viewAlkane Resources Ltd

Alkane Resources looks underground after stellar year at Tomingley Gold Operations

The company produced 78,533 ounces of gold in FY2018 for $128.8 million revenue at an AISC of $1,002 per ounce.

Open pit at Tomingley Gold Operations
Mineralisation is open under the three pits at Tomingley Gold Operations

Alkane Resources Limited (ASX:ALK) had another stellar 12 months of production in the 2018 financial year from Tomingley Gold Operations (TGO) in Central West NSW.

As the company gears up to begin underground mining at TGO in mid-2019, Alkane reports the production of 78,533 ounces of gold in FY2018 for $128.8 million revenue at an all in sustaining cost (AISC) of $1,002 per ounce.

Operating pre-tax cash flow after development costs in the 12 months was $39.7 million.

Due to the completion of open cut mining in the March quarter of 2019, guidance for FY19 is 30,000 to 35,000 ounces of gold at an AISC of A$1,300 to A$1,400 per ounce.

Included in this is budgeted expenditure of $5 million on rehabilitation.

Resources and reserves update

Alkane has completed a re-estimation of mineral resources and ore reserves for the TGO to account for depletion, increased geological knowledge with depth and actual operating costs and conditions.

Total mineral resources stand at 6.78 million tonnes at a grade of 1.5 g/t for 437,000 ounces.

Ore reserves total 2.21 million tonnes grading 1.8 g/t for 144,000 ounces and include the underground reserves of 730,000 tonnes at 3.2 g/t for 74,000 ounces.

The primary differences from 2017 to 2018 are:

- Ore mined from Caloma One, Caloma Two and Wyoming One during the period.

- Caloma One mining completion.

- Update of geological models and Block model estimations.

- Increase in grade control removing almost all inferred material in all remaining pits.

- Completion of the underground study and feasibility based upon substantial infill core drilling at the Wyoming One deposit.

The current life of mine plan sees the open cut pits finishing in the March quarter of 2019.

A small cutback of the Caloma One pit to the northeast utilising smaller equipment has been designed and whilst not scheduled is an option for TGO should economics allow it in the future.

Low-grade stockpiles of about 1.257 million tonnes are also available for milling but are at present not scheduled until the potential underground material is available to be blended with it.

Regional exploration

Alkane is confident of adding to the resource base and mining life at TGO.

A major regional aircore, RC and core drilling program is in progress testing an initial area from the southern boundary of the TGO mine site to the Cemetery target, which is just north of the Peak Hill mine site.

Three major target zones - Roswell, San Antonio and El Paso - have been identified and recent drilling results are being compiled with follow-up drilling scheduled.

At the former Peak Hill mine to the south of TGO, a review of the underground mineral resource potential based on the historical drilling database is in progress.

READ: Alkane Resources green light for Tomingley Gold Operations underground development

The company’s board recently approved the underground mining development at TGO.

Ground support work for the portal will begin by the end of 2018 with development starting shortly after in early 2019.

First ore is expected to be produced from underground in mid-2019 and stockpiled on the surface until processing recommences in the final quarter of 2019.

The gold will be recovered over a 40-month development at cash costs estimated to be $1,100 to $1,200 per ounce while the cash outflow to recover first ore is estimated at $25 million.

Alkane has two advanced projects - Tomingley, which began production in early 2014, and the nearby Dubbo Project, a large resource of zirconium, hafnium, niobium, yttrium and rare earth elements.

Tomingley cash flow has provided the funding to maintain the project development pipeline and has assisted with pre-construction development of the Dubbo Project.

Quick facts: Alkane Resources Ltd

Price: 0.945 AUD

Market: ASX
Market Cap: $548.13 m

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