By Jane Goldsmith
11 May, 2015
CANADIAN miner Crocodile Gold is ramping up production at its Australian operations, in conjunction with the rising US dollar and slowly stabilising gold price.
The mid-tier miner produced 59,676oz of gold in the first quarter of 2015, marking an 11.4 per cent rise from its year-on-year results and its seventh consecutive quarter producing above its 53,000oz guidance.
Crocodile has three mines in Australia – Cosmo gold in the Northern Territory, and Fosterville and Stawell in Victoria – and substantial land packages including the focal exploration project, Enhanced Big Hill at Stawell.
In the company’s first quarter report, chief executive Rodney Lamond said Crocodile was well positioned to meet full-year targets.
“As a result of our strong start to 2015, the company is on track to meet the top end of our full year 2015 production guidance of 220,000oz and the lower end of our [all in sustaining costs] cost guidance of US$1020/oz,” Mr Lamond said.
“Our strategy for sustainable production, which starts with a fundamental understanding of our geological models, aims to extend the reserve mine life at all of our operations by replacing depleted mineral resources in a timely manner through the execution of targeted exploration programs.”
In early January, Crocodile exited a net free cash flow sharing arrangement for its operations with fellow Canadian company, AuRico Gold. The agreement – established in March 2012, when Crocodile Gold acquired its Victorian assets from AuRico-owned Northgate Australian Ventures Corporation – bound Crocodile to share its revenue under various terms and conditions, when mine site cash flow exceeded C$60 million.
Crocodile terminated the agreement this year, paying AuRico C$20 million in cash and granting a 2 per cent net smelter return royalty and a 1 per cent royalty from the Fosterville gold mine and Stawell operations, respectively.
Despite the payout, Crocodile’s finances in Q1 2015 remained solid.
“Our solid cash balance at the end of 2014, combined with the confidence in our ability to deliver strong physical and financial results for Q1 2015, enabled us to fund the related one-time payment of US$16.7 million, without incurring debt,” Mr Lamond said.
“As a result of our first quarter performance, we are extremely pleased to end the first quarter of 2015 with a preliminary cash balance of US$27.7 million.
“We are extremely pleased to have closed on the agreement that terminates the net free cash flow sharing arrangement. Crocodile Gold will now fully benefit and retain 100 per cent of the strong free cash flows we expect to generate from our Fosterville and Stawell gold mines going forward.
“This agreement was a critical step in supporting the future growth toward the five year strategy of Crocodile Gold.”
Stawell and Fosterville
Stawell, 250km west of Melbourne and 2km from the Stawell township, lies in a historically prosperous gold region, having produced about 2.7 million ounces of gold between 1853 and 1926. The tenements passed through several owners, before AuRico’s acquisition in October 2011. Crocodile purchased the operation in early May 2012.
Stawell’s onsite facilities include a gold processing plant, a 96 hectare tailings dam, core shed, laboratory, workshops and administrative buildings. Crocodile currently mines from the Magdala deposit, although it previously stated all reserves would be exhausted by early 2013.
In Q1 2015, the operation produced 220,087t of ore grading 1.75g/t of gold. Ore was processed to 80.2 per cent recovery, resulting in 9929oz for the quarter.
Stawell’s sister site Fosterville lies 20km from Bendigo and is similarly historic for gold mining, although operations have moved underground since its earliest activity in 1894. Crocodile currently operates Fosterville’s Phoenix, Falcon, Ellesmere, Kink, Vulture, Raven, Robin and Harrier ore bodies.
In Q1 2015, Fosterville produced 178,676t of ore grading 5.85g/t of gold compared to 206,540t of ore grading 3.76g/t of gold, year-on-year. Crocodile said Q1 2015’s results reflected better grades at Fosterville, despite the decrease in tonnage, combined with higher recovery.
“The decrease in tonnage was driven by the transition of the operation to receive a lower contribution from the Harrier zone and a proportionately larger contribution from Central and Phoenix lodes, including the higher grade Lower Phoenix area,” the company stated.
“Grade performance helped to offset lower mine production and has continued to strengthen.
“Fosterville achieved a new quarterly record recovery of 89.2 per cent, eclipsing the previous record recovery rate of 88.5 per cent, achieved in Q4 2014. As a result, Fosterville achieved gold production of 29,135oz in Q1 2015 which represents the highest quarterly total since Q3 2011 and the third highest ever.”
Cosmo underground mine, 285km southeast of Darwin, lies within Crocodile’s highest priority tenements in the Cosmo/Howley geological corridor. The tenements entered commercial production in early 2013, and several additional deposits have been identified since, extending along the corridor from the current site.
Ore produced at Cosmo is processed at the 2.5 million-tonne-per-annum Union Reefs gravity and carbon-in-leach mill. The site also has a 200-person mining camp, adjacent to the Cosmo/Howley deposits.
In Q1 2015, Cosmo gold achieved its second highest production quarter on record with 20,612oz of gold in output; the result was up 15.5 per cent from Q1 2014, with higher milled feed grade of 3.7g/t resulting in mill recovery of 91 per cent.
“Our first quarter performance was highlighted by a significant improvement in consolidated average grade to 3.58g/t, a 22.6 per cent increase year-over-year, which also contributed to a solid increase in year-over-year production results from Fosterville and Cosmo,” Mr Lamond said.
“Stawell continued to deliver value by maintaining consistent production levels from its underground operations and successfully produced 9929oz of gold in the first quarter of 2015.
“The first quarter also marked Stawell’s seventh consecutive quarter of gold production above 9500oz and is a notable achievement for a mine that was previously expected to end operations in early 2013.”
Mr Lamond said Crocodile would increase exploration in 2015 in line with its ‘sustainable mining model’, while continuing to streamline processes at its existing sites.
“We are very pleased with the strong operating results accomplished during the first quarter of 2015. We continued to build on the momentum we experienced throughout 2014 and successfully increased first quarter 2015 consolidated production by 11.4 per cent to 59,676oz of gold compared to the prior year,” Mr Lamond said.
“The quarter also marked a seventh consecutive quarter of gold production above 53,000oz as we executed on our strategy for sustainable production and clearly demonstrated our ability to deliver consistent physical performance.”