THE INSIDE STORY: As it moves closer to becoming the next Australian gold producer Blackham Resources (ASX: BLK) rarely has time to stand still.
The company recently finalised a Pre-Feasibility Study into its 100 per cent-owned Matilda gold project, located near Wiluna in Western Australia.
Although impressive, the PFS results were quickly outdated with Blackham well advanced into a Definitive Feasibility Study (DFS), for which a number of drilling programs that are likely to increase the current Resource base have been completed.
In just nine months, the PFS increased the mineable Resource at the Matilda project by over one million tonnes from the Scoping Study, while confirming the project’s robust economics including a low capital requirement, short timeframe to production, fast payback and operating costs.
The Matilda project is benefitting from the current market forces with all associated cost reductions resulting in a low capex due to substantial plant and infrastructure already at site and relatively minor plant refurbishments required to re-start the project.
The PFS added an additional year to the mine life forecast in the Scoping Study and converted Inferred Resources into Indicated Resources and Scoping Mineral Inventory into Reserves.
“The de-risking of the Matilda gold project as a result of the PFS is something that should not be overlooked,” Blackham Resources managing director Bryan Dixon told The Resources Roadhouse.
“Not only did it come back with a mining inventory of six million tonnes at 2.8 grams per tonne for 540,000 ounces of gold, it also presented us with another pleasing figure in the extremely low capex of $28 million.
“What that means is that, at today’s prices, we only need to spend $28 million over five months building the project, which will then make over $200 million in cash flow over the next five years.
“It has emerged as being a very capital-efficient project, which should produce high returns for our shareholders.
“It has a Net Present Value (NPV) of $124 million and an Initial Rate of Return (IIR) of 105 per cent.
“The only way a gold project is capable of hitting those sort of numbers is to be doing what we are doing, which is leveraging off a brownfields asset with an existing plant in-situ.”
Blackham scored well from drilling associated with the DFS from Golden Age and Matilda and more recently from two other targets within the project area, Galaxy and Williamson.
An RC drill program of 26 holes carried out at Galaxy included holes GARC0065, GARC0066, and GARC0067, which returned impressive oxide intercepts of 12m at 4.57g/t gold, 4m at 7.93g/t gold, and 10m at 2.54g/t gold, respectively.
An additional small, three-hole diamond program was also completed in order to provide further geological confidence and metallurgical samples.
This program identified further high-grade mineralisation within the optimised pit shell, with holes GLDD0005 and GLDD0006 (10m at 4.52g/t gold from 82m; and 5m at 6.33g/t gold from 18.5m) confirming mineralisation continuity at depth, and along strike.
“Galaxy came out of the recent Pre-Feasibility Study as a high-grade shallow deposit suitable for open pit mining with good metallurgical recoveries,” Dixon said.
“The latest DFS associated drilling has given us greater confidence within the Galaxy pit while also identifying further high-grade mineralisation outside the PFS pit design.”
The Galaxy and Golden Age deposits are ranked as early targets in Blackham’s mine plan as both are high-grade, free milling quartz reefs located in close proximity of the Wiluna gold plant.
The first round of drilling completed at the Williamson deposit also paid dividends, hitting a new shallow high-grade zone of oxide mineralisation.
Blackham completed a program of 19 RC holes, which it claims has discovered a new zone of mineralisation along the western (footwall) flank of Williamson.
Results from the new high-grade footwall zone discovered in the Williamson pit include:
2 metres at 95.14 grams per tonne gold from 33m;
1.45m at 5.73g/t from 70m;
Interpretation of the drilling results determined the shallow newly-discovered lode extends into the PFS pit design, which the company considers is likely to improve the pit’s economics.
The drilling also infilled the southern extensions of the resource to a spacing that is likely to support an Indicated resource classification.
Five diamond core (DD) holes were also completed to provide geotechnical and metallurgical samples for the current Definitive Feasibility Study (DFS).
Blackham expects these results to expand and add further confidence to the free milling, open pit mining inventory prior to the planned recommissioning of the Wiluna gold plant in 2016.
As a bulk-tonnage gold deposit Blackham considers Williamson to possess a number of geological similarities to others in the Yilgarn region, such as the Thunderbox deposit of Saracen Mineral Holdings (ASX: SAR) and the Gruyere deposit of Gold Road Resources (ASX: GOR).
“The gold mineralisation at Williamson is associated with disseminated pyrite and arsenopyrite and sulphide-bearing quartz veinlets within monzogranite dykes and sheared monzogranite – dolerite contacts,” Dixon explained.
“High-grade pods are noted along the monzogranite contacts, and visible gold has been seen in historical drill core.
“Although the overall grade of the Williamson resource is modest at 6.3 million tonnes at 1.7 grams per tonne for 350,000 ounces, the relative large tonnage of the deposit is typical of this style of mineralisation.
“For us, that makes it an attractive exploration and development target that ensures a sustainable base load mine plan for the Wiluna gold plant.”
The results of the PFS confirm mining and processing parameters are very similar to the results of the Scoping Study.
From this Blackham has gained a sound understanding of the technical and operational aspects of the project that has further de-risked the development of the Matilda gold project.
“The PFS has confirmed the robust cash flows the Matilda gold project is capable of generating, its capital efficient nature and that it can be bought into production rapidly,” Dixon said.
“Since finalising the PFS Resource, we have enjoyed significant exploration success and we plan to keep growing the mine life through aggressive drilling programs.”
The progress Blackham has already been able to achieve with the Matilda DFS gives gold industry watchers something to anticipate over the holidays.
The drilling programs and resource, metallurgical, environmental and engineering studies the company has underway are expected to enable it to completion of the DFS in a condensed timeframe, which would further de-risk the project and increasing confidence levels.
Blackham has agreed an early drawn down of $7 million on its $30 million undrawn debt facility with Orion Mine Finance to fast track Matilda towards production.
The funds will be used for ordering long lead items, initial plant and infrastructure refurbishment, additional drilling aiming at extending the reserves and mine life inventory and completion of the Definitive Feasibility Study by January 2016.
“Blackham is pleased to have agreed with Orion the early drawdown of funds under the debt facility,” Dixon said.
“A lot of the DFS work programs have been completed and the early drawdown of these funds allows the team to look beyond the studies and begin the first stages of development work.
“Starting the refurbishment of the plant and infrastructure will allow a more orderly progression into gold production planned for the middle of next year.”
Blackham Resources Limited (ASX: BLK)
… The Short Story
Level 2, 38 Richardson St.
West Perth WA 6005
Ph: +61 8 9322 6418
Fax: +61 8 9322 6398
Paul Murphy, Bryan Dixon, Alan Thom, Greg Miles, Peter Rozenauers