Digging for gold in iron ore country
There is no doubt there is gold in the Pilbara hills controlled by Millennium Minerals.
The hundreds, if not thousands, of artisanal mines that dot the hillsides of the company’s 250sqkm of Pilbara tenements are testament to that.
The small shafts and trenches of earlier workings — some dating to the 19th century — are easily visible from almost anywhere on Millennium’s ground.
There is also a fair bit of gold on the flats that surround the rocky hills, where Millennium’s territory sits neatly between Gina Rinehart’s Roy Hill iron ore project, Fortescue’s Chichester mines, and BC Iron’s Nullagine project.
There’s no iron ore there, but chief executive Glenn Dovaston reckons it would be difficult to pick a bit of ground on the tenements where you wouldn’t hit at least some gold in a drill hole.
He’s only half joking — a bore hole drilled by Millennium not long ago accidentally hit an intersection of 12m grading 5g a tonne gold. The problem is not so much finding gold, as exciting the same kind of investor interest as other, higher profile, WA gold stocks. Part of that is historic. Millennium built its two million tonne-a-year processing facility cheaply and well in 2012, but struggled to move from builder to miner.
It took a battering after initially failing to meet production and cost guidance. But a new management team and a $21 million capital raising late last year fixed the company’s most pressing debt problems, and Millennium is now a reliable performer on track to produce 80,000 to 85,000 ounces this financial year, at an average all-in-sustaining cost of $1180 to $1220 an ounce.
Part of the problem is also in the nature of Millennium’s projects.
Where others are riding high on multimillion ounce deposits feeding long mine lives, Millennium produced its 23,166 March quarter ounces from four open pits.
Its 159,000oz reserve — about two years mine life — is spread across 10 deposits. Nullagine is a scheduling whirlwind, as its fleet mines out a small deposit — the most recent pit, Junction, was opened and mined within eight weeks — and moves on.
The fact that Millennium kept its costs down and spat out $7.1 million in free cash in the March quarter is testament to the skill of its young operational team.
And while its exploration regularly produces results most investors would be happy to see, they also come from a head-spinning number of prospects and new discoveries.
Until recently Millennium’s most pressing need was to replenish its reserves and deal with the financial legacy of earlier failings.
That is starting to change, according to Mr Dovaston.
Millennium’s cashflow is now free for its own use, and $10 million will go towards exploration to add reserve ounces and find the next pit, but also to look beyond those pressing needs.
Mr Dovaston says Nullagine reminds him of the Kalgoorlie Goldfields’ earlier days.