Hillgrove cashed up for Kanmantoo copper exploration, development

Investors have lined up behind Hillgrove committing to a $10m placement to fund exploration and development at its Kanmantoo copper-gold mine.

Institutional and sophisticated investors, several of which were new to the company, strongly oversubscribed for the $10m placement priced at 5.2c each.

Hillgrove Resources (ASX:HGO) intends to use the proceeds of the equity raising to carry out 16,000m of drilling at Kanmantoo from October that will target resource extensions at the Kavanagh, North Kavanagh, South West Kavanagh, Nugent, and Spitfire lodes.

This will include infill drilling to improve the geological confidence to support a maiden reserve, prior to a final investment decision in 2022 to recommence mining at the South Australian project.

Proceeds will also be used to:

Support the completion of a Kanmantoo resource upgrade within the next two months as well as a further upgrade on completion of the upcoming drill program;
Complete a study in the December 2021 quarter into preliminary capital expenditure and operating expense forecasts for mine recommencement; and
Establish a portal, underground drill platforms and an exploration decline.

The company will also look to raise up to $2m through a share purchase plan to existing shareholders under the same terms.

“Drilling to date has demonstrated that the ore lodes mined in the Kanmantoo open pits continue below the base of the pits with grade, width and continuity to support underground development,” managing director Lachlan Wallace said.

“I expect that recent drilling will increase the existing resource and with this raising, we will continue drilling and accelerate development plans ahead of a planned mine recommencement next year.

“I am confident that the planned works will create value for our shareholders through the potential recommencement of copper and gold production at Kanmantoo, which enables us to unlock the value of the region through further advancement of the near mine and regional exploration projects.”

Komatsu agreement and trial underground decline

The company has also signed a binding contract with Joy Global Australia, a subsidiary of Komatsu Australia, to establish a portal, exploration decline and underground drill platforms using the earthmoving and mining equipment manufacturer’s Komatsu MC51 continuous miner.

Under the agreement, all contract fees incurred by Hillgrove during the trial are accrued and become payable only following the receipt of project financing and commencement of the capital development of the Kanmantoo Underground which is expected in 2022.

Wallace said Komatsu’s DynaCut continuous mining technology could potentially transform underground mine development design and processes.

“Although the application of any new technology in a production setting can be sometimes viewed as higher risk, this trial commences the decline a year ahead of schedule, and the deferred and contingent nature of the Komatsu agreement, coupled with the $2m State government grant, allows Hillgrove to facilitate the trial and create the underground access and drill platforms for minimal cash outflow,” he added.

The trial underground decline will create a portal towards the base of the Giant Pit and establish a number of underground drill platforms from which the Kavanagh and Spitfire lodes can be drilled.

Drilling has already demonstrated that the Kavanagh lodes extend for up to 500m below the base of the pit, which has resulted in increased drilling costs.

Hillgrove notes that underground drill platforms will reduce the length of drill holes, leading to faster and lower cost drill out of the Kavanagh Resource.

Additionally, these platforms enable areas directly below the base of the pit such as South West Kavanagh and Spitfire, which are otherwise difficult to target from surface, to be drilled and brought into future resource estimates.

The company added that the decline enables close spaced stope definition drilling to be brought forward, potentially removing this work from the critical path to first copper production.

Kanmantoo copper-gold mine

The Kanmantoo copper-gold mine produced 137,000 tonnes of copper in concentrate from a series of open pits between 2011 and 2020.

Clear signs that all of the mined lode dipped steeply beyond the base of the pits led to the company’s decision to move towards underground mining.

This will benefit from a fully-permitted site, strong community support, and having all required infrastructure – including a 3.5 million tonne per annum process facility – already in place.

This article was developed in collaboration with Hillgrove 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.