Zinc Lead Silver

David Huston (david.huston@ga.gov.au)

Keith Porritt (keith.porritt@ga.gov.au)

Zinc (Zn) is the 23rd most abundant element in the Earth's crust and the 4th most common metal in use after iron, aluminium and copper. The construction, transport and appliance manufacturing industries use large amounts of zinc, mainly as anti-corrosion coatings (galvanising) on sheet steel, steel beams, vehicle panels, chain-link fencing, guard rails and light posts. Worldwide, galvanising accounted for 50% of the world's total consumption of zinc in 2011 (consumption data from www.ilzsg.org). The widespread use of zinc as a protective coating is due mainly to its resistance to weathering as a consequence of an electrochemical reaction known as galvanic action. Zinc is more reactive than iron or steel and consequently attracts almost all local oxidation. A protective surface layer of oxide and carbonate forms as the zinc corrodes. Zinc is used also in brass (17% of zinc consumption), other alloys (17%), with the balance in other uses such as pigments, salts, oxide additives to rubber and agricultural chemicals (16%). Zinc metal is produced in Australia at Sun Metals Corporation's Townsville refinery in Queensland (Qld) and at Nyrstar NV's Hobart refinery in Tasmania (Tas).

The widespread occurrence of lead (Pb), its relatively simple extraction and a combination of desirable properties have made it useful to humans since at least 5000 BC. In deposits mined today, lead, mainly in the form of galena (PbS), is usually associated with zinc, silver (Ag) and sometimes copper (Cu) and is extracted as a co-product of those metals. The largest use is in batteries for vehicles, which accounts for 80% of modern lead usage. The remaining 20% of applications include weights and ballast, underwater cable sheathing, solder, casting alloys, chemical compounds, including PVC plastics and pigments, ammunition, glassware and radiation protection. Uses for lead could increase in the future in large-storage batteries used for load-levelling of electrical power and in electric vehicles. The growing popularity of electric bikes, particularly in China, has led to an increase in demand for lead to make batteries for e-bikes. More than half of the lead currently used is from recycling rather than from mining. Of the 10.49 million tonnes (Mt) consumed in 2011, only 4.67 Mt was primary mine production (www.ilzsg.org). Lead recycling plants jointly owned by Nyrstar NV and the Sims Group are in Melbourne, Victoria (Vic) and in Sydney, New South Wales (NSW). Nyrstar NV's Port Pirie smelter in South Australia (SA) is the world's largest primary lead smelting facility and a leading global silver producer.

The relative scarcity, attractive appearance and malleability of silver make it suitable for use in jewellery, ornaments and household silverware. Its extensive use in coins throughout history has declined over the past 50 years. In Australia, the 1966 50-cent piece was the last coin in general use to contain silver (80% Ag, 20% Cu). Silver is mined and produced mainly as a co-product of lead, zinc, copper and, to a lesser extent, gold (Au). In 2011, the global supply totalled 32.4 kilotonnes (kt) of which 23.7 kt was mine production (73%) with the balance from scrap and government sales. Consumption was dominated by industrial applications (15.1 kt or 47%), followed by fabrication (10.1 kt or 31%: 5.0 kt for jewellery, 3.7 kt for coins and medals, and 1.4 kt for silverware), and photography (2.1 kt or 6%). The balance of consumption was nett investment of 5.1 kt (16%). The use of silver in the photographic industry has declined steadily since the development of digital photography, declining over the past decade from 6.3 kt in 2002 to 2.1 kt in 2011 (source of supply and demand data: www.silverinstitute.org). Industrial uses of silver are varied and include electronics such as batteries and solar panels, coatings for mirrors, catalysts, construction of high quality musical instruments, biocides in many different guises and many other applications. The use of silver as a biocide to prevent bacterial and fungal growth in plastic and textiles as well as an antibacterial agent in topical gels, the treatment of wounds and in water treatment is growing and largely replacing the photographic industry as a major use.

Resources

Australia's total resources of zinc, lead and silver rose by nearly 5% in 2011. Total identified resources of zinc increased from 94 Mt in 2010 to 97 Mt in 2011 while lead rose by 2 Mt in 2011 to 62 Mt and silver rose by 6 kt to 131 kt.

Zinc

Australia's Economic Demonstrated Resources (EDR) of zinc increased by 3 Mt to 68 Mt in 2011 and accounted for around 26% of world economic resources representing the world's largest holding. Queensland continued to hold the largest resource with 38 Mt, or 55% of national EDR, predominantly at the George Fisher, Mount Isa, Century and Dugald River deposits. The Northern Territory (NT) had the second largest EDR with 19 Mt, or 28% of national EDR, almost all of which is at the McArthur River deposit. Following was NSW with 5 Mt EDR, mostly at the Broken Hill and Endeavor deposits, Western Australia (WA) with 3 Mt, mostly at the Golden Grove, Sulphur Springs and Bentley deposits, and Tasmania with 2 Mt, mostly at Rosebery. Total Inferred Resources of zinc increased by 3 Mt to 27 Mt in 2011.

Lead

Australia's EDR of lead increased by 1 Mt in 2011 to 36 Mt of contained lead and constituted 58% of Australia's total identified lead resources (62 Mt). Australia also accounts for the largest share of world economic resources for lead at 39%. Queensland retained the top ranking with its EDR increasing from 19 Mt in 2010 to 20 Mt in 2011 representing a 57% share of national EDR which is mostly at the Mount Isa, George Fisher, Cannington and Lady Loretta deposits. The NT EDR of lead ranks second with 8 Mt or 23% of the national total, almost all of which is at the McArthur River mine. New South Wales has lead EDR of 4 Mt and WA has 2 Mt. Australia's Paramarginal Demonstrated Resources of lead decreased by 1 Mt to 3 Mt, which is 5% of total Identified Resources, as more of the older resources are re-estimated under the Joint Ore Reserve Committee (JORC) Code. Total Inferred Resources of lead increased slightly in 2011 to 22 Mt.

Silver

EDR for silver increased by 11 kt in 2011 to 88 kt, which represents 16% of world economic resources. Queensland has 52 kt or 59% of Australian EDR, mainly in the Mount Isa, Cannington, George Fisher, Dugald River and Century deposits. Most other silver EDR occurs in SA (11 kt), NSW (10 kt), the NT (8 kt), WA (3 kt) and Tas (3 kt). In SA, most silver EDR is at Olympic Dam with some at Prominent Hill, while in NSW it is mostly at Broken Hill and Endeavor. In the NT, silver EDR is nearly all at McArthur River, while in WA it is predominantly at Golden Grove, Spinifex Ridge and Bentley, and in Tas it is largely at Rosebery.

Accessible EDR

All zinc, lead and silver EDR is accessible.

JORC Reserves

Of Australia's AEDR of zinc, 33% occurs in the Joint Ore Reserve Committee (JORC) Code ore reserves categories. The remaining AEDR is made up of those measured and indicated resources as reported by mining companies and which Geoscience Australia considers will be economic over the long term. The zinc resource life using national AEDR divided by annual production is 45 years, but using the ore reserve and dividing by annual production gives a resource life of only 15 years.

Of Australia's AEDR of lead, 35% occurs in the JORC Code ore reserves categories. For lead, the national AEDR/production ratio is 58 years, but if the ore reserve/production ratio is used it is 20 years.

For silver, JORC Code reserves account for around 32% of AEDR and resource life is 51 years for AEDR or 16 years for JORC Code reserves.

Exploration

In 2011, exploration spending on zinc, lead and silver was $83 million, 24% higher than in 2010. The 2011 expenditure was 11% of the total base metal expenditure of $741 million compared to 12% in 2010. Expenditure on exploration for the three commodities made up only 2.3% of all mineral exploration of $3.57 billion (excluding petroleum), and compared to 2.7% of $2.49 billion in 2010. New South Wales and WA accounted for over half of the 2011 zinc, lead and silver exploration expenditure.

Production

According to the Bureau of Resources and Energy Economics (BREE), 2011 Australian mine production of zinc, lead and silver was 1.51 Mt, 0.62 Mt and 1.73 kt, respectively. Compared to 2010, production in 2011 increased by 2% for zinc, but decreased by 13% for lead and was down 8% for silver. The majority of production was from Qld which contributed 1008 kt, or 67% to national zinc production during 2011 (up 14 kt on 2010) along with 444 kt, or 72% of lead (down 30 kt) and 1.35 kt, or 78% of silver. Western Australia produced 90 kt of zinc and 17 kt of lead with both decreasing over the 2010 production levels of 99 kt of zinc and 96 kt of lead. The large decrease in lead production in WA resulted from a further suspension of operations at the Magellan lead mine. Elsewhere, NSW produced 111 kt of zinc and 78 kt of lead while the NT produced 191 kt of zinc and 39 kt of lead and Tas produced 97 kt of zinc and 35 kt of lead. In all of these States, production of zinc and lead increased from the levels in 2010.

The Century zinc mine, which is located close to the Gulf of Carpentaria about 250 kilometres (km) north of Mount Isa in northwest Qld, ranks in the top few globally in zinc production. Century produced 497 kt of zinc and 27 kt of lead as metal in concentrate in 2011. The Cannington mine, also located in northwest Qld, is the world's largest and lowest-cost single mine producer of both silver and lead as well as a significant producer of zinc. Cannington produced 232 kt of lead, 1001 tonnes of silver and 60 kt of zinc in 2011. Also in Qld are Xstrata's Mount Isa operations which, in 2011, produced 357 kt of zinc, 131 kt of lead and 204 tonnes of silver, including 32 tonnes in silver from purchased concentrate.

The value of Australia's exports of zinc concentrates and refined zinc in 2011 totalled $2414 million, 2% more than the $2376 million in 2010 and 1% of the value of total merchandise exports. The amount of zinc exports increased by 4% to 1.55 Mt in 2011. The average price for zinc in 2011 was $2350/tonne, 3% lower than the average of $2419/tonne in 2010. The 2011 December quarter average price was 17% lower than for the December quarter in 2010.

Exports of lead totalled 691 kt in 2011, up 5% on 2010. The value of the 2011 exports was 13% higher at $2181 million compared to $1938 million in 2010. The average price for lead was $2631/tonne in 2011 and only slightly lower than in 2010. However, lead prices were 13% lower when comparing December quarters. For silver, the average price was 53% higher at $1061/kilogram (kg) compared to the average of $695/kg in 2010 with a 13% December on December increase. The value of Australia's mine production of silver was $1836 million in 2011, up 40% on 2010.

World Ranking

Based on United States Geological Survey data for other countries, Australia has the world's largest economic resources of zinc (26%), lead (39%) and silver (16%). In terms of production, Australia ranks second for zinc and lead after China and fourth for silver after Mexico, Peru and China.

Industry Developments

Mount Isa (Qld): Mount Isa zinc-lead operations commenced production in 1931 and were acquired by Xstrata Plc in 2003. Operations currently comprise the George Fisher underground mine, the open cut mines of Black Star and Handlebar Hill, an eight million tonnes per annum (Mtpa) capacity zinc-lead concentrator, a lead smelter and a zinc filter plant. Following a major restructuring in 2009, there have been major increases in production in the Mount Isa operations that continued into 2011. Mined volumes increased by 6% to 9.09 Mt, and ore treated increased by 8%, to 9.23 Mt in 2011. However, lower head grades resulted in only a small increase in zinc in concentrate to 0.357 kt from 0.355 kt in 2010 and a small decrease in lead with combined in-concentrate and bullion down to 0.269 kt from 0.284 kt in 201098. These results contributed to a profit of $105 million for Xstrata's Australian zinc operations, which included McArthur River (see below), compared to $270 million in 2010. The lower profit is the result of reduced zinc prices in the second half of the year, a re-evaluation of open sales at year's end, a stronger Australian dollar and increased cost of energy and other mining consumables.

During 2011 and the 2012, Xstrata continued to expand its Mount Isa operations. The Blacks Star Deeps and Handlebar Hill expansions were completed in October and December 2011, respectively, and expansion of the George Fisher underground mine was begun. A decision was made in May 2011 to accelerate development of the Lady Loretta deposit northwest of Mount Isa. First ore production at Lady Loretta was achieved in September 2012, with ore to be trucked 140 km to the Mount Isa milling operations.

McArthur River (NT): Underground mining at McArthur River began in 1995, with open cut mining beginning in 2009. Xstrata Plc also acquired the McArthur River operations in 2003. The conversion to open-cut mining combined with a concentrator expansion increased production capacity to 2.5 Mtpa in 2009. Despite weather-related slowdowns in the first quarter, ore treated increased by 5% to 2.34 Mt in 2011. Slightly higher zinc grades combined with the greater throughput resulted in an increase in zinc in concentrate of 6% to 194 kt, and production of lead in concentrate increased by 21% to 38.3 kt. In March 2011, Xstrata announced a $270 million plan to more than double concentrate production from McArthur River. If the development plan is approved by Xstrata and government regulators, mine life will be extended by six years to 2033.

Century (Qld): The Century Mine is one of the world's three largest zinc mines, producing 4% of global production. Minerals and Metals Group (MMG), a Chinese-owned corporation, acquired the Century, Rosebery and Golden Grove mines, amongst others, in early 2009. Production at the Century Mine in 2011 was similar to that in 2010, despite severe weather in the first quarter. During 2011, production of zinc in concentrate decreased slightly by 3% to 497 kt, while lead-in-concentrate increased by 5% relative to 2010 to 26.5 kt. Total payable silver production was 3.8 tonnes, a decrease of 47% relative to 2010, resulting from a decrease in grade. The December production of zinc at 54.26 kt was the highest recorded. Because of the inclusion of stage 10 development, mine life will extend to 2016. An 18-month exploration program in 2009-10 failed to identify new resources at the mine, or in adjacent exploration leases.

Cannington (Qld): The Cannington deposit in northwest Qld was discovered in 1990 by BHP-Billiton, with mining operations commencing in 1997. Mine production in 2011 increased marginally by 2% to 1.60 Mt on that achieved during 2010, while mill throughput increased by 8% to 1.71 Mt. A significant reduction in silver head grades reduced silver production by 17% to 1.0 tonne. Lead-in-concentrate also decreased by 8% to 232 kt, also because of lower grades while zinc-in-concentrate remained unchanged at 60 tonnes.

Rosebery (Tas): In 2011, metal-in-concentrate produced at the Rosebery operations of MMG was 80.7 kt Zn, 25.4 kt Pb, 1.83 kt Cu and 0.378 tonnes Au99. Total mine production was 13% higher than that achieved in 2010, but lower zinc grades resulted in 2% lower zinc in concentrate production, although lead in concentrate and copper in concentrate production increased by 9% and 12%, respectively, as a result of improved mill recoveries. Mill testing of ore from the nearby South Hercules mine was completed in the fourth quarter of 2011, with development possibly beginning in the third quarter of 2012. Successful near-mine exploration has increased mineral resources to their highest level in the 75 years of Rosebery operations. Rosebery currently has a mine life beyond 2020.

Golden Grove (WA): MMG's Golden Grove operation consists of the Scuddles and Gossan Hill underground mines and the Scuddles processing plant. In 2011, a greater emphasis was placed on zinc production, with a decrease in copper-in-concentrate of 35% to 21.7 kt. Zinc-in-concentrate and lead-in-concentrate also decreased by 4% and 3% to 70.7 kt and 7.5 kt, respectively, as a result of lower grades, which more than offset higher production. Silver and gold in the HPM (high precious metal) concentrate experienced different results with silver increasing by 14% to 41.87 tonnes and gold decreasing by 18% to 0.736 tonnes. The Scuddles mine was re-opened in April 2011. In the first half of 2011, approval was granted for development of a shallow copper resource at Gossan Hill. Development of this resource is scheduled to commence in the second half of 2012 and will extend mine life to 2019.

Broken Hill (NSW): In 2011, Perilya Limited increased ore production from its Southern Operations at Broken Hill, treating a total of 1.74 Mt, compared with 1.64 Mt in 2010. The increase in ore production resulted in increased production of metal-in-concentrate. Relative to 2010, zinc production increased by 10% to 70.1 kt and lead production increased by 0.4% to 51.5 kt. Silver production, on the other hand, was 41.6 tonnes, down by 7% from 44.7 tonnes in 2010. Current reserves and resources provide for at least 10 years of production at the Southern Operations. The Potosi-Silver Peaks operation is currently in development and the historic Broken Hill North Mine is the subject of a development study.

In 2010, CBH Resources Limited continued to push towards production at its Rasp Mine development, which had been placed on care and maintenance in June 2008. Approval from the NSW Department of Planning and Infrastructure for development was gained in January 2011 and development was approved by the Toho Board (see below) in February. Underground development began in April 2012 and the mine was opened in June. Full-scale production is now expected in mid 2012. On 1 July 2009, the mineral resource was 16.5 Mt at 6.6% Zn, 5.1% Pb and 89 grams per tonne (g/t) Ag. At an annual throughput of 0.75 Mtpa, annual production would be 48 kt Zn, 39 kt Pb and 72 tonnes Ag for a minimum mine life of 15 years. In September 2010, CBH Resources was taken over by Toho Zinc Company Limited of Japan.

Endeavor (NSW): Because of the takeover of CBH Resources by Toho Zinc in September 2010, production figures for zinc and lead at the Endeavor mine near Cobar in NSW are not available. However, the current operation plan involves mining of 0.720 Mt of ore for 44 kt of zinc-in-concentrate and 24 kt of lead-in-concentrate. Given these production rates, mine life is expected to be six years. Silver production, which is owned separately by Couer d'Alene Mines Corporation, was 19.1 tonnes, an increase of 8% over 2010.

Angas (SA): Operations began at Terramin Australia Ltd's underground Angas Mine in July 2008 at a setup cost of $71 million. The mine reached nameplate production capacity of 0.4 Mtpa in the second half of 2009. Production for 2011 was 18.3 kt Zn, 8.7 kt Pb, 145 tonnes Cu, 8.6 tonnes Ag and 0.123 tonnes Au, all as payable metal. Production in 2011 of all metals except zinc matched or exceeded production in 2010. On 30 June 2011, Angas had reserves of 1.29 Mt at 7.2% Zn, 2.9% Pb, 31 g/t Ag and 0.5 g/t Au, which is sufficient for a further three-year operation at current production rates. Near-mine exploration resulted in delineation of the Sunter deposit in November 2011, with a total resource of 0.375 Mt grading 3.8% Zn, 1.6% Pb and 15 g/t Ag.

Mount Garnet-Chillagoe-Balcooma-Thalanga (Qld): At the end of 2011, Kagara Limited's north Qld zinc interests were centred on the Mount Garnet-Chillagoe region of north Qld and included mines at Mungana, Mount Garnet and Balcooma and ore processing facilities at Mount Garnet (separate facilities for copper and polymetalic ores) and Thalanga. Mill production in 2011 for all Kagara north Qld operations totalled 1.46 Mt of ore that yielded 56.4 kt of zinc-in-concentrate, 3.2 kt of lead-in-concentrate, 22.6 kt of copper-in-concentrate, 30.4 tonnes of silver-in-concentrate and 0.149 tonne of gold-in-concentrate, higher than the 2010 production by 48%, 170%, 27%, 92% and 41%, respectively. Much of this increase in production resulted from refurbishment of the Thalanga facility in 2010, which converted it from a copper-only circuit to a polymetallic facility with a capacity for oxide ores. In April 2012, Kagara Ltd went into voluntary administration, and its assets, including its north Qld operations, were on the market at the time of writing (see below).

Jaguar-Bentley (WA): The Jaguar project consists of three high-grade deposits, Jaguar, Teutonic Bore, and Bentley, located approximately 300 km north of Kalgoorlie. Perth-based Jabiru Metals Limited began operations at Jaguar in 2007 and the Bentley deposit was discovered in 2008, with production beginning in June 2011. Jabiru Metals Ltd was taken over by Independence Group in February 2011. Production in 2011 was 12.4 kt of zinc-in-concentrate and 7.03 kt of copper-in-concentrate from 0.358 Mt of ore. Although tonnage milled was similar to 2010, metal-in-concentrate production was down by 39% for zinc and by 27% for copper because of lower grades. In the June quarter, geotechnical issues impacted on mining of high-grade copper ore and resulting in the milling of ore from lower grade stopes and surface stockpiles.

Hellyer-Fossey (Tas): Following cessation of Bass Metals mining activities at its Que River Mine in September 2010, Bass Metals concentrated on developing and mining the Fossey and Fossey East deposits, which were discovered adjacent to the historical Hellyer Mine in 2007 and 2010, respectively. Work to develop a decline to access the Fossey deposit and refurbish the Hellyer mill began in January 2011. First ore production from Fossey was achieved in March. Production at Fossey for 2011 was 0.317 Mt of ore for 15.04 kt of zinc-in-concentrate, 6.61 kt of lead-in-concentrate, 0.277 kt of copper-in-concentrate, 23.57 tonnes of silver-in-concentrate, and 97.1 kg of gold-in-concentrate. Mining ceased at Fossey in May 2012 (see below).

Magellan (WA): Magellan Metals Pty Ltd, which is a wholly owned subsidiary of Toronto-listed Ivernia Inc, totally owns the Magellan deposit, 30 km west of Wiluna. Lead production at this deposit, which is the largest known carbonate lead deposit in the world, began in October 2005, with concentrates sold overseas and shipped initially from the Port of Esperance. However, because of lead contamination at the port, shipping was suspended and the mine was placed on care and maintenance in April 2007. Mine production recommenced in February 2010 following revision of concentrate transport procedures with the concentrate being shipped through the Port of Freemantle. However, production ceased again in early January 2011 following a stop order on the transportation of lead carbonate and the mine is again on care and maintenance.

Other zinc-lead-silver developments

There are several zinc-lead-silver prospects at various stages of development that could come online in the next decade. The most significant of the zinc-lead projects is the Dugald River deposit in Qld, owned by MMG. This deposit, the first new zinc deposit discovered in the Mount Isa region after Mt Isa, was the subject of a feasibility study in 2008, which was updated in 2010. The feasibility study indicated a mine life of 23 years based on a resource of 53 Mt grading 12.5% Zn, 1.9% Pb and 36 g/t Ag. Development approval was granted in December 2011 to bring the project to full environment approval, which was achieved in August 2012 for a possible start to production in 2014.

The next most advanced project is the Independence Group's Stockman Project (Vic) which includes the Wilga and Currawong volcanic-hosted massive deposits with a combined resource of 12.7 Mt grading 4.4% Zn, 0.7% Pb, 2.1% Cu, 39 g/t Ag and 1.0 g/t Au. At the time of writing this report, a definitive feasibility study and an Environmental Effects Statement were being prepared for this project. Another project for which a definitive feasibility study was completed is YTC Resources' Hera-Nymagee Project near Cobar in NSW. Based on a global resource of 2.44 Mt grading 3.8% Zn, 2.8% Pb, 0.2% Cu, 16.7 g/t Ag and 4.1 g/t Au, the feasibility study indicated a financially and technically robust project with a minimum 7.3-year mine life. This result would be enhanced by a significant resource (8.10 Mt grading 1.2% Cu, 0.7% Zn, 0.3% Pb and 9 g/t Ag) at the nearby Nymagee prospect.

Venturex Resources Ltd has consolidated many of the zinc-lead resources in the Pilbara region (WA) into its Pilbara VMS Copper-Zinc Project. The project includes the Whim Creek, Mons Cupri, Salt Creek, Evelyn and Sulphur Springs deposits. Current resources for the consolidated project total 26.3 Mt grading 3.0% Zn, 0.3% Pb, 1.2% Cu, 19.8 g/t Ag and 0.1 g/t Au. Release of a bankable feasibility study has been delayed from September 2012 until November 2012 to allow incorporation of new results from Sulphur Springs. Subject to board approval, finance and permitting, construction is scheduled to begin in the first half of 2013, with commissioning in the second half of 2014.

The Myrtle Project (NT) is located about 20 km south of the McArthur River deposit in the same host succession. The project, a joint venture between Rox Resources and Teck Australia, is still at the exploration stage, but has a total resource of 43.6 Mt grading 4.09% Zn and 0.95% Pb, with a higher grade resource of 15.3 Mt grading 5.45% Zn and 1.40% Pb. Exploration is continuing in the region, with identification of significant intersections from historic drilling highlighting the potential of the Teena prospect, about 10 km west of McArthur River.

At Kagara's Admirals Bay deposit in the Canning Basin (WA), a prefeasibility study identified mineral resources of 72 Mt grading 3.1% Zn, 2.9% Pb, 18 g/t Ag and 20% barite. However, this deposit is located more than a kilometre below the surface and requires a large injection of money to bring the project to bankable feasibility status. At the time of writing, this asset was out for tender as a consequence of Kagara Ltd going into voluntary administration.

Silver

The interest in deposits in which silver is the main or only commodity has continued, with mining and processing commencing at Alcyone Resources Twin Hills (Qld) mine in July 2011, and at Cobar Consolidated Resources Wonawinta (NSW) mine in May 2012. A number of other projects are also at various stages in the production pipeline, mostly in NSW and QLD, but also in SA and WA.

At its Texas Project, Alcyone Resources Ltd recommissioned the Twin Hills mine in February 2011. Initially, historic heap-leach stockpiles were re-irrigated, producing in excess of the budgeted 250 000 ounces (7087 kg) by September, at which time the crushing circuit had been upgraded and new ore was being added to the heap-leach pads. At the time of writing, the Texas Project has identified reserves sufficient to last five years.

At the Wontawinta deposit in the Cobar mineral field, Cobar Consolidated Resources Ltd treated the first batch of ore in May 2012, with pouring of the first silver in July. From the decision to mine in June 2011, mine construction took less than a year, with the first pour occurring just over a year after initial construction. Full production is expected in December 2012, with a mine life of 8-10 years. Cobar Consolidated Resources indicates that Wontawinta is not a typical Cobar-type deposit, but more likely a Mississippi Valley-type deposit.

Other silver projects in early stages of development in eastern Australia include Argent Minerals' Kempfield project (NSW), and Kingsgate Consolidated Bowdens project (NSW), both of which are the subject of feasibility studies. At Kempfield, updated resources at 26 April 2012 total 21.8 Mt grading 47 g/t Ag and 0.12 g/t Au with lead and zinc credits in primary ore. In addition, the deposit contains large amounts of barite. At Bowdens, a total resource of 58.2 Mt grading 52.9 g/t Ag, 0.40% Zn and 0.30% Pb has been defined. Other less advanced silver projects include Silver Mines Ltd's Webbs Project in NSW and White Rock Minerals's Mount Carrington Project in Qld. The Webbs Project currently has a total resource of 1.49 Mt grading 245 g/t Ag, 0.27% Cu, 0.71% Pb and 1.56% Zn. In July 2012, a scoping study on the Mount Carrington project using JORC-compliant mineral resource data released in February 2012 (12.21 Mt grading 58 g/t Ag and 0.2 g/t Au (Ag-rich) and 5.01 Mt grading 1.4 g/t Au and 2.8 g/t Ag (Au-rich)) indicated robust viability, and White Rock Minerals has been encouraged to undertake a prefeasibility study in 2013 with the aim of development in 2014.

Although silver exploration and development is occurring mostly in NSW and QLD, particularly in the New England and Lachlan Orogens, silver exploration has recommenced at MacPhersons Rewards Nimbus Project in WA and Investigator Resources discovered previously unknown epithermal silver mineralisation at the Paris prospect in Peterlumbo silver field in SA. At Nimbus, which produced 112 tonnes of silver between 2003 and 2007, MacPhersons Reward has identified total resources of 2.792 Mt grading 112 g/t Ag, 0.12 g/t Au, 1.23% Zn, 0.20% Pb, 0.02% Cu and 98 parts per million mercury. In addition, the company has identified several massive sulfide zones with grades up to 41% Zn that are not considered in the resource. The company has added to the existing mill on site by purchasing additional equipment for a gold circuit.

Perhaps the most significant development in silver was Investigator Resources discovery of high-grade silver at the Paris prospect in the southern Gawler Province. This prospect, which was only discovered in January 2011, consists mainly of sheet-like zones and subvertical veins in dolomite just below the unconformity with Gawler Range volcanics. The silver is interpreted to be epithermal in origin and has some similarities to manto-type deposits.

Rocky roads

In contrast to 2010-11, when takeovers dominated the zinc-lead-silver sector, 2012 was dominated by financial difficulties for small to mid-tier producers, including Kagara Limited, Bass Metals and the Independence Group as a result, at least in part, of depressed zinc and lead prices. Kagara Limited went into voluntary administration on 30 April 2012 after suspending all operations earlier in the month. At the time of writing, the assets of Kagara, including its north Qld operations and the Admiral Bay deposit in WA, were up for tender.

Bass Metals ceased mining of the Fossey deposit in May 2012, with milling at the Hellyer mill finishing in June. LionGold of Singapore pulled out of an agreement to purchase the Hellyer mill in September, leaving the immediate future of Bass Metals unclear. Independence Group, which acquired the Jaguar and Bentley deposits after taking over Jabiru Mining in April 2011, reported impairments of $157.7 million in December 2011 and $98.7 million in June 2012 related to Jaguar-Bentley operations.

Endnotes

98 Cited values for zinc and lead production are from the 2011 Xstrata production report and differ for the payable metal values reported in the 2011 Xstrata annual report.

99 Values of 2010 Rosebery metal production differ significantly between the MMG 2010 and 2011 annual reports, with the values reported in 2011 significantly lower than the values reported in 2010. In this report, the 2011 metal production is compared with the 2010 values reported in the 2011 annual report.