Dacian Gold presented the findings of its 100% owned Mt Morgans Gold Project Feasibility Study to deliver an Initial Ore Reserve of 1.2Moz on 21 November 2016.

Key Outcomes

The Mt Morgans Gold Project (MMGP) Feasibility Study shows the MMGP is both technically and economically feasible beginning its life with an initial Ore Reserve of 18.6Mt @ 2.0g/t Au for 1.2Moz over an 8 year period with an average all-in-sustaining-cost (AISC) of A$1,039/oz (US$779/oz).  Key outcomes from the Feasibility Study include:

  • 8Mt @ 4.5g/t Au for 557Koz is mined from underground mines of which 492Koz is mined from the Westralia Mine Area (Beresford and Allanson) at an AISC of A$837/oz (US$628/oz);
  • 8Mt @ 1.4 g/t Au for 643Koz is mined from a single, 1.8km long, up to 560m wide and 220m deep open pit from the Jupiter Mine Area at an AISC of A$1,193/oz (US$895/oz);
  • Infrastructure capital costs of A$172M (US$129M) include a new 2.5Mtpa CIL treatment facility and tailing storage facility; establishment of raw-water supply infrastructure, a new 416-person accommodation village, construction of mine service area facilities (including offices, workshops, fuel storage and power distribution) at both the Westralia and Jupiter Mine areas; administration complex, reticulation of overland power from the power station, re-establishment of previously used haul roads and service roads and installation of mobile phone, data, voice and radio communications infrastructure;
  • Mine-establishment capital costs of A$48M (US$36M) at Beresford, Allanson and the Jupiter open pit so as to deliver high grade stocks to the ROM pad ahead of Q1 CY2018 commissioning of the 2.5Mtpa CIL treatment facility;
  • The Feasibility Study production schedule delivers 171Koz in year 1, 224Koz in year 2, 196Koz in year 3 and 152Koz in year 4 as the impact of the high-grade high-margin Westralia Mine Area ores reduces with the depletion of its initial Ore Reserve;
  • The low-cost nature of the preferentially mined high-grade ores from the Westralia Mine Area provides a Project payback period of less than 21 months using a $A1,600/oz (US$1,200/oz) gold price; and
  • The initial Ore Reserve period to payback period ratio of 4.3 confirms the MMGP as a new, high quality Australian mid-tier gold production centre.

The Board of Dacian Gold has approved the Feasibility Study. Construction of the MMGP started in January 2017 targeting gold production in Q1 CY2018.

Mining/Ore Reserves

The initial Ore Reserve for the MMGP is 18.6Mt @ 2.0g/t Au for 1.20Moz over an initial mining and treatment period of 8 years.
The MMGP is essentially a large underground mining complex at Westralia and a single large open pit at Jupiter, located 16km apart; both feeding a new 2.5Mtpa CIL treatment facility to be built close to Jupiter.  The initial Ore Reserve for the MMGP shows Jupiter contributes approximately 80% of the tonnage feed to the treatment plant for 54% of the ounces.  Correspondingly, the initial Ore Reserve for the underground mines contributes 46% of the ounces to the treatment plant and only 20% of the tonnage.

Given the high-grade and high-margin nature of the Westralia Mine Area ores, all material mined from the Beresford and Allanson underground mines is prioritised as early production sources in the mining and treatment schedules to maximise the cash-margin from the early stage mining at Mt Morgans.  It remains a core focus for Dacian Gold to extend the Westralia Mine Area Ore Reserve life beyond 2021, and the 3.5Mt @ 6.5g/t Au for 715,000 ounces of Inferred Mineral Resource that lies directly along strike and beneath, and is contiguous with, the Beresford and Allanson Ore Reserves provides the Company with the potential to extend the mine life at both Beresford and Allanson.

The Feasibility Study was managed by Dacian Gold with several well-regarded mining consultants assisting in estimation of Ore Reserves, including Orelogy Consulting Pty Ltd, Entech Pty Ltd, Peter O’Bryan & Associates, Groundwater Resource Management Pty Ltd and Blueprint Environmental Strategies.  GR Engineering Services Ltd completed all infrastructure designs and costings including the 2.5Mtpa CIL treatment facility.

Westralia Mine Area
The Westralia Mine Area comprises the Beresford and Allanson underground mines, both of which lie beneath the historic Westralia open pit, and both of which contain the down dip-continuation of those lodes mined in the historic open pit.

The Westralia Mine Area contains an 8.6Mt @ 5.8g/t Au for 1.62Moz Mineral Resource of which 5.2Mt @ 5.4g/t Au for 905Koz is defined as Measured and Indicated.  It is from the 905Koz Measured and Indicated Mineral Resource that 3.3Mt @ 4.6g/t Au for 492Koz has been estimated as initial Ore Reserves.  The forecast all-in-sustaining-cost (AISC) of the Westralia Mine Area Ore Reserves is A$837/oz (US$628/oz).  It is likely the Beresford and Allanson underground mines will become two of the lowest cost underground gold mines in Australia.

The low-cost nature of the preferentially mined high-grade ores from the Westralia Mine Area provides a Project payback period of less than 21 months using a $A1,600/oz (US$1,200/oz) gold price.

Beresford’s initial Ore Reserve is 2.4Mt @ 4.2g/t Au for 331Koz which is to be mined at an AISC of A$845/oz (US$634/oz), whereas the Allanson initial Ore Reserve of 0.9Mt @ 5.7g/t Au for 162Koz ounces has a corresponding AISC of A$819/oz (US$614/oz).  For both the Beresford and Allanson mine designs, Dacian Gold focused on maximising cash-margins, and in doing so, omitted several stoping blocks and associated development despite such areas having production grades in excess of cut-off grades.   The Company’s early-production objective is to maximise the cash-generating ability of the mines to accelerate pay-back.

Both Beresford and Allanson will be mined utilising a top-down, sub-level open stoping arrangement commonly seen throughout the Western Australian gold fields.  Both mines will be accessed off existing mine development associated with the historic Westralia open pit and underground mine.

All material assumptions including a detailed account of technical inputs used in the mine designs can be found in the ASX announcement released on 21 November 2016.

The Transvaal Ore Reserve of 0.5Mt @ 3.9g/t Au for 65Koz mines ore that lies beneath the previously mined underground mine.  The estimated AISC is A$1,074/oz (US$806/oz) and is scheduled for commencement of mining in 2020.

Jupiter Mine Area
The Jupiter Mine Area is defined principally by a single large open pit measuring 1.8km long, up to 650m wide and up to 220m deep.  The initial Ore Reserve at Jupiter is 14.8Mt @ 1.4g/t Au for 643Koz and with a strip ratio of 7.5.  It will be mined and treated over the 8 year period of the MMGP Ore Reserve.  As noted above, a key focus for Dacian Gold is to preferentially mine and process the high-grade, high-margin ores from the Westralia Mine Area.   Such ores will take priority in the treatment schedule with any available treatment capacity to be consumed by treating the Jupiter ores.

The individual deposits that make up the large 1.8km long Jupiter open pit comprise Doublejay, Heffernans and Ganymede.  Each of the three deposits can be mined and scheduled separately and have been assumed for the Feasibility Study to follow the production schedule:

  • Heffernans: 323Koz mined at an AISC of A$1,108 (US$831/oz);
  • Doublejay: 268Koz mined at an AISC of A$1,241 (US$931/oz);
  • Ganymede: 52Koz mined at an AISC of A$1,485 (US$1,114/oz).

Should Dacian Gold be successful in identifying higher-value ores during its aggressive exploration campaigns or converting high grade Inferred Mineral Resource at Westralia Mine Area to Ore Reserves, then it will have the option to preferentially mine and treat such material in place of the Jupiter ores.

Processing

Over 100 leach testwork programs on top of extensive comminution and gravity recovery tests of ores from Beresford, Allanson and Jupiter have determined an average expected recovery of 90.7% for the new 2.5Mtpa MMGP processing facility.  This compares favourably with the historic recovery achieved from the old Mt Morgans CIP/CIL treatment plant (since removed) which recorded a recovery of 91.4% from a 10 year treatment history during the 1990s that processed over 10Mt of ore and produced over 740,000 ounces of gold.

The main ore feed sources for the historic treatment facility during the 1990s at Mt Morgans were Westralia, Jupiter and Transvaal.  The main ore feed sources for the newly proposed 2.5Mtpa CIL treatment plant at the MMGP is also Westralia (Beresford and Allanson), Jupiter and Transvaal.

The proposed process design for the new plant incorporates an SABC configuration (primary crush, SAG mill, pebble crush and ball mill) which is similar to the configuration used during the 1990s at Mt Morgans.

The crushing and milling of ores is designed to produce a P80 passing 106 microns.  The MMGP ores exhibit coarse gold able to be recovered using gravity concentrators.  Leach residence time will be 28 hours.  Gold dore will be smelted on site and transported to the refinery prior to sale.

The process flowsheet for the new 2.5Mtpa CIL treatment facility at the MMGP is similar to many other treatment plants seen throughout the Western Australian gold fields.

Treatment costs are estimated at A$17.88/t.

Power will initially be provided by a diesel-fueled 20MW power station built close to the site of the treatment plant near to the Jupiter open pit mine.  It is anticipated the power station will be constructed under a build-own-operate arrangement.  Dacian Gold may investigate gas-fired power once it is able to measure power draw from the site after an initial 12 month operating period.

Over the initial 8 year Ore Reserve which produces 1.1Moz of gold as determined by this Feasibility Study, a breakdown of ore mined and ounces produced by year is tabulated in on the right hand side of this page.

Capital Costs

Total capital cost to develop the Project is A$220M (US$165M) which includes A$172M (US$129M) for site-infrastructure including a new 2.5Mtpa CIL processing facility, and A$48M (US$36M) for mine-establishment capital to develop the Beresford and Allanson underground mines; and the Jupiter open pit ahead of commencement of ore treatment in Q1 CY2018.

The estimated cost of the new 2.5Mtpa treatment facility, including associated infrastructure, is $134.2M.  Other material capital items include a new 416-person accommodation village at A$20.8M, Mine Service Areas Facilities $7.3M, Communications $4M and earthworks and roads $4M.

Project Permitting

All key approvals including the Mining Proposal and Mine Closure Plan; the Native Vegetation Clearing Permit and the Works Approval and License have all been granted from the relevant government departments.

All tenure required to develop the Project lies on granted Mining and Miscellaneous Leases.

Project Finance

As noted above, Project payback occurs in less than 21 months at a gold price of A$1,600/oz.  The initial Ore Reserve period to Payback ratio of 4.3 provides the Company with confidence it will be able to finance the Project on attractive terms.

Dacian Gold intends to finance the Project through a combination of project debt and equity.  The Company entered into a $150M Project Facility Agreement in December 2016 with three tier-one banks, with first draw down anticipated to be in Q2 CY2017.