The Australian today: Money pit too good to pass up!

• THE AUSTRALIAN
• NOVEMBER 27, 2015 12:00AM

Money pit? That’s an idea too good to pass up

Concern about the capitulation in mineral commodities prices has got to the point where there is open discussion about whether there will be much of a mining industry at all in years to come. It is of course nonsense.

But there is upside to all this, and it is not necessarily springing from where you might suspect. Take Nagambie Resources (NAG), one of the best-performed juniors on the boards in the past couple of months.

It is a gold explorer across some of Victoria’s lesser known goldfields, including its namesake at Nagambie, and also Clonbinane, Rushworth and Redcastle.

It has had some success in the hunt but it is its ownership of the old Nagambie gold mining operation — it produced its last gold ores from open cuts back in 1995 — that has the market excited.

Not because NAG is thinking about returning the operation to production but because it has found a use for the old open cuts which could become a very nice earner for a company with a market capitalisation of some $26 million (7.7c a share).

So old mining holes have a value, maybe more than the reason they were dug in the first place.

In the case of NAG, the old pits at Nagambie have come in to their own thanks to Melbourne’s infrastructure and apartment construction boom requiring a lot of digging up of stuff that goes by the fancy name of potential acid sulfate soils (PASS).

The best way to stop PASS becoming what is known in the excavation trade as actual acid sulfate soils (ASS) is to store it under water to prevent the formation (oxidation) of acids and sulfates. And as luck would have it, the old water-filled West and East pits at Nagambie are also highly alkaline, providing another buffer to an acidic event.

By NAG’s reckoning, the West and East pits (17 million tonnes of material was removed in the gold mining era) could take about 6.2 million tonnes of PASS and keep it under water (water depths are 40m in the West pit and 50m in the East pit).

There is the alternative of storing PASS above ground but not in my backyard, thanks very much. Acid drainage is always the danger, and the (proper) monitoring of the PASS material under environmental laws more or less demands an underwater solution.

To be cost competitive, NAG would need to offer the Nagambie solution at about the $150 a tonne which is the landfill cost in Melbourne, less $10 a tonne for the additional transport cost. NAG reckons that the West and East pits have the capacity to accept about one million tonnes a year of PASS, making for a 6.2-year life of the operation. Some modest investment in providing safe conditions for trucks tipping the PASS into the holes would be required.

But at the planned acceptance rate of one million tonnes annually, what would be left over from a $140 a tonne tipping charge makes for a potentially very lucrative earner for the company. More so than a comparable mining operation at these short of commodity prices, that’s for sure.

http://www.theaustralian.com.au/bus...624639520?sv=ce411a112c6aeffe4d8dbc397f9ef17f



The East Pit at the old Nagambie mine in Victoria. The market has been excited by Nagambie Resources’ discovery of a new use for the old open cuts.