Explorers eye Victorian gold renaissance
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Barry FitzGerald reports from Diggers & Dealers 2017 in Kalgoorlie
There was the usual bragging about exploration results and reserve growth by the gold producers at the Diggers & Dealers bash beneath Kalgoorlie’s big blue sky.
But there was no need for any bragging by Toronto-listed Kirkland Lake Gold (TSX:KL).
The reserve addition it reported for its Fosterville project north-east of Bendigo in central Victoria spoke for itself, with underground reserves more than doubling to 1.03 million ounces grading a spectacular 17.9 grams of gold a tonne.
The driving force in the increase was the mining reserve estimate for the Swan shoot – 532,000 ounces at an amazing 58.8g/tonne gold or close to two ounces a tonne. It compares with the average grade for the Australian industry of about 2 g/tonne gold.
At an Australian dollar gold price of $1600 an ounce, a tonne of ore from the Swan shoot has a contained metal value of more than $3000. That compares with $103 for 2 g/tonne material.
Needless to say, mining $3000 ore – or 17.9 g/tonne material for that matter – is having a telling impact of the profitability of the Fosterville operation.
While much of the Australian industry works hard to produce gold at a cost of $1000 an ounce, Fosterville is now doing it for less than $320 an ounce.
It has been wonderful stuff for Kirkland which is now a $2.7 billion company on the strength of Fosterville and its Canadian operations.
It has also been wonderful stuff in fuelling hopes that the long talked-about Victorian gold renaissance – one that recaptures some of the glory of the 1850s gold rush on which Melbourne was built – might finally arrive.
Already there is talk of an aggressive move by other Canadian groups into central Victoria looking to cut deals on exploration ground in the region on the strength of Kirkland’s success at Fosterville.
The broader central Victoria region is home to more than 80 million ounces of historical gold production, most of it before the First World War.
As Fosterville – itself a historic gold producer following its discovery in 1894 – has demonstrated, there is good reason to think there is a lot more gold to come.
Gaining exposure to the modern rush expected to come from Kirkland’s Fosterville success is not limited to buying shares in the Canadian company. There are a number of ASX-listed juniors that have made the region their prime focus.
One of them – Catalyst Metals (ASX:CYL) – has attracted the attention of Australia’s richest woman Gina Rinehart through an exploration joint venture at its Four Eagle project north of Bendigo, as well as a direct equity investment in the company by one of the country’s biggest gold producers, St Barbara Mines (ASX:SBM).
The gold corridor (Whitelaw Fault) on which the old Bendigo goldfield sits (22 million ounces) continues to the north but is totally covered by geologically younger sediments. As a result the oldtimers could not see where the corridor went.
The Whitelaw Fault sits west of the fault system which controls the Fosterville gold mineralisation and is now the subject of drilling campaigns by Catalyst at Four Eagles and Tandarra.
Encouraging early results have boosted confidence that Catalyst’s ground could yield shallow open-cut gold mineralisation, and possibly big primary lode gold discoveries.
Catalyst is valued by the market at $32m (56c a share).
Another ASX-listed junior that has Victorian gold in its sights is Navarre Minerals (ASX:NML), a $9m company (4c a share).
Navarre owns the Tandarra project area in which Catalyst is earning a 51 per cent interest by spending $3m on exploration over a four year period. Best resent exploration results included an 11-metre intersection which graded 17.8g/tonne gold from a depth of 47 metres.
It also holds 100 per cent of the promising Irvine gold project at the historic Ararat goldfield in western Victoria. Recent drilling there included a best result of 18.7m grading 7.1g/tonne gold from a depth of 196m.
Barry FitzGerald’s Garimpeiro column appears weekly in Stockhead.
Barry has covered the resources industry for 35 years and has written for The Australian, The Financial Review and The Age. The inaugural winner of the Diggers & Dealers Media Award in 2003, Barry is a committee member of the Melbourne Mining Club, a non-profit organisation formed to foster industry debate.