Strong gold prices and a general improvement in market conditions have ignited a wave of activity across Western Australia’s Goldfields region.
The value of gold has held firm in 2017 and remains strong in Australian dollar terms, at times rising to around $1700 an ounce depending on its strength against the US dollar.
WA’s Goldfields region is on the verge of notable growth from a range of mid-tier companies that are advancing projects towards production.
Eastern Goldfields, which is chaired by experienced mining executive Michael Fotios, is contributing to the expansion through the Davyhurst project about 120km northwest of Kalgoorlie.
Fotios, who played a key role in building Northern Star Resources into one of Australia’s largest gold miners, has guided the revival of the Davyhurst operation after its 1.2 million tonne per annum (Mtpa) processing plant was placed on care and maintenance in 2008.
First ore was crushed at Davyhurst this month, with Eastern Goldfields hopeful it will become a 200,000 ounce a year operation in the coming years.
The company raised $25 million this year, which followed a $27 million share placement in 2016, to complete funding for the commissioning of Davyhurst, which has historically produced close to one million ounces of gold from a mix of deposits.
Fotios said there was a perception in the gold mining industry that Davyhurst had a “chequered history” following the activities that led to the operation closing in 2008.
However, he explained that Eastern Goldfields would re-launch the operation by taking a different development and mining strategy to what had been used historically at the site.
Fotios said the mine’s previous owners had targeted the site’s lower-grade open pits, a strategy that broke down during a period of much lower gold prices compared with today.
“We are looking more at the high-grade potential of the project, which we think is vastly underestimated,” Fotios told Australian Mining.
“Our strategy is lower tonnes and higher grade in the open pits, and then we are pushing hard on the undergrounds, which historically no one has looked at.”
To reach production, Eastern Goldfields has refurbished and recommissioned the plant to process ore from sources within the Davyhurst hub. The company has also built a new raw water dam and installed a 5.5MW diesel-fired power station to support the existing grid power supply.
Eastern Goldfields anticipates that the September quarter will be the first full three-month period of production at the site.
During the commission phase, Eastern Goldfields will focus on low and medium-grade stockpiles at the site, Fotios explained.
“We will run the mill up to its rated capacity on that stuff…maybe see how fast it can go as part of the commissioning process,” Fotios said.
“We have budgeted the mill at 1.2Mtpa, but we plan to run it at 800,000tpa through until December this year.”
The company will then move on to processing high-grade ore as it ramps up operations at the processing plant
“We will see a significant amount of high-grade input from July onwards,” he said.
Fotios said the Davyhurst strategy shared similarities with how Northern Star expanded over the past decade. He believes this approach has helped the company secure ongoing support and funding for its plan at Davyhurst.
“A lot of it has to do with the track record of our group being involved with the early days of Northern Star – we had success there and it is a similar strategy to be honest,” he said.
“A lot of our investors have been with us since Northern Star, and then were with us at General Mining in the lithium space. We had a good track record for delivering strong returns – I see Eastern Goldfields to be the same.”
Fotios is also hopeful that Eastern Goldfields will share one more similarity with Northern Star – growth.
“We will look at organic growth with the project we’ve got first, but we will always look at other opportunities we think will complement what we’ve got around Davyhurst,” he concluded.
Eastern Goldfields has a joint venture with explorer Intermin at the Menzies and Goongarrie gold projects which has potential to deliver this growth in the years to come.
This article also appears in the June edition of Australian Mining.