Ramelius, Red 5 unveil new mine plans

Red 5 has reversed the operating strategy for its Darlot and King of the Hills mines in Western Australia, while fellow goldminer Ramelius Resources also unveiled a new production plan, as well as made $32.5 million from a royalty sale.

Today, Red 5 said it would process ore from its WA operations at the King of the Hills plant instead of at the Darlot hub (as per the company's original operating strategy).

KOTH will be a low-cost production centre, managing director Mark Williams said, with processing costs forecast to be $11.83 per tonne.

He said the decision to reverse Red 5’s original operating plan – to what the business is now referring to as the KOTH processing hub strategy – followed an exhaustive review of the Darlot operation.

“Darlot has until now served as a central processing facility under our ‘truck-to-Darlot’ strategy but, with the impending completion of the new state-of-the-art KOTH processing plant and its substantial latent capacity, we have a unique opportunity to treat other ore sources over and above those proposed in the KOTH mine plan,” he said.

“The impact on our cost base gives us the flexibility to implement a more aggressive mine development plan to unlock the significant resource base at Darlot to reduce our dependency on remnant stopes.”

The company acquired Darlot and KOTH from Gold Fields and Saracen Mineral Holdings, respectively, in 2017.

Red 5 completed a final feasibility study for a standalone bulk mining and processing operation at KOTH in September last year.

“The metallurgy of the KOTH-Darlot ore blend is well understood as we have been processing these combined ores at Darlot for some years,” Mr Williams said.

“This allows for the seamless integration of the Darlot underground ore into our future milling and production plans at KOTH, providing an additional high-grade ore feed in the early phases of the production ramp-up.”

He said Red 5 would continue exploration efforts at Darlot to identify extensions and make new discoveries.

The KOTH project should add around 150,000 ounces of gold to the company's annual production, with first pour expected in the June quarter of 2022.

Shares in Red 5 remain unchanged, closing at 20 cents.

Meanwhile, Ramelius Resources expects its portfolio of WA assets – including the Edna May and Mt Magnet mines – to produce a combined 1.84 million ounces across the next seven years, in addition to a two-year tail for nearly 200,000oz.

Ramelius said the new mine plan was 27 per cent higher than its previous strategy.

Average all-in sustaining costs (AISC) are expected to be between $1,390/oz and $1,490/oz.

It follows a record year of production for Ramelius, which achieved more than 272,000oz in fiscal 2021 – up 18 per cent on FY20 – at an AISC of $1,317/oz.

The company has allocated $32 million toward its exploration budget for FY22.

Ramelius has bolstered its cash position, which stood at $228.5 million at the end of June, after agreeing to sell its entire royalty over the Kathleen Valley lithium-tantalum project in WA to owner Liontown Resources.

Perth-based Ramelius was granted the royalty when it sold Kathleen Valley to Liontown in 2016.

Liontown, led by managing director Tony Ottaviano, has agreed to pay $32.5 million in cash to terminate the royalty.

That's expected to enhance the net present value of the project, currently stood at $1.1 billion.

“The termination of this royalty… will further cement the tier-1 credentials of the Kathleen Valley project, at a time when the outlook for the lithium market continues to improve,” Mr Ottaviano said.

“This is a value-accretive opportunity which removes a source of value leakage for the project and lowers future operating costs.”

He said Liontown would remain well funded to continue developing the project, with $33 million in cash and liquidity, post settlement.

Its shares closed down 1.1 per cent to trade at 9.2 cents while Ramelius shares closed up 4 per cent to trade at $1.78.