Digging deeper for Victoria’s golden rewards

The Castlemaine and South Muckleford projects have become Kalamazoo’s priorities.

The upward spiral in production and grades at the Fosterville gold mine has reignited interest in the riches that the central Victorian Goldfields offer. Vanessa Zhou writes.

Central Victoria has not only delivered to the gold mining sector during past centuries but is also emerging as a thriving region for the miners of today.

The romanticism of Victoria’s gold rush in the 1850s may even go to another level with the wave of discoveries that modern companies are threatening to make.

According to Victorian Department of Jobs, Precincts and Regions head of resources John Krbaleski, the state’s gold sector is booming with more gold being found every year and more companies searching for the next viable deposit.

“Geological evidence suggests there may be as much as 32 million ounces of undiscovered gold across the Bendigo region,” Krbaleski tells Australian Mining.

Kirkland Lake Gold’s resounding success at the Fosterville mine is a clear indication of the potential in central Victoria.

Though the much-celebrated Fosterville mine commenced operations back in 2005, it has only truly made headlines as Victoria’s largest gold mine in recent years.

The abundance of gold has always been there. What’s different is Kirkland Lake’s audacious commitment to drilling.

“A lot of it owes to the hard work of drilling we’re putting into Fosterville,” Kirkland Lake vice president, investor relations Mark Utting says.

“(The previous operator) already knew the grade was improving in traditional sulphide mineralisation as they were drilling deeper, and there was also a sense there was a different kind of mineralisation starting to appear at depth.

“But at the end of the day, you’ve just got to get into it and drill it to know exactly what you have.”

Kirkland Lake invested $US25 million ($37.4 million) in exploration drilling in the first year after the company’s completed its acquisition of Newmarket Gold in 2016.

The budget was more than what had been invested in exploration at Fosterville for a number of years, potentially going back to around when the underground mine opened, according to Utting.

Still, the Canadian company has continued to lift its exploration budget since, investing $US48.4 million in 2017, followed by a 38 per cent boost to $US66.6 million in 2018.

“Our exploration budget for this year is $US70 million to $US80 million – the highest it’s ever been – and that was just based on what we see: a number of different potential targets with encouraging results,” Utting says.

“We saw an opportunity to make an exploration campaign at Fosterville and we were willing to invest in it and prove it up. That’s been a character of Kirkland Lake and the success we’ve had.”

Kirkland Lake’s tireless commitment to drilling wasn’t left unfounded to a geologist’s instinct but a due diligence study that validated the takeover decision: Fosterville could become a more profitable mine.

Bendigo has re-emerged as a major centre for Australian gold mining.


During its initial years, Fosterville’s gold was produced from near-surface, low-grade mineralisation.

Kirkland Lake has since discovered the Eagle and Harrier zones, which contain high-grade visible-gold bearing mineralisation, and down-plunge extensions of the Lower Phoenix gold system.

As Victoria’s leading gold operation, Fosterville boasted a reserve of 2.7 million ounces at 31 grams per tonne at the end of 2018.

This figure has grown significantly from the reserve of 244,000 ounces at seven grams per tonne when Fosterville was acquired from fellow Canadian-listed Newmarket around four years ago.

“It’s really the case of successful exploration leading to significantly higher grade and a much more profitable mine,” Utting says.

“We just finished 2019 where we produced 619,000 ounces at Fosterville. When we acquired the mine in 2016, it produced 150,000 ounces. The gold is all in the ground. It’s all about proving what’s there.”

The prominence of gold in central Victorian extends beyond what’s already unearthed from Fosterville.

Kirkland Lake is investigating a sulphide structure at the Lower Phoenix system where it has extended mineralisation 950 metres down plunge of the bottom of the Swan Zone.

Utting describes the structure as a “very large exploration target” to pursue.

“We haven’t discovered the next Swan Zone yet, but we’ve had intersections of quartz with visible gold in it that suggest this is a very large area we’re going to be exploring,” Utting continues.

Kirkland Lake has also identified the Cygnet Zone, a structure that extends 650 metres along strike and intersected quartz with visible gold.

This adds to another plunge from a different open pit which Kirkland Lake calls Harrier.

Deep drilling at target is under way at Harrier, which Utting believes carries high potential.

“We’ve got all areas on the mining lease property that are showing extremely profitable mineralisation that’s been intersected at various locations, and we’re following up on all of them,” Utting says.

“In fact, we will be driving a twin drive from where the existing mine infrastructure is underground, which is going to help us with exploration and ultimately production.

“That’s allowed us to investigate another very attractive exploration target in the Twin Phoenix where Swan and Robin’s Hill are.”

Robin’s Hill, dubbed as potentially being Fosterville 2.0, has returned “very encouraging” results and could ultimately feed the existing Fosterville mill, which has capacity to accommodate an expansion.

“If you were to draw a straight line to the Phoenix System where Swan Zone was discovered, Robin’s Hill mineralisation compares very favourably,” according to Utting.

“That’s why we’re investing so much capital in drilling there this year. We’re confident there’s a lot more to be found in Fosterville and that we’re going to be mining Fosterville for a very long time.”

Fosterville has awakened industry interest in the high-grade gold projects that potentially exist in the region, particularly that of Kalamazoo Resources chairman and chief executive Luke Reinehr.

“What’s interesting there is that (Fosterville) was a low-grade open pit operation that had been running for 15 to 20 years,” Reinehr says.

“It was only in recent times that under the guidance of Kirkland Lake that they found incredibly high-grade mineralisation by drilling deeper and using new technologies, giving everyone an encouragement to find potential world-class gold orebodies.”

Kalamazoo insists in finding projects of at least 10 grams a tonne.

Given the proximity of Kalamazoo’s exploration projects to Kirkland Lake’s mine (45 kilometres to be exact), the geological similarities between the junior’s Castlemaine and South Muckleford gold projects and Fosterville are undeniably appealing.

The two exploration projects remain Kalamazoo’s priorities for 2020 with the maiden drilling program commencing in November 2019. 

“An exceptional high-grade intersection was reported in just the fourth hole of 1.42 metres at 261 grams per tonne of gold from 100.3 metres, which not only provides further support of Kalamazoo’s model and strategy, but demonstrates its ability to potentially deliver a potential world-class discovery,” Reinehr says.

“This was followed with an $8 million investment by legendary Canadian gold investor Eric Sprott and Canadian gold explorer Novo Resources just weeks later.

“For the rest of this year, we have planned a further 14,000 metres of diamond drilling at Castlemaine and South Muckleford.”

Yet Kalamazoo is hoping to expand its footprint in the state’s north central Goldfields area after lodging a tender in the North Central Victorian Goldfields ground release in February.

Gold deposits have not run dry in central Victoria.

Reinehr believes there is golden potential in the region, describing the bidding areas as “very prospective”, with the closest of the land packages just 15 kilometres from Kalamazoo’s north-east tenement boundary.

The Fosterville success has sparked international interest in exploring for gold in central Victorian, according to Krbaleski.

Fosterville is not just a unique success story for the mining industry, but it is also a project that contributes to the community.

“We think it’s a great win-win in terms of our willingness to invest and creating value for the company and for Victoria,” Utting says.

Victoria’s newly introduced gold royalty of 2.75 per cent doesn’t deter Kirkland Lake from what it is pursuing either.

The royalty simply represents “an additional cost” that has to go into the economic analysis, Utting says.

“It doesn’t impact anything we’re doing today, but in terms of future exploration successes, we have decisions to make in future investments,” he says.

“The royalty could impact that, only because it represents an additional cost that has to go into our economic analysis.”

For Kalamazoo, Reinehr is confident in the company’s financial capacity should it be successful in transitioning into a producer.

“We have a high-grade strategy only at Kalamazoo,” Reinehr says.

“We’re looking at projects of not less than 10 grams a tonne, and even though the costs in Victoria can be elevated at times, if we find a world-class gold resource, we’ll have the capacity to pay for that royalty.”

It seems the prospect of rising costs won’t stop large or junior miners alike from flocking to central Victoria, a testament to how abundant its gold riches could again become.

This article will also appear in the March edition of Australian Mining.

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