THE INSIDE STORY: Despite the recent efforts of the Western Australian government to hamstring the state’s gold sector, the commodity has been enjoying a buoyant 2017.
Globally, the actions of governments of larger scale and influence have provided a boost to the gold price resulting in it having gained nine per cent in just the past two months, and 17 per cent for the calendar year to date, to be hovering above the $1600 (US$1300) per ounce range.
For any local company currently catalogued in the ‘gold producer’ category this is good news, especially if its project can demonstrate it has room to improve and has the support of strong financial backers.
Blackham Resources (ASX: BLK) recently completed an Expansion Preliminary Feasibility Study (PFS) on the company’s 100 per cent-owned 6.2-million-ounce Matilda and Wiluna gold operation in Western Australia.
The PFS demonstrated robust economics, a large increase in reserves and improved economies of scale supporting the operation’s expansion.
Over the last six years, Blackham has consolidated the Wiluna Goldfield with a tenement package covering over 1,100 square kilometres, into one operation that has historically produced over 4.3 million ounces.
Blackham recommenced production in October 2016, and for the period from commencement until 30 June 2017, has produced 39,402 ounces of gold, with production for the coming September quarter expected to increase due to both higher tonnes processed and a higher-grade profile from mining to commence in the project’s open pits.
Blackham is the latest in a line of owners of the project, however, the company’s renewed approach to the operation has enabled to breathe life into it where previous owners had struggled.
Historically, over the last 20 years, the Matilda operation had relied predominately on underground feed.
Blackham has established 15 million tonnes at 2.3 grams per tonne gold (85 per cent at Reserve classification) in open pit feed, which is included in the current Expansion PFS Mine Plan.
Where the company has been particularly successful to date is having identified consolidating, and defining orebodies all located within 20 kilometres of the existing Wiluna gold plant.
From the large existing Resource base of JORC 2012-compliant 61 million tonnes at 3.1g/t gold for 6.2 million ounces of gold, the Expansion PFS brings Reserves at the Wiluna and Matilda operation to 1.2 million ounces of gold (15Mt at 2.5g/t) – representing an increase of 116 per cent in the space of one year.
The Wiluna and Matilda Expansion PFS outlines an economic plan to process both oxide ore (1.8Mtpa) and sulphide ores (1.5Mtpa) for a combined processing capacity of between 2.3 and 3.3 million tonnes per annum.
Key operating parameters to emerge from the PFS include:
Gold Production of 1.47 million ounces of gold from processing 19.1 million tonnes at 2.8g/t gold at an 86 per cent recovery over nine years;
The first six years of expanded plant gold production to average 207,000 ounces of gold at 3.1g/t gold;
Base load open pit production (including stockpiles) to underpin plant feed, which totals 15.1 million tonnes at 2.3g/t gold with an average stripping ratio of 11.7:1 mined over nine years; and
An initial underground production total of 4 million tonnes at 4.7g/t mined over nine years, which is likely to be extended from the large underground resources currently sitting outside the mine plan of 3 million ounces (20Mt at 4.8g/t gold);
The study determined the is expected to take 15 months from commencement and is assumed to be completed in June 2019.
“The Expansion PFS also provided an initial assessment of alternate processing routes to the base case expansion scenario while also providing an indication as to where the business model can further be improved,” Blackham Resources managing director Bryan Dixon told The Resources Roadhouse.
“As we move into the Expansion Definitive Feasibility Study, we will run some of these other possible cases as parallel investigations to benchmark capital cost and return metrics to verify the best possible case for the Board to consider.
“There are not many operations sitting in premium mining jurisdictions that have the geology on a scale such as what Wiluna and Matilda boasts.
“We have the potential to support a plus-200,000-ounce operation with strong grade profile and long mine life as the expanded Wiluna processing facility will have the ability to process a variety of ore types.”
The work completed by Blackham and the potential it has revealed may have bypassed the attention of local sophisticated investors, but not that of The Australian Special Opportunity Fund, a New York-based institutional investor, managed by The Lind Partners.
Lind Partners has come on board to the tune of $72 million in funds to enable Blackham to continue to advance the Expansion DFS and, more importantly, to manage its balance sheet whilst it implements improving operational cash flows from the operation.
“We have been following Blackham since Lind’s first investment in 2012, shortly after it bought into the Matilda gold project and have seen them evolve from an explorer with a 300,000 ounce resource to a gold producer with a 6.2 million ounce resource and an impressive growth story.” Lind Partners managing director Jeff Easton said when the deal was announced.
“We are excited to return at this crucial point to fund Blackham and back management as they demonstrate the next chapter of their significant growth story.”
Although it has access to the funds, Blackham doesn’t expect it will need to draw down on them anytime soon as it plans to utilise its operating cash flows to fund the Expansion.
Of course, this will require a suitable funding solution, but what the Lind Facility provides is time to choose the optimal funding solution without Blackham needing to head back to the market, tapping its loyal shareholder base in a capital raising.
“Our final funding solution for the Expansion will ideally mean that we can secure a fully-funded solution that minimises dilution to existing Blackham shareholders,” Dixon said.
“The Lind funding basically allows a flexible funding solution that ensures we continue with the exploration and reserve definition work we have been carrying out.
“It also increases our current hedge facilities, allowing us to manage gold price risk.”
The agreement allows Blackham to carry out additional private placements of equity and debt funding facilities without restricting the company’s ability to enter into strategic industry partnerships.
As the Wiluna and Matilda operation’s production profile grows, Blackham has the flexibility to manage its funding requirements monthly, letting it monitor gold price fluctuations and feasibility and resource/reserve drilling requirements.
The Lind Fund facility provides Blackham with certainty of a flexible base level of funding over the next 24 months.
“The Lind Partner funding has given us more than cash, it has provided us with valuable time, with which we can take the robust economics defined by the Expansion PFS to enter into discussions with potential financiers to allow financing to be gained on attractive financing terms,” Dixon said.
“We have appointed a financing advisor who has opened discussions with potential financiers with a view to re-sizing the current debt facility.
“We have received a number of expressions of interests for the financing of the Expansion and we intend to continue discussions with financiers in parallel to the completion of the Expansion DFS.”
Blackham Resources Limited (ASX: BLK)
… The Short Story
Level 2, 38 Richardson St
West Perth WA 6005
Ph: +61 8 9322 6418
Milan Jerkovic, Bryan Dixon, Alan Thom, Greg Miles, Peter Rozenauers