17/05/2016 - 12:43

New golden crop for Wheatbelt

17/05/2016 - 12:43

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The return of gold mining as Western Australia’s fastest-growing industry is becoming more interesting, with a near-record price for the metal in Australian dollars triggering increased exploration and a pair of possible mine developments in the Wheatbelt.

New golden crop for Wheatbelt
Wheat may not be the only golden crop produced in WA’s agriculture areas in the near future. Photo: iStockphoto/Rasica

The return of gold mining as Western Australia’s fastest-growing industry is becoming more interesting, with a near-record price for the metal in Australian dollars triggering increased exploration and a pair of possible mine developments in the Wheatbelt.

Both Katanning and Narembeen, better known as centres for the production of wool and wheat, have possible gold mine developments on their outskirts.

Even if the companies behind the discoveries – Ausgold at Katanning and Explaurum at Narembeen – are not successful in starting mines, the work they have done promises to boost interest in the potential for gold across a large part of WA’s South West, where agriculture is the traditional leader.

While gold mining is welcomed by many of those living in the Katanning and Narembeen districts, the prospect of the industry spreading to prime farmland has attracted some criticism, which will grow louder as development decisions get closer.

Of the two projects, Ausgold’s discovery at Katanning, about 280 kilometres south-east of Perth, is the most likely to win the first investment approval because work is more advanced and the exploration results more promising. The latest drilling has expanded the area of known mineralisation, almost certainly forcing Ausgold to increase a modest mine plan revealed late last year.

The original Katanning proposal, contained in a scoping study, was for a $70 million development that would last just four years, producing 47,340 ounces of gold a year at an all-in sustaining cost (AISC) of $A1,198/oz.

The starting point for mining is likely to be at a site called Jinkas, where a small gold mine was developed in the 1980s but quickly abandoned after the gold price fell.

With gold back to $US1,273/oz, and the Australian dollar down to US72.4 cents, the Australian gold price is close to an all-time high of $A1,755/oz, almost $A100/oz more than last year’s scoping study for the Jinkas redevelopment, which assumed gold at $US1,250/oz and the dollar at US75 cents.

More importantly for Ausgold’s mining plans, another potentially rich new deposit has been revealed by drilling at the Datatine prospect, located seven kilometres north of Jinkas, with best assays of 3.67 grams of gold a tonne over 22 metres with a four metre core grading a rich 16.9g/t.

Ausgold’s challenge now is to stitch together a viable mining plan that accommodates the extra gold at Datatine with other discoveries that stretch in a north-south line across 20km of farmland.

Explaurum’s work at its Tampia project near Narembeen, about 300km east of Perth, is also a follow-up program of 1980s gold indications (though not of anything that became a mine).

The company behind the original Narembeen discovery was BHP, before its merger with Billiton, at a time when the big miner had an active interest in gold.

After BHP walked away, the gold near Narembeen was ignored until Brisbane-based Explaurum secured the ground and restarted fieldwork, which led earlier this month to its best yet drilling results – including eight metres at 8.96g/t and seven metres at 5.99g/t.

More drilling is planned but the latest results should enable Explaurum to build on an earlier scoping study, which estimated that the Gault prospect at Tampia contained 310,000oz at 2g/t, with enough high-grade material to almost start a small mine.

The latest results, when combined with previous work, should shift Tampia closer to a development decision.

What’s happening at Katanning and Narembeen is a reflection of the increased activity in the gold industry across WA, with mines expanding, new mines planned and, perhaps more importantly, exploration accelerating thanks to the attraction of that near-record gold price.

Investment bank UBS calculated last week that total spending on gold exploration by the major mining companies it researches had risen by more than 50 per cent over the past 12 months, from a collective annual budget of $115 million to $180 million.

More is expected, because UBS also estimates that the Australian gold industry has one of the world’s lowest all-in sustaining costs of $US833/oz compared with a global figure of $US877/oz – and $US903/oz if Australia is removed from the calculation.

On average, that means Australian gold miners are operating at a profit margin of $A590/oz – close to the highest on record thanks to the strong gold price and a sharp fall in local operating costs, with gold miners benefiting from the collapse in iron ore exploration and mine development.

How farmers, and the WA government, react to the spread of gold exploration and mine development into prime farmland will be the next phase of what looks likely to be another WA gold boom.

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