viewKingwest Resources Ltd

Kingwest Resources completes Goongarrie Lady scoping study

The study investigated the economics of the mineral resource being mined and operated by a third party, using arrangements to cover mining, haulage and toll treatment.

Kingwest Resources Ltd - Kingwest Resources completes Goongarrie Lady scoping study
The study estimated that a 92% recovery could be achieved with the conventional Goldfields ore type

Kingwest Resources Ltd (ASX:KWR) has completed a scoping study at the Goongarrie Lady deposit, around 40 kilometres southeast of the company’s Menzies Gold Project (MGP) in WA.

As the company is focused on the high-grade MGP it is evaluating options to commercialise, sell or partner Goongarrie Lady, given its favourable metallurgy, proximity to gold processing plants, advanced permitting status and low strip/high-grade production target.

The study, which an independent mining consultancy was engaged to conduct on the open pit mining and third-party toll treatment of the deposit, has enhanced the company's intentions.

It was based on a review of the mineral resource estimate of 504,000 tonnes at 1.76 g/t for 28,500 ounces, a feasibility study, a metallurgical report, cash-flow models and supporting information.

Study findings

Previous historic production showed good metallurgical recovery with the mine producing 29,000 tonnes of ore grading 4.5 g/t in the 1990s.

The Goongarrie Lady production target is 150,000 tonnes of ore grading 3.12 g/t and strip ratio of 14.94:1 to produce 15,000 ounces of gold.

As it is a short-lived six-month operation, it was estimated that the operation would be mined by a contractor already operating in the region who would supply much of the temporary site infrastructure.

A drill and blast style of mining was assumed, with a load and haul operation using a locally based workforce by on-highway road trains to a third party for processing.

Mineral processing

The study has assumed ore will be hauled to the Lakewood mill (Golden Mile Milling), with Paddington (Norton Goldfields) as an alternative milling facility.

Both plants are licensed to toll treat third-party ore and while no formal discussions have been made regarding processing, Kingwest believes that it is reasonable to assume that processing is viable.

Goongarrie Project location

Pit optimisation

A Lerchs-Grossman optimisation was undertaken of the block model at a base case AU$1,600/ounce gold price, varying the revenue factor (RF) from 0.4762 (A$1,000/ounce) to 1.1905 (A$2,500/ounce).

This approach was taken in order to examine the progression of earlier pit shells, allowing identification of high-margin ounces early in the schedule.

The optimum pit shell mines 190,000 tonnes of ore at a grade of 2.57 g/t.

This returns an indicative undiscounted cash-flow of A$8 million at the applied gold price and A$16 million at a A$2,300 gold price, which is considered appropriate and adequate to present a proof of concept for scoping study purposes.

It also provides strong upside potential for the project as additional drilling may increase confidence in deeper mineralisation and allow Kingwest to conduct optimisations which could increase the overall size of the operation.

Mineral resource estimate

The mineral resource estimate incorporated over 6,000 metres of drilling and showed grade-tonnage estimates at various grade cut-offs for each oxidation profile resulting in and estimate at a 0.5 g/t cut-off.

Approximately 5% of the material is classified as inferred and this material is lower grade (around 1.6 g/t) than the average of the production target and represents approximately 3% of the total gold production.

The company is confident that follow-up drilling could potentially convert inferred resources below the chosen pit optimisation and allow an increase in mining material after stage one.

Chosen pit optimisation (wireframe) surrounding the existing open pit (purple) and showing the mineralised wireframes which contain the JORC resource

Tentative schedule

The planned 10-month schedule assumes a three-month site establishment period before mining would commence in month four.

A production rate of 250,000 cubic metres/month is achievable by a single 120-tonne class excavator in a confined pit.

Ore will be processed from month five, with mining being completed in month nine and processing being completed in month 10.

The model has a peak negative cash flow of $3.7 million in month six, which will require working capital.

With equipment operating hours, fuel and gross mining costs (inclusive of flights, accommodation and contractor’s margin) the all-In Sustaining Costs (AISC) are estimated at AU$1,719 per recovered ounce of gold.

Financial modelling

Net cash flow from the project estimated to be in a range of $6 million to $12 million, with an indicated net cash flow of $10.3 million.

The company had $1.5 million cash at December 31, 2019, and subsequently raised $3.5 million cash in February 2020, however it is likely additional funding would be required which may be dilutive to existing Kingwest shareholders.

Kingwest is focused on the high-grade MGP where it is conducting diamond drilling with the aim of converting known high-grade exploration targets to mineral resources.

Quick facts: Kingwest Resources Ltd

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Market: ASX
Market Cap: $18.9 m

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