A RECORD gold price in terms of Australian dollars is shining a light on Australian gold producers as they rake in outsized gains in a bullish market.

Spot gold burst through US$1660/oz in February, its highest level since early 2013, but in Australian dollar currency this translates to $2500/oz – its highest ever.

One Australian gold producer well positioned to capitalise on soaring gold prices is Tropicana, one of the largest gold mines in Australia.

Situated on the edge of the Great Victoria desert, 330km northeast of Kalgoorlie in WA, Tropicana is about to embark on a major growth phase.

An expansion project, the Boston Shaker underground mine, is due to come online in the second half of 2020 and could be a major game-changer.

Overseen by its joint venture owners, operator Anglo Gold Ashanti with a 70pc equity stake and its 30pc partner IGO, the expansion will dramatically increase Tropicana’s production.

Boston Shaker will also provide Tropicana with access to high grade ore, improving the mine’s grade profile over its life of mine.

IGO states the underground mine will enable Tropicana to maintain its production at a rate of 440,000 to 500,000oz/pa over a five-year period to 2023.

A bankable feasibility study has proposed mining Boston Shaker’s ore at a rate of 1.1mtpa and an estimated grade for gold of 3.5g/t to produce approximately 100,000oz/pa.

The Boston Shaker underground project has a mineral resource of 1.9m/oz.

The mine’s owners have identified the potential for other underground mines at both Tropicana and its sister mines of Havana and Havana South.

“We continue to assess a number of merger and acquisition opportunities to deliver near term production growth and a pipeline of development assets,” Independence Group managing director and chief executive Peter Bradford said in a company report.

IGO discovered the Boston Shaker, Havana and Tropicana gold deposits between 2005 and 2010, and moved to develop Tropicana first in 2010.

After a bankable feasibility study for Tropicana in 2010, the company started to mine the Havana deposit in 2012 and, began development of Boston Shaker in 2019.

Exploration activity has occurred at the northern end of Tropicana mine with drilling completed at three potential projects – Electra, Voodoo Child and Wild Thing.

The Tropicana mine at twilight time.

Production, resource

Tropicana is likely to be producing well into the future based on its current resource of gold-bearing ore which was estimated at 3m/oz in July 2019.

Tropicana’s gold production on a 100pc equity basis of 257,300oz in the July-December 2019 quarter exceeded its guidance for the period of 225,000 to 250,000oz.

The mine produced 262,000oz in the corresponding July-December 2018 half year.

Tropicana has exceeded the 2.05mt processing capacity of its ore mill during 2019 with throughput rising to as high as 2.25mt in July-September 2019.

Gold recovery rates from processing stand at around 90pc for the mine.

All-in sustaining costs for Tropicana in the year ended December 2019 were US$766/oz, equivalent to $1172/oz, according to Anglo Gold Ashanti’s latest results.

Total cash production costs have been declining for Tropicana because of higher mined volumes and improved efficiencies.

The mine ended 2019 with a record safety performance and achieved 14 months without lost time injury, a company report stated.

Tropicana’s owners have already carried out extensive improvements and extensions to the mine.

This has included opening a second ball mill to increase ore processing throughput and improve recovery rates in 2018.

Using conventional mechanised mining methods, Boston Shaker mine is expected to have a seven-year life span.

The underground operation will be serviced by two production drills, four haul trucks and three loaders with in-built remote operating capability.

Australian mining contractor Macmahon is the surface mining contractor for Tropicana which includes mine planning, drilling and blasting, loading and hauling ore to the mine’s ore crusher.

Tropicana mine has recently taken delivery of six new electric haul trucks from equipment maker Liebherr.

The Liebherr 240t class T264 trucks have a 2700 horsepower engine and Litronic Plus AC drive system and are operated by Macmahon.

Electricity provider to the Tropicana mine Kalgoorlie Power Systems, a subsidiary of Pacific Energy, recently secured a contract for the mine’s Boston Shaker expansion.

The energy company is undertaking an upgrade of Tropicana’s gas-fired power system to increase its generation capacity to 50MW from around 44MW.

According to Anglo Gold Ashanti’s 2019 annual report, year construction work on Boston Shaker is progressing well.

Two raise bore holes required for ventilation and egress to the underground mine were tracking ahead of schedule by year end, the company said.

“Recruitment of the underground workforce is in line with plan and the underground operation remains on track to deliver first gold in the second half of 2020,” it said.

Soaring gold

With spot Australian gold prices trading at record highs, gold miners are generating increased cashflow from their Australian operations.

Anglo Gold is keen to capitalise on higher prices for its Tropicana product and its increased cashflow to invest in its mines.

“We are working hard to deliver on our strategy and to capture the wider margin in this strong gold price environment,” Anglo Gold chief executive Kelvin Dushnisky said in a February results statement.

“We are generating strong cash flow from our operations, and that is allowing us to increase returns to shareholders, strengthen our balance sheet and invest in our ore bodies,” he said.

Additional capital investment will help the company to convert its existing resources into additional ore reserves and increase development at its mines.

“The added reserves extend mine lives, while more development will allow greater operating flexibility, which in turn will translate into more efficient and predictable cost production outcomes,” the company stated.

The Johannesburg and New York-listed miner said it expected to increase its capital investment in its mines to US$640m to US$670m in 2020, up from US$494m in 2019.

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