THE DRILL SERGEANT: Red 5 Limited (ASX: RED) released a maiden 1.45 million ounce open pit Ore Reserve for the company’s 100 per cent-owned King of the Hills (KOTH) gold mine in Western Australia supported by a Pre-Feasibility Study on a stand-alone bulk open pit mining and processing operation.
The maiden open pit Probable Ore Reserve for the KOTH gold project has come in at 36 million tonnes at 1.25 grams per tonne gold for 1.45 million ounces of contained gold.
A maiden open pit Probable Ore Reserve for the satellite Rainbow deposit was also calculated at 1.4 million tonnes at 1g/t gold for 44,000 ounces of contained gold.
Red 5 is currently undertaking a supporting Pre-Feasibility Study (PFS), which it said is an important part of the long-term bulk mining strategy for KOTH, holding key components of:
A bulk open pit mining operation, underpinned by a maiden 1.45Moz Probable Ore Reserve;
Construction of a new 4Mtpa CIL processing plant on site, which will provide processing capacity for the integrated KOTH bulk mining strategy, consisting of the KOTH open pit, satellite starter pits, as well as maintaining or expanding output from the existing bulk underground mine;
Average annual gold production of 140,000 ounces over a mine life of 10 years. The company believes the current higher-grade underground mining operation is likely to be able to be reconfigured to add additional annual production ounces, to be assessed as part of studies for the Final Feasibility Study (FFS);
Forecast capital cost of $218 million, which includes pre-strip costs of $24 million and owners’ costs;
Estimated average all-in sustaining cost (AISC) of $1,167 per ounce over the life-of-mine (LOM); and
Technically low-risk project development, with extensive mining history providing well-established metallurgy and recovery metrics.
The Red 5 Board has given approval to proceed with a FFS on the integrated bulk open pit opportunity and underground mining operations at KOTH.
The FFS is scheduled for completion by mid-CY 2020, with an estimated cost of $4 million.
Additional elements to be included in the FFS include Indicated and Inferred Mineral Resource of 17.5 million tonnes at 2g/t gold for 1.11 million ounces of contained gold (1.0g/t Au cut-off) outside of the current KOTH optimised pit shell, which will be the basis of the underground mine.
Underground exploration upside exists with a large proportion of the prospective Eastern Margin Contact remaining largely untested by drilling.
Regional satellite deposits, including Severn, Centauri and Cerebus-Eclipse, also offer the opportunity for early gold production and cash-flow.
Regional exploration targets include Cavalier, Puzzles and other prospects along the Ursus and Tarmoola Fault Zones.
These and other targets are being systematically explored.
“The delivery of this maiden JORC 2012 open pit Ore Reserve and the supporting PFS is a significant milestone for our shareholders,” Red 5 managing director Mark Williams said in the company’s announcement to the AUSTRALIAN Securities Exchange.
“It marks a key step towards realising our objective of transforming Red 5 into a substantial mid-tier gold producer with a diversified production base and production profile.
“To put the PFS numbers into perspective, King of the Hills now has a bulk Mineral Resource for the Eastern Margin contact zone of 3.11 million ounces, inclusive of a maiden open pit Ore Reserve of 1.45 million ounces, and has the potential to become Western Australia’s next significant gold mine.
“This open pit PFS is a key stepping-stone, setting a firm foundation for us to unlock the broader value at King of the Hills by developing an integrated open pit and underground bulk mining operation.
“The PFS confirms a technically robust, long-life project based on the open pit mine development, underpinned by maiden Ore Reserves of 1.45 million ounces, with annual average gold production of 140,000 ounces per annum at an average all-in sustaining cost of $1,167 per ounce.
“The initial capital cost of $218 million includes the construction of a 4 million tonnes per annum CIL processing plant on site, which provides sufficient processing capacity for an integrated bulk open pit and underground mining operation and is the significant component of the expected total upfront cost.
“We will now use this PFS as the basis for a Final Feasibility Study (FFS) that will also incorporate concurrent bulk underground mining as well as satellite starter pits to provide a more complete picture of the project.
“The FFS will also include the bulk underground Resource, which currently stands at 1.1 million ounces, the regional oxide resources, as well any additions to the Resource base as a result of ongoing underground and regional exploration programs.
“We are confident the project will continue to enjoy growth in both Resources and Reserves over the next 12 months and we are focused on advancing the KOTH project towards development over the next 18 months.
“In parallel with the continued successful operation and growth of our Darlot operations, King of the Hills has the potential to quickly elevate Red 5 in the ranks of Australia’s mid-tier gold producers.”