Real rewards for gold production hopefuls could be just over the horizon
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Gold prices have been on decidedly upward trend since the beginning of this year and while the precious metal has moderated since breaching the US$2,000/oz mark at several points in April and May, it is still up some 6.17% since the beginning of January.
Unsurprisingly, Australia’s largest gold producers have also seen some big gains with a number actually outstripping the precious metal.
However, the same cannot be said for most junior explorers that expect to start production in the near-term with Black Cat Syndicate (ASX:BC8) essentially unchanged while Brightstar Resources (ASX:BTR) tumbled 23.53%.
Kaiser Reef managing director Jonathan Downes shared some thoughts with Stockhead, expressing his belief that the ASX was essentially a fear-dominated market at this point.
“Most juniors don’t generate cash flow, so there’s a propensity in a tough time to not want to continue to finance an explorer’s hopes and dreams to become a producer,” he noted.
“And it is very much a function of people not having looked in detail and in our case realizing that we are actually producing but are valued at less than many explorers and certainly much less than many explorers in our region.
“I think to have a positive cash flow in a closed market world like right now is an exceptional strength and I think that’s going to really separate the explorers from the producers.”
He added that while he can’t explain why Australia’s love affair with gold had appeared to fall away so dramatically despite spectacular discoveries like De Grey Mining’s (ASX:DEG) Hemi find in the Pilbara, the precious metal always came back.
“Gold is a major export from Australia, I guess there’s going to have a bit more discretion in a tough market about quality and those that really do have potential to enter into production,” Downes pointed out.
“Higher interest rates are not helping anyone. It is certainly increasing costs across the board but that impacts (near-term) producers more so than exploration companies.
“But I believe the once the selling is concluded and there’s some clear air, investors will come back into the gold space.”
Here’s a selection of ASX junior gold plays that are either already producing or are positioned to start production in the near-term, in time to catch the expected return of investors into gold.
While primarily a copper producer, Aeris also packs a serious gold punch with output of 15,400oz in the March 2023 quarter, up from the 13,900oz it produced in the previous quarter.
Its Cracow operations in Queensland, which deliver the bulk of its gold output, sold 13,300oz of gold at an all-in-sustaining cost of $2,229/oz, or about $29.7m, during the March quarter due to higher electricity costs and operating an additional drill rig.
This is still within plan and the company expects the project to meet its full-year guidance of between 48,000oz and 59,000oz this financial year.
Greenfields exploration activities were focused on the Southern Vein Field directly south of the current Cracow mine infrastructure.
Black Cat is focused on bringing its Paulsens gold operation in Western Australia’s Eastern Pilbara region back into production.
Once a foundation asset of Northern Star with historical production of over 900,000oz in its first 13 years of operations, the mine was acquired by the company along with the Western Tanami project on Western Australia’s border as part of a combined $44.5m deal last year.
Paulsens brings with it an existing and well-maintained 450,000tpa mill and camp infrastructure which will make a restart of operations much more straightforward along with an underground resource of 322,000oz at an average grade of 10.1 grams per tonne (g/t) gold, about 58% of which is in the higher confidence Measured and Indicated categories, in the Main Zone.
Another 133,000oz at 9.2g/t gold is hosted in the Gabbro Veins while the Hangingwall Zone is home to another 35,000oz of gold at 11.1g/t.
Resources are poised to increase further after drilling continued to intersect multiple mineralised veins with double digit gold grades outside the current resource envelope.
More recently, Black Cat has outlined several gold, base metal and antimony targets from first pass regional exploration at Paulsens that could further increase its mining inventory.
These are all inputs that the company will certainly consider as it drives towards a potential re-start decision in mid-2023.
Mere weeks separate Brightstar from becoming Australia’s newest gold producer with the company poised to start mining in August some 30,000t of ore at a head grade of more than 6g/t from the Selkirk open pit mine within its Menzies project in WA.
It follows on the company agreeing with partner BML on the project scope after a recent site visit and also reaching a toll treatment deal with St Barbara (ASX:SBM).
Haulage of ore from Selkirk and processing at St Barbara’s Gwalia operations is scheduled to begin in the first quarter of 2024 with BML responsible for all capital, mining and haulage costs whilst profits are split evenly on a 50/50 basis on reconciliation of gold sales and project costs.
Proceeds from this gold production will be used to fund additional exploration and development efforts underway across the company’s broader portfolio.
This includes ongoing drilling to streamline prospects within the Menzies project into a single, large portfolio.
It also comes as the company’s overall resource inventory broke past the million ounce mark after upgrading resources at its Cork Tree Well project in Laverton by 20% to 303,000oz of gold.
Catalyst is currently focused on its merger with Plutonic gold mine Superior Gold – after digesting Vango Mining, a move that will increase its production profile to about 100,000oz per annum.
While the company’s existing production from the Henty gold mine (5,461oz of gold in March) already places it more than halfway to that target, merging with the Canadian company will consolidate the Plutonic-Marymia gold belt and provide access to higher-grade resources that will reduce the risk of ongoing Plutonic underperformance.
It will also increase the opportunity to materially grow annual gold production.
Other recent activity includes the definition of a maiden resource of 665,000t at a whopping 7.7g/t gold, or 163,000oz of contained gold, at its Four Eagles JV with Hancock Prospecting near Bendigo, Victoria.
Some 70,000 of those ounces grade at 26.2g/t at the project’s Iris Zone, an underground deposit 100m below Boyd’s Dam and in close proximity to the proposed underground exploration tunnel.
With commissioning of its Kat Gap processing plant currently underway, Classic expects to produce gold before the end of June initially using material it has stockpiled on the ROM pad.
With gold resources at the project enjoying a recent upgrade which moved 20,488oz of gold into the higher confidence Indicated category, the company has a greater level of surety as it progresses towards Stage 1 extraction, processing and monetisation.
The company will carry out detailed staged mine planning activities, paying particular attention to the new Indicated resource for initial Stage 1 trial mine extraction, which will provide a strong foundation for future mining operations at the deposit out.
This work will also allow Classic to gauge the economics of Kat Gap and contribute to better understanding of the greater Forrestania project.
Mallina Basin pioneer De Grey may be a little further away from production compared to some of the other featured near term gold producers, but when you’re sitting on a 11.7Moz resource, it really is only a matter of time.
Most of the resource at the Mallina gold project is contained within the monstrous 9.5Moz Hemi discovery, which dwarfs the size of the last two major gold discoveries brought to market in WA and essentially opened up the new intrusion-hosted form of gold mineralisation in the Pilbara region.
Work is now underway on an updated reserve estimate, which will in turn feed into the Definitive Feasibility Study that will build on last year’s Pre-Feasibility Study.
Said PFS had already outlined the Mallina project’s potential to production of 540,000oz per annum for the first 10 years, generating a post-tax net present value of $2.7bn.
De Grey also has plenty of opportunity for further resource growth with deeper potential under the planned open pits and along strike from major deposits like Diucon/Eagle, south of Brolga and Falcon and at Antwerp.
Additionally, the company has reached a heads of agreement with Novo Resources that effectively expands its exploration exposure in the Mallina Basin by 70% to more than 2,500km2.
This ground – the Egina project – contains similar geology and structures to those found within the Mallina gold project and is highly prospective for large scale, intrusion-related gold deposits similar to Hemi.
Unlike many junior gold plays, Kaiser Reef has distinguished itself by having already established profitable production from its A1 Mine, selling 3,376oz of gold at an average price of $2,807/oz in the March quarter for $9.48m in revenues versus total costs of $8.09m.
And it is now poised to take production even higher after completing significant debottleneck and infrastructure improvements such as modernising the SAG milling operation to ensure the plant could be operated and maintained more effectively, expanding the underground remote mining fleet, improving ventilation infrastructure and accessing ore bodies developed over the previous quarter.
The company is clearly confident enough in all this activity that it is projecting a doubling in mine output from the current 2,000t to 2,500t per month to between 4,000t and 5,000t.
Recent drilling has also delivered exceptional results including 4.4m @ 118 g/t gold from 25.4m, 1.75m @ 53.8 g/t gold from 40.9m, 15.20m @ 3.01 g/t gold from 51.4m and 0.25m @ 2,006 g/t gold from 66.65m which bodes very well for the ongoing exploration and mine development.
This will go a long way towards ensuring the company has sufficient resources to continue feeding its production operations.
Kingsgate is a recent gold producer that only recently brought its Chatree gold mine in Thailand into production and sold its third shipment of 1,074oz of gold and 9,067oz of silver in May.
This was sold for more than $4m and confirmed earlier estimates that ounces refined will trend upwards as the refining process continues to be fine-tuned.
It noted in May that its Plant 2 continued to perform above expectations and is continuing to run above nameplate capacity at an average of 370 dry tonnes throughput per hour.
Near-mine exploration also continues to return significant results with recent assays such as 19m at 2.73g/t gold from 6m and 44m at 0.43g/t gold from 18m indicating that the mineralised zones in this area are generally low to medium grade gold, with some exciting localised narrow high-grade zones.
This gentle east dipping mineralisation zone is at least 200m long, and still open in all directions.
Probably the most recent gold producer on our list, Manuka is only a little more than a week out from restarting gold production at its Mt Boppy mine in New South Wales’ Cobar Basin.
The company expects the mine to produce for between three to four years at a rate of up to 25,000oz of gold per annum through the 1 million tonne per annum Wonawinta mill, which can also process silver.
Mt Boppy has previously been a very nice money-maker for Manuka, beating expectations on several levels prior to the completion of Manuka’s first phase of mining in the final quarter of 2021.
What’s perhaps the most important point for the company is that production at Mt Boppy will underpin organically funded exploration of the priority targets identified in the company’s Strategic Exploration Review.
This had revealed substantial silver and gold resource upside along with high-grade base metals potential within its tenements.
Ora Banda is an existing gold producer with big plans for its Davyhurst gold plant 120km northwest of Kalgoorlie, the kind of big that involves doubling its production capacity to more than 100,000ozpa by FY25.
Not an impossibility given that the company’s production in the March 2023 quarter was 12,445oz of gold, up 4.7% from the two previous quarters, while the output in the June quarter is forecast at between 14,000oz to 15,000oz due to mining and ore volume increases.
The driver for the company’s plans is the recently approved development of the high grade Riverina underground mine, which will carry a reserve grade of 4.3g/t, well in excess of the average resource grade of 2.6g/t across Ora Banda’s tenements.
Underground diamond drilling and first ore is expected in the first quarter the 2024 financial year with the first stopes (economic ore zones contained within the mine plan) to be blasted in the December quarter).
Production will come from Riverina’s underground resource of 303,000oz at 4.1g/t which is open in all directions though further extensions are likely given that exploration drilling has already delivered gold hits around the Main Lode and Reggie Lode, which is emerging as a key target for mineralisation extension.
The company notes that the underground mine remains open at depth on multiple lodes and that historical deposits could also hide further underground resources.
Stepping out of Australia, West Wits already possesses a sizeable resource of 4.28Moz grading 4.58g/t gold at its Witwatersrand project in South Africa and has plans to achieve first gold pour during the fourth quarter of 2023.
The company is currently updating its DFS with new information gained from underground survey works, optimisations of the mine plan and updated market assumptions and expects to deliver the results in July.
Its current Qala Shallows DFS already outlines an attractive underground development with estimated pre-tax Net Present Value and Internal Rate of Return, both measures of profitability, at US$180m and 38% respectively using a gold price of US$1,750/oz and an exchange rate of ZAR15/USD.
Further resource growth is also a clear possibility given that the company has received Environmental Authorisation approval from South Africa’s Department of Mineral Resources & Energy for the prospecting right following completion of the 30-day community consultation period.
This will reintroduce areas reported under the project’s previous Prospecting Rights which were removed upon granting of the Mining Right which has a reduced tenement footprint.