Laneway to bank substantial cash from next Agate Creek gold mining campaign; shares take off
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Special Report: Laneway Resources has begun another round of high-grade gold mining at its Agate Creek mine in North Queensland that is set to deliver even more cash than the prior campaign thanks to even higher prices.
The well-timed restart coincides with still strong gold prices that are back up over and $US1900 an oz, which for Aussie gold producers translates into a very lucrative $2,691 an oz.
Laneway Resources (ASX:LNY) expects this high-grade production run of 42,800t at 6.5 grams per tonne (g/t) to deliver around 8,950oz and “significant positive near term cash flow”.
At the current high Aussie dollar gold price, that would likely hand the company something in the vicinity of around $24m revenue. This will substantially boost Laneway’s coffers and leave it well funded to advance exploration and development of its projects without the need to tap shareholders for more cash and risk further dilution.
“With mining activities now underway at a time of continuing high gold prices, we are looking forward to the significant cash generation from this mining campaign to support the self-funded ongoing appraisal and exploitation of the Agate Creek project and the company’s broader project portfolio,” chairman Stephen Bizzell said.
This news was well received by investors, with shares rising 14.3 per cent to an intra-day peak of 0.8c on Friday.
Blast hole drilling has begun in the pit area with the initial blast planned for next week.
Mining contractor Maas Group is currently mobilising the mining fleet with some plant now on site and the balance scheduled to arrive in the coming days.
Mining will be done in two stages to optimise ore timing and maximise near term cash flow.
In August, Laneway reported that drilling success had expanded the high-grade zone of the Sherwood deposit at Agate Creek and that it anticipated being able to mine significantly more material than the 20,000-25,000 tonnes initially expected.
An initial 18,000 tonnes from the Sherwood Pit will be processed in the current quarter and the remaining 25,000 tonnes will be stockpiled for processing at the end of the wet season.
The initial ore parcel will be toll processed at the Lorena gold mine carbon-in-leach processing plant at a fixed price per tonne.
The processing of the initial 18,000t will start around mid-November and take about three weeks to complete. Laneway anticipates high gold recoveries of around ~90 per cent.
The company expects to have the bulk of the cash from the processing of the first parcel of ore in its bank account before the end of the year.
Given the current high gold price, Laneway has also identified the potential for further high-grade mining.
The company has identified the opportunity for a much larger open pit shell containing 120,000 tonnes at 5.7g/t for 22,000oz of contained gold.
Studies are already underway to facilitate environmental approvals required before mining of this larger open pit shell can begin – which is targeted for 2021.
Laneway is also continuing to progress other processing plant options which may be utilised
longer term for the processing of high-grade ore from Agate Creek, including for the second batch of ore from the current mining campaign.
Agate Creek so far has a defined resource of 471,000oz of contained gold.
Laneway is continuing to evaluate and progress the broader mineralisation potential at Agate Creek and the development and planning for large scale mining activities, including the processing of the current resource.
The company’s plan longer term is to grow the resource to beyond 1 million ounces, at which size it should be able to justify the development of a processing facility on site.
This article was developed in collaboration with Laneway Resources, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.