After a difficult 2017, Blackham Resources has turned around mining activity at its 100%-owned Wiluna gold project. A strong lift in ounces mined in January continued the positive trend begun late last year and the company expects strong operational cash flows through 2018. Blackham also enters the new year with a strong balance sheet thanks to a fully underwritten capital raising of $36 million that will see it convert resources to reserves.
Blackham Resources has put last year’s difficult mining conditions at Wiluna behind it, reporting a dramatic increase in mined open pit ounces of gold in January that eclipsed the entire September 2017 quarter.
In its December quarterly lodged on 31 January, the gold producer said it had mined 11,410 ounces from its M4 and Galaxy open pits in the month to date in January, exceeding the 8,368 ounces for the September quarter.
The number of ounces mined in January was also 45% higher than the 7,887 ounces in the month of December, which marks the beginning of a trend of strong improvements at the mine and allowed high-grade stockpiles to be accumulated for the first time since March last year.
Blackham was beset last year by pit wall slippages, high stripping ratios, fires and other matters leading to a blowout in costs that caused the market to sell down its shares.
However the key cost metrics at Wiluna are now plummeting after Blackham finally gained access to high-grade zones at the Galaxy and M4 pits in November and December, which the company says will now underpin strong operational cash flows in 2018.
Total material mined dropped sharply from 2.54 million tonnes in the September quarter to 1.8 million tonnes in the December quarter reflecting that Blackham finally has its stripping ratios under control.
All in sustaining costs were down from $1,962 per ounce in the September quarter to $1,359 per ounce in the month of December and are expected to fall further to an average of $1,100 to $1,200 per ounce in the first half of calendar year 2018.
The dramatically improved results have also been assisted by above-budget performance of mining at the Golden Age underground mine in the December quarter. The company said the underground operations had been cashflow positive for the past two quarters and this was expected to continue.
The latest quarterly also showed signs the mining turnaround was flowing through to gold production from the Wiluna mill, which achieved record throughput in the December quarter. Gold production at 14,922 ounces was slightly below the September quarter due to last year’s setbacks, but the last week of December saw a record 1,685 ounces of gold produced.
Blackham is entering 2018 in a strong financial position, with cash and bullion on hand of $10.3 million at the end of December and news two weeks ago of a fully underwritten five-for-two renounceable entitlements issue to raise $36 million. The issue is sub-underwritten by Orion, Pybar and the company’s primary mining contractor, MACA, which has also provided a $14.3 million loan.
Blackham’s Executive Chairman, Milan Jerkovic, said: “With the entitlement offer being fully underwritten, Blackham will be well funded with a strong balance sheet to enable us to initially focus on a simple, free-milling mine plan at our Matilda-Wiluna gold operation and enjoy a period of stable gold production, having recently accessed high-grade ore zones. The company is at an exciting stage, with 2018 expected to be a transformational year of strong operational performance that is likely to generate significant cashflow and value for Blackham and its shareholders.”
It's make or break time for Blackham and it looks more likely they will make it now after two solid months of mining and a stripping ratio that is now sitting at under 5 to 1 after languishing at 26 to 1 in the September quarter.
In fact Blackham now say they should be able to turn out between 80,000 and 90,000 ounces of gold for the calendar year ahead with all in sustaining costs per ounce as low as AUD$1100 now that they are sitting on the ore body.
If that turns out to be accurate, then Blackham will have completed a remarkable turnaround and will be sitting pretty as a mid-tier West Australian gold producer with plenty of upside from its 6m ounce resource.