EMERGING metal producer Millennium Minerals is on track to begin commercial gold production at its flagship Nullagine gold project in WA’s Pilbara region in the fourth quarter of this year.
With construction on schedule and on budget, Millennium has announced it is financially positioned to assess the possibility of a future production expansion, having received firm commitments in March for a $16.6 million capital raising.
Following Millennium’s 31 per cent ore reserve increase late last year, underpinned by solid exploration results, the company believes the optimum scale of the Nullagine operation will reach an annual production rate of between 2 million and 3 million tonnes – an increase from its current 1.5mt per annum capacity – in order to achieve the targeted 100,000 ounce annual gold production base.
This is set to be an exciting year for Millennium as it ramps up exploration to reach its goal of a 1 million ounce reserve during the next 12 to 18 months. Nullagine gold project The Nullagine gold project is currently a 1.33moz gold resource contained within seven deposits on 640 square kilometres of granted mining leases in an under explored area of WA’s East Pilbara.
The largest deposit is Golden Eagle, about 10km south of the Nullagine township, which contains 62 per cent of the total mineral resource.
Other deposits are Shearers, Otways, All Nations, Bartons, Little Wonder and Golden Gate.
Historical exploration has included aeromagnetic surveying, mapping and rock chip sampling. Before Millennium acquired the main Nullagine tenements in 2001, exploration on the Mosquito Creek Belt (the principal host of mineralisation within the Nullagine goldfield) produced 47,380t of ore returning 78,108oz of gold and 8904oz of silver from alluvial sources and dollied specimens.
Millennium commenced construction at the open pit operation in July 2011, and the capital cost of the construction phase is funded to completion. The project is currently designed to treat 1.5mtpa of ore for about eight years to produce 505,000oz of gold during its operating life.
Millennium chief executive officer Brian Rear said that despite the predicted gold production rate of 73,000ozpa, calculated by the current ore reserves and eight-year mine life, the operations would be running at about 80,000ozpa “for the first two or
three years”. “We have tabled a much bigger ore reserve than we were planning to start up on,” he said.
A feasibility study commissioned to determine optimum throughput and production rates was expected to be completed within the next six months. “I am hoping by the end of the year that the studies will have shown us that we can look at ramping it up to somewhere between 2 and 2.5 million tonnes a year,” Mr Rear said.
Exploration
Last December, after an active year of exploration, Millennium announced a significant mineral resource and ore reserve increase at six of its gold deposits within the Nullagine operations. Mineral resources were increased by a combined 81,000oz, equivalent to a further year’s production, and now stand at 34.68mt grading 1.19 grams per tonne of gold for 1.33moz of gold. Ore reserves were increased by 31 per cent, or 174,000oz, and now stand at 16.38mt grading 1.4g/t for 741,000oz. A cut-off grade of 0.5g/t of gold was used, with a $1500 per oz gold price.
The company attributes the increases in gold mineral resource inventories to strong results from the 22,531m reverse circulation drilling program completed last September, and believes there is further potential to increase the mineral resource inventories at these deposits. Strike depth and extensions for the six gold deposits – Golden Eagle, Shearers, Otways, All Nations, Bartons and Little Wonder – were drilled during 2011 to test for extensions to mineralisation outside the margins of the current proposed pit designs.
Construction update
As of January 2012, construction of the gold process plant and associated infrastructure remained on schedule and within the approved $87.6 million capital cost budget. Significant construction progress was
made last year, including the completion of various access roads, site earthworks, tank erections, equipment overhauls and accommodation construction.
By July 2011, the company had commenced construction of the 1.5mtpa carbon-in-leach (CIL) gold processing facility adjacent to Golden Eagle, which was expected to take 14 months to complete.
Last month, the design construction was enhanced and 99 per cent of the equipment orders had been placed. “All our carbon leach tanks are in place and there is a lot of other equipment arriving on site, like the crusher and all the equipment for the carbon leach circuit,” Mr Rear said.
“We are sitting at about 55 per cent built and as long as we don’t get any further cyclones or weather events, we should have a reasonable chance of keeping on schedule.”
However, Mr Rear said that there were mounting concerns over the poor road access between Newman and Nullagine: an issue the WA Government had to address.
He said that while all the mining companies in the region were reliant on that road, a “rickety bridge outside Newman could hardly take a decent truck”.
“If the truck is above the weight limit you have to go through the creek itself and of course, in the summer months, you are denied access,” he said. “It’s a subject of considerable debate by all the operators along that road. “If you are denied that route then you have to go all the way around to Port Hedland and Marble Bar, and come south, and that adds a day to your transport and, therefore, significant costs. “So really I think the Government needs to focus on some of those issues.” Capital raising Along with the $16.6 million capital raising, Millennium also announced it had restructured its global debt facility, entered into with BNP Paribus and National Australia Bank, to increase and optimise the project funding. The capital raising, by way of private placement priced at $0.019 per share, will allow the company to assess a future
medium-term production expansion and provide additional working capital reserves during the ramp up phase of the Nullagine project. The capital raising would be completed in two tranches: the first for $8.5 million, to be settled under the company’s 15 per cent rule; and the second, for $8.1 million, to be settled after the company received shareholder approval at the Annual General Meeting on April 24. The capital raising will fund further studies to identify the optimal mining production rate suggested by the increase ore reserve estimate, assess the process design required for a higher plant throughput and complete capital cost estimates.
The project’s global financing facility was restructured to increase flexibility and now stands at $53 million, comprising $40 million for core construction (increased from $25 million), $8 million for asset
lease (decreased from $10 million) and $5 million for cost overrun. Millennium will contribute $2.5 million to a cost overrun reserve that, on completion, will be returned to the company. The $5 million environmental bond facility remains unchanged. Mr Rear said the capital raising and the increased debt facilities would fund increased capital construction reserves and working capital during a conservative
operational ramp up schedule.
“We are delighted to be in a position to evaluate the potential to expand the project’s production capacity and our continuing exploration success,” he said Millennium also locked in gold price hedge contracts that were nearly double its projected site cash operating costs. These provide put options totalling 10,500oz at an option strike price of $1600 that offers price protection during the ramp-up phase, and deliveries of 94,100oz at an average forward delivery price of $1673 during the first three years of operations. The contracts represent 18.6 per cent of the forecast gold production under the current life-of-mine plan.
Future
Mr Rear said that Millennium’s priority was getting the mine up and running this year. “We will also be focussing on work that will support the start up of operations and next year we will shift our focus to the
resource/reserve expansion,” Mr Rear said. Mr Rear said that once the expansion studies were completed, the company would look at obtaining additional ore reserve to extend the mine life to 10 years.
“We have a lot of potential still on strike and depth, outside the envelopes which we are working on at the moment, and we have targets on our holdings that haven’t been looked at yet.
“We see quite a lot of potential to grow the project size and resource base over the next five years.”
Millennium is looking at completing a number of joint venture acquisitions aimed at expanding the resource and reserve base in and around its tenements. “We will be the only serious operator and producer in that whole area: there is nothing within 300km of us so we willtend to attract more parties interested in stitching up a deal to get value to come out of their ground,” Mr Rear said.
“We’ve already done three deals and are about to do a fourth, and I’m sure a few more will pop out of the woodwork later on.”
Gold outlook
With Millennium about to embark on a series of forward sales of gold during the next three years, Mr Rear said that he expected the gold price to stay around the $1600 to $1700/oz mark until the European and American economies recovered. “Essentially our path forward effective price is going to be around $1670,” he
said. “There’s only been seven times in the last five years that the Aussie dollar price of gold has been higher than that.“Our view is that the price should bounce around the current ranges this year and into the whole of next year,” he said.
By Helena Bogle
