Havilah Resources advances towards near-term development of West Kalkaroo Gold Project

Havilah Resources Ltd (ASX:HAV) (FRA:FWL) is progressing towards near-term gold production at its large-scale Kalkaroo copper-gold-cobalt deposit in north-eastern South Australia, near Broken Hill. The company’s priority focus  has been on advancing several key tasks required to commence production from the West Kalkaroo open pit gold mine, including: Infill drilling which intersected widespread copper and gold mineralisation; Progressing the program for environment protection and rehabilitation (PEPR) document; Advancing the design of the process flow sheet; and Generating a preliminary financial model. “Advancing towards development in 2021” Havilah technical director Dr Chris Giles said: “The Kalkaroo project has progressed considerably since the beginning of the year in accordance with our indicative timeline for West Kalkaroo project activities. “Infill resource drilling continues to demonstrate good continuity of mineralisation at consistent copper and gold grades. “We have engaged with several possible contractors and project financiers with the view to seeking suitable arrangements while waiting for PEPR document feedback and approval. “Preliminary financial modelling for the West Kalkaroo gold open pit indicates robust returns for a modest capital outlay and should allow a substantial debt financing component. “Our priority objective remains advancing the West Kalkaroo gold open pit towards development during 2021, subject to a final investment decision by the Havilah board, obtaining financing and final South Australian Government approvals.” Infill drilling Several infill reverse circulation (RC) drill holes have been completed along strike of the proposed West Kalkaroo open pit to improve confidence in the continuity of mineralisation with the results to be used in future mine planning studies. Widespread copper and gold mineralisation was intersected in most drill holes, with grades and widths of mineralisation very typical of the Kalkaroo deposit, including 17 metres at 2.24 g/t gold from 110-127 metres (native copper zone) and 46 metres of 0.49% copper from 110-156 metres (native copper zone and chalcocite zone). The low-grade base of tertiary gold mineralisation was also extended by shallow aircore drilling within or adjacent to the proposed West Kalkaroo open pit. In addition, six sterilisation holes have been completed in the vicinity of the planned locations of key infrastructure, including the processing plant, tailings storage facility and waste dump, to ensure that they will not be built too close to potentially economic mineralisation. PEPR progress   The PEPR document, which is the final permitting approval required for commencement of mining, was submitted to the Department for Energy and Mining (DEM) during March 2021. To date, Havilah has had no feedback other than in relation to the calculation methodology of the rehabilitation bond, which the company is in the process of addressing. Location of drillhole cross-section line A-B and the planned West Kalkaroo gold open pit outline (blue) which is being advanced towards development (if feasible) during 2021, subject to receipt of required approvals and financing. Process flow sheet A process flow sheet design is well advanced, with further refinement in equipment selection. The process plant has been designed to treat the soft oxidised and clayey ore material and would recover coarser gold and native copper (greater than 50 microns grain size) by gravity methods. The finer gold would be recovered via a conventional cyanide leach circuit. Notably, a positive feature of the Kalkaroo deposit is that while there is a high proportion of sub-10 micron saprolite gold ore material, there is very little gold in this size fraction which raises the possibility of rejection of a large mass of the very fine clayey material prior to leaching - effectively increasing the leaching circuit ore throughput. The process flow sheet is currently being validated by laboratory tests. Robust financial model The preliminary financial model for the West Kalkaroo gold open pit is based on detailed open pit designs and ore mining schedules developed by Havilah’s experienced senior mine planning engineer Richard Buckley. This model is being integrated with the projected extensions of the initial gold open pit designs that will merge with the eventual large-scale copper sulphide mining operation. A financial model will be released in the near term when more precise mining and plant construction costs have been obtained and the model has been reviewed. Given the preliminary indicated robust economics of the gold mining operation at current spot gold prices, the company intends to seek maximum project debt financing to avoid dilution of its 100% Kalkaroo project equity (and currently free of external non-government royalty or streaming obligations) and also to minimise shareholder dilution via a large capital raising. Forecast copper demand The Kalkaroo copper-gold-cobalt deposit contains JORC mineral resources of 1.1 million tonnes of copper, 3.1 million ounces of gold and 23,200 tonnes of cobalt and has an open pit JORC ore reserve of 100.1 million tonnes at a 0.89% copper equivalent - of which 90% is in the proved category. This makes it one of the largest undeveloped open pit copper-gold deposits in Australia on a copper equivalent ore reserve basis. The Kalkaroo project pre-feasibility study (PFS) results released almost two years ago showed an estimated pre-tax NPV7.5% of A$564 million and IRR of 26% at USD2.89/pound copper, US$1,200/ounce gold, A$:US$0.75 – with the Kalkaroo project’s net present value (NPV) highly sensitive to copper and gold metal prices. Notably, the spot copper price has had a remarkable rise of over 30% since December 2020 which has resulted in an upward adjustment to the long-term consensus copper price to USD3.50/pound (according to Consensus Economics Inc). With low sovereign risk, advanced, large-scale open pit copper-gold development opportunities like Kalkaroo are rare at a time when renewable energy and electric vehicles are adding to the demand for copper and with copper prices breaching US$10,000/tonne (USD4.53/pound). In addition, South Australia’s mining-friendly government and enforcement of world’s best practice ESG (environmental, social and governance) regulations means the Kalkaroo project ticks all boxes as a potential future source of ethical copper (and potentially cobalt).