Archer Exploration (AXE) to turn coal pain into magnesia gain

Published at Nov 13, 2015, in Mining

When the coal industry closes a door, the magnesia industry can open a window if the latest plan from Archer Exploration (ASX:AXE) is anything to go by.

At its annual general meeting earlier today, chairman Greg English told AXE investors while the Leigh Creek coal field closure was sad for the local community, it did provide an opportunity for its magnesia dreams.

Earlier this year Alinta Energy confirmed that it was shutting down operations in the region as it sought to shift its power sources away from coal.

It has previously said its site would be shut down in 2017 but has now sped this process up, with AXE sensing an opportunity.

AXE had previously talked about ramping up its magnesite dreams, signing a heads of agreement with Leigh Creek Energy to “explore synergies” in getting AXE’s magnesite deposit up and running.

Better known as a graphite miner in South Australia, AXE now thinks the left over infrastructure from the Alinta closures provides an opportunity for it to get a “magnesia-based mining venture” up and running.

“Development of this valuable resource has previously been restricted by both the lack of infrastructure and the inability to access existing Leigh Creek coalfield infrastructure,” English said.

“However, Alinta’s decision to close the Leigh Creek coalfield from next week means that its railway line and associated infrastructure is potentially available to Archer.”

He added that it had already been in talks with the South Australian government about a potential project.

About AXE’s magnesite project

At the moment, AXE’s magnestite deposit in Leigh Creek is considered secondary to its graphite deposits in the Eyre Peninsula.

However, to the north east it has its foot on a total JORC compliant magnesite resource of 453 million tonnes grading at 41.1% magnesium oxide.

Previously, companies had put forward a bankable feasibility study for a 50,000 tonne per annum magnesium metals plant.

However, cheap magnesia from China put these plans on hold until Archer got its hands on the southern edge of the resource in 2011.

A map showing Archer Exploration's projects

A map showing Archer Exploration’s projects

“Our belief is based around a very long-term profitable business case for a project producing Caustic Calcined Magnesia (CCM) or Dead-Burned Magnesia, negating the high capital costs faced by the previous owners,” English said.

“In essence, much of the work needed to develop a magnesia mining operation at Leigh Creek has already been completed and simply needs updating.”

He said an average large magnesia operation produced 150,000 tonnes per annum of CCM, based on throughput of 315,000tpa.

With a resource of 453Mt, English said, it would not be difficult to see Leigh Creek as an ‘almost inexhaustible’ supply of high-grade magnesia.

AXE shares are up 1.12% in intraday trading at 9c.

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