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Wiluna Mining set for transition to stage 1 sulphide production after putting funding in place

Snapshot

The gold producer has completed the first of its five core objectives and is now placing priority on remaining strategies to achieve its goal of producing more than 250,000 ounces per annum.

Wiluna Mining Corporation Ltd - Wiluna Mining all set for transition to Stage 1 sulphide production after putting funding in place, extends chairman's term

Quick facts: Wiluna Mining Corporation Ltd

Price: 1.3 AUD

ASX:WMX
Market: ASX
Market Cap: $130.37 m
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Wiluna Mining Corporation (ASX:WMX) (OTCMKTS:BKHRF), formerly known as Blackham Resources Ltd (ASX:BLK), is set for its transition to stage 1 sulphide production after putting in place financing and extending the term of its executive chairman Milan Jerkovic.

So far, the company has completed the first of its five core objectives and is now placing priority on the remaining strategies to achieve its goal of producing more than 250,000 ounces per annum.

It is targeting to process both styles of free-milling and sulphide mineralisation often seen within the same deposit.

Its first step is to increase annual production to around 100,000 to 120,000 ounces of gold, which includes securing funding to execute stage 1 of the expansion plan.

As of June 18, 2020, Blackham Resources officially changed its name and started trading under Wiluna Mining Corporation Ltd, changing its ASX code to WMX.

Chair’s term extended

Jerkovic, who has been behind the company’s turnaround since he became its fulltime executive chair in 2018 and took over day-to-day management in May 2019, had his term extended by a further three years this month.

He is also one of the company’s largest shareholders.

He said: “We have managed to start turning the company around in the last 10 months but there is a lot of work still to be done to build a successful mining company.

“We have put together a fine team at Blackham in the last six months and we are all excited about the prospectivity of the Wiluna geology, with its four mining centres, existing production, high-calibre people and culture, infrastructure and potential for scale.

“Going forward, we want to create a large and successful mining company by using the Wiluna Mining Operations as the key building block.”

Five-point plan

The company has drawn up a five-point strategic plan to create maximum shareholder value. They are:

➢Strengthen the balance sheet;

➢Increase operational cashflow;

➢Transition to include gold concentrate production;

➢Expand production; and

➢Undertake exploration and feasibility studies to fully develop a more than 200,000 ounces per annum, long-life gold operation.

Wiluna hopes to double production to 1.5 million tonnes, which would equate to between 220,000 ounces and 250,000 ounces once stage II had been completed.

Jerkovic said: “Wiluna is, in my opinion, the largest single-site undeveloped gold project in Western Australia.

“We have not even explored the underground sulphides below 500 metres which compared with peers like Jundee and Gwalia, is very shallow.

“There is real potential to significantly increase our resource and reserves at Wiluna and we have many other sulphide targets, including Regent, that have significant potential.”

Williamson Open Pit steady-state production

In its latest update, the company said it expected the Williamson Open Pit to reach a steady-state production profile in July 2020.

During this transition phase from free-milling into the Stage 1 Sulphide production, the open pit is a significant contributor to the Wiluna production profile.

Underground results

The recent high-grade drill intercepts reported from the Golden Age Underground drilling programs are expected to increase the mine's monthly production rate from 6,500 tonnes to 15,000 tonnes during the first quarter of the 2021 financial year.

It is placing suitable resources to ensure equipment and manning support planned production rates.

Wiluna added that crushing and milling circuits were consistently running at around 20% above nameplate throughput capacity and that open pit mining movements were meeting expectations in this quarter.

Further, construction work on the new tailings dam has completed.

At the end of Wiluna’s 24-month transitional period, gold production from its higher-grade underground sulphide mineral resources is scheduled to begin.

During the transition period, it aims to produce around 60,000 ounces per annum from its existing free milling deposits, which will provide valuable cashflow and production continuity prior to the transition into producing 110,000-120,000 ounces per annum concentrate.

Credit approval from Mercuria Energy

Wiluna has signed an updated, indicative term sheet with Mercuria Energy Group providing A$21 million in the form of a prepaid swap on gold with a supporting hedge facility, and an intention to a further A$40 million, for a total of up to A$61 million.

Jerkovic said: “The ability to upsize the prepay amount by up to an additional A$40 million and to align this to our revised capital requirement timetable on the Stage 1 Sulphide extension, gives us real flexibility to finish the Stage 1 Expansion and fast track studies for Stage 2."

The updated terms of the facility, which replaces the initial indicative non-binding term sheet announced on February 26, 2020, better aligns the drawdown of funds to the company’s current proposed capital expenditure commitment timeline.

It gives Wiluna the flexibility of drawing a further A$40 million if required and subject to Mercuria credit approval, which is contingent on Wiluna further developing and upgrading its Stage 1 Expansion mine plan and financial model.

Challenges and COVID-19

Over the past six months since December 31, 2019, the transitional period has faced many challenges including the onset of COVID-19 in March.

However, despite these challenges, Wiluna remains focused on its long-term strategy to develop its large sulphide mineral resource base and is confident the current issues associated with the transition period at Williamson and Golden Age are nearing a point where steady-state production can be maintained.

At Williamson, the extensive waste stripping that has occurred during the second half of the financial year 2020 is very close to providing access to high-grade ore zones, which will enable the mine to continue in a production steady-state from July 2020.

Previous reported below forecast productivity issues have been addressed and production rates are now achieving expectations.

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