BY: JESSICA CUMMINS
In the final stages of debt financing discussions over its 823,000oz Karlawinda Gold Project ahead of construction in the second half the year, Capricorn Metals is working in parallel to further enhance the value of this compelling project – and the results have been outstanding.
CAPRICORN has a very low profile for a company lining up to become one of Australia’s next significant gold producers. After acquiring its flagship Karlawinda Gold Project – 65km, southeast of Newman in WA – at the beginning of 2016, Capricorn has moved quickly towards development.
In June, an optimisation study increased the value of an already attractive project by $100m, with improved rates of return and a quicker payback period. The Australian Mining Review spoke with Capricorn Metals chief Heath Hellewell.
Q: Your recent 23% reduction in project design and construct capex is impressive. How were you able to cut costs so significantly since releasing the 2017 Feasibility Study?
In some ways it is the a function of running a very good tender process with the prospective engineering groups, working closely with them to get an optimal engineering solution, but at the same time running a good commercial and competitive process.
We are very happy to now be working exclusively with GR Engineering Services as our preferred contractor, as in our view there is really no-one better at delivering these types of projects in Australia.
Utilising their experience and engaging them on a fixed price contract allows for a significant amount of contingency to be removed from capital estimates. This further de-risks the funding of the project.
Working with GR we have settled on a much more efficient processing flow sheet that provides a number of significant operational improvements.
Not only was there a reduction in capital costs but at the same time we also managed to reduce the operating cost estimates for the processing plant, this very positive outcome is a real credit to both our team at Capricorn and the team at GR.
Q: How is project funding tracking?
The project funding is going very well. We have been working very closely with a number of traditional banks since early this year, who have been busy reviewing all technical aspects of the project.
With the recent updated Ore Reserve, we expect to deliver an updated project financial model to the banks within the next few weeks. It will be on this basis that we will move to finalise the debt funding component of our project financing.
The level of interest from the banks in our project is very high and we received very attractive indicative terms based on our Feasibility Study financial model. The economics of the project only get better with the Reserve update so we are very confident in obtaining an attractive debt solution for a significant portion of the project financing.
Q: Tell us about the geology of the Karlawinda’s Bibra deposit. Will it be the main source of proving up resources and reserves into the near future?
Bibra is a greenstone hosted gold system, in many ways not unlike many of the other the greenstone hosted systems around Kalgoorlie and in the Goldfields region of WA.
We are still learning more and more about not only what we have at Bibra, but what we also have elsewhere in the project area including at our Francopan/K3 deposit, which looks very similar to Bibra in terms of both its style and size potential.
It is really only the beginning at this project, as the belt is a new discovery and really hasn’t been exposed to much modern day regional mineral exploration.
What is clear though is that these systems are potentially very large. At Bibra we have 1.5moz in Resources already and recently we stepped out a drilled a deep hole beneath Bibra, effectively doubling the current size potential of the deposit.
While at Bibra to date we have been focussed on a bulk tonnage, open pit mining scenario, we also see a potential higher grade core zone to these systems that ultimately might lead to underground mining positions and extend the life of the project – well beyond the initial eight year starting mine life.
In addition to the size potential what is equally important to us is the simple mineralogy of these deposits. The mineralisation is essentially gold, quartz and pyrite; this simple mineralogy translates into very benign metallurgical properties, which makes the ore very easy to process and will give us very high gold recoveries in our plant, including very high gravity gold recoveries.
Q: What led to the decision to bring forward the implementation of the 4.8MW SAG mill and 4.8MW Ball mill at project commencement?
There are numerous advantages. Simplicity is an important part of the decision; not having to shut the plant down in a couple of years and retro-fit a second mill just makes for more simple execution.
Most importantly though, it will mean we won’t have to blend our very important laterite ore during the first few years of production. The laterite, on average, is our highest grade ore and is also the first material to be mined.
Not having to stockpile and blend that ore through the plant translates into significant project cash flow advantages. The new flow sheet with equal sized mills at 4.8MW also resulted in a much easier to operate process plant and also gives us the ability to fine tune the size to which we grind our ore so we can extract as much value as possible from our processing plant over the life of the project.
Q: What exploration will Capricorn be conducting during Karlawinda construction and ramp-up?
We are very excited to be drilling our Tramore target at the moment and expect that the work there will continue this year.
It is potentially a significant extensional target at Bibra which will very likely add open pit ounces to our mine plan in the long term.
Aside from the extension work at Bibra we are now starting to do some more work on the Francopan/K3 deposit; just scoping it out initially to understand the geometries and potential open pit positions at K3, but also the potential for higher grade ore which could represent a long term underground mining target.
We are also now ramping up our regional exploration to look for new mineralised positions within the greater project area.
At the moment we are completing a significant soil geochemical sampling program, which aims to define the potential for additional and very important oxide mineralisation across the 1400km2 of tenure we currently have at Karlawinda.
Q: Gold prices have remained buoyant over the past year. What is your medium term outlook?
We have a quite bullish view on the gold price, particularly in Australian dollar terms. In terms of the sector, the Australian producers have, in most cases, done a wonderful job in recent years, and this is bringing significant confidence to our industry here in Australia from investors all over the world.
While Australia will always be a very attractive jurisdiction it is important our producers continue to perform well and run well considered and efficient businesses, which I’m sure the majority will.
With the current, very high standards being set by our producers it is inevitable that interest will soon work its way down the line to the developers and explorers.
Overlaying that general confidence is the fact that new economic gold resources are getting harder and harder to find globally, but particularly in low risk jurisdictions like WA. I believe we are going to see increasing competition for access to those low risk ounces in the coming years.
