Pilbara, Fosterville set up future of gold

Canadian businessman and Kirkland Lake Gold chairman Eric Sprott has been closely involved in the development of the gold mining industry on both sides of Australia this year.

The 73-year-old billionaire investor’s already substantial interest in Australia’s gold sector has grown even further in 2018 for two reasons – the continued success of the Kirkland Lake’s Fosterville gold mine in Victoria and the gold rush that has emerged in Western Australia’s Pilbara.

The Fosterville mine in Victoria is setting the bar high in a Kirkland Lake portfolio that also includes three producing mines in Canada with an upward trending company market capitalisation that had reached $C3.8 billion in mid November.

Production at Victoria’s largest gold mine was 184,700 ounces in the first nine months of 2017, about 70 per cent higher compared to the same period a year earlier.

Output at the operation moved by 200,000 ounces for the year in October after a monthly record of more than 30,000 ounces at an average grade of around 23 grams a tonne was produced.

The company has now set a medium to long-term goal to be producing 400,000 ounces a year at the mine in the next three years.

Exploration excitement

Despite the significant production growth, it is the exploration results the company has released this year that makes the prospect of Fosterville’s output rising to these levels even more exciting.

Kirkland Lake reported extensions of the Swan Zone at Fosterville to 120 metres down-plunge with intercepts as high as 52 grams a tonne during November.

Sprott said the production growth and exploration developments confirmed Fosterville’s future.

Eric Sprott

“And if you keep finding that kind of grade, which if you look at our last drilling results it looks like we continue to keep finding it, and it is better.

“We think it goes a lot further down plunge, we haven’t proven it yet, but theoretically it goes further.”

Sprott said Kirkland Lake was not aiming to turn Fosterville into the top producing gold mine in Australia, but joked that getting into the top 10 was its target.

“I want to see if we can get to number 10. I don’t know what number one is yet, but we haven’t gone that far down the line yet,” Sprott said.

Despite being realistic about Fosterville’s place in the Australian gold sector, Sprott did describe how the exploration results it had unveiled had changed the potential of the mine.

“When you go from five grams (a tonne grades) to mining 35 grams the profitability is off the charts, it is crazy,” Sprott said.

“Imagine if we do 2000 tonnes a day, which we can mine in a 70 grams area…5000 ounces a day, or 1.8 million ounces (Moz) in a year. No one does 1.8Moz in a mine – they don’t, it just doesn’t happen.”

Pilbara potential

While Kirkland Lake has kept Victoria’s gold industry relevant on Australia’s east coast, in Western Australia the company has become a key player in the emergence of the gold sector in the Pilbara.

Having found gold nuggets with a metal detector in the region himself, Sprott is a believer that this gold rush is for real.

Sprott even believes the region could host a gold resource like Witwatersrand in Africa, from which more than a third of the world’s gold has been mined.

In the Pilbara, it is the Sprott- backed, Toronto-listed Novo Resources which has led the charge by acquiring vast property in the region and securing a joint venture with Artemis Resources at the Purdy’s Reward project near Karratha.

Kirkland spent $C56 million to acquire an 18.2 per cent stake in Novo during September, giving it exposure to several promising gold tenements in the region, including the Pilbara Paleoplacer gold project.

Novo’s shares have grown from C82 cents at the beginning of July to a high of $C8.55 earlier this month, giving it a market capitalisation of more than $C1.2 billion.

Artemis’ shares have surged from 8 cents to more than 50 cents over the same period, giving it a value of more than $250 million.

The company then added to its presence in the Pilbara a month later with a $5 million investment in another of the region’s explorers, De Grey Mining.

As Kirkland Lake made these investments, a series of exploration results from junior companies has spiked interest in the region as their announcements outlined the potential for significant conglomerate-hosted gold discoveries.

Something special

Sprott, who also personally owns around 12 per cent of Novo, believes the opportunity in the Pilbara for gold companies and investors has become special.

However, from Novo’s perspective, he said it would likely be known in the coming months if the company was on to the “real thing”.

“I think we will have assays by then,” Sprott said. “We will have drilled some of those big diameters holes, we will have results, and the results will tell us what the conglomerate looks like.

“The only questions then will be how expansive is the conglomerate and yes there will be places where I’m sure the grade will be higher than other places.”

In addition to his stake in Novo, Sprott also invested $5 million in another Pilbara gold explorer, Kairos Minerals, during October.

With Novo, De Grey, Kairos and others exploring across such a large area, Sprott was certain that success would come out of the region – it is just a matter of how much success.

“Everyone is going to have a discovery theoretically,” Sprott said. “You have an area that is 200km by 100km. There will be all sorts of guys with discoveries – there is just no question about it.”

This article also appears in the December edition of Australian Mining.