2 days ago
Broken Hill is being put back on the map by this emerging miner
Broken Hill Mines is planning a listing next month via a reverse takeover of Coolabah Metals
It will bring the asset on which BHP was founded back to Australian retail investors for the first time in decades
BHM head honcho Partick Walta says Broken Hill has years of life still in it
On September 5, 1883, a German-born boundary rider known as Charles Rasp pegged the first block on what became known as the Broken Hill.
Originally thought to be a mountain of tin, the intuition of the enterprising Kraut finally crystallised into revelation with the discovery of a rich vein of silver two years later.
The result was the formation of BHP (ASX:BHP), now the world's richest mining company after trading in its New South Wales roots for iron ore in the Pilbara and copper in Chile.
Yet what became of that original line of lode?
It may surprise many investors to know it continues to be tapped to this day at the aptly named Rasp mine.
But the project has been hidden in the bowels of Japanese zinc refiner Toho Zinc since 2010. As Toho sought to exit the Aussie mining business, with the 200 miners still working the operation facing the bread line, a white knight emerged.
The reimagined Broken Hill Mines, led by Patrick Walta – a metallurgist who almost a decade ago breathed new life into the Century zinc mine in Queensland – acquired the distressed assets in October 2024.
It plans to relist through the shell of Coolabah Metals in a reverse float that will include the injection of $15-20 million in fresh capital from investors.
Following the launch of a replacement prospectus last Monday chasing that quantum at 35c per share, Walta says the miner has been swamped with interest.
Much of it has come from investors drawn to the romance of Broken Hill.
" It's pretty cool being able to say you're operating the mine that started BHP. We've literally got the first shaft that was sunk," Walta told Stockhead after the launch of the replacement prospectus this month.
" Every single person you talk to says, 'my granddad worked there', or 'my auntie or my uncle was associated with Broken Hill'.
" Everyone in the mining community has a history with Broken Hill.
"It's such a revered mining town, and the mines there are so well known."
The other major producer in the region is the Broken Hill operations mined by Chinese-owned Perilya.
" Broken Hill as an orebody has been effectively owned by private Asian interests for a good couple of decades," Walta said.
"And there's a lot of patriotism there where they see this as really a story of national significance as much as anything else, about Broken Hill getting back into Aussie hands, being publicly listed, being transparent."
Multi-generational
Broken Hill has many of the hallmarks of other great mining hubs that have been consolidated by Australian miners in recent decades.
The Super Pit at one point had a potential three years in front of it under North American majors Newmont Corporation (ASX:NEM) and Barrick before its acquisition by Northern Star Resources (ASX:NST).
Now they are talking about Kalgoorlie's Golden Mile running well beyond the lifespan of anyone prospecting its workings.
Cobar's CSA copper mine is heading back into international hands, being acquired by Harmony Gold in a $1.6bn deal after MAC Copper (ASX:MAC) pried it from the labyrinthine portfolio of Glencore.
Now BHM is looking revitalise an underinvested asset by not just keeping the operations going but consolidating some of the key deposits around the region.
"People are able to actually see what's going on there and it's drawing people back to the town as well," Walta said.
"They're not seeing it as a mine that's about to shut down, they're seeing as a potential generational asset that can run for multiple decades.
"There's a great saying in Broken Hill that the Broken Hill orebody has had an eight-year mine life since 1885," he added.
"It's one of those classic, super orebodies where you keep drilling it, you keep investing, you keep giving it the love and it keeps returning."
" The orebody currently stands (historically) at 300 million tonnes at 15% zinc and lead and 300g/t silver.
" When Charles Rasp came across it as a rocky outcrop in 1883, it obviously wasn't a 300 million tonne orebody.
" So it's had consistent discovery and growth over that 140-year life and there's no reason why that doesn't continue on."
Scaling up
Currently, the mine produces in the order of 25,000tpa of zinc equivalent metal.
But it doesn't take long to figure out that there's plenty of opportunities to improve the outlook.
Despite the Rasp plant's 750,000tpa capacity, the project has been campaign milled since 2020 and ore feed grades are currently around 6% ZnEq. There are immediate opportunities to upgrade that.
"We bought an operating mine, a going concern, we've got 120 staff on day one and a hungry plant," Walta said.
"The whole philosophy here is about utilisation of sunk capital. We have this beautiful plant that's really had 500 million bucks spent on it over the years and it's only about 12 years old.
" It is only fed by one orebody and it's a relatively low-grade ore body by Broken Hill standards."
That ore source – Western Mineralisation – runs at around 8.2% ZnEq, including 4.8% zinc, 3.1% lead and 38g/t silver.
Yet the Main Lode grades an impressive 17.7% ZnEq, including some 870,000t of ore at 7.8% zinc, 7.6% lead and 151.7g/t silver.
Walta says the mine still made $20 million in operating cashflow last year with a plant running at around 40% of its total capacity. When the Main Lode comes online it will introduce not just more ore, but ore running at 2.5x the grade.
Not resting on its laurels, BHM has also struck a deal to share 70% of the profits by exploring and developing the Pinnacles mine some 15km to the southwest.
Pinnacles is a true artefact, one of the last major operations in Australia to be run by a local family. First pegged in 1884, the Williams clan has mined the deposit since 1954, aided by a 30,000tpa processing plant.
It hosts close to 6Mt of ore in its open pit and underground deposits at a 10.88% ZnEq grade.
Drilling is expected to take place over the next two years to bring the mine up to commercial standards before tapping the rich stuff underground in 2027, though an open pit could be expanded to complement production from Rasp before then.
"What they've done is nothing short of amazing. They've built up their own operation just through the sweat off their own back," Walta said.
" They have a 40m deep open pit, four underground levels down to about 100m. They built their own processing plant.
" No engineers, no consultants. This is hand-built stuff. It's very small by corporate standards, it's about 30,000 tonnes per annum.
" We've managed to team up with the Williams family, we've got a 70-30 profit share JV over the Pinnacles mine with them, so ultimately we want to get Pinnacles back up and running."
Opportunity beckons
The company is aiming to return to listing under its new name next month, with demand for the IPO said to have run as much as three times the available shares on offer.
Once listed the market cap will run at a pro forma $89-94 million.
That's potentially bargain barrel material when similar base metals producers are taken into account.
Polymetals Resources (ASX:POL), for instance, which is in the process of commissioning the Endeavor silver and zinc near Cobar has run ~150% higher over the past year to a market cap of ~$210m. Endeavor is an interesting comparison to Broken Hill, being the other NSW mine Toho Zinc acquired in its 2010 takeover of CBH Resources.
"When you look at our value proposition, we're at $95m as a comp, Poly's at $200m, Aurelia Metals (ASX:AMI) is at $500, Develop Global's (ASX:DVP) at $1bn.
"They've all got very good reasons why they're at those levels. (But) you don't have to do a lot more research to go, there's a bit of value here.
"And we deliberately priced it that way. We wanted early stage investors to capture value and we obviously want it to perform well."
There's a lot to like in the company's markets as well.
Silver recently broke the back of long-term resistance at US$35/oz and is now worth US$36.50/oz, powered by investment demand and close to five years of deficits due to stagnant mine supply and its increasing use in solar panels.
Zinc and lead may not have accelerated like copper, lithium, cobalt and rare earths did during the battery metals boom.
But they remain large stable markets trading at levels that offer solid and predictable returns for operators of BHM's scale.
Walta says the mix of industrial and precious metals also means the mine naturally hedges against different market conditions.
"Zinc is a 70 or 80 billion dollar a year industry, lead's a 60 billion dollar a year industry," he said.
" These are established industries of commodities that are essentially part of the makeup of every single person's life every day."
