the combination of (a) Intec being in the crap as part of the GFC and needing to shed assets, and (b) The mill (replacement value $100m) being stranded on a worked-over tenement with no major ore reserves (Refer "exploration" which I'll post is a couple of days)
We had a good tour around the Mill lead by BSM's own Mill Manager who works in partnership with a third party contracting company.
The Mill is where the technical part of the operation occurs and a heap of wizardry occurs to try and extract and separate the valuable components of the rocks that are tipped into the start of the process.
I wont even pretend that I understand the complex processes involved so will merely parrot off what we were told and some of the answers to our questions.
MILL OPERATORS
BSM employs a GM (overall responsibility for the Hellyer site) and a Mill Manager. The Mill Manager is responsible for the operations within the Mill and manages the functional/ technical/ decision making processes. A third party contractor then provides operators to run the Mill.
I was amazed that only 4 operators per shift were required to run such a large Mill. The Operators are all highly experienced at Hellyer with many of them having been employed originally by Aberfoyle (who originally mined Hellyer) and then contracted to Intec.
Being a Pb mine/ mill all the operators are regularly tested for Pb poisoning via regular blood tests.
ROM PAD
The ROM pad sits above the Mill. When we saw it there was a mix of Que River (low grade and differing metallurgy), low grade Fossey ore from prior to the resource re-interpretation and higher grade Fossey ore from more recent mining (sorry no photo).
This was causing inefficiencies for the haul trucks bringing ore from Fossey and for the loaders feeding the Mill.
This has now been rectified with all Fossey ore (high and low grade) being processed and the Que River Ore removed from the ROM. For campaign 6 only higher grade Fossey Ore mined from the re-interpreted resource model will be on the ROM pad which in turn will greatly improve efficiency.
MILL EFFICIENCY AND FLOW SHEET
As you can imagine that flow sheet is incredibly complex and each circuit in itself has multiple variables to be managed.
As the metallurgy of the Fossey deposit is different to Hellyer the first 4 campaigns were continuously tweaking the variables to try and achieve maximum recovery rates. This process was made more difficult due to the resource modelling problems and low grade ore reporting to the Mill.
Page 8 of the 20/07/2011 announcement shows graphically how improvements within the Mill have been ongoing.
The tactic/ goal has been to try and achieve a high recovery rate AND a stable circuit for each concentrate. These have been tackled one at a time before moving onto the next circuit.
The order of priority has been (1) Zinc (2) Lead (3) Copper.
When we toured, the Mill Manager was very happy as they had just solved the problems occurring in the Lead circuit. At the start of Campaign 5 the recovery rates were still low. Mid way through the first week a major flow sheet change was implemented and that created a stable circuit for Lead with much higher recovery rates/ grades. As this change was made mid way through the campaign, I would guess that we should see the full benefit in Campaign 6.
As BSM's recent announcement stated, Cu recovery is still too low. Now that the Pb circuit is sorted the Mill team is focusing on changes to the Cu circuit in this shut down period.
Very basically, as it was relayed to us: The problem is mechanical in that the floatation cell sizes are designed for much higher throughput volumes. As BSM is putting through much lower volumes this is causing problems in recovery rates/ grades. After trying (unsuccessfully) to boost recovery rates using a chemical solution (reagents) a new solution will be implemented in cutting the size of the floatation cells via welding partitions into the cells to reduce their size. This is a very low capital cost work stream (i.e. a few thousand dollars).
The Mill team was confident that this would boost recovery rates for Cu up towards the targeted levels.
It is very clear from the comparison below that Campaign 5 was far more successful than Campaign 4:
CAMPAIGN 4 (source: Page 8, 20/07/2011)
Ore throughput: ~ 55,000 t Zn concentrate: ~4,250 t Pb concentrate: ~2,050 t Cu concentrate: ~ 255 t
Zn grade: 49% Pb grade: 54% Cu grade: 17.5%
CAMPAIGN 5 (source: Page 2, 09/09/2011)
Ore throughput: 52,863 t Zn concentrate: 6,060 t Pb concentrate: 2,966 t Cu concentrate: 251 t
Zn grade: 53.2% Pb grade: 60.7% Cu grade: 19.6%
BITS AND PIECES
We toured the site with a representative doing DD from a large institution (not RMB). He commented that none of the problems BSM is encountering are unusual for a mine/ mill start up and he was impressed with how the Mill team was operating and achieving progressive solutions to each problem.
As part of RMB committing to another $13m part of their DD would have centered around the Mill and how they were/ are addressing the recovery and grade problems.
Like us, they must have been impressed and confident that the Mill could deliver three salable products in a profitable manner.
In fact, it was relayed to us during our visit that RMB had recently toured the facility and were very complimentary (a fact proved by their subsequent additional funding line).
CONCLUSION
- Mill operated efficiently by a team of highly experienced operators
- Circuit modifications continue to improve recovery and grade rates
- Zinc circuit sorted: Lead circuit sorted: Copper remaining
- Likely that Copper circuit will be sorted prior to campaign 6
- Mill is well maintained, in good working order and has the capacity for a successful exploration campaign
- Industry experts, much more knowledgeable than I, are satisfied with the Mill operations
Cheers John
BSM Price at posting:
20.3¢ Sentiment: Buy Disclosure: Held
