Back in 2017, when Red 5 bought the historic King of the Hills mine in WA from Saracen Mineral Holdings, it was supposed to be a high grade add-on to the mill it bought from Gold Fields around 100km north at Darlot.
While Darlot was a grand old operation that had continuously produced almost 3Moz of gold over three decades, King of the Hills had largely been a high grade satellite underground operation for St Barbara and Saracen since its life as the 1.65Moz Tarmoola open pit ended in 2004.
At that point it had the misfortune to be in the portfolio of Sons of Gwalia, which also owned the Gwalia gold mine 30km to the south, on the doorstep of the northern Goldfields town of Leonora.
SoG infamously collapsed under heavy debts and the weight of a poorly conceived hedging regime.
A large rockfall also forced Tarmoola into care and maintenance. A portal was blasted years later by new owners St Barbara, and companies since, including Red 5, have extracted gold from narrow quartz veins a few hundred metres below surface.
For Red 5’s geologists it was a case of seeing only the trees. Red 5 managing director Mark Williams says a new geological approach means they can now see – and mine – the forest at King of the Hills.
Now, the ageing and constrained Darlot mill will be shut in April next year and the ore trucked instead to King of the Hills, which is being redeveloped at a cost of $226 million and will deliver first gold by mid-2022.
Construction is well under way by contractors MACA-Interquip (ASX:MLD) on a new 4.7Mtpa processing plant, one of the largest in Australia, reimagining King of the Hills as the Goldfields’ next large-scale bulk open pit and underground gold mine.
A mine once thought of as spent, King of the Hills now boasts a resource base of 4.1Moz, Australia’s ninth largest gold ore reserve of 2.4Moz and a 16-year mine life, an operation which Williams says our children will be mining.
Bulk, not grade, is king
Underground mining was halted at King of the Hills last year to prepare for the redevelopment, which promises to significantly scale up Red 5.
When Red 5 paid $35 million in cash and shares for King of the Hills and Darlot in 2017 it was a tiddler worth around 4c a share looking for a new identity after the suspension of its Siana gold mine in the Philippines.
Exploration results from King of the Hills energised its share price in 2019, and the company is now up 105% over the past five years.
Despite a dip with the rest of the gold sector in 2021, Red 5 is still a $518 million capped producer trading at 22c a pop, which analysts at Morgans, Petra Capital and Canaccord Genuity have 33-35c targets on.
With commercial production from the revamped King of the Hills expected in the September Quarter next year, Red 5 is poised to well and truly enter the ranks of Australia’s mid-tier gold miners.
It sold 75,907oz at all in sustaining costs of $2,273 an ounce in 2020-21, as KOTH wound down and its ore feed was replaced by the Great Western satellite mine.
The new KOTH will produce 176,000ozpa alone for its first six years, with contributions from the Darlot gold mine pushing its overall production to up to ~240,000ozpa from 2023.
Building economies of scale will also bring down life of mine costs to $1,415/oz and $1339/oz over its first six years, improving margins and providing a cushion against any future weakness in the gold price.
“So it’s all about economies of scale, we’ve got a 4.7Mt processing plant, which will be one of the largest here in Western Australia,” Williams told Stockhead on a site visit last week.
“We’ll be able to expect it to produce over 200,000 ounces, once we roll in the underground ore feed at Darlot.
“And so therefore what we’ve created is this supersized regional hub that will be fed from one open pit and two undergrounds that we own producing that 200,000 plus ounces on an annual basis.”
The new processing plant is a simple crusher, SAG mill and carbon in leach process, which will garner recoveries of around 92%. It means the plant has ample room to increase in the future as drilling uncovers more ore sources in and around King of the Hills.
“We have the opportunity for organic growth with our own tenements,” Williams said.
“And also in the future, our long term goal is to be able to potentially grow processing plant greater than the 4.7Mtpa. And again, deliver even stronger economies of scale.
“If there’s the mine plan and the ore feed to sustain that we can grow to greater than 5Mtpa, potentially up to 6Mtpa.”
Red 5 share price today:
King of the Hills larger than the old timers imagined
Red 5 chief geologist Byron Dumpleton was involved in the formation of Kalgoorlie’s Super Pit in the 1980s, when Alan Bond conceived the idea to consolidate the series of underground mines in that richest square mile on Earth into a single massive open cut gold mine visible from space.
He sees many similarities in the process Red 5 has undertaken to reimagine King of the Hills, which has emerged as a system at least 4km long by 2km wide.
The drill hits that convinced Red 5 to study the open pit cutback including multiple intercepts as long as ‘three to four football fields’ grading 1.5g/t or more.
Despite having 900km of drilling data from a series of owners, Dumpleton says there remains more to be found around the open pit, where mining will largely take place in the newer southern end before heading north into the historic open pit and intersecting with current underground workings after seven years.
“From what we know it’s at least 4km long, what we do not know is how far down it is to the north,” Dumpleton said.
“We have a good understanding where it is to the south. And we’re not too sure how far it actually goes out to the west, how we define all this is through geophysics.”
Williams said Red 5 is effectively picking up from where Sons of Gwalia left off in 2004, when the mine last operated as an open cut operation and gold prices were around US$400/oz.
Yesterday they were US$1828/oz according to Kitco and, thanks to favourable exchange rates, $2450/oz Australian.
It has helped convince lenders and shareholders to back the development, which was funded from a $60 million entitlement offer and $175 million in debt facilities from a high-powered syndicate including BNP Paribas, HSBC and Macquarie.
“We’re turning the clock back 18 years picking up where they left off. But the difference is one, we don’t have their hedge position, two, the gold price is four times what it is back in 2004,” Williams said.
“Thirdly, we understand the geology better in our view, because we have the underground so we’re actually in the guts of the ore body.
“And fourthly, we have the ability to put in the high grade underground feed that the Sons of Gwalia didn’t have.
“Certainly from an underground point of view, we’ve only explored a fraction of the potential. (It has a) 16-year mine life, which will certainly outlive my working life, and if there’s underground mineralisation that’s economic and with the other areas, our children will be mining this project.”
WA still No.1 for gold
Red 5 recently struck a deal to sell its mothballed Siana project in the Philippines to a local company for US$19 million and a further royalty worth up to US$36 million.
It means the company will be entirely focused on its burgeoning WA gold business.
Operations in resource-rich WA have been boosted by successful efforts to lock COVID out through Premier Mark McGowan’s hermetic but politically and economically effective hard border with those states suffering major outbreaks like New South Wales.
But they are under increasing scrutiny with cost pressures and labour shortages rising as the mining sector booms. Some big firms with operations in WA like BHP, South32 and Wesfarmers (but not Rio, FMG or Woodside) were included in a group of 80 companies that submitted a letter to major newspapers last week calling for a clear path to reopening the country.
WA Mines Minister Bill Johnston, who visited the mine with journalists, maintained his leader’s hardline stance, saying the state’s tough border policy had kept mines from pandemic-related closures that would have been devastating for the state and national economy.
“As the Premier has continually explained, if we had the hard border removed with New South Wales, we would have to have restrictions on economic activity in Western Australia,” he said.
“So that would actually lead to a lower outcome for our economy in Western Australia. So we can’t risk that until we have a significantly higher vaccination rate in this Australia.”
Johnston praised both the strength of the exploration and mining sectors in WA, encouraging the state to increase its investment in the Exploration Incentive Scheme from $10m to $12.5m a year.
The WA Department of Mines, Industry Regulation and Safety will also invest in a program to digitise analogue mines department data, increasing the amount of pre-competitive data accessible to modern explorers by 200%.
“One of the reasons for that is that we’ve here in Western Australia managed COVID so well, and it’s kept the industry strong,” he said.
“We’re really pleased with the level of exploration activity in Western Australia.
“And we want to contribute to that because we understand the government understands the connection between exploration and discovery and discovery and new mines.”
King of the Hills will employ some 450 people in its construction phase and 600 while operational through Red 5 and its partners like mining contractor Macmahon (ASX:MAH).
But Williams said he was confident COVID would not prove a barrier to finding workers for the $226m expansion.
“Certainly we all want the borders to to open when … safe to do so,” he said.
“In the meantime, we’re able to find a good pool of workforce.
“The decision to close the surface operations at Darlot and be able to transfer the surface staff from the processing plant to King of the Hills gives us a ready-made workforce for the large bulk of what we’re looking to do.”
The post How the $226m King of the Hills development will make Red 5 a mid-tier gold miner in 2022 appeared first on Stockhead.asx gold
Monsters of Rock: IG’s top two miners to watch this week
Whitehaven Coal (ASX:WHC) and Northern Star Resources (ASX:NST) are two large cap miners worth keeping an eye on in the … Read More
The post Monsters…
Despite general concerns about global growth and subsequent drop in global bond yields, gold prices fell throughout last week.
The drop in the value of the yellow metal weighed on Aussie gold miners like Northern Star.
Northern Star’s share prices fell to two-year lows as investors reduced exposure to gold-mining stocks, to close below what was price support at roughly $8.80 per share.
“The technicals look quite poor for the stock now, with the trend and price momentum skewed to the downside,” IG analyst Kyle Rodda says.
“The next major level of long-term price support looks to currently sit at around $7.65 per share.”
The stock was down another 1.15% in Monday trade.
At the other end of the spectrum was Whitehaven Coal, which surged last week.
Global coal prices jumped to a record high as energy demands spikes on what is an unfolding and worsening energy shortage globally.
“Whitehaven shares look to be forming a primary uptrend now, with the weekly RSI showing a stock that is technically overbought, but that that is not signalling yet a meaningful slowdown in momentum,” Rodda says.
“WHC shares probably remain highly tied to the budding energy crisis now and any further upside in coal prices, and in the short-term, risk-reward appears skewed to the downside given the stock’s overbought technicals.
“A re-test of previous price resistance now support at around $2.50 may indicate whether the stock’s longer term uptrend remains in play.”
WHC was down 2.5% in late arvo trade.
Iron ore miners up as Materials ekes out small gain
The benchmark iron ore price – down 30% year-to-date – has staged a small comeback to ~$US110/t since going into the low 90’s on September 21.
In the mid cap space, +$1bn market cap lithium hopeful AVZ Minerals (ASX:AVZ) led the winners after securing a “cornerstone investor” for its Manono development in the DRC.
Private Chinese company CATH will pay US$240 million cash for an initial 24% equity stake in the project.
“Proceeds from the transaction will fund a majority of the total project financing required, whilst AVZ will retain a controlling 51% interest in the Manono Project post-completion of the transaction and its position as lead developer of the Manono Project,” the company says.
The post Monsters of Rock: IG’s top two miners to watch this week appeared first on Stockhead.asx gold iron
This ASX-listed iron ore developer is well placed to benefit from the shift to high grade ore
Special Report: All eyes have been on the price of iron ore in recent days as volatility in the iron … Read More
The post This ASX-listed iron ore developer…
All eyes have been on the price of iron ore in recent days as volatility in the iron ore price has had a big impact on markets.
But while that is where the focus is in the here and now, there remains a story bubbling under the surface about where iron ore is headed in the future.
Increasingly, iron ore experts believe grade will be an important factor for steel mills, as efforts to curb emissions and pollution from steelmaking take centre stage.
Take this comment for instance from Fastmarkets index manager Peter Hannah, who observes iron ore markets for one of the two major price-reporting agencies.
“To succeed in decarbonizing the global steelmaking industry there needs to be a greater recognition of how much the iron ore supply base needs to change,” he wrote recently.
“Vast volumes of existing production will need to be replaced by higher-grade supply, first to meaningfully reduce CO2 emissions from the prevailing BF/BOF (blast furnace) technology, and later to meet the demands of a DRI (direct reduced iron) sector at least an order of magnitude larger than it is today.”
As Magnetite Mines (ASX:MGT) showed in a presentation released on Friday, it is one of a handful of iron ore hopefuls able to capitalise on this growing thematic.
Its Razorback mine in South Australia is now in the Definitive Feasibility Study stage leading to decision to mine, planning to start operations around the end of 2024. It would produce a 68% iron magnetite concentrate.
That is well above any commonly quoted indices like the 65% Brazilian index, which already generates an substantial premium compared to the commonly quoted benchmark 62% fines price.
While the 62% iron ore index – used by most of the Pilbara iron ore miners such as BHP – was fetching US$108.67/t on Friday morning, 65% iron ore demanded US$134.60/t.
In the long run over the past decade the gap between discounted 58% iron ore, 62% product and premium product has trended wider and wider.
“Steelmakers need to adopt best practices that prioritise decarbonisation with existing assets. Some of these best practices include installation of energy efficient technology, optimisation of the blast furnace (BF) burden (e.g. with high- grade ore),” CRU Group says.
Razorback a logistical dream
While grade is one aspect of Razorback’s allure, it is not the only reason Magnetite Mines has been so keen to push ahead with a definitive feasibility study after releasing a successful PFS in July.
The mine, which has a resource of 4.2Bt of iron ore, stands to be a logistical dream. Located just 240km northeast of Adelaide, it has access to rail and high voltage powerlines that connect it to the Australian electricity grid.
That is significant from an ESG perspective as well because of South Australia’s high penetration of wind power and other renewables, which met around 60% of the State’s electricity needs last year.
Being in the vicinity of the town of Yunta, Razorback will have a 50km purpose built private all weather haul road and rail siding with access to an existing heavy freight network and iron ore port at Whyalla.
From a mining perspective it is also technically simple. Ore can be mined from surface, saving costs on pre-stripping with a low PFS strip ratio of 0.16:1 and the potential to improve grades with selective mining and or ore sorting.
Low cash costs underpin long-life operation
Once built, the project is highly competitive. As reported in Magnetite’s pre-feasibility study in July, the project is expected to generate cash when the 62% iron ore price is above US$54/t (including the appropriate quality adjustment). That would still be half the iron ore price on Friday, after the contraction seen in the benchmark 62% fines price in recent weeks.
At US$110/t, around the long-term average iron ore price over the past 10 years, Razorback would carry a post-tax NPV of $700 million and IRR of 20%, generating around $144 million a year in net cash flow after taxes and royalties.
At a production rate of 2.7Mtpa, the project would pay back its estimated $675m capex in 4.6 years, leaving two decades of reserves still to go.
If we were to see another bull run to US$150/t – and remember, at a 68% grade, Razorback’s concentrate would earn a premium on that – that would increase to an NPV of $1.67 billion, with an IRR of 33% and average net cashflow of $241m, something that would see Magnetite pay back its initial investment in just over 2 years.
DFS activities under way with appointment
Magnetite Mines this week appointed engineering and professional services company GHD to deliver its critical power supply and non-process infrastructure elements of the Razorback DFS, effectively kickstarting the process.
It will build on the power supply option selected from the DFS of installing a 132KV transmission line connecting to the national grid at Robertstown.
“GHD’s appointment is an important milestone for Magnetite Mines as it represents the commencement of the DFS and continues our commitment to delivering a well planned and high quality study for our shareholders,” Magnetite Mines executive chairman Peter Schubert said last week.
The DFS well underway and currently expected to be completed next year, with a decision to mine looking to be at the end of next year. Project financing and permitting will take place in parallel. The current schedule sees Razorback in production around the end of 2024, well placed to benefit from a stronger ESG focus in the mining and steel industries.
On the approval side of the ledger, work is well underway. South Australia is a predictable, stable and low risk mining jurisdiction and there is regular consultation between Magnetite and the State Government.
Baseline environmental studies are also well progressed, while the important consultation process with the people of the Ngadjuri Nation, the region’s traditional owners has started, reflecting the company’s acknowledgement of and respect for the traditional owners of the country.
Braemar district fertile for further development
While Magnetite has unlocked an impressive 5.7bt of resources across its Razorback (4.2Bt) and Muster Dam (1.5Bt) projects, that does not tell the full story of just how fertile the Braemar region is for iron ore discoveries and developments.
Of that bounty just 473Mt is included in the Razorback PFS reserve.
That factors in just 8% of Magnetite’s resource, 4% of the Braemar region’s kilometres long strike length and 0.3% of Magnetite’s tenured area.
That suggests Magnetite should have room to grow and expand beyond its initial 25-year project should the numbers stack up.
Its long life and plentiful resource and reserve base should be attractive to lenders, with Magnetite targeting early engagement to allow a collaborative approach to risk mitigation and achieve financial close by the fourth quarter of 2022.
Debt funding is likely to be complemented by a conventional equity raising or other options for equity funding.
Magnetite has $15.3m in the bank to progress its all important DFS, and a market cap of $69m as of September 21.
MGT stock is around 170% up over the past 12 months despite a dip after PFS release, but it has caught some tailwinds in recent days as investors responded well to news about its DFS preparations, rising by almost 29% from 2.1c a share to 2.7c a share over its past three trading days.
This article was developed in collaboration with Magnetite Mines, 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.
The post This ASX-listed iron ore developer is well placed to benefit from the shift to high grade ore appeared first on Stockhead.asx ax iron steel
ASX Small Cap Lunch Wrap: Who’s outperforming Warren Buffett today?
A hamster in the US has a portfolio up by around 20% since June, outpacing the S&P500 and Warren Buffett’s … Read More
The post ASX Small Cap Lunch…
Ever wished you were as rich as Warren Buffett?
Or perhaps more accurately; sometimes feel like you’re just a hamster running on a wheel?
Some enterprising crypto investors have made that idea work for them, with a unique hamster-based investment strategy.
According to reports, the hamster — Mr Goxx — dutifully runs on his wheel and in doing so, also selects from a range of different cryptocurrencies.
The wheel is uniquely designed for Mr Goxx to choose one of two tunnels, which indicate buy or sell.
And apparently his portfolio is up by around 20% since June, outpacing the S&P500 and Warren Buffett’s Berkshire Hathaway.
So if your fundamental analysis of ASX small caps isn’t bringing returns, there are options…
Elsewhere, the idyllic, resource-rich locale of Perth, Western Australia, has been run over by some rampant demons following Melbourne’s AFL Grand Final victory on Saturday night.
208cm ruckman Max Gawn stayed in game-shape following the financial siren, taking hangers while still dressed in his match guernsey:
Max Gawn in his full kit on Tomlinson’s shoulders at the club. pic.twitter.com/fMdCqyt7tA
— 7AFL (@7AFL) September 26, 2021
On markets, ASX futures markets suggested the local index was going to edge higher (maybe) before the opening bell, but local stocks have beaten expectations as upbeat sentiment permeates through Monday trade.
Just after 12pm EST the ASX 200 was on track for a gain of around 1%, with steady demand across all the major sectors.
Energy stocks kept the ball rolling after last week’s big rally, and the ASX 200 Energy index has now climbed by an impressive 10.6% since last Monday’s selloff.
Brent crude oil is trading at three-year highs above US$78 a barrel, as consensus around a global energy supply crunch continues to build.
Along with the ASX, positive sentiment extended across Asian markets with steady gains across the other major indexes including the Hang Seng (home of Evergrande) which rose by more than 1%.
ASX SMALL CAP WINNERS
Here are the best performing ASX small cap stocks for Monday September 27 [intraday]:
Stocks highlighted in yellow made market-moving announcements.
|Code||Name||Price||% Change||Volume||Market Cap|
|NTL||New Talisman Gold||0.002||100.0%||1,184,051||$2,792,225|
|ANL||Amani Gold Ltd||0.0015||50.0%||3,911,521||$14,205,197|
|DDD||3D Resources Limited||0.004||33.3%||125,305||$11,641,116|
|ARR||American Rare Earths||0.22||22.2%||4,175,115||$62,065,499|
|ARU||Arafura Resource Ltd||0.235||20.5%||21,478,573||$302,239,730|
|RBR||RBR Group Ltd||0.006||20.0%||1,030,125||$6,409,900|
|AJL||AJ Lucas Group||0.038||18.8%||966,220||$38,281,172|
|POW||Protean Energy Ltd||0.013||18.2%||1,476,795||$7,156,743|
|TBA||Tombola Gold Ltd||0.044||15.8%||1,546,928||$24,103,240|
|HWK||Hawkstone Mng Ltd||0.046||15.0%||22,265,624||$68,793,777|
|AVL||Aust Vanadium Ltd||0.025||14.0%||5,913,983||$72,178,161|
Recent ASX debutante Resource Base (ASX:RBX) is getting into the rare earths game, where a number of other ASX juniors are running hot.
The company announced that its snapped up 1,380sqkm of ground in the Murray Basin, which is prospective for ionic clay hosted Rare Earth Elements (REE).
Elsewhere among stocks with news, biopharmaceutical company Invex Therapeutics (ASX:IXC) jumped by around 20% after announcing a long-term Collaboration and Manufacturing Agreement with Peptron Inc — a company listed on the Korean Stock Exchange.
The deal will see Peptron use Presendin — IXC’s treatment for neurological conditions relating to raised intracranial pressure — in clinical trials and for commercial use, once Presendin is approved.
The agreement is “exclusive, applies globally and provides a defined price per dose for the supply of Presendin for clinical studies, and for the first ten years following the first commercial sale,” IXC said.
Get the wrap of the rest of today’s resources winners here.
ASX SMALL CAP LOSERS
Here are the best performing ASX small cap stocks for Monday September 27 [intraday]:
Stocks highlighted in yellow made market-moving announcements.
|Code||Name||Price||% Change||Volume||Market Cap|
|ACB||A-Cap Energy Ltd||0.085||-26.1%||2,448,518||$100,266,760|
|BDC||Bardoc Gold Ltd||0.045||-21.1%||28,783,076||$98,909,670|
|YPB||YPB Group Ltd||0.002||-20.0%||100,000||$12,479,551|
|EVE||EVE Investments Ltd||0.0035||-12.5%||2,082,615||$15,372,568|
|TOE||Toro Energy Limited||0.029||-12.1%||37,032,041||$128,612,292|
|VMY||Vimy Resources Ltd||0.1775||-11.3%||4,532,779||$210,299,732|
|EL8||Elevate Uranium Ltd||0.56||-11.1%||777,573||$143,780,897|
|AGR||Aguia Res Ltd||0.046||-9.8%||98,089||$17,031,064|
|PEN||Peninsula Energy Ltd||0.23||-10.0%||6,774,820||$253,984,637|
|BBX||BBX Minerals Ltd||0.19||-10.0%||365,091||$96,184,510|
|COD||Coda Minerals Ltd||0.79||-9.0%||69,456||$79,566,922|
The post ASX Small Cap Lunch Wrap: Who’s outperforming Warren Buffett today? appeared first on Stockhead.asx ax gold vanadium rare earths ree
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