GOLDEN OPPORTUNITIES
Westgold has remained undeterred by lower than expected production and higher costs, instead looking to big opportunities still on the horizon.
DESPITE suffering some setbacks, Westgold Resources was on the way to achieving its goal of becoming a long-life gold producer, having confirmed Big Bell underground was on track for first production before the end of 2018.
According to Westgold’s September quarter report, Big Bell had advanced significantly towards production with drilling defining a new ore position to the south, which would enable modest, but early production from the mine in the December quarter.
In its annual report released on 26 October, Westgold chair Peter Newman said Big Bell would continue to be the gold miner’s major initiative going forward.
“This will become our trophy mine, a mine that will add a further 100,000 ounces per annum to our profile with a life of more than 10 years,” Mr Newman said.
Big Bell, 24km north-west of Cue in WA, was owned and operated by Harmony Gold when it closed in June 2003 after gold prices plummeted to $500 per ounce.
Westgold eventually took over the historic mine in 2011 following a series of acquisitions, with Big Bell coming under its Cue gold operations.
The gold miner began dewatering and refurbishing the mine more than two years ago, aiming to restart the development by the end of 2018 and begin ore drives early in 2019.
The mine was expected to reach full production by the end of the 2020 calendar year, with the potential to fill the Tuckabianna processing hub in its own right.
Big Bell was the centrepiece of Westgold’s goal to increase annual production to 350,000oz per annum.
Westgold, the sixth largest domestic gold producer in Australia, currently produced about 275,000oz per annum.
Major Milestones
In the last financial year, Westgold’s output was 253,210oz at a cash cost of $1273 per ounce and an All-In-Sustaining Cost (AISC) of $1462 per ounce.
Westgold took several hits early in FY18, including the disruption of operations at Meekatharra gold operations in the March quarter due to a freak storm.
The plant at the Higginsville operations also caused disruptions with issues associated with its age causing significant downtime with the crushing circuit and fine ore bin.
This caused remedial actions to be taken, including contract crushing and major maintenance repairs to the fine ore storage system.
Mr Newman said production in FY18 had been slightly below expectations, while costs had been marginally higher, but this paled into insignificance against the progress made in the big picture.
“In our 2018 financial year, our first full year since the demerger from Metals X, we have made major milestones towards our objective of building a long-life gold producer with its assets firmly planted in WA,” Mr Newman said.
“Our Murchison region operations, including the Meekatharra gold operations and Cue gold operations are a massive aggregation play, the likes of never seen before on such a regional scale.
“The renovation and re-invigoration of the projects in the Murchison have set the company up for a long future.”
Mr Newman said during the year, the company had started five new underground mines, five new open pits, and completed the refurbishment and re-commissioning of two treatment plants – Tuckabianna and Fortnum.
Following the start-up of the Tuckabianna plant, the previous central Murchison gold project was split into two operations based around two hubs.
The northern section and Bluebird processing hub became the Meekatharra gold operations, while the southern section and Tuckabianna processing hub became the Cue gold operations.
Mr Newman said to top that off, Westgold absorbed ownership and management of Australian Contract Mining, and internalised mining processes.
“We completed three other acquisitions with that of Polar Metals from S2 Resources; a 14.3 per cent interest in Cue region neighbour, Musgrave Minerals; and divested our toughest project, the South Kalgoorlie Operations,” Mr Newman said. “All in all, it was a busy year.
“A year in which we invested over $176 million into capital to establish these projects for the long-term.”
Results
By the September quarter, Tuckabianna was tracking well, having increased gold production by 40 per cent to 12,557oz as plant capacity reached target levels in its second full quarter of production after commissioning.
Ore feed during the quarter continued to be a blend of Comet underground mine ore, existing tailings and low grade ore stocks.
Open pit mining began at the Day Dawn open pit group of Great Fingall, Yellow Taxi and South Fingall.
A small amount of this ore began to be blended late in the September quarter
“Our Murchison Region operations, including the Meekatharra gold operations and Cue gold operations, are a massive aggregation play, the likes of never seen before on such a regional scale.”
and would replace the low grade tailings ores in the next six months as planned in the project ramp up, filling the gap until the Big Bell underground mine production started.
Meekatharra gold operations had a steady output in the September quarter of 25,298oz in line with the June quarter.
Its cash costs reduced by 13 per cent to $1188/oz, while AISC reduced to $1389/ oz.
Ore processed for the quarter was 366,787 tonnes, down by about 8 per cent on the previous quarter as the contract secondary crushing installation was removed.
According to Westgold, the new permanent secondary circuit would be installed by the end of the year, which would provide for increased plant throughput, especially for the harder ores as production from underground mining increased.
Fortnum gold project’s quarterly output rose marginally from 13,390oz in the June quarter to 13,394oz at a cash cost of $1312/oz and an AISC of $1444/oz.
Higginsville gold operations has remained problematic for Westgold as operating costs continued to rise in the September quarter.
Cash operating costs were $1773/oz taking the rolling 12 month average to $1638/oz, which Westgold attributed to the low margin and higher costs of the Mt Henry open pit ores.
Meanwhile, quarterly gold output was 13,189oz, with 3400oz of that being attributable to toll processing, which consumed 40 per cent of plant capacity.
Despite the difficulties, Westgold remained optimistic about Higginsville, with the expectation that the Baloo deposit, which was in the approvals process, would be ready to mine by the end of 2018, which would improve operational outcomes.
Overall quarterly gold output across Westgold’s operations was steady at 61,037oz, which was marginally lower than the 61,461oz produced in the June quarter.
The miner’s quarterly gold operations generated EBITDA of $11.9 million.
Exploring Future Options
Mr Newton said in the year ahead, Westgold would continue its ramp up to full production at its Murchison projects, while continuing to rebuild and improve the profile of Higginsville.
He said the company would also continue to focus on its core objective of becoming a pure-play Australian gold producer.
“This may mean the divestment or spin-off of our remaining base metal and lithium assets,” Mr Newton said.
Westgold retained significant exploration rights and royalties when it sold its South Kalgoorlie Operations to Northern Star for $80 million in March, including two royalties over the northern extent of the Mt Marion lithium mine.
However, Westgold considered its lithium assets as non-core to its business.
Meanwhile, on the exploration front, Westgold discovered what appeared to be an interesting Volcanogenic Massive Sulphide (VMS) mineral deposit in the Bryah Basin stratigraphy at Fortnum.
VMS deposits are base metal-rich deposits, which can also contain lesser amounts of precious metals.
Its ores could be major sources of zinc, copper, and lead, with gold and silver by-products.
While gold would remain the focus of Westgold at Fortnum, the miner intended to devote time and resources to understand what it considered to be a possibly significant opportunity to add value, in what has historically been an underexplored terrain.
Exploration at Westgold’s projects would also continue this quarter at its newest underground mine, South Emu-Triton in Meekatharra, after initial ore development defined extensions of the western lode, which was not previously considered in the mine plan.