Dalgaranga demands development status
THE INSIDE STORY: There has been a misconception floating around, for some time in fact, that all the near-surface multi-ounce gold projects that are to be found in Western Australia – have been developed.
Aspiring Perth-based gold mine developer, Gascoyne Resources (ASX: GCY) is more than happy to debunk this myth.
It’s hard to dismiss the company’s version of the WA gold story, especially when it holds such an exciting portfolio of gold mine development opportunities.
The project is located on the company’s 1,000 square kilometre tenement package within the prospective and underexplored Glenburgh belt, which is considered to have geological similarities to the eight million ounce Tropicana district.
Gascoyne also has an 80 per cent interest in the Dalgaranga gold project, located in the Murchison Province of Western Australia.
A 2015 Scoping Study on Dalgaranga determined a low capital cost development scenario costing $37 million to produce 60,000 ounces per annum for approximately six years from 1.5 million tonnes per annum throughput, with cash costs of $813 per ounce (all in costs $1025 per ounce), and life of mine revenue of $612 million.
A Pre-Feasibility Study is currently underway on the development of the Dalgaranga project.
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“While the projects already have very large defined resources, massive exploration potential remains at both projects with high priority targets yet to be drilled.”
Gascoyne recently completed a program of RC and Diamond drilling at Dalgaranga, some of the first drilling to be carried out at the Gilbeys deposit in over 15 years.
The drilling was designed to test the continuity of the gold mineralisation immediately below and along strike from the existing Gilbeys open pit and to test potential resource extensions in poorly drilled areas within the Gilbey’s Stage 3 pit design.
Results include:
39.9m at 2g/t gold, including 9.5m at 3.9g/t gold (and 0.5m at 48.4g/t gold);
26 metres at 1.5 grams per tonne gold, including 14m at 1.7g/t gold;
13m at 2.7g/t gold from 46m, including 5m at 5.6g/t gold;
21m at 1.5g/t gold, including 10m at 2.1g/t gold;
15m at 1.5g/t gold and 3m at 4g/t gold; and
34m at 1.0g/t gold, including 16.55m at 1.2g/t gold and 5.15m at 1.3g/t gold.
The results Gascoyne achieved from its most recent drilling campaign, along with historical RC and Diamond drilling results, were incorporated into a revised Mineral Resource, which will in turn form the basis for the current PFS.
The combined Dalgaranga Measured, Indicated and Inferred Mineral Resource now stands at 23 million tonnes at 1.4 grams per tonne gold for 1.02 million ounces of gold, of which 21.8 million tonnes at 1.4g/t gold for 949,000 ounces is within the Gilbeys deposit.
Unsurprisingly, Dalgaranga has emerged as the front-runner in the company’s development pipeline.
“The drilling certainly went well and I always believed the Dalgaranga Resource could grow to around the one million ounce mark, but that could be just the start for the project,” Dunbar said.
“The data suggests that we could conceivably keep a two million tonnes per annum plant full, which would result in the production of 80,000 to 100,000 ounces,” Dunbar explained.
“That establishes Dalgaranga as a great base-case project, however there is a clear development path towards Gascoyne eventually becoming a plus-150,000 ounce producer, and that’s by bringing the Glenburgh project on line later, through cash flow generated at Dalgaranga.
To some industry watchers, Gascoyne’s decision to work-up the Dalgaranga project to a producing mine in favour of the already one million ounce Glenburgh project may seem odd.
The company’s rationale is that it expects to add substantial ounces to the Glenburgh Resource over time, and its preference is to fund the Glenburgh exploration from cash flow generated at Dalgaranga, which, as the 2015 Scoping Study determined, is emerging as the company’s lowest capital cost entry point into cash flow.
“Glenburgh will be a standalone plant and operation, which will come at further capital cost, funded from Dalgaranga and the dual project aspect basically de-risks both operations.”
Gascoyne has completed a comprehensive review of historical data on the Dalgaranga gold project, which identified a further six high-priority exploration targets close to established Resources.
The company expects the targets to provide the ideal follow-up to the Golden Wings deposit where it has established an initial Indicated and Inferred resource of 1.2 million tonnes at 1.8g/t gold for 70,000 ounces.
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“Golden Wings is smaller than Gilbey’s, but it is unmined and slightly higher grade, so that is where we would commence our operation,” Dunbar said.
“Up until Dalgaranga became such a compelling case, Glenburgh had been our flagship project, but now it is our second development option to be developed using cash flow generated from Dalgaranga.”
Glenburgh may be second place in Gascoyne’s running sheet, but with a one million ounce Resource, within which is a high-grade core of 2.1 million tonnes at 4.1 grams per tonne for 273,000 ounces of gold, with plenty of lower grade material surrounding, it too presents a compelling case for development.
The current Glenburgh Mining Lease runs for 12 kilometres, however Gascoyne has identified mineralisation continues for around 18 kilometres of strike length, basically sticking out of the ground, which means no big pre-stripping is required, or sand dune cover to drill through.
“We completed a Preliminary Feasibility Study on Glenburgh in mid-2013 – right in the middle of the high-cost cycle – but even then we had five million tonnes at two grams per tonne gold producing 73,000 ounces per annum for over four years,” Dunbar said.
“Life of mine revenue was estimated at just under $450 million with All In Sustaining Costs of $994 per ounce.
“Capex of $70 million included $10 million of working capital, however we do expect the PFS update, which is due for completion next year, is likely to deliver a substantial capex and operating cost reduction, driven partly by the change in the economic environment since the previous study was completed.
“There is no better time than now to be building a project, especially when you have a project that has already been worked-up to a one million ounce Measured and Indicated Resource with substantial exploration upside.”
Gascoyne Resources Limited (ASX: GCY)
…The Short Story
HEAD OFFICE
Level 2, 33 Ord Street
West Perth WA 6005
Phone: +61 8 9481 3434
Fax: +61 8 9481 0411
Email: admin@gascoyneresources.com.au
Web: www.gascoyneresources.com.au
DIRECTORS and MANAGEMENT
Mike Joyce, Mike Dunbar, Stan Macdonald, Graham Riley, Gordon Dunbar, John den Dryver
MAJOR SHAREHOLDERS
Board and Management 25%
JP Morgan Asset 9.4%
Citicorp Nominees 7.1%
National Nominees 6.6%