Hillgrove Resources: Australia’s Next Copper Producer

Located only 55km from Adelaide, Kanmantoo Underground was operated by Hillgrove Resources (ASX:HGO) as a series of open pits from 2010 to 2020, producing around 140kt of copper and over 55koz of gold.

 Over the past three years, Hillgrove has been drilling to prove up an underground extension which ended in the release of a feasibility study highlighting that Kanmantoo could generate over $200m in free cash flow for a capital requirement of $25m.

 This makes Kanmantoo one of the lowest capital-intensive copper development projects anywhere in the world.

Mining Begins

Mining began in May 2023 with first copper production on track for early 2024.

 As anticipated, the underground conditions proved to be very capable, assisting in turning the development faces over quickly and getting to the planned production straight away.

Ore on the run-of-mine is being stockpiled for future processing.

 Hillgrove managing director and chief executive Lachlan Wallace said beginning operations was a milestone for the company.

“The commencement of operations was an excellent milestone. I am very proud of the team; within four short years they have taken the underground from concept, through permitting, exploration, feasibility, funding and into operations,” he said.

“It is also very pleasing to have excellent support from our suppliers and contractors that have safely mobilised equipment and enabled the project to hit the planned development rates from day one.

“As we move forward, I am confident that we have the right mix of people and plant to deliver first copper early in 2024.”

Infrastructure in Place

All the critical spares Hillgrove needs, including spare mill motor, gearbox, trunnion bearing, girth gear and crusher swing stock are on site with refurbishment works on track for the restart of processing activities early next year.

The tailings storage facility has sufficient storage for the current mine plan — plus a further 3mt — enabling Hillgrove to house additional tailings as drilling continues to identify additional resources and grow the mine plan without further permitting.

The processing facility has been maintained and is in an operational state while the processing plant is in good condition.

“Since processing operations ceased in 2020, we have maintained the energy and water contracts and continued to pump water through the entire processing and tailings system daily, and every week we inch the mill, and fire up the crushing and conveying system,” Mr Wallace said.

“More recently, we have commenced some minor repairs to the flotation cells, however, this is limited to relatively minor welding and fabrication.

“Although keeping the plant energised and maintaining the mill in an operational state is more expensive than a traditional care and maintenance program, it materially reduces the capital and risk when restarting the process facility.

“Hence our strategy has been to develop an underground mine plan that could secure funding in the shortest time frame possible, with view to recommencing operations and using cash flows to further expand the mine.”

Future Operations

Mr Wallace emphasised that underground operations are the first stage of development and potential exists to grow Kanmantoo.

“It is important to emphasise that the underground that we have funded is just the first stage of development. The real prize is extending the mine life through further drilling,” he said.

“The stage one underground only includes two of the nine known mineralised lodes that were either drilled or mined as part of the previous open operations.

“Effectively, every time we drill, we hit, and every drill program materially increases the resource base — this positions Hillgrove well to continue to expand the mine through future exploration success.”

To take advantage of the rising copper price, Mr Wallace said Hillgrove can ramp up production at Kanmantoo at any time.

“The Kanmantoo project is extremely well leveraged to copper price. As prices rise, we are able to quickly increase copper production for low incremental costs by simply widening the stopes,” he said.

“The processing facility is only 40% utilised in the current plan, and this spare capacity enables the additional copper to be produced without displacing high grade ore, essentially producing more copper into a higher price environment for low cost.

“This uniquely positions Hillgrove to capitalise on rising copper prices quickly, with no capital and no additional permitting.”

With copper production on track for early 2024, Hillgrove is set to become Australia’s next copper producer.