Gold exploration prospects rise

Prospects for gold explorers in Western Australia are stronger than they have been in a while. Exploration was the biggest casualty of the commodities downturn and the gold industry was not spared from the carnage that resulted.

Gold exploration in Australia has declined significantly in the past five years, with expenditure for greenfields exploration 70 per cent lower over that period.

However, the gold industry still contributes around 50 per cent of the total amount invested in Australian exploration and the stage is set for the sector to continue to be the driving force for grassroots mining.

The exploration initiatives have been established for companies
to search for the next discoveries, including the Australian Government’s $100 million Junior Mineral Exploration Tax Credit, which was launched in September. But more importantly, the foundation has been set for the next generation of gold mines by the companies that have continued to explore despite a challenging marketplace.

There has been a bevy of WA-based companies committed to uncovering and developing an emerging pipeline of gold deposits. Kin Mining typifies this hope at its Leonora project in the Eastern Goldfields.

The gold development company released a definitive feasibility study (DFS) for Leonora in October, forecasting a development cost of $35.4 million to produce around 372,000 ounces of gold over a seven-year mine life at the site.

Kin, which acquired the property in 2014, is targeting first production at Leonora in the second half of 2018. The DFS estimates that 61,000 ounces of gold will be produced in the first year, with output peaking at 65,000 ounces a year.

The operation will involve three open pits, which will supply a 1.5 million tonne per annum (Mtpa) carbon-in-leach (CIL) processing plant. Leonora’s life-of-mine (LOM) operating cash costs have been estimated at $957 an ounce and all-in sustaining costs at $1038 an ounce.

Kin technical director David Sproule said the company had taken a conservative approach at Leonora, but also that it was optimistic about the foundation that the DFS set.

“It (the DFS) develops a good solid platform to cash flow and the opportunity to grow the project, both in life and output by exploration success,” Sproule told Australian Mining.

“It is a good, high-margin gold project that’s in an environment where I believe the price should increase over time. It also has a very modest capex with the build methodology we are using.”

Gold Road Resources, which is already developing the Gruyere greenfields project in the Eastern Goldfields, joins Kin as a company that has placed significant focus on its exploration strategy in WA.

Perth-based Gold Road has openly shared its exploration focus in the Yamarna belt where Gruyere is located, budgeting $30 million earlier this year to add further greenfields discoveries in the region.

The Perth-based company has since expanded its exploration scope to WA’s south west region by forming two JVs with junior explorer Cygnus Gold in October.

Gold Road plans to leverage its expertise in greenfields exploration in covered greenstone terranes at the Cygnus properties, with the aim of identifying discoveries of more than one million ounces.

The earn-in agreements involve a 3400-square-kilometre area of the Wadderin and Lake Grace exploration projects.

Gold Road executive director, exploration and growth Justin Osborne said the company was looking to acquire greenfield projects to complement its Yamarna greenstone package.

“With the significant decline in Australian greenfields exploration over the last 10 years, Gold Road is looking to fill the void and leverage its proven exploration skills and experience which led to the discovery of the 6.2 million ounce Gruyere gold deposit,” Osborne said.

With Kin, Gold Road and others increasing exploration activity in WA, Sproule reinforced how important it was for gold projects like Leonora to secure support to ensure the sustainability of the sector.

“It is pleasing to see an enhancement in exploration because the reality is without exploration there will be no further deposits,” Sproule said.

“Kin is sitting on a great piece of ground with the Leonora gold project and we believe that as we continue to unlock the geological understanding of the area our targeted exploration will generate many more tonnes and enhance the life of the project.

“The gold industry, particularly in WA, is a vibrant industry and
the capital is coming back into the business. If people are strategically spending that risk capital on geology then hopefully the gold industry in Australia will be vibrant for some time to come.”

And the recent signs are that the exploration sector is, slowly, becoming a buoyant environment again, with expenditure increasing by 6.6 per cent in the June quarter compared to the same period a year earlier.