CITADEL RESOURCE GROUP LIMITED Audio Webcast

THE WALL STREET JOURNAL (1WSJ)	MarketWatch Hot Stocks Report: Energy Markets Wed, 7 Jan 2009 03:48PM 04:48AM GMT
THE WALL STREET JOURNAL (1WSJ)	A Pipeline to Profits Markets Tue, 6 Jan 2009 03:47PM 04:47AM GMT
THE WALL STREET JOURNAL (1WSJ)	EU Calls for End to Gas Dispute Markets Thu, 8 Jan 2009 08:52PM 09:52AM GMT

CITADEL RESOURCE GROUP LIMITED (CGG)

Please refer to the relevant stock exchange if any of the above information is incorrect

CITADEL RESOURCE GROUP LIMITED (CGG) Events

Company (Stock Code)	Date/Time	Event	Timezone: Australia/NSW
CITADEL RESOURCE GROUP LIMITED (CGG)	Wed, 26 Nov 2008 02:30PM	CGG - 2008 Annual General Meeting - Ms Ines Scotland, CEO
CITADEL RESOURCE GROUP LIMITED (CGG) Building the Next Mid Tier Mining House	Fri, 1 Aug 2008 10:30AM	CGG - Sydney Mining Club Presentation - Ms Ines Scotland - CEO
CITADEL RESOURCE GROUP LIMITED (CGG)	Tue, 15 Apr 2008 12:05PM	Investor Series: Copper and Molybdenum - Citadel Resource Group - Ms Ines Scotland, CEO
CITADEL RESOURCE GROUP LIMITED (CGG)	Wed, 26 Nov 2008 04:00PM	Annual General Meeting Level 18, Park Hyatt Hotel, 1 Parliament Square, Melbourne, VIC
CITADEL RESOURCE GROUP LIMITED (CGG)	Wed, 1 Oct 2008	Full Year Results
CITADEL RESOURCE GROUP LIMITED (CGG)	Fri, 29 Feb 2008	Interim Results
		Display 10 results per page 20 results per page 50 results per page 100 results per page

CITADEL RESOURCE GROUP LIMITED (CGG)

Please note: This company appears on this website as a result of its listing on the Australian Securities Exchange. Boardroom Radio does not claim any association with any company listed on this site.

PRESENTATION BY INES SCOTLAND, CHIEF EXECUTIVE OFFICER OF CITADEL RESOURCE GROUP (CGG)

“Building the Next Mid Tier Mining House”

http://www.brr.com.au/event/48842

 

FRIDAY, AUGUST 1, 2008, 10:30 AM.

 

            CGG    Good afternoon, ladies and gentlemen, and thank you very much, Julian, for the opportunity to speak today. Speaking about Citadel is my absolute

10                    favourite thing to do. I have been asked if I was nervous and I said no. I love speaking about Citadel and I like speaking about copper and gold. I think all the companies in the copper and gold space at the moment have a great future ahead of us, particularly PanAust of course.

 

15                    I am going to spend a little bit of time talking to you, because we are quite new and not a lot of people know the Citadel story, about where we are working, which is in Saudi Arabia, some time explaining our team and the focus of our team, and then a bit about our projects as well.

 

20                    We have been working actually in the Middle East since about 2004, so even though Citadel is quite a new story to the Australian mining scene, we have been quite busy for the last four years actually doing the groundwork in Saudi Arabia. What really attracted us there was the fact that in 2005, Saudi was admitted to the World Trade Organization and they also spent about five

25                    years prior to that working on a new mining act. The new mining act was really to draw western companies into Saudi Arabia. They have a lot of expertise, but they do not have a lot of expertise in the mining industry. They have a lot of infrastructure. Obviously, they are very well known for oil and gas and the downstream industries associated with that, but not a lot of

30                    expertise in base and precious metals particularly.

 

                        The new mining act which was released in early 2005 has some really key strategic advantages. One of them is that there are no mineral royalties payable in Saudi Arabia, and that, I think, is one of the most unique mining

35                    acts in the world. I do not know of any other countries where that is the case where there is also no free carried government equity that is required. So you can be 100% foreign-owned and own those projects in Saudi Arabia 100%. We have nine projects of which eight Citadel owns 100%.

 

40                    There is no issue with security of tenure in Saudi and they were very careful when they drafted the mining act about that. Unless you are the current holder of the exploration license, you will not be granted the mining license. It is a very transparent process to move from an exploration license through to a mining license. The mining act is actually available in English on the

45                    government website for everybody to download and it is a very transparent system.

 

                        Of course, Saudi has a very modern banking system so there are no issues with repatriating your profits and there is full repatriation of profits allowed out of Saudi Arabia. That is after you pay your 20% corporate tax, and that is what is payable in Saudi, a 20% flat corporate tax on profits. There are no income taxes payable or any other taxes like goods and services taxes.

 

5                      What also makes Saudi very unique and very attractive for the mining industry is the very low energy cost. I have actually got there that bulk diesel is less than 15 cents a litre. It is actually tracking at about 10 cents a litre at the moment. When the rest of the world’s energy prices go up, they actually go down in Saudi. Because there are no income taxes payable, when all this

10                    money is flowing into the Kingdom, they have no other way of sort of compensating the people and spreading out the wealth than to do things like lower the energy costs. So it was just recently that the cost of fuel in Saudi went down about 30% as did the cost of power. So at the moment, you pay power off the grid for 2.5 cents per kilowatt hour, which is also excellent for

15                    the mining environment.

 

                        There is also some good debt financing available in Saudi. They have been reinvesting a lot of the profits back into projects and they do that through providing infrastructure and also through providing debt.

20

                        The currency is currently fixed against the US dollar.

 

                        Saudi definitely has an emerging mining scene. What has been getting the most publicity recently is the Rio Tinto-Ma’aden joint venture on the bauxite,

25                    alumina, aluminium projects. They have actually been working on that project together for a couple of years now, and just recently, the rumour is that Rio Tinto have also applied for a reconnaissance license for base and precious metals as well as industrial minerals. So some of the majors are starting to take note in Saudi, but there have a number of junior and mid tier companies

30                    moving in recently and applying for exploration licenses as well.

 

                        There are currently six operating gold mines in Saudi. They are 50% owned by the government and 50% privately owned. One of them, called Mahd adh Dhahab, has actually produced 6 million ounces over its life and are currently

35                    mining at about 10 grams from only about 300 metres underground. So there is actually some spectacular precious metal activity going on there.

 

                        There is also an iron ore project which was recently granted to a London-listed company and there is a zinc project down by the border of Saudi and

40                    Yemen which is a consortium between the Saudis and the Chinese, two private companies. So although it is not very well known for base and precious metals, there is quite a bit of activity currently underway, and I imagine with the number of people that we have seen in Saudi, that will just continue.

45

                        There are also quite a few Australian companies working in Saudi. WorleyParsons have about 800 people based there, of which quite a few hundred are actually Australian expats. Barclay Mowlem-Laing O’Rourke were recently granted a contract to build about a third of the minerals railway and that is being built by the Saudi government in support of both the bauxite and phosphate projects. The phosphate project that is currently under construction is going to be the world's largest phosphate project by a factor of about four; it is a massive project. So currently committed in the phosphate

5                      and the bauxite projects are over about $12 billion towards those projects. Of course, there is a number of other people working there and Austrade have been quite heavily endorsing Saudi Arabia for the past couple of years.

 

                        A bit about Citadel. Our market cap is about $300 million. At the moment, we

10                    have about $28 million cash on hand. We did a capital raising a few months ago. We did that very close to our current share price today, so we have not dropped much in the markets recently. We raised $29 million at 27 cents and did that within 24 hours. It was oversubscribed and it was all with Australian institutions. About 60% of our shares, our trading shares, are currently held

15                    by Australian institutions and we have really seen some good support out of Australia.

 

                        We are working on a bankable feasibility study on a copper project at the moment, which is our Jabal Sayid Project. We expect between now and the

20                    middle of next year we will spend about $12 million in completing that study work. We will also be ordering some (inaudible) (0:07:16) and I will talk a bit about that and we have got some other projects going on.

 

                        Just a bit about our team. People say it is difficult to hire geo-professionals in

25                    Australia at the moment. Over the course of the last six months, we have actually hired 15 people out of Australia. We have hired 10 geologists and some very senior mining engineers, metallurgists, and geologists also. Michael Hulmes is our Chief Operating Officer and he is quite well known here. He was Underground Mine Manager of Plutonic and Executive General

30                    Manager with Barrick for a number of years. We have Tim Benfield, Steve Rose (he is actually here today if anybody wants to talk about the geology), and currently about 13 geologists working in Saudi, most of whom are Australian. We have recently appointed an independent Non-Executive Chairman also who is also here today, Andrew Thomson, and he has got a lot

35                    of experience in Saudi, particularly in dealing with the Saudi government.

 

                        Here are our project locations. Jeddah is the commercial capital of Saudi. It has a population of about 4.5 million people. It sits on the Red Sea. It is historical. Trading-wise, it is quite multicultural. As you drive north from

40                    Jeddah and then inland past two projects there, it is what you call Jabal Shayban and Baydan, that is a six-lane sealed highway that goes past those project areas, and that highway continues most of the way to our copper project. The highway turns off and goes to an area where we have got four projects including the Jabal Sayid Project. It is a two-lane sealed highway that

45                    goes right past our project. At the moment, the government is actually putting some power (inaudible) (0:09:05) which we asked them to do a couple of years ago, so they are stringing up some power lines. So the only other tick in my box now is to get them to build a water pipeline for us, which I am sure we can convince them to do.

 

                        There is an operating mine there called Mahd adh Dhahab. Mahd adh Dhahab actually means the Cradle of Gold. That is the mine that has produced about 6 million ounces over its life. That is about 30 kilometres

5                      away from Jabal Sayid, so it is actually quite a nice mining area.

 

                        If you travelled from Jabal Sayid along sealed highways, it actually turns into a four-lane sealed highway that goes to the port of Yanbu. Yanbu is an industrial city and a deepwater port facility. There are material handling

10                    facilities there already. There is currently a copper and zinc concentrate that shipped from there. That is a by-product of some of the gold operations in Saudi. There are good sheds in place and good materials handling in place already.

 

15                    We have another couple of projects around that area and I will not touch on them today, but we have currently nine granted exploration areas and another 10 under application in Saudi.

 

                        So the Jabal Sayid Project. For those of you who know Citadel, it is really the

20                    project that we are known for. We have really been focusing on the copper resource in the project, which is 52 million tonnes at 1.6% copper. Within there, we have got some really nice high-grade zones which are pretty continuous, about 31 million tonnes at 2.2% copper. We fully expect for our first five years of operation that we will be mining a head grade of about 2.5%

25                    copper, so we have fairly spectacular grades. There is already a decline in place. It is a 3.9-kilometre decline that was actually put in there by the French Geological Mission on contract with the Saudi government in the 1970s and 1980s. They are on a cost plus 15% contract to do the exploration work in Saudi and they did 50 kilometres of drilling at this project, put in a decline, did

30                    a large bulk sample, and then gave it back to the government, and the government said, “Well, thanks, but actually, we don't know how to develop a copper project,” so we are actually the first private holders of the license there. As I said, it is located on a major highway and we have been quite busy doing some metallurgy this year and I will talk a bit more about that.

35

                        So here is how some of the project looks. There is a 100-man exploration camp in place. That was a bit of a hangover from the BRGM also. We have just finished refurbishing it, and against my explicit instructions, the guys have actually finished refurbishing the swimming pool as well. There is also the

40                    bulk sample and portal in place and that is the guys there in the decline. It is a 4.5- x 5- decline and we have got some work at the moment in actually dewatering that decline and refurbishing it.

 

                        So here is how the project looks and we are really focused on Lode 4 and

45                    Lode 2. Lode 4 is actually more than 250 metres wide and more than 100 metres thick through the high-grade zone in Zone 4. It is a very significant size in its own right, and the current grade in that high-grade zone in Lode 4 is 2.3% copper. Lode 2 is smaller, but it is similar grade. Obviously, it will help de-bottleneck the project. Mining out of those two areas really helps us to ramp up production.

 

                        For the bankable study, we have actually set aside Lode 1. We have Lode 1

5                      that we will use to increase our production after our third year of operation. We also have a lot of exploration that we need to do. The BRGM actually put some holes into the bottom of Lode 4 which at the moment terminates at about 650 metres. So if you compare that to somebody like OZ Minerals’ Golden Grove, that is currently at about a kilometre, so it is quite shallow. The

10                    BRGM estimated at the bottom of that, there is about 20 million tonnes at 3% copper. We will be drilling that in late October of this year and we will actually go and put some good deep holes into there. We have got Burncut which are starting in October to refurbish the decline, and after they have completed that, Swick Drilling are coming in to do the infill drilling and also the

15                    exploration drilling for us. We have only got 25,000 metres of drilling left to do in order to get all of these into reserve category for the bankable study, so we expect to finish that by March of next year. It has been pretty aggressive in getting all of this drilling done.

 

20                    Here is just a little bit of a look of it from the surface. So there is Lode 4, Lode 2 and Lode 1, and you can see the decline running through both of those areas. There are the nice flat areas for the mill there as well. The end of Lode 1 is about 500 metres from the main road, so very well positioned.

 

25                    As part of our study work, AMC have actually just finished the mine scheduling. We have scheduled out the production for 13 years at this stage. We will be producing about 3 million tonnes per annum. That is quite aggressive for an underground operation. Using a Golden Grove analogy again, they mine currently about 1.7 million tonnes. We can do that at Jabal

30                    Sayid because we have both the width and the thickness and the continuous mineralisation, but also because we do not have to do a lot of  development work. The nature of the ore body means that we will be probably doing about 6 to 7 kilometres in average of development work per annum. So most of the equipment underground will actually be underground mining rather than doing

35                    underground development work. We are looking at resource extensions and I am sure by the time we get this into production, as with PanAust, we will be planning some future resource extensions pretty quickly.

 

                        We finished our flow sheet. This was actually finished a few days ago and it is

40                    already out of date. We will not be putting in a ball mill, we are just going to be putting in a larger SAG mill at this stage. We have had (inaudible) (0:15:13) from five of the SAG mill suppliers including lead times, and the current lead time on the SAG mill is 110 weeks across four suppliers and one of them is about 150 weeks. So we will be getting the SAG mill order in in

45                    October of this year and that really helps set the project start date for very early in 2011. It is pretty standard process flow sheet. There is nothing amazing about it. We will be making a pastefill. We will de-slime the tailings, make a pastefill, and pump that back underground.

 

                        I have to say we make a very spectacular copper concentrate and we have been very popular with the off-takers as part of that . We will be making about 55,000 to 60,000 tonnes of copper in concentrate per annum. That is as a result of obviously our high head grades. We are not mining a lot of tonnes in

5                      order to do that. We are getting concentrates up to about 30% copper with recoveries tracking between 93% and 95%, and really with no penalty elements in there. It is a very clean concentrate. It is basically a straight chalcopyrite. What is quite new to us is actually the precious metal credits. Prior to us actually starting work on the project, there was never any assays

10                    done for precious metals and there was never any flotation rate done for precious metals either. So what is not included in our current resource are any precious metal credits. At the moment, in our drilling results, we are getting about 0.5 grams gold and about 15 grams of silver, so quite significant precious metal. Obviously, over 2 grams reporting to the concentrate of gold

15                    and very good silvers reporting to the concentrate as well. With the current TC assays even using about 45 and 4.5, the precious metal credits will really take care of the TC assays and also some of the transportation costs.

 

                        So becoming a copper producer. We will complete the current study work that

20                    we have been doing next month. We have just basically just been looking at a bunch of different mining options. We have started on the bankable study already and WorleyParsons are our engineers for the study. We have got Burncut doing the underground refurbishment study in October, Swick Drilling coming in towards the end of October. We will order the SAG mills also in

25                    October. We plan to put out a resource upgrade in November of this year that will include some of our exploration success; we have had continued exploration success. A couple of weeks ago, we released a hole 301 metres at 2.7% copper. Some of that was outside of the current known resource and it was actually almost a true width, that hole. It was not actually down the

30                    middle of the ore body or anything. We will also include the precious metals when we put out the new resource towards the end of the year. We will then complete our mining reserve early next year, complete the feasibility study, and then actually start mining, start the underground mining works by the middle of next year. One of the advantages of Saudi Arabia on top of all of

35                    the energy costs and other things is you can actually mine quite early and the material obviously does not oxidize. We will install the SAG mills towards the end of 2010 and our plant commissioning at this stage is between about April 2011 and mid June 2011.

 

40                    Our current capex of about $330 million, that includes about $30 million for our water pipeline, but as I said, we are actively at work on the Saudi government to get them to build that for us, and operating cost sitting just under about a dollar a pound of copper, so pretty decent operating cost but we have left some fat in there and I am pretty sure that we can get that down as well.

45

                        I will just talk really briefly about two of our other projects because we are working quite aggressively on these. As I said, we have 13 geologists in Saudi, seven of them are working on our copper project, three of them are working on our gold projects and three of them are working on exploration. We will put out a resource on the Shayban Gold Project at the end of the year. We did make some announcements including 39 metres of that 38 grams. If the whole project looked like that, believe me, we will be mining it

5                      right now. We are expecting that the average grade will be about 2.5 to 3 grams on this project, but we will have a better idea by the end of the year, and we have got some metallurgy underway as well.

 

                        We also have a spectacular nickel project. This project sits right on the coast

10                    of the Red Sea and I always thought I like this project because there is fantastic scuba diving just off the coast. It is absolutely beautiful, just down from (inaudible) (0:20:01). It is actually a spectacular project. We have had some Australian nickel geologists out looking at it. They have mapped it. We will actually be drilling it in about three months’ time. The drilling that was

15                    done previously was in sulphide. It was terminated before they actually hit the basal contact, so we are pretty confident that this project will be a large sulphide-nickel project.

 

                        I guess my last slide is building the next mid-tier mining house and I know

20                    today, and as Julian mentioned, we made an announcement about Owen Hegarty joining us. Citadel's goal really is to build the next mid-tier mining house. We plan to be standing up here in three years’ time having Jabal Sayid in operation and a number of other projects in operation across a diversified portfolio of commodities, and it is with the help of people like Owen

25                    that I am sure that we are going to achieve those      goals. He has already got his foot in my back actually. “Will you just hurry up? Get it done, get it done. What are you doing with dewatering? Just get it done,” in typical Owen style. So I think he is going to help us in making Citadel what it has the opportunity to be. So, thank you.

 

INTERVIEW CONCLUDED

 

 

 

 

Contact brr@brr.com.au for more information

 

DISCLAIMER: Transcripts made available by Boardroomradio.com is a free service whereby the transcripts are created by one or more third party contractors without any involvement or oversight by Boardroomradio.com or the respective company, firm, partnership or individual that is being transcribed.  Boardroomradio.com and its contractors, client companies, firms, partnerships and guest speakers (paid or otherwise) do not invite reliance upon, nor accept responsibility for, the information they provide. Boardroomradio.com makes every effort to provide a high quality service. However, neither Boardroomradio.com, its transcript providers, nor the providers of any other written or oral data made available on the Boardoomradio.com site (and its partner sites) give any guarantees, undertakings or warranties concerning the accuracy, completeness or up-to-date nature of the information provided. Users should confirm information from another source if it is of sufficient importance for them to do so. Boardroomradio.com, its directors and employees do not accept any liability for the results of any actions taken or not taken on the basis of information in this site, or for any negligent misstatements, errors or omissions.