After Victoria's modern day gold rush, will its government 'walk the talk'?

Exploration in Victoria has increased 2.5 times over in the past four years
Much of the enthusiasm has been driven by the success of Agnico Eagle’s high grade Fosterville mine
It has been called a modern day gold rush, but with the initial phase of discoveries now done, how many if any will become new mines?

Over the past three years Victoria has enjoyed its biggest mining investment boom since the Bendigo and Ballarat gold rushes that first brought immigrants from around the world to Australian shores in the 1850s.

Mining sector capex and exploration for minerals, notably gold, touched record highs in FY22.

Under $150 million was spent exploring for metals as recently as 2017-18; that has risen each year to a touch under $400m last financial year.

With recession fears dulling investment in junior mining equities and discoveries from that first wave of the boom now in the books, the next and most important phase of the ‘modern gold rush’ is now upon us.

Will Victoria, long a laggard in the resources space compared to WA, South Australia, Queensland and New South Wales, now back in the development of new mines?

Stavely Minerals (ASX:SVY) managing director Chris Cairns said support from the Victorian Government had helped lay the groundwork for its Thursday’s Gossan copper discovery on the Stavely Arc.

But the best trigger for another boom in exploration spending will be the delivery of new mines.

Hhow long is a piece of string? As you say, there hasn’t been a new mine permitted in Victoria for some time,” he told Stockhead in an interview on the sidelines of the International Mining and Resources Conference in Sydney.

“I think the truth is that they need at some point in time to walk the talk.

“They’re encouraging explorers to come there. But really the best encouragement any explorer could have is that mines are getting approved.”

Fosterville up in lights

What really made the Victorian gold sector stir was the discovery in 2016 of the Swan Zone at Kirkland Lake’s (now TSX-listed Agnico Eagle’s) Fosterville mine.

The almost 50g/t orebody contained grades rarely seen since the 1800s and turned Fosterville into Australia’s lowest cost and one of its largest producing gold mines, turning out around 640,000oz in 2020 and over 500,000oz in 2021 at extraordinary margins.

Other operations in Victoria are more modest. Nearby TSX-listed Mandalay Resources owns the Costerfield mine, which produced almost 50,000oz of gold in 2021, but is also one of the few antimony producers in the west, a rare critical mineral largely mined in Russia and China.

The Chinese-owned Ballarat gold mine, mired in controversy in recent years, was paused recently when its tailings capacity veered close to the edge.

Kaiser Reef (ASX:KAU) has reopened the small high grade A1 gold mine and Maldon processing plant on the historic Maldon gold field, home to 620,000oz of historical production.

Kirkland Lake spent over $80.5m exploring at and around Fosterville in 2021 but is yet to make another find to replicate Swan’s golden elegance.

But it was the recipient of three highly contested exploration blocks around the Fosterville mine in 2021 after a Victorian government release. The kicker there is Agnico lost out on the most treasured block, surrounding the mine lease, to famous explorer Mark Bennett and his Sirius Resources spin off S2 Resources (ASX:S2R).

There is a big question mark around a lot of these explorers, and that is the regulatory framework for a new mine, as opposed to a restart, is largely unknown.

Given Agnico appears to have a strong commitment towards Fosterville (if not Australia, it didn’t retain KLA’s ASX listing) it is more likely to be an acquirer of a company that makes a major Victorian gold find than a seller of what is a low-cost, high yield asset.

The uncertainty around Victoria’s mining reputation and the ability to get social licence from communities in the densely populated state could push further discoveries into the already licensed Agnico’s hands.

Licence to operate

At the same time, Cairns says the copper-dominant nature of Stavely’s Thursday’s Gossan discovery will be of benefit.

He says local communities are accepting of the role copper will play in the transition to low carbon energy.

The high grade Cayley Lode contains a mineral resource estimate of 9.3Mt at 1.23% copper, 0.23g/t gold and 7.1g/t silver, with the total resource of 28.3Mt at 0.75% Cu, 0.11g/t Au and 3.5g/t Ag containing a substantial 210,000t of copper metal, 100,000oz of gold, 3.2Moz of silver and 2,400t of zinc.

“Certainly in discussion with local people, they understand that these critical minerals, that copper is necessary for the transition to a low carbon economy. Really it is part of the solution, not part of the problem,” Cairns told Stockhead.

“Whereas I think if we were just another gold mine, there are some major investors in the world who are questioning the social utility of gold and whether the massive carbon footprint associated with mining gold is really worth it from an environment perspective.”

A unique magma-butte style discovery close to surface, Stavely believes a large porphyry exists at depth, where high copper grades with increasing gold grades (equal in g/t to copper percentages) open the pathway for a lower footprint underground development.

That could open development pathways amenable to government regulators, with stabilising underground paste fill a potential option to reduce the amount of waste sent to tailings.

“Our advice really, is that a fast track permitting process where maybe you have something that is already permitted in terms of a tailings dam in the region, for example, we might be looking at a period of maybe two years from the time that you enter into that process,” he said.

“If we had to do a stand alone, build our own tailings dam, we’re actually really seriously looking at not doing an open pit, so that we don’t have to have big waste dumps, we don’t have to have a massive tailings dam, just a small footprint, straight underground, and very little in the way of tailings.

“That’s probably a much more amenable scale of operation and type of operation in terms of a quicker approvals process. So we’re thinking in that respect, we might be looking at about three years.”

The recent Victorian gold rush was powered in part by exuberant capital markets, with investors willing to splash cash passionately on speccy explorers with low market caps and little track record.

But with recession fears emerging, Cairns said explorers without “a chair to sit on” may be left scrambling for capital to keep up the pace of drilling.

“I think the difference — and we’re not comparing ourselves with Fosterville – but the difference for us versus any other explorer in the Stavely belt is that we’ve got a resource, we’ve identified a mineral system, and it’s clearly going to expand,” he said.

“So I think it’s kind of like a game of musical chairs in so much as when the market turns if you haven’t found a chair, you’re screwed. Whereas we’ve found a chair and Fosterville has found a large chair and a very comfortable one with that sort of grade.”

Capturing the market

One explorer which is capturing the attention of the market, Southern Cross Gold (ASX:SXG), is up over 90% since its May IPO.

Not only has it found high grade disseminated gold rarely seen in the Victorian gold field in an area to the south of the famed Ballarat and Bendigo fields dubbed the Melbourne Zone, Southern Cross has also identified antimony, giving it a leg up on competitors.

“We believe that will give us a helping hand when it comes to permitting going forward because the Victorian Government and the Australian Government wants to be able to keep that sort of opportunity onshore, as opposed to the market that’s being dominated by China and Russia,” SXG manager of corporate development Nicholas Mead said.

“If it was a pure gold mine it would be a different story, but because we’ve got the antimony, we believe that is an opportunity for us to be able to get the government to help us out on the permitting side.”

SXG has also taken a 10% stake in fellow ASX-listed explorer Nagambie Resources (ASX:NAG). It has an historic mine and tailings dam, something SXG could leverage if it finds an economic deposit of gold and antimony.

Mead said most of the 80Moz of gold mined in Victoria has come from shallow, nuggety style mineralisation. SXG’s aim is to unlock some of the 70Moz of largely disseminated gold the Geological Survey of Victoria thinks is locked in the ground waiting to be mined.

“Our success will hopefully change the market’s perception on Victoria,” Mead said.

“What happened the past was very high grade gold, but very thin intercepts and nuggety.

“What we’ve got in the Melbourne Zone is a more disseminated style of mineralisation, which happened about 80 million years after the Bendigo zone.

“We’re showing wider intercepts, higher grades, and also extending to depth below the traditional oxide style gold that’s been produced in the past.

“We’re hoping to demonstrate that there is a new Victorian Gold Rush within this style of mineralisation, we’ve got it, a couple of other companies have got it, and we are working towards through every release that we put out, just pushing the story that this is not your typical Victorian gold.”