Tale of two islands – the potential for large-scale mining in Fiji

Michael Schwartz explores how Fiji offers major mineral resources.

Fiji comprises just over 300 islands and islets in the South Pacific. Over 70% of the population of just under one million people live on one island alone – Viti Levu. The latter, in turn, features Fiji’s two official cities, the capital Suva and Lautoka. Vanua Levu, meanwhile, makes up 30% of the 18,272km2 of Fiji’s land mass and just 15% of its population. Both islands are mountainous to 1,300m, with these mountains providing shelter for the western regions of the islands facilitating the growth of 
sugar cane.

Geology in and around Fiji is complex due to its proximity to the Australian-Pacific plate boundary. Subduction of the Pacific plate under the Australian plate produced Fiji’s oldest rocks. Further movement between the plates generated another group of islands. It is therefore important to understand Fiji’s basic geology, as well as the mining companies that are operating there.
 
Untapped potential
The first such company is North Vancouver, Canada-based, exploration and development company Lion One Metals Ltd. It focuses on advancing its 100%-owned and fully-permitted Tuvatu Alkaline Gold Project towards production on Viti Levu. The second is Kalo Exploration Ltd, a privately held mineral exploration and drilling company based in Fiji. 

Four years ago, Fiji’s Bureau of Statistics showed that production of mineral commodities – notably cement, gold and silver – represented only a small part of the country’s economy. Since then, interest in Fiji has greatly increased, supported by a series of legislative measures such as the Mining Act, the Oil and Petroleum Act, and several land use and environmental regulations.

Joe Gray, Head of Investor Relations at Lion One, says that, ‘Fiji has a very good Mining Act, originally enacted in 1963 and updated from time-to-time since then. The Mining Act is structured similarly to those you would find in Australia and Canada. The law in Fiji is British Law, and they speak English, so it is easy for Commonwealth countries to undertake work.’ 

Listed on TSX-V and ASX, Lion One claims that it is set to become Fiji’s leading high-grade gold producer. It backs up its claims through exploration of its licence areas within the highly prospective, but under-explored, Navilawa mineralised volcanic complex. 

A mineral resource preliminary estimate of May 2014 was prepared by Mining Associates Pty Ltd of Brisbane, Queensland. It comprises 1.101Mt indicated at 8.46g/t gold (299,500oz of gold) and 1.506Mt inferred at 9.7g/t gold (468,000oz of gold) at a cut-off grade of 3g/t of gold.

Crucial to identifying Tuvatu’s wealth was the Controlled Source Audio MagnetoTelluric (CSAMT) survey conducted late last year. It clearly shows structural controls of known lode systems and also reveals numerous new untested targets. Using CSAMT, electrical resistivity of rock down to roughly 1.0-1.5km under the surface can be measured, highlighting potential mineral hosting structures.

Ploughing the depths

Recent drilling has also shown several high-grade intercepts at Tuvatu. Lion One’s first deep diamond drill hole (536.9m) has met several highly encouraging results – 105g/t over 0.35m, 10.21g/t over 3.83m, and 33.22g/t over 4.29m, which includes 322.0g/t over 0.31m. This latter intersection, according to the company, suggests high-grade mineralisation will be discovered at lower depths. To achieve these ambitions, Lion One will incorporate several strategies, including using Fiji’s previous mining expertise and working with locally trained and qualified personnel. 

Gray explains, ‘Many of the senior people within the regulatory bodies have further tertiary qualification from Australian or New Zealand universities. Fiji now sees itself as a mining jurisdiction and hosts one of the oldest continuously mined operations in the South Pacific – the Vatukoula gold mine – which has been in operation for the past 85 years. Vatukoula has been a significant employer for decades and produced over 7Moz of gold to date, along with Mount Kasi, which was a gold mine operated in the 1980s and with current bauxite and iron sands mining operations. Both government and the people consider the country a mining friendly jurisdiction.’

Turning to local personnel, Gray comments that, ‘Lion One recruits local people where possible. The local senior employees of Lion One in Fiji include four geologists, a field supervisor, senior environmental officer, administration manager, drillers, lawyer, land and government relations manager, two GIS personnel, IT specialist, etc. Consequently, nearly all its senior people in Fiji are local.’

Gray also elaborates on the accessibility of Tuvatu, explaining that the project is conveniently situated near major infrastructure. The Lion One Fiji office is situated 1km from the Nadi International airport, which receives just under one million visitors every year, while the project itself is only 17km from the airport. Access to the site by means of that 17km distance is via a sealed bituminised road for about two thirds of the way, and then an all-weather gravel road for the remainder. 

To put this in perspective, he states that, ‘a visitor can stand on the project and see the international airport, the tourist islands offshore and tourist hotels’.

Island life
Kalo Exploration Ltd, based out of Labasa on Fiji’s North Island, is exploring the Cirianiu Prospect, which lies within an 8.5km NE-SW trending mineralised corridor. The style of mineralisation is low-sulphidation epithermal.

The company has drilled 32 diamond holes over 4,597.4m, and has also undertaken over 14km of trenching, which has produced further mineralised targets. Kalo Exploration’s inferred gold resource comprises 158,831oz and is open at depth and to the north and east. The company anticipates a greater resource as drilling increases. 

In agreement with Gray, Kalo Exploration’s President, Michael Nesbitt, says, ‘The government is supportive of mining. The Mineral Resource Department has a strong and dedicated team that has been assisting us along the way to develop a mine. At a national level, Fiji would like to see a significant increase in GDP per person, and I think the government recognises that mining can play a significant role in achieving this.’

Regarding access to Kalo’s site, the company is located on the north island, Vanua Levu. There are multiple daily flights to Labasa from Nadi and Suva, as well as ferries. From the Labasa airport to the company’s office takes about 10 minutes driving, and from its office to the work site takes about 50km on sealed and unsealed roads.

Regarding local employees and specialised roles, such as managers or geologists, Kalo confirms that its field manager, driller, offsiders, mechanic and machinist are all Fijian, along with all labour positions and the camp cook. Unfortunately, Fiji does not offer earth sciences at university level, so there are not as many qualified geologists available there.

However, it should be stated that not all mining enterprises in Fiji have been automatically successful. One example is Xinfa Aurum Exploration (Fiji) Ltd – a decrease in bauxite mining was due to both geological and economic factors. In fact, all bauxite mined in Fiji is now being exported to China, which has a high demand for it. The mine involved has encountered lower grades in recent years. 

There are also other sources of higher-grade bauxite in the region. Australia supplies China with bauxite, and both Indonesia and Malaysia have lifted mining/export bans on bauxite in recent years, reopening their markets to China. All these aspects have combined to make upgrading the existing plant in Fiji less attractive. 

Community consultation
Both companies highlight how seriously they take corporate social responsibility. ‘Lion One has 100% support for all its exploration and mining activities. In the past nine or 10 years, the company has carried out approximately 300 stakeholder consultation meetings [with] government, landowners, villages, schools, churches etc, and not one objection to its activities has ever been received,’ elaborates Gray.

‘There is a company policy to employ locally whenever possible. To this end, Lion One currently has full-time staff of around 50 people, only two of which are expats because their specialties are not available in Fiji. Additionally, all contractors and casual employees are local. Lion One also contributes to community development programmes, education of individuals from the communities, road building etc.’

Kalo also commented on its relationship with the local community. ‘We hire from the communities we work in [and] assist with community projects, such as water system upgrading, toilets, showers, funerals and road maintenance. We also provided a scholarship for a young woman in the community to attend Fiji National University in Suva.’

Taxes and royalties
Fiji’s tax and royalty regime are outlined by Gray and Nesbitt. The corporate tax is a flat 20%, but two royalties exist – an export tax and a gold tax. These two taxes combined total 8%. In fact, Lion One has spent considerable time negotiating a reduction of these royalties for Tuvatu. Kalo states that currently there is a 5% royalty on gold, of which 80% goes to the landowners. Companies contribute 8% of gross wages to the Fiji National Provident Fund, a retirement savings plan organised by the government. There is also 9% VAT levied on goods and services.
Regarding markets for the gold, Gray notes that ‘gold is one of the few commodities that doesn’t need marketing’. Gold is sold to refineries, but gold bars produced can be sold into any market, he says. ‘Gold is a global commodity, and we would be price takers. The closest market would be Australia,’ adds Nesbitt.

Kalo has since added an additional Special Prospecting Licence (SPL) – Coqeloa – located to the southwest of Cirianiu. Preliminary exploration has returned up to a 9g/t sample, and mineralisation appears to be controlled by a large caldera. Kalo has already established two main zones of mineralisation on the new SPL and is undertaking an auger and trenching programme to identify drill targets. By adding this licence, it has now established a 25km-long mineralised corridor on Vanua Levu.