With record expenditure on exploration, exciting new discoveries, and a host of new developments about to start pouring their first gold bars, Western Australia (WA) is set to extend its position as Australia’s gold capital.
Funds pouring into gold exploration in Australia’s largest state are at an all-time high, with the Australian Bureau of Statistics reporting that A$309M was spent searching for the precious metal in WA during the September quarter – the most since records began in 1988.
Those exploration numbers are reflected in the state’s gold production figures, including 11 of the world’s largest gold mines located in WA, accounting for almost 70% of Australia’s total production. WA mines and petroleum minister, Bill Johnston, says gold mining is a critical export earner and employer in the area.
“WA’s gold sales reached a record A$16.6B in the 2020-21 financial year,” Mr Johnston said. “This was a 4% increase from 2019-20, which was also a record year with sales of A$15.9B.
“Gold remains WA’s second most valuable commodity and a key employer in the resources sector, with over 31,000 people employed in the sector.”
According to Mr Johnston, funding for the WA exploration incentive scheme leaped from A$2.5M to A$12.5M a year, while mineral exploration expenditure ballooned to A$2.1B in 2020-21 – the highest level since 2012. He said the rocketing exploration spend during financial year ‘21 was largely due to increased spending on gold, up A$286M, supported by record high prices.
“The continued interest in gold and critical minerals reflects WA’s position as a preferred supplier to global markets and a sought-after destination for investment,” Mr Johnston said.
Exploration success
The ramping up of gold exploration in WA is paying off too, with a string of drilling successes, including one of the world’s largest new precious metals finds. DeGrey Mining’s Hemi discovery within its Mallina Gold Project in the vast and remote Pilbara region has unveiled a potentially significant new gold producer and a new precious metals play in an area that has long been dominated by world class base metals projects.
Operator DeGrey Mining (ASX: DEG) has recently committed to Pre-feasibility Study (PFS) for the Mallina Project following the completion of a highly successful Scoping Study.
Highlights of that Scoping Study include:
- Average gold production ranges from ~473,000oz per annum for the first five years to ~427,000oz pa over the 10-year evaluation period
- Average All-in Sustaining Cost (AISC) ranges from ~A$1,111/oz over the first five years to ~A$1,224/oz over the current 10-year evaluation period
- Estimated capital cost for a 10Mtpa plant and site infrastructure of ~A$835M inclusive of a 25% (~$167M) contingency
- Average processing recovery of ~93%, based on conventional comminution, flotation, oxidation via one of pressure oxidation, albion or biological oxidation, followed by CIL
Attractive financials including Pre-Tax NPV 5% of $2.8B Pre-Tax IRR of approximately 60% and unleveraged payback of approximately 1.5 years
Hemi currently comprises of six main zones – Aquila, Brolga, Crow, Diucon, Eagle, and Falcon. Mineralization has been confirmed over an area of +3,500m north-south, +3,500m east-west and to depths of up to 500m in some areas. Hemi remains open in multiple directions and significant potential remains to further extend mineralization.
An extensive drilling programme combining air core, reverse circulation (RC) and diamond drilling was undertaken to test the extent of the deposit and infill, in support of a high-quality maiden resource estimate of 6.8Moz at Hemi released in 2021. Analysts are suggesting that resource number may reach as high as 12Moz.
New developments
Meanwhile, several revitalized gold projects are about to open the door to a significant increase in WA’s gold production numbers.
Red 5 Limited (ASX: RED) recently told shareholders that its King of The Hills (KOTH) gold development is progressing within budget and on schedule to deliver first gold production in the June quarter 2022.
Highlights of recent activity at KOTH includes:
- All critical equipment for the SAG mill, gyratory crusher, conveyors, and power station is now in place
- KOTH project over 83% complete at the end of the December quarter
60,000m of underground and open pit grade control drilling completed during the quarter - Mining contractor Macmahon has commenced mobilizing on site, ready to start mining in February 2022
- Macmahon recruitment activities are progressing
“I’m pleased to report that we finished 2021 at a frenetic pace, with the workstreams at KOTH progressing on schedule and within budget to deliver first production by the June quarter 2022,” Managing Director, Mark Williams, said.
“We now have all elements of the SAG mill largely in place, the stacker conveyer erected and the assembly of the gyratory crusher nearing completion.
“Red 5’s decision to fast-track development of the KOTH project back in 2020 is paying off, with the company in the unique position of being ahead of the curve in terms of the cost inflation currently being experienced across the resources sector.
“Our operations team is working closely with our mining contractor, Macmahon, with equipment and crews now mobilizing on site ready to start mining in advance of the commissioning of the plant. Macmahon’s recruitment remains on plan, and our first 13-week mining schedule has been developed and is ready to be implemented.”
We are only just beginning to understand the true potential of the mine
Beta Hunt expansion
TSX-listed Karora Resources Incorporated (TSX: KRR) has declared it is on target to double its annual gold production at the Beta Hunt Mine, with a current production target of 185-205,000oz by 2024.
Karora’s big Beta Hunt plans have recently been boosted with promising new exploration drilling results materially extended the strike length of gold mineralization at the Fletcher Zone to over 500m.
The recently discovered Gamma Block mineralization strike length has also been extended to over 200m. Both mineralized systems remain open along strike and at depth.
“Exploration at Beta Hunt continues to drive extensions of known primary shears and of newly discovered zones, underscoring the fact that we are only just beginning to understand the true potential of the mine. The new drilling announced today highlights the exciting potential south of the Alpha Island and Gamma faults,” Chairman and CEO, Paul Huet, said.
Fletcher is a third major shear zone at Beta Hunt that we have now materially extended for the first time since 2016.
Karora is expected to issue a progress update on its mineral resources later in the first quarter, which will include the addition of the maiden Larkin Zone mineral resource.
Significant projects include Newcrest Mining’s (ASX: NCM) Telfer West Dome 5 and Havieron sites; Bellevue Gold’s (ASX: BGL) Bellevue site; Pantoro’s Norseman project (ASX: PNR); Calidus Resources’ (ASX: CAI) Warrawoona site, Willuna Mining’s (ASX: WMC) Wiluna project, and Bardoc Gold’s (ASX: BDC) Bardoc site.
At Newmont’s (NYSE: NEM | TSX: NGT) Boddington mine in WA, the expansion of its north and south Wandoo open pits will extend the mine life until 2041. With a recently acquired fully autonomous haulage fleet, annual production is expected to increase from 670,000oz gold to approximately 690,000oz, possibly increasing even further as expected teething issues are ironed out.
With these are many other developments on the path to production, WA is set to maintain its position as one of the world’s leading gold jurisdictions.
